Holding

Dividend income cannot be deemed business income absent evidence that the shareholdings are incidental to or constitute trading assets of the assessee; consequently, loss cannot be carried forward under s.24(2), but the order rejecting the claim for carry‑forward of unabsorbed depreciation is set aside.

Summary

Brooke Bond & Company Ltd., a UK‑based tea business, owned shares in various tea companies worldwide, including a wholly‑owned Indian subsidiary. It was assessed for AY 1955‑56 as a resident with a net loss and for AY 1956‑57 as a non‑resident with dividend income under “Income from Other Sources”. The company sought to revise both assessments under s.33A, claiming that the dividend income should be treated as business income so that the loss of 1955‑56 could be carried forward and set off against later profits, and that unabsorbed depreciation could be carried forward. The Commissioner rejected the claim for AY 1956‑57 on the ground that the shareholdings were not trading assets and the dividends were not business income; the High Court upheld this view. The Supreme Court held that, without material evidence that the shareholdings were incidental to the tea business or held as trading assets, the dividend income could not be classified as business income, so loss could not be carried forward under s.24(2). However, the Court set aside the order rejecting the claim for carry‑forward of unabsorbed depreciation and directed fresh consideration of that claim. The appeal was allowed in part and dismissed in respect of the other reliefs.

Issues considered

Whether dividend income from shareholdings in tea companies can be treated as business income for the purpose of set‑off of loss under s.24(2) of the Indian Income Tax Act, 1922.
Whether the loss incurred in assessment year 1955‑56 can be carried forward to assessment year 1956‑57 (or 1957‑58) when the nature of the income differs.
Whether unabsorbed depreciation from assessment year 1955‑56 may be carried forward to assessment year 1956‑57.
Whether the Commissioner’s order rejecting the set‑off and carry‑forward claims should be set aside.

Legislation cited

Income Tax Act, 1922s. 10, s. 24(2), s. 33A, s. 6

Subjects

income taxdividend incomebusiness incomeloss set‑offcarry forward of lossunabsorbed depreciationsection 24section 33Aresidentnon‑residentshareholdingstrading assets

Judgment

A

BROOKE BOND & COMPANYLTO. (NOW KNOWN AS
BROOKE BOND LEIBIG LIMITED)
v.
B C.I.T., WEST BENGAL-II, CALCUTTA

SEPTEMBER 30, 1986

[RS. PATHAK AND SABYASACHI MUKHARJI, JJ.]

Indian Income Tax Act, 1922--Sections 6, 24(2) & 33A-Asses-
c see-Dividend income shown in return under head 'income from other
sources'-Whether could be computed under head 'income from·
,business'.

The appellant, a sterling company carrying on business in tea
D with its Head Office in the United Kingdom, invested in the shares of
other tea companies in different parts of the world, and had a hundred
per cent share holding in an Indian subsidiary.

The appellant was assessed under the Indian Income Tax Act
1922. For the assessment year I955-56 the appellant was assessed on its
E total world income on the basis of provisional figures of its business loss
including depreciation, and its income from individuals. As its Indian
income exceeded its income outside India it was assessed as a resident.
Meanwhile the appellant had already been assessed for the subsequent
assessment year 1956-57 in the status of a 'non-resident' and its income
from dividends was assessed under the head 'Income from Other
F Sources'. The loss determined for the assessment year 1955-56 could
not be carried forward and set off against the income for the assessment
year 1956-57, as the latter assessment was made subsequent to the
former.

The appellant preferred two revision applications, one each for
G the assessment years 1955-56 and 1956-57 under sub-s. (2) of s. 33A. In
the revision application for the assessment year 1955-56, the appellant
claimed that the quantum of loss determined for that year having been
based on provisional figures should be revised on the basis of final
figures certified by an Inspector of Taxes in the United Kingdom, that
the loss should be ascertained for the purpose of carrying it forward,
H and that the loss should be bifurcated between an unabsorbed depreda-

