S.K.DAS, J.

(1) THESE are two appeals on a certificate of fitness granted by the High Court of Judicature at Bombay under s. 66A(2) of the Indian Income-tax Act, 1922. The relevant facts which have given rise to them are shortly stated below.

(2) THE Indore Malwa United Mills, a limited liability company, is the appellant before us and will be referred to in this judgment as the assessee company. The respondent is the Commissioner of Income-tax(Gentral), Bombay. The assessee company carried on a business of manufacture and sale of textile goods. The manufacture was made at its mills in Indore which was Indian State before integration and had its own law as to income-tax known as the Indore Industrial Tax Rules, 1927. The sales of textile goods were made at various places, some inside and some outside the taxable territories of British India. For and upto the assessment year 1949-50 the assessee company was treated as a non-resident within the meaning of s.4A of the Indian Income-tax Act, 1922. For the assessment years 1950-51, and 1951-52 which are two assessment years under consideration, the account years were the calendar years 1946 and 1950 respectively. Indore became a part of the taxable territories within the meaning of the Indian Income- tax Act is the two assessment years and the assessee company was held to be resident and ordinarily resident" with the meaning of- that Act. Upto the assessment year 1949-50 that part of its profits which was received in British India was subjected to tax together with its other income which accrued in British India, namely, interest on securities and interest on bank accounts. In the assessments made for the assessment years 1948-49 and 1949-50 the position of the assessee company was stated to be as follows: 1948-49 Income under the head Interest on securities ... Rs. 1,032 Income under the head "Other-sources interest from banks ... Rs. 231 Rs. 1,263 Business loss ... Rs. 1,992.00. Balance of loss Rs. 729.00 carried forward. 1949-50 Interest on securities ... Rs. 1,023 Bank interest ... Rs. 213 Rs. 1,236 Less : loss of 1948-49 set off ... Rs. 729 Total income ... Rs. 507

(3) IN making the calculation of business profits or loss received or arising in the taxable territories, a proportion was struck between the total turn-over of the assessee company and its sales the proceeds whereof were received in the taxable territories. The following table, which is part of the order of assessment of 1950-51, shows clearly how the calculation was made.

Net profit Depreciation Business Total Sales for Business profit Other Total income

of the as per income turnover which considered as income for

Assessment company the Indian of the of the proceeds having been accruing the purpose

before Income-tax company company were received in the in the of assess

year allowance Act received taxable taxable ment under

of in the territories (by territories the Indian

depreciation (Col. 2 taxable apportioning the Income-tax

minus territories amount in Act.(Col.7

col.3) col. 4 in the plus col. 8)

proportion of

col 5 : col. 6)

1 2 3 4 5 6 7 8 9

Rs. Rs. Rs. Rs. Es. Rs. Rs. Rs.

1946-47 1,81,71,152 52,68,048 5,05,296 1,854 5,07,150

1947-48 - - 1,45,22,377 5,46,322 21,028 1,467 22,495

1948-49 : Loss -- 1,57,82,905 60,000 1,992 1,263 729

(loss) (loss)

(4) DURING the course of the assessment proceedings for 1950-51 the assessee company claimed that it was entitled to a set off of the entire losses of the assessment year 1948-49 which, it was common ground before the Tribunal, came to Rs. 5,19,590.00, and not merely the proportionate loss. The assessee company also claimed that the depreciation allowances of the two years 1948-49 and 1949-50 to which effect could not be given in those years and which had, therefore, to be carried forward should be added to the depreciation allowance of 1950-51 and be set off against the profits and gains of the assessee company liable to ass