Unabsorbed depreciation...Urgent Sir...

This query is : Resolved

Rajesh (Querist)
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06 October 2010 Dear Experts,
Pls. explain me whether i am right in the following issue.
We are going to sell an asset for which we have claimed depreciation. There is unabsorbed depreciation. This unabsorbed depreciation is mainly due to the asset which we are going to sell.
While we sell the asset there is going to be Short term capital gain and this can be set off against the unabsorbed depreciation, am i right in this issue?

2)And in another point where i differ from my colleague is he is saying that the unabsorbed depreciation after set-off might not be eligible for carry forward of unabsorbed depreciation. I said no where in the Income Tax Act it has been specified like this. But he wants me to quote the section based on which we can carry forward the unabsorbed depreciation after set-off from the short term capital gain.

Pls. help me in this issue.

Thanks for the reply.
With regards,
Rajesh.

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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06 October 2010 1. Unabsorbed Depreciation cannot be set off against Short term capital gain.

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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06 October 2010 Section 32(2) provides that unabsorbed depreciation shall be added to the amount of allowance for depreciation for the following previous year and deemed to be a part of that allowance. Thus depreciation which is unabsorbed can be carried forward indefinitely.

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