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TMI Blog1983 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... 84,860(sic) 412 33,613 (sic) 2,412 Balance depreciation to be carried forward 31,201 Development rebate: Assessment years Rs. 1967-68 7,20,405 1968-69 66,559 1969-70 nil 1970-71 1,16,270 1971-72 27,324 9,30,558 The assessee was entitled to deduction under s. 80J to the extent of Rs. 2,81,972 for the said assessment year. As the income computed was loss, the ITO held that the said sum of Rs. 2,81,972 will be carried forward and set off against the income, if any, in the subsequent years. Similarly, for the assessment year 1972-73, the ITO computed the income as under: Rs. Rs. Rs. Interest on securities 2,000 Business-spinning mills-income before depreciation 13,75,960 Inadmissible as per audited statement 4,000 13,79,960 Less . Current depreciation 5,47,904 2. Allowance u/s. 32(1)(v) 13,789 3. Bonus actually paid 80,078 4. Brought forward depreciation 31,201 6,72,972 7,06,988 Less : Brought forward development rebate 9,03,234 1,96,246 Current year development rebate 67,350 2,63,596 Remaining development rebate to be carried forward 2,61,596 The ITO computed the relief to which the assessee was entitled under s. 80J at Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation will be set off lastly or carried forward. It is not, therefore, possible for us to understand the mind of the Tribunal as to why it held that the unabsorbed depreciation will have to be set off lastly after the deduction under s. 80J is given. The question is whether the view taken by the Tribunal that the unabsorbed depreciation will have to be set off lastly after the deduction is allowed in respect of the relief under s. 80J is legally sustainable. As already stated, the Tribunal has given elaborate reasons to hold that so far as the carried forward development rebate and the current year's development rebate are concerned, they should be deducted first before s. 80J relief is given for the current year and afterwards the s. 80J deficiency brought forward from the earlier years will have to be considered. We do not see why the reasoning given by the Tribunal with reference to the development rebate will not apply to the unabsorbed depreciation also. The Tribunal has also held that so far as the current year's depreciation is concerned, it has to take precedence before the relief under s. 80J is given, and it has given reasons as to why the depreciation of the current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32(2) on that basis. When s. 32(2) treats the unabsorbed depreciation of the earlier years as part of the current year's depreciation by a deeming clause, then, for the purpose of a deduction, it should be treated as current year's depreciation. As already stated, the Tribunal has held that the current year's depreciation should be allowed first before the deduction is allowed under s. 80J. However, it has ignored the fact that the unabsorbed depreciation has to be treated as forming part of the current year's depreciation. As already stated, the Tribunal has overlooked sub-s. (2) of s. 32 and has made a distinction between the current year's depreciation and the unabsorbed depreciation of the earlier years and has stated that so far as the current year's depreciation is concerned, it will take precedence over the deduction contemplated under s. 80J but so far as the unabsorbed depreciation is concerned, it will come last after the deduction under s. 80J is allowed. Giving due effect to sub-s. (2) of s. 32 which deems unabsorbed depreciation of the earlier years as part of the current year's depreciation, the deduction under s. 32(1) must relate to both the current year's depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits before the relief under s. 80J is computed. The above decision of this court has been followed in Asian Cables Corporation Ltd. v. CIT [1981] 132 ITR 34 (Bom). In CIT v. Sivan Pillai [1970] 77 ITR 354, the Supreme Court bad occasion to consider the scope of s. 15C(1) of the Indian I.T. Act, 1922. In that case, the Supreme Court expressed the view that under the scheme of s. 15C, the profits or gains of an industrial undertaking must be determined under and in the manner provided by s. 10 of the I.T. Act, that for that purpose, all the allowances under sub-s. (2) must be taken into account, and the resultant amount forms a component of the taxable profit, that, if by proviso (b) to s. 10(2)(vi), the unabsorbed depreciation of the previous year is deemed depreciation for the subsequent year, there is no room for making any distinction between the unabsorbed depreciation for the previous year and the depreciation for the current year, that the right to appropriate the profits towards the unabsorbed depreciation of the previous year does not arise under s. 24(1): it arises by virtue of s. 10(2)(vi) and that in computing the profits of an industrial undertaking for any year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 44. Section 33 is included in those provisions and cannot be ruled out of consideration for the purpose on hand. If section 84 had provided for the exclusion of relief under section 33 for the present purpose, then the position would have been different. But the language of section 84(5), as we have already seen, enjoins the computation in accordance with the provisions contained in Chapter IV-D. Therefore, the development rebate allowable under section 33 has to be taken as a deduction for this purpose." This court took the view that the deduction of the development rebate allowable under s. 33 should be made first and the deduction to which the assessee will be entitled under s. 84 will have to be worked out later. In Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84, the Supreme Court, giving effect to the words " as computed in accordance with the other provisions of the Act ", occurring in s. 80E(1), held that before deduction is made under s. 80E as it stood prior to the amendment by the Finance (No. 2) 1967, the income from business in view of s. 29 has to be computed in accordance with ss. 30 to 43A which would include s. 32(2) providing for carry fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment or the losses, depreciation allowance or development rebate in respect of the new industrial undertaking for the past assessment years were not set off against the profit from other businesses. In CIT v. Coromandel Steels Ltd. [1981] 130 ITR 856, this court again held that first comes the deduction of the depreciation of the current year and then as between unabsorbed business loss carried forward and unabsorbed depreciation, business loss has priority over unabsorbed depreciation and has to be allowed, that the unabsorbed development rebate comes up for consideration only after those two allowances, and that the assessee has no choice in the matter as the statute determines the priorities. As already stated, s. 32(2) deems the unabsorbed depreciation of the earlier years as the depreciation of the current year which has to be taken note of in the computation of the total income of the current year. The deduction under s. 80J will come in only after the total income is determined under the other provisions of the Act as per s. 80B(2). If, as held by the Tribunal, the relief under s. 80J is to be granted before the allowance is granted for unabsorbed depreciation, then it wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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