TMI Blog2007 (1) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals) 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 Commissioner of Income-tax (Appeals) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y virtue of the said section, the claimed set off is deemed to have been given effect and should 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. When this issue was carried before the learned Commissioner of Income-tax (Appeals), it was argued that the Assessing Officer was bound to allow various deductions under the provisions of the Income-tax Act but no speaking order was passed nor any reasons were assigned for not allowing the set off under section 72 of the 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder that no books of account have been maintained and the income was to be assessed under section 44AE of the Income-tax Act. Another fact has been mentioned by the Assessing Officer that the assessee has got 8 trucks, however, the income was computed by him as per the provisions of section 44AE in respect of seven 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, to 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 provisions of section 32(2) of the Income-tax Act reproduced below : Section 32(2) Where, in the assessment of the assessee, full effect cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if not wholly set off, then shall be carried forward to the following assessment year and shall be set off against profits and gains assessable for that assessment year and if again not wholly set off, then such amount of unabsorbed depreciation allowance is to be carried forward to 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 mention 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the year. Otherwise also, this distinction is quite visible in the statute itself because it provides that if any assessee has unabsorbed depreciation under section 32(2) as well as unabsorbed business loss carried forward under section 72(1), then, section 72(2) provides that the unabsorbed 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 then 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 in as much as the unabsorbed business loss have a time bar of eight years while the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue basically revolves around the applicability of section, hence reproduced below : 44AE. (1) . . . . 3. Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. 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 the Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
