1981 (3) TMI 74

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....rbed depreciation of past years can be set off against the profit under section 41(2) assessable in the assessment year 1964-65 ? " Briefly stated, the facts of the case are as follows: The assessee is M/s. Kapila Textiles (P.) Ltd. It ceased to carry on its business in the year 1956 and went into liquidation on June 19, 1958. During the year 1957-58, there was unabsorbed depreciation carried forward which amounted to about Rs.28.48 lakhs. On March 24, 1961, the liquidator sold the building, plant and machinery in auction. But, actually, the sale deed was executed on May 9, 1963. The previous year for the assessment year 1964-65, with which the reference is concerned, was the year ended 30th June, 1963. Before the ITO, the assessee cl....

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....out earlier has been referred for our opinion. On the above facts, the precise question which arises for consideration in this reference is : Is it necessary, that in order to claim the benefit of set-off of carried forward depreciation allowance permitted by s. 32(2) of the Act, that the assessee must have actually carried on the business during the relevant accounting year ? (i) There is no dispute that the assessee ceased to carry on its business in the year 1958-59 itself. Then how did the assessee earn income in May, 1963 ? During the relevant year the assessee had realised amounts by sale of building, plant and machinery. A part of the amount so realised is treated as income in view of sub-s. (2) of s. 41. That sub-section pr....

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....cceeding previous years. There is no dispute that in the case of the assessee the unabsorbed depreciation carried forward, in terms of this provision, was, during the relevant year, a sum of Rs. 28.48 lakhs. (iii) Section 29 of the Act provides that the income from profits and gains of business or profession referred to in s. 28 shall be computed in accordance with the provisions contained in ss. 30 to 43A. Therefore, once the amount realised by the assessee, by sale of the building, plant and machinery is treated as income arising out of the profits and gains of business by virtue of sub-s. (2) of s. 41 of the Act, notwithstanding the fact that the assessee was not carrying on any business during the relevant year, the provision contain....