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TMI Blog2012 (11) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... bstance of the above mentioned grievance of the assessee suggests that (a) the Ld. CIT(A) should have allowed current year's depreciation at Rs. 2,32,059/- as set off from the capital gains and (b) the unabsorbed depreciation brought forward from the earlier year's at Rs. 6,42,208/- should have also been allowed as set off against current year's Long Term Capital Gain. 4. The facts giving rise to the grievance of the assessee show that for the year under consideration, during the course of the assessment proceedings, the Assessing Officer observed that the assessee company had incurred loss of Rs. 17,48,195/-. The assessee company also had a Long Term capital gains to the tune of Rs. 1,30,00,000/-. The assessee claimed set off of business loss from Long Term capital gains. This fact is not in dispute. What has been questioned by the AO is the set off claimed by the assessee of Current year's depreciation at Rs. 2,32,059/- at the brought forward depreciation at Rs. 6,432,20/-. The AO sought explanation from the assessee for its claim of set off of current year's and brought forward depreciation. The assessee filed a detailed reply to substantiate its claim. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r etc. The Ld. Counsel further submitted that the assessee company filed a return of income claiming business loss as well as current year's depreciation to be allowed as set off against the Long Term capital gains. The Ld. Counsel further pointed out that the assessee company has also unabsorbed depreciation of Rs. 6,42,208/- of earlier years . The Counsel strongly objected to the observation of the lower authorities that assessee has not shown /claimed unabsorbed depreciation brought forward in its return of income. To substantiate, the Ld. Counsel drew our attention to pages 1 & 2 of the Paper Book which are the statement of income for the year under consideration. The Ld. Counsel continued arguing that the assessee has filed profit and loss account and balance sheet and has claimed current year's depreciation at Rs. 2,32,059/-. It is the contention of the Ld. Counsel for the assessee that though the AO has accepted the figure of business loss but has denied current year's depreciation to be set off against the profit under the head Long Term capital gains. The Ld. Counsel further pointed out that a copy of the depreciation statement was filed along with Tax Audit Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years.] 9. A perusal of the aforementioned section shows that Sec. 32(2) has been subjected to the provisions of Sec. 72(2) and 73(3) of the Act. Before discussing the provisions of Sec. 72(2) let us first analyze the provisions of Sec. 32(2) of the Act prior to this amendment w.e.f. 1.4.2002 "Substituted by the Finance Act, 2001, w.e.f. 1-4-2002. Prior to its substitution, sub-section (2), as amended by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988, Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 and Finance Act, 1992, w.e.f. 1-4-1993, substituted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997 and further amended by the Finance Act, 2000, w.e.f. 1-4-2001, read as under : '(2) Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stricted to profits or gains of business or profession cannot be accepted because had that been the intention of the legislature it would not have deleted phrase "of any business or profession in the post amended provisions of Sec. 32(2). The law regarding set off of unabsorbed depreciation upto 1.4.1996 was very liberal and set off was allowable against any income. This was also upheld by the Hon'ble Supreme Court in the case of Virmani Indus. (P.) Ltd. (supra). However, the law regarding such set off was changed by the Finance Act No. 2 of 1996 and from A.Y. 1997-98 to 2002-03 the unabsorbed depreciation was put at par with business losses u/s. 72. However the status quo have been restored from A.Y. 2003-04 and therefore the ratio laid down by the Hon'ble Supreme Court in the case of Virmani Indus. (P.) Ltd. (supra) once again hold good and so now unabsorbed depreciation can be set off against any income. Thus, the claim of current year's depreciation of Rs. 2,32,059/- is directed to be set off against the income under the head "Capital gains". Accordingly, ground No. 1 of the appeal is allowed. 11. Having considered the provisions of Sec. 32(2), it is also clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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