SESHASAYEE PAPER & BOARD LTD. vs THE DEPUTY COMMISSIONER OF INCOME TAX

The Supreme Court held that under Section 32 of the Income Tax Act, 1961, unabsorbed depreciation must be set off before unabsorbed investment allowance when computing income. The Court affirmed the decisions of the lower authorities, including the Income Tax Appellate Tribunal and the Madras High Court, which prioritized unabsorbed depreciation over investment allowance. Consequently, the appeal was dismissed, upholding the treatment of the income-tax return as 'Nil' after adjusting for unabsorbed depreciation.