Unabsorbed depreciation can be carried forward despite a belated return, as sections 80 and 139(3) do not apply.

Unabsorbed depreciation under section 32(2) is governed by its own statutory regime and may be carried forward and set off in the succeeding year. The due-date restriction in section 80 read with section 139(3), which applies to losses required to be returned within time, does not extend to unabsorbed depreciation. Accordingly, a belated return does not, by itself, defeat the assessee's entitlement to carry forward and set off such depreciation, and the Revenue's objection on that ground fails.

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Issues: Whether unabsorbed depreciation under section 32(2) can be carried forward and set off despite the return having been filed after the due date under section 139(1), and whether the restrictions in sections 80 and 139(3) apply to such depreciation.

Analysis: Section 32(2) treats unabsorbed depreciation as part of the depreciation allowance of the succeeding year, subject only to the statutory priority rules governing set-off. The limitation in section 80 read with section 139(3) applies to losses that are required to be returned within the due date, but not to unabsorbed depreciation, which stands on a different footing. Once the statutory scheme and the supporting precedents are applied, the belated filing of the return does not destroy the assessee's entitlement to carry forward and set off unabsorbed depreciation.

Conclusion: The assessee was entitled to carry forward and set off the unabsorbed depreciation, and the Revenue's objection based on sections 80 and 139(3) failed.

Ratio Decidendi: Unabsorbed depreciation under section 32(2) is governed by its own statutory regime and is not subject to the due-date restriction applicable to losses under sections 80 and 139(3).

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