TaxTMI 
TaxTMI 
2009 (11) TMI 549
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....ng total income of Rs. 18,24,420. AO noted that the assessee had adjusted unabsorbed depreciation coming under the head 'Profits and gains of business or profession', against income from the head 'Salary', which according to him, was not allowable. Assessee was required to explain why claim of set off of unabsorbed depreciation against salary income should not be disallowed. Though the assessee submitted certain explanations, these were not accepted and applying sub-s. (2A) of s. 71 of the IT Act, 1961 (for short, 'the Act'), assessee's claim of set off of unabsorbed depreciation against the-salary income was not allowed. 3. In its appeal before the learned CIT(A), the submission of the assessee was that the loss computed under the head 'P....
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....he matter, the learned CIT(A) confirmed the AO's order. 4. Now before us, the learned Authorised Representative submits that the Act itself has given different types of treatment for unabsorbed loss and unabsorbed depreciation. For this proposition, he called into reference s. 72 of the Act. According to him s. 72 of the Act dealt with carry forward and set off of business losses whereas sub-s. (2) of s. 32 of the Act dealt with carry forward and set off of deprecation. The learned Authorised Representative submitted that unabsorbed depreciation and business loss were treated by the Act differently and the loss that was to be considered for inter-head adjustments insofar as it concerned 'profits and gains of business or profession', could ....
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.... 'Profits and gains of business or profession'. According to him, such a special treatment was given for unabsorbed depreciation so as to enable it to be carried forward for any number of years. Learned Departmental Representative further submitted that such special treatment being given to unabsorbed depreciation would not in any way enlarge heads of income. According to him, s. 71 of the Act governed inter-head 'adjustments' and since sub-s. 2A thereof, specifically barred claiming set off against salaries, any income computed under the head 'Profits and gains of business or profession', unabsorbed depreciation could not be allowed to be set off. The learned counsel also brought to our attention Explanatory Memorandum to Finance (No. 2) A....
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....sessee has income assessable under the head 'Salaries', the assessee shall not be entitled to have such loss set off against such income. (3) where in respect of any assessment year, the net result of the computation under the head 'Capital gains' is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head. (4) Where the net result of the computation under the head 'Income from house property' is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-ss. (1) and (2) and thereafter the loss referred to in s. 71A shall be ....
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....business is so re-established, reconstructed or revived, and- (a) it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year; and (b) if the loss cannot be wholly so set off, the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding. (2) Where any allowance or part thereof is, under sub-s. (2) of s. 32 or sub-s. (4) of s. 35, to be carried forward, effect shall first be given to the provisions of this section. (3) No loss (other than the los....
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.... in the case of Virmani Industries. Of course, the order of the Hon'ble apex Court does bring out the difference between unabsorbed loss and unabsorbed depreciation. Nevertheless unabsorbed depreciation was never considered as something that was not falling under the head 'Profits and gains of business or profession'. Sec. 72 stipulates conditions regarding carry forward and set off of business loss year to year, but this would not in any way hamper the working of s. 71 which deals with inter-head set off. Sub-s. (2) of s. 32 has stipulated a special treatment to be given to unabsorbed depreciation where it is not absorbed in any given year. Such a special treatment, in our opinion, would never take it out of the head 'Profits and gains of ....