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TMI Blog2019 (9) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... [1978] 111 ITR 119 (Born) dated 16/11/1976 which is as per the provisions laid down in Income Tax Act, 1922? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in relying on a decision which was based on the provisions of the Income Tax Act, 1922 when in the impugned matter the provisions of the Income Tax act, 1961 applies? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the set off of unabsorbed depreciation against Income from House Property and Income from Other Sources and further to set off of earlier years business losses against business income of current year disregarding the decision of the Hon'ble Kerala High Court in the case of Malabar Agricultural Co. Ltd. (229 ITR 548) wherein it is held that the assessee did not engage in any manufacturing or processing, nor was there any trading activity and hence, as per the provisions of Sec.72(1) of the Income Tax Act, 1961, since there is no business activity carried on by the assessee during the year, the losses of earlier years as well as the unabsorbed depreciation of earlier years cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other sources' of Rs. 5,66,579/- was also declined by him. Accordingly, the A.O on the basis of his aforesaid observations assessed the income of the assessee at an amount of Rs. 2,39,36,050/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) not finding favour with the view taken by the A.O, vacated his order to the extent he had declined to allow 'set off' of the brought forward 'business losses' and 'unabsorbed depreciation' as was claimed by the assessee in its return of income. Accordingly, the CIT(A) finding the claim of the assessee for 'set off' of the brought forward losses/unabsorbed depreciation as being in order, therefore, allowed the appeal. 5. The revenue being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. We find that our indulgence in the present appeal has been sought by the revenue for adjudicating two issues viz. (i) that, as to whether the CIT(A) is justified in allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Sec. 71 during the year itself is to be carried forward and to be 'set off' against the profit or gains, if any, of any business or profession carried on by him and assessable for that assessment year. 7. Admittedly, at the first blush the contention of the ld. D.R appeared to be very convincing and we were persuaded to subscribe to his view that in the absence of any "business or profession carried on by the assessee" during the year, the requisite condition envisaged in clause (i) of sub-section (1) of Sec. 72 was not satisfied, and resultantly the claim of "set off" of the brought forward 'business losses' raised by the assessee could not be accepted. However, a careful perusal of clause (i) of sub-section (1) of Sec. 72 reveals that what is required for "set off" of the brought forward 'business losses' is "...the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year". In fact, there is nothing therein provided that such business or profession must be carried on by the assessee during the year in which 'set off' of the brought forward 'business losses' is claimed by the assessee. We are of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) of Sec. 72, as had been deliberated at length by us hereinabove. In the backdrop of the aforesaid facts, we are of the considered view that the 'set off' of the brought forward 'business losses' against the 'business income' of Rs. 17,96,914/- as claimed by assessee is well in order. We thus not finding any infirmity in the order of the CIT(A) to the extent he had upheld the claim of the assessee as regards 'set off' of the brought forward business losses of Rs. 17,96,914/-, uphold the same. 9. We shall now advert to the claim of the revenue that the CIT(A) had erred in allowing the 'set off' of the brought forward 'unabsorbed depreciation' of earlier years against the current years 'Income from house property' of Rs. 2,15,72,559/-and 'Income from other sources' of Rs. 5,66,579/-. The controversy involved in context of the present issues lies in a narrow compass i.e as to whether the brought forward 'unabsorbed depreciation' could be 'set off' against income other than that shown under the head 'business income', or not. It is the claim of the assessee that 'unabsorbed depreciation' under Sec. 32(2) can be carried forward indefinitely and 'set off' against any head of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for being 'set off' against his income, if any, assessable for that assessment year under any other head (other than income assessable under the head "Salaries"). 10. We have perused the observations of the A.O and are unable to persuade ourselves to subscribe to the same. Admittedly, as per the provisions of Sec. 32(2) of the Act prior to their amendment by the Finance Act, 2000 w.e.f 01.04.2001 the 'set off' of the 'unabsorbed depreciation' was restricted to the profits and gains from business or profession. However, post-amendment of Sec. 32(2) the 'set off' of unabsorbed depreciation is no more restricted to the profits and gains of business or profession. In fact, pursuant to the amendment made available on the statute vide the Finance Act, 2001, w.e.f 01.04.2002 the liberal regime prior to A.Y 1997-98 had been restored from A.Y 2002-03 onwards. In our considered view, the observations of the A.O as regards the limited scope of 'set off' of 'unabsorbed depreciation' appears to be guided by the pre-amended provisions of Sec. 32(2) of the Act i.e as had remained available on the statute during the period A.Y 1997-98 to A.Y 2000-01. Our aforesaid view that existence of any bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of s. 72 and sub-s. (3) of s. 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." As is discernible from a perusal of the aforesaid statutory provision i.e Sec. 32(2), it can safely be concluded that as the same in substance had remained the same as in context to that applicable to the case of the assessee before us, therefore, the aforesaid view arrived at by the Hon'ble Apex Court seizes the issue under consideration. Accordingly, we are of the considered view that as the 'set off' of the 'unabsorbed depreciation' cannot be bridled with a condition that the business should be continued by the assessee in the said year, therefore, the claim of 'set off'' of the brought forward 'unabsorbed depreciation' by the assessee against its current year 'Income from house property' of Rs. 2,15,72,559/- and 'Income from other sources' of Rs. 5,60,579/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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