2014 (9) TMI 1059 - AT - Income Tax

Set off of addition made u/s. 68 against the unabsorbed depreciation loss - CIT(A) observed that brought forward depreciation can be set off against income under any other head other than business in subsequent years - Held that - In view of the decision of CIT Vs. D.P. Sandu Bros. Chembur (P) Ltd. 2005 (1) TMI 13 - SUPREME Court the amount which has been deemed as income u/s. 68 is assessable as income from other sources and because of the same, it forms part of the total income of the assessee. It is not in dispute that brought forward unabsorbed depreciation can be set off against the income which is assessable under the head income from other sources . We, therefore, do not find any error in the order of the Commissioner of Income Tax (Appeals). It is confirmed. - Decided against revenue

Summary

Issues:
Set off of addition made under section 68 of the Income Tax Act against unabsorbed depreciation loss.

Analysis:
The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the set off of an addition made under section 68 of the Income Tax Act against unabsorbed depreciation loss. The Commissioner had allowed the set off, but the Assessing Officer disagreed, leading to the reopening of the assessment. During the re-assessment proceedings, the appellant argued that the addition under section 68 should be considered as part of the current year's income, justifying the set off against unabsorbed depreciation. However, the Assessing Officer held that section 68 income does not fall under any specific head and is not business income, thus disallowing the set off. The Commissioner, in the appeal proceedings, noted that the issue had been finalized in the original assessment and could not be reopened. It was argued that unabsorbed depreciation can be set off against income under any head other than business in subsequent years, as per section 32, which merges brought forward depreciation with the current year's depreciation. The Commissioner concluded that the appellant was entitled to set off the unabsorbed depreciation against income determined under section 68 of the Income Tax Act.

The Tribunal reviewed the orders of the lower authorities and the available material. The Assessing Officer had contended that the addition under section 68 does not constitute a specific head of income and is not business income, hence disallowing the set off of unabsorbed depreciation. However, the Commissioner of Income Tax (Appeals) pointed out that brought forward depreciation can be set off against income under any head other than business in subsequent years, as per section 32. The Tribunal noted a Supreme Court decision emphasizing that income deemed under section 68 is assessable as income from other sources, forming part of the total income of the assessee. Consequently, the Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal. The decision confirmed that unabsorbed depreciation can be set off against income assessable under the head 'income from other sources.'

In conclusion, the Tribunal affirmed the Commissioner's decision, allowing the set off of unabsorbed depreciation against income determined under section 68 of the Income Tax Act. The appeal filed by the Revenue was dismissed, and the order was pronounced in September 2014 at Ahmedabad.