980
BROOKE BOND & CO. v. C.I.T. 981

lion and other loss. In the revision application ·for the assessment year A
)- 1956-57, the appellant claimed a set off of the loss determined for the
assessment year 1955-56 against the income of the assessment year
1956-57 on the gronnd that the shares held by it in different companies
constituted its trading assets and the dividend income accruing there-
from should be regarded as income from accruing therefrom should be
B
regarded as income from business.
-j-
During the pendency of these revision petitions the assessment for
the assessment year 1957-58 was completed as a non-resident, and the
income was determined as receipt by way of dividends on it~ share
'
--k holdings.
f
c
In the appeal to the Appellate Assistant Commissioner, it was
claimed that the loss for the assessment year 1955-56 should be carried
forward and set off against the income of the assessment year 1957-58
'!'
under sub-s. (2) of s. 24 because both the. losses and the income arose
from business carried on by the appellant, but the appeal was dismissed
D
holding that there would be no loss if the loss for the assessment year
1955-56 was set off against the income for the assessment year 1956-57
and that the loss could not be legally set off directly in the assessment
year 1957-58.

)... In further appeal, the Income-Tax Appellate Tribunal set aside
E
the order of the Appellate Assistant Commissfoner and directed it to
dispose of the appeal afresh after determining whether the appellant
was entitled to set off a business loss arising outside the taxable
~ territories for the assessment year 1955-56 against the dividend income
arising in the taxable territories for the assessment year 1957-58. The
) reference to the High Court was declined by the Appellate Tribunal.
F
The. revision application pertaining to the assessment year.1955-
-~
56 was allowed subject to the claim being verified in regard to the
figures and calculation of depreciation by the Income Tax Officer. The
revision application pertaining to the assessment year 1956-57, how-.
ever, was rejected .holding that the dividends earned by the appellant
. ' G
from the investments in shares of companies carrying on the tea busi-
ness could not be said to be a part of the appellant's business because
,. the investments were not incidental to the appellant's business activities
and were not held as trading assets, that the companies from which the
dividend was earned were not companies of which the appellant was
managing agent, that a set off cannot be allowed to the extent of the H
982 SUPREME COURT REPORTS (1986] 3 S.C.R.

A unabsorbed depreciation brought forward from the assessment year
1955-56 against the business income derived during the assessment year -(_.
1956-57, and that there was no business income in the assessment year
1956-57.

A Petition under Art. 226 filed by the appellant against the dis-
B
posal of his revision application for the assessment year 1956-57 was
dismissed by a Single Judge, and the appeal against that order as well as
dismissed. -<-

In the appeal to tliis Court on behalf of the appellant it was
contended: (1) that if this Court clarified that the Appellate Assistant ---r: -
c Commissioner Cl)n proceed in the appeal relating to the assessment year
1957-58 pending before him without being Influenced by the observa-
tions of tl"e Commissioner of Income Tax and the High Court in the case
relating to the assessment year 1956-57 on the aspect of carry forward
of loss under sub-s. (2) of s. 24, the appeal would not be pursued, and 'I"
that if such clarification is not possible then this Court should confine
D
itself to the case relating to the assessment year 1956-57; (2) that the
Commissioner of Income Tax had conceded in an earlier. proceeding
that the dividend income was income from business; (3) that the loss
should be carried forward under sub-s. (2) of s. 24 from the assessment
year 1955-56, to the assessment year 1956-57 and it is not necessary that
the business·carried on in the assessment year 1956-57 should be the ..(
E
same as that carried on in the assessment year 1955-56, and (4) that the
claim of the appellant to carry forward of unabsorbed depreciation
under sub-s. (2) of s. 10 should be allowed.

Partly allowing the Appeal,
F
HELD: 1. The order of the Division Bench and of the Single Judge
,\
as well as the order of the Commissioner of Income Tax on die revision
application for the assessment year 1956-57 are set aside In regard to the >-
claim of the appellant to the carry forward of unabsorbed depreciation and
the Commissioner is directed to dispose of the revi<iion application afresh.
As to the rest of the reliefs the appeal is dismissed. [992C-D l
G
2. Income-tax is a single charge on the total income of an asses-
see. For the purpose of computation the statute recognises different
classes of income which it classifies under different heads of income.
For each head of income the statute has provided the mode of comput-
ing the quantum of such income. The mode of computation varies with
H
•. BROOKE BOND& CO. v. C.l.T . 983

the nature of class of such income, for the deductions permissible under A
the law in computing the income under each head bear a particular
relevance to the nature of the income. [988B-C]

