TMI Blog1996 (3) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... emaining unabsorbed in the hands of the firm will be brought back to the partner's file to be absorbed against his other income so that this processing of reversion is repeated year after year till the entire unabsorbed depreciation is wiped out ? " The question is of the unabsorbed depreciation remaining in the hands of the firm to be brought back to the partner's file for absorption against his other incomes. A short resume of facts would not be without purpose. The deceased assessee was a partner in the firm, Messrs. Anthraper Industries. The firm suffered losses continuously for the assessment years 1973-74, 1974-75, 1975-76 and 1976-77. The completion of assessment for the years 1978-79, 1979-80 and 1980-81 required consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (v) or clause (vi) of sub-section (1) or under clause (i) of sub-section (1A) 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 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." The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms incurring business losses which cannot be absorbed by or adjusted against their incomes under other heads, prima facie including depreciation allowances also, in regard to the unabsorbed losses requiring primarily to be apportioned among the firm's partners who alone shall be entitled to have such unabsorbed amounts set-off and carried forward for set-off against future profits. The process of reasoning took into consideration the various decisions in the aid of the reasoning. It is unnecessary to refer to these decisions now at this stage in view of the question having been declared and settled by the Supreme Court in Garden Silk Weaving Factory v. CIT [1991] 189 ITR 512. The Revenue's appeal to the Tribunal confirmed the earlier o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after having fulfilled the two stages referred to hereinbefore, in a situation where full effect cannot be given to the depreciation allowance of the firm even after following the first two stages and on finding that some depreciation remained unadjusted, the registered firm will carry forward the remaining unadjusted depreciation to the succeeding assessment year. On an examination of the provisions of section 32(2), it is observed that this carrying forward of unabsorbed depreciation has always been understood and interpreted as arising only after the adjustments against other business income and income under other heads have been carried out. It is because the depreciation attributable to a particular business exceeds the profits other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the process referred to above and still remaining to be dealt with. This situation requires obviously the process of carrying forward. It is observed in the process that the procedure would only enable a firm and the partners to set off the aggregate of the unabsorbed depreciation of the firm against the income of the firm and the partners. These observations of the Supreme Court would rule the answer to the question, even apart from the situation that on a plain reading of the provisions of the Act, the Tribunal would have to be justified in rejecting the application for reference. The result is that the question is answered affirmatively, in favour of the assessee and against the Revenue. A copy of this judgment shall be caused to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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