COMMISSIONER OF INCOME TAX Vs. BISON KNITTING CO

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following two questions for the opinion of this Court under s. 256(1) of the IT Act, 1961 :

(2.) THE assessee is a firm engaged in the manufacture and sale of hosiery articles. It filed a return for the asst. yr. 1976-77 on 23rd July, 1976 admitting an income of Rs. 88,169. In arriving at the above income, the assessee had claimed depreciation of Rs. 40,671, i.e., at 15 per cent. on Rs. 2,71,138. THE ITO while completing the assessment, allowed the assessee's claim as above. Later on the CIT, while scrutinising the said order, found that the sum of Rs. 2,71,138 represented the book value of the machineries as taken over by the assessee from the predecessor-owner and was not its written down value, which alone should have been adopted as cost for depreciation purposes.

(3.) WE have also heard the learned counsel appearing for the assessee, who supported the order passed by the Tribunal. According to the learned counsel appearing on behalf of the assessee, inasmuch as there is no continuity of the old firm, it cannot be said that there is change in the constitution of the new firm. It was, therefore, submitted that the Tribunal was correct in setting aside the order passed by the CIT under s. 263 of the Act.