TMI Blog2009 (11) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural income, had filed return of income for the impugned assessment year admitting total income of Rs. 18,24,420. AO noted that the assessee had adjusted unabsorbed depreciation coming under the head 'Profits and gains of business or profession', against income from the head 'Salary', which according to him, was not allowable. Assessee was required to explain why claim of set off of unabsorbed depreciation against salary income should not be disallowed. Though the assessee submitted certain explanations, these were not accepted and applying sub-s. (2A) of s. 71 of the IT Act, 1961 (for short, 'the Act'), assessee's claim of set off of unabsorbed depreciation against the-salary income was not allowed. 3. In its appeal before the learned CIT(A), the submission of the assessee was that the loss computed under the head 'Profits and gains of business or profession' to the extent it comprised of carried forward depreciation, was treated differently as unabsorbed depreciation and only the balance amount could be considered as loss, which could not be set off against any income under the head 'Salaries'. For this proposition, assessee relied on s. 72 of the Act which sets out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Virmani Industries (P) Ltd. (1995) 129 CTR (SC) 189 : (1995) 216 ITR 607 (SC). According to him, this decision clearly brought out that unabsorbed depreciation carried forward and unabsorbed business loss are to be treated differently and not as items which are akin to each other. 5. Per contra, the learned Departmental Representative submitted that the line of argument taken by the assessee could lead to an absurd conclusion that unabsorbed depreciation was by itself a head independent of 'profits and gains of business or profession'. Taking cue from s. 14 of the Act, the learned counsel submitted that the heads of income were very much clearly specified therein and it did not include any head called 'Unabsorbed depreciation'. Learned Departmental Representative forcefully argued that just because a different treatment was given by the legislature regarding unabsorbed depreciation, through, sub-s. (2) of s. 32 of the Act, that by itself would not take it out of the head of 'Profits and gains of business or profession'. According to him, such a special treatment was given for unabsorbed depreciation so as to enable it to be carried forward for any number of years. Learned Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entitled to have such loss set off against income under the other head. (4) Where the net result of the computation under the head 'Income from house property' is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-ss. (1) and (2) and thereafter the loss referred to in s. 71A shall be set off in the relevant assessment year in accordance with the provisions of that section. 72. (1) Where for any assessment year, the net result of the computation under the head 'Profits and gains of business or profession' is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of s. 71, so much of the loss as has not been so set off or, (* * *) where he has no income under any other head, the whole loss shall, subject to the other provisions of this chapter, be carried forward to the following assessment year, and- (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for the succeeding previous years." 7. A reading of the above sections would show that s. 71 deals with inter-head adjustments within a given year. Sec. 72 provides for carry forward and set off of loss, whereas s. 32(2) deals with carry forward of unabsorbed depreciation. The last of these above referred sections clearly mentions that unabsorbed depreciation has to be added to the depreciation allowance of the subsequent year and to be considered as part of the current depreciation. This position is clear from the decision of the Hon'ble apex Court in the case of Virmani Industries. Of course, the order of the Hon'ble apex Court does bring out the difference between unabsorbed loss and unabsorbed depreciation. Nevertheless unabsorbed depreciation was never considered as something that was not falling under the head 'Profits and gains of business or profession'. Sec. 72 stipulates conditions regarding carry forward and set off of business loss year to year, but this would not in any way hamper the working of s. 71 which deals with inter-head set off. Sub-s. (2) of s. 32 has stipulated a special treatment to be given to unabsorbed depreciation where it is not absorbed in any giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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