Bihar State Industrial Development Corporation Ltd. vs Commissioner of Income Tax

This is a reference u/s 256(1) of the Income Tax Act, 1961, in relation to the assessment year 1967-68. The facts are that while assessing, the Income Tax Officer found that the income of the assessee came to Rs. 11,33,617 after giving effect to the order of the Appellate Assistant Commissioner. It was also found that there was a large amount of unabsorbed depreciation relating to the assessment years 1963-64 to 1966-67. Besides unabsorbed depreciation, there was also unabsorbed development rebate amounting to Rs. 9,85,528 pertaining to the assessment year 1964-65. The Income Tax Officer set off the unabsorbed depreciation to the extent of Rs. 11,33,370. The income thus came to "nil". The unabsorbed development rebate for the assessment year 1964-65 was carried forward. The assessee, being aggrieved by the refusal of grant of unabsorbed development rebate, filed an appeal. Before the appellate authority, the assessee contended that the unabsorbed development rebate should have been allowed in preference to the grant of unabsorbed depreciation. The submission of the assessee did not find favour with the Appellate Assistant Commissioner. The same contention was agitated before the Income Tax Appellate Tribunal as well with the same result. Thus, the Income Tax Officer, the Appellate Assistant Commissioner and the Tribunal all held that in the matter of allowance, unabsorbed depreciation must take precedence over unabsorbed development rebate. The assessee, being aggrieved by the order of the Tribunal, filed an application for reference to this court. Hence, the present reference before us.

On the facts mentioned above, the Tribunal has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the brought forward unabsorbed development rebate is to be given preference over the brought forward unabsorbed depreciation losses in allowing the set-off against the current year''s income ?"

The question referred to us does not need any detailed examination of the law on the subject. The law is now well settled that brought forward unabsorbed depreciation losses must take precedence over brought forward unabsorbed development rebate. That was the view taken by the Kerala High Court upon a consideration of decisions of several High Courts. Since the matter has been elaborately discussed by the Kerala High Court in Calicut Modern Spinning and Weaving Mills Ltd. Vs. Commissioner of Income Tax, , we would refrain from covering the same ground over again. In that case, their Lordships categorically laid down that "it is only after wiping out such (balance) unabsorbed business loss and also the unabsorbed depreciation, the question of any set off of the unabsorbed development rebate can or will arise". Reference may only be made to the decisions relied on by the Kerala High Court in Commissioner of Income Tax, Gujarat I Vs. Gujarat State Warehousing Corporation, , Mysore Paper Mills Ltd. Vs. Commissioner of Income Tax, Karnataka-I, and Commissioner of Income Tax, Tamil Nadu Vs. Coromandel Steels Ltd., . The treatise of the law on the, subject in Kanga and Palkhivala and Chalurvedi and Pithisaria''s are also the same. In that view of the matter, we have not the least doubt that it is only after setting off of unabsorbed business loss and unabsorbed depreciation that the question of allowance of unabsorbed development rebate can arise. In terms of the question posed before us, the answer must be that the brought forward unabsorbed depreciation loss will first be set off against the current year''s income. Thereafter, if any balance is left, allowance may bo made for brought forward unabsorbed development rebate.

No decision of any court has come to light taking a view contrary to the view taken by the Kerala, Mysore, Gujarat and Madras High Courts and ourselves.

For the reasons stated above, the question referred to us is answered in the negative, in favour of the Revenue and against the assessee.

No one has appeared on behalf of the assesee. Probably the assessee is not interested in the reference any more.

The reference is answered accordingly. There shall be no order as to costs. Let a copy of this judgment be transmitted to the Assistant Registrar, Income Tax Appellate Tribunal, in terms of Section 260 of the Income Tax Act, 1961.