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TMI Blog1971 (11) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... as of the contrary opinion. According to him the refund which was chargeable to tax under section 41(1) could not be adjusted against the depreciation for previous years because no business had been carried on in the previous year relevant to 1961-62 and that the machineries, etc., had not been used for that purpose during that year. In view of this difference of opinion, the matter was heard by the President of the Tribunal. We have perused the orders of the differing Members as also of Sri T. P. Mukerji, the President (who later joined the Bench of this court), and having heard learned counsel we are in entire agreement with the views expressed by the President. The learned President held : This case has been referred to me under section 255(4) of the Income-tax Act, 1961, by the learned Members of the Delhi Bench 'C' who had differed on the following question of law : " Whether the profit of Rs. 6,982 assessed under section 41(1) should be set off against the depreciation allowance determined for the assessment years 1951-52 to 1954-55 ? " The material facts have been set out in detail in the orders of the learned Members. To repeat them briefly, the assessee is a limited com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to exist and the plant and machinery were not used for the purposes of business. In his opinion, the provisions of section 32(2) under which unabsorbed depreciation can be carried forward are independent of the provisions of section 32(1) under which depreciation is allowable in the year in which business is carried on and the plant and machinery are used. As the learned Judicial Member has observed, the question which presents itself in this case is not covered by authorities and should be regarded as res integra. I have considered carefully the relevant provisions of law bearing on the question and am inclined to agree with the view taken by the learned Judicial Member. Section 28 of the Income-tax Act, 1961, says that the profits and gains of any business or profession " carried on by the assessee at any time during the previous year " shall be chargeable to income-tax under the head " profits and gains of business or profession ". Section 29 provides that income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43. Obviously, therefore, in computing income from business, the provisions of section 32 as well as sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of the preceding year shall " be deemed to be the allowance for that previous year ". I would, however, advert to this aspect of the matter presently. Reverting to sub-section (2) of section 32, it is manifest that it is an independent provision. Its operation has not been made to depend upon the fulfilment of the two conditions precedent referred to above which must be satisfied before allowance for normal depreciation can be given under sub-section (1) of section 32. In this context, the learned Judicial Member has observed as follows : " When, however, we come to section 32(2) it is not the question of fresh allowance for depreciation for fresh use of the machinery in the following previous year but it is the question of allowing the benefit of the unallowed portion of the depreciation allowance for the use of the machinery for the purposes of his business in the preceding previous year, to which the assessee has already become qualified. " I am in complete agreement with the learned Judicial Member that the benefit of unabsorbed depreciation can be availed of by an assessee in any subsequent year without satisfaction of the preconditions attaching to sub-section (1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Hence, the unabsorbed depreciation shall be deemed to be the allowance for the relevant previous year. I, therefore, agree with the learned Judicial Member that the sum of Rs. 6,982, which has been assessed as the business income of the assessee for the relevant previous year, is liable to be set-off against the unabsorbed depreciation of Rs 46,003, carried forward from the assessment year 1954-55. The matter can be looked at from another angle. As already noted, the sum of Rs. 6,982, has been assessed as the business income of the assessee, although no business was carried on by the assessee in that year. This is because section 41(1) creates a legal fiction whereby the refund of Rs 6,982 received by the assessee in the relevant previous year " shall be deemed to be profits and gains of business " of that year, although the business in respect of which the amount in question had been allowed as a deduction in the past was not in existence in that year. It is a well-known legal principle that a statutory fiction to has be carried to its logical conclusion. The principle has been enunciated by Lord Asquith in memorable words in the case of East End Dwellings Co. Ltd. v. Finsbury ..... X X X X Extracts X X X X X X X X Extracts X X X X
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