TaxTMI 
TaxTMI 
2019 (11) TMI 1342
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....all the cases were heard together and disposed of by the common order. 3. ITA No.1245/Ahd/2017 relevant to AY 2012-13 is taken as a lead case for the purposes of adjudication. ITA No.1245/Ahd/2017 - AY 2012-13 4. In the captioned appeal, the Revenue has raised the following grounds of appeal for adjudication: "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing to set-off of unabsorbed depreciation allowance carried forward from earlier years against the income from other sources as well as capital gains without appreciating the fact that the assessee during the year under consideration has not carried any business activity. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing to set-off of unabsorbed depreciation allowance, without appreciating the fact that carrying on of a business was an essential prerequisite for allowing set off of such unabsorbed depreciation, as mentioned in the case of Rajaratna Naranbhai Mills Ltd. held by ITAT Ahmd. Bench "C" (Special Bench) [1982] 1 ITD 1044 (Ahd.) (SB), and in the case of Dharti Dredging & Infrastructure Ltd. vs. Additional Commissioner of Income-tax,....
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....T(A) has dealt with the issue as under: "2.2 Rejection of claim of set-Off of brought forward unabsorbed depreciation against income from capital gains. The assessee has earned long term and short term capital gains during the year under consideration and accordingly, it has claimed set off of brought forward unabsorbed depreciation against the capital gains income. The AO proposed to reject the claim of assessee on the ground that business activities were not being carried out during the year under consideration and hence set off of depreciation was not permissible. The assessee objected to the AO's proposition and filed a detailed reply which has been reproduced by the AO in para 6.2 of the assessment order, The assessee mainly submitted that as per the provisions of section 32(2), the brought forward depreciation is deemed to be the depreciation of year under consideration even if no profit under the head business / profession was chargeable to tax. To support the contention, the assessee has relied upon the decision of Hon'ble ITAT, Ahmedabad In the asseee's own case for A.Y. 2006-07 to 2009-10 (order dated 27.06.2014), where it has been held that existence of b....
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....ds of income. Eg. Income from salary has to be calculated as per the provisions of Section 15 to Section 17, Income from House Property has to be calculated as per the provisions of Section 22 to Section 27, Profits and Gains of Business or Profession has to be calculated as per the provisions of Section 28 to Section 44, Capital Gains as per Section 45 to Section 55 and Income from Other Sources as per Section 56 to Section 59. Then, Chapter V deals with Income of Other person included in assessee's total Income. Chapter VI deals with set off and carry forward of losses. Section 71(2) states "Where in respect of any assessment year, the net result of the computation under any head of Income, other than "Capital gains", is a loss and the assesses has income assessable under the head "Capital gains", such loss may, subject to the provisions of this Chapter, be set off against his Income, if any, that assessment year under any head of Income Including the head "Capital gains" (whether relating to short- term capital assets or any other capital assets)." Thus, the basic condition for set off of business loss is that there should be computation under any head of Income. In the ....
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....r the head "Profits and gains of Business or Profession ". Accordingly, the deductions available as per provisions u/s 38 to 43D are not applicable In the case of the assessee and when, there Is no computation of Income under the head Business as Profession, then question of merger of brought forward depredation with current year depredation or treating the brought forward unabsorbed depredation as current year depreciation doesn't arise. The depreciation, whether unabsorbed or current could only come into picture when the Income under the head "Profits and gains of business or profession" is computed. Therefore, even if the unabsorbed depredation by virtue of fiction enacted In Section 32(2) is treated as depredation for the current year, there must be Income under the head "Profits and gains of business or profession" or existence of some business activity, so that the allowance for depreciation could operate. The fiction enacted in Section 32(2) only treats unabsorbed deprecation on par with current depredation and subject to the carry forward of losses, which has precedence by operation of Section 72, the said unabsorbed depreciation assumes the character and colour of cu....
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....eciation cannot be allowed to be carried forward and, consequently, could not be set off against income from any other sources. 16. In the result, the appeals are allowed." 6.7 Another Important fact in this case is that the carry forward of unabsorbed depreciation has been disallowed in Para 25 of assessment order for AY 2004-05 dated 20/11/2006, against which the assessee has not preferred any appeal tilt date. This means that the assessee has accepted the decision on this issue and the issue has attained finality. The Assessment order for A.Y. 2004-05 is final and in that assessment order, carry forward of unabsorbed depreciation was expressly denied. Since the assessment of earlier year i.e. A.Y. 2004-05 is finalized without allowing carry forward of unabsorbed depreciation and the assessee is not in appeal, there exists no unabsorbed depreciation to be brought forward and the question of setting off such bought forward depreciation against current year's income doesn't arise. Similarly, for A.Y. 2007-08, A.Y. 2008-09, A.Y. 2009-10, A.Y. 2010-11 & A.Y. 2011-12 the carry forward of unabsorbed depreciation has been disallowed in the assessment order. For all these yea....