TMI Blog2007 (11) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming the disallowance of set off-of unabsorbed depreciation of earlier years to assessment year 1999-2000 from income from "house property" during the year under consideration. 2. That the learned CIT (Appeals) has not correctly appreciated the provisions of section 32(2) and the amendment made therein and is not justified in disallowing the claim of set-off of depreciation of earlier years brought forward against the income of the appellant during the relevant previous year. 3. That the learned CIT (Appeals) is wrong in holding that unabsorbed depreciation brought forward up to the assessment year 1997-98 is not liable to be set-off from income house property in the subsequent years as claimed by the appellant. 4. That the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 32(2) pre-amended as also post-amended. As per the pre-amended section prior to 1-4-1997 unabsorbed depreciation should be allowed to be carried forward and set-off against assessable income of subsequent year notwithstanding the fact that the business in respect of which depreciation was allowable ceased to exist in the year of such set-off. Further receipt of business income during the relevant previous year was not a condition for deduction of allowance like depreciation. There were many judicial decisions to support this view some of which were relied upon by the learned counsel. However, after insertion of proviso to section 32(2) with effect from assessment year 1997-98, the Legislature has made it crystal clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Finance No. (2) Bill, 1996 was only prospective as pronounced by the Hon ble Finance Minister in his speech wherein it was stated that cumulative unabsorbed depreciation brought forward as on 1-4-1997 can still be set off against the taxable business profit or income under any other head for the assessment year 1997-98 and seven subsequent assessment years. Reliance was placed by the learned AR on the decisions of the ITAT, in case of the ITAT in case of Asstt. CIT v. Poddar Projects Ltd. [2005] 92 ITD 468 (Kol.), ITO v. Selchem Engineers (P.) Ltd. [2004] 90 ITD 732 (Delhi), ITO v. Keshwa Enterprises (P.) Ltd. [2006] 100 ITD 365 (Chd.) and the decision of ITAT Special Bench, Chennai in case of Southern Travels v. Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provided that in the assessment of the assessee where full effect cannot be given to the depreciation allowance owing to there being no profit and gains chargeable for that previous year or owing to the profit or gain chargeable being less than the allowance, then subject to the provisions of sections 32(2) and 72(2) and 73(3), the allowance or the part of the allowance to which effect could not be given, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance. The effect of these provisions are that the unabsorbed depreciation for the particular year becomes, by legal fiction, part of the depreciation allowance for the succeeding years and so on without any ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness or profession carried on by the assessee and assessable for that assessment year and following assessment year. However, after the amendment, it was made mandatory that for availing the benefit of carried forward of unabsorbed depreciation, the business or profession for which the allowance was originally computed continued to be carried on by the assessee in the previous year relevant for that assessment year as stipulated in the first proviso to section 32(2)( iii ) of the Act. In the instant case, relevant assessment year under consideration is 1999-2000, now the question arises as to whether the provisions of section 32(2)( iii ) as substituted with effect from 1-4-1997 can be applied to the unabsorbed depreciation or the old pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1996-97 which remained unabsorbed and is brought forward to the assessment year 1997-98 and subsequent assessment years up to assessment year 2004-05 can be set-off as per pre-amended section 32(2) and consequently, it can be set-off against taxable business profits or income under any other head for assessment year 1997-98 and seven subsequent assessment years. Therefore, the assessee s claim, in the present case, to set-off unabsorbed depreciation brought forward from assessment years 1995-96 and 1996-97 against income under House Property for the assessment year 1998-99 is to be allowed, and, we order accordingly. Consequently, the issue involved in the Cross Objection filed by the assessee is decided in favour of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
