SHRI HARBANS SINGH BAWA, MUMBAI V. ACIT- 17(1), MUMBAI

ITA 3596/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8384 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 24-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: S SRIRAM
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Salary income; Unabsorbed depreciation; Capital Gains
• Section: 271(1)(c); 143(3); 143(1); 43D; 72; 32; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H, BENCH MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL M EMBER ITA NO.3596/MUM/2018 ( ASSESSMENT YEAR: 2014-15 ) HARBANS SINGH BAWA 410, JOLLY BHAVAN NO.1 10, NEW MARINE LINES MUMBAI-400 020 VS. ACIT-17(1) ROOM NO.117, 1 ST FLOOR, AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AA APB6894K APPELLANT ) .. RESPONDENT ) & ITA NO.4423/MUM/2018 ( ASSESSMENT YEAR: 2016-17 ) HARBANS SINGH BAWA 112, FREE PRESS HOUSE NARIMAN POINT MUMBAI-400 021 VS. DCIT, CPC, BANGALORE ACIT-17(1) ROOM NO.117, 1 ST FLOOR, AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AAAPB6894K APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI S.SRIRAM, AR REVENUE BY SHRI SACHCHIDANAND DUBE, DR DATE OF HEARING 06/01 /20 20 DATE OF PRONOUNCEMENT 10/01/2020 / O R D E R PER G.MANJUNATHA (A.M) : THESE TWO APPEALS FILED BY THE ASSESEE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-56, MUMBAI, DATED 14/03/2018 AND 21/05/20 18 FOR THE AYS 2014-15 AND 2016-17. SINCE, THE FACTS ARE IDEN TICAL ISSUES ARE ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 2 COMMON, FOR THE SAKE OF CONVENIENCE THESE APPEALS W ERE HEARD TOGETHER AND DISPOSED-OFF BY THIS CONSOLIDATED ORDE R. 2. THE ASSESSEE HAS MORE OR LESS RAISED COMMON GRO UNDS OF APPEAL FOR BOTH ASST. YEARS. THEREFORE, FOR THE SAK E OF BREVITY GROUNDS OF APPEAL FILED FOR AY 2014-15 ARE REPRODUC ED AS UNDER:- 1. THE COMMISSIONER (APPEALS) ERRED IN PARTLY CON FIRMING THE ORDER OF THE ASSESSING OFFICER REGARDING DISALLOWANCE OF SET OFF OF THE UNABSORBED DEPRECIATION ALLOWANCE OF RS. 54 ; 18,631/- RS. 62,49,880 MINUS SET OFF RS, 8,31.249 AGAINST INCOME FROM HOUSE PROPERTY ALLOWED BY THE CIT(A)] FOR THE YEAR UNDER CONSIDERATION AGAINST THE INCOME CHA RGEABLE UNDER THE HEAD 'SALARY INCOME', 2. THE COMMISSIONER (APPEALS) ERRED IN NOT FOLLOWIN G THE DECISIONS OF THE HONBLE TRIBUNAL IN THE CASE OF SHRI V. LAKSHMANAN VS. THE IT.O. IN 1TA NO, 198/MAD/2010 FOR A.Y. 2005-06 DATED 10 TH DECEMBER, 2010, 3. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT THE HON'BLE TRIBUNAL RELIED UPON THE JUDGMENT OF THE SUPREME CO URT IN THE CASE OF CI T VS. VIRAMANI INDUSTRIES PVT.LTD, [(1995) 216 JTR 607 (SC), 4. THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE (HAT THE HONBLE SUPREME COURT HAD DRAWN A DISTINCTION BETWEEN BUSIN ESS LOSS AND UNABSORBED DEPRECIATION AND THEREFORE, THE LIMITATI ONS ARC APPLICABLE TO THE CARRYING FORWARD OF BUSINESS LOSSES AND DO NOT APPLY TO THE CARRYING FORWARD OF UNABSORBED DEPRECIATION.. 