3. The statute operates on the principle that it is the net income.
under each head which should be considered as a component of the total B
income. The statute permits specified deductions from the gross receipt
in order to c0mpute the net income. The net income under the different
heads is then pooled together to constitute the total income. The process
of computation at this stage takes in the provisions relating to the carry
forward and setting off of losses and of unabsorbed depreciation. On
the conclusion of the entire process of assessment what emerges is the
figure of taxable income, the quantum of income which is assessed to c
tax. [988C-E]

4. Ordinarily when income pertains to a certain head, the source
of such income is peculiar to that head, but it is not unusual that
commercial considerations may properly describe the source differen- D
tly. For instance, a banking concern may hold securities in the course of
its business. The securities constitute its trading assets and income from
them would in the commercial sense be regarded as business income.
However, for the purposes of computation under the incom_e-tax, the
income from such securities would be computed not under the bead 'Income
from Business' but under the head 'Interest on Securities'. [988E-G] E

5(i) Business income is broken up under different heads only for
the purpose of computation of the total income, and that by such break-
up the income does not cease to be the income of the business. [988G]

5(ii) Section 6 of the Indian Income Tax Act 1922, which clas- F
sified the taxable income wider different heads made such classif"tcation only
for the purpose of computation of the net income of the assesstt. [989C]

United Commercial Bank Ltd. v. Commissioner of Income Tax,
[1957] 32 I.T.R. 688; Commissioner of Income-tax, Bombay City v.
Chugandas and Co., I1965] 55 I. T .R. 17; Commissioner of Income-tax, G
Andhra Pradesh v. Cocandada Radhaswami Band Ltd., [1965] 57
I. T .R. 306 and 0. RM. M. SP. SV. Fir~ v. Commissioner of Income-tax,
Madras, I1967] 63 I. T .R. 404, 410 followed. ·

6. · The mere circumstance that the appellant showed the dividend
income under the head 'Income from other Sources' in its returns can- H
984 SUPREME COURT REPORTS [1986] 3 S.C.R. •
A not in law decide the nature of the dividend income. It must be oetermined
from the evidence whether having regard to the true nature and character
of the income it could he described as income from business, even though it
is liable to fall for computation under another head. [989F -GI

7. In the instant case, the appellant placed material before the
B
Commissioner of Income-tax showing that it held shares in companies
carrying on the tea business, and that in India it enjoyed a hundred per
cent share holding in the Indian subsidiary. But in order that the share
holdings in tea companies should be regarded as the business assets of
the appellant there must be material evidence indicating that the owner-
ship of the share-holdings is necessarily incidental to the business of tea
c carried on by the appellant or that the share holdings are held as busi-
ness assets. [989H; 990A-B] ·

8. From the material placed before the Court, the Revenue can-
not be said to have admitted that the dividend income received by the
appellant from its share holdings in other companies can be regarded as
D
part of the appellant's income from business. [990F-G I

9. The loss cannot be carried forward under sub-s. CV of s. 24
from the assessment year 1955-56 to the assessment year 1956-57 be•
cause the shares held by the appellant cannot !le regarded as its trading
assets. [991A-B]
E
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
2020 (NT) of 1974

From the Judgment and Order dated 14.8.1973 of the Calcutta
High Court in Appeal No. 317of1970 '
F
T.A. Ramachandran, J. Ramamurthi and O.N. Gupta for the ,I.
Appellant.

C.M. Lodha and Ms. A. Subhashini for the Respondent.
G
The Judgment of the Court was delivered by

PATHAK, J. This appeal by certificate granted by the High 'r
Court of Calcutta is directed against a judgment of the Division Bench
of the High Court confirming on appeal the dismissal of the appellant's
H writ petition.
BROOKE BOND & CO. v. C.J.T. [PATHANK, J.] 985

. __} The appellant, Brooke Bond & Company Ltd., now known as A
Brooke Bond Leibig Limited, is a sterling company carrying on busi-
ness in tea with its Head Office in the United Kingdom. The appellant
has invested in the shares of other tea companies in different parts of
the world, and has a hundred per cent share holding in an Indian
subsidiary, Brooke Bond (India) Limited. ll

