TMI Blog2013 (3) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gains. The business income is a loss. The view taken by the Tribunal is therefore, fully justified proceeded to decide the appeal on the footing that the law provides to give full effect to the unabsorbed depreciation and investment allowance as per provisions of Section 32(2)/Section 32A (3) whereas under Section 34A it is 2/3rd of. It held that the view taken by the CIT that set off to 2/3rd of the unabsorbed depreciation and investment allowance is permissible only against the income from the business and profession and not from the income under the head income from other sources. No merit in the argument of the appellant which proceeds on the footing that business loss and unabsorbed depreciation and unabsorbed investment allowance are one and the same thing. In this view of the matter, the Commissioner of Income Tax was not justified in invoking the jurisdiction under section 263 of the Income Tax Act or not allowing the unabsorbed depreciation against income from capital gains to the extent of admissibility to Rs.66.67 %. - INCOME TAX APPEAL No. - 200 of 2005 - - - Dated:- 6-3-2013 - Prakash Krishna And Ram Surat Ram (Maurya),JJ. Petitioner Counsel :- Shamb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting it in the following manner: Capital gain as per order under section 143 dated 26.2.1993 471024 Add: Income from house property 20000/492024 Less: Business loss for current asstt. year as determined vide u/s143(3) dated 26.02.1993 186333/301691 Less: Relief allowed by the C.I.T(A)vide order 05.04.99 12125/292566 or say 292570/- The assessee carried the matter in appeal before the Income Tax Appellate Tribunal which has allowed it by the order under appeal. In the memo of appeal, the following substantial question of law has been raised. "Whether on the facts and in the circumstances of the case the Hon'ble ITAT was correct in setting aside the order under section 263 without appreciating properly the restrictive provisions brought to the statute by introducing section 34A by Finance Act, 1992?" Shri Shambhu Chopra, learned standing counsel for the Department in support of the appeal submits that the Tribunal was not justified in interfering with the revisional order passed by the Commissioner of Income Tax. The submission is that under section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties is reproduced below: (2) Where, in the assessment of the assessee [(or, if the assessee is a registered firm or an unregistered firm assessed as a registered firm, in the assessment of its partners)] full effect cannot be given to any allowance [under clause(ii) of subsection (1)] in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then subject to the provisions of sub-section(2) of section 72 and sub section(3) of section 73, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added 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. Section 71(2) as then stood and referred by the counsel for the parties is reproduced below: (2) Where in respect of any assessment year, the net result of the computation under any head of income, other than Capital gains , is a loss and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g computed after deduction of the allowances under section 33 and section 33A, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A) is less than the aggregate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following procedure shall be followed, namely : (a) the allowance under clause (ii) shall be made before any allowance under clause (i) is made; and (b) where an allowance has to be made under clause (ii) in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year. The Income Tax Act as pointed out by Shri N.A.Palkhivala in his commentary makes a distinction in between unabsorbed depreciation and carried forward loss. In the commentary, the following eight distinction have been pointed out: 23.Unabsorbed Depreciation and Carried Forward Loss This sub-section deals with the carry-forward of unabsorbed depreciation allowance; while s72(1) deals with the carryforward of loss incurred under the head 'Business or profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any assessment year, the net result of computation under any head of income, other than capital gains Capital gains , is a loss and the assessee has income assessable under the head Capital gains , In such a situation, such loss may, subject to the provisions of this Chapter, be set off for and from assessment years 1992-1993, against assessee's income if any, assessable for that assessment year under any head of income including the head Capital gains . The brought forward unabsorbed depreciation and brought forward investment allowance shall be added in the current depreciation and investment allowance be set off against the income from capital gains. The business income is a loss. The view taken by the Tribunal is therefore, fully justified. We do not find any merit in the argument of the learned counsel for the appellant which proceeds on the footing that business loss and unabsorbed depreciation and unabsorbed investment allowance are one and the same thing. The learned counsel for the Department has placed reliance on Commissioner of Income Tax versus Kunal Engineering Co.Ltd.(2010)325 ITR 328 wherein it was observed that set off unabsorbed income should be restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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