9911796707
|
Home
Issues:
1. Set off of unabsorbed depreciation against income taxable under section 41(2). 2. Treatment of customs duty payable as expenditure in computing profits. 3. Set off of business loss against profit taxable under section 41(2). Analysis: Issue 1: Set off of unabsorbed depreciation against income taxable under section 41(2) The case involved the assessee, a public limited company, selling properties and claiming adjustment of unabsorbed depreciation against income taxable under section 41(2) and income from other sources. The Assessing Officer negatived the claim in the assessment year 1982-83. The Tribunal, in an earlier decision, held that the income assessed under section 41(2) did not become income from business for the purpose of set off of unabsorbed depreciation. The Tribunal also ruled that unabsorbed depreciation could not be set off against income from other sources. However, in the present case, the CIT(A) accepted the assessee's claim that the amount payable to customs authorities on the sale of machinery should be treated as expenditure and allowed as a deduction in computing profits under section 41(2). Issue 2: Treatment of customs duty payable as expenditure in computing profits The controversy arose when the assessee sold machinery and became liable to pay customs duty to the Government of India. The Assessing Officer denied the deduction, citing that section 41(2) did not mention such reduction. On appeal, the CIT(A) ruled in favor of the assessee, considering the amount payable to customs authorities as an expenditure connected with the sale of property. The Tribunal upheld the CIT(A)'s order, emphasizing that the net amount payable, excluding relevant expenses, should be considered, and in this case, the customs duty was a valid expense to be adjusted in computing profits. Issue 3: Set off of business loss against profit taxable under section 41(2) The Tribunal referred to a previous judgment where it was held that unabsorbed depreciation of earlier years could not be set off against profit taxable under section 41(2) due to the presumption created by the section about the existence of business. However, the assessee cited several authorities supporting the view that unabsorbed depreciation can be set off against income taxable under section 41(2). High Courts in various cases, including Allahabad, Kerala, Andhra Pradesh, and Karnataka, supported the assessee's position. The Tribunal acknowledged the conflicting views but held that when multiple High Courts favor the assessee's view, the interpretation favorable to the assessee should be adopted. Therefore, for the years under consideration, the Tribunal allowed the set off of business loss/depreciation against the profit taxable under section 41(2) in line with the CIT(A)'s decision. This comprehensive analysis covers the key issues addressed in the judgment, providing a detailed overview of the Tribunal's decisions and the legal principles applied in each situation.
|
