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TMI Blog1985 (7) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... sorbed depreciation 21,815 (ii) unabsorbed development rebate 17,186 (iii) business loss 22,753 The Income-tax Officer, relying on section 79 of the Income-tax Act, refused the relief of carry forward of any of these " losses ". On appeal, the Appellate Assistant Commissioner held that development rebate and unabsorbed depreciation could be carried forward, notwithstanding section 79. The assessee appealed to the Tribunal. The Tribunal reasoned thus : " There is a discussion in the commentary on the Law and Practice of Income-tax by Kanga and Palkhiwala, 7th edition, volume-I, at page 385 of the four features which distinguished a loss from unabsorbed depreciation. It is clear that the term 'loss' as used in Chapter VI does not include unabsorbed depreciation and development rebate. As a matter of fact, in section 72(2), unabsorbed depreciation is referred to expressly as an allowance under sub-section (2) of section 32. The provisions of section 79 place a bar only on the carry forward and set off of losses and not of unabsorbed depreciation or unabsorbed development rebate ......... In view of this finding of the Appellate Assistant Commissioner that neither unabsorbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in section 72, accumulated loss and unabsorbed depreciation allowance in certain cases of amalgamation of a company is as per section 72A, losses in speculation business are in section 73, losses under the head " Capital gains " are dealt with under section 74, losses from certain specified Sources falling under the head " Income from other sources " are mentioned in section 74A, losses of registered firms are contained in sections 75 to 78 and thereafter there is the non obstante provision in section 79. Section 79 overrides the other provisions in Chapter VI and not the other provisions in the Act itself as is clear from the opening words "Notwithstanding anything contained in this Chapter ". The connotation of the expression " loss " occurring in section 79 has thus to be understood in the context of the provisions contained in Chapter VI itself. Where a change in shareholding has taken place in a previous year in the case of a company (not being a company in which the public are substantially interested) no loss incurred in any year prior to the, previous year shall be carried forward and set oft against the income of the previous year unless the conditions prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not losses under the Act, at least for the purpose mentioned in Chapter VI. There is no case before us that clauses (a) and (b) of section 79 are attracted. We are not called upon to consider whether these clauses are disjunctive or cumulative. The bar imposed under the main part of section 79 is not attracted, as section 79 does not apply to " unabsorbed depreciation " or " unabsorbed development rebate ". The counsel for the Revenue cited Lakshmichand Jaipuria Spinning and Weaving Mills, In re [1950] 18 ITR 919, a decision of the East Punjab High Court. The Supreme Court was construing section 10(2)(vi) and proviso (b) to section 24(2) of the 1922 Act (corresponding to sections 34(2)(i) and 72 of the 1961 Act) in CIT v. Jaipuria China Clay Mines (P.) Ltd. (1966] 59 ITR 555 (SC), wherein it was observed thus (at pp. 559, 561): " The second consideration which is relevant is that the Act draws no express distinction between the various allowances mentioned in section 10(2). They all have to be deducted from the gross profits and gains of a business. According to commercial principles, depreciation would be shown in the accounts and the profit and loss account would refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of section 72. In other words, section 72(2) contemplates the loss other than the unabsorbed depreciation being given a priority in the matter of set-off, as there is a time-limit within which such loss can be adjusted. Under section 72(3), the loss other than from depreciation is eligible for being carried forward and set off only for a period of eight assessment years immediately succeeding the assessment year for which the loss was first computed; in the case of unabsorbed depreciation allowance, there is no such time-limit. The Legislature has, therefore, made a specific provision for priority in setting off the loss other than the unabsorbed depreciation allowance so that the unabsorbed depreciation allowance can be carried forward if necessary without any time-limit and set off in the appropriate succeeding years. It is thus clear that there is a separate identity maintained under the statute with reference to the unabsorbed depreciation allowance though at the time of computation, it forms part of 'loss'. It may be that at the time of allocation amon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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