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TMI Blog2015 (2) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act relating to the assessment years 1995-96 and 1997-98 and business loss under Section 72 relating to the assessment year 1997-98. While completing the assessment for the assessment year 1997-1998 in March 2000 under Section 143(3) of the Income Tax Act, the Assessing Officer reduced the carry forward loss for setting off under Sections 72 and 32(2) of the Income Tax Act. 3. For the assessment year 1999-2000, of which we are now concerned, the Assessing Officer initiated re-assessment proceedings under Section 147 of the Income Tax Act by issuing notice dated 23.03.2001 under Section 148, on the ground that the income had escaped assessment due to setting off carry forward business and depreciation loss for the assessment year 1997-1998 against income from short term capital gains arising on the sale of business asset. 4. Before the Assessing Officer, the assessee contended that short term capital gains in terms of Section 50 of the Income Tax Act had arisen out of sale of depreciable assets, viz., Shoval Loader and Crane, held by the assessee and used for the purpose of earning income, which was assessable to tax under the head 'income from business '. It was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible to set off brought forward depreciation loss against capital gains for the assessment year 1999-2000. 9. The Special Bench of the Tribunal referred to the provisions of Sections 32(2), 32(2)(i), (ii) and (iii), Section 71 as also Section 72 of the Income Tax Act Act and was of the view that in the facts of the present case, the claim of the assessee that unabsorbed depreciation should be allowed to be adjusted against capital gains is incorrect, as the said provisions are not attracted to the facts of the present case. 10. Aggrieved by the order of the Tribunal, the assessee is before this Court and this Tax Case (Appeal) was admitted by this Court on the following substantial question of law: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant is not entitled to set off of brought forward depreciation loss relating to assessment year 1997-98 against profit and gains arising from sale of business assets for assessment year 1999-2000?" 11. Learned counsel appearing for the assessee submitted that the depreciation loss carried from the assessment year 1997-98 could be set off against short term capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year, owing to there being chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or part of the allowance to which effect has 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. (2) Wherein the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be,- (i) shall be set off against the profits and gains, if any, or any business or professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o on: Provided ..... (a)..... (b).... (2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section. (3)......." (emphasis supplied) 16. In the present case, the Tribunal came to hold that the depreciation for set off relates to the assessment year 1997-1998 and the business is still continuing. In such a situation, the Tribunal went on to hold that Section 32(2) (i) and 32(2) (ii) do not get attracted. This is not the case of the appellant/assessee. The only plea is that if Section 32(2) (iii) provides that unabsorbed depreciation allowance cannot be wholly set off under clause (i) and clause (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and it shall be set off against profit and gains, if any, of any business or profession carried on by him and assessable for that assessment year in terms of Section 32(2)(iii)(a) of the Income Tax Act. The following assessment year in this case is 1999-2000. 17. Unfortunately, the Tribunal has not addressed the issue in the light of the said provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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