Indian Aluminium Co. Ltd. v. Commissioner Of Income Tax, West Bengal-Ii

- The facts found and/or admitted in these proceedings are as follows :

Indian Aluminium Co. Ltd., the assessee, carries on business as manufacturer of Aluminium, respectively, at Alupuram, Belgaum, Muri, Kalwa and Hirakud and produces aluminium in different forms, viz., ingots, sheets, circles, foils, extrusions, etc. In assessment year 1970-71, the relevant previous year in respect of which ended on December 31, 1961, the assessee claimed relief under s. 80J of the I.T. Act., 1961, inter alia, in respect of its foil mill unit at Kalwa. The ITO following the assessments of the assessee in earlier years disallowed the claim on the ground that the said unit was an expansion of the assessees existing business.

The ITO also disallowed depreciation claimed in respect of fencing, culverts, drainage and sewerage within the assessees factory compounds. The assessee also claimed relief under s. 80-I of the Act on the basis that its income was derived from a priority industry. The ITO allowed 75% of such claim holding that the assessee was entitled to such relief for its income attributable only for manufacture of ingots.

Against the aforesaid decisions of the ITO, the assessee preferred an appeal to the AAC who held that the assessees claim under s. 80J in respect of its foil mill at Kalwa would not be considered in the said assessment year as the losses sustained by the said unit in earlier years had not been determined and carried forward and also because the assessee did not claim such relief in the earlier years when such determination should have been made. Following an earlier appellate order, in the case of the assessee for the assessment year 1966-67, the AAC also sustained the disallowance of depreciation on fencing, culverts, drainage and sewerage. In respect of the assessees claim for relief under s. 80-I of the Act, the AAC, following earlier appellate orders in the case of the assessee for assessment years 1966-67 to 1969-70, held that the assessee was entitled to deduction under the said section in respect of its profits on sale of all its products except aluminium pigment and directed the ITO to recompute the deduction allowable under s. 80-I on a pro rata basis taking into account its total sales and the sales of pigment. The assessee raised a further contention before the AAC that interest earned on its short-terms deposits and debentures should also be considered for relief under s. 80-I. It was submitted that interest paid by the assessee for procuring the same fund was being allowed to be deducted as business expenses, but the interest earned was being treated as income from other sources. The AAC held that by its very nomenclature income earned by way of interest could to be profits from a priority industry and directed the ITO to exclude the same in computing relief claimable under s. 80-I.

From the said appellate order the assessee preferred a further appeal to the Income-tax Appellate Tribunal. It was contended before the Tribunal that the its foil plant at Kalwa was completed in 1965. As the said unit did not earn any profit up to 1968, no claim under s. 80J in respect thereof was made but details of the earning of this unit in the earlier years was filed before the ITO for the purpose of claiming exemption under s. 197(3) of the Act. In the relevant assessment year, this unit in its fifty year of operation earned profit for the first time for which the assessee was entitled to exemption under s. 80J. Under s. 80J(3), which was introduced with effect from the April, 1968, and permitted the carry forward of a deficiency in a new unit of industry on and from the assessment year 1967-68, the assessee became entitled to carry forward any deficiency of the said unit the earlier years and set off the same against the profits of a subsequent year. It was submitted that the assessee, in any event, could not have preferred a claim under s. 80J earlier than the April 1, 1968, from which date sub-s. (3) of the said section came into force. It was submitted further that in the prescribed form of return there was no provision for recording a claim under s. 80J(3) to be carried forward.

The revenue sought to support the order of the ITO and the AAC and submitted, in the alternative, that as the said authorities had not applied their minds to the question whether the conditions of s. 80J had been fulfilled, the matter should be remanded to the AAC for re-examination and verification.

Construing s. 80J and the decisions cited, the Tribunal held that it was not necessary for the assessee to make a formal claim for relief under the said section in the earlier years in respect of losses suffered as there was no provision in the return for making such a claim. The Tribunal held further that sub-s. (3) of the said section having been introduced under the Finance Act No. 2 of 1967 with effect from the April 1, 1968, it was not compulsory for the assessee to make a claim and have the deficiency determined in each year before it could claim the benefit of set off in a subsequent year in which it actually earned a profit. The Tribunal found from the materials on record that the Tribunal found from the materials on record that the Kalwa unit of the assessee was entitled to relief under s. 80J. For the limited purpose of verification of the figures of the working of this unit, the Tribunal remanded the matter to the ITO with a direction to allow relief under s. 80J including that under sub-s. (3) thereof after checking the figures.