The appellant is assessed under the Indian Income Tax Act, and
the relevant financial year is the previous year in relation to the
correspodding assessment year. For the assessment year 1955-56 the
appellant was assessed on its total. world income by an assessment
order dated July 16, 1957 on the basis of provisional figures of its
business loss including depreciation, and its income from dividends. c
On the basis of those provisional figures it was assessed to a net .loss of
Rs.31,33,647. As its Indian income exceeded its income outside India
it was assessed as a resident. Meanwhile, on March 28, 1957 the appel-
lant had already been assessed for the subsequent assessment year
1956-57 in the status of a non-resident, and its income of Rs.53, 11,958
D
from dividends was assessed under the head 'Income' from Other
Sources'. It is obvious that the loss determined for the assessment year
1955-56 could not be carried forward and set off against the income for
the assessment year ~956-57, as the latter assessment was made sllbse· .
quent to the former.
E
. On February 12, 1958 the appellant preferred two rev1s1ons
applications, one each for the assessment years 1955-56 and 1956-57,
before the Commissioner of Income-tax under sub·s. (2) of s. 33A of
the Indian Income Tax Act, 1922. In the revision application for the
assessment year 1955-56 the appellant claimed that the quantum of
Joss determined for that year having been based on provisional figures
F
should now be revised on the basis of the final figures certified by an
Inspector of Taxes in the United Kingdom. The appellant claimed a!So
that the loss should be ascertained for the purpose of carrying it for-
ward, and further that the loss sliould be bifurcated between an un-
absorbed depreciation of Rs.40,27 ,853 and other loss. In the revision
application for the assessment year 1956-57 the appellant claimed a set
G
off of the loss determined for the assessment year 1955-56 against the
income of the assessment year 195.6-57 on the ground that the shares
held by it in te~ companies constituted its 1r·ading assets and the
dividend income accruing therefrom should be regarded as income
from business. It mentioned that it carried on business in tea in the
United Kingdom and the investments were made in the usual course of H
986 SUPREME COURT REPORTS [1986] 3 S.C.R.

A its tea business in companies also engaged in the tea business exclu-
sively. The revision petitions remained pending for eight years.

Meanwhile the appellant's assessment for the assessment year
1957-58 was completed in November 1957 as a non-resident, determin-
B ing an income of Rs.51,85,836 received by way of dividends on its
share holdings. An appeal was taken to the Appellate Assistant Com-
missioner of Income Tax claiming that. the loss for the assessment year
1955-56 should be carried forward and set off against the ihcome for
the assessment year 1957-58 .under sub-s. (2) of s. 24 because both the
loss and the income arose from business carried on by the appellant.
By his order dated Aug.us! 14, 1958 the Appellant Assistant Commis-
c sioner dismissed the appeal holding that there would be no loss if the
loss for the assessment year 1955-56 was set off against the income for
the assessment year 1956-57, .and that the loss could not be legally set
off directly in the assessment year 1957-58. The appellant appealed to
the Income-tax Appellate Tribunal and on July 1, 1966 the Appellate
D Tribunal set aside the order of the Appellate Assistant Commissioner
and directed the Appellate Assistant Commissioner to dispose of the
appeal afresh after determining whether the appellant was entitled to
set off a business loss arising outside the taxable territories for the
assessment year 1955-56 against the dividend income arising in the
taxable territories for the assessment year 1957-58 .. The Commissioner
E of Income Tax applied for a reference to the High Court but .the
Appellate Tribunal rejected the application on Dec~mber 1, 1966.

