TMI Blog2007 (1) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is not justified in ignoring the fact that the depreciation carry forward having been provided in section 32(2) in different manner and section 72 deals with losses other than losses due to depreciation. 3. On the facts and in the circumstances of the case, the CIT(A) is not justified in ignoring the Hon'ble Supreme Court's decision in the case of CIT v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 where it is held by the Hon'ble Supreme Court that it is wrong to assume that section 72 also deals with the carry forward of depreciation. This carry forward having been provided in section 32(2) in different manner and section 72 deals with losses other than losses due to depreciation: 2. This appeal was fixed for hearing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be allowed to be set-off against the current year's income. Accordingly, the total income of the assessee was assessed at Rs. 1,78,000 in terms of the provisions of section 44AE of the Income-tax Act. 5. When this issue was carried before the learned CIT(A), it was argued that the Assessing Officer was bound to allow various deductions under the provisions of Income-tax Act but no speaking order was passed nor any reasons were assigned for not allowing the set off under section 72 of Income-tax Act. It was also argued that for the preceding year, a loss was computed at Rs. 4,22,900 which was claimed for setoff against the income of the year under consideration irrespective of the provisions of section 44AE, because of the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him as per the provisions of section 44AE in respect of 7 trucks used for 12 months at Rs. 1,68,000 and for the remaining truck, the income was computed for five months at Rs. 10,000, so the income was assessed at Rs. 1,78,000 without any set-off of depreciation loss. With this brief factual background, our attention was firstly drawn on the provision of section 32(2) of Income-tax Act reproduced below:- "32(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the following assessment year. It has also been provided that for availing the benefit, it is essential that for which business the allowance was originally computed has to be continued to be carried on by him in the previous year. To deal with this issue, it is also worth mentioned that current depreciation is deductible, in the first place, from the income of the business to which it relates. If such depreciation amount is larger than the amount of profits, then such excess comes for absorption from the profits and gains of any other 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 of the income during that year. If balance is still left over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d losses shall have precedence and to be set off first, so far as the sufficiency of the income to be set-off against permits. It is only after the carried forward business loss is set-off and there yet remains positive income than the unabsorbed depreciation would come in for set-off. This method and way of set-off of two types of losses are beneficial to the assessee inasmuch as the unabsorbed business loss have a time bar of 8 years while the unabsorbed depreciation as referred by the ld. D.R. has no time bar because it integrates with and is treated as depreciation allowable for the subsequent year itself. 6.1 From the foregoing discussions, the position of law emerges that the set-off unabsorbed depreciation falls under section 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed." This sub-section thus debars an assessee to again claim any deduction which falls under sections 30 to 38. This is a deeming provision stating that the deductions which had fallen under these sections shall be deemed to have already been given full effect and no further deduction shall be allowed. As we have discussed above, since the unabsorbed depreciation falls under section 32(2) of Income-tax Act, which is within the debarred claims as per sub-section (3) of section 44AE, therefore, the assessee is not entitled for set-off of unabsorbed depreciation while computing the income under section 44AE of Income-tax Act. For the sake of clarification, ld. D.R. has also argued that the assessee has not claimed the applicability of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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