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2006 (7) TMI 291
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....or considering the following question: "In view of the provisions of section 32(2)(iii) whether it is possible to set off the brought forward depreciation loss against capital gains?" 2. On behalf of the assessee-firm, Mr. C.V. Rajan, Senior Advocate along with Shri S.P. Chidambaram appeared and for the Department, Mr. C. Venkateswarlu appeared. The counsel for the assessee and the Departmental Representative placed before us in clear terms the contentions that they both felt are relevant to the issue before us. We appreciate the arguments and contentions placed by both of them as they were eloquent and relevant to the issue before us. Considering the rival submissions, we would be rendering our conclusions along with the reason....
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....(2) Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as 'unabsorbed depreciation allowance'), as the case may be,- (i) shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for the assessment year; (ii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be....
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.... company becomes equal to or exceeds the accumulated losses.' Explanation.- For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)]." 4. We bring below in a table form the comparative position that all the provisions of section 32(2) of the Act as it stood prior to 1-4-1997 and after 1-4-1997 which we believe would give a comprehensive view of the changes: Sl. No. Section Before 1-4-1997 After 1-4-1997 1. 32(2) Computation of income under the head "Profits and gains of a business" insufficient to absorb Computation of income under the head "Profits and ....
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....s) Not applicable Section 72(2) of the Act states that given to set off of losses over unabsorbed depreciation. 7. 32(2)(iii) Not applicable In the event of the depreciation allowance of the year is unable to be absorbed by any other business income or from the income under any other head in the same assessment year, then the remaining unabsorbed depreciation allowance shall be carried forward in the following manner: (a) Unabsorbed depreciation allowance shall beset off against profits and gains of any business carried on by the person; (b) if the unabsorbed depreciation allowance cannot be wholly so set off it shall be allowed to be carried forward f....
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....-98. It is only in the event of the depreciation remaining wholly unabsorbed for the assessment year 1999-2000, that the assessee could insist for adjustment or set off of such unabsorbed portion of the depreciation against income from any other head including capital gains. This being not the fact of the present case, the claim of the assessee that unabsorbed depreciation should be allowed to be adjusted against capital gains is incorrect because this provision is not attracted to the facts of the present case. 7. The facts of the present case, as they are, attract the provisions of section 32(2)(iii) of the Act. This is because the unabsorbed depreciation is for the assessment year 1997-98 and the assessment year before us is 1999-2000....
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.... eight years would be calculated from assessment year 1997-98. In the other case of Perfect Pharmacists (P.) Ltd. identical facts existed as was in the case of Uttam Air Products (P.) Ltd and for identical reasons, as in that case, the Bench had approved the claim of the assessee. 9. In the present case before us the assessment year 1999-2000, as mentioned earlier, and the depreciation allowance is for the assessment year 1997-98 which the assessee is claiming for set off against the income for the present assessment year. As explained in the earlier paragraph in the table giving comparative position before the amendment and after the amendment it is absolutely clear that it is only section 32(2)(iii) of the Act, that is operational in t....