Law:

Section:

Section 32(2), read with section 75, of the income-tax act, 1961-Depreciation-Unabsorbed depreciation-Whether benefit of carry forward and set off of unabsorbed depreciation determined in registered firm's assessment is to be allowed to that registered firm only and not to its partners-Held, yes-Whether such unabsorbed depreciation could be equated with business losses so as to hold that benefit of carry forward and set off could be allowed only in partners' hands in terms of section 75-Held, no Section 75 of the income-tax act, 1961-Loss-Of registered firms-Whether provisions of section 75 would apply only to business losses or losses in speculation business, and not to carry forward and set off of depreciation-Held, yes Facts For the assessment year 1969-70, the total income of the assessee, a registered firm, resulted in loss, which comprised both business loss and unabsorbed depreciation. The assessee had positive income for the assessment year 1970-71, and consequently, it claimed set off of aforesaid losses against that income. The ITO and the AAC negatived the claim on the ground that section 75(2) put a complete ban on the carry forward of losses in the case of a registered firm. The Tribunal, however, held that the ban would operate only in respect of business loss, and that insofar as unabsorbed depreciation was concerned, the assessee-firm was entitled to the carry forward and set off, in view of the specific provisions contained in section 32(2). On reference Held As held by the Madras High Court in CIT v. Nagapatinam Import & Export Corporation [1979] 119 ITR 444, the Act has made a clear distinction between unabsorbed depreciation and other losses and a separate identity has been maintained under the statute with reference to unabsorbed depreciation, though at the time of computation, it forms part of 'loss'. Further, a registered firm is a separate and distinct entity under the Act and depreciation is allowed to the firm on account of the firm owning the building, plant or machinery. Consequently, the benefit of unabsorbed depreciation for purposes of set off in the following years has to go to the same assessee, viz., the firm itself and not…

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