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PETITIONER: COMMISSIONER OF INCOME TAX,MEERUT, ETC. ETC.

       Vs.

RESPONDENT: M/S VIRMANI INDUSTRIES PRIVATE LIMITED, ETC. ETC.

DATE OF JUDGMENT12/10/1995

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) MAJMUDAR S.B. (J)

CITATION:  1995 SCC  (6) 466        JT 1995 (7)   322  1995 SCALE  (5)718

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P. JEEVAN REDDY, J.      A common  question arises  in these  three appeals.  It relates to the meaning and interpretation of sub-section (2) of Section 32 of the Income-Tax Act. I would be enough if we state the facts in Civil Appeal No.1052 of 1976.      The  respondent-assessee,  Virmani  Industries  Private Limited, was  engaged in  the manufacture  of soap  and  oil during the  previous year  relevant to  the Assessment  Year 1956-57. The  business was  stopped in  that year whereafter the factory  was let  out on hire. Ten years later, i.e., in the previous  year relevant  to Assessment Year 1965-66, the assessee started the business of manufacture of steel pipes. For the purpose of this business a part of the old machinery used i the manufacture of soap and oil was utilised.      In the  assessment proceedings  relating to  Assessment Year 1956-57,  depreciation under  Section  32(1)  (ii)  was found to  be more than the profits and gains of the assessee for that  assessment year.  In  the  assessment  proceedings relating to  Assessment Year  1965-66, the  assessee claimed that the unabsorbed depreciation, to the extent it pertained to the old machinery utilised in the new business, should be brought forward  and set  off against the profits of the new business. This  claim was rejected by the Income Tax Officer and by  the Appellate  Assistant Commissioner  on the ground that such  a set  off is permissible only where the business carried on  in the  subsequent assessment  year is  the same business which  was carried  on in  the  earlier  assessment year. The  Income Tax Appellate Tribunal, however, disagreed with the said view and upheld the assessee’s. At the request of the Revenue, the Tribunal referred the following question to the  Allahabad High  Court under  Section 256(1)  of  the Income-Tax Act, 1961:      "Whether  on   the  facts   and  in  the      circumstances of the case the unabsorbed

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    depreciation in respect of a part of the      machinery  used  in  the  soap  and  oil      manufacturing business  which was  again      used for the new business of manufacture      of steel  pipes should  be allowed to be      set off  against the  profits of the new      business of  manufacture of  steel pipes      carried  on   by  the  assessee  in  the      accounting  period   relevant   to   the      assessment year 1965-66 ?".      The  High   Court  answered   the   question   in   the affirmative, i.e., in favour of the assessee. The High Court understood Section 32(2) to mean: 1.   in  computing   the  net   income  from  the  business, deduction is  to be  allowed on  account of  depreciation of buildings, plants  and machinery,  etc. used in the business at the  prescribed  rate.  If  such  depreciation  allowance cannot be  completely absorbed  by the  "profits  and  gains chargeable to  tax" -  which expression includes profits and gains arising  not only  under the  head "business" but also under other  heads -  Then the  unabsorbed  depreciation  is treated to  be the  depreciation allowance for the next year and so on until it is completely wiped out. 2.   there  is  a  distinction  between  business  loss  and unabsorbed  depreciation.   The  limitations  applicable  to carrying forward of unabsorbed depreciation. In other words, it is  not  necessary  that  the  same  business  should  be continued  in  the  following  assessment  year  nor  is  it necessary that  the machinery  which earned the depreciation in the  previous year should also be used for the purpose of the business in the following year. All that is necessary is that the  assessee  must  carry  on  some  business  in  the succeeding year  in which  the set  off  of  the  unabsorbed depreciation is  claimed. If there is no business, there can be no depreciation allowance but it does not follow that the business in the succeeding year should have some depreciable assets. Even  if there  are no  depreciable assets,  yet the unabsorbed depreciation  of the  previous  year  has  to  be carried forward  and deemed to be the depreciation allowance for the  succeeding year.  Similarly there  is no limitation that the unabsorbed depreciation can be carried forward only for eight years.      In view  of the  above understanding  of Section 32(2), the High  Court held  that the  assessee was entitled to set off the  unabsorbed depreciation  allowance relating  to the assessment Year 1956-57 against the income of the Assessment Year 1965-66.  The High  Court disagreed with the view taken by the  Bombay High  Court in Sahu Rubber Private Limited v. Commissioner of  Income-tax [(1963) 48 I.T.R.464]. It was of the opinion  that the  view taken  by it is supported by the decision of  this Court  in Commissioner  of  Income-tax  v. Jaipuria China Clay Mines (P) Limited {(1966) 59 I.T.R.555].      While it  is not  necessary to state the facts in Civil Appeal No.2849  of 1977,  it is  sufficient to state that in this decision the Bombay High Court followed the decision of the Allahabad  High Court  in Commissioner  of Income Tax v. Virmani Industries  (P) Ltd.  [(1974)  97  I.T.R.  461].  It distinguished its  earlier decision  in Sahu Rubbers Private Limited as  one rendered  with reference  to the  proviso to Section 10(2)  (vi) of  the Indian Income-Tax Act, 1922. The Court held  that though  the  said  proviso  corresponds  to Section 32(2)  of the  present Act, even so the fact that it was only  a proviso,  and not  a substantive  provision, did colour the  decision in  Sahu Rubber  Private  Limited.  The Court pointed  out that  under the present Act Section 32(2)