The assessee also contended before the Tribunal that it was entitled to carry forward the deficiency in its new Smelter Unit at Belgaum in the earlier years for relief under s. 80J(3). This claim had been made before the ITO but was not reiterated before the AAC. It was contended on behalf of the revenue that under for Income-tax (Appellate Tribunal) Rules, 1963, a new ground could not be taken for the first time. The Tribunal held that the assessee was entitled to urge the said ground before the Tribunal a it had been raised before the ITO and directed the ITO to examine the facts and figures in respect of this Smelter Unit, determine the quantum of the deficiency to be carried forward and set it off against the profits of the current year in accordance with law as in the case of the unit at Kalwa.

Following an earlier order of the Tribunal, in the case of the assessee, in the assessment years 1966-67 to 1969-70, the assessees claim for depreciation in respect of fencing, culvert, drainage and sewerage within its factory compounds was accepted by the Tribunal and it was held that the assessee was entitled to claim depreciation on such items at the rate applicable to first class factory buildings. The ITO was, accordingly, directed to re-examine the matter and allow such depreciation.

The decision of the AAC that the assessee was not entitled to relief under s. 80-I in respect of sale of pigments was also challenged before the Tribunal. Following its earlier order for the assessment years 1966-67 to 1969-70, the decision of the AAC was confirmed by the Tribunal.

The next contention of the assessee was that its income from interest also should be held to be income from a priority industry and qualified for relief under s. 80-I. It was submitted that the assessee had funds at its disposal obtained, inter alia, from loans and borrowings on interest, which were not immediately required for investment in the priority industry. Under cl. 19 of its memorandum the assessee was empowered to invest and deal with such surplus fund in such manner as it might from time to time determine. The interest which was being paid by the assessee for procuring such fund was accepted as a business expenditure of the assessee and as such the interest which accrued on such should be held to have arisen from the same business, i.e., a priority industry and the assessee should be allowed relief under s. 80-I therefor. It was submitted that the language of s. 80-I and that of s. 80-J were different. Section 80-I permitted a relief on profits and gains as "attributable to" a priority industry while s. 80J granted relief on profits and gains "derived from" a priority industry. It was contended that the expression "attributable" in s. 80-I was wider in scope than the expression "derived" in s. 80-J.

The Tribunal held that though the memorandum of the assessee permitted investment of its funds, it did not follow that interest from such investments could for a particular purpose but not in fact utilised for the same should be deemed to have been utilised for such purpose was rejected. The Tribunal also held that there was no evidence that the loans and borrowings of the assessee were meant only for the purpose of investment in a priority industry. Accordingly, the contention of the assessee was rejected.

On an application by the assessee under s. 256(1) I.T. Act, 1961, the Tribunal has drawn up a statement of case and referred the following questions of law, stated to have arisen out of its aforesaid order, for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not entitled to deduction under section 80-I of the Income-tax Act, 1961, in respect of sales of pigments ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the deduction allowable to a priority industry was not available to the assessee on the interest income under section 80-I of the Income-tax Act, 1961 ?"

On a similar application by the Commissioner, West Bengal II, Calcutta, the Tribunal has also referred the following questions :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Kalwa Foil Mill unit of the assessee-company was entitled to relief under section 80J and in that view directing the Income-tax Officer to determine the quantum of deficiency to be carried forward from earlier years and to set it off against the profit of assessment year 1970-71 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Belgaum Smelter Unit of the assessee-company was entitled to relief under section 80J and in that view in directing the ITO to determine the quantum of deficiency of the current year to be carried forward for set off against future profit in accordance with law ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for obtaining the benefit of the carry forward of the deficiency of the earlier previous year and set off thereof against the profits of the previous year in which the assessee actually earned profits it was not obligatory upon the assessee to make a claim under section 80J (3) in respect of each of the earlier assessment years and get the deficiency determined and carried forward to the next following assessment year ?

4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to depreciation on fencing, culverts and drainage within the factory compound at the rate applicable to first class factory building ?"

