ORDER
S.V. Maruthi, J
1. This application is filed under Section 256 (2) of the Income Tax Act (for short the Act) at the instance of the Revenue.
2. The assessee firm was dealing in mining of Barytes and exports the same and sells the Barytes within the country. The assessee filed return of Income for the assessment year 1987-88 belatedly under Section 139 (10) of the Act. The assessee filed the return for the assessment year 1988-89 on 29.7.1988 declaring loss of Rs.4,75,879/-and on 3.8.89 the assessee filed revised returns declaring loss of Rs.7,41,330/-, while completing the assessment the Assessing Officer has rejected the claim of the assessee for carrying forward the depreciation relating to the assessment year 1987-88 on the ground that the returns for the assessment year 1987-88 was a non-est. Therefore, the depreciation allowance for 1987-88 has not been quantified. Aggrieved by the assessment order assessee preferred an appeal to the Commissioner of Income Tax (Appeals) and the same has been allowed holding that unabsorbed depreciation can be carried forward and under Section 32(2} of the Act it could be given effect to in the current year for the year 1988-89. On further appeal to the Tribunal, the order of the Commissioner of Income Tax (Appeals) has been confirmed and the tribunal also refused to State a case which gives rise to the present application of the Revenue under Section 256 (2).
3. The Revenue sought reference of the following three questions.
(i) “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the unabsorbed depreciation in respect of an assessment year where the return was non-est under the provisions of Section. 139(10) can be carried forward to a subsequent assessment year and set off against the profit of that subsequent assessment year.
(ii) Whether on the facts and in the circumstances of the case, the Tribunal was not incorrect in upholding the order of the CIT (A) holding that allowing the carry forward of depreciation allowance relating to the assessment year, where the return was non-est under the provisions of Section 139 (10) of the I.T. Act would be the same as allowing depreciation for subsequent year at a higher figure viz., the cost of the assessment before reducing the depreciation allowance for the assessment year 1987-88.
(iii) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in treating a return filed under Section. 22 (2A) of the Indian Income Tax Act, 1922 on par with the return treated as non-cst under Section 139 (10) of the I.T. Act, 1961 and applying the ratio of the decision of the Madras High Court in the case of Sathappa Textiles”.
4. The main argument of the learned Counsel for Revenue is since the return filed under Section 139 (10) for the assessment year 1987-88 is a non-est, the depreciation for that year cannot be carried forward to the assessment year 1988-89 and treated as depreciation for that year. To consider the argument of the learned Counsel for Revenue, it is necessary to refer to Section 32 (2) of the Act.
32(2) “Wherein the assessment of the assessee, full effect cannot be given to any allowance under clause (ii) of Sub-section (i) in any previous year, owing to therebeing no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of Sub Section (2) of Section 72 and sub-section (3) of section 73, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years”.
5. A reading of the above section makes it clear that in the assessment of the assessee if full effect cannot be given to any allowance in any previous year owing there be no profits or gains chargeable for that previous year, the allowance or part of the allowance to which effect has not been given shall be added to the amount of allowance for depreciation in the following previous year and deemed to be part of the allowance. Therefore, if full effect could not be given to the depreciation on account of lack of profits or gains in the previous year, the said depreciation shall be treated as depreciation of the current year and it can be treated as depreciation of the current year. We are also fortified in our view with the judgment of the Supreme Court in Commissioner of Income Tax, Calcutta v. Jaipuria China Clay Mines (P) Limited, Vol.59 I.T.R. 555 wherein it was held “that the unabsorbed depreciation of past years had to be added to depreciation of the current year and the aggregate unabsorbed and current year’s depreciation had to be deducted from the total income of the previous year relevant to the assessment year.”
6. Following the above, the answer to the questions are self evident. Therefore, it is not necessary to call for the questions sought to be raised.
7. The learned Counsel relying on the judgment in Commissioner of Income-Tax and Another v. Dalmia Cement (Bharat) Limited argued that in case a return which is non-est, the depreciation cannot be carried forward for the current year cannot be sustained, as that judgment relates to carrying forward of loses of the previous year to the current year, for which there are limitations under the Act. Further there is no provision similar to Section 32(2) of the Act in Section 72 of the Act deeming unabsorbed loss of the earlier year to be the loss of the current year. Therefore, it is not a fit case calling for reference. The petition is accordingly rejected.
