doubt section 32(2)

vipul jain (EFFORTS NEVER FAIL) (2894 Points)

30 September 2010  

Carry forward and set off of unabsorbed depreciation......unabsorbed dep set of against salary income???

is it correct????


according to icai suggested answer-----

Section 32(2) provides for carry forward of unabsorbed depreciation.

Where, in any previous year, the profits or gains chargeable are not sufficient to give full effect to the depreciation allowance, such unabsorbed depreciation shall be added to the depreciation allowance for the following previous year and shall be deemed to be part of that allowance.

If there is no depreciation allowance for that previous year, the unabsorbed depreciation of the earlier previous year shall become the depreciation allowance of that year. The effect of the provisions of section 32(2) is that unabsorbed depreciation brought forward shall be deemed as the current year depreciation.  Consequently, such unabsorbed depreciation can be set-off not only against income under the head “Profits and gains of business or profession” but also against income under any other head.  Further, the unabsorbed depreciation can be carried forward indefinitely till it is fully set off.

However, in the order of set-off losses under different heads of income, effect shall first be given to current year depreciation, then to brought forward business losses and finally to unabsorbed depreciation.