Notional recomputation of set-off disallowed where depreciation and loss were already adjusted against other income.

Once depreciation or loss relating to windmills has been set off in an earlier year against the assessee's other income, the Revenue cannot reopen that set-off and recompute it notionally. The Tribunal followed the jurisdictional High Court ruling in Velayudhaswamy Spinning Mills and its own earlier order in the assessees' group cases, and upheld the Commissioner (Appeals)'s direction allowing carried forward depreciation and loss. The Revenue's challenge therefore failed, and the appellate relief to the assessees was sustained.

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Issues: Whether the Revenue could deny the direction to allow carried forward depreciation and loss relating to windmills on the footing that the earlier set-off was only notional.

Analysis: The issue was covered by the jurisdictional High Court decision in Velayudhaswamy Spinning Mills and the Tribunal's own earlier order in the assessees' group cases. Once depreciation or loss has been set off in an earlier year against the assessee's other income, the Revenue cannot rework that set-off on a notional basis.

Conclusion: The direction of the Commissioner of Income-tax (Appeals) was upheld and the Revenue's challenge failed.

Final Conclusion: The appellate relief granted to the assessees was sustained, and the Revenue's appeals did not succeed.

Ratio Decidendi: Where depreciation or loss has already been set off in an earlier year, it cannot be reopened and recomputed notionally by the Revenue.

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