On question No. 1 referred at the instance of the assessee Dr. Debi Pal, learned counsel for the assessee, contended that the aluminium pigment fell within the definition of aluminium metal. The production of aluminium metal was priority industry within the meaning of s. 80-I of the I.T. Act, 1961, and the assessee was entitled to deduction under that section in respect of profits and gains arising from sale of aluminium pigment. In support of such contention Dr. Pal cited and relied on :

CIT v. West India Steel Co. Ltd. [1977] 108 ITR 601 (Ker) [FB]. In this case, the assessee carried on the business of re-rolling steel and produced mild steel, billets and mild steel ingots as also M.S. rods and steel sections. The question arose whether the assessee was entitled to a higher rate of development rebate as being engaged in the business of production or manufacture of iron and steel (metal) as defined in item (1) of the Fifth Schedule of the I.T. Act, 1961. It was held by a Full Bench of the Kerala High Court that the said M. S. Rods and steel sections were basically iron and steel (metal) within the meaning of the said item of the Fifth Schedule of the Act and, therefore, the assessee must be held to be engaged in the business of production or manufacture of iron and steel (metal) and was entitled to a higher rate of development rebate.

Mr. A. K. Sengupta, learned counsel for the revenue, contended on the other land that no evidence has been adduced on behalf of the assessee at any stage of the proceedings that aluminium pigment was aluminium metal in its primary form. Accordingly, the assessee was not entitled to any deduction under s. 80-I of the I.T. Act, 1961, in respect of the item. Mr. Sengupta submitted further that in any event the question was covered by the following decision of this court.

Indian Steel and Wire Products Ltd. v. CIT [1977] 108 ITR 802 (Cal). In this case, the assessee manufactured steel wire rods in coils and straight lengths which were sold as such and such wire was also processed further for the manufacture of other kinds of wires, nails, revisit, etc. On a reference, it was held by this Bench that such wire rod was a commercial product made out of iron and steel. It was held further that while processed iron and steel in the shape and forms like billets, slabs, ingots, etc., could be treated as raw materials and could come within the definition of iron and steel (metal) but after a certain stage by further processing or manufacture, the produce ceased to be a raw material and entered into the category of a finished product. The wire rods in question were found to be such finished products and it was held that the said product did not come within the meaning of the expression "iron and steel (metal)".

Dr. Pal contended that the decision in the case of Indian Steel and Wire Products Ltd. [1977] 108 ITR 802 (Cal) needed reconsideration in view of the decision of the Full Bench of the Kerala High Court in West India Steel Co. [1977] 108 ITR 601.

It appears to us that decision of this court and the decision of the Kerala High Court are not really divergent. All that was found in the case of West India Steel Co. Ltd. [1977] 108 ITR 601 (Ker) was that the products in question, M. S. Rods and steel sections were basically iron and steel (metal) and as such could be considered to be a raw material whereas in Indian Steel and Wire Products Ltd. [1977] 108 ITR 802 (Cal), the items in questions were found to be finished products.

On the assessees question No. 2, Dr. Pal reiterated the contentions on the assessee before the revenue authorities. He submitted that the interest accruing from the surplus funds of the assessee procured for the priority industry and invested for short periods should be held to have arisen from the business of the assessee in a priority industry and, therefore, should be held to be income from such priority industry. He also submitted that the interest paid by the assessee in respect of such borrowed fund was being allowed to be deducted by way of a business expenditure. In support of his contentions, Dr. Pal cited the following decisions :

(a) Cambay Electric Supply Industrial Co. Ltd. v. Cit . [1978] 113 ITR 84 (SC). The assessee in this case carried on the business of generation and distribution of electricity. During the relevant assessment year, the assessee had sold some of its old machinery and buildings. This resulted in a blanching charge under s. 41(2) of the I.T. Act, 1961, which was computed at Rs. 7,55,807. The ITO treated the said amount as profits attributable to the business of generation and distribution of electricity and allowed deduction at 8% under s. 80E(1) of the Act. In proceedings initiated under s. 263 the Addl. Commissioner held that such deduction had been wrongfully allowed. The order of the ITO was set aside and a fresh assessment was directed to be made. On appeal, the Income-tax Appellate Tribunal held that the said item of balancing charge could not be treated in isolation or separately from the profits and gains of the business of generation and distribution of electricity carried on by the assessee and, therefore, the said item should be regarded as profit "attributable to" thought not "derived from" such business. It was held that the assessee was entitled to claim deduction in respect of the said item. On a reference, the Gujarat High Court upheld the decision of the Tribunal. On a further appeal to the Supreme Court, the decision of the Tribunal and High Court was upheld. The Supreme Court observed as follows (p. 93) :

