1983 (1) TMI 123 - AT - Income Tax

Summary

Issues:
Disallowance of assessee's claim for set off of unabsorbed depreciation against current year's income.

Analysis:
The appeals were filed by the assessee against the order of the CIT(A) regarding the disallowance of the claim for set off of unabsorbed depreciation from earlier years against the income for the current years. The ITO initially rejected the claim without providing any reasons. The CIT(A) upheld this decision, stating that since the assessee was no longer the owner of the assets and the business where the assets were employed had ceased, the claim was not valid. However, the assessee contended that as per section 32(2) of the IT Act, unabsorbed depreciation from earlier years can be set off against the income for the current year, even if the business is not the same. The assessee relied on previous court decisions to support this argument.

Upon hearing both parties and examining the case facts, the Tribunal concluded that the CIT(A) was not justified in disallowing the assessee's claim for set off of unabsorbed depreciation. Section 32(2) allows for the carry-forward of unabsorbed depreciation to the subsequent year, regardless of the continuity of the business or ownership of assets. The Tribunal referred to the interpretation of the statute by the Allahabad High Court in the case of Virmani Industries Pvt Ltd, emphasizing that there is no time limit for carrying forward unabsorbed depreciation, unlike losses. The Karnataka High Court's decision in the case of Kapila Textile further supported the view that the continuity of the business is not a prerequisite for setting off unabsorbed depreciation.

Additionally, the Tribunal cited the Allahabad High Court's ruling in the case of CIT vs. Rampur Timber & Turnery Co. Ltd, which clarified that the benefit of unabsorbed depreciation can be availed in any subsequent year, even if the business is not operational, as long as the assessee has some income. Following the principles established in these cases, the Tribunal allowed the appeals, affirming the assessee's entitlement to set off unabsorbed depreciation from earlier years against the income for the current year.