Depreciation allocation across businesses: unabsorbed depreciation in one business may be set off against other business profits.

The note addresses whether depreciation attributable to one business that exceeds that business's profits may be applied against profits of other businesses of the same assessee. It interprets the computation rules to treat depreciation as an allowable charge capable of cross-business set off, rather than being confined by the carry forward proviso; consequently unabsorbed depreciation can be set off against aggregate profits from other businesses where those profits permit, producing an affirmative outcome for the assessee on that question.

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Issues: Whether depreciation allowance attributable to one business, if not fully absorbed by that business's profits, can be set off against profits of other businesses carried on by the same assessee.

Analysis: Section 10 requires computation of profits after making specified allowances, including depreciation. Other allowances under section 10 may produce a loss on a particular business which can be set off against profits of other businesses under section 24. Proviso (b) to clause (vi) of section 10(2) provides for carrying forward any part of depreciation not given effect in a year, but the proviso does not, by necessary implication, exclude treatment of depreciation like other allowable charges so as to permit setting off against other businesses where aggregate profits permit. A construction treating "any business" as the aggregate of all businesses supports allowing the depreciation to be set off against profits of other businesses.

Conclusion: Depreciation not fully absorbed by the profits of the specific business may be set off against profits of the assessee's other businesses; issue answered in the affirmative in favour of the assessee.

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