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2023 (10) TMI 138 - HC - Income TaxSet-off of unabsorbed deprecation against short term capital gains - ITAT held that unabsorbed depreciation of the years in question could be set-off only against the profits and gains of subsequent assessment years - HELD THAT:- As decided in M/S GUNNEBO INDIA PVT. LTD. [2019 (2) TMI 1872 - BOMBAY HIGH COURT] has quoted the relevant portion of the order of ITAT which had dismissed the revenue’s appeal where ITAT has held that as per the provisions of Section 32(2) of the Act read with Sections 70, 71 and 72 of the Act it becomes very clear that the total depreciation comprising of the depreciation of the relevant assessment year along with the unabsorbed depreciation of the earlier years becomes the total current year’s depreciation which is allowed to be set-off against income under any head of income including long term capital gain and hence did not find any reason to interfere with the order of CIT(A). The High Court has also quoted relevant paragraph from General Motors [2012 (8) TMI 714 - GUJARAT HIGH COURT] where there is reference to a Circular No. 14 of 2001 issued by the CBDT where the Court has held that the unabsorbed depreciation was available for carry forward and set-off in the subsequent assessment year. In the appeal at hand, the ITAT, in the impugned order, after relying on General Motors (supra), has incorrectly come to a conclusion that the Assessee has claimed set-off of the impugned unabsorbed depreciation against the income under the head capital gain which is not permissible. This is totally contrary to the conclusion of the co-ordinate bench of the ITAT in Gunnebo (supra) where, as quoted above, the ITAT has held that the unabsorbed depreciation of earlier years become the total current year depreciation which is allowed to be set-off against income under any head of income including long term capital gain. As stated in General Motors (supra) with which we are in respectful agreement, if current depreciation is deductible in the first place from the income of the business to which it relates and such depreciation amount is larger than the amount of the profit of that business, then such excess comes for absorption from profit and gains from any other business or business, if any, carried on by the Assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is still a balance leftover, it is to be treated as unabsorbed depreciation and taken to the next succeeding year. We hold that ITAT was not justified. Assessee should be permitted to set off of the unabsorbed depreciation against short term capital gains.
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