2012 (12) TMI 1204 - AT - Income Tax

Summary

Issues Involved:

1. Taxability of income surrendered during survey u/s 133A as deemed income.
2. Set off of unabsorbed depreciation against the surrendered income.

Summary:

Issue 1: Taxability of Income Surrendered During Survey u/s 133A as Deemed Income

The appellant challenged the CIT(A)'s decision confirming the taxability of surrendered income during a survey u/s 133A as deemed income u/s 69, 69A, 69B, and 69C of the Income-tax Act, 1961. The surrendered income included unaccounted cash (Rs. 50,00,000), unaccounted investments (Rs. 75,000), and unaccounted expenditure (Rs. 12,50,000), totaling Rs. 70,00,000. The CIT(A) held that this income is to be treated separately as deemed income and not assessable under any other head of income, thus disallowing any set-off against business losses or depreciation. This decision was based on the Hon'ble Gujarat High Court's ruling in Fakir Mohmed Haji Hasan V CIT, which stated that deemed income u/s 69, 69A, 69B, and 69C is not assessable under any head of income.

Issue 2: Set Off of Unabsorbed Depreciation Against the Surrendered Income

The appellant argued that the surrendered income should be treated as business income, allowing the set-off of unabsorbed depreciation u/s 32(2). The Assessing Officer and CIT(A) rejected this, stating that deemed income cannot be set off against any head of income. The Tribunal, referencing the Hon'ble Punjab & Haryana High Court's decision in M/s Kim Pharma (P) Ltd. V. CIT, upheld that surrendered income should be assessed separately as deemed income without setting off losses u/s 70 & 71.

However, regarding the set-off of unabsorbed depreciation, the Tribunal noted that section 32(2) allows unabsorbed depreciation to be carried forward and set off against any head of income in subsequent years. The Tribunal referred to the Special Bench decision in DCIT V. Times Guaranty Ltd., which clarified the treatment of unabsorbed depreciation post-amendments. It concluded that unabsorbed depreciation outside the block of Assessment Year 1997-98 to 2001-02 could be set off against the current year's income.

Conclusion:

The Tribunal partially allowed the appeal, directing the Assessing Officer to allow the set-off of unabsorbed depreciation that falls outside the specified block of Assessment Years against the current year's income. The appeal was partly allowed, with the order pronounced on 17.12.2012.