5. THE ORDER OF THE COMMISSIONER (APPEALS) IS BAD I N LAW AND WITHOUT JURISDICTION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVES INCOME FROM SALARIES, INCOME FRO M HOUSE PROPERTY, INCOME FROM BUSINESS, INCOME FROM CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR AY 2014-15 ON 08/10/2014,DECLARING TOTAL INCOME AT RS. 93,55,670/-. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE LD. AO NOTICED THAT THE ASSESSEE HAS SET OFF LOSSES FROM THE HEAD BUSINESS AND PROFESSIO N AGAINST THE INCOME FROM THE HEAD SALARIES. THEREFORE, CALLED UP ON THE ASSESSEE TO EXPLAIN AS TO WHY LOSSES FROM THE HEAD INCOME FR OM BUSINESS OR ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 3 PROFESSION CANNOT BE SET OFF AGAINST SALARY INCOME, IN VIEW OF SPECIFIC PROVISIONS PROVIDED IN SECTION 71(2A) OF T HE I.T.ACT, 1961. IN RESPONSE, THE ASSESSEE SUBMITTED THAT DEPRECIATION OF BUSINESS ASSET AS SPECIFIED U/S 32 OF THE I.T.ACT, 1961 IS A LLOWABLE BUSINESS EXPENDITURE THAT PART OF DEPRECIATION ALLOWANCES TH AT CANNOT BE OBSORBED BY THE PROFITS AND GAINS OF BUSINESS IN TH E CURRENT YEAR CAN BE CARRY FORWARD TO THE NEXT YEAR AND BE GIVEN A TR EATMENT AT PAR WITH DEPRECIATION OF THE THAT YEAR. HOWEVER, THE DE PRECIATION THAT YEAR MUST BE SET OFF FIRST. IN THIS REGARD, HE RELI ED UPON CERTAIN JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF VIRMANI INDUSTRIES LIMITED VS CIT (9 95) 216 ITR 607. THE LD. AO AFTER CONSIDERING RELEVANT SUBMISSIONS O F THE ASSESSEE AND ALSO TAKEN NOTE OF SPECIFIC PROVISIONS OF SECTI ON 71(2A) OF THE I.T.ACT, 1961, CAME TO THE CONCLUSION THAT LOSSES O F BUSINESS AND PROFESSION, INCLUDING DEPRECIATION CANNOT BE SET OF F AGAINST INCOME FROM SALARIES AND ACCORDINGLY, DISALLOWED UNABSORBE D DEPRECIATION OF RS.62,49,880/- AND ADDED BACK TO THE TOTAL INCOM E OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE LD. AO ARE A S UNDER:- 5.1 IT WAS OBSERVED FROM THE ASSESSEES RETURN OF I NCOME THAT THE ASSESSEE WAS SETTING OFF LOSS FROM THE HEAD BUSINE SS AND PROFESSION AGAINST THE INCOME FROM THE HEAD SALARIES. IN THIS REGARD IT IS PERTINENT TO NOTE THAT SECTION 71(2A) OF THE INCOME TAX AC READS AS FOLLOWS: 71.(1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THA N CAPITAL GAINS IS A LOSS AND THE ASSESSEE HAS NO INCOME UND ER THE HEAD CAPITAL GAINS, HE SHALL, SUBJECT TO THE PROVISIONS OF THIS CHAPTER BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AG AINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER A NY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN CA PITAL GAINS IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAINS, SUCH LOSS MAY, SUBJECT TO THE PROVIS IONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, ASS ESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 4 CAPITAL GAINS (WHETHER RELATING TO SHORT-TERM CAPI TAL ASSETS OR ANY OTHER CAPITAL ASSETS.) (2A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB SECT ION (1) OR SUB SECTION(2), WHERE IN RESPECT OF ANY ASSESSMENT YEAR , THE NET RESULT OF THE COMPUTATION UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IS A LOSS AND THE ASSESSEE HAS INCOME AS SESSABLE UNDER THE HEAD SALARIES, THE ASSESSE SHALL NOT BE E NTITLED TO HAVE SUCH LOSS SET OFF AGAINST SUCH INCOME. 