2013 (4) TMI 791

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.... Income Tax (A) has erred in law and on the fact in holding that the brought forward unabsorbed depreciation could be adjusted against the income from Other Sources in view of provisions of Section 32(2) of the Income Tax Act-1961." 3. In this case, the assessee filed its return of income on 16.3.2005 declaring total income at Rs.nil. Subsequently, the AO completed the assessment u/s 143(3) on 26.12.2006 determining total income at Rs. 8,49,210/-. Being aggrieved with the AO's order, the assessee filed appeal before the learned CIT(A), who vide order dated 6.3.2007, deleted the addition of Rs. 4,41,213/- in respect of trade tax/central sales tax. The CIT(A) also held that unabsorbed depreciation claimed by the assessee may be adjusted ag....

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....d with the AO's order in disallowing the claim of the assessee for setting off of depreciation, the assessee preferred an appeal before the learned CIT(A). 8. Before the learned CIT(A), the assessee has taken a ground that AO was not justified in not allowing set off of unabsorbed depreciation of Rs. 22,50,000/- against income under the head "other sources". After considering the provisions contained in Section 32(2) and the decision of Hon'ble Supreme Court in the case of CIT Vs. Virmani Industries (P) Ltd. - (1995) 216 ITR 607, the learned CIT(A) directed the AO to allow set off of unabsorbed depreciation of Rs. 22,50,000/- against "income from other sources" and allow consequential relief to the assessee. 9. Hence, the departme....

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....2002-03 is prospective in nature and shall be prospectively applicable w.e.f. AY 2002-03 onwards. It was further observed by the Bench that by substituting sub-section (2) of Section 32 by the Finance Act, 2001 w.e.f. AY 2002-03, the legislature has restored the position of law as it existed prior to 1.4.1997. The legal position of current and brought forward unadjusted/ unabsorbed depreciation allowance in three periods i.e. (i) in the first period prior to 1.4.1997, i.e. upto AY 1996-97, (ii) in the second period i.e. from AY 1997-98 to 2001-02, and (iii) for the third period from AY 2002-03 onwards has been exercised by the Hon'ble Special Bench of the Tribunal as under:- "38. The legal position of current and brought forward un....

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.... period of eight assessment years from the assessment year immediately succeeding the assessment year for which it was first computed, to be set off only against the income under the head 'Profits and gains of business or profession'. C. In the third period (i.e. asst.yr. 2002-03 onwards) (i) 'First unadjusted depreciation allowance' can be set off upto asst.yr. 2004-05, that is, the remaining period out of maximum period of eight assessment years (as per B(i) above) against income under any head. (ii) 'Second unabsorbed depreciation allowance' can be set off only against the income under the head 'Profits and gains of business or profession' within a period of eight assessment years succeeding the assessment year....