1989 (12) TMI 362

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....t year involved is 1974-75 for which the relevant year of account is the year ended on 30-9-1973. 2. The facts found by the Tribunal are as under :     The assessee is a firm which maintains accounts under the mercantile system of accounting. In respect of the previous year ending on 30-9-1973 relevant to the assessment year 1974-75 the assessee submitted initially a return showing a loss of Rs. 1,08,139 which was subsequently revised showing enhanced loss of Rs. 2,09,091. Along with the revised return the assessee submitted copies of revised profit and loss account and balance sheet. The ITO on scrutiny of the balance sheet found that the assessee debited an amount of Rs. 4,57,844 in the profit and loss account being l....

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....s loss and not a capital loss as held by the ITO. The Tribunal reversed the order of the Commissioner (Appeals) by observing, inter alia, that section 28(ii)(d) of the Act had no application to the assessee's case and it was held that the loss of Rs. 4,57,844 was a capital loss and not a business loss. The reasoning given by the Tribunal may be found in paragraph 2 of their order which reads as follows :         "The Commissioner of Income-tax (Appeals) held that as there was a provision for treating the compensation received as business income if there was a loss in the matter of take over of the business by the Government, the loss would be a business loss on the same analogy. The Departmental rep....

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....ntended on behalf of the assessee that there is a further question of section 32(1)(iii) of the Act. The assessee's case is that what the assessee received by way of compensation was less than the depreciated value of some of the assets, which were taken over by the Government. It has been stated that in such a situation the assessee was allowed to claim depreciation on the loss. A part of the loss was on account of compensation paid on the depreciable assets. 4. It has further been contented by the assessee that this point was actually agitated before ITO when the ITO disallowed the claim on a number of grounds. On behalf of the assessee a prayer was made to remand the case back to the Tribunal to consider this aspect of the matter.....