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Issues: (i) Whether, where the assessee is a registered firm, unabsorbed depreciation of earlier years can be carried forward by the firm and set off against its own income in the next year when full effect could not be given in the assessment of the partners; (ii) whether the assessee's claim to carry forward and set off the business loss of Rs. 3,49,242 against the income for assessment year 1968-69 was rightly rejected.
Issue (i): Whether, where the assessee is a registered firm, unabsorbed depreciation of earlier years can be carried forward by the firm and set off against its own income in the next year when full effect could not be given in the assessment of the partners.
Analysis: Under section 32(2) of the Income-tax Act, 1961, the carry-forward of unabsorbed depreciation, in the case of a registered firm, is to be worked out in the assessments of the partners. Once the firm's profits are allocated and depreciation is given effect to in the partners' assessments, nothing remains in the hands of the firm to be carried forward again. A contrary reading would permit the same depreciation to be used twice, once at the firm level and again at the partners' level. The amendment made in 1953 was intended to prevent such double benefit, and the statutory scheme, read as a whole, supports the revenue's construction.
Conclusion: The question is answered in the negative and against the assessee.
Issue (ii): Whether the assessee's claim to carry forward and set off the business loss of Rs. 3,49,242 against the income for assessment year 1968-69 was rightly rejected.
Analysis: The claim for carry-forward and set-off of business loss stood concluded by the earlier binding view referred to by the Court. On that basis, the rejection of the claim required no separate acceptance in the assessee's favour.
Conclusion: The question is answered in the affirmative and in favour of the revenue.
Final Conclusion: The reference was answered wholly against the assessee, with the revenue succeeding on both referred questions.
Ratio Decidendi: In the case of a registered firm, unabsorbed depreciation already allocated and given effect to in the partners' assessments cannot be carried forward again by the firm, as the statutory scheme is designed to prevent double benefit and places the carry-forward in the partners' individual assessments.
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