INCOME TAX ACT V/S TAXMANN

follow Reckoner..... its correct... it can be only set off against business head as depreciation is a part of business income and asset....

First, unabsorbed depreciation in the next year merges with the current year depreciation and becomes part of the current year depreciation and it can be set off from business income. Second, Chapter of set off and carry forward of losses does not contain any provision for set off of unabosebed depreciation. So provision for set off and carry forward of unabsorbed depreciation comes only under sec 32 and thus it can be set off from business income only. and there is no confusion regarding the indefinite period for carry forward of unabsorbed depreciation.

Answer, if you are satisfied with the arguement.

It is very obvious if an expense of business is not allowed to be set off against business income then how can it be set off against other incomes...rit...so unabsorbed dep can be set off against all incomes except salary income and can be carry forward for infinite period of time....even if business continued then too it can be carry forward.

the sequence is...

i)  current year dep

ii) carry forward business losses

iii) unabsorbed dep

if it is added to current year dep then business losses can not be set off accordingly if no income left after that and business losses has time limit of 4 (speculative) and 8 years to set off.

Al of U hav no read my Ques  carefully ?

In Reckoner and in all other books, it is written that unabsorb Dep. after carried forward (i.e. in future) can be set off from any head Income except salary Head.

But Act is Silent about same. it means unabsorb Dep. after carried forward (i.e. in future) can set off only from income from busi. head.

setoff and carry forward of losses is under sec 70-72 , but unabsorbed depreciation is u/s 32, so there is no reference for unabsorbed dep. in setoff & sarry forward sections , Hence unabsorbed dep can be set off under any head of income.

Supporting case laws are there which held that unabsorbed dep.can be setoff from any head of income

https://www.financialexpress.com/news/unabsorbed-dep-can-be-set-off-under-sec-56-hc/59479/

The Delhi High Court has held that unabsorbed depreciation carried forward from earlier years can be set off against income assessed under the head “income from other sources” under Section 56 of the Income Tax Act.

Disposing of an appeal in favour of Escorts Electro-nics Ltd, the assessee, a division bench comprising justice DK Jain and justice Sharda Aggarwal set aside the decision of the tax tribunal.

Escorts Electronics was initially incorporated as CGR India Ltd and was engaged in the business of manufacturing and assembling x-ray equipment. However, the business stopped from January 1, 1981 as the foreign collaborator withdrew.

Subsequently, the name of the company was chang-ed to Escorts Electronics. The company then filed its return for the assessment year 1982-83 for which the previous year ended on December 31, 1981.

The assessing officer not only disallowed the entire expenditure incurred by the company during the previous year but also the depreciation for the current year and the unabsorbed depreciation for earlier years.

Aggrieved, the company first filed an appeal before the Commissioner of Income-Tax (Appeals) and then before the tax tribunal.

The revenue department also filed an appeal before the tribunal as part of the commissioner’s order was not in its favour.

The tribunal dismissed the appeal of Escorts Electronics but allowed the revenue department’s appeal, holding that the depreciation brought forward from earlier years could not be set off against income from other sources.

Against this order of the tribunal, Escorts Electronics filed an appeal before the Delhi High Court. In setting aside the tribunal’s order, the bench relied on the Supreme Court’s decisions in Commissioner Income Tax (CIT) vs Virmani Industries; CIT, Calcutta vs Jaipuria China Clay Mines and Rajapalayam Miills vs CIT, Madras. In these cases the apex court had observed that the unabsorbed depreciation was not only to be set off against other heads of income in the relevant previous year but where it is carried forward, it “stands exactly on the same footing as the current depreciation”.

thank u vry vry much ''Parth''