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TMI Blog1991 (7) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is selling its properties from which some income taxable under section 41(2) of the Income-tax Act, 1961 is earned. Apart from that, the assessee also has some income from "other sources". The assessee also has some unabsorbed depreciation and loss, for which it claimed adjustment against the income taxable under section 41(2) as well as against the income from other sources. This claim of the assessee was negatived by the Assessing Officer in assessment year 1982-83 and the matter ultimately came to this Tribunal in I.T.A. Nos. 3493/87 and 4684/87, which were decided by a Bench of this Tribunal to which one of us, the Judicial Member, was a party. The Tribunal held that the presumption about the existence of business was limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Departmental Representative merely relied upon the Assessing Officer's view without pointing out how the amount payable by the assessee as customs duty on the sale of the machinery could not be treated as expenditure. It is true that sub-section (2) of section 41 does not speak of expenditure connected with the sale of property but it does speak of moneys payable in respect of the building, machinery or plant and when determining the money so payable we have to arrive at the net amount payable by excluding all relevant and reasonable expenses. It is not disputed that on the sale of the machinery the assessee became liable to pay customs duty to the Government of India and, therefore, in determining the profit arising from the sale such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against profit taxable under section 41(2). The earliest judgment on the point seems to be in CIT v. Rampur Timber Turnery Co. Ltd. [1973] 89 ITR 150 (All.) in which in similar circumstances it was held that unabsorbed depreciation can be set off against the income taxable under section 41(1) and 41(2). The Hon'ble High Court held that section 41 creates a legal fiction that certain amounts shall be deemed to be business income of the assessee for the relevant previous year although in fact the business has ceased to exist. According to the Hon'ble Allahabad High Court the inevitable corollary of that fiction would be that the business would be deemed to have been carried on in that year. Then in CIT v. Official Liquidator, New Era Mfg. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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