TMI Blog2012 (8) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... ember The present appeal filed by the assessee is against the order of Commissioner of Income Tax (Appeals), Chandigarh dated 16.09.2011 relating to assessment year 2007-08 against the order passed under section 143(3) of the Income-tax Act (in short 'the Act'). 2. The only ground of appeal raised by the assessee reads as under: "1. The Ld. CIT(A) is not justified in upholding the action of AO in not allowing the current year loss of Rs. 12,11,410/- on account of unabsorbed depreciation to be carried forward set off against future years income, which is highly unjustified, bad in law is uncalled for". 3. The issue raised in the present appeal is in relation to computation of brought forward and carried forward of unabsorbed depreciation in the hands of the assessee. 4. The brief facts of the case are that during the year under consideration the assessee had e-filed its return of income on 10.11.2007 declaring net loss of Rs. 12,11,410/-. The assessee had paid tax on MAT on book profits for the year under consideration. During the course of assessment proceedings the Assessing Officer noted the assessee to have filed its return of income late on 10.11.2007 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 80, 139(1) and 139(3) of the Act. 7. The learned A.R. for the assessee in reply pointed out that section 80 dealt with the same provision as in section 139(1) of the Act. 8. We have heard the rival contentions and perused the record. In order to adjudicate the issue in the present case it is relevant to refer to the provisions of the Act. Section 139(1) of the Act requires every person to furnish the return of income relating to the previous year, in the prescribed form and verified in the prescribed manner, setting forth such particulars as may be prescribed, on or before the due date of filing the return of income. Further under section 139(3) of the Act it is provided that where any person had sustained loss in any previous year under the head 'profits and gains' of business, or 'capital gains' and claimed that such loss is to be carried forward under section(s) 72(1)/73(2)/74(1)/74(3)/74A(3) of the Act may furnish return of loss in the prescribed form and verified in the prescribed manner, within the time allowed under sub-section (1) to section 139 of the Act. Consequently return of loss by any person in order to claim the carry forward loss are to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years.] " 11. In view of the provisions of section 32(2) of the Act the depreciation allowance or part thereof, which could not be given effect to during the previous year, owning to there being no profits or gains chargeable for that previous year, then such depreciation allowance is to be added to the amount of depreciation allowance in the following year and is deemed to be part of that allowance. In case there being no allowance in the succeeding year, then such allowance of depreciation would be deemed to be allowance of that previous year or in the succeeding previous year/s. In view thereof, depreciation allowable in the hands of the assessee is allowance under the statute and cannot be equated with the loss of the business determined under the head profits and gains of business or profession. The return of income claiming carry forward of business loss are compulsorily to be filed within the time allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable under section 32(1) on account of there being insufficient profit. No other condition is required to be fulfilled by the assessee for carry forward of unabsorbed depreciation. Once the depreciation allowable under section 32(1) cannot be allowed or partly allowed, the unabsorbed portion of such depreciation automatically becomes the depreciation of the subsequent year. This is subject to the provisions of sections 72(2) and 73(3). From the reading of sub-sections (2) and (3) of section 72, it is evident that these sub-sections only provide the priorities which is to be given while setting of the unabsorbed depreciation vis-a-vis business loss. Thus, both these sub-sections have no relevance for the right of the assessee to get carry forward of unabsorbed depreciation. Carry forward of unabsorbed depreciation, as per section 32(2) is automatic and the assessee is not required to fulfil any condition so as to be entitled to get such carry forward. Admittedly in the relevant year, after giving effect to the order of appellate authorities full effect could not be given to the depreciation permissible under section 32(1), because of no profit or gains. Therefore, unabsorbed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above that section 32 deals with the different types of depreciation whereas section 80 deals with carry forward of unabsorbed losses other than losses on account of depreciation. If that was not so, there was no need for Legislature to provide specific provision for carrying forward of depreciation under section 32 of the Act. It has already been noted that in case of Nagapatinam Import Export Corpn. ( supra ), which was relied by our High Court in the case of J. Patel Co. ( supra ) whereby, it was held that section 72 contemplates loss other than unabsorbed depreciation and there was a time-limit within which loss can be adjusted, whereas in the case of unabsorbed depreciation there is no time-limit and further that under the statute there is a separate identity with respect to unabsorbed depreciation though at the time of computation, it becomes a part of loss. 17. From the above, it comes out that the effect of section 32(2) is that unabsorbed depreciation of a year becomes part of depreciation of subsequent year by legal fiction and when it becomes part of current year depreciation it is liable to be set off against any other income, irrespective of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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