On December 5, 1966 the Commissioner of Income Tax disposed
of the revision applications filed by the appellant. The revision appli-
cation pertaining to the assessment year 1955-56 was allowed subject
F to the claim being verified in regard to the figures and calculation of
depreciation by the Income Tax Officer. The revision application per-
taining to the assessment year 1956-57, however, was rejected with the >
observation that the dividend earned by the appellant from invest-
ments in shares of companies carrying on the tea business could not be
said to be a part of the appellant's business because the investments
G
were not incidental to the appellant's business activities and were not
held as trading assets. It was also stated that the companies from which
the dividend was earned were not companies of which the appellant
was managing agent so as to require the making of such investments
for the purposes of its business as managing agents. The Commissioner
'r
also rejected the contention of the appellant that a set off should be
H allowed to the extent of the unabsorbed depreciation brought forward
,. BROOKE BOND & CO. v. C.I.T. [PATHAK, J.[

from the assessment year 1955-56 against the business income deriv.ed
during the assessment year 1956-57. The Commissioner observed that
there was no business intome in the assessment year 1956-57.
987

A

Thereafter the appellant filed a writ petition in the High Court of
Calcutta agaiost the disposal of his revision application for the assess-
"ll
ment year 1956-57, but on September 22, 1969 the learned Single
"")"
Judge dismissed the writ petition. An appeal filed by the appellant was
dismissed by the Division, Bench of the.High Court on August 14,
1973.
~ ·.7'··
The Division Bench adverted tci the finding of the Commissioner
of Income Tax in the appellant's revision application relating to the c
assessment year 1956-57 that the material placed before him did not
,.
.. show that the dividend e.arned by the appellant from its investment in
the shares of different companies could be regarded as part of the
appellant's business income. He had found that the investments in
shares were not incidental to .the appellant's business activities and
D
they were not held as trading assets. The Division Bench held that no
error of law in the Commissioner's order had been established and
consequently there was no case for interference with the rejection of
the appellant's claim for carrying forward the losses arising from its
>- . business in the assessment year 1955-56 against the dividend income
for the assessment year 1956-57. On the other contention raised by the
E
appellant, the claim to carry forward the depreciation allowance per-
taining to the business activities of the assessment year 1955-56 for
I;,. deduction in the assessment proceedings of the assessment year 1956-
57 the Division Bench appeared to be in favour of the appellant, but it
) declined to express any final opinion on the point. The judgment of the
Division Bench is under appeal before us.
F
..I_
At the outset learned counsel for the appellant stated before us
that he would not press this appeal if we clarify that the Appellate
Assistant Commissioner can proceed in the appeal relating to the
assessment year 1957-58 pending before him without being influenced
by the observations of the Commissioner of lqcome Tax and the High
G
Court in the case relating to the assessment year 1956-57 on the aspect
of carry forward of loss ·under sub-s. (2) of s. 24, and .that if such
~ clarification is not possible then we should, in this appeal, confine
ourselves to the case relating to the assessment year 1956-57.

There was considerable debate on the question whether the H
988 SUPREME COURT REPORTS l1986]3S.C.R.

A dividend income received by the appellant from its share holdings in
different companies engaged in the tea business could be regarded as
business income._

It is a cardinal principle of the law relating to income-tax that
inome-tax is a single charge on the total income of an assessee. For the
B purpose of computation the statute recognises different classes of in-
come which it classifies under different heads of income. For each
head of income the statute has provided the mode of computing the
quantum of such income. The mode of computation varies with the
nature of the class of such income, for the deductions permissible
under the law in computing the income under each head bear a parti-
c cular relevance to the nature of the income. The statute operates .on
the principle that it is the net income under each head which should be
considered as a component of the total income. The statute permits
specified deductions from the gross receipt in order to compute the net
income. The net income under the different heads is then pooled to-
gether to constitute the total income. The process of computation at
D this stage takes in the provisions relating to t)le carry forward and
setting off of losses and of unabsorbed depreciation. On the conclusion
of the entire process of assessment what emerges is the figure of tax-
able income, the quantum of income which is assessed to tax.
~ ,I,
Ordinarily when income pertains to a certain head, the source of
E such income is peculiar to that head, but it is not unusual that commer-
cial considerations may properly describe the source differently. For
instance, a banking concern may hold securities in the course of its
business. The securities constitute its trading assets and income from
them would in the commercial sense be regarded as business income.
However, for the purposes of computation under the income-tax law
F the income from such securitit>s would be computed not under the
head 'Income from Business' but under the head 'Interest on Secu'
rities'. In United Commercial Bank Ltd., v. Commissioner of Income
tax, 11957] 32 I.T.R. 688, this Court pointed out that business income
was broken up under different heads only for the purpose of computa-
tion of the total income, and that by such break-up the income did not
G cease to be the income of the business. The principle was followed by
this Court in Commissioner of Income-tax, Bombay City v. Chugandao
and Co., 11965] 55 I.T.R. 17 and it was reiterated.. that business income
was broken up under different heads under the Income Tax Act only
for the purpose of computation of the total income, and that by break-
ing up the income did not cease to be the income of the business. It was
H
said:
BROOKE BOND & CO. v. C.l.T. [PATHAK, J.] 989

