2008 (11) TMI 656 - AT - Income Tax

Summary

Issues involved: Disallowance of depreciation on plant and machinery, Set off of carried forward unabsorbed depreciation, Treatment of rental income from the factory.

Dispute 1 - Disallowance of Depreciation on Plant and Machinery:
The Assessing Officer disallowed depreciation due to no manufacturing activity, which was confirmed by CIT(A). The assessee argued that depreciation should be allowed for the entire block of assets based on a Tribunal decision. The Tribunal found discrepancies in asset usage and ordered the issue to be reconsidered by the Assessing Officer.

Dispute 2 - Set off of Carried Forward Unabsorbed Depreciation:
The Assessing Officer disallowed set off against short term capital gain, stating that depreciation can only be adjusted against business income. The Tribunal upheld this decision, citing legal provisions from the relevant assessment years. The Tribunal found no error in CIT(A)'s order and upheld the denial of the claim.

Dispute 3 - Treatment of Rental Income from the Factory:
The Assessing Officer treated rental income as income from other sources, which was upheld by CIT(A). The assessee argued that only the factory building was rented out, not the plant and machinery, and thus the income should be assessed under 'house property'. The Tribunal found insufficient examination of the matter and remanded it to the Assessing Officer for a fresh decision after proper examination.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, with the Tribunal issuing its order on 26.11.2008.