HARI MILLS LIMITED Vs. FIRST INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner is a company registered on 4-12-1954 and if commenced production on 1-9-1956. It has adopted the calendar year for purposes of accounting. For the assessment year 1957-58, it submitted a return on 12-3-1959. Actually it made a trading profit of Rs. 64131 for that year. But it claimed Rs. 56280 as depreciation allowance and Rs. 1,34,317 as development rebate so that its returns showed a loss. THE first respondent by an order of his dated 18-11-1961, considered the return as null and void on the view that it was not filed within the assessment year and that in view of the provisions of S. 22(2-A) of the Income tax Act 1922, which according to him applied to the case, the loss returned by the return of the petitioner would have to be ignored and not carried forward. THE petition is to quash the order. THEre is a further prayer that this court should direct the first respondent to set off the loss of prior years in the assessment for 1957-58.

(2.) IN support of the petition it is contended that the view of the first respondent cannot be supported. Learned counsel for the petitioner candidly stated that so far as development rebate is concerned, no question of carrying it forward can arise, as there is no specific enabling provision in the Act. But he says that the carrying forward of depreciation allowance is not under S. 24(2) and the view of the first respondent to the contrary is incorrect. If the matter were res integra, it would have been necessary for this court to deal with the point in greater detail, Commr. of income tax, Madras v. Speed-a-away (P) Ltd., 1966-1 ITJ 9 (Mad) decided by a Division Bench of this court to which one of us was a party, had occasion to consider the ambit and effect of S. 10(2) (vi) and proviso (b) thereto in relation to S. 24. It was there held that the scheme of carrying forward of unabsorbed depreciation and set off envisaged by proviso (b) stands by itself and is independent of S. 24(2), which has nothing to do with that item of allowance and contains only a rule of priority Proviso (b) to clause (vi) of S. 10(2) is broadly speaking to the effect that unabsorbed depreciation of the previous year shall be carried forward to the subsequent year and be deemed to be part of similar depreciation of such subsequent year and so on for succeeding years and set off thereof allowed on that basis. S. 24(2) does not concern itself with depreciation allowance except that proviso (b) to clause (iii) directs that where such allowance is to be granted effect shall first be given to sub-sec. (2). IN other words, as we already indicated, allowance for depreciation under S.10(2)(vi) will follow and not precede the set off permissible under S. 24(2). The view in 1966-1 ITJ 9 (Mad) receives support from Commr. of INcome tax Calcutta v. Jaipuria China Clay Mines, . The Supreme Court there observed-