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TMI Blog2013 (3) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the fact that income from long term capital gain which worked out to Rs.3,04,711/- after giving set off to the current year's business loss was given set off against 66.67% of brought forward unabsorbed depreciation and investment allowance. In response to notice for re-assessment, the assessee furnished its reply and participated in the proceedings. Reassessment order was completed by the Assessing Officer by computing the income of the assessee in the following manner: "The unabsorbed b/f depreciation takes the shape of current depreciation and, therefore, can be given set off against income under any head including income from long term capital gains. In view of above, the income of the assessee is computed as under: Income as computed vide order dated 26.2.93 before set off. Rs.3,04,711/- Less:Relief allowed by CIT(A) vide order dated 5.4.99 12,125/- Less:B/f depreciation as per I.T Records as discussed. Rs.3,33,459/- Balance unabsorbed depreciation(-) Rs. 40,873/- The said order was revised by the Commissioner of Income Tax by invoking Section 263 of the Income Tax Act. The Commissioner of Income Tax found that the set off of unabsorbed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by Finance Act 1992 to provide that in case of domestic companies, only 66 and 2/3rd of unabsorbed depreciation and investment allowance or the aggregate of such allowances carried forward from earlier years shall be allowed to be deducted from the business income and shall be carried forward and allowed in the subsequent years until the same is absorbed. On a plain and simple reading of the Section 34-A, it is clear that it provides for the partial adjustment of the brought forward unabsorbed depreciation and investment allowance for set off to a limited extent against the business income. In other words it no where talks about adjustment of unabsorbed such allowances against the income from capital gains. A bare perusal of the order of the Tribunal would show that the Tribunal proceeded to decide the appeal on the footing that the law provides to give full effect to the unabsorbed depreciation and investment allowance as per provisions of Section 32(2)/Section 32A (3) whereas under Section 34A it is 2/3rd of. It held that the view taken by the CIT that set off to 2/3rd of the unabsorbed depreciation and investment allowance is permissible only against the income from the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year under sub-section (1) shall be only such amount as is sufficient to reduce the said total income to nil ; and (ii) the amount of the investment allowance, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the investment allowance to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any, still outstanding shall be carried forward to the following assessment year and so on, so, however, that no portion of the investment allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, as the case may be, the immediately succeeding previous year. Explanation.-Where for any assessment year, investment allowance is to be allowed in accordance with the provisions of this sub-section in respect of any ship or aircraft acquired or any machinery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of eight years. (f) Section 79 which disentitles a company in certain circumstances upon a change in shareholding to carry forward an earlier year's loss does not apply to unabsorbed depreciation. (g) The condition in s 80 regarding furnishing the return by the assessee for the concerned year within the time specified under s 139(1), in order to be entitled to carry forward, applies to business loss, etc, and not to unabsorbed depreciation. Therefore, unabsorbed depreciation under s 32(2) can be carried forward even if the return for the concerned year is filed beyond the time specified under s 139(1). Due to the legal fiction contained in s 32(2) to the effect that unabsorbed depreciation becomes part of depreciation for the next year, such unabsorbed depreciation is allowed to be carried forward even if no return for the concerned year is filed. (h) In the year of set-off of business loss the same business in which the loss was incurred has to be carried on [proviso to s 72(1)(i)] (now deleted from 1 April 2000); whereas there is no such condition for carry-forward of unabsorbed depreciation. (i)Section 78 which dis entitles a firm to carry forward losses in certain case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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