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TMI Blog2012 (8) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 consequently show cause notice was issued to the assessee proposing to disallow current year loss claimed to be carried forward to be set off in future. Reliance was placed on the provisions of section 139(3) of the Act by the Assessing Officer. In response to the query raised by the Assessing Officer, the assessee pointed out that the carry forward claimed in the return of income was not because of business loss but only on account of depreciation and the plea was raised for carry forward of the said unabsorbed depreciation to the succeeding years. The Assessing Officer rejected the claim of the assessee in view of the provisions of sections 139(3) and 72(1) of the Act. The Assessing Officer further observed that there was no justification between the depreciation loss or other than depreciation loss under section 139(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be furnished within the time prescribed for filing the return of income under section 139(1) of the Act. 9. Now coming to the provisions of carry forward of business loss, we find that under the provisions of section 72(1) of the Act it is provided that where the net result under the head 'profits and gains' of business is a loss which could not be wholly set off against the income under any other head of income in accordance to section 31 of the Act, the whole loss shall be carried forward to be set off against the profits and gains, if any of the business or profession carried on by him in the following assessment years. Under sub-section (2) of section 72 of the Act, it is provided that where any allowance or part thereof is under section 32(2)/35(4) of the Act and the same is to be carried forward then the effect shall be first given to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 allowed under sub-section (1) to section 139 of the Act, in order to claim the carry forward of such loss. The loss referred to in section 139(3) of the Act are the losses which would be carried forward under section(s) 72(1)/73(2)/74(1)/74(3)/74A(3) of the Act. However, in the present facts of the case before us, the assessee had claimed carried forward of depreciation allowance, which could not be adjusted against the profits of the captioned previous year. In view of the provisions of the Act i.e. section 32(2) of the Act where depreciation allowance is not adjusted against profits of the previous year, forms part of the allowance for depreciation for the succeeding previous year, and as per provisions of section 72(2) of the Act, the effect of the allowance which is carried forward to the succeeding year is to be allowed first as against the current allowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 depreciation of the relevant year was to be carried forward and added to the depreciation of the following year. In view of the above, there was no infirmity in the order of the Commissioner (Appeals) wherein he directed the Assessing Officer to carry forward unabsorbed depreciation. [Para 9]" 13. In the facts of the present case the assessee had claimed set off and carry forward of unabsorbed depreciation to be made against the profits and gains of the business of the succeeding year. The said claim of the assessee was rejected by the Assessing Officer as the return of income in the assessment year was filed late by the assessee and provisions of section 139(3) of the Act were invoked and applied. We find no merit in the stand of the authorities below in this regard. In view of our holding that the business loss determined in the hands of the assessee under the head 'pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the earlier years return was filed in time or not." 15. The Hon'ble Punjab & Haryana High Court in CIT v. Haryana Hotels Ltd. (supra) held as under: 20. A reading of section 32(2) of the Act makes it clear that a carried forward unabsorbed depreciation allowance is deemed to be part of and stands on the same footing as current depreciation, i.e., in the assessment of the assessee, if full effect cannot be given to any allowance in any previous year owing to there being no profits or gains chargeable for that previous year, the allowance or part of the allowance to which effect has not been given, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of the said allowance. There is no time-limit provided under section 32(2) of the Act for carry forward of unabsorbed depreciation to any subsequent year. The Apex Court in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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