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is an independent and a substantive provision.      It is  brought to  our notice  by  Dr.  Gauri  Shankar, learned counsel  for the  appellant-Revenue that  there  has been a  divergence of  opinion among  the High Courts in the country as  to the  meaning and  interpretation  of  Section 32(2). He  referred to the decision of the Madras High Court in East  Asiatic Company  Private Limited v. Commissioner of Income-Tax [(1986)  161 I.T.R. 135] taking the view that for claiming  the  benefit  of  Section  32(2),  it  has  to  be established that  the assessee  was  carrying  on  the  same business as in the previous year and that if the business is not in  existence in  the  following  year,  the  unabsorbed depreciation of the previous year cannot be adjusted in such following year.  It accepted the decision of the Bombay High Court in  Sahu Rubber Limited as laying down the correct law and disagreed with the basis and reasoning on which the said decision was  distinguished in  the later  decision of  that Court in  Commissioner of  Income Tax  v. Estate and Finance Limited [(1978) 111 I.T.R. 119]. Dr Gauri Shankar brought to our notice  that Madras High Court had indeed taken the said view even  earlier in  Commissioner of  Income Tax v. Dutt’s Trust, Calicut  [(1942) 10  I.T.R. 477]  and Tube  Suppliers Ltd. v.  Commissioner of Income Tax [(1985) 152 I.T.R. 694]. Counsel further  pointed out that in yet another decision of the Bombay  High Court  in Hindustan  Chemical Works Ltd. v. Commissioner of  Income  Tax  [(1980)  124  I.T.R.  561],  a similar view  has been  expressed.  Dr.  Gauri  Shankar  has fairly brought to our notice that besides the Allahabad High Court in  Virmani and  the Bombay  High Court  in Estate and Finance Limited,  the Calcutta High Court in Commissioner of Income Tax  v. Kishanlal  and sons (Udyog) Pvt. Ltd. {(1985) 154 I.T.R.  735], Andhra  Pradesh High  Court  in  Hyderabad Construction Co.  Ltd. v. Commissioner of Income Tax [(1981) 129 I.T.R.  81]  and  Karnataka  High  Court  in  Additional Commissioner of  Income Tax  v.  Kapila  Textiles  (P)  Ltd. [(1981) 129 I.T.R. 458) have taken a view similar to the one taken by the Allahabad High Court in Virmani.      The provision  in Section  10(2)  (vi)  of  the  Indian Income Tax  Act, 1922 owes its origin to the U.K. Income Tax Act,  which   was  prior   to  its  consolidation  in  1952, administered through  the  provisions  made  in  the  Annual Finance Acts.  The Finance  Act  of  1918,  read  with  some changes made  in 1925,  dealt with  this specific provision. This provision  (which appeared  later as  Section 323(2) of the U.K. Income Tax Act, 1952) was as follows:      "Where full  effect cannot  be given  to      any such  allowance as  aforesaid in any      year 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,  the allowance      or part of the allowance to which effect      has not  been given, as the case may be,      shall, for  the purpose  of  making  the      assessment for  the following  year,  be      added to  the amount of such allowances,      or, if  there are no such allowances for      that  year,   be  deemed   to   be   the      allowances for  that year, and so on for      succeeding years."      This provision  was  adopted  almost  verbatim  in  the Indian Income  Tax Act, 1922. As in the U.K. Act, the Indian Act also  did not  place any  limit regarding  the number of years upto  which unabsorbed  depreciation could  be claimed for set off.

