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TMI Blog1983 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... t off against the speculative profit of Rs. 25,570. The current year's depreciation for the assessment year 1959-60 to which the assessee was entitled amounted to Rs. 35,769, and according to the assessee this should not be absorbed at all against the profits of the assessment year 1959-60, but should be added to the depreciation brought forward from the earlier years and should be carried forward to the next year. The obvious intention was to see that the depreciation of the current year could be set off in future years and the business loss brought forward from the year 1954-55 could be set off before it becomes impermissible for set off at the end of eight years. The ITO declined to allow the current year's depreciation to be carried f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case, non-speculative business profits of Rs. 10,342 should be set off against brought forward business losses of the earlier years before making any adjustment for depreciation for the year in question ? (2) Whether, on the facts and in the circumstances of the case, the losses in non-speculative business brought forward from earlier years could be set off against speculation profit earned for the assessment year 195-960, before considering the set off of the current, year's loss in non-speculative business against speculation profits ? The learned counsel for the assessee did not press question No. 2 and it is, therefore, not necessary to answer question No. 2. The argument that the current yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent year's profit against which the business losses have to be set off cannot be adequately determined unless depreciation for the current year is taken into account on the basic principles of accounting. CIT v. Gujarat State Warehousing Corporation [1976] 104 ITR 1, is no doubt decision which arose under the I.T. Act, 1961, but the same principles which govern the construction of ss. 72(2) and 32(2) will apply in the case under the old Act where the relevant provisions were s. 24(2), proviso (b), and s. 10(2)(vi), proviso (b). Since the Gujarat High Court has elaborately discussed the matter and since we are in agreement with the view taken by the Gujarat High Court, it will suffice for us to refer to the view which the Gujarat High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Indian I.T. Act, 1922, have to be deducted from the gross profits and gains of a business and observed that, according to commercial principles, depreciation would be shown in the accounts and the profit and loss account would reflect the depreciation accounted for in the account. Thus, the decision in Jaipuria China Clay Mines (P.) Lid. v. CIT [1966] 59 ITR 555 (SC), showed that the taxable profits and gains from particular business could not be ascertained without deducting the current year Is depreciation from the profits and gains. The Gujarat High Court, thus, expressly dissented from the view of the Allahabad High Court, because, on basic principles of accountancy, net profits which are chargeable to tax could not ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh High Court that, in the first instance, the income of the current year must be ascertained, for the determination of which depreciation of the relevant accounting year must be determined and the same should be deducted from the revenue income of the relevant accounting year in accordance with ss. 30 to 43A of the I.T. Act, and it is only thereafter that the question of set off of the business loss carried forward by the assessee against the revenue income arises. Thus, according to the Andhra Pradesh High Court, the business losses carried forward from the previous years cannot receive priority over the current depreciation allowance. We are in respectful agreement with the view taken by the Gujarat High Court and the Andhra Prades ..... X X X X Extracts X X X X X X X X Extracts X X X X
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