1970 (9) TMI 9 - HC - Income Tax

Summary

Issues:
1. Priority between unabsorbed loss and current depreciation for assessment years 1951-52 and 1952-53.

Detailed Analysis:
The judgment by the High Court of Allahabad involved a reference under section 66 of the Indian Income-tax Act, 1922, concerning the priority between unabsorbed loss and current depreciation for the assessment years 1951-52 and 1952-53. The case pertained to a limited company with unabsorbed loss and depreciation from previous years. The Income-tax Officer had adjusted the current depreciation against the business income, resulting in unabsorbed amounts being carried forward. The Appellate Assistant Commissioner directed the adjustment of business loss before allowing depreciation, but the Appellate Tribunal overturned this decision, leading to the reference to the High Court.

The primary issue revolved around the interpretation of sections 10 and 24 of the Act regarding the priority between unabsorbed loss and current depreciation. The department contended that current depreciation should be deducted before unabsorbed loss, while the assessee argued for the opposite. Proviso (b) to section 10(2)(vi) and section 24 dealt with the carry forward of unabsorbed depreciation and set off of losses, respectively. The court analyzed the provisions and previous case laws to determine the correct priority.

The court considered the precedence given to business losses over depreciation allowance as recognized by the Supreme Court in previous cases. Proviso (b) to section 24(2) mandated giving priority to business losses over unabsorbed depreciation. The court emphasized that if business losses were prioritized, then losses brought forward should also take precedence over current depreciation allowance. The judgment concluded in favor of the assessee, affirming the priority of unabsorbed business loss over current depreciation allowance for the assessment years in question.

In conclusion, the High Court of Allahabad ruled in favor of the assessee, establishing the precedence of unabsorbed business loss over current depreciation allowance for the assessment years 1951-52 and 1952-53. The judgment was based on a thorough analysis of relevant provisions of the Income-tax Act and previous legal precedents, emphasizing the priority given to business losses in such scenarios.