"As regards the aspect emerging from the expression attributable to occurring the phrase profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression attributable to and not the expression derived from. It cannot be disputed that the expression attributable to is certainly wider in import than the expression attributable to is certainly wider in import than the expression derived from. Had the expression derived from been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression derived from, as, for instance, in section 80J. In our view, since the expression of wider import, namely, attributable to, has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity."

(b) Addl. CIT v. Abbas Wazir (P.) Ltd. [1979] 116 ITR 811 (All). The assessee in this case in its business of manufacture and export of carpets suffered a loss which was made up by sale of import entitlements and cash subsidies received by the assessee on its exports and there was a net profit. The question arose whether in respect of the said profit the assessee was entitled to be taxed at a concessional rate on the ground that it would be deemed to be an industrial company within the meaning of s. 2(8)(c) of the Finance Act, 1974. On a reference, the Allahabad High Court held that the import entitlements and clash subsidies were received by the assessee from sources directly connected with the business activity of the assessee and the receipts from the sale the import entitlements were attributable to the activity of manufacture of carpets within the meaning of the said section of the Finance Act, 1974.

Mr. A. K. Sengupta, for the revenue, contended that on facts it was not established that interest which the assessee received from its temporary investment was attributable to a priority industry and the onus was on the assessee to establish that such income was attributable to a priority industry.

Mr. Sengupta further contended that in any event there has been no apportionment of such interest between the part of the industry of the assessee which was a priority industry and the other part which was not a priority industry and at the stage of reference this court should not direct apportionment of such income. In support of his contentions, Mr. Sengupta cited the following decisions :

(a) CIT v. Mewar Textile Mills Ltd. [1966] 60 ITR 423 (SC). In this case, the assessee, a non-resident, sold goods in British India. The profit received by the assessees banker in British India as price of goods sold by the assessee under railway receipts in the name of the consignee or as price of goods delivered ex-godown Bhilwara was sought to be taxed in India under the Indian I.T. Act. In a reference, it was held by the High Court that in determining such tax the profits should be apportioned between the manufacturing process and the selling process. On appeal, the Supreme Court held that the dispute having been raised earlier in respect of apportionment of such profits the High Court should not have directed opportionment.

(b) CIT v. New India Investment Corporation Ltd. [1978] 113 ITR 778 (Cal). The assessee held shares and securities as stock -in-trade and received dividends therefore. The expenditure incurred in earning such dividend was apportioned by the ITO between several heads and only a portion was treated as expenditure for earning dividend. The Tribunal held that such apportionment was not justified. On a reference, this Bench held that there was no question of apportionment and such expenditure should either be allowed under the head "business income" or against the dividend income.

It appears to us that, in the facts and circumstances, no part of the interest accruing from temporary investment of surplus funds can be said to be attributable to the priority industry of the assessee. In our view, such interest has arisen by reason of the surplus fund being not employed in the priority industry and such temporary investment has not been shown to have any connection whatsoever direct or indirect with the priority industry of the assessee.

On question No. 2, referred at the instance of the revenue. Dr. Pal, for the assessee, has drawn our attention to the fact that the assessees Belgaum smelter unit went into production in 1969 in the relevant assessment year and was admitted to be a new industrial undertaking. This is a concluded finding and appears in the order of rectification of the Tribunal dated the September 27, 1976. Dr. Pal cited CIT v. Indian Aluminium Co. Ltd. [1977] 108 ITR 367 (SC) and Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC).

Mr. A. K. Sengupta, for the revenue, did not press for an answer to the question No. 2.

On questions Nos. 1 and 3 referred at the instance of the revenue, Mr. A. K. Sengupta, for the revenue, confined his submissions only to the right of the assessee to carry forward the deficiency. He submitted that on a proper construction of s. 80J, the deficiency arising in each year had to be claimed and computed in that very year and, unless it was so done, the assessee in a subsequent year could not claim that such past deficiency could be computed for the purpose of being carried forward. In this connection, he referred to ss. 32, 37 and 73 of the I.T. Act providing for the carry forward of loss by an assessee to subsequent years.

