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<h1>Unabsorbed depreciation can be carried forward without the old time limit and set off against income under any head.</h1> Unabsorbed depreciation available on 1 April 2002 was governed by the amended Section 32(2) of the Income-tax Act, 1961, and could be carried forward ... Carry forward of unabsorbed depreciation - Set off against income under other heads - Effect of amendment to section 32(2) AO was of the view that the business losses included depreciation u/s. 72 of the Act, hence, carry forward of depreciation including business losses can be set off from business income only. HELD THAT: - The Tribunal held that the lower authorities had proceeded on an incorrect view of law in denying carry forward and inter-head set off of the unabsorbed depreciation. It noted that the appellate authority had decided the matter solely on the basis of Times Guaranty Ltd. [2010 (6) TMI 516 - ITAT, MUMBAI] without considering General Motors India (P.) Ltd. [2012 (8) TMI 714 - GUJARAT HIGH COURT] which was subsequently accepted by the jurisdictional High Court in Bond Safety Belts (Dissolved) [2023 (10) TMI 138 - BOMBAY HIGH COURT]. Applying that position, the Tribunal held that the restriction of eight years stood dispensed with by the amendment effective from A.Y. 2002-03, and the unabsorbed depreciation available thereafter was to be treated in accordance with the amended provision and could be set off against income under other heads, including house property income and short term capital gain. [Paras 15, 18] Final Conclusion: The Tribunal allowed the appeal and held that the assessee was entitled to carry forward the unabsorbed depreciation and set it off against the income from house property and short term capital gain for A.Y. 2013-14. The addition made on that account was directed to be deleted. Issues: Whether the assessee was entitled to carry forward unabsorbed depreciation from earlier assessment years and set it off against income from house property and short-term capital gains in the relevant assessment year.Analysis: The relevant legal position under Section 32(2) of the Income-tax Act, 1961, as amended by Finance Act, 2001, was applied in the light of the binding interpretation that unabsorbed depreciation available on 1 April 2002 is to be governed by the amended provision and is available for carry forward without the earlier eight-year restriction. The reasoning accepted that unabsorbed depreciation, once carried forward into the post-amendment regime, assumes the character of current depreciation and may be adjusted against income under any head. The decision also followed the jurisdictional High Court view that the restrictive approach adopted by the lower authorities was not in accordance with the correct law.Conclusion: The assessee was entitled to carry forward the unabsorbed depreciation and to set it off against income from house property and short-term capital gains; the disallowance was deleted.
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