Law:

Section:

Section 5, read with section 32, of the Income-tax Act, 1961 [Corresponding to section 4(1), read with section 10(2), of the Indian Income-tax Act, 1922] - Income - Deemed to accrue or arise in India - Assessment year 1946-47 - Whether unless assessee brought forward, losses of previous years in books of account of current year, he cannot claim to set off losses of prior years against profits of current year - Held, yes - Whether income or profits within meaning of section 4(1)(b)(iii) of 1922 Act would be income as understood in commercial sense, in other words, excess of business incomings over business outgoings - Held, yes - Whether depreciation cannot be said to be expenditure or outgoing expenditure for purposes of business - Held, yes - Whether profits accruing to assessee are ascertained or get ascertained at end of year, but that would not mean that no part of profits of business located outside taxable territories could be received in taxable territories during course of year - Held, yes FACTS The assessee-firm consisted of father and son. They belong to Mandvi, a town in the then native State of Kutch. The Head Office of the assessee was at Bombay. The bulk of the income of this firm was derived from its business at 'P' and 'L', which were places in the then native State of Hyderabad. The business carried on there was of ginning and pressing factories. The books of account of the head office were maintained according to the Samvat year. The total remittances from 'L' and 'P' to Bombay either directly or through Kutch-Mandvi amounted to Rs. 1,53,967. The income-tax authorities had computed the total profits of the business for the Samvat year 1999 at Rs. 97,398. The assessee in the first instance disputed the computation of the profits at this figure. According to the assessee two items ought to have been taken into account and given credit before computing his total profits. In the first instance the assessee's contention that the loss incurred by the assessee in the years prior to 1-4-1943, should have been set off against the said amount and in the second instance it was contended that depreciation on the fixed assets admissible under section 10(2)…

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