In support of his contentions, Mr. A. K. Sengupta cited Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC). In this case, the assessee appealed against an assessment contending that benefit under s. 84 of the I.T. Act, 1961, to which it was entitled had been wrongfully disallowed. The AAC dismissed the appeal on the ground that the assessee had not claimed exemption under the said section before the ITO. On further appeal, the Tribunal held that since the entire assessment was before the AAC there was no reason for not entertaining the claim of the assessee and directed the ITO to allow appropriate relief under s. 84. On a reference, the High Court upheld the decision of the Tribunal. On appeal, the Supreme Court held that as no claim had been made before the ITO and as there was no material on record to support such claim, the Tribunal was not correct in holding that the AAC should have entertained the question of relief under s. 84 and in directing the ITO to allow the same.

In reply Dr. Debi Pal, for the assessee, contended that it has been found as a fact that the Kalwa unit of the assessee went into production in 1965 and, therefore, any claim for loss or deficiency in respect thereof could be made for the first time in the assessment year 1966-67. section 80j(3) came into force only from April 1, 1968, with retrospective effect and a new industrial undertaking could claim relief with effect from January 1, 1967. Therefore, the section itself envisaged that it was not necessary for an assessee to have the loss and deficiency in respect of a new undertaking to be determined every year for the same to be carried forward.

Dr. Pal contended further that specific sections in the Indian I.T. Act, 1922, and the I.T. Act, 1961, made it incumbent on an assessed to have his loss determined every year so that the same could be carried forward for being set off in a future year. Before s. 22(2A) was introduced in the Indian I.T. Act, 1922, the position in law was different and an assessee in any future year could claim that its unabsorbed loss in the past years should be determined, carried forward and set off against profits in such future year. In support of his contentions, Dr. Pal cited the following decisions :

(a) CIT v. Govindalal Dutta [1958] 33 ITR 630 (Cal).

In this case, the assessee filed voluntary returns in respect of assessment years from 1946-47 to 1950-51. The ITO ignored the returns for the years 1946-47 and 1947-48, as there was loss in the said years and made an assessment only for the assessment year 1948-49, without determining or taking into account the loss at the earlier years. On a reference, it was held by this court that the assessee had an unqualified right subject only to the limitation contained in s. 24(2) of the Indian I.T. Act, 1922, to have his losses carried forward an set off against the profits of subsequent years irrespective of any assessment in the earlier years. In the course of any particular assessment, the assessee was entitled to establish that he had suffered loss within the six preceding years and that it had not been possible to set off such loss against the profit of the relevant years or any subsequent year.

(b) CIT v. Manmohan Das [1966] 59 ITR 699 (SC). It was laid down in this case that s. 24(2) of the Indian I.T. Act, 1922, conferred a statutory right on the assessee who should sustain a loss in any year in any business, profession or vocation to carry forward the same to the extent it was not set off under sub-s. (1) of the said section to the following year, and to set it off against his profits and gains, if any, from the same business, profession or vocation for that year. The ITO, who would deal with the assessment of the subsequent year, would have to determine whether the loss of the previous year might be set off against the profits of that year. A decision of the ITO, who would compute the loss in the previous year under s. 24(2) that such loss could not be set off against the income of the subsequent year, was not binding on the assessee.

(c) CIT v. Harprasad & Co. P. Ltd. [1975] 99 ITR 118 (SC). It was laid down in this case that before the insertion of s. 22(2A) in the Indian I.T. Act, 1922, an assessee was entitled to carry forward a loss even if he had submitted no return for the year in which the loss was sustained. After the enactment of the said sub-s. (2A), it becomes a condition precedent to the carry forward and set-off of such loss that an assessee must file a return for the year in which the loss was incurred and yet the loss computed by the ITO. If the same was not down the right to carry forward the loss would be lost.

