Law: Income Tax Act, 1961

Section: 32

Income-tax---Depreciation---Firm---Partner---Unabsorbed depreciation ---Assessee, partner in various firms---Unabsorbed depreciation relating to one of firms which had closed its business---Unabsorbed depreciation could be carried forward and set off against profits from other firms---Indian Income Tax Act, 1961, S. 32. The assessee derived income from property and share income from three firms. He was also a partner in a firm by name Sri Abirami Cotton Mills, which had been incurring losses year after year right from its inception. That firm was sold as a going concern in the course of the assessment year 1978-79. The assessee had certain carried forward losses and unabsorbed depreciation relating-o this firm. The assessee claimed that this carried forward business loss and unabsorbed depreciation of Rs.40,827 should be set off against his income for the assessment year 1979-80. The Income-tax Officer rejected the claim but the- Tribunal allowed it. On a reference: Held, that the Tribunal was correct in holding that the depreciation relating to the defunct firm which had closed its business in the assessment year 1978-79 must be carried forward and set off against the profits of the assessee from other business in the assessment for the year 1979-80. CIT v. Virmani Industries (Pvt.) Ltd. (1995) 216 ITR 607 (SC) and CIT v. C. Angammal (1998) 232 ITR 637 (Mad.) (Appex.) fol. CIT v. Estate and Finance Ltd. (1978) 111 ITR 119 (Bom.) and CIT v. Virmani Industries (P.) Ltd. (1974) 97 ITR 461 (All.) ref. JUDGMENT K. A. THANIKKACHALAM, J.---At the instance of the Department, the Tribunal referred the following question for the opinion of this Court under section 256(1) of the Income Tax Act, 1961: "Whether, in the case of the partner of a firm which had become defunct, the Appellate Tribunal is correct in coming to the conclusion that the unabsorbed depreciation relating to the defunct firm which had closed it business in the assessment year 1978-79 must be carried forward and set off against the profits of the assessee from other business in the assessment for the year 1979-80?" The assessee is a partner in the firm by name Sri Abirami Cotton Mills. The assessee is…

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