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TMI Blog1962 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2,44,648. The assessee had unabsorbed depreciation of ₹ 5,62,317 determined for the preceding years. The Income-tax Officer allowed a set-off of the unabsorbed depreciation of the preceding years only to the extent of the business income during the year under consideration, and as such the profit from business was determined at nil. The assessee also had income from property which was determined at ₹ 5,614. The assessment was completed on a total income of ₹ 5,614. 3. In appeal, the Appellate Assistant Commissioner held that by virtue of the provisions of section 10(2)(vi) the unabsorbed depreciation of the preceding year was to be treated as part of the depreciation allowance of the current year. He therefore held that the business income would not be determined at nil but at a negative figure of ₹ 3,17,669 after setting off the unabsorbed depreciation of the preceding years against which the property income of ₹ 5,614 was to be set off, so that the income for the previous year was to be assessed at nil and the balance of the depreciation was to be carried forward to subsequent years. 4. On further appeal by the Income-tax Officer, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income falling under the head income from property which was determined at ₹ 5,614. The Income-tax Officer assessed the assessee on a total income of ₹ 5,614. The assessee appealed against the decision of the Income-tax Officer. The Appellate Assistant Commissioner held that by virtue of the provisions contained in section 10(2)(vi) the unabsorbed depreciation of the preceding years was to be treated as a part of the depreciation allowance for the year in question. He, therefore, permitted the amount of unabsorbed depreciation to be set off also against the income from property amounting to ₹ 5,614 leaving a balance of ₹ 3,12,055 as the unabsorbed depreciation for carry forward purposes. The matter was carried further to the Income-tax Appellate Tribunal. The Tribunal upheld the decision of the Appellate Assistant Commissioner, whereupon the Commissioner of Income-tax, Gujarat, applied to the Income-tax Appellate Tribunal for a reference under section 66(1). Thereupon, the Income-tax Tribunal has raised the following question and referred the same for our decision: Whether the Appellate Tribunal was right in holding that the unabsorbed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 year and deemed to be part of that allowance, or, if there is no such allowance for that year, be deemed to be the allowance for that year, and so on for succeeding years. Under the aforesaid provisions, an unabsorbed depreciation of ₹ 5,62,317 of the preceding years had been carried forward to the assessment year 1957-58. By virtue of what is contained in proviso (b) such unabsorbed depreciation was liable to be added to the amount of allowance for depreciation for the assessment year in question and was to be deemed to be part of that allowance for the said assessment year. The learned Advocate-General contends that this unabsorbed depreciation, even though it is deemed to be part of the depreciation allowance for the assessment year, is not available for the purpose of set-off against income arising under other heads (i.e., heads other than profits and gains of business, profession or vocation ) by reason of the use of the words in the said proviso subject to the provisions of clause (b) of the proviso to sub-section (2) of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be set off only against the profits and gains, if any, of any business in speculative transactions carried on by him in that year; (ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any, of any business, profession or vocation carried on by him in that year, provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year; and (iii) if the loss in either case cannot be wholly set off, the amount of loss not so set off shall be carried forward to the following year and so on but no loss shall be carried forward for more than eight years. Sub-section (2) of section 24 comes into operation where an assessee sustains a loss in any year and the loss cannot be wholly set off in that year under sub-section (1), so that where effect could be given to the provisions contained in section 24(1), the provisions of section 24(2) are not attracted. If the matter had stood without the provisos to sub-section (2) of section 24, the result would have been that by reason of the deeming provision referred to above the unabsorbed deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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