1. In this case, at the instance of the assessee, the following questions have been referred to us for our opinion:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the carried forward development rebate of the earlier years cannot take precedence over the unabsorbed depreciation and business losses for the purpose of set off during the current year?
(2) Whether the Tribunal has erred in interpreting S.2(45) read in the context of S.5, S.33 and S.72, etc., in determining the point at issue?"

2. The facts leading to this reference are as follows:
The assessment year under consideration is 1970-71, corresponding to calendar year 1969. The assessee is a limited company carrying on the business of manufacture and sale of cotton cloth. The ITO computed the income of the assessee at Rs. 15,92,301. From this he made certain deductions on account of telephone deposit, depreciation, business losses carried forward from earlier years and unabsorbed carried forward depreciation at Rs. 5,73,136. The ITO also assessed a share of profit from Monotes Sales Agency. The assessee, on the other hand, claimed that the development rebate should hav