2010 (5) TMI 879 - AT - Income Tax

Summary

Issues involved: Disallowance of depreciation on fixed assets and allowing carry forward of brought forward losses of earlier years.

Disallowance of Depreciation on Fixed Assets:
The revenue appealed against the deletion of the addition of Rs. 5,46,831/- made on account of disallowance of depreciation on fixed assets. The revenue argued that the assessee did not maintain proper records of fixed assets and failed to provide quantitative details and usage information. The revenue contended that since it was unclear whether the fixed assets were put to use during the relevant previous year, depreciation was rightfully denied. On the other hand, the assessee's counsel defended the order, stating that depreciation was disallowed based solely on the auditor's notes. It was emphasized that depreciation had been regularly allowed on these assets since their inclusion in the balance-sheet, and disallowing it based on the auditor's remark was unjustified. The Tribunal noted that the assessee had utilized the assets for business purposes, had previously claimed depreciation, and no adhoc disallowance could be made in this case. Consequently, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals).

Allowing Carry Forward of Brought Forward Losses of Earlier Years:
The Senior Departmental Representative argued that the disallowance of carrying forward losses of earlier years was justified due to the lack of proof provided by the assessee. However, the assessee's counsel defended the order. Upon review and considering the submissions, the Tribunal found that the Assessing Officer had disallowed carrying forward losses of earlier years citing lack of proof. The assessee maintained that the losses had been assessed in previous years and were on record with the Assessing Officer, hence, the disallowance was unwarranted. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to allow the carry forward of brought forward losses of earlier years after verifying the records. Section 72 allows for the carry forward of losses when they are not set off against income under any other head. The Tribunal upheld the Commissioner's decision, stating that unabsorbed losses must be assessed each year to determine if they can be set off against profits. Losses can be set off against income from any business, and the Assessing Officer is required to allow set off even if not claimed, hence, the direction to allow carry forward was deemed appropriate. The appeal of the revenue was ultimately dismissed.

Separate Judgement: No separate judgment was delivered by the judges.