ITAT grants assessee's appeal, allows set-off of unabsorbed depreciation.

The ITAT allowed the assessee's appeal, overturning the disallowance of the set-off of unabsorbed depreciation against income from other sources, citing a violation of Section 115BBE of the Income Tax Act, 1961. The ITAT emphasized the legislative intent behind the amendment and a CBDT Circular, directing the AO to allow the set-off as permissible until the assessment year 2016-17. The decision was pronounced on 9th September 2022, ordering the AO to permit the set-off of unabsorbed depreciation to the assessee.

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Issues:
- Disallowance of set-off of unabsorbed depreciation against income from other sources in violation of Section 115BBE of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed against the CIT(A)'s order upholding the AO's disallowance of the set-off of unabsorbed depreciation against income from other sources, citing a violation of Section 115BBE of the Income Tax Act, 1961.

2. The facts revealed that a search and seizure operation was conducted under section 132 of the Act, leading to an assessment under sections 153A/143(3) of the Act. The AO disallowed the set-off of unabsorbed depreciation against the income added under section 68 of the Act, triggering a series of rectification orders and appeals.

3. The AO initially allowed the set-off of unabsorbed depreciation but later withdrew it citing Section 115BBE of the Act. The CIT(A) confirmed the AO's decision, disregarding a CBDT Circular instructing AOs to allow such set-offs in assessments prior to the amendment.

4. The ITAT, after reviewing the case and the CBDT Circular, concluded that the set-off of unabsorbed depreciation should have been allowed as per the Circular, which clarified that such set-offs were permissible until the assessment year 2016-17. The ITAT reversed the CIT(A)'s decision and directed the AO to allow the set-off of unabsorbed depreciation to the assessee.

5. The ITAT emphasized the legislative intent behind the amendment in Section 115BBE and the CBDT Circular, highlighting that prior to the assessment year 2017-18, the set-off of losses, including unabsorbed depreciation, had to be allowed. The ITAT allowed the assessee's appeal, overturning the disallowance of the set-off.

6. Consequently, the ITAT allowed the appeal of the assessee, ordering the AO to permit the set-off of unabsorbed depreciation. The decision was pronounced in an open court on 9th September 2022.

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