TMI Blog1970 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ons amounted to Rs. 50,624. The Income-tax Officer adjusted the current depreciation amounting to Rs. 58,140 as against the business income amounting to Rs. 50,624. It was ordered that the balance of depreciation amounting to Rs. 7,516 should be carried forward. The result was that the total unabsorbed depreciation carried forward amounted to Rs. 1,85,670. It was further decided that the entire unabsorbed loss amounting to Rs. 67,534 should be carried forward. At the time of assessment for 1952-53 the business income was found to be Rs. 64,232. Depreciation allowance for that year amounted to Rs. 44,580. The Income-tax Officer adjusted the current depreciation against the business income of the assessee. The net income came to Rs. 19,652. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjusted before considering the current depreciation allowance. The answer to the question depends upon a proper interpretation of sections 10 and 24 of the Act. According to sub-section (2) of section 10, an assessee is entitled to certain allowances by way of deduction from business income. Clause (vi) of sub-section (2) deals with allowance for depreciation. Proviso (b) to section 10(2)(vi) states: "Where in the assessment of the assessee....owing to there bring no profits or gains chargeable for that year or owing to profits or gains chargeable being less than the allowance, then, subject to the provisions of clause (b) of the proviso to sub-section (2) of section 24, the allowance or part of the allowance to which effect has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso (b) to sub-section (2) of section 24. Dr. Misra appearing for the department contended that in the present case the assessee cannot raise the question of unabsorbed depreciation, because the two items mentioned in the question before the court relate to current depreciation and not unabsorbed depreciation. It is true that the two sums mentioned in the question relate to current depreciation. But we cannot overlook the fact that in the present case there were also items of unabsorbed depreciation. We are not answering any abstract question of law. The question before us is whether, in the circumstances of the case, the assessee is entitled to claim priority for unabsorbed business loss over depreciation allowance for the current year. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also an amount of Rs. 27,000 being the loss carried forward from earlier years. The Income-tax Officer set off the depreciation allowance against the profits and directed the amounts of unabsorbed depreciation and loss carried forward from earlier years to be carried over to the next year separately. It was held that the procedure adopted by the Income-tax Officer was correct. It was observed at page 376: "....... no question of a priority as between the setting off of the depreciation allowance for the current year and the carried over loss of earlier years can ever arise." That observation no doubt lends support to the stand taken by the department. It may, however, be pointed out that in that case there was no question of unabsorbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different manner, section 24(2) only deals with losses other than the losses due to depreciation." In that passage the Supreme Court recognised the broad principle that in the matter of carry forward, business losses should receive priority over depreciation allowance. Dr. Misra conceded that by virtue of proviso (b) to sub-section (2) of section 24, business losses have to be given priority over unabsorbed depreciation allowance. We have seen that under proviso (b) to section 10(2)(vi), depreciation allowance which is carried forward merges into depreciation allowance for the succeeding year. After such merger, the unabsorbed depreciation allowance is to be deemed to be direct allowance for the current year. If business losses have to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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