2013 (3) TMI 811 - AT - Income Tax

Summary

Issues involved:
1. Denial of set-off of unabsorbed depreciation and business loss against gains on sale of depreciable assets.
2. Denial of adjustment of deemed short term capital gains against brought forward business loss and depreciation.

Issue 1: Denial of set-off of unabsorbed depreciation and business loss against gains on sale of depreciable assets

The assessee-company challenged the denial of set-off of unabsorbed depreciation and business loss against gains on the sale of depreciable assets. The appellant argued that the unabsorbed depreciation and business loss from the previous assessment year should be allowed to be set off against the gains on the sale of depreciable assets in the current year. The appellant pleaded for the set-off of brought forward unabsorbed depreciation and business loss against the gains on the sale of depreciable assets.

Issue 2: Denial of adjustment of deemed short term capital gains against brought forward business loss and depreciation

The appellant contested the denial of adjustment of gains on the sale of depreciable assets deemed to be short term capital gains against unabsorbed depreciation and business loss. The appellant asserted that the gains on the sale of depreciable assets should be treated as business income and be eligible for set-off against business losses and depreciation. The appellant requested that the gains on the sale of depreciable assets be considered as business income and adjusted against unabsorbed losses and depreciation.

The Assessing Officer (AO) finalized the assessment u/s 143(3) of the Income Tax Act, 1961, determining the total income of the assessee. During the assessment proceedings, the AO found that the assessee had claimed set-off of unabsorbed depreciation against short term capital gains. The AO held that unabsorbed depreciation could not be set off against income under the head capital gains.

The First Appellate Authority (FAA) compared the relevant provisions of the Income Tax Act and held that depreciation could only be set off against 'profit and gains of business' and not against other heads of income.

In the appeal before the Appellate Tribunal, the Authorized Representative argued that the assessee was entitled to claim unabsorbed depreciation against the current year's income. The Tribunal, after considering the submissions and relevant provisions, held that post-amendment provisions allowed unabsorbed depreciation to be set off against any income. Citing relevant case laws, the Tribunal directed the AO to allow set off of unabsorbed depreciation and business loss against short-term capital gains.

In conclusion, the Tribunal allowed both grounds of appeal in favor of the assessee-company, resulting in the appeal being allowed.

This summary provides a detailed overview of the judgment, highlighting the issues involved and the decisions made by the authorities and the Appellate Tribunal.