GARDEN SILK WEAVING FACTORY, SURAT versus COMMISSIONER OF INCOME TAX, GUJARAT, AHMEDABAD

Citation: [1991] 1 S.C.R. 909 · Decided: 22-03-1991 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Appeal(s) allowed
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

.. 
--
-
GARDEN SILK WEAVING FACTORY, SURAT 
A 
>.( 
V. 
COMMISSIONER OF INCOME TAX, 
GUJARAT, AHMEDABAD 
MARCH 22, 1991 
B 
. [S. RANGANATHAN AND K. RAMASWAMY, JJ] 
~ 
.. 
Income Tax Act, 1961-Sections 32(2), 72(2)-"Depreciation"-
-
y· 
Meaning of-Unabsorbed loss and unabsorbed depreciation-Diffe-
rence of-Carry forward and set off of unabsorbed depreciation-
Principle and distinction of. 
c 
Income Tax Act, 1961-Sections 72(2), 32(2), 35-Unabsorbed 
depreciation computed in assessment of registered firm-Carry forward 
of-Alternatives indicated. 
Income Tax Act, 1961-Section 32(2)-Unabsorbed depreciation 
D 
allocated to partners of registered firm-Firm whether entitled to carry 
forward the depreciation and set off. 
Income Tax Act, 1961-Section 32(2)-Construction and object 
of-Assessee-Registered firm-Steps to be taken to carry forward of 
)... ·unabsorbed depreciation to successive assessment years, indicated. 
E 
·~ 
Income Tax Act, 1922-Section 10(2)(vib), proviso (as amended 
in 1953)-Effect and application of 
For the assessment year of 1968-69, the assessee appellant, a 
registered firm, returned a total income of Rs.3,94,483 and a provi-
sional assessment was made. 
Subsequently, the Income Tax Officer found that for the said 
assessment year, the assessee had made an income of Rs.11,82,056 and 
deducting therefrom three figures viz., (i) unabsorbed depreciation: 
F 
Rs.1,59,181; (ii) unabsorbed development rebate: Rs.2,79,150; and (iii) 
G 
unabsorbed business loss: Rs.3,49,242, aggregating to Rs. 7 ,87 ,573 and 
\,-arrived at the net income of Rs.3,94,483, which had been returned and 
accepted. The three figures were the figures carried over from the 
previous year for the assessment year 1967-68. 
The Income Tax Officer allowed the unabsorbed development 
H 
909 
910 
SUPREME COURT REPORTS 
( 1991] 1 S.C.R. 
rebate pertaining to the assessment year of 1967-68 to be carried for-
:.c 
A 
ward and set off in computing the total income fOr the assessment year 
of 1968-69, but he did not allow the amounts of unabsorbed deprecia-
tion and unabsorbed business loss. He, therefore, added back the sum 
of Rs.5,08,423 (the aggregate of the amounts of unabs~rbed deprecia-
tion and unabsorbed busine~s loss) to the returned income for determin-
B 
ing the total income for the assessment year of 1968-69. 
The action of the Income Tax Officer was confirmed by the Appel-
~\ 
late Assistant Commissioners (A.A.C.). However, on further appeal, the 
Income-tax Appellate Tribunal (A. T.) upheld the Income-tax Officer's 
stand that the firm could not be allowed to carry forward and set off the 
~~ 
busines~ loss carried from the earlier year but, so far as the unabsorbed 
c 
depreciation was concerned, it upheld the assessee's contention. 
On these two issues a reference to the High Court was made and y 
the High Court answered them against the assessee. 
D 
For the assessment year 1967-68, the assessee filed a return on 
.30.6.67 showing a loss of Rs. 7 ,87 ,515 but filed a revised return on 
22.3.1972 showing a loss of Rs.5,46,351. On 14.3.73 the I:T.O. comp-
leted the assessment determining a loss of Rs.4,85,250. 
The assessee's request that this loss should be carried forward to 
~ 
E 
the subsequent assessment year was rejected by the I.T.O. This was 
confirmed by the A.A.C. On further appeal, the A.T. confirmed the 
order of the A.A.C., following the High Court's decision for the assess-
ment year 1968-69 which had by then been announced. 
The High Court answered the q,,qestion-"Whether, on the facts 
F 
and circumstances of the case, the Tribunal was justified in rejecting 
~' 
the claim for carry forward of business loss in the hands of the firm in 
view of the decision reported in 101 I. T .R. 658?" in the affirmative. 
Hence the assessee's the appeals-one appeal for the assessment 
year of 1968-69 and the other for the assessment year of 1967-68--
G 
under certificates of fitness granted by the High Court. 
On behalf of the assessee it was contended that the firm as well as .-J.. 
the partners had been returning losses all along with the result that no 
part of the unabsorbed depreciation of the firm had been set off in the 
partner's hands; that when there was an unabsorbed depreciation com-
H 
puted in the assessment of a registered firm for any year, for the 
.. 
-
..
-
-
GARDEN SILK v. C.l.T. 
911 
>w( purpose of carry forward, it should be t_etained and carried forward by 
the firm only. 
· 
On the other hand,
Excerpt shown. Read the full judgment & AI analysis in Lexace.