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TMI Blog2019 (9) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... iation is sought to be set off by the assessee is not required is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Virmani Industries Pvt. Ltd. [ 1995 (10) TMI 1 - SUPREME COURT ] As is discernible from a perusal of the aforesaid statutory provision i.e Sec. 32(2), it can safely be concluded that as the same in substance had remained the same as in context to that applicable to the case of the assessee before us, therefore, the aforesaid view arrived at by the Hon ble Apex Court seizes the issue under consideration. We are of the considered view that as the set off of the unabsorbed depreciation cannot be bridled with a condition that the business should be continued by the assessee in the said year, therefore, the claim of set off of the brought forward unabsorbed depreciation by the assessee against its current year Income from house property and Income from other sources is found to be in conformity with the mandate of law. - Decided against revenue. - ITA No.2434/Mum/2018 - - - Dated:- 7-8-2019 - N.K. Pradhan (ACCOUNTANT MEMBER) And Ravish Sood (JUDICIAL MEMBER) Appellant by: Shri Rajesh Ojha, D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30.09.2011, declaring its total income at Rs. Nil. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was reopened under Sec. 147 of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the business income of ₹ 17,96,914/- shown by the assessee in its return of income was set off by the assessee against the brought forward business losses of the earlier years. Also, it was observed by him that the assessee had set off its entire Income from house property of ₹ 2,15,72,559/- and Income from other sources of ₹ 5,66,579/- against the brought forward unabsorbed depreciation of the earlier years. The A.O held a conviction that as the assessee had admittedly discontinued its business activities in A.Y. 2010-11, therefore, it was not entitled to claim set off of losses of earlier years against its income for the current year. On being confronted with the aforesaid observation of the A.O, it was submitted by the assessee that the unabsorbed depreciation under Sec. 32(2) could be carried forward by it for an indefinite peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he brought forward unabsorbed depreciation against the current year Income from house property of ₹ 2,15,72,559/- and Income from other sources of ₹ 5,66,579/. 6. We shall first advert to the claim of the ld. D.R that the CIT(A) is in error in allowing set off of the brought forward business losses of the earlier years against the current years business income of ₹ 17,96,914/- shown by the assessee in its return of income. It is submitted by the ld. Departmental Representative (for short D.R ), that admittedly as the business of the assessee company was discontinued in the immediately preceding year viz. A.Y. 2010-11 and there was no business activity carried out by it during the year under consideration, therefore, the set off of the brought forward business losses of the earlier years against the business income for the year under consideration was not justified. We have given a thoughtful consideration to the aforesaid contention of the ld. D.R and are unable to persuade ourselves to subscribe to the same. As is discernible from a perusal of Sec.72(1) of the Act, where a loss suffered by an assessee under the head Profit or gains o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a precondition for set off of brought forward business losses is that there is profits and gains of any business or profession carried on by the assessee and assessable for that assessment year. Accordingly, there is nothing provided in Sec. 72(1)(i) which mandates that the business or profession should be carried on by the assessee during the previous year. In our considered view, if during the year there are profits and gains of any business or profession carried on by the assessee and assessable for that assessment year, then, the assessee would be entitled for set off of its brought forward business losses against the same. Accordingly, Sec. 72(1)(i) does not mandate that the business or profession should have been carried on by the assessee during the previous year as a precondition for set off of the brought forward business losses. In fact, if there are profits and gains of any business or profession carried on by the assessee, which are assessable in its hands during the year, it would be entitled to set off its brought forward business losses against the same. Say, for instance, sum received by the assessee after discontinuance of its business and chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also the unabsorbed depreciation of the earlier years cannot be set off against the income shown by the assessee under the other heads. We have given a thoughtful consideration to the aforesaid issue and are unable to persuade ourselves to subscribe to the view taken by the A.O. As per Sec.32(2) of the Act (as was applicable to the year under consideration), where in the assessment of the assessee, full effect cannot be given to any allowance under subsection (i) in any previous year, owing to their being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of Sec. 72 and sub-section (3) of Sec.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 in for the succeeding previous years. A perusal of the aforesaid statutory provision reveals that in a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court in the case of CIT Vs. Virmani Industries Pvt. Ltd. (1995) 216 ITR 607 (SC). The Hon ble Apex Court in its aforesaid judgment had observed as under: Yet another question which has to be answered before we can answer the question concerned in this appeal is whether it is necessary that in the following year the assessee must carry on business, i.e., some or other business, to avail of the benefit of the said sub-section ? Two views are possible in this behalf, viz., (1) since the sub-section speaks of unabsorbed depreciation being carried forward to the next year and added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance the sub-section necessarily contemplates existence of a business in the following year, and (2) inasmuch as the sub-section not only speaks of adding the unabsorbed depreciation to the depreciation allowance allowed in the following year but also says that in the absence of such allowance, the carried forward depreciation allowance shall be the allowance for that year, it means that in the following year the assessee need not carry on any business or profes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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