2019 (8) TMI 1414 - AT - Income Tax

Allowability of set off of unabsorbed depreciation - with Income from house property and income from other sources - HELD THAT - A comparative study of pre-amendment and post amendment provisions of Sec. 32(2) suggests that prior to the amendment, the set off was restricted to the profits and gains, if any, of any business or profession whereas post amendment (i.e. the law applicable for the year under consideration) the set off is available from profits or gains chargeable for the previous year. In A.Y 2007-08, the CIT(A) has allowed the claim of set off in assessee's own case and in A.Y 2013-14, AO himself has allowed the claim of set off. Considering the facts of the case in hand in light of the relevant provisions of the Act and considering the decision of SURESH INDUSTRIES (P.) LTD. VERSUS ACIT 2012 (11) TMI 674 - ITAT MUMBAI we direct the Assessing Officer to allow the claim of set off of unabsorbed depreciation by setting aside the findings of the CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of provisions relating to unabsorbed depreciation and its set off.

Analysis:
The appeal was filed against the Commissioner of Income Tax [Appeals] order regarding the assessment year 2011-12. The primary grievance of the assessee was the denial of set off of unabsorbed depreciation due to an alleged misinterpretation of relevant provisions. The assessment framed under section 143(3) of the Income-tax Act, 1961 disallowed depreciation claims, resulting in a reduced loss declared by the assessee. The assessee contended that unabsorbed depreciation should be allowed for set off against any source of income as it gets carried forward. The CIT(A) issued a show cause notice proposing enhancement of assessment, questioning the claim of depreciation set off against non-business income. The assessee cited precedents and legal provisions supporting their claim.

The CIT(A) was not convinced by the assessee's arguments, stating that unabsorbed depreciation must be carried forward if not set off against business income. Additionally, the CIT(A) held that there was no provision allowing set off of unabsorbed depreciation against income from house property or other sources. The assessee, citing previous judgments and legal provisions, argued for the set off of unabsorbed depreciation against various sources of income. The Tribunal considered the arguments presented and referred to relevant judgments to support the assessee's position.

The Tribunal analyzed the provisions of section 32(2) of the Act, emphasizing the treatment of unabsorbed depreciation and its set off against different sources of income. The Tribunal referred to previous decisions and legal amendments to support the assessee's claim for set off of unabsorbed depreciation against any income. The Tribunal highlighted the legal fiction created by the provisions of section 32(2) and the precedence set by the Supreme Court in similar cases. Ultimately, the Tribunal directed the Assessing Officer to allow the claim of set off of unabsorbed depreciation, overturning the CIT(A)'s decision. The appeal filed by the assessee was allowed based on the interpretation of relevant legal provisions and precedents.

In conclusion, the judgment addressed the interpretation of provisions related to unabsorbed depreciation and its set off against various sources of income. The Tribunal's decision favored the assessee's position, citing legal precedents and amendments to support the allowance of set off of unabsorbed depreciation. The detailed analysis provided clarity on the treatment of unabsorbed depreciation under the Income-tax Act, leading to the allowance of the assessee's claim for set off against different income sources.