S.M.SIKRI,J.

(1) THIS is an appeal by certificate granted by the High court of Calcutta against its judgment in a reference made to it under s. 66 of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act.) The question referred to it by the Appellate tribunal, at the instance of the assessee, was as follows : `Whether in the facts and circumstances of the case, the unabsorbed depreciation of the past years should be added to the depreciation of the current year and the aggregate of the unabsorbed depreciation and the current years depreciation be deducted from the total income of the previous year relevant for the assessment year 1952-53.` The relevant facts and circumstances are as follows : The Income Tax Officer assessing the respondent, M/s Jaipuria China Clay Mines (P) Ltd. Calcutta, hereinafter referred to as the assessee, for the year1952-53 computed its total income at Rs. 14,041.00 before charging depreciation for that year. From that figure he deducted depreciation for the year amounting to Rs. 5,360.00, thus computing a profit of Rs. 8,681.00. From this figure he deducted an equivalent amount, i.e., Rs. 8,681.00, in respect of losses during 1947- 48, and he thus worked out the business income as nil. He then computed the dividend income at Rs. 2,01,130.00 and determined the total income at this figure and levied tax on it. The assessee had in its favour an unabsorbed depreciation aggregating to Rs. 76,857.00, and it contended before the Income Tax Officer that this sum should be deducted from The income received from dividends, which, if done, would reduce the total income to Rs. 1,32,955.00, but the Income Tax Officer refused to accede to this contention. The Appellant Assistant Commissioner upheld the order of the Income Tax Officer and the assessees appeal to the Appellate tribunal met with the same fate. The High court, however, accepted the contention of the assessee and answered the question referred, to it in favour of the assessee.

(2) THE answer to the question depends on the interpretation of ss. 6, 10 and 24 of the Act. We are concerned with the law as it stood on 1/04/1952. The scheme of the Act is that the tax is levied in respect of the total income of the previous year of every individual, Hindu Undivided family, etc., and the total income consists of income under various heads such as Salaries, Interest on Securities, Income from Property, Profits and gains of business, profession or vocation, and Income from other sources and Capital gains. Various S. deal with how income, profits and gains under each head have to be computed. Section 10 deals with the communication of profit and gains of any business carried on by an assessee, Section 10(2) prescribes the allowances which have to be deducted before computing the profits and gains; one of the allowances is depreciation, and this Is provided under subcl. (vi). Proviso (b) to S. 10(2) (vi). On this a great deal of argument has been addressed to us and it reads as follows : `(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 last 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 clause (b) of the proviso to Ss. (2) of section 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, he deemed to be the allowance for that year, and so on for succeeding years;` It may be mentioned that the words `in the assessment of the assessee or if the assessee is a registered firm, in the assessm