Unabsorbed depreciation of a registered firm can be carried forward to later years for set-off in the firm's hands.

Unabsorbed depreciation of a registered firm, once allocated to partners and left partly or wholly unabsorbed in their individual assessments, is treated in later years as the firm's own unabsorbed depreciation for carry forward and set-off against the firm's income. The principle follows Supreme Court authority that the balance depreciation can be brought back to the firm for computation of its total income in subsequent assessment years. The question was answered in the affirmative, in favour of the assessee and against the Revenue.

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Issues: Whether the unabsorbed depreciation of a registered firm, allocated to the partners and not fully set off in their individual assessments, could be brought back to the firm for carry forward and set off against the firm's income in the subsequent assessment years.

Analysis: The controversy was governed by the principle that unabsorbed depreciation of a registered firm, after allocation to partners and where it remained partly or wholly unabsorbed in their hands, had to be treated for later years as the firm's unabsorbed depreciation for purposes of computing the firm's total income. The issue stood concluded by the Supreme Court decisions holding that such balance depreciation could be brought back and carried forward for set off in the firm's subsequent assessments.

Conclusion: The question was answered in the affirmative, in favour of the assessee and against the Revenue.

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