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TMI Blog2019 (11) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... d the action of the AO and directed him to allow the set off of unabsorbed depreciation allowance carried forward from earlier years against income from other sources after necessary verifications of quantum of brought forward unabsorbed depreciation. We see no error in the order of the CIT(A). - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that identical issue came up for adjudication before the Tribunal in AYs. 2006-07 to 2009-10 where the co-ordinate bench of ITAT has relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Virmani Industries Pvt. Ltd. (1995) 215 ITR 60 (SC) and the decision of the Hon'ble Gujarat High Court in case of General Motors India P. Ltd. vs. DCIT 354 ITR 244 (Guj) whereby firstly the restriction of 8 years for carry forward and set off and unabsorbed depreciation has been dispensed with by the subsequent amendment and accordingly the unabsorbed depreciation arising in the assessment order prior to the amendments are also governed by the provisions of Section 32(2) of the Act as amended by the Finance Act, 2001. Similarly, in view of the decision of the co-ordinate bench in relation to AY 2006-07 in assessee's own case the assessee is entitled for claim of set off of unabsorbed depreciation under s.32(2) of the Act against 'income from other sources' for the reasonings provided by the co-ordinate bench in this regard. 7. We have considered the rival submissions. The core issue involves maintainability of set off of unabsorbed depreciation. The CIT(A) has dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order and the same view was upheld by the CIT(A) furthermore the adjustment for unabsorbed deprecation cannot be allowed. In the return of Income filed, the assesses Ass set off the Income from long term capital gains and short term capital gains against brought forward unabsorbed depreciation. However, this cannot be allowed for the reasons stated as below:- 6.4 The Income Tax Act, 1961 has laid down the manner in which total Income of an assesses is to be computed. Chapter TV deals with the computation of Total income. Section 14 states that "Save as otherwise provided by this Act, all income shall, for the purposes of charge of Income-tax and computation of total income, be classified under the following heads of income : - A.- Salaries. B. - 35[***] C.-Income from house property. D, - Profits and gains of business or profession. E.- Capital gains. F. -Income from other sources." U/s 14, income for the purposes of charge of income tax has to be classified in 5 heads of income. Once the income is classified under any of the head of Income, the deductions shall be available to the assessee as per the Section dealing with the respective heads of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any business activity during the year under consideration, there shall be no computation under the head "Profits and gains of business or profession", The assessee has claimed benefit of unabsorbed depreciation u/s 32(2) of the Income Tax Act, 1961, Section 32(2) states that when there is no depreciation allowance for a particular year, the brought forward unabsorbed depreciation shall be treated as depredation allowance for that year. Thus, Section 32(2) deems the brought forward depreciation of previous assessment year as the depredation allowance of the current assessment year. The depreciation allowance u/s 32 shall tie given effect as per the provisions of Section 29 which prescribe the manner in which Income from business or profession shall be computed. Section 29 states that "The Income referred to in section 28 shall be computed in accordance with the provisions contained In sections 30 to 34[43D]." Section 29 is with reference to income referred in Section 28. Since, during the year under consideration, the assesses has not earned any income referred to in Section 28 and no business activity existed for the year under consideration, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against Income of current year - Held, yes 2) Income-Tax Officer vs Rajaratna Naranbhai Mills Ltd. [1982] 1 ITD 1044 (Ahd) (SB):- Whether benefit of set off of carry forward depredation allowance is admissible if assessee had not carried on any business or had no notional Income assessable under section 41 during relevant accounting year- Held, No The concluding paragraph of the judgment i.e. Para No. 15 is as follows:- "To sum up, we recapitulate the question which is referred to us as follows: "Whether the assessee is entitled to set off of unabsorbed depreciation of the earlier year and brought forward against the income from other sources?" Our decision is that the assessee is not entitled to such a set off because the business in respect of which the depreciation is claimed had ceased to exist and the assessee is not having any Income from business at all either actual or notional. The assessee will be entitled to carry forward unabsorbed depreciation if, firstly, there is Income from same business, secondly, if there is income from some business and, lastly, if there is income from business which is said to have been notionally carried on by virtue of fic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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