1992 (9) TMI 27 - HC - Income Tax

High Court rules for assessee on manufacturing, estoppel, and set-off issues

Anant Mills Limited Versus Commissioner Of Income-Tax

Anant Mills Limited Versus Commissioner Of Income-Tax - [1994] 206 ITR 582, 109 CTR 231 Issues Involved:1. Determination of whether the assessee carried on business activities in the assessment year 1968-69.2. Entitlement of the assessee to reagitate the point in a subsequent year.3. Determination of the actual year of business discontinuation.4. Set-off of unabsorbed depreciation against income under the head 'Other sources' for the assessment year 1972-73.Summary:Issue 1: Determination of Business Activities in Assessment Year 1968-69The Tribunal held that the question of whether the assessee carried on business activities in the assessment year 1968-69 had to be determined in the assessment order for that year only. The High Court found that the manufacturing activities of the assessee had come to an end with effect from October 1, 1966, and the subsequent sales were realisation sales to facilitate the winding up of the business. Therefore, the Tribunal was not justified in holding that the sales of stock-in-trade after October 1, 1966, were part and parcel of business activity.Issue 2: Reagitation of the Point in Subsequent YearThe Tribunal held that the assessee was not entitled to reagitate the point in a subsequent year. The High Court, however, ruled that the doctrine of estoppel does not apply to successive assessments. The Tribunal's reliance on the decision in CIT v. Army and Navy Stores Ltd. [1957] 31 ITR 959 (Bom) was misplaced as the facts of the case did not support the application of estoppel. Therefore, the assessee was not precluded from contending the closure of business with effect from October 1, 1966.Issue 3: Actual Year of Business DiscontinuationThe Tribunal concluded that the assessee discontinued the business in the accounting year relevant to the assessment year 1968-69. The High Court found that the business activities had ceased on October 1, 1966, based on the resolution of the board of directors, the discontinuation of electricity supply, and the winding-up petition filed in March 1967. The sales of finished goods were deemed realisation sales. Therefore, the Tribunal's finding that the business continued after October 1, 1966, was incorrect.Issue 4: Set-off of Unabsorbed DepreciationThe Tribunal held that unabsorbed depreciation could not be set off against income under the head 'Other sources' unless there was business income. The High Court referred to the decision in CIT v. Deepak Textile Industries Ltd. [1987] 168 ITR 773, which allowed the set-off of unabsorbed depreciation against assessable income of a subsequent year, even if the business ceased to exist. Therefore, the Tribunal's decision was overturned, and the assessee was entitled to set off the unabsorbed depreciation.Conclusion:The High Court answered all questions in the negative, in favor of the assessee and against the Revenue. The Tribunal's findings were not justified based on the facts and legal principles discussed. The High Court directed the registry to renumber the references as Income-tax References Nos. 163 of 1977 and 163A of 1977. There was no order as to costs.