2013 (4) TMI 791 - AT - Income Tax

Summary

Issues involved: Appeal against order u/s 143(3)/254 for AY 2004-05 regarding adjustment of unabsorbed depreciation against income from Other Sources.

Summary:

Issue 1: Adjustment of unabsorbed depreciation against income from Other Sources

The Revenue appealed against the CIT(A)'s order allowing adjustment of unabsorbed depreciation against income from Other Sources u/s 32(2) of the Income Tax Act, 1961. The Tribunal set aside the assessment and directed the AO to reconsider the matter. The AO disallowed the set off of unabsorbed depreciation against income from Other Sources, stating it should only be set off against business income. The CIT(A) allowed the set off based on Section 32(2) and a Supreme Court decision. The Tribunal considered a Special Bench decision and held that unabsorbed depreciation from AY 1997-98 to 2001-02 can only be set off against business income, not against income from Other Sources. Unabsorbed depreciation from AY 2002-03 onwards can be set off against any income. The AO was directed to allow set off accordingly.

This judgment clarifies the scope of adjusting unabsorbed depreciation against different sources of income based on the provisions of Section 32(2) of the Income Tax Act, 1961 and relevant case law interpretations.