Set-off of income-tax refund interest against carried forward depreciation loss was allowed in rectification proceedings.

Interest on an income-tax refund, assessable under the head "Income from other sources," was held eligible for set-off against carried forward depreciation loss in rectification proceedings. The Tribunal noted that the assessee had specifically raised this point in response to the rectification notice, but the Assessing Officer did not consider it before denying the adjustment. In light of the statutory allowance for set-off against depreciation loss, the denial was found unsustainable, and the set-off was directed to be allowed in favour of the assessee.

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Issues: Whether interest on income-tax refund assessable under the head "Income from other sources" could be set off against carried forward depreciation loss in rectification proceedings.

Analysis: The assessee had pointed out in reply to the rectification notice that the refund interest was not to be adjusted against carried forward business loss, but could be adjusted against carried forward depreciation loss and current year depreciation. The Tribunal noted that the Assessing Officer had not considered this submission and had denied the set-off while making the rectification addition. In view of the statutory allowance for set-off of such income against depreciation loss, the denial was held to be unsustainable.

Conclusion: The set-off of interest income on income-tax refund against carried forward depreciation loss was directed to be allowed, and the issue was decided in favour of the assessee.

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