Unabsorbed depreciation carried forward and set off against firm profits under the Supreme Court rule on depreciation treatment.

Unabsorbed depreciation from prior years, even after allocation among partners of a firm, could be carried forward and set off against the firm's profits for the relevant assessment years by applying the Supreme Court rule on unabsorbed depreciation. On that basis, the firm was entitled to the set-off, and the issue was decided in favour of the assessee and against the Revenue.

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Issues: Whether the unabsorbed depreciation of prior years allocated among the partners of a firm could be carried forward and set off against the firm's profits for the assessment years in question.

Analysis: The controversy was resolved by applying the rule laid down by the Supreme Court in relation to the treatment of unabsorbed depreciation. On that basis, the firm was entitled to have the depreciation remaining unabsorbed in earlier years set off against its profits for the relevant assessment years.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

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