TMI Blog2020 (3) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... rom other sources. In this view of the matter and respetfully following case laws considered hereinabove, including the decision of ITAT, Mumbai, in the case of DCIT vs Time Guaranty Ltd. (surpa), we are of the considered view that losses under the head income from business or profession, including unabsorbed depreciation, if any cannot be set off against income assessable under the head salaries. The Ld.CIT(A) after considering relevant facts has rightly confirmed disallowances of unabsorbed depreciation losses against income under the head salaries and hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject ground taken by the assessee. Assessee made an alternate argument that if at all unabsorbed depreciation loss ise not allowed to be set off against salary income, and then said unabsorbed depreciation allowances may be allowed to carry forward to subsequent years. We find that there is no restriction, as per the provisions of section 72 to carry forward unabsorbed deprecation to subsequent years. Therefore, if the assessee has fulfilled conditions prescribed therein for carry forward of unabsorbed depreciation, then the ld. AO is directed to allow carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or AY 2014-15 on 08/10/2014,declaring total income at ₹ 93,55,670/-. The case was selected for scrutiny and during the course of assessment proceedings, the Ld. AO noticed that the assessee has set off losses from the head business and profession against the income from the head salaries. Therefore, called upon the assessee to explain as to why losses from the head income from business or profession cannot be set off against salary income, in view of specific provisions provided in section 71(2A) of the I.T.Act, 1961. In response, the assessee submitted that depreciation of business asset as specified u/s 32 of the I.T.Act, 1961 is allowable business expenditure that part of depreciation allowances that cannot be obsorbed by the profits and gains of business in the current year can be carry forward to the next year and be given a treatment at par with depreciation of the that year. However, the depreciation that year must be set off first. In this regard, he relied upon certain judicial precedents, including the decision of Hon ble Supreme Court in the case of Virmani Industries Limited vs CIT (995) 216 ITR 607. The Ld. AO after considering relevant submissions of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed differently from Business loss. The assessee submitted a revised calculation of his income (with total income remaining the same) explaining his position. The assessee in his submission on 06/12/2016 also stated the following case laws: Veeramani industries Limited (SC): this case law does not carry merit in the assessee s case on the following grounds-The question of law in the present case was whether the Assesee company could set off unabsorbed deprecation from one business against profits and gains from another business. The Hon ble HC in the present case opined as follows: in computing the net income from the business, deduction is to be allowed on account of depreciation of buildings, plants and machinery, etc. used in the business at the prescribed rate. If such depreciation allowance cannot be completely absorbed by the profits and gains chargeable to tax-which expression includes profits and gains arising not only under he head business but also under other heads. Thus, it is clear that the Hon ble court meant profits and gains. To include the income from Salaries (there is no profit and gain from salary) under this ambit and not taking into account the fags and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. Penalty proceedings u/s 271(1)(c) of the I.T.Act, 1961 are initiated for concealment of income and/or for furnishing inaccurate particulars of income. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee reiterated its submissions made before the Ld. AO and argued that unabsorbed depreciation, if any under the head income from business can be set off against income from salaries. Therefore, it is incorrect to refer the provisions of section 71(2A) of the I.T.Act, 1961, when, the main provisions itself has provided for set off unobsrorbed depreciation against any other head of income. In this regard, he relied upon the decision of ITAT, Chennai bench, in the case of V.Lakshmanan Vs ITO in ITA.No.198/Mad/2010. 5. The Ld.CIT(A) after considering relevant submissions of the assessee and also taken note of provision of section 71(2A) of the I.T.Act, 1961 held that as per law, a loss under the head profits and gains of business and profession cannot be set off against income form salaries. He, further, observed that the claim that unabsorbed depreciation is separate from profits and gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout appreciating the fact that the ITAT, Chennai bench, in the case of V.Lakshmanan vs ITO had considered the identical issue, even after amendment to section 71(2A) of the I.T.Act, 1961. He further, submitted that if at all unabsorbed depreciation is not allowed to set off against salary income, then a direction may be given to the Ld. AO to allow carry forward of such depreciation to subsequent years. 7. The Ld. DR, on the other hand, strongly supporting order of the Ld.CIT(A) submitted that as per the provision of the Act, the income has been classified under five heads of income as stated in section 14 of the Act. Further, section 14D defines the income under the head profits and gains of the business and profession. If you go through, provision of section 29, it clearly explain, how income from profits and gains of business and profession shall be computed as per which, the income referred to in section 28 shall be computed, in accordance with the provisions contained in section 30 to 43D of the Act. Since, depreciation allowance comes under provision of section 32, any loss arises under the head income from business and profession cannot be set off against income under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition has been strengthened by the decision of ITAT, Mumbai in the case of DCIT vs Time Guaranty Limited (4 ITR 210), where the law has been explained, in light of provision of section 32(2) and held that losses under the head income from business or profession cannot be set off against income under the head income from other sources. Insofar as, case laws relied upon by the assesee, in the case of V. Laxmanan vs ITO in ITA No.198/Mad/2010, we find that the facts of the above case is not applicable to facts of the present case, more particularly, in light of specific provision provided under section 71(2A) of the I.T.Act, 1961 and hence, the same is hereby rejected. 9. In this view of the matter and respetfully following case laws considered hereinabove, including the decision of ITAT, Mumbai, in the case of DCIT vs Time Guaranty Ltd. (surpa), we are of the considered view that losses under the head income from business or profession, including unabsorbed depreciation, if any cannot be set off against income assessable under the head salaries. The Ld.CIT(A) after considering relevant facts has rightly confirmed disallowances of unabsorbed depreciation losses against income unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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