BALLARPUR COLLIERIES CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following two questions have been referred by the Tribunal, Bombay Bench "B", to this Court under S. 66(1) of the Indian INCOME TAX ACT, 1922 (hereinafter referred to as "the Act") :

(2.) THE assessee, M/s Ballarpur Collieries Co. Nagpur, is a registered firm carrying on business of coal mining. In the asst. year 1956 -57, the assessee's income was Rs. 9,236 before adjustment of depreciation. The depreciation allowable for that year was Rs. 1,21,519. After setting off the depreciation to the extent of profits there was unabsorbed depreciation of Rs. 1,12,283. In the following year, namely, the asst. year 1957 -58, there was a business loss of Rs. 1,38,756. This was before making allowance for the depreciation of Rs. 2,15,911 for that year. In the asst. year 1958 - 59, after making allowance for the depreciation and the development rebate allowable for that year, the total income of the assessee -firm was determined by the ITO at Rs. 5,24,035. This income was assessed by the ITO under S. 23(3) of the Act and these profits were allocated among the partners in accordance with their shares. The assessee -firm was not satisfied with this order of the ITO and it filed an appeal before the AAC, Akola Range, Akola. Before the AAC the contention raised was that the aggregate losses of the earlier two years should be set off against the income of Rs. 5,24,035 before tax was levied on the registered firm. This contention was rejected by the AAC and he substantially maintained the assessment order passed by the ITO except that a deduction of Rs. 600 paid as salary to an employee was allowed.

(3.) WE shall first take up the second question. In order to appreciate the contentions raised on behalf of the Revenue, it is necessary to reproduce some relevant provisions of the Act. Sub - ss. (5) and (6) of S. 23 of the Act which provides for the assessment of a firm are as follows :