TaxTMI 
TaxTMI 
2025 (7) TMI 1851
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsideration on 25.09.2016, declaring total income at 'Nil'. The assessee was converted into Parshwanath Land Organisers LLP vide Certificate of Registration on Conversion issued by Registrar pursuant to section 58(1) of the LLP Act, 2008 on 01-06-2016. The case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS) and notices under sections 143(2) and 142(1) were duly issued and served. 2.2 During the assessment proceedings, the Assessing Officer noted that the assessee had disclosed exempt income of Rs. 27,82,796/-, which included Rs. 17,15,768/- as interest income claimed exempt under section 10(15)(iv)(h), and Rs. 10,67,028/- as gain on sale of Tax Saver Bonds, which the assessee erroneously claimed as exempt. Upon verification, the Assessing Officer held that the gain on sale of Tax Saver Bonds was liable to be taxed as Long-Term Capital Gain (LTCG) and added the same to the total income under normal provisions. The assessee, upon confrontation, accepted the taxability and offered the income to tax, but the AO treated it as concealed income, initiating penalty proceedings under section 271(1)(c). It was further noticed by the AO that the assessee ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be so held now and the claim of the Appellant for allowance of unabsorbed depreciation of Rs. 2,46,533/- brought forward from Asst. Year 2015-16 be allowed to be set off against current year's income computed by the learned Assessing Officer. 4. The Learned Authorised Representative (AR) reiterated the facts already on record and submitted that the sole dispute arising in the present appeal relates to the non-allowance of set-off of unabsorbed depreciation of Rs. 2,46,533/- brought forward from A.Y. 2015-16 against the total income assessed for A.Y. 2016-17. It was submitted that the disallowance sustained by the CIT(A) was based on an erroneous and narrow interpretation of section 32(2) of the Act. The AR invited the Bench's attention to the return of income and computation statement filed for A.Y. 2016-17 wherein the assessee had specifically disclosed the brought forward depreciation of Rs. 2,46,533/- in the appropriate schedule. The AR demonstrated that the depreciation was neither disputed in quantum nor disallowed in A.Y. 2015-16, and therefore its set-off in the current year was rightly claimed. 4.1 The AR strongly contended that the CIT(A) erred in holding that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e issue for adjudication is whether the assessee is entitled to set off the brought forward unabsorbed depreciation amounting to Rs. 2,46,533/- from A.Y. 2015-16 against the assessed income for the year under consideration, despite the admitted fact that no business activity was carried out during the relevant previous year. The legislative framework governing the carry forward and set-off of business loss and unabsorbed depreciation is contained in sections 72(2) and 32(2) of the Income-tax Act, 1961. Section 72(2) provides that where in any assessment year the assessee is entitled to a set-off of both brought forward business loss and unabsorbed depreciation, the business loss shall be set off first. However, the scope of section 32(2) is materially broader. It provides that if the full effect cannot be given to the depreciation allowance under section 32(1), the unabsorbed portion shall be added to the depreciation allowance of the following year and deemed to be part of that year's depreciation. 6.1 The legal fiction created under section 32(2) has been authoritatively interpreted by the Hon'ble Supreme Court in CIT v. Virmani Industries Pvt. Ltd. (supra) and CIT v. Jaipuria....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... could not be wholly set off under clause (i) and clause (ii), the amount of depreciation not so set off can be set off from income from other head, if any, available for that assessment year. The language of Section 32(2) is very clear and there is hardly anything contained in Section 72(2) to prevent such set off of carried forward depreciation being given to the assessee under the head of income from business or income from other sources. The Revenue does not deny the fact that as far as the income from other sources are concerned, there could be no set off of business loss or carried forward loss. However, what is contended by the Revenue is that Section 72(2) controls the operation of Section 32(2) to have the set off of unabsorbed depreciation against the income from other sources. We do not agree with this line of reasoning. What is spoken to under Section 72(2) is as regards set off of business loss as against the income from profits and gains of business or profession and if there is loss as well as unabsorbed depreciation, the set off shall be first on the business loss as against the business income and then on unabsorbed depreciation. What is spoken to under Section 32(....