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    In 1936,  an Income  Tax Inquiry  Committee, headed  by J.B.   Vacha,   looked   into   the   provision   and   made recommendation that  as the allowance for depreciation is on account of  loss in  the value  of land  and machinery, such loss should  only be  regarded as  an expense of the year in which it  occurred and,  therefore, depreciation  should  be allowed each  year as  expense in determining profit or loss of the  year along  with the  other items of expenditure, as for  instance,   rent,  insurance   charges,  etc.  and  the resultant loss,  if any, should be carried forward and dealt with in  the general section on carry forward. The Committee recommended that  the special provision for carry forward of depreciation without limit of time should be abolished. This recommendation along  with some  others, was incorporated in this  Bill  introduced  in  the  Assembly,  but  the  Select Committee did not approve of the recommendation and retained the original  clause as  it stood,  thus placing  the  carry forward of  depreciation on  a different  footing from carry forward of loss. [See Para 454 of the Indian Income Tax Act, Vol.II by A.C. Sampath Iyengar, IVth Edn., 1952].      The provision  in the  Income Tax  Act,  1922  remained unamended till  1961. The  provision as it stood in 1937 was as follows:      "Where full  effect cannot  be given  to      any such  allowance in any year 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,  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, be deemed to be      the allowance  for that  year, and so on      for succeeding years."      The above  provision was  enacted in  the 1961  Act  as Section 32(2). The additional word "previous" after the word "following" is  the result of a drafting change suggested by the XIIth Report of the Law Commission, which gave the draft for a  new enactment of the Income Tax law. [This draft Bill given by  the Law Commission was the basis of the Income Tax Act, 1961].      Let us  now turn to Section 32(2) and also note certain other relevant  provisions. Section  32(1) of the Income-Tax Act  provides  for  depreciation  on  buildings,  machinery, plant, etc.  owned by  the assessee and used for the purpose of the  business or  profession. The  rates of  depreciation vary. Sub-section  (2) of  Section 32,  as it  stood at  the relevant time, read thus:      "32(2) where,  in the  assessment of the      assessee  or,   if  the  assessee  is  a      registered firm (or an unregistered firm      assessed as  a registered  firm, in  the      assessment of  its partners) full effect      cannot be  given to  any allowance under      clause (i) or clause (ii) or clause (iv)      or clause  (v) or sub-section (1) in any      previous year  owing to  there being  no      profits or  gains  chargeable  for  that      previous year,  or owing  to the profits      or gains  chargeable being less than the      allowance   then,    subject   to    the

