Sick industrial company status overrides the eight-year limit on carrying forward unabsorbed depreciation.

A company supported by balance-sheet material showing long registration, accumulated losses exceeding net worth, and liabilities far above realizable assets was treated as a sick industrial company under the statutory definition. On that footing, the proviso to section 32 exempted it from the eight-year restriction on carry forward and set-off of unabsorbed depreciation. The appellate authority could examine that statutory exemption even though the Assessing Officer had not expressly dealt with it, and the nature of film exhibition as an industry did not prevent the company from meeting the statutory conditions.

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Issues: Whether the assessee was a sick industrial company entitled to carry forward unabsorbed depreciation beyond eight assessment years under the proviso to section 32 of the Income-tax Act, 1961.

Analysis: The assessee's balance-sheet and financial particulars showed that it had been registered for more than five years, had accumulated losses exceeding its net worth, and had liabilities far in excess of its realizable assets. The finding that the assessee was a sick industrial company was supported by the material already on record, and the appellate authority was competent to examine the statutory exemption even if the Assessing Officer had not specifically dealt with it. Since film exhibition is an industry and the statutory conditions for a sick industrial company were satisfied, the restriction of eight years did not apply.

Conclusion: The assessee was entitled to carry forward and set off the unabsorbed depreciation as a sick industrial company, and the Revenue's challenge failed.

Ratio Decidendi: Where the recorded financial material establishes that a company is a sick industrial company within the statutory definition, the proviso to section 32 excludes it from the eight-year limit on carry forward of unabsorbed depreciation.

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