| Case ID |
1088535e-9e12-4f67-8c1f-6aa7caad1f3e |
| Body |
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| Case Number |
CIVIL APPEAL Nos. 1371-72 (NT) OF 1974 |
| Decision Date |
Mar 19, 1986 |
| Hearing Date |
|
| Decision |
The Supreme Court affirmed the decision of the Allahabad High Court, ruling that the unabsorbed depreciation of the unregistered firm from the assessment year 1949-50 could be carried forward and allowed as a deduction in the assessments of the partners of the registered firm in the assessment year 1950-51. The Court held that there was no provision in the Income-tax Act that prohibited an unregistered firm from carrying forward unabsorbed depreciation upon becoming registered in a subsequent year. The essence of the ruling emphasized the continuity of the firm despite the change in registration status, thereby allowing the partners to benefit from the unabsorbed depreciation. |
| Summary |
In the landmark case of Commissioner of Income Tax v. J.K. Hosiery Factory, the Supreme Court of India addressed crucial issues surrounding the treatment of unabsorbed depreciation for tax purposes. This case is significant in the context of income tax law, particularly under the provisions of the Indian Income-tax Act, 1922, and the Income-tax Act, 1961. The Supreme Court ruled in favor of the assessee, J.K. Hosiery Factory, affirming that unabsorbed depreciation from an unregistered firm's assessment could be carried forward to the partners of a subsequently registered firm. The Court's decision highlighted the importance of continuity in the entity's identity, despite changes in registration status, thus ensuring the rights of the partners to claim deductions for unabsorbed depreciation. This ruling has far-reaching implications for taxation practices and principles, particularly concerning the treatment of depreciation allowances in the context of partnership firms. It reiterates the principle that legislative provisions should be interpreted in favor of the taxpayer, particularly when ambiguity exists. This case is pivotal for tax practitioners and businesses alike, as it clarifies the treatment of unabsorbed depreciation in the transition from an unregistered to a registered firm, ensuring that firms are not unjustly deprived of legitimate tax benefits. The ruling serves as a precedent for similar cases in the future, reinforcing the rights of assessees under the income tax framework. |
| Court |
Supreme Court of India
|
| Entities Involved |
Commissioner of Income Tax,
J.K. Hosiery Factory
|
| Judges |
R.S. Pathak,
Sabyasachi Mukharji
|
| Lawyers |
Not available
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
J.K. Hosiery Factory
|
| Citations |
1986 SLD 1657,
(1986) 159 ITR 85
|
| Other Citations |
Indian Iron & Steel Co. Ltd. v. CIT [1943] 11 ITR 328 (PC),
Ballarpur Collieries Co. v. CIT [1973] 92 ITR 219 (Bom.),
K.T. Wire Products v. Union of India [1973] 92 ITR 459 (All.),
CIT v. Estate & Finance Ltd. [1978] 111 ITR 119 (Bom.)
|
| Laws Involved |
Indian Income-tax Act, 1922,
Income-tax Act, 1961
|
| Sections |
10(2)(vi),
24(2),
32(2),
72(2)
|