TaxTMI 
TaxTMI 
2025 (9) TMI 583
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Income Tax Act, 1961 (hereinafter referred to as the "Act") and relates to Assessment Year (A.Y.) 2020-21. 2. Grounds raised by the Revenue are as under: "i) "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in treating the current year loss of Rs. 2,38,86,742/- as unabsorbed depreciation. ii) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal." 3. The only issue raised by the Revenue is in relation to the treatment of loss incurred by the assessee during the year amounting to Rs. 2,38,86,742/- as unabsorbed depreciation. The ground raised by the Revenue appears to be pertaining to a factual matter as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... before him that the loss for the impugned year was depreciation loss and not business loss and noting the provisions of Section 32(2) of the Act which allowed carry forward of depreciation loss without requirement of claiming the same in a return filed u/s. 139(1) of the Act, he held that there was no mistake apparent from the record in allowing assesses claim of carry forward of losses to the tune of Rs. 2.38 Crs. His findings in this regard are contained at para 5 to 5.4 of his order as under: "5. DECISION: 5.1 Ground no.1, 2 and 3 are related to not allowing carry forward of unabsorbed depreciation amounting to Rs. 2,38,86,742/-. In this case, the assessee filed belated return u/s. 139(4) on 24.05.2021 for A.Y.2020-21.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s loss for the reason of return not filed within due date u/s. 139(1). The appellant submitted its reply against this notice, however, this claim was denied as the AO considered unabsorbed depreciation as business loss and did not allow the set off. The appellant has quoted the provisions of section 32(2) and made submissions as reproduced below: "(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owning to the profits of gains chargeable 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 and its eligible to carry forward unabsorbed loss. The observation of the AO that its business loss and not unabsorbed depreciation is factually incorrect. 10. Further, set-off and carry forward of depreciation is governed by section 32(2) of the Act and not under section 80 of the Act. Section 32(2) of the Act provides that where any depreciation allowance or part of it cannot be given effect to in a particular year due to shortage of profits, then such allowance or part thereof respectively shall be carried forward and shall be treated as part of depreciation of the subsequent year and so on for the succeeding years. Neither section 139(3) nor section 32 lay down any pre-requisite of filing the return of income within prescribe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of a year becomes part of depreciation of subsequent year by legal fiction and when it becomes part of current year depreciation it is liable to be set off against any other income, irrespective of the fact that the earlier years return was filed in time or not." 5.4 Respectfully following the decisions of Hon'ble High Court and ITAT relied upon by the appellant. It is held that the unabsorbed depreciation is required to be set off against the current year income even if the return is not filed within due date. Accordingly, it is held that there is no mistake apparent from record as specified u/s. 154 and order passed by the AO u/s. 154 r.w.s. 143(1) dated 27.09.2023 is bad in law and quashed. These grounds of the appeal are allow....