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2018 (5) TMI 1255 - AT - Income TaxUnabsorbed depreciation of current year and earlier year as allowable against income under the Head Income from other sources being disclosed/assessed under section 68 - Held that - As per Section 72 carried forward of business loss is not to be allowed to be set-off against any other head of income other than income from business. Inter Head set-off of business loss is allowed under section 71 against all other income except income from salary. Same head adjustment of business loss against other business income is allowed under section 70 of the Act. As such provisions of law on unabsorbed deprecation which is allowed as depreciation of current year under section 32(2) fall in Section 71 and not under section 72 as such allowable as business expenditure . Therefore findings of the A.O. is not correct that surrendered income cannot be assessed even under the Head Income from other sources . It may also be noted here that after insertion of Section 115BBE any income assessed under sections 68 to 69D will be taxed under section 115BBE and not under regular provisions w.e.f. A.Y. 2013-2014. Further Section 115BBE has got amended w.e.f. A.Y. 2017-2018 that loss will not be allowed against such income. Therefore it is clear that w.e.f. A.Y. 2017- 2018 any type of loss will not be allowed deduction and this Amendment is not retrospective in nature. Therefore claim of assessee-company shall have to be allowed by authorities below. The issue is covered in favour of the assessee-company
Issues Involved:
1. Whether unabsorbed depreciation of current year and earlier year is allowable against income under the Head “Income from other sources” being disclosed/assessed under section 68 of the I.T. Act, 1961? Issue-wise Detailed Analysis: 1. Allowability of Unabsorbed Depreciation Against Income Under Section 68: Background and Arguments: The primary issue in both appeals is the allowability of unabsorbed depreciation against income assessed under section 68. The assessee argued that this issue has been favorably decided in several ITAT decisions, including ACIT vs. M/s. Raghav Woollen Mills and Shri Satish Kumar Goyal vs. JCIT. The assessee contended that income declared under section 68 should be set off against unabsorbed depreciation, citing these precedents. Revenue's Position: The Revenue did not dispute the facts presented by the assessee but opposed the set-off, relying on the judgment of Punjab & Haryana High Court in Kim Pharma (P) Ltd. vs. CIT, which held that income under section 68 is deemed income and not eligible for set-off against business losses or depreciation. Tribunal's Findings: The Tribunal noted that the assessee's reliance on ITAT decisions in similar cases supports their claim. Specifically, in M/s. Liberty Plywood Pvt. Ltd., the ITAT allowed the set-off of unabsorbed depreciation against deemed income. The Tribunal also referenced the Special Bench decision in DCIT vs. Times of Guaranty Ltd., which supported the assessee's position. The Tribunal observed that the A.O. disallowed the set-off based on the Department's non-acceptance of the Liberty Plywood decision, which was later dismissed by the Punjab & Haryana High Court due to low tax effect. Thus, the Tribunal found no valid reason to deny the claim. Legal Provisions and Interpretation: The Tribunal emphasized that every income must be assessed under one of the five heads specified in section 14 of the I.T. Act. Losses are to be adjusted as per sections 70 to 72. The Tribunal clarified that unabsorbed depreciation under section 32(2) is treated as current year's depreciation and thus eligible for set-off against income under section 68. Impact of Section 115BBE: The Tribunal noted that section 115BBE, which restricts set-off of losses against income assessed under sections 68 to 69D, was introduced prospectively from A.Y. 2013-14 and further amended from A.Y. 2017-18. Since the appeals pertain to A.Ys. 2012-13 and 2013-14, the Tribunal concluded that the amendments do not apply retrospectively, and the assessee's claim must be allowed. Conclusion: The Tribunal allowed the appeals, directing the A.O. to permit the set-off of unabsorbed depreciation against the income surrendered during the survey. The stay applications were dismissed as infructuous. Separate Judgments: Both appeals were decided together, and there were no separate judgments delivered by different judges. Final Orders: - ITA.No.2777/Del./2017 for A.Y. 2012-2013: Allowed. - ITA.No.2778/Del./2017 for A.Y. 2013-2014: Allowed. - Stay Applications: Dismissed as infructuous. Order Pronouncement: The order was pronounced in the open court.
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