9911796707
TMI Blog2015 (5) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... The aforesaid question has arisen for consideration in the following set of facts: 4) The appellant/assessee is a public limited company engaged in the business of manufacturing paper. It had filed its return under Section 139 of the Income Tax Act, 1961 (for short, the 'Act') for the Assessment Year 1991-92 declaring its income as 'Nil'. In fact, the income for that year after showing exemptions, deductions and additions, which are to be made in terms of Sections 28 onward relating to computation of the business income, was arrived at Rs.2,87,15,912. The assessee had unabsorbed investment allowance of previous years. It also had unabsorbed depreciation of the earlier years. In its income-tax return, however, it chose to carry forward investment allowance and claimed set off of the said unabsorbed investment allowance to the extent of Rs.2,87,15,912, thereby showing the returned income as 'Nil'. According to the Assessing Officer, it was not the investment allowance, but unabsorbed depreciation of the earlier years which had to be set off first by giving priority to the unabsorbed depreciation. Therefore, instead of allowing the assessee to carry forward i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was more beneficial to the assessee had to be given effect to. 9) The High Court took note of these contentions of the assessee predicated on the judgment of the Punjab and Haryana High Court in Ram Nath Jindal & Anr. v. Commissioner of Income Tax (2001) 252 ITR 590, in which the said High Court held that the Assessing Officer could not grant the depreciation allowance when it was not claimed by the assessee as there is no provision by which depreciation could be fictionally deemed to have been claimed and granted. It would be pertinent to point out that this judgment of the High Court was in the light of Section 32 of the Act which stood at the material time and this very provision existed even in respect of Assessment Years 1991-92 and 1992-93 with which we are concerned. Therefore, the High Court took cognizance of the said judgment. The High Court also noted another judgment of its own Court in Guindy Machine Tools P. Ltd. v. Commissioner of Income Tax (2002) 254 ITR 780, which had followed judgment of this Court in Commissioner of Income-Tax v. Mahendra Mills (2000) 243 ITR 56 wherein it was held that the provision in respect of depreciation was for the benefit of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the allowance for that previous year, and so on for the succeeding previous years." 11) This Section deals with depreciation in respect of certain assets which are mentioned in sub-section (1) of Section 32 and owned wholly or partly by the assessee and used for the purpose of business or profession. The nature of deductions that is to be allowed is also mentioned in sub-section (1). We are not directly concerned with this provision inasmuch as it is not in dispute that the assessee herein was entitled to depreciation on its assets and the amount of depreciation is also not in dispute. As mentioned above, in fact, the depreciation of earlier orders could not be utilized by the assessee in those years. Since the provisions of the Act permit the assessee to accumulate the unabsorbed depreciation of the previous years with right to the assessee to choose the same in subsequent years, the assessee herein had unabsorbed depreciation of the previous years. This is so stipulated in sub-section (2) of Section 32., which has already been noted earlier. 12) As per the aforesaid provision, the depreciation allowance or part thereof to which effect has not been given in a particular assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is without any time limit. Sub-section (2) of Section 72 stipulates that where any allowance or part thereof is under sub-section (2) of Section 32 or sub-section (4) of Section 35 and is to be carried forward, effect shall first be given to the provisions of this section. Section 73, on the other hand, deals with loss in speculation business and subsequently mentions that such loss of a speculation business shall not be set off except against profits and gains, if any, of another speculation business. Thus, losses of speculation business can be set off only against profits and gains of another speculation business and not against profits earned from other kinds of businesses. Here sub-section (3) of Section 73, which finds mention in Section 32(2), states that provisions of sub-section (2) of Section 72 shall also apply in relation to speculation business. We are not concerned with the aforesaid situation arising out of sub-section (2) of Section 72 or sub-section (3) of Section 73. However, the same are mentioned for the purpose of clarity as there is a reference to these provisions in Section 32(2). Insofar as the instant case is concerned, it depends upon the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s specific and admits of no ambiguity. Section 32 allows depreciation as deduction, subject to the provisions of Section 34. Section 34 provides that deduction under Section 32 shall be allowed only if the prescribed particulars have been furnished. It was specifically held that there is no mandatory duty on the officer to allow depreciation if the assessee does not want to claim that. The provision for claim of depreciation is certainly for the benefit of the assessee. If he does not wish to avail of that benefit for some reason, the benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage. Income under the head "Profits and gains of business or Profession" is chargeable to income-tax under Section 28 and income under Section 29 is to be computed in accordance with the provisions contained in Sections 30 to 43A. The argument that since Section 32 provides for depreciation it has to be allowed in computing the income of the assessee cannot, in all circumstances, be accepted in view of the bar contained in Section 34. If Section 34 is not satisfied and the particulars are not furnished by the assessee, his claim for depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of set off of unabsorbed depreciation allowance of the previous years. As noted above, by legal fiction unabsorbed depreciation becomes depreciation of the year in question and gets added to the depreciation of the current year. If that be so, is it the right of the assessee to partly invoke the provisions of Section 32 when it comes to depreciation of the current year and still claim that it has right not to claim unabsorbed depreciation allowance? On a plain reading of Section 32, it does not appear to be the position. Once the entire depreciation, namely, unabsorbed depreciation allowance of the previous year gets merged into the depreciation of the current year, it would become an integral part thereof. Legal fiction makes it one whole thereby making it possible to the assessee to claim set off of unabsorbed carried forward depreciation as well. A fortiorari, bifurcation thereof with option to claim depreciation of current year only and contending at the same time that portion of unabsorbed carried forward depreciation is not to be thrusted upon him as it is not claimed, would not be permissible. 20) Notwithstanding the above, the endeavour of the learned counsel for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the earlier years or carry forward of unabsorbed business losses of earlier years arises. In other words, the normal accountancy principle has to be applied in arriving at the net income from business for that year by debiting the current year's depreciation. The question is whether any deviation from this normal rule of accountancy is contemplated by proviso (b) to s. 10(2)(vi) read with proviso (b) to s. 24(2) of the 1922 Act or by s. 32(2) read with s. 72(2) of the 1961 Act, and it is here that the aspect of proper construction of these provisions arises. Dealing with the provisions of the 1922 Act first, it will be clear that proviso (b) to s. 10(2)(vi) is in two parts and provides for two things; its first part provides for a carry forward of unabsorbed depreciation and its second part provides for clubbing the said carried forward depreciation with the current year's depreciation and deeming the aggregate to be the current year's depreciation. However, carrying forward of the unabsorbed depreciation and the deeming provision in proviso (b) are not absolute but are subject to the proviso (b) to s. 24(2). Had proviso (b) to s. 24(2) not been enacted by the Legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision contained in Section 32(2) of the Act is to make the unabsorbed carried forward depreciation partake the same character as the current depreciation in the following year, so that it is available, unlike unabsorbed carried forward business loss for being set off against other heads of income of that year. On that basis, the Court answered that since unabsorbed carried forward depreciation had become part of the current depreciation, the entire depreciation had to be given preference (current as well as unabsorbed carried forward depreciation) over unabsorbed carried forward losses. 22) We do not understand as to how the aforesaid judgment helps the assessee. On the contrary, it goes against the assessee while answering the question which has arisen in the instant appeals. Once the unabsorbed carried forward depreciation has become a part of the depreciation of the current year, it is not open to the assessee to bifurcate the two again and exercising its choice to claim the depreciation of the current year under Section 32(1) of the Act and take a position that since unabsorbed depreciation of the previous years is not claimed, it cannot be thrusted upon the assessee. The po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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