Tax Appeal Decision: Set off Depreciation Loss Against Capital Gain Upheld

Perfect Pharmacists (P) Ltd. Versus Joint CIT

Perfect Pharmacists (P) Ltd. Versus Joint CIT - TMI Issues:
1. Whether brought forward depreciation loss could be set off against capital gain.

Analysis:
The appeal involved a dispute regarding the set off of business loss, specifically the carry forward of depreciation against short-term capital gain. The assessee claimed the set off, which was disallowed, leading to the appeal. The main contention was whether the carry forward depreciation, being part of current depreciation, should have been allowed against the short-term capital gain. The learned Authorised Representative argued that the amendment regarding set off of losses against capital gain was prospective in nature. Reference was made to a speech by the Finance Minister, emphasizing that the proposed amendment limiting the carry forward of unabsorbed depreciation would only have a future impact. The representative also cited a relevant case law to support the argument.

The Departmental Representative, on the other hand, supported the orders of the lower authorities. The Tribunal carefully considered the submissions from both sides and referred to a decision by the Calcutta Bench of the Tribunal in a similar case. The Calcutta Bench had held that the unabsorbed cumulative depreciation up to a certain assessment year merged with the pool of current depreciation for a subsequent assessment year, making it available for set off. Relying on this precedent and the clarification in the Finance Minister's speech, the Tribunal decided the issue in favor of the assessee. As a result, the appeal was allowed.

This judgment clarifies the treatment of carry forward depreciation in relation to setting off against capital gains. It establishes that the unabsorbed cumulative depreciation can be merged with current depreciation for set off purposes, as clarified by the Finance Minister's speech and supported by relevant case law. The decision provides a clear interpretation of the relevant provisions and ensures consistency in the application of tax laws in such cases.