(d) CIT v. Dalmia Cement (Bharat) Ltd. [1976] 104 ITR 337 (Mad). The assessee in this case, a public limited company, carried on, inter alia, the business of mining magnesite. During the periods 1945 to 1966, the assessee incurred losses. For the assessment years 1950-51 to 1955-56, the assessee filed its return on the April 23, 1956. Such returns were not taken cognizance of by the ITO as they had been filed beyond the period stipulated under ss. 22(1) and 22(2A) of the Indian I.T. Act, 1922. For the assessment years 1960-61 to 1961-62, the assessee claimed set off in respect of the loss incurred in the earlier years including the loss incurred during the assessment years 1950-51 to 1954-55. On a reference, on the above facts, the Madras High Court upheld the order of the Tribunal which held that though losses in the earlier years had not been quantified the assessee was entitled to carry forward and set off the same in the assessment year in question.

(e) CIT v. Patiala Flour Mills Co. P. Ltd. [1978] 115 ITR 640 (SC). The assessee in this case had set up a new cold storage plant in the assessment year 1967-68. This was a new industrial undertaking within the meaning of s. 80J of the I.T. Act, 1961. Losses, depreciation and development rebate in respect of the said plant for the assessment years 1967-68 to 1969-70 were adjusted against the profits of the order businesses of the assessee in computing the assessees total income and no loss, depreciation or development rebate remained unabsorbed to be carried forward. In the assessment year 1970-71, the new undertaking earned profit. The ITO declined to allow any deduction in respect of capital employed in the undertaking in the said assessment year under s. 80J(1) or in respect of the deficiencies in the past assessment years under s. 80J(3). The AAC affirmed the decision of the ITO, but the assessees contentions were accepted by the Tribunal. On a reference, the High Court upheld the decision of the Tribunal. On further appeal, the Supreme Court affirmed the order of the High Court and held that the Tribunal was right in law in adjusting the capital employed in the undertaking in the assessment year 1970-71 as also in adjusting the deficiency in the earlier assessment years against the profits in the said assessment year.

(f) Addl. CIT v. Sheetalaya [1979] 117 ITR 658 (All). In this case, the assessee carried on the business of running a cold storage. In the assessment year 1972-73, the assessee claimed deduction under s. 80J of the I.T. Act, 1961, as also for deficiency relating to the past there assessment years. The ITO rejected the claim for the past years and allowed the claim only for the current year. On appeal, the AAC sustained the decision of the ITO. On a further appeal, the Tribunal held that losses in the past assessment years had been computed and the failure to make a specific claim for relief under s. 80J did not stand in the way of the same being carried forward as the section did not require that such claim should be made. On a reference, the Allahabad High Court agreed with the Tribunal and held that s. 80J did not require that the assessee must make a definite claim and the ITO must determine the amount of deduction claimable before the same could be carried forward even in a case where the new business undertaking had suffered losses. The High Court further held that the deduction would be permissible even in a case where the formality of making a claim has not been specifically observed in the earlier years where admittedly losses had been sustained.

On a consideration of the scheme of Chap. VIA and in particular s. 80J, it appears to us that the contentions on behalf of the assessee are of substance and overrides the contention made on behalf of the revenue to the contrary. We respectfully agree with the decisions cited on behalf of the assessee on this point. Admittedly, s. 80J came into force in the assessment year 1969-70, it gave retrospective benefit to assessees whereby they could carry forward their loss and deficiency with effect from January 1, 1967. In such a case, there could not have been any prior determination or claim for carry forward of loss and deficiency. The section does not provide that in respect of assessment years subsequent to April 1, 1968, the assessee is required to have its loss and deficiency in every year determined so that it could be carried forward. There is no procedure laid down in the Rules for prior determination of such loss and deficiency and the income-tax return forms do not have any column for making such a claim. It is not disputed that in the relevant earlier years the assessee while making a claim under s. 197(3) of the I.T. Act, 1961, had furnished full details of the working of the Kalwa unit including the amount of capital employed in that unit to the ITO and the material facts came on record.

On question No. 4 referred at the instance of the revenue, Mr. A. K. Sengupta submitted that facts necessary to answer the questions has not been enquired into or ascertained and the matter should, therefore, be remanded for ascertainment of such facts. Mr. Sengupta cited the following decisions in this context.

