Law:

Section:

Section 32 of the Income-tax Act, 1961 (Corresponding to section 10(2)(vi) of the Indian Income-tax Act, 1922) - Depreciation - Unabsorbed depreciation - Assessment years 1942-43 to 1947-48 - Whether where amount of depreciation determined was deductible against total world income of assessee, carried forward depreciation allowance had to be allowed against total world income of assessee - Held, yes FACTS During the relevant accounting years, the income earned by the assessee-company in British India being more than the income earned by it outside British India, the assessee was treated as a resident for purposes of assessment of income-tax on it. The result was that the assessee's total world income, that is, income earned in the Indian State as well as income earned in British India, was treated as its total income. The amount of depreciation determined for those years could not be completely set-off against the profits of those years and thus it was carried forward to the assessment year 1942-43 for being adjusted in that year in accordance with law. In the assessment year 1942-43 the income earned by the assessee in the Indian State exceeded the income earned by it in British India. The result thereof was that the assessee was treated as a non-resident for the purpose of the income-tax. The assessee claimed that the unabsorbed depreciation allowance must be adjusted only against the profits earned by it in British India and not against the total world income of the assessee. The assessee's claim was disallowed by the department as also by the Tribunal. On reference : HELD From the language of proviso (b ) of sub-clause (vi) of section 10(2), of the 1922 Act it is clear that the amount of unabsorbed depreciation allowance of the previous year assumes the same character and colour of the depreciation amount determined for the assessment year and the question whether the unabsorbed depreciation amount of the previous year is to be adjusted against the total income or total world income would depend on the determination of the question as to whether the depreciation amount determined for the assessment year is deductible against the total world income of the…

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