"The heads described in section 6 and further elaborated for A
r the purpose of computation of income in sections 7 to 10 and
12, 12A, 12AA and 12B are intended merely to indicate the
classes of income: the heads do not exhaustively delimit
sources :frOm wh~ch inoome arises,"
B
The point was elaborated by the Court in Commissioner of
.,. lncome-tax,.Andhra Pradesh v. Cocanada Radhaswami Bank Ltd.,
(1965] 57 l.T.R. 306, where the Court. was called upon to consider
whether the securities owned by the assessee formed part of the trad-
,..J....... ing assets of his business, and income therefrom could be described as
. ~ income from business, and the Court reaffirmed that s. 6 of the Indian

Income Tax Act 1922, which classified the taxable income under diffe- c
rent heads made such classification only for the purpose of computa-
tion of the net income of the assessee and

"' "though for the purpose of comlfutation of the income,
interest on securities is separately classified, income by way D
of interest from securities does not cease to be part of the
income from business if the securities are part of the trad-
· ing assets. Whether a particular income is part of the in-
come from a business falls to be decided not on the basis of
the provisfons. of section 6 but on commercial principles
>- ................. If it was ·the income of the business, E
section 24(2) of the Act was immediately attracted. If the
income from the securities was the income from its busi-
, ness, the loss could, in terms of that section, be set off
' against that income."

'"I the dividend
Accordingly, the mere circumstance that the appellant showed
income under the head 'Income from Other Sources' in F
'
-~. its returns cannot in law decide the nature of the dividend income.· It
must be determined from the evidence whether having regard to the
true nature and character of the income it could be described as in-
come from business, even though it is liable to fall for computation
under another head. The principle was again applied in O.RM. M
G
.SP.SV. Firmv: Commissioner of Income-tax, Madras (1967] 63 l.T.R.
404, 410. The position on the law is clear. But is the appellant in the
present case entitled to the relief claimed by it?
i
The appellant placed material before the Commissioner of Income-
tax showing that it held shares in companies carrying on the tea business
H
990 SUPREME COURT REPORTS [1986] 3 S.C.R.

A and that in lndia it enjoyed a hundred per cent share holding in the
Indian subsidiary. But in order that the share holdings in tea com-
panies should be regarded as the business assets of the appellant there
must be material evidence indicating that the ownership of the share-
holdings is necessarily incidental to the business of tea carried on by
ll
the appellant or that the share holdings are held as business assets. The
Commissioner of Income Tax was unable to draw any conclusion in
favour of the appellant in this regard, and the appellant failed to
convince the High Court also.. We have given our careful consideration
to the matter and except for the Indian subsidiary there is nothing to
show that the investments of the appellant in the other tea companies
were intended to bring, or in fact brought about, some advantage or
c benefit to the business carried on by the appellant. The mere fact that
the share holdings related to the tea companies is not sufficient by
itself to support the submission that they were acquired to safeguard
the appellant's interest in the tea business carried on by it. The matter
is pending in appeal relating to the assessment year 1957-58 before the
Appellate Assistant Commissioner and it will be open to the appellant
D
to place further material before the Appellate Assistant Commissioner
to enable him to come to an adequate and satisfactory decision. The
appellant may have a sufficient case specially in regard to the share
holding possessed by it in its Indian subsidiary, but we refrain from
expressing any opinion on the point and we leave it to the appellant to
satisfy the Appellate Assistant Commissioner that the appellants share
E
holdings in the Indian subsidiary and the other tea-companies enures
to the benefit of the business carried on by it.

