Law: Income Tax Act, 1922

Section: 10(2)(vi)

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 1956-57 and 1957-58 - Whether in order to claim adjustment of unabsorbed depreciation of earlier year in subsequent assessment year, assessee must establish that his business was continuing and if business was no more in existence unabsorbed depreciation cannot be adjusted - Held, yes - Whether, therefore, unabsorbed depreciation of assessment years 1950-51 and 1951-52 relating to closed business of manufacture and sale of rubber shoes could not either in whole or in part be added to amount of depreciation allowance of business of dealing in trimobiles, clocks and cement to be deemed to be part of that allowance for assessment years 1956-57 and 1957-58 - Held, yes FACTS In April, 1950, the assessee-company re-started its rubber shoes factory which had earlier been closed. This business was again closed within a couple of years and a business of dealing in trimobiles, clocks and cement was carried on. In respect of assets used for the shoe manufacturing business during the assessment years 1950-51 and 1951-52, depreciation amounting to Rs. 51,547 (Rs. 13,909 for 1950-51 and Rs. 37,638 for 1951-52) remained unabsorbed during those years and was therefore carried forward. That unabsorbed depreciation was claimed as a deduction from the profits of the assessment years 1956-57 and 1957-58 when the company was dealing only in trimobiles, clocks and cement. The claim was rejected by the Income-tax authorities as well as by the Tribunal. On reference : HELD Proviso (b) to clause (vi) of section 10(2) of 1922 Act, deals with the manner in which the depreciation allowance determined under clause (vi ) is to be set off against the profits and gains of the assessee. In the first instance, it provides that the amount of depreciation allowance, as determined, is to be set off against the profits and gains of the assessee chargeable in that year. If there are no profits or if the available profits are not sufficient to absorb the amount of depreciation, proviso (b) further provides that such unabsorbed…

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