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    provisions of sub-section (2) of section      72 and  sub-section (3)  of section  73,      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  previous  year  and      deemed to  be part of that allowance, or      if there  is no  such allowance for that      previous  year,  be  deemed  to  be  the      allowance for that previous year, and so      on for the succeeding previous years."      (Emphasis added)      Section 57  provides for  deductions out of income from other sources  chargeable  under  Section  56.  One  of  the deductions provided  by Clause  (ii) of  Section 57  is  the depreciation provided  by sub-section  (1) as  well as  sub- section (2) of Section 32.      Inasmuch as  Section 32(2) refers to sub-section (2) of Section 72  and sub-section  (3) of  Section 73, it would be appropriate to  reproduce the  said provisions.  Sub-section (2) of Section 72 says:      "(2) Where any allowance or part thereof      is, under  sub-section (2) of section 32      or sub-section  (4) of section 35, to be      carried forward,  effect shall  first be      given  to   the   provisions   of   this      section."      (One of  the reasons  for providing  this preference in favour of business loss may be the time-limit of eight years applicable thereto  besides the  other limitation  that  for availing of the said benefit, the business carried on in the subsequent year  should be  the same business as was carried on in the preceding year.)      Sub-section (3) of Section 73 reads:      "(3) In  respect of allowance on account      of depreciation  or capital  expenditure      on scientific  research, the  provisions      of sub-section  (2) of  section 72 shall      apply   in   relation   to   speculation      business as  they apply  in relation  to      any other business."      We may  first consider  the meaning  of the  expression "profits or gains chargeable". On first impression, the said expression appears  to refer  only to  profits or  gains  of business or profession chargeable under Section 28. But this court has repeatedly held that the said expression is not so confined and that it refers to income under all the heads of income specified in Section 14. In Jaipuria China Clay Mines (P) Limited,  the facts  were these: the total income of the respondent-assessee for  the Assessment  Year 1952-53 before charging  depreciation   was  Rs.14,041/-.  After  deducting depreciation of  Rs.5,360/-, the Income Tax Officer computed the profit  at Rs.8,681/-.  Against this  profit, he set off the losses  of an earlier year. Having done this, the Income Tax  Officer  computed  the  income  of  the  assessee  from dividends  at  Rs.2,01,130/-  and  levied  tax  on  it.  The assessee   claimed    that   the   unabsorbed   depreciation aggregating to  Rs.76,857/-  should  be  deducted  from  the dividend and  if it  is so  done, the total income would get reduced to  Rs.1,32,955/-. The  Income Tax  Officer rejected the claim.  When the  matter was  ultimately carried to this Court, it  took note  of the  opening words  of sub-section, viz., "where,  in the  assessment of  the assessee or if the assessee is  a registered  firm, in  the assessment  of  its

