JUDGMENT

SABYASACHI MUKHARJI, J.:— These appeals by special leave are from the judgment and order of the Division Bench of the Allahabad High Court dated 4th August, 1972 (reported in 1972 UPTC 509).

2. M/s. J. K. Hosiery Factory, Kanpur, the assessee firm herein, originally consisted of Sir Padampat Singhania, L. Lakshmipat Singhania and L. Kailashpat Singhania and J. P. Agarwal as partners. In January, 1946, the three Singhania brothers appeared to have retired from the firm and in their place the Kamla Town Trust was alleged to have become partner.

3. The revenue challenged this reconstitution of the firm and according to the revenue, the Singhania brothers never retired and the trust never became a partner. Four questions were referred by the Tribunal to the High Court under S. 66(1) of the Indian Income-tax Act, 1922 (hereinafter called the Act). The question No. 4 is the only question canvassed before us and survives for these appeals. The same is as follows :

"Whether, under the provisions of S. 10(2)(v), proviso (b) of the Income-tax Act, the unabsorbed depreciation of the unregistered firm in 1949-50 can be allowed as a deduction in the assessments of the partners of the registered firm in the assessment year 1950-51?"

4. Question No. 4 is relevant only for the assessment year 1950-51. For the previous assessment year 1949-50, the firm had been allowed an unabsorbed depreciation of Rs. 43,963/-. The firm claimed a setoff thereof in the assessment year 1950-51. The Tribunal refused to grant this setoff on the view that in the year 1949-50, the assessee firm was an unregistered firm while it had been registered under the Income-tax Act for the year 1950-51. According to the Tribunal. the loss on account of depreciation of an unregistered firm could not be carried forward to the succeeding year in case the firm got registered. It was so held by the Tribunal.

5. The High Court by reference to S. 10(2)(vi) and proviso (b) to S. 24(2) of the Act and on interpretation of the provisions and scheme of the sections held that the Tribunal was not right and answered the question in favour of the assessee. These appeals are from that decision.

6. In order to appreciate this question, it is necessary to bear in mind the relevant provisions of the Act. At the relevant time, sub-sec. (2) of S. 2 was as follows :

"assessee means a person by whom income-tax is payable."

7. The relevant provisions of S. 10 were as follows :

"10. (1) The tax shall be payable by an assessee under the head profits and gains of business, profession or vocation in respect of the profits or gains of any business, profession or vocation carried on by him.

(2) Such profits or gains shall be computed after making the following allowances, namely :-

(vi) in respect of depreciation ..........

Provided that -............(b) where, in the assessment of the assessee or if the assessee is a registered firm, in the assessment of its partners, full effect cannot be given to any such allowance in any year not being a year which ended prior to the 1st day of April, 1939, owing to there being no profits or gains chargeable for that year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of Cl. (b) of the proviso to sub-sec. (2) of S. 24, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following year and deemed to be part of that allowance, or if there is no such allowance for that year, be deemed to be the allowance for the next year, and so on for succeeding years."

8. It is apparent, as the High Court noted, that the proviso dealt with every assessee. It specified that where the assessee was a registered firm, then in the assessment of its partners, if full effect could not be given to any depreciation allowance and where the assessee was an unregistered firm where there was no question of its partners being ass