5.2 AS IS EVIDENT FROM A PLAIN READING OF THE SECTI ON, ANY LOSS UNDER THE HEAD BUSINESS AND PROFESSION CANNOT BE SET OFF AGAI NST SALARY INCOME. WHEN THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE SET OFF OF BUSINESS LOSS AGAINST INCOME FROM SALARY SHOULD NOT BE DISALLOWED, THE ASSESSEE SUBMITTED THAT HE WAS ACTUALLY SETTING OFF UNABSORBED DEPRECIATION OF AY 2011-12, 2012-13, 2013-14 AND 20 14-15 AGAINST SALARY INCOME AND THE SAME SHOULD BE TREATED DIFFER ENTLY FROM BUSINESS LOSS. THE ASSESSEE SUBMITTED A REVISED CALCULATION OF HIS INCOME (WITH TOTAL INCOME REMAINING THE SAME) EXPLAINING HIS POS ITION. THE ASSESSEE IN HIS SUBMISSION ON 06/12/2016 ALSO STATED THE FOL LOWING CASE LAWS: VEERAMANI INDUSTRIES LIMITED (SC): THIS CASE LAW DO ES NOT CARRY MERIT IN THE ASSESSEES CASE ON THE FOLLOWING GROUNDS-THE QU ESTION OF LAW IN THE PRESENT CASE WAS WHETHER THE ASSESEE COMPANY COULD SET OFF UNABSORBED DEPRECATION FROM ONE BUSINESS AGAINST PR OFITS AND GAINS FROM ANOTHER BUSINESS. THE HONBLE HC IN THE PRESEN T CASE OPINED AS FOLLOWS: IN COMPUTING THE NET INCOME FROM THE BUSIN ESS, DEDUCTION IS TO BE ALLOWED ON ACCOUNT OF DEPRECIATION OF BUILDINGS, PLANTS AND MACHINERY, ETC. USED IN THE BUSINESS AT THE PRESCRIBED RATE. I F SUCH DEPRECIATION ALLOWANCE CANNOT BE COMPLETELY ABSORBED BY THE PROF ITS AND GAINS CHARGEABLE TO TAX-WHICH EXPRESSION INCLUDES PROFIT S AND GAINS ARISING NOT ONLY UNDER HE HEAD BUSINESS BUT ALSO UNDER OTHER HE ADS. THUS, IT IS CLEAR THAT THE HONBLE COURT MEANT PROFITS AND GAINS. TO INCLUDE THE INCOME FROM SALARIES (THERE IS NO PROFIT AND GAIN FROM SAL ARY) UNDER THIS AMBIT AND NOT TAKING INTO ACCOUNT THE FAGS AND CIRCUMSTAN CES OF THE CASE ON WHICH THE JUDGMENT WAS PRONOUNCED IS UNACCEPTABLE. ALSO, THE AMENDMENT TO SECTION 71 TO INSERT71(2A) (APPLICABLE FROM FY 2005-06) WAS MADE AFTER THIS JUDGMENT AND THE AMENDMENT LAID TO REST ANY DOUBTS REGARDING THE SET OFF OF BUSINESS LOSS (INCLUDING U NABSORBED DEPRECIATON) AGAINST SALARY INCOME. 5.3 DEPRECIATION OF BUSINESS ASSETS AS SPECIFIED U /S 32 OF THE I.T.ACT, IS AN ALLOWABLE BUSINESS EXPENDITURE. THAT PART OF DEP RECIATION ALLOWANCES THAT CANNOT BE ABSORBED BY THE PROFITS AND GAINS OF BUSINESS IN THE CURRENT YEAR CAN BE CARRIED FORWARD TO THE NEXT YEA R AND BE GIVEN A TREATMENT AT PAR WITH DEPRECIATION OF THAT YEAR, HO WEVER, THE DEPRECIATION OF THE NEXT YEAR MUST BE SET OFF FIRST, (SC MOTHER INDIA REFRIGERATION INDUSTRIES PVT.LTD.) SECTION 32(2) OF THE INCOME TA X ACT READS AS FOLLOWS. WHERE IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFEC T CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE B EING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB S ECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73, THE A LLOWANCE OR THE ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 5 PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWAN CE FOR DEPRECATION FOR THE FOLLOWING PREVIOUS YEAR AND DEE MED TO THE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIO US YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS.] 5.4 HENCE IT IS CLEAR THAT THE SECTION 32(2) PROV ISIONS OF SECTION 72. WHEN DEPRECATION OF BUSINESS ASSETS IS AN ALLOWABLE DEDUCTION AGAINST PROFITS AND GAINS OF BUSINESS, LEADING TO THE CALC ULATION OF TAXABLE BUSINESS INCOME/BUSINESS LOSS AND IF BUSINESS LOSS IS NOT ALLOWED TO BE SET OFF AGAINST THE HEAD SALARIES, THE CONTENTION T HAT DEPRECIATION/UNABSORBED DEPRECIATION CAN BE SET OFF AGAINST INCOME FROM SALARIES LACKS ANY MERIT WHATSOEVER. TO MAKE IT ABU NDANTLY CLEAR THE FOLLOWING IS AN EXTRACT FROM THE FAQ IS ISSUED BY T HE INCOME TAX DEPARTMENT ON ITS OFFICIAL WEBSITE: IN VIEW OF THE ABOVE, THE SUM OF RS. 62,49,880/- OF UNABSORBED DEPRECIATION SET OFF BY THE ASSESEE AGAINST INCOME FROM SALARIES IS DISALLOWED AND THE SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T.ACT, 1961 ARE INITIATED FOR CONCEALMENT OF INCOME AND/OR FOR FURN ISHING INACCURATE PARTICULARS OF INCOME. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE LD. AO A ND ARGUED THAT UNABSORBED DEPRECIATION, IF ANY UNDER THE HEAD INCO ME FROM BUSINESS CAN BE SET OFF AGAINST INCOME FROM SALARIE S. THEREFORE, IT IS INCORRECT TO REFER THE PROVISIONS OF SECTION 71(2A) OF THE I.T.ACT, 1961, WHEN, THE MAIN PROVISIONS ITSELF HAS PROVIDED FOR SET OFF UNOBSRORBED DEPRECIATION AGAINST ANY OTHER HEAD OF INCOME. IN THIS REGARD, HE RELIED UPON THE DECISION OF ITAT, CHENNA I BENCH, IN THE CASE OF V.LAKSHMANAN VS ITO IN ITA.NO.198/MAD/2010. 5. THE LD.CIT(A) AFTER CONSIDERING RELEVANT SUBMISS IONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF PROVISION OF SECTIO N 71(2A) OF THE I.T.ACT, 1961 HELD THAT AS PER LAW, A LOSS UNDER T HE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION CANNOT BE SET OFF AGAINST INCOME ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 6 FORM SALARIES. HE, FURTHER, OBSERVED THAT THE CLAIM THAT UNABSORBED DEPRECIATION IS SEPARATE FROM PROFITS AND GAINS OF THE BUSINESS AND PROFESSION IS WRONG INTERPRETATION OF LAW. UNABSORB ED DEPRECIATION DOES NOT HAVE SEPARATE EXISTENT IN FINAL COMPUTATIO N OF PROFITS AND GAINS OF BUSINESS AND PROFESSION. THEREFORE, HE OPI NED THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ALSO DISTINGUISHED THE DECISION OF ITAT, CHENNAI BENCH, IN THE CASE OF V.LAKSHMANAN VS ITO (SUPRA). THE LD.CIT(A) HAS ALSO TAKEN SUPPORT FROM EXPLANATORY MEMORANDUM TO FINANCE ACT, 2004, WHICH EXPLAINS THE POSITION OF LAW AS AM ENDED WITH EFFECT FROM 01/04/2005 TO SECTION 71(2A), AS PER WHICH LOS SES UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS CANNOT BE S ET OFF AGAINST INCOME UNDER THE HEAD SALARIES. ACCORDINGLY, HE HAS REJECTED ARGUMENTS OF THE ASSESSEE AND CONFIRMED ADDITIONS M ADE BY THE AO TOWARDS DISALLOWANCE OF LOSSES BEING UNOBSROBED DEP RECIATION. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE IS I N APPEAL BEFORE US. 6. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) WAS ERRED IN CONFIRMED THE ACTION OF THE LD. AO IN DISA LLOWANCES OF SET OFF OF UNABSORBED DEPRECIATION ALLOWANCES AGAINST I NCOME UNDER THE HEAD SALARY WITHOUT APPRECIATING THE FACT THAT THE PROVISION OF SECTION 32(2) OF THE I.T.ACT, 1961 HAS NOT MADE ANY DISTINCTION BETWEEN CURRENT YEAR DEPRECATION AND UNABSORBED DEP RECIATION. HE, FURTHER, SUBMITTED THAT IN ANY FINANCIAL YEAR THE R ESULT OF COMPUTATION UNDER THE HEAD INCOME FROM BUSINESS IS RESULTED UNT O LOSS, AND THEN THE SAME CAN BE SET OFF AGAINST INCOME FROM ANY OTH ER HEAD OF INCOME. IN THIS REGARD, HE REFERRED TO PROVISION OF SECTION 71(2A) OF THE I.T.ACT, 1961 AND ARGUED THAT TILL 1997, THERE WAS NO RESTRICTION ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 7 FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPREC IATION AND ONLY IN THE YEAR 1998, THE PROVISION HAS BEEN AMENDED TO RE STRICT CARRY FORWARDED OF UNABSORBED DEPRECIATION TO EIGHT YEARS . FURTHER, THE SAID AMENDMENT HAS BEEN FURTHER AMENDED TO BRING BA CK OLD PROVISIONS OF THE ACT AND ACCORDINGLY, THERE IS NO RESTRICTION IN THE ACT FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEP RECIATION. THIS BEING THE CASE, IT IS INCORRECT ON THE PART OF THE LD. AO, AS WELL AS THE LD.CIT(A) TO INTERPRET THE LAW BY RELYING UPON THE PROVISION OF SECTION 71(2A) OF THE I.T.ACT, 1961, WHERE IT CLEA RLY SAYS THAT LOSSES UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION CANNOT BE SET OFF AGAINST INCOME UNDER THE HEAD SALARIES WITHOUT APPRECIATING THE FACT THAT THE ITAT, CHENNAI BENCH, IN THE CASE OF V .LAKSHMANAN VS ITO HAD CONSIDERED THE IDENTICAL ISSUE, EVEN AFTER AMENDMENT TO SECTION 71(2A) OF THE I.T.ACT, 1961. HE FURTHER, SU BMITTED THAT IF AT ALL UNABSORBED DEPRECIATION IS NOT ALLOWED TO SET OFF A GAINST SALARY INCOME, THEN A DIRECTION MAY BE GIVEN TO THE LD. A O TO ALLOW CARRY FORWARD OF SUCH DEPRECIATION TO SUBSEQUENT YEARS. 7. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD.CIT(A) SUBMITTED THAT AS PER THE PROVISION OF T HE ACT, THE INCOME HAS BEEN CLASSIFIED UNDER FIVE HEADS OF INCOME AS STATED IN SECTION 14 OF THE ACT. FURTHER, SECTION 14D DEFINES THE INC OME UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS AND PROFESSI ON. IF YOU GO THROUGH, PROVISION OF SECTION 29, IT CLEARLY EXPLAI N, HOW INCOME FROM PROFITS AND GAINS OF BUSINESS AND PROFESSION SHALL BE COMPUTED AS PER WHICH, THE INCOME REFERRED TO IN SECTION 28 SHA LL BE COMPUTED, IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION 30 TO 43D OF THE ACT. SINCE, DEPRECIATION ALLOWANCE COMES UNDER PROV ISION OF SECTION 32, ANY LOSS ARISES UNDER THE HEAD INCOME FROM BUSI NESS AND ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 8 PROFESSION CANNOT BE SET OFF AGAINST INCOME UNDER T HE HEAD SALARIES, BECAUSE THE LAW HAS BEEN AMENDED BY WAY OF SECTION 71(2A) OF THE I.T.ACT,1961 TO EXCLUDE LOSS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION TO BE SET OFF AGAINST INCOME ASSESSABLE UNDER THE HEAD SALARIES. IN THIS REGARD, HE RELIED UPON THE DECISION OF CHENNAI, ITAT IN THE CASE OF CHANDRKUMAR VS ACIT (2 010) 5 ITR 540 AND ALSO, THE DECISION OF ITAT, MUMBAI BENCH IN CASE OF DCIT VS TIMES GUARANTY LIMITED (4 ITR 210). HE HAS ALSO RELIED UPON THE DECISION OF ITAT, MUMBAI BENCH, IN THE CASE OF NITI N CHANDRAKANT. DESAI VS ACIT IN ITA .NO. 2877/MUM/2012. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE PROVISIONS OF SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER HEAD HAVE BEEN PROVIDED IN SECTION 71 OF TH E I.T.ACT, 1961. AS PER SECTION 71(2A) OF THE I.T.ACT, 1961, NOTWITH STANDING ANYTHING CONTAINED IN SUB SECTION (1) OR SUB SECTION (2), WH ERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTAT ION UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IS A LOSS AND THE ASSESEE HAS INCOME ASSESSABLE UNDER THE HEAD SALARI ES, THE ASSESSEE SHALL NOT BE ENTITLED TO HAVE SUCH LOSS SE T OFF AGAINST SUCH INCOME. FROM THE ABOVE, IT IS VERY CLEAR THAT FROM AY 2005-06 ONWARDS, IT IS NOT ALLOWED TO SET OFF LOSS UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION TO INCOME ASSESSABL E UNDER THE HEAD SALARIES. FURTHER, THE EXPLANATORY MEMORANDUM GIVEN TO FINANCE ACT, 2004, WHILE AMENDING THE PROVISION OF SECTION 71(2A) OF THE I.T.ACT, 1961 W.E.F 01/04/2005, HAS CATEGORICAL LY EXPLAINED THAT IN ORDER TO PREVENT ABUSE OF THE PROVISION OF SET O FF LOSSES, AN AMENDMENT HAS BEEN PROPOSED TO SECTION 71 TO PROVID E THAT AN ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 9 ASSESEE SHALL NOT BE ENTITLED TO SET OFF ANY LOSS U NDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AGAINST INCOME UNDER THE HEAD SALARIES. FROM THE LANGUAGE USED IN PROVISIONS OF SECTION 71(2A) AND THE EXPLANATORY MEMORANDUM TO FINANCE AC T, 2004, IT IS VERY CLEAR THAT ANY LOSSES UNDER THE HEAD INCOME FR OM BUSINESS OR PROFESSION CANNOT BE ALLOWED TO SET OFF AGAINST INC OME ASSESSABLE UNDER THE HEAD SALARIES. THEREFORE, WE ARE OF THE C ONSIDERED VIEW THAT THE LD. AO, AS WELL AS THE LD.CIT(A) WERE RIGH T IN DISALLOWED SET OFF OF UNABSORBED DEPRECIATION ALLOWANCES AGAINST INCOME UNDER THE HEAD SALARIES. THIS LEGAL POSITION HAS BEEN STR ENGTHENED BY THE DECISION OF ITAT, MUMBAI IN THE CASE OF DCIT VS TIM E GUARANTY LIMITED (4 ITR 210), WHERE THE LAW HAS BEEN EXPLAIN ED, IN LIGHT OF PROVISION OF SECTION 32(2) AND HELD THAT LOSSES UND ER THE HEAD INCOME FROM BUSINESS OR PROFESSION CANNOT BE SET OF F AGAINST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. INSOFAR A S, CASE LAWS RELIED UPON BY THE ASSESEE, IN THE CASE OF V. LAXMA NAN VS ITO IN ITA NO.198/MAD/2010, WE FIND THAT THE FACTS OF THE ABOVE CASE IS NOT APPLICABLE TO FACTS OF THE PRESENT CASE, MORE PARTI CULARLY, IN LIGHT OF SPECIFIC PROVISION PROVIDED UNDER SECTION 71(2A) OF THE I.T.ACT, 1961 AND HENCE, THE SAME IS HEREBY REJECTED. 9. IN THIS VIEW OF THE MATTER AND RESPETFULLY FOLLO WING CASE LAWS CONSIDERED HEREINABOVE, INCLUDING THE DECISION OF I TAT, MUMBAI, IN THE CASE OF DCIT VS TIME GUARANTY LTD. (SURPA), WE ARE OF THE CONSIDERED VIEW THAT LOSSES UNDER THE HEAD INCOME F ROM BUSINESS OR PROFESSION, INCLUDING UNABSORBED DEPRECIATION, IF A NY CANNOT BE SET OFF AGAINST INCOME ASSESSABLE UNDER THE HEAD SALARI ES. THE LD.CIT(A) AFTER CONSIDERING RELEVANT FACTS HAS RIG HTLY CONFIRMED DISALLOWANCES OF UNABSORBED DEPRECIATION LOSSES AGA INST INCOME ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 10 UNDER THE HEAD SALARIES AND HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD.CIT(A) AND REJECT GROUND TAKEN B Y THE ASSESSEE. 10. COMING BACK TO ALTERNATE ARGUMENTS OF THE ASSES SEE. THE LD. AR OF THE ASSESEE MADE AN ALTERNATE ARGUMENT THAT I F AT ALL UNABSORBED DEPRECIATION LOSS ISE NOT ALLOWED TO BE SET OFF AGAINST SALARY INCOME, AND THEN SAID UNABSORBED DEPRECIATIO N ALLOWANCES MAY BE ALLOWED TO CARRY FORWARD TO SUBSEQUENT YEARS . WE FIND THAT THERE IS NO RESTRICTION, AS PER THE PROVISIONS OF S ECTION 72 TO CARRY FORWARD UNABSORBED DEPRECATION TO SUBSEQUENT YEARS. THEREFORE, IF THE ASSESSEE HAS FULFILLED CONDITIONS PRESCRIBED TH EREIN FOR CARRY FORWARD OF UNABSORBED DEPRECIATION, THEN THE LD. AO IS DIRECTED TO ALLOW CARRY FORWARDED OF UNABSORBED DEPRECATION TO SUBSEQUENT YEARS. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.4423/MUM/2018:- 12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL 1 . THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING T HE ORDER OF THE ASSESSING (CPC) REGARDING DISALLOWANCE OF SET OFFF BALANCE UNABSORBED DEPRECIATION ALLOWANCE OF RS.5,08,529/- FOR THE YEA R UNDER CONSIDERATION AGAINST THE INCOME DIE HEAD 'SALARY INCOME 1 WHILE MAKING ADJUSTMENT IN THE INTIMATION U/S143(1). 2. THE COMMISSIONER (APPEALS) ERRED IN RELYING ON HIS ORDER FOR A.Y. 2014-15 AGAINST ASSESSMENT U/S 143(3) IN THE CASE O F APPELLANT HIMSELF FOR UPHOLDING THE DISALLOWANCE AS THE FACTS AND CIR CUMSTANCES BEING IDENTICAL ON ACCOUNT OF SAME REASONS. 3. THE COMMISSIONER (APPEALS) ERRED IN NOT FOLLOW ING THE DECISIONS OF THE HON'BLE TRIBUNAL IN CASE OF SHRI V. LAKSHMANAN VS. THE I.T.O.IN ITA NO. L98/MAD/2010 FOR A.Y .2005-06 DATED 10 TH DECEMBER, 2010 ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 11 4 . THE COMMISSIONER (APPEALS) FAILED TO APPRECIATE T HAT THE HON'BLE TRIBUNAL RELIED UPON THE JUDGMENT OF THE SUPREME CO URT IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT.LTD [(1995) 216 ITR 607 (SCJ) 5. THE COMMISSIONER (APPEALS) FAILED TO APPRECIAT E THAT THE HON'BLE SUPREME COURT HAD DRAWN A DISTINCTION BETWEEN BUSIN ESS LOSS AND UNABSORBED DEPRECIATION AND THEREFORE, THE LIMITATI ONS ARE APPLICABLE TO