( 1 ) REVENUE is before us seeking for an answer to the following question of law: whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that the assessment order passed by the Assessing Officer allowing the claim of the assessee for adjustment of the unabsorbed depreciation against the income from other sources was in order and hence cannot be considered to be erroneous or prejudicial to the interests of revenue and in cancelling the order Under Section 263?

( 2 ) FACTS are as under:

The respondent-assessee is 100% export oriented industrial unit in terms of the provisions of section 10-B. Any profits and gains derived by it from the said export oriented undertaking are not liable to be included in the total income of the assessee. Although the industrial operations are stated to have been commenced in assessment year 1988-89, the assessee however, did not claim the benefits Under Section 10-B in assessment years 1988-89, 1989-90 and 1990-91. On the other hand, it claimed the said benefits for a connective period of 5 years starting from assessment year 1992-93. In assessment year 1994-95, the assessee is stated to have other income beyond the profits and gains of the export oriented commercial unit. Un-absorbed depreciation available to the assessee in assessment year 1988-89 was carried forward to this year and was claimed by the assessee to be adjustable against the income from other sources, thereby it reduced for assessment purposes at nil. The Assessment Officer, in the assessment order passed on 17. 3. 1995 accepted the above claim of the assessee and assessed the total income at nil. The CIT, exercised its power Under Section 263 and passed an order on 25. 3. 1996. He considered the above action on the part of the Assessing Officer of adjusting the brought forward unabsorbed depreciation against the income from the sources of the assesses to be wrong and bad in law and causing loss to the Revenue. He directed that the unabsorbed depreciation and unabsorbed investment allowance should be adjusted against the income of the export oriented business undertaking and the total income of the assessee should accordingly be recomputed afresh. Aggrieved by the same, the assessee preferred an appeal. The Tribunal has chosen to allow the appeal filed by the assessee. Thereafter, a reference application was filed by the Revenue and accepting the reference application, a question of law as referred to above was framed four our decision.

( 3 ) HEARD the learned Counsel elaborately for some time. Sr. Indra Kumar, learned Counsel appearing for the Revenue takes us to the provision of Section 10-B and also the other provisions of the Act to say that the Tribunal is wrong in reversing the order passed by the Commissioner of income Tax in the case on hand. According to him, the unabsorbed depreciation ought to have been taken note of for the purpose of exemption Under Section 10-B of the Act. According to him in the case on hand, the asseasee cleverly has chosen to show nil for the purpose of tax by way of novel method unknown to Income Tax Laws. He also says that the Commissioner was right in rejecting the case of the asseasee.

( 4 ) PER contra, Sr. S. Parthasarathi, learned Counsel however pleads that Section 10-B provides for total exemption and the conclusion so made by him could also be on commercial basis. He would therefore says that the Tribunal was fully justified in holding in his favour.

( 5 ) AT the time of arguments, we directed the parties to place before us the computation of total income arrived at by the assesaee. The assessee has placed before us a photocopy of the calculation. The said calculation is also taken into consideration for the purpose of finding in the case on hand. It is seen from the material on record that the assessee-respondent has chosen to file a nil return. Thereafter, the Commissioner has chosen to issue a show ca