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TMI Blog2020 (3) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... ,49,880 minus set off Rs, 8,31.249 against Income from House Property allowed by the CIT(A)] for the year under consideration against the income chargeable under the head 'Salary income', 2. The Commissioner (Appeals) erred in not following the decisions of the Hon'ble Tribunal in the case of Shri V. Lakshmanan vs. The IT.O. in 1TA No, 198/Mad/2010 for A.Y. 2005-06 dated 10th December, 2010, 3. The Commissioner (Appeals) failed to appreciate that the Hon'ble Tribunal relied upon the judgment of the Supreme Court in the case of CI T vs. Viramani Industries Pvt.Ltd, [(1995) 216 JTR 607 (SC), 4. The Commissioner (Appeals) failed to appreciate (hat the Hon'ble Supreme Court had drawn a distinction between business loss and unabsorbed depreciation and therefore, the limitations arc applicable to the carrying forward of business losses and do not apply to the carrying forward of unabsorbed depreciation.. 5. The order of the Commissioner (Appeals) is bad in law and without jurisdiction. 3. The brief facts of the case are that the assessee is an individual derives income from salaries, income from house property, income from business, income from capital gains and inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he computation under any head of income, other than Capital gains is a loss and the assessee has income assessable under the head Capital gains, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head Capital gains (whether relating to short-term capital assets or any other capital assets.) (2A) Notwithstanding anything contained in sub section (1) or sub section(2), where in respect of any assessment year, the net result of the computation under the head Profits and gains of business or profession is a loss and the assessee has income assessable under the head Salaries, the assesse shall not be entitled to have such loss set off against such income. 5.2 As is evident from a plain reading of the section, any loss under the head Business and Profession cannot be set off against Salary Income. When the assessee was asked to show cause as to why the set off of Business Loss against Income from Salary should not be disallowed, the Assessee submitted that he was actually setting off "unabsorbed depreciation of AY 2011-12, 2012-13, 2013-14 and 2014-15 against sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 72 and sub-section (3) of section 73, the allowance or the 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 deprecation for the following previous year and deemed to the 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.] 5.4 Hence it is clear that the section 32(2) provisions of section 72. When deprecation of business assets is an allowable deduction against profits and gains of business, leading to the calculation of taxable business income/business loss and if business loss is not allowed to be set off against the head salaries, the contention that depreciation/unabsorbed depreciation can be set off against income from salaries lacks any merit whatsoever. To make it abundantly clear the following is an extract from the FAQ is issued by the Income tax Department on its official website: In view of the above, the sum of Rs. 62,49,880/- of unabsorbed depreciation set off by the assesee against income from salaries is disallowed and the same is added back to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the provision of section 32(2) of the I.T.Act, 1961 has not made any distinction between current year deprecation and unabsorbed depreciation. He, further, submitted that in any financial year the result of computation under the head income from business is resulted unto loss, and then the same can be set off against income from any other head of income. In this regard, he referred to provision of section 71(2A) of the I.T.Act, 1961 and argued that till 1997, there was no restriction for carry forward and set off of unabsorbed depreciation and only in the year 1998, the provision has been amended to restrict carry forwarded of unabsorbed depreciation to eight years. Further, the said amendment has been further amended to bring back old provisions of the Act and accordingly, there is no restriction in the Act for carry forward and set off of unabsorbed depreciation. This being the case, it is incorrect on the part of the Ld. AO, as well as the Ld.CIT(A) to interpret the law by relying upon the provision of section 71(2A) of the I.T.Act, 1961, where it clearly says that losses under the head income from business and profession cannot be set off against income under the head salar ..... 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 such income. From the above, it is very clear that from AY 2005-06 onwards, it is not allowed to set off loss under the head profits and gains of business or profession to income assessable under the head salaries. Further, the explanatory memorandum given to Finance Act, 2004, while amending the provision of section 71(2A) of the I.T.Act, 1961 w.e.f 01/04/2005, has categorically explained that in order to prevent abuse of the provision of set off losses, an amendment has been proposed to section 71 to provide that an assesee shall not be entitled to set off any loss under the head profits and gains of business or profession against income under the head salaries. From the language used in provisions of section 71(2A) and the explanatory memorandum to Finance Act, 2004, it is very clear that any losses under the head income from business or profession cannot be allowed to set off against income assessable under the head salaries. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were right in disallowed set off of unabsorbed depreciation allowances against income under the head salaries. This legal posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile making adjustment in the intimation u/s143(1). 2. The Commissioner (Appeals) erred in relying on his order for A.Y. 2014-15 against assessment u/s 143(3) in the case of appellant himself for upholding the disallowance as the facts and circumstances being identical on account of same reasons. 3. The Commissioner (Appeals) erred in not following the decisions of the Hon'ble Tribunal in case of Shri V. Lakshmanan vs. The I.T.O.in ITA No. l98/Mad/2010 for A.Y .2005-06 dated 10th December, 2010 4. The Commissioner (Appeals) failed to appreciate that the Hon'ble Tribunal relied upon the judgment of the Supreme Court in the case of CIT vs. Virmani Industries Pvt.Ltd [(1995) 216 ITR 607 (SCJ) 5. The Commissioner (Appeals) failed to appreciate that the Hon'ble Supreme Court had drawn a distinction between business loss and unabsorbed depreciation and therefore, the limitations are applicable to the carrying forwards of business losses and do not apply to the carrying forwards of unabsorbed depreciation. 6. The Commissioner (Appeals) erred in holding that the adjustment made u/s 143(1) falls within the scope of section 143(1) 7. The order of the Commissioner (App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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