TaxTMI 
TaxTMI 
1981 (8) TMI 112
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....ate at Rs. 8,020 and the brought forward past losses were of course allowed to be carried forward in full. For reasons given in paragraphs 8 to 11 of his order and, in particular, following the Allahabad High Court decision in the case of Mother India Refrigeration Industries (P.) Ltd. v. CIT [1971] 80 ITR 510, the AAC accepted the assessee's submission that brought forward losses have priority not only over the unabsorbed depreciation of the past years but also over the current year's depreciation in the matter of set off. 2. It is for this reason that the department is in appeal before us. It is common ground that the assessee had unabsorbed depreciation, unabsorbed development rebate as well as brought forward losses and its income in the year before allowance of current year's depreciation is Rs. 2,48,704. While according to the revenue the brought forward losses have priority over the brought forward unabsorbed depreciation only, it is the case of the assessee that once there is brought forward unabsorbed depreciation, such unabsorbed depreciation merges into the current year's depreciation in terms of section 32(2) of the Income-tax Act, 1961 ('the Act') so much so that th....
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....pression 'to be carried forward' appears to be somewhat loosely worded but it really refers to the allowance or that part of the allowance to which effect could not be given owing to paucity of profits in the years to which such allowance pertains and such allowance or part of the allowance was to be added to the current year's allowance and so on and so forth. In any event, there is no serious dispute about it in these proceedings. Therefore, we proceed on the basis that section 72(2) refers to past unabsorbed depreciation in contradistinction with the current year's depreciation. 5. The second question that arises for consideration is what is the actual nature of merger of unabsorbed depreciation with the current year's depreciation. Now, as we understand, the expression "then subject to the provisions of sub-section (2) of section 72 . . ., the allowance . . . to which effect has not been given, . . shall be added to . . ." is very significant. It indicates to our mind that the question of 'shall be added to' will arise only if there are no brought forward losses under section 72(2). In other words, the merger where there are brought forward losses also either does not take p....
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....depreciation does not lose its identity in the case of an assessee where brought forward past losses have also to be set off and, therefore, while the current year's income will have to be computed under sections 29 to 43A, the past losses will get priority over the unabsorbed depreciation, the identity of which is maintained as stated above in terms of section 72(2). 8. The last argument advanced on behalf of the assessee was that when two views are possible, the one in favour of the subject should be adopted. In this connection, it may not be out of place to observe that the Allahabad High Court as well as other High Courts in the cases, which we will be referring to hereafter, have explained and relied upon the Supreme Court decision in the case of CIT v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555. The above said rule of interpretation is applicable only when the two views are equally reasonable and not just when one view has been taken without much discussion. On going through the decisions relied upon by the parties, we do not agree with the learned counsel for the assessee that the aforesaid rule of interpretation supports his client's case. 9. Before conclud....
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....taken the same view as the Bombay High Court has taken in the case of Ballarpur Collieries Co. 10.2 In the following two cases there was no brought forward unabsorbed depreciation and to that extent the controversy in the case before us is somewhat different. However, the ratio of the decisions is evidently against the assessee. 1. In the case of Aluminium Corporation of India Ltd. v. CIT [1958] 33 ITR 367 (Cal.), the facts were that the assessee had no brought forward unabsorbed depreciation and the dispute was as regards priority between the brought forward losses and the current year's depreciation. The High Court held that depreciation allowance for the current year in respect of a business should first be set off against the profits of that business in that year and that there could be no competition between loss carried forward from previous years and the depreciation allowance for the current year. It is thus evident that the question that unabsorbed depreciation of the earlier years had merged into the depreciation of the current year so as to make it one block or lump was not in issue which was not considered. 2. The facts in the case of Addl. CIT v. Andhra Printe....