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Issues: Whether unabsorbed depreciation of an earlier year, deemed to be part of the current year's depreciation under proviso (b) to section 10(2)(vi), can be set off against income under heads other than business.
Analysis: The statutory scheme distinguished carried forward business losses under section 24(2) from carried forward depreciation under section 10(2)(vi), proviso (b). Unabsorbed depreciation, once carried forward, retained the character of depreciation allowance and was to be treated as part of the depreciation for the following year, subject only to the priority given to carried forward losses under proviso (b) to section 24(2). The Court held that this treatment did not convert the depreciation into a business loss for all purposes, and that, like current depreciation, the carried forward amount could be adjusted against income from other heads after application against business income and other business profits.
Conclusion: The question was answered in the affirmative and the assessee's right to set off carried forward unabsorbed depreciation against income under other heads was upheld.
Final Conclusion: Carried forward unabsorbed depreciation was held to be available for set-off against income from heads other than business, with only the statutory priority in favour of carried forward business losses preserved.
Ratio Decidendi: Unabsorbed depreciation carried forward under proviso (b) to section 10(2)(vi) retains the character of depreciation allowance and, subject to the priority of carried forward business losses under section 24(2), may be set off against income under other heads.
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