COMMISSIONER OF INCOME TAX, MEERUT, ETC. ETC versus M/S. VIRMANI INDUSTRIES PVT. LTD. ETC. ETC.

Citation: [1995] SUPP. 4 S.C.R. 275 · Decided: 12-10-1995 · Supreme Court of India · Bench: B.P. JEEVAN REDDY, S.B. MAJMUDAR · Disposal: Appeal(s) allowed
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Judgment (excerpt)

COMMISSIONER OF INCOME TAX, MEERUT, ETC. ETC. 
A 
l'. 
M/S. VIRMANI INDUSTRIES PVT. LTD. ETC. ETC. 
OCTOBER 12, 1995 
[B.P . .JEEVAN REDDY AND S.B. MAJMUDAR, JJ.) 
Income Tax Act 1961-Section 32(2)-Claim of unabsorbed deprecia-
tion-May be set off against any incom<-ln any following year and if income 
B 
of that year was not sufficient, can be ca11ied fo1ward to tlte next following 
yean till wiped out-Not necess01y to continue same or any business in fol-
C · 
lowing year-Can claim against new business also sta1ted immediately or after 
a la11se of tinie-Not necessa1y to use the sante or pa1t of the nzachine1y 
against which set off claimed in lite following year(s). 
Expression 'profits and gains chargeable to tax'-S 32(2)-Meaning of 
Refe1> to income under all heads. 
D 
'Cany fo1ward of business' and 'unabsorbed depreciation '--Distinction 
between. 
Appellant assessee who used to manufacture soap and oil in the 
previous year, reievant to assessment year 1956-57, discontinued the same 
and hired out the factory. Later, after a lapse of nearly 10 years, he started 
manufacturing steel pipes using some of the old machinery, in the previous 
year, relevant to assessment year 1965-66 and in the assessment proceed-
ings for that year, he claimed unabsorbed depreciation under S.32 (2) of 
l.T. Act against the said machinery. The J.T.O. and Appellate Assistant 
Commissioner rejected the claim holding that the set off can be allowed 
E 
F 
only when the business in the subsequent year was the same as in the 
previous year. The Appellate Tribunal disagreed with them. On a Refer-
ence, the Allahabad High Court, relying on this Court's decision in Jaipwia 
China Clay Mines (P) Ltd., (1966) 56 I.T.R. 555 and dissenting from 
l!ombay High Court's decision in Sahu Rubbers Pvt. Ltd., (1963) 48 l.T.R. G 
464, came to the conclusion that 'profits and gains chargeable to tax' in S. 
32 (2), I.T. Act, includes profits and gains not only from business but also 
under other heads of income and if depreciation claim cannot be fully 
covered in the Assessment year, the unabsorbed portion can be set off in 
the next year and following years till it is wiped out. The Court distin- H 
275 
276 
SUPREME COURT REPORTS (1995] SUPP. 4 S.C.R. 
A 
guished between 'carry forward business loss' and 'unabsorbed 
depreciation' and felt that it was not necessary to carry on the same 
business or use the same machinery in the following Assessment year or 
have depreciable assets but at the same time held that it was necessary to 
carry on some business to claim set off though there was no time bar for 
B such a claim. 
In the other connected appeal, the Bombay High Court, on a refer-
ence, followed the decision of the Allahabad High Court in 
C.J. T. v. 
Vinnani Industiies (P) Ltd., (1974) 97 I.T.R. 461 while distinguishing its 
own earlier decision in Salm Rubbe11 Pvt. Ltd., (supra), inter alia on the 
C ground that though S. 32 (2) of I.T. Act 1961 corresponds to the proviso 
to S. 10 (2)(vi) 01· I.T. Act 1922, this is an independent and substantive 
section and not a mere proviso. 
In Appeal to this Court, it was contented on behalf of the Revenue, 
that there was divergence of views between the various High Courts on the 
D interpretation of S. 32 (2) of I.T. Act, 1961. It was also submitted that the 
expression 'the following previous year' literally means what it says and 
cannot be any 'following previous year' and if the chain of setting of snaps, 
it cannot be restarted. 
E 
Allowing the Appeals, this Court 
HELD : 1. 'Profits and gains chargeable' in S.32(2) of I.T. Act 1961, 
refers to income under all heads of income specified in S.14 as has been 
repeatedly held by this Court. 
F 
. C.l. T v. Jaipwia China Clay Mines (P) Ltd., (1966) 59 I.T.R. 555 and 
Rajapalayam Mills Ltd. v. C.I. T., Madras, (1978) 115 J.T.R. 777, relied on. 
Karam Illa/ti Md. Shafi v. C.I. T, (1929) 3 J.T.C. 456; A. Suppa11 
Chettiar & Co. v. C.l.T., (1929) 4 l.T.C. 211; Laxmiclzand Jaipwia Spg. & 
G ltvg. Mills; In Re;'(1950) 18 I.T.R. 919;Ambika Silk Mills Co. Ltd. v. C.I.T., 
(1952) 22 I.T.R. 58; Balle1pur Col/ieiies v. C./. T, (1929) 4 J.T.C. 255; C.l. T 
v. Ravi lndusuies Ltd., (1963) 49 I.T.R. 145; C.l. T. v. Girdhaii/a/ Haiival-
/abhdas Mills Co. Ltd., (1964) 51 J.T.R. 693 and C./. T v. B. Nagi Reddy, 
(1964) 51 l.T.R. 178, referred to. 
H 
2. Jn the absence of any words to that effect, it must be held that for 
C.l.T. v. VIRMANI INDS. PVf. LTD. 
277 
availi
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