TaxTMI 
TaxTMI 
2011 (7) TMI 39
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....law in holding that the unabsorbed depreciation in the case of the assessee for and up to A.Y.1996-97 could be carried forward and set off against income chargeable under any head of income in any subsequent year, on the ground that such unabsorbed depreciation was not governed by the provisions of Section 32(2) as substituted by the Finance (No.2) Act, 1996 w.e.f. 1.4.1997, in spite of the judgment of the Hon'ble Supreme Court in the case of CIT v. Virmani Industries Ltd., (216 ITR 607) according to which such unabsorbed depreciation once carried forward to the A.Y. 1997-98 would be deemed to be the depreciation for A.Y. 1997-98?" 2. Briefly stated, the facts of the case are that the assessee was running a hotel at Manali till September, 1995. On the night intervening 6th/7th September, 1995 heavy floods took place in the river Beas and the hotel building was washed away in the floods. The assessee did not carry out any hotel business thereafter and advanced the surplus funds available with it to its sister concern on interest. 3. The assessee filed return for the year 1998-99 on 23.11.1998 and the interest income received by the assessee was declared to be inc....
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....geable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." 9. Vide Finance Act of 1996 sub section (2) was substituted by the following: "(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 as....
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....affect the growth of industry. Similar apprehensions have been raised in a large number of post-budget memoranda. I would like to allay these fears. The proposed amendment is only prospective inasmuch as the cumulative unabsorbed depreciation brought forward as on 1st April, 1997, can still be set off against taxable business profits or income under any other head for the assessment year 1997-98 and seven subsequent assessment years. Therefore, the proposed change will have effect only after 8 years and there is no cause for immediate concern about its likely impact on industry. Eight years is a period long enough for industry to adjust itself to the new dispensation and provide for depreciation accordingly. A number of Hon'ble members have brought to my notice that the proposed amendment may adversely affect sick companies. I accept the suggestions made by them. I, therefore, propose to provide that the time limit of 8 years shall not apply to sick companies, during the period the company is treated as a "sick company" under the Sick Industrial Companies (Special Provisions) Act, 1985. 5. I further propose to make a drafting amendment in clause 11 to clarify th....
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....Pioneer Asia Packing P. Ltd. (2009) 310 ITR 198 (Mad) considered this point at length. It was held that as per the amended provisions of Section 32(2) of the Act, with effect from April 1, 1997, if the income from business for the assessment year is insufficient to absorb the depreciation allowance of that assessment year, the amended provision permits absorption of depreciation allowance of a business against profits and gains of any other business of the same assessment year. When the depreciation allowance of a business of the assessment year is not absorbed by any other business of the same assessment year, then the remaining unabsorbed depreciation allowance could be set off against the income under any other head, that is assessable for the same assessment year. In the event of the depreciation allowance of the year being not absorbed by any other business income or from income under any other head in the same assessment year, the remaining unabsorbed depreciation allowance shall be carried forward to the following year. Therefore, it follows that (a) unabsorbed allowance shall be set off against the profits and gains of any business carried by a person, (b) if the unabsorbed....