An· attempt was made by learned counsel for the appellant to
show that the Commissioner of Income Tax had conceded in an earlier
F
proceeding that the dividend income was income from business. Our .(
attention has been invited to a recital in the order of the Appellate
Tribunal relating to the assessment year 1957-58 and to what has been
stated by the Commissioner in his reference application against that
order. We are not satisfied from the material placed before us that the
Revenue can be said to have admitted that the dividend income re-
ceived by the appellant from its share holdings in other companies can
G
be regarded as part of the appellant's income from business.

Consequently we are unable to sustain the appellant's challenge
to the view expressed by the Division Bench of the High Court in
regard to the appellant's claim that the dividend income must be
H regarded as income from business.
BROOKE BOND & CO. v. C.l.T. [PATHAK, J.[ 991

The next point raised by the appellant is that the loss should be A

' carried forward under sub-s. (2) of s. 24 from the assessment year
1955-56 to the assessment year 1956-57 and it is not necessary that the
business carried on in the assessment year 1956-57 should be the same
as that carried on in the assessment year 1955-56. '.This point must also
fail because it proceeds on the assumption that the shares held by the B
appellant can be regarded as its trading assets .
.,.
The final contention of the appellant relates to the carry forward
of unabsorbed depreciation under sub-s. (2) of, s. 10. The Division
""" Bench appeared to be of the tentative view that the appellant was
-~/ entitled to the carry forward claimed by it, but it did not express any
(
final opinion as it had decided to decline relief to the appellant on the c
ground that the assessment for the assessment year 1956-57 had al-

. ready been closed by the Revenue when the assessment for the assess-
ment year 1955-56 was being made and the grant of relief would have
its consequence on the assessment for the assessment year 1957-58, in
respect of which an appeal was 'pending. The writ petition was directed D
against the order of the Commissioner of Income Tax made upon the
revision application filed by the appellant in respect of the assessment
year 1956-57, and the High Court could have directed the Commis-
sioner to grant appropriate relief for the assessment year 1956-57. The
)..
Commissioner was not concerned with the proceeding relating to the
assessment year 1957-58. That was a matter pending in appeal before
E
the. Appellate Assistant Commissioner. The point could have been
considered by the Commissioner in the revision application for the
, assessment year 1956-57. Merely because relief given by the Commis-
' sioner in that regard in the proceeding for the assessment year 1956-57
.--, could have its consequence upon the proceeding for the assessment
year 1957-58 then pending in appeal before the Assistant Appellate
F
Commissioner, could not bring the case within proviso (b) to sub-s. (1)
~. of s. 33A of the Indian Income Tax Act. It may be that the same point
was the subject.of the appeal, but the point agitated before the Com-
missioner was with reference to the assessment year 1957-58. It could
not debar the Commissioner from considering the same point in rela-
tion to the assessment year 1956-57. We need express no opinion at
G
this stage on the view tentatively expressed by the Division Bench of
the High Court that the appellant's claim to the carry forward of unab-
sorbed depreciation from the assessment year 1955-56 to the assess-
'(
ment year 1956-57 is vaild or not. As we have noted, the view taken by
the High Court was tentative only and not its final opinion. Indeed, no
submission was made on behalf of the Revenue before us on the point. H

I
992 SUPREME COURT REPORTS [1986) 3 S.C.R.

A We shall concern ourselves merely witl1 the correctness of the Division
Bench refusing to grant relief after it reached the tentative finding that
there was merit in the appellant's claim to the carry forward of un-
absorbed depreciation. In our opinion, the order of the Commissioner
disposing of the revision application for the assessment year 1956-57
should have been set aside by the Division Bench and the Commis-
B sioner should have been directed to consider the claim on its merits.
We make that direction now. At the same time, we make it clear that it
will be open to the Revenue to contend on the merits that the\appel-
lant is not entitled to the carry forward of unabsorbed depreciation.

The appeal is allowed in so far only that the order of the Division
c Bench and of the learned Single Judge as well as the order of the
Commissioner of Income Tax on the revision application for the
assessment year 1956-57 are set aside in regard to the claim of the
appellant to the. carry forward of unabsorbed depreciation, and the
Commissioner is directed to dispose of the revision application in
respect of that claim afresh. As to the rest of the reliefs the appeal is
D
dismissed. In the circumstances there is no order as to costs.

A.P.J. Appeal allowed in p~rt.

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