Allahabad H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in upholding the decision of the Dy. CIT(A) who allowed the assessee’s claim for carry forward and set off of unabsorbed depreciation of the earlier year ?

High Court Of Allahabad

CIT vs. Brigadier Parmanand

Sections 32(2), 80

Asst. Year 1986-87

R.K. Agrawal & Prakash Krishna, JJ.

IT Ref. No. 151 of 1993

29th March, 2005

Counsel Appeared

Shambhu Chopra, for the Revenue : None, for the Assessee

JUDGMENT

By the court :

The Tribunal, New Delhi has referred the following question of law under s. 256(2) of the IT Act, 1961, hereinafter referred to as ‘the Act’ for opinion to this Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in upholding the decision of the Dy. CIT(A) who allowed the assessee’s claim for carry forward and set off of unabsorbed depreciation of the earlier year ?”

2. The present reference relates to the asst. yr. 1986-87. The respondent-assessee is an individual. He had filed return of income showing loss of Rs. 2,75,850. While completing the assessment, the AO observed that the loss for the earlier year could not be allowed to be carried forward and set off as per provisions of s. 80 of the Act and he, accordingly, completed the assessment on a total income of Rs. 21,740. Feeling aggrieved the respondent preferred an appeal before the Dy. CIT(A), who had held that the AO was not justified in refusing to carry forward unabsorbed depreciation and s. 80 did not speak of unabsorbed depreciation. The Dy. CIT(A), therefore, directed to carry forward the unabsorbed depreciation amounting to Rs. 1,98,476 for the assessment year in question. Revenue feeling aggrieved, preferred an appeal before the Tribunal.

The Tribunal has dismissed the appeal by the following orders : “The order of the Dy. CIT(A) shows that the assessee’s claim for carry forward and set off was in respect of unabsorbed depreciation and not in respect of business losses falling under s. 72, 73, 74 or 74A of the IT Act. Sec. 72 deals with carry forward of unabsorbed business loss other than losses on account of depreciation has been specifically provided for in s. 32(2). The manner of carry forward in the two provisions is different. Unabsorbed depreciation is carried forward and added to the depreciation of the following year. The total amount of depreciation thus arriving is deemed to be depreciation of the following year. The total amount of depreciation thus arriving is deemed to be depreciation of the subsequent year. In view of the amendment introduced in s. 80 w.e.f. 1st April, 1985, business losses other than unabsorbed depreciation can be carried forward and set off under ss. 72, 73, 74 and 74A if such losses have been determined in pursuance of a return filed under s. 139(1). If return has not been filed under s. 139(1) or within such time as may be allowed by the ITO, in such a case, business loss other than unabsorbed depreciation cannot be allowed to be carried forward and set off in the subsequent years in view of the amended provisions of s. 80. However, s. 80 is not at all applicable to unabsorbed depreciation for which provision is separately made under s. 32(2). The provisions contained under s. 32(2) do not confine the benefit of carry forward of unabsorbed depreciation only to cases where a return is filed under s. 139(1) or within such time as may be allowed by the ITO. I am, therefore, of the opinion that the Dy. CIT(A) was justified in allowing the assessee’s claim for carry forward and set off of unabsorbed depreciation of the earlier year.”

We have heard Sri Shambhu Chopra, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee.

Learned standing counsel submitted that as the loss for the earlier year had not been determined in terms of ss. 72 to 74A of the Act the respondent was not entitled to carry forward unabsorbed depreciation in view of the provisions of s. 80 of the Act. His submission is misconceived. Sec. 80 of the Act confines itself to the losses mentioned in sub-s. (1) of s. 72 or sub-s. (2) of s. 73 or sub-s. (1) or sub-s. (3) of s. 74 or sub-s. (3) of s. 74A. It does not talk about the unabsorbed depreciation which is allowed to be carried forward under sub-s. (2) of s. 32 of the Act. Thus, the respondent was entitled for carry forward unabsorbed depreciation under s. 32(2) of the Act notwithstanding the fact that the losses had not been determined.

We, accordingly, answer the question referred to us in the affirmative i.e., in favour of the assessee and against the

Revenue. However, there shall be no order as to costs.

[Citation : 287 ITR 142]

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