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Section 32(2) of the Income-tax Act, 1961 - Depreciation - Carry forward and set-off of unabsorbed depreciation - Assessment year 1982-83 - Whether unabsorbed depreciation carried forward from earlier years can be allowed to be set off against income assessed under head 'Income from other sources' - Held, yes CASES REFERRED TO CIT v. Estate & Finance Ltd. [1978] 111 ITR 119 (Bom.), CIT v. Virmani Industries (P.) Ltd. [1995] 216 ITR 607/ 83 Taxman 343 (SC), CIT v.Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC) and Rajapalayam Mills Ltd. v. CIT [1978] 115 ITR 777 (SC). JUDGMENT D.K. Jain, J. - At the instance of the assessee, the Tribunal, Delhi Bench 'E', has referred the following questions under section 256(1) of the Income-tax Act, 1961 ('the Act'), for our opinion : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that unabsorbed depreciation of an earlier year could not be allowed to be set off against the income taxed under section 56 (sic) of the Income-tax Act, 1961 ? 2.Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the allowance of only 10 per cent of the total expenditure incurred by the assessee as expenditure for earning the income that was the subject-matter of tax ?" 2. The assessee-company, initially incorporated as a public limited company under the name and style of 'CGR India Limited', was engaged in the business of manufacturing and assembling X-ray equipments. However, its business activity stopped from 1-1-1981 as the foreign collaborator had withdrawn from the company. The name of the company was thereafter changed to Escorts Electronics Ltd. For the assessment year 1982-83, for which the previous year ended on 31-12-1981, the assessee filed its return declaring a loss of Rs. 11,76,539. While computing total income for the said assessment year, the Assessing Officer held that since the business of the assessee had ceased to exist, the entire income was to be assessed under the head 'Income from other sources' and not under the head 'Profits and gains of business'. He, accordingly, assessed the receipts on account of sale of…

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