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partners,  full   effect  cannot   be  given   to  any  such allowance....." and  held on  that basis that the expression "profits or gains chargeable" in the said sub-section is not confined to  profits and  gains from  business or profession but takes  within its  ambit all heads of income. This Court was of the opinion that while amending Section 10(2) (vi) of the Indian  Income Tax  Act, 1922 by the Amendment Act 25 of 1953, the  Parliament has accepted the interpretation placed upon the said expression by several High Courts to the above effect. It referred to the decisions of Lahore High Court in Karam Ilahi  Mohammad Shafi  v. Commissioner  of Income  Tax [(1929) 3  I.T.C. 456],  Madras  High  Court  in  A.  Suppan Chettiar &  Co. v.  Commissioner of  Income  Tax  [(1929)  4 I.T.C. 211],  East Punjab  High Court in Laxmichand Jaipuria Spg. &  Wvg. Mills. In re. [(1950) 18 I.T.R. 919] and Bombay High Court  in Ambika Silk Mills Co. Ltd. v. Commissioner of Income Tax [(1952) 22 I.T.R. 58] besides the judgment of the Judicial Commissioner,  Nagpur in  Ballarpur  Collieries  v. Commissioner  of   Income  Tax   [(1929)   4   I.T.C.   255] interpreting the  said expression  as covering  all heads of income. The  Court further  pointed out  that even after the said amendment,  the Bombay  and Gujarat  High  Courts  have taken the  same view  in Commissioner  of Income Tax v. Ravi Industries Ltd.  [(1963) 49  I.T.R. 145] and Commissioner of Income  Tax  v.  Girdharlal  Harivallabhadas  Mills  Company Limited [(1064)  51 I.T.R.  693] respectively.  The contrary view taken  by the  Madras High  Court  in  Commissioner  of Income Tax  v. B.  Nagi Reddy  [(1964) 51  I.T.R.  178]  was disapproved. The court then observed:      "Bearing  these  two  considerations  in      mind, if  one looks  at the  language of      proviso (b)  to section  10(2) (v),  the      first question  that arises  is: What is      the meaning  of the  expression "in  the      assessment of  the assessee  or  if  the      assessee is  a registered  firm, in  the      assessment of  the partners, full effect      cannot be given to any such allowance in      any  year?"   Taking  the  case  of  the      partners  of   a  registered  firm,  the      assessment  must   be  their  individual      assessment, i.e,  assessments  in  which      the profits  from  the  firm  and  other      sources   are   pooled   together.   The      legislature  is  clearly  assuming  that      effect  can  be  given  to  depreciation      allowance  in   the  assessment   of   a      partner; the  only  way  effect  can  be      given in  the assessment of a partner is      by setting it of against income, profits      and gains under other heads. The learned      counsel for  the revenue  tried to  meet      this inference  by suggesting  that what      the  legislature   contemplated  was  an      assessment of  those partners  who  were      carrying on  other business.  But in our      opinion this suggestion is unsound. What      would happen  if a  partnership consists      of four  partners, two carrying on other      business,  Mr.   Sastri  was  unable  to      explain. Now,  if this  is the inference      to be  drawn from  these  words,  it  is      quite clear  that the  words "no profits      or gains  chargeable for  that year" are      not  confined   to  profits   and  gains

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    derived from  the business  whose income      is being computed under section 10."      To the same effect is the decision in Rajapalayam Mills Ltd. v.  Commissioner of  Income  Tax.  Madras  [(1978)  115 I.T.R. 777].  The Court  observed that  when the  profits or gains of  a business for a particular assessment year are to be computed  under Section  10 (of  1922 Act),  the  current depreciation allowance  for the  assessment year in question is deductible  under clause  (vi) of  Section 10(2), but the depreciation allowance  of  the  preceding  years  would  be liable to  be taken  into account only if, and to the extent to which,  it is  not absorbed  by the  total income  of the assessee computed  under different  heads and  chargeable to tax for those assessment years. The Court observed:      "Now, it is well settled, as a result of      the decision  of this  court in  CIT  v.      Jaipuria  China  Clay  Mines  (P)  Ltd.,      [1966] 59  ITR 555  (SC), that the words      ‘no profits or gains chargeable for that      year’ are  not confined  to profits  and      gains derived  from the  business  whose      income is being computed under s.10, but      they  refer   to  the  totality  of  the      profits  or  gains  computed  under  the      various heads and chargeable to tax."      and added:      "It is,  therefore,  clear  that  effect      must be  given to depreciation allowance      first against  the profits  or gains  of      the particular  business whose income is      being computed  under s.10  and  if  the      profits  of   that  business   are   not      sufficient to  absorb  the  depreciation      allowance, the  allowance to  the extent      to which it is not absorbed would be set      off against  the profits  of  any  other      business  and   if   a   part   of   the      depreciation  allowance   still  remains      unabsorbed, it would be liable to be set      off  against   the  profits   or   gains      chargeable under  any other  head and it      is only if some part of the depreciation      allowance still  remains unabsorbed that      it can  be carried  forward to  the next      assessment year.....  But where any part      of the  depreciation  allowance  remains      unabsorbed after  being set  off against      the total  income chargeable  to tax, it      can be  carried forward  under prov. (b)      to cl.  (vi) to  the following  year and      set off against the year’s income and so      on  for  succeeding  years.  The  method      adopted by  the  statute  for  achieving      this result  is that the carried forward      depreciation allowance  is deemed  to be      part of  and stands  on exactly the same      footing as  the current depreciation for      the  assessment   year   and   is   thus      allowable as a deduction under cl.(vi)."      Both these  decisions are  rendered by a Bench of three learned Judges and are binding upon us.      The next  question is  whether for availing the benefit of Section  32(2), is it necessary that the business carried on in  "the following  previous year"  should  be  the  same business as was carried on in the preceding previous year as

