Unabsorbed depreciation allowance in the case of a registered firm is allowed to be carried forward by the firm and set off against its profits in the following year or years.

( 1 ) THE Income-tax Appellate Tribunal, Delhi Bench a has referred the following question of law for the opinion of this Court at the instance of the Commissioner of Income-tax, Delhi-IV, New Delhi : -

"whether on the facts and in the circumstances of the case the Tribunal was right in holding that benefit of carry forward unabsorbed depreciation was available to the Registered firm for adjustment against the income of the succeeding year ?"

THE assessee is a registered firm having two partners. For the A. Y. 1970-71, it was assessed on a total income of Rs. 80,1561-: This comprised entirely of business income. For the immediately preceding assessment year, its total income had been assessed at a net loss of Rs. 80,1001-, which was duly allocated in equal shares to the two partners, Shri J. R. Patel and Smt. Dhai Laxmi Patel. The Income-tax Officer relying on the provisions of Section 75 of the Income-tax Act, 1961 (hereinafter referred to as the Act) did not allow the assessee firm the benefit of the carry forward loss in the A. Y. 1970-71. The firm was required to pay tax as a registered firm on its total income of Rs. 80,1561 -.

( 2 ) THE assessee in the appeal taken to the Appellate Assistant Commissioner contended that against, its total income for A. Y. 1970-71 the following brought forward losses should be allowed to be adjusted :

THIS contention, however, did not prevail with the Appellate Assistant Commissioner. He took the view that Section 75 (2) of the Act put a complete ban on the carry forward of losses in the case of a registered firm. He further observed that as Section 76 of the Act placed registered firms, and unregistered firms on the same footing in that respect and that except to the limited extent of speculation losses under the Act of 1922 no other losses as-buffered by registered firms could be carried forward and set off against the profits of the subsequent years, even for the limited purposes of determing the tax payable by the registered firms. The appeal of the assessee was accordingly dismissed.

( 3 ) THE assessee took the matter to the Appellate Tribunal in the second appeal. Before the Tribunal it was conceded on behalf of the assessee that the loss originally deternined for the assessment year 1968-69 had since been converted into a positive income and, therefore, there was no question of adjusting any carped forward loss from that year. As regards the loss computed for the A. Y. 1970-71 it was submitted that it had two parts, viz. , business loss proper amounting to Rs. 13,8441- and unabsorbed depreciation amounting to Rs. 66,2561. 00 It was submitted that the ban regarding the carry forward of loss in the hands of a registered firm, as imposed under Section 75 of the Act might apply, only in respect of the loss of Rs. 13,8441- and that the other amount of Rs. 66,256. 00 must be treated as unabsorbed depreciation which was required, under the provisions of. Section 32 (2) of the Act, to be added to the amount on depreciation allowance for the following previous year and deemed to be a part of that allowance.

( 4 ) ON behalf of the Revenue it was contended that under Section 75 (2) of the Act only the partners of a registered firm were entitled to get the set off of the carry forward loss and not the firm. The Tribunal on a consideration of the rival contentions observed that Section 75 (2) of the Act refers to the loss of a registered firm, before considering the unabsorbed depreciation and that Section 32 (2) covers the case of unabsorbed depreciation. The decision of the Bombay High Court in the case of Ballarpur Collieries Co. v. Commissioner of income-tax, Poona [ (1973) 92 ITR 219 (1)] was relied upon by the Tribunal. IT was observed that the ratio of the decision in that case which was under the provisions of the old Act of 1922 was equally applicable to the cases under the new Act of 1961 as the corresponding provisions of Section 32 (2) of the Act of 1961 are pari materia wi