1984 (10) TMI 75 - AT - Income Tax

Summary

Issues:
1. Eligibility to bring forward depreciation allowance under section 32(1)(i) against profits of subsequent years.
2. Interpretation of the provisions of section 44B(1) in relation to the allowance of depreciation.

Analysis:

Issue 1:
The assessee, a non-resident company engaged in ship operations, appealed against the denial of bringing forward depreciation allowance under section 32(1)(i) for the assessment years 1976-77 and 1978-79. The Income Tax Officer (ITO) and the Commissioner (Appeals) rejected the claim, citing section 44B(1) of the Income-tax Act, 1961. The assessee argued that unabsorbed depreciation should be treated as a business loss and set off against the profits of the years under consideration. The assessee relied on legal precedents such as the Madras High Court decision in A. Suppan Chettiar & Co. v. CIT and the Bombay High Court decisions in Ambika Silk Mills Co. Ltd. v. CIT and Dharampur Leather Cloth Co. Ltd. v. CIT to support their case. The revenue contended that depreciation allowance is distinct from ordinary business losses and should not be considered for set off under section 72 of the Act.

Issue 2:
The Tribunal analyzed the applicability of section 44B in determining the taxable profits of a non-resident shipping concern. It noted that the rough method prescribed under section 44B supersedes the normal procedure of profit determination. The Tribunal emphasized that once section 44B excludes the operation of sections 28 to 43A, the assessee cannot rely on section 32(1)(i) or 32(2) for claiming depreciation allowance. The Tribunal distinguished the case at hand from previous decisions that allowed brought forward depreciation, stating that section 44B specifically rules out such allowances. The Tribunal dismissed the relevance of other court decisions cited by the assessee, emphasizing that the nature of depreciation allowance under section 32(1)(i) is immaterial when section 44B(1) precludes its consideration.

In conclusion, the Tribunal upheld the lower authorities' decision, denying the assessee's claim to bring forward depreciation allowance against the profits of the subsequent years. The appeals were dismissed, emphasizing the inapplicability of section 32(1)(i) and 32(2) due to the overriding effect of section 44B(1) in determining taxable profits for non-resident shipping concerns.