Law:

Section:

Section 32, read with section 72 of the Income-tax Act, 1961 [Corresponding to section 10(2)(vi), read with section 24 of the Indian Income-tax Act, 1922] - Depreciation - Allowance of - Assessment year 1949-50 - During relevant assessment year, assessee-company showed profit of Rs. 9,56,479 - Amount of depreciation allowance to which assessee was entitled during relevant year was Rs. 12,52,117 - Assessee-company also had Rs. 27,359 as loss carried forward from earlier years - Assessee claimed that against profit of Rs. 9,56,479, amount of loss carried forward from previous years i.e. Rs. 27, 359 should first be set off, and then as against balance of profits, depreciation allowance due for year i.e. 12,52,117 should be set off - ITO, however, set off deprecation against profit and determined difference of Rs. 2,95,638 as loss for year - Amount so determined as loss was directed to be carried over to next year as unabsorbed deprecation along with loss carried forward from earlier years - AAC and Tribunal upheld ITO's order - Whether in view of clause (b) of proviso to section 10(2)(vi), read with clause (b) of section 24(2) of 1922 Act, it is clear that no question of a priority as between setting off depreciation allowance for current year and carried over loss of earlier years can ever arise - Held, yes - Whether, therefore, assessee's contention that carried forward loss of Rs. 27,359 ought first to have been set off against current year's profit of Rs. 9,56,479, was rightly negatived - Held, yes FACTS During the relevant assessment year the assessee-company showed a profit of Rs. 9,56,479 which was done without deduction of the depreciation due for that year. The amount of depreciation allowance to which the assessee was entitled in respect of its working during the year in question was Rs. 12,52,117. The Income-tax Officer set off that depreciation against the profit and determined the difference, namely, Rs. 2,95,638, as the loss for the year. The amount so determined as loss was directed to be carried over to the next year as unabsorbed depreciation. The company, however, had an amount of Rs. 27, 359 as loss carried forward from earlier years. Before the…

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