JUDGMENT - SUGLA T.D., J.:---In this reference under section 256(1) of the Income Tax Act, 1961, the Income-tax Appellate Tribunal has referred to this Court the following two questions of law at the instance of the Department :

"(1) Whether on the facts and in the circumstances of the case, the assessment of the assessee for the assessment year 1962-63 having been validity reopened under section 147 of the Income Tax Act, 1961, could the Income-tax Officer set off the unabsorbed depreciation of past years in such re-assessment when the omission to effect the set off in the original assessment was not due to any omission or failure on the part of the assessee to disclose fully and truly all material facts as to that unabsorbed depreciation?

(2) Whether on the facts and in the circumstances of the case it was open to the Income-tax Officer in the re-assessment proceedings under section 147(a) of the Income Tax Act, 1961 to recompute the assessable income of the assessee at 'Nil' and thereby disentitle it to the Income-tax Rebate when in the Original Assessment, the assessable income of it had been computed at Rs. 1,24,929/- and on that basis it has been held entitled to the Income tax Rebate under section 2(5)(i) of the Finance No. II Act, 1962 and such assessment had become final as both the assessee and the Income tax Department had taken no further proceedings from the Tribunal's order to that effect?"

2. When the reference came up before a Division Bench of this Court to which one of us (Justice Bharucha) was a party, it was submitted that in view of the Supreme Court decisions in (Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali H.M. Abdulali)1, 90 I.T.R. 271, and (The Deputy Commissioner of Commercial Taxes v. H.R. Sri Ramulu)2, 39 S.T.C. 177, and the Full Bench decision of Andhra Pradesh High Court in (Commissioner of Wealth Tax, A.P. III v. Subakaran Gangabhishan)3, 121 I.T.R. 69, the decision of this Court in (New Kaiser-I-Hind Spg. and Wvg. Co. v. Commissioner of Income-tax)4, 107 I.T.R. 760, required reconsideration. Being prima facie of the view that the said decision required reconsideration the Bench referred the matter to the Hon'ble Chief Justice for constituting a Full Bench. This is how this reference has come up before this Full Bench for adjudication.

3. Shri Dalvi, hitherto the learned Counsel for the respondent assessee, sought discharge on the ground that despite intimation sent by him to the assessee, he had received no instructions. However, having regard to the importance of the question raised, the Court considered it appropriate to request Shri Dalvi to assist the Court in the capacity of amicus curiae. Shri Dalvi, it may be stated in fairness to him, gladly agreed to assist the Court.

4. The assessee is a company. The assessment involved is assessment year 1962-63. The assessment was originally completed computing the total income at Rs. 5,68,797/- (comprising of business income at Rs. 4,43,868/- and income from property and other sources at Rs. 1.24,929/-). Holding that unabsorbed depreciation was to be set off against business income, total taxable income was computed at Rs. 124.929/-.

An appeal was filed by the assessee. It was inter alia contended that its claim for deduction in respect of Rs. 1,20,398/-, being provision for gratuity to staff, was wrongly disallowed and that the assessee was entitled to relief under section 2(5)(i) of the Finance Act, 1962, in respect of profits made on export of goods out of India. The Appellate Assistant Commissioner confirmed the disallowance as regards claim in respect of provision for gratuity, but held that the assessee was entitled to relief in respect of export profits provided under section 2(5)(i) of the Finance Act, 1962. Accordingly, he directed the Income-tax Officer to compute that relief in accordance with the Rules framed under the Act.

Against the order of the Appellate Assistant Commissioner, the Department filed an appeal on the ground tha

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