Claim of setoff of Unabsorbed Depreciation carried forward from earlier year against Income from Capital Gains shall be permitted: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the claim of setoff of unabsorbed depreciation carried forward from earlier years against income from capital gains shall be permitted.

The assessee company is engaged in the business of manufacturing and supply of electrical steel lamination, gas cutting products, gas regulators, and assembling of welding equipment, & AC/DC ARC Welders. The assessee has filed the return of income disclosing a total income of Rs Nil.

The Assessing Officer (AO) found that the assessee has adjusted and brought forward unabsorbed depreciation of Rs.15,11,939/-against the income of the current year, whereas the assessee has disclosed the income under the head, income from house property, short-term capital gains, and income from other sources and the business loss of Rs. 2,27,37524/-.

The AO has disallowed the setoff of unabsorbed deprecation of earlier years and has assessed the total income of Rs.15,11,940/- and passed the order under Section 143(3) of the Income Tax Act. The Commissioner of Income Tax (Appeal) [CIT(A)] has confirmed the action of the AO and dismissed the assessee's appeal.

The Authorized Representative submitted that the CIT(A) has erred in confirming the action of the AO in denial of the claim of setoff of unabsorbed depreciation carried forward from an earlier year against the income from capital gains and which is permitted in accordance with the provisions of the Income Tax Act.

The Single-member bench comprising of Pavan Kumar Gadale (Judicial member) held that “the unabsorbed depreciation carried forward from earlier years to set off against the short-term capital gains”. Therefore, the order of the CIT(A) was set aside and the AO was directed to allow the claim of setoff of unabsorbed depreciation carried forward from earlier year against the income from short-term capital gains.

Further, the AO was directed to compute interest under Section 234D and under Section 244A of the Income Tax Act in accordance with the provisions of the Income Tax Act. Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates