9911796707
TMI Blog1986 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ory, Kanpur, the assessee-firm herein, originally consisted of Sir Padampat Singhania, L. Lakshmipat Singhania and L. Kailasbpat Singhania and one J. P. Agarwal as partners. In January, 1946, the three Singhani brothers appeared to have retired from the firm and in their place, the Kamala Town Trust was alleged to have become partner. The Revenue challenged this reconstitution of the firm and according to the Revenue, the Singhania brothers never retired and the trust never became a partner. Four questions were referred by the Tribunal to the High Court under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter called the " Act "). Question No. 4 is the only question canvassed before us and survives for these appeals. The same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 10 were as follows: " 10. (1) The tax shall be payable by an assessee under the head 'Profits and gains of business, profession or vocation' in respect of the profits and gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely:-... (vi) in respect of depreciation... Provided that-... (b) where, in the assessment of the assessee or if the assessee is a registered firm, in the assessment of its partners, full effect cannot be given to any such allowance in any year not being a year which ended prior to the 1st day of April, 1939, owing to their being no profits or gains chargeable for that year, or owing to the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso to sub-section (2) of section 24 which gives the right to carry forward the loss, then the effect would be that the loss had to be carried forward and adjusted first against the profits of the next year. Neither of the provisions prohibited the carry forward of unabsorbed depreciation in case the firm became registered in the subsequent year. This appears, in our opinion, on a plain reading of the different provisions of the section. The entity being the firm, registration makes no difference to that entity. By registration, the firm gets certain additional qualifications and puts upon itself certain additional burden. The assessee in both the cases, however, is the same. We were referred to the provisions of section 23(5)(b) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bengal Company had to its credit unabsorbed depreciation allowance to the extent of Rs. 85,45,150 which it could set off against its future profits. Similarly, the appellant company had an unabsorbed depreciation allowance of Rs. 62,00,775. It was held by the judicial Committee, affirming the decision of the High Court of Calcutta, (i) that the appellant company was not entitled to have the depreciation allowance of the Bengal Company computed on the original cost of such assets to the Bengal Company for the whole of the previous year but only up to the date of succession and that after that date, it had to be computed on the original cost to the appellant company; and (ii) that the appellant company was not in law entitled to carry forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in the case of all assessees except registered firms. In the case of registered firms, the net loss including depreciation allowance, if any, is allocated to the partners, who alone were entitled to set off the loss allocated to them in their individual assessments and to carry forward any loss which remained unabsorbed, as provided in sections 32(2) and 75(2) of the Income-tax Act, 1961. The firm, as such, was not entitled to carry forward the losses determined in the assessment. It could not be contended that since a registered firm was liable to a separate tax called the " firm tax ", which is over and above the tax payable by the partners, the registered firm should be treated like an ordinary assessee for the purpose of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on had to be construed in favour of the assessee. Where two interpretations were possible, the court should take the interpretation that is favourable to the assessee bearing in mind that a taxing statute is being construed. Therefore, under the provisions of section 32(2), for the purpose of setting off unabsorbed depreciation carried forward from a preceding year, it was not necessary that the business in respect of which the depreciation allowance was originally worked out should remain in existence in such succeeding year. It dealt with some other aspect with which we are not presently concerned. Having regard to the scheme of the relevant provisions and in view of the provisions of section 10(2)(vi) read with section 24(1) and sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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