LexCOMMISSIONER OF INCOME TAX, CALCUTTA versus JAIPURIA CHINA CLAY MINES (P) LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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COMMISSIONER OF INCOME TAX, CALCUTTA
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v.
JAIPURIA CHINA CLAY MINES (P) LTD.
November 1, 1965
[K. SUBBA RAo, J. C. SHAH AND S. M. SIKRI, JJ.]
Income Tax Act 1922-s. 10(2) (vi), proviso (b)-Unahsorbed de-
preciation for previous years~Whether can be set off against
profits
under other heads than those of the business-.1'. 24(2) Effect of.
The Income Tax Officer, after deducting depreciation for the year and
an amount in respect of losses, assessed the income of the assessee for
1952-53 as nil.
He then computed the dividend income at Rs. 2,01,130
and determined the total income at this figure and levied tax on it. The
assessee had in its favour unabsorbed depreciation relating to earlier year
aggregating to Rs. 76,857 and contended that this amount should be de-
ducted from the dividend income; but the Income Tax
Officer rejected
!hi,, contention and, in appeal, the Appellant Assistant Commissioner as
well as the Tribunal upheld his view. The High Court, however, upon a
reference. decided the issue in favour of the assessee.
In the appeal to this
Court, it was
also
contended,
inter alia,
on behalf of the revenue that depreciation, although a permis·sible allow-
ance under s. 10{2) of the Act, served to compensate an assessee for the
capital Joss suff~red by him by way of depreciation of his assets and is a
charge on the profits of a business; and that
therefore the expression
"loss of profits and gains" in s. 24( 1) did not include any deficiency re-
sulting from depreciation and could not be included in the amount which·
could be set off against income p·rofits or gains under other heads such·
as income from property or dividends.
HELD : The assessee Was entitled to have the
unabsorbed
depre-
ciatit>n of past years set off against income from sources other than the·
business and therefore against the dividends. [450 B; 456 DJ
Case law reviewed.
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Civ1L APPELLATE JURISDICTION : C. A. No. 307 of 1964.
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Appeal from the Judgement and Order dated 6th February
1962 of the Calcutta High Court in Income Tax Reference No. 72
of 1957.
A. V. Viswanatha Sastri, R. Ganapathy Iyer, R.H. Dhebar and
R. N. Sachthey, for the appellant.
K. N. Rajagopal Sastri and D. N. Mukherjee, for the respon-
dent .
The Judgment of the Court was delivered by
Sikri, J.
This is an appeal by certificate granted by the High
Court of Calcutta against its judgment in a reference made to it
. under s. 66 of the Indian Income Tax Act, 1922 (hereinafter re-
450
SUPREME COURT REPORTS
[1966] 2 S.C.R.
ferred to as the Act.) The question referred to it by the Appel-
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late Tribunal, at the instance of the assessee, was as follows :
"Whether in the facts and circumstances of the case,
the unabsorbed depreciation of the past years should be
added to the depreciation of the current year and the
aggregate of the unabsorbed depreciation and the cur-
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rent year's depreciation
be deducted
from the total
income of the previous year relevant for the assessment
year 1952-53."
The relevant facts and circumstances are as follows :
The
Income Tax Officer assessing the respondent, M/s Jaipuria China
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Clay Mines (P) Ltd. Calcutta, hereinafter referred to as the asses-
see,
for the year
1952-53
computed
its total income
at
Rs. 14,041/- before charging depreciation for that year.
From
1hat figure he deducted depreciation for the year amounting to
Rs. 5,360/-, thus computing a profit of Rs. 8,681/-. From this
figure he deducted an equivalent amount, i.e., Rs. 8,681/-, in
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respect of losses during 1947-48, and he thus worked out the
business income as nil. He then computed the dividend income at
Rs. 2,01,130/- and determined the total income at this figure and
.levied tax on it.
The assessee had in its favour an unabsorbed
depreciation aggregating to Rs. 76,857 /-, and it contended before
~he Income Tax Officer that this sum should be deducted from
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the income received from dividends, which, if done, would reduce
:the total .income to Rs. 1,32,955/-, but the Income Tax Officer
:refused to accede to this contention.
The Appellant Assistant
(,ommissioner upheld the order of the Income Tax Officer and
the assessee's appeal to the Appellate Tribunal met with the same
fate.
The High Court, however, accepted the contention of the
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assessee and answered the question referred to it in favour of
the assessee.
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