2007 (1) TMI 493 - AT - Income Tax

Summary

Issues involved:
The appeal involves the question of allowing set off of depreciation carry forward u/s 44AE and the applicability of provisions of section 72 and section 32(2) of the Income-tax Act.

Issue 1: Set off of depreciation carry forward under section 44AE:
The assessee, a transporter, claimed set off of brought forward depreciation loss against the current year's income filed under section 44AE. The Assessing Officer disallowed the set off based on section 44AE provisions. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to allow the set off, stating that section 72 did not affect section 44AE. The Tribunal noted that unabsorbed depreciation falls under section 32 and not section 72. The Tribunal reversed the Commissioner's finding and confirmed the Assessing Officer's action, allowing the Revenue's appeal.

Issue 2: Applicability of section 32(2) and section 72:
Section 32(2) deals with unabsorbed depreciation allowance, which can be set off against profits and gains assessable for the year. The Tribunal clarified that unabsorbed depreciation is to be treated as per section 32 provisions alone. Section 72, on the other hand, deals with carry forward of unabsorbed business loss, distinct from depreciation carry forward under section 32(2). The Tribunal highlighted that section 72(2) gives precedence to unabsorbed business loss for set off before unabsorbed depreciation. The Tribunal emphasized the clear distinction in the operation and manner of carry forward between these two types of losses.

Separate Judgment:
The Tribunal reversed the Commissioner of Income-tax (Appeals) finding and confirmed the Assessing Officer's action, allowing the Revenue's appeal. The judgment was pronounced on January 25, 2007.