(a) CIT v. Indo-Burma Petroleum Co. Ltd. [1978] 112 ITR 755 (Cal). In this case, the question before this court was whether an assessee who carried on business in petroleum could claim depreciation on driveways and compound walls of its building. It was found that it was necessary for the business to have driveways to enable motor vehicles to come to the pumps and it was also necessary to enclose the area by a compound wall. This court held that the word "building" which had not been defined in the I.T. Act, 1961, had to be construed in its ordinary sense having regard to the purpose of user. On the facts found it was held that the driveways as also the compound walls were parts of the building in which the assessee carried on its business. It was held that the assessee was entitled to claim depreciation in respect of the same.

(b) Oil India Ltd. v. CIT [1978] 114 ITR 323 (Cal). In this case, the question before this court was whether an assessee was entitled to claim depreciation on drains, culverts, roads, etc. The ITO disallowed such claim on the ground that the assets were not eligible for allowance of depreciation. The AAC on appeal held that the items, namely, drains, culverts and roads came within the ordinary meaning of the word "building" and directed the ITO to allow appropriate depreciation. On further appeal, the Tribunal held that if the word "building" be understood as in common parlance the items concerned could not be treated as buildings and set aside the order appealed from. On a reference, this court held that there were no materials on record to show whether the items concerned were used for the purpose of the business of the assessee as in the case the Indo- Burma Petroleum Co. Ltd. 112 ITR 755 (Cal). The Tribunal was directed to ascertain the user of the items in dispute as also the nature of the business carried on by the assessee in order to decide the question. The matter was accordingly remanded.

(c) CIT v. Colour-Chem Ltd. [1977] 106 ITR 323 (Bom). In this case, the Bombay High Court held on the facts before it that roads or roadways laid out the assessee for the purpose of linking factory buildings within the factory premises and used for the purposes of carrying raw materials and finished products and workers must be regarded as buildings within the meaning of s. 10(2)(vi). The court held further that like factory building the roads and roadways appertaining thereto were liable to deteriorate by reason of constant use.

(d) Hukamchand Mills Ltd. v. CIT [1978] 114 ITR 870. In this case, the Bombay High Court followed its earlier decision in the case of Colour-Chem Ltd. [1977] 106 ITR 323 and held that roads and roadways laid out by an assessee within the factory premises for the purpose of linking factory buildings and for carrying raw materials, finished products and movement of workers must be regarded as buildings within the meaning of s. 10 (2) of the Indian I.T. Act, 1922, and as part of the factory building the assessee would be entitled to claim depreciation in respect of the same.

Dr. Debi Pal, for the assessee, relied on the said decisions cited on behalf of the revenue and contended that the law on the point was well settled and the facts were sufficiently established to enable this court to answer this question in favour of the assessee.

In the instant case, the Tribunal has followed its earlier order in the case of the same assessee in respect of assessment years 1966-67 to 1969- 70. This earlier order of the Tribunal dated the May 4, 1974, is a part of the paper book. Reading the said order it appears that the admitted position is that the fencing, roads and culverts are parts of the factory of the assessee. The only dispute which was raised before the AAC was whether the said fencing, roads and culverts in law could be included in the expression "building". The AAC proceeded on the basis that the expression "building" should be given its ordinary meaning, namely, a covered structure or edifice. This limited dispute was considered by the Tribunal. The Tribunal held that the word "building" should be construed broadly and should not be considered in isolation. The revenue did not challenge that the items in dispute, namely, the fencing, roads and culverts were not part of the assessees factory not did it call upon the Tribunal to ascertain further in this connection. In the aforesaid circumstances, we do not feel that the matter need be remanded for further consideration. The decisions cited at the Bar on this point uniformly support the contentions of the assessee.

For the above reasons, we answer the questions referred as follows :

A. Questions referred at the instance of the assessee :

Questions No. 1 is answered in the affirmative and in favour of the revenue.

Questions No. 2 is also answered in the affirmative and in favour of the revenue.

B. Questions referred at the instance of the revenue :

Questions No. 1 is answered in the affirmative and in favour of the assessee.

Questions No. 2 is answered in the affirmative and in favour of the assessee.

Questions No. 3 is answered in the affirmative and in favour of the assessee.

Questions No. 4 is also answered in the affirmative and in favour of the assessee.

The reference is disposed of accordingly.

There will be no order as to costs.

C. K. BANERJI J. - I agree.