S. 32: The assessee has the
right to disclaim depreciation in its entirety. However, it cannot claim
depreciation for the current year and disclaim unabsorbed depreciation
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The assessee claimed
the depreciation allowance insofar as it pertained to the current year. At the
same time, it did not want to claim the set off of the unabsorbed depreciation
allowance of the previous years. The Supreme Court had to consider whether it
is open to the assessee to invoke the provisions of Section 32 of the Act by
claiming depreciation of the current year, but at the same time choose not to
make a claim of set off of unabsorbed depreciation allowance of the previous
years. HELD by the Supreme Court rejecting the plea:
Once the unabsorbed
carried forward depreciation has become a part of the depreciation of the
current year, it is not open to the assessee to bifurcate the two again and
exercising its choice to claim the depreciation of the current year under
Section 32(1) of the Act and take a position that since unabsorbed depreciation
of the previous years is not claimed, it cannot be thrusted upon the assessee.
The position would have been different if the assesse had not claimed any depreciation
at all. However, once the depreciation is claimed and while giving deductions
the depreciation is to be set off against the profits of the current year prior
to the unabsorbed carried forward investment allowance, it is the entire
depreciation, namely, the depreciation of the current year as well as the
unabsorbed carried forward depreciation, which is to be taken into account as
by virtue of the fiction created under Section 32(2) of the Act, carried
forward depreciation also partakes the character of depreciation of the current
year. This scrambled egg cannot be unscrambled now. Otherwise, it would amount
to negating the legal fiction that is created by the said provision, even to
the limited extent. In fact, the case falls within the ambit of the said
limited extent of legal fiction and gets covered by it Commissioner of Income-Tax, Kanpur v. Mother India Refrigeration
Industries P. Ltd. (1985) 155 ITR 711 referred)
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