2024 (1) TMI 601 - AT - Income Tax

Claim of setoff of unabsorbed depreciation carried forward from earlier year against the income from short term capital gains - AO was not satisfied with the explanations and has dealt on the provisions of Section 32 section 70 to 72 of the Act is of the opinion that the setoff claim cannot be allowed - AR emphasized on the provisions of Section 71 72 of the Act and the methodology adopted in setoff of current year losses and carried forward/brought forward business loss and unabsorbed depreciation - HHELD THAT - As relying on Bond Safety Belts 2023 (10) TMI 138 - BOMBAY HIGH COURT unabsorbed depreciation carried forward from earlier years to set off against the short term capital gains. Accordingly, fallow the judicial precedence, and set aside the order of the CIT(A) and direct the Assessing officer to allow the claim of setoff of unabsorbed depreciation carried forward from earlier year against the income from short term capital gains. AO is directed to compute interest u/sec 234D u/sec 244A of the Act in accordance with the provisions of the Act. And the grounds of appeal are allowed in favour of the assessee.

Summary

Issues Involved:
1. Set-off of unabsorbed depreciation against short-term capital gains.
2. Directions for computing interest under section 234D.
3. Directions for computing interest under section 244A.

Summary:

Issue 1: Set-off of Unabsorbed Depreciation Against Short-term Capital Gains

The assessee appealed against the CIT(A)'s order, which upheld the AO's decision disallowing the set-off of unabsorbed depreciation brought forward from earlier years against short-term capital gains for the relevant assessment year. The CIT(A) ignored the provisions of section 32(2) read with section 71(2) of the Act, which treat unabsorbed depreciation on par with current year depreciation, allowing it to be set off against income under any head. The assessee cited several judicial precedents supporting their claim. The Tribunal, referencing the Bombay High Court's decision in Bond Safety Belts vs. DCIT and other cases, concluded that unabsorbed depreciation carried forward from earlier years should be treated as current year's depreciation and can be set off against any head of income, including short-term capital gains. The Tribunal directed the AO to allow the set-off of unabsorbed depreciation against short-term capital gains.

Issue 2: Directions for Computing Interest under Section 234D

The CIT(A) failed to provide appropriate directions for computing interest under section 234D of the Act. The Tribunal directed the AO to compute interest in accordance with the provisions of the Act.

Issue 3: Directions for Computing Interest under Section 244A

Similarly, the CIT(A) did not give proper directions for computing interest under section 244A of the Act. The Tribunal instructed the AO to compute interest as per the Act's provisions.

Conclusion:

The Tribunal allowed the appeal in favor of the assessee, directing the AO to set off unabsorbed depreciation against short-term capital gains and compute interest under sections 234D and 244A as per the Act's provisions. The order was pronounced in the open court on 06.11.2023.