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has been  held by  the Madras  High Court  in  East  Asiatic Company Private  Limited. We  are of the opinion that in the absence of  any words  to that  effect, no  such requirement ought to  be read  into the  said  sub-section.  A  look  at Section 72  shows that  where  the  Parliament  intended  to provide such  a limitation,  it did so expressly. Section 72 deals with  carry-forward and  set off of business loss. The proviso to  clause (1)  of sub-section  (1)  of  Section  72 expressly provides  that such  a course  is permissible only where "the  business or  profession for  which the  loss was originally computed continued to be carried on by him in the previous year  relevant for  that assessment  year". In  the absence of  any words  to that  effect, it must be held that for availing  the  benefit  of  Section  32(2),  it  is  not necessary that the business carried on in the following year is the same business as was carried on in the previous year.      The other  question is  whether the assets which earned the depreciation  in the  preceding year  should  exist  and should continue  to be  used for  the purpose of business in the following  year. In the absence of any words in the said sub-section to  that effect, we cannot read this requirement also into  the said  sub-section. This  is evident  from the words "or  if there  is no  such allowance for that previous year, be  deemed to  be the allowance for the previous year" occurring in the sub-section.      Yet another question which has to be answered before we can answer  the question concerned in this appeal is whether it is necessary that in the following year the assessee must carry on business, i.e., some or other business, to avail of the benefit  of the said sub-section? Two views are possible in this  behalf, viz.,  (1) since  the sub-section speaks of unabsorbed depreciation  being carried  forward to  the next year  and   "added  to  the  amount  of  the  allowance  for depreciation for  the following  previous year and deemed to be part  of  that  allowance"  the  sub-section  necessarily contemplates existence  of a  business in the following year and (2)  inasmuch as  the sub-section  not  only  speaks  of adding  the  unabsorbed  depreciation  to  the  depreciation allowance allowed  in the  following year but also says that in the  absence  of  such  allowance,  the  carried  forward depreciation allowance shall be the allowance for that year, it means  that in  the following  year the assessee need not carry on any business or profession for availing the benefit of sub-section  (2) of  Section 32. We are inclined to adopt the second  of the  above two  views having  regard  to  the decisions of  this Court  in Jaipuria  China Clay  Mines (P) Limited and Rajapalayam Mills Limited. We have extracted the relevant observations  from both  the judgments hereinabove, which say that the unabsorbed depreciation allowance has not only to  be set  off against  other heads  of income  in the relevant previous  year but  where it is carried forward, it "stands  on   exactly  the   same  footing  as  the  current depreciation".      Now, coming  back  to  the  facts  of  this  case,  the assessee had  carried on  a business  in the accounting year relevant to  the Assessment  Year 1956-57.  Then there was a gap of  about  eight  years  whereafter  he  started  a  new business in  the accounting  year relevant to the Assessment Year 1965-66. In the intervening years, he was in receipt of income from  property only.  The assessee did not claim that the unabsorbed  depreciation relating to the Assessment Year 1956-57 should be set off against the property income in the said intervening  years. He  made such  a claim only when he commenced another  business in  the accounting year relevant to the  Assessment Year  1965-66, i.e.,  in  the  assessment

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proceedings relating  to Assessment  Year 1965-66. Probably, the assessee  was under  the  impression  that  he  was  not entitled to  set off  the unabsorbed  depreciation until and unless he  had income  from business  in the following year. (He seems  to have  been under yet another impression, viz., not only  should he  have business  income in  the following year to claim the benefit of Section 32(2) but also that the very same assets should also be used for the business in the following year. This is evident from the fact that his claim for setting  off the  unabsorbed depreciation  allowance was confined to  the extent  it pertained  to the  old machinery utilised  in   the  new  business.)  In  the  light  of  the interpretation of  sub-section (2) of Section 32 affirmed by us in  this judgment, however, what should have been done is this: the  unabsorbed depreciation allowance relating to the Assessment Year 1956-57 should have been set off against the income (income  from property)  in the following year, i.e., in the  following previous year (relevant to assessment Year 1957-58) and  if the  income in that year was not sufficient to absorb  the  entire  depreciation  allowance  so  carried forward, it  had to be carried forward to the next following year and  so on.  Only if  some depreciation allowance still remained to  be absorbed, it could have been set off against the total income for the Assessment Year 1965-66.      It is  true that the question which was referred to the Tribunal under  Section 256(1)  of the Income Tax Act merely raises the  question  whether  the  unabsorbed  depreciation pertaining to  the Assessment  Year 1956-57  can be  carried forward and  set off  against the  income for the accounting year relevant to the Assessment Year 1965-66, yet we thought it necessary  to clarify the true position of law. We answer the aforesaid question in the following words:      If  after   setting  off  the  unabsorbed  depreciation allowance relating  to the  Assessment Year  1956-57 against the  income   for  the   following  assessment   years,  any depreciation allowance  still remained  unabsorbed it  could have been  set off  against the  income for  the  accounting period relevant to the Assessment Year 1965-66.      In the  light of the views expressed by us hereinabove, it is  not necessary  to go  into the question raised by Dr. Gauri Shankar,  learned counsel for the Revenue with respect to the  meaning of  the words "the following previous year". The contention  of the  learned counsel  was that  the  said expression means literally what it says and it does not mean any following  previous year. His submission was that if the chain of  setting off  snaps for the reason that there is no income in  any of the following years, it snaps once for all and that the process of setting off cannot be restarted.      For the above reasons, Civil Appeal No. 1052 of 1976 is disposed of  in the above terms and the question referred by the Tribunal  under Section  256(1) of  the Income  Tax Act, 1961 is answered in the terms aforesaid. No costs.      The question referred to the High Court in Civil Appeal No. 2840 of 1977 runs thus:      "Whether on  a proper  interpretation of      sections 56,  57(ii) and  32(2)  of  the      Income-Tax  Act,  1961,  the  unabsorbed      depreciation  of   Rs.70,700/-   brought      forward since  1952-53 could  be set off      against the  business income assessed in      the assessment  year  1963-64  when  the      source   in   respect   of   which   the      depreciation was  computed has ceased to      exist"?      Since the  facts of this appeal are rather involved and

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we did  not have  the assistance  of  the  counsel  for  the assessee (the  assessee remained unrepresented), we think it appropriate to  remand the  matter to  the  High  Court  for disposal afresh  in accordance  with law  and this judgment. This appeal is allowed accordingly. No costs. CIVIL APPEAL NO.7372 OF 1995:      The High  Court has  refused to  answer the  reference, made at  the instance of the Revenue, on the ground that the Revenue has  failed to  file the  paper-book  inspite  of  a period of  ten years  having elapsed since the reference. At the same time, the Court noted the submission of the learned counsel for the Revenue that the question referred herein is concluded by  the decision  of the  said Court  (Bombay High Court) in  Estate  and  Finance  Limited.  In  view  of  our judgment in Estate and Finance Limited, we allow this appeal also and  remit the same to the High Court with a request to dispose it  of according  to law  and in  the light  of this judgment. No costs.