Law: Income Tax Act, 1961

Section: 32A

Section 32, read with section 32A of the Income-tax Act, 1961 - Depreciation - Unabsorbed depreciation (Computation of) - Assessment year 1991-92 - Whether assessee has a right to disclaim depreciation in its entirety, however, it cannot claim depreciation for current year and disclaim unabsorbed depreciation - Held, yes - Whether unabsorbed depreciation is to be allowed before allowance of unabsorbed investment allowance - Held, yes - Whether once depreciation is claimed and while giving deductions depreciation is to be set off against profits of current year prior to unabsorbed carried forward investment allowance, it is entire depreciation, namely, depreciation of current year as well as unabsorbed carried forward depreciation, which is to be taken into account by virtue of fiction created under section 32(2) - Held, yes[Para 22] [In favour of revenue] Interpretation of statutes - Rule of liberal interpretation Circulars & Notifications: CBDT Circular No. 202, dated 5-7-1976 FACTS â–  The assessee was a public limited company engaged in the business of manufacturing paper. It had filed its return for relevant assessment year declaring its income as 'Nil'. â–  The assessee had unabsorbed investment allowance of previous years. It also had unabsorbed depreciation of the earlier years. In its return, however, it chose to carry forward investment allowance and claimed set off of the said unabsorbed investment allowance, thereby showing the returned income as 'Nil'. â–  The Assessing Officer accepted 'Nil' income return as filed by the assessee, but according to him, 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 investment allowance, the Assessing Officer adjusted the unabsorbed depreciation of the earlier years. â–  The Commissioner (Appeals) as well as the Tribunal confirmed the order of the Assessing Officer. â–  On further appeal, even the High Court, affirmed the view taken by the authorities below and dismissed the appeal of the assessee.…