2002 (7) TMI 226 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) regarding set off of unabsorbed depreciation from earlier years against income under "House property" and other sources for assessment year 1997-98.

Summary:
The appeal was filed by the Revenue against the order of the CIT(A) for the assessment year 1997-98, concerning the set off of unabsorbed depreciation from earlier years against income under "House property" and other sources. The assessee had unabsorbed depreciation from the assessment year 1979-80 to 1996-97. The controversy arose when the AO did not allow the set off of unabsorbed depreciation against income from other sources.

The Departmental Representative argued that as per section 32(2)(ii)(b), unabsorbed depreciation cannot be carried forward for more than 8 assessment years succeeding the initial computation year. It was contended that unabsorbed depreciation allowance from years prior to 1989-90 cannot be set off in the assessment year 1997-98. The Departmental Representative urged the Tribunal to uphold the AO's decision.

The counsel for the assessee highlighted the substantial amendment to section 32(2) by the Finance Act, 1996, effective from the assessment year 1997-98. The counsel argued that post-amendment, unabsorbed depreciation could be carried forward for 8 succeeding years to be set off against business profits only. The question arose whether unabsorbed depreciation from assessment years more than 8 years prior to 1997-98 could be carried forward. The counsel emphasized the clarification provided by the Finance Minister and CBDT Circular No. 762, supporting the carry forward of unabsorbed depreciation.

The Tribunal noted that the AO did not consider the Finance Minister's clarification and CBDT Circular No. 762, leading to a dispute. Referring to legal precedents, the Tribunal explained the treatment of unabsorbed depreciation and the power of CBDT to issue circulars for fair enforcement of provisions. The Tribunal concluded that the CIT(A) rightly directed the AO to revise the income computation, finding no fault in the order.

In conclusion, the Departmental appeal was dismissed, upholding the decision of the CIT(A) regarding the set off of unabsorbed depreciation against income under "House property" and other sources for the assessment year 1997-98.