1976 (3) TMI 65

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....ending 30th June, 1963 for business and the year ending 31st March, 1964 for other sources. 2. The ITO computed the profit under s. 4(2) on sale of building, plant and machinery at Rs. 7,58,982. This figure is not in dispute. There is also no dispute that this profit is assessable in the asst. yr. 1964-65. 3. Before the ITO it was claimed that the amount of unabsorbed depreciation brought forward should be set off against the profits computed under s.41(2) The ITO negatived this claim because, according to him, there was no provision to allow losses of a business which has been closed in a later year to be set off against profit under s. 41(2). He compared the language of s. 41(5) according to which losses sustained in a previous year....

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....t s. 32(1) and 32(2) were subject to s. 28 and would be operative only if the business was in existence during the year. He emphasised that there was a clear distinction in the language of s. 41(1) and s. 41(2) and 41(5). According to the learned Departmental Representative the business must be carried on in the year for allowance of carry forward of unabsorbed depreciation. He urged that s. 41(5) was limited in scope and the principle underlying that section could not be invoked for any other purpose. He pointed out that the case relied upon by the AAC relates to s. 41(1) and hence was not applicable. He accordingly urged that the AAC was in error in directing the ITO to set off unabsorbed depreciation brought forward in the earlier years ....

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....is aspect of s. 32(2) which has been considered by the Allahabad High court in Rampur's case. In that case, the assessee, which was carrying on business in the manufacture of bobbins stopped that business with effect from the previous year relevant to the asst. yr. 1955-56. During the previous year, relevant to the asst. yr. 1962-63 i.e., subsequent to the closure of the business a sum of Rs. 6,982 received as refund from the Electricity Department was assessed as income of the assessee by virtue of the provisions of s. 41(1). The High Court held that the benefit of unabsorbed depreciation could be availed of by an assessee in any subsequent year without satisfying the preconditions attached to sub-s. (1) of s. 32 of the Act and it is not n....