Carry forward of unabsorbed depreciation depends on income classification, but prior benefit cannot be repudiated later.

An earlier assessment classification of income does not bind the assessee in later years when statutory carry forward of unabsorbed depreciation is claimed, so the correct head of income may be re-examined for earlier years to give effect to the allowance. On that basis, carry forward and set-off were permitted for the unabsorbed depreciation relating to the assessment years 1943-44 to 1953-54. For 1954-55, however, the assessee had already taken the benefit of the assessment made under income from other sources and could not later disown that classification to secure an additional advantage; the rule against approbation and reprobation barred the claim.

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Issues: (i) Whether the assessee could, in the later assessment years, challenge the earlier assessment orders which had treated the income from requisitioned assets as income from other sources and deny carry forward of unabsorbed depreciation for the years 1943-44 to 1954-55; (ii) whether the unabsorbed depreciation relating to the assessment year 1954-55 could be carried forward and set off in the later years.

Issue (i): Whether the assessee could, in the later assessment years, challenge the earlier assessment orders which had treated the income from requisitioned assets as income from other sources and deny carry forward of unabsorbed depreciation for the years 1943-44 to 1954-55.

Analysis: The governing scheme under the Indian Income-tax Act, 1922 distinguished between business income under section 10 and income from other sources under section 12, while section 10(2)(vi) permitted carry forward of unabsorbed depreciation. The principle of finality in the earlier assessments did not prevent the correct character of the income from being examined in the subsequent years when the assessee claimed set-off. The earlier view that the income was assessable under section 12 could not bind the assessee in the later proceedings merely because no appeal had been filed against those assessments. The correct head of income for those years had to be determined afresh for the purpose of giving effect to the statutory carry forward allowance.

Conclusion: The assessee was entitled to claim set-off of the unabsorbed depreciation relating to the assessment years 1943-44 to 1953-54 in the later assessment years.

Issue (ii): Whether the unabsorbed depreciation relating to the assessment year 1954-55 could be carried forward and set off in the later years.

Analysis: For the assessment year 1954-55, the assessee had derived a definite advantage from the assessment being made under section 12 rather than section 10, since the consequence of that classification had already been accepted and acted upon. Having retained the benefit of that position, the assessee could not later re-agitate the matter and assert that the income ought to have been assessed under section 10 for the purpose of securing carry forward of depreciation. On this aspect, the principle against approbating and reprobating applied.

Conclusion: The assessee was not entitled to carry forward and set off the unabsorbed depreciation relating to the assessment year 1954-55.

Final Conclusion: The reference was answered in favour of the assessee for all assessment years except 1954-55, and the carry forward of unabsorbed depreciation was permitted only for the earlier years covered by the question.

Ratio Decidendi: A finding in an earlier assessment that income falls under a particular head does not bind the assessee in a later year for purposes of statutory carry forward of depreciation or loss, but a taxpayer cannot retain a pecuniary benefit obtained from one classification and later disown that classification to claim a further advantage.

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