TMI Blog2013 (4) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... brought forward unabsorbed depreciation could be adjusted against the income from Other Sources in view of provisions of Section 32(2) of the Income Tax Act-1961. 3. In this case, the assessee filed its return of income on 16.3.2005 declaring total income at Rs.nil. Subsequently, the AO completed the assessment u/s 143(3) on 26.12.2006 determining total income at ₹ 8,49,210/-. Being aggrieved with the AO s order, the assessee filed appeal before the learned CIT(A), who vide order dated 6.3.2007, deleted the addition of ₹ 4,41,213/- in respect of trade tax/central sales tax. The CIT(A) also held that unabsorbed depreciation claimed by the assessee may be adjusted against the income from any head keeping in view the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for setting off of depreciation, the assessee preferred an appeal before the learned CIT(A). 8. Before the learned CIT(A), the assessee has taken a ground that AO was not justified in not allowing set off of unabsorbed depreciation of ₹ 22,50,000/- against income under the head other sources . After considering the provisions contained in Section 32(2) and the decision of Hon'ble Supreme Court in the case of CIT Vs. Virmani Industries (P) Ltd. (1995) 216 ITR 607, the learned CIT(A) directed the AO to allow set off of unabsorbed depreciation of ₹ 22,50,000/- against income from other sources and allow consequential relief to the assessee. 9. Hence, the department is in further appeal before us. 10. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospectively applicable w.e.f. AY 2002-03 onwards. It was further observed by the Bench that by substituting sub-section (2) of Section 32 by the Finance Act, 2001 w.e.f. AY 2002-03, the legislature has restored the position of law as it existed prior to 1.4.1997. The legal position of current and brought forward unadjusted/ unabsorbed depreciation allowance in three periods i.e. (i) in the first period prior to 1.4.1997, i.e. upto AY 1996-97, (ii) in the second period i.e. from AY 1997-98 to 2001-02, and (iii) for the third period from AY 2002-03 onwards has been exercised by the Hon ble Special Bench of the Tribunal as under:- 38. The legal position of current and brought forward unadjusted/ unabsorbed depreciation allowance in the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding the assessment year for which it was first computed, to be set off only against the income under the head Profits and gains of business or profession . C. In the third period (i.e. asst.yr. 2002-03 onwards) (i) First unadjusted depreciation allowance can be set off upto asst.yr. 2004-05, that is, the remaining period out of maximum period of eight assessment years (as per B(i) above) against income under any head. (ii) Second unabsorbed depreciation allowance can be set off only against the income under the head Profits and gains of business or profession within a period of eight assessment years succeeding the assessment year for which it was first computed. (iii) Current depreciation for the year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me under any head for a maximum period of eight assessment years starting from AY 1997-98. We, therefore, hold that the AO shall allow assessee s claim of set off of unabsorbed depreciation arose in the AY 1997-98 to 2001-02 only against the income under the head profits and gains of business or profession . However, the AO shall be entitled to allow set off of unabsorbed depreciation pertaining upto the AY 1996-97 against income under any head for a maximum period of eight years starting from AY 1997-98. The AO may allow set off of unabsorbed depreciation pertaining to the AY 2002-03 onwards against income under any head. The AO shall examine the assessee s claim of unabsorbed depreciation and shall ascertain the relevant assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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