Carried forward depreciation set off with short term capital gain u/s 50 is allowed in view of the amended provisions of Section 32(2) wef 01-04-2002- ITAT
ABCAUS Case Law Citation:
ABCAUS 2035 (2017) (08) ITAT
Assessment Year : 2012-13
Important Case Laws Cited/relied upon by the parties:
M/s. Nandi Steels Limited
Brief Facts of the Case:
The appellant assessee ws engaged in executing civil contract works. It filed its return of income admitting total income at Rs. NIL.
The Assessing Officer (AO) took up the case for scrutiny. During the course of scrutiny, the assessee filed revised computation showing the loss to be Rs. 1,24,303/-. The AO proceeded to complete the assessment and determined the loss at Rs.1,39,007/- as against loss admitted.
The AO also determined a short term capital gain of Rs. 10,00,000/- u/s 50 of the Income Tax Act, 1961 (the Act). The AO has held that this short term capital gains determined u/s 50 cannot be set off against loss not only of brought forward amount but even the current year loss.
In response to AO’s queries it was submitted that the assessee wass entitled to set off the short term capital gains against loss as the provisions of Section 50 is only a deeming provision for computation and cannot extend beyond that and that the balance after set off with current year should be treated as business income and set off against brought forward loss.
The AO, however, did not accept the same and taxed the short term capital gain separately.
CIT(A) confirmed the order of the AO. Against which the assessee was in appeal before the ITAT.
Observations made by the Tribunal:
The ITAT opined that in view of the amended provisions of Section 32(2) by Finance Act 2001, w.e.f. 01-04-2002, the carried forward unabsorbed depreciation takes the character of current year depreciation and it could be set off against the short term capital gain in this assessment year.
However, the ITAT clarified that the carried forward business loss if any, that cannot be set off against the short term capital gain in the assessment year under consideration.
Held:
The ground for set off of depreciation allowed.
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