Unabsorbed depreciation can be set off against income under other heads when carried forward as current depreciation.

Unabsorbed depreciation carried forward from earlier years, treated as part of the current year's depreciation under proviso (b) to section 10(2)(vi), could be set off against income under other heads and was not confined to business income alone. The statutory scheme under section 10(2) focused on deduction from business profits and gains, but the governing approach was computation of total income. Applying the cited precedent, the remaining unabsorbed depreciation was available for adjustment against interest on securities and capital gains, and such set-off was allowable.

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Issues: Whether unabsorbed depreciation allowance of previous years, deemed to be part of the depreciation allowance of the current year under proviso (b) to section 10(2)(vi), could be set off against income assessable under other heads.

Analysis: The statutory scheme treated the various allowances under section 10(2) as deductible from business profits and gains, and the governing principle was assessment of the assessee's total income. The precedent applied held that unabsorbed depreciation of earlier years, when carried forward and combined with current depreciation, was not confined to business income alone and could be adjusted against income under other heads. On the facts, the assessee's remaining unabsorbed depreciation was therefore available for adjustment against interest on securities and capital gains.

Conclusion: The set-off of unabsorbed depreciation against income from interest on securities and capital gains was allowable.

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