LexSESHASAYEE PAPER & BOARDS LIMITED versus DEPUTY COMMISSIONER OF INCOME TAX
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
. II
[2015) 7 S.C.R. 1054
A
SESHASAYEE PAPER & BOARDS LIMITED
B
,..,;
v.
DEeUTY COMMISSIONER OF INCOME TAX
(Civil Appeal Nos.1812-1813of2005)
MARCH 15, 2015
[A.K. SIKRI AND R. F. NARIMAN, JJ.]
c
Income Tax Act, 1961- s. 32- Unabsorbed Depreciation
- Whether the unabsorbed depreciation should be allowed
before the allowance of the unabsorbed investment allowance
in computing income of the assessee for the Assessment
Year 1991-1992, when assessee had not claimed the
o unabsorbed 'depreciation in its income-tax return though it
had claimed depreciation for the current year- Held: By legal
fiction unab$orbed depreciation becomes depr:eciation of the
year in question and gets added to the depreciation of the
current y.ear - Once the unabsorbed carried forward
E depreciation .becomes part of the depreciation of the current
year; it is no{ open to assessee to bifurcate the two again and
claim depreciation of the current year and take a position
that since unabsorbed depreciation of the previous years is
not claimed,Jt cannot be thrusted upon the assessee - Once
... ~ ' ..
F depreciation is claimed and while giving deductions the
depreciatio11.~ to be set off against the profits of the current
year prior Jg the unabsorbed carried forward investment
allowance.
G
DismissinB the appeals, the Court
H
HELD: 1.1 By legal fiction unabsorbed depreciation
becomes depreciation of the year in question and gets
1054
MAY
SESHASAYEE PAPER & BOARDS LTD. v. DEPUTY
1055
COMMNR. OF INCOME TAX
added to the depreciation of the current year. If that be A
so, is it the right of the assessee to partly invoke the
provisions of Section 32 when it comes t<?,~~.~reciation
of the current year and still claim that it has th'e right not
to claim unabsorbed depreciation allowance? On a plain
reading of Section 32, it does not appear to be the B
position. Once the entire depreciation, namely,
unabsorbed depreciation allowance of the previous year
gets merged into the depreciation of the current year, it
would become an integral part thereof. Legal fiction
makes it one whole thereby making it possible to the C
assessee to claim set off of unabsorbed carried forward
depreciation as well. A fortiorari, bifurcation thereof with
option to claim depreciation of current y'·"r .only and
contending at the same time that portion o(u~absorbed 0
carried forward depreciation is not to be thrusted upon
,..,
him as it is not claimed, would not be permissible. [Para
\-~·
19) (1067-F-H; 1068-A-B]
t~ ~·
1.2 Once the unabsorbed carried'e+orward
depreciation has become a part of the depreciation of E
the current year, it is not open to the assessee't'o bifurcate
the two again and exercising its choice t'o claim the
depreciation of the current year under Section 32(1) of
the Act and take a position that since unabsorbed F
depreciation of the previous years is not claimed, it
cannot be thrusted upon the assessee. THe position
would have been different if the assessee had not
claimed any depreciation at all. However, once the
depreciation is claimed and while giving deductions the G
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 H
1056
SUPREME COURT REPORTS
[2015) 7 S.C.R.
A 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
B 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. [Para 22].£1071-F-H; 1072-A-C]
C
1.3 Once the provision is read in the aforesaid
manner, the aid of other interpretative tools which is
sought to be taken by the counsel for the assessee,
namely, the provision 1s to be given liberal construction;
the scheme of the Act envisages giving preference in
D the matter of deduction from income to those expiring
by afflux of time, etc. would become irrelevant and pales
into insignificance. [Para 23] [1072-D-E]
Commissioner of Income Tax v. Coromandel Steels
E (1981) 130 ITR 856; Ram NExcerpt shown. Read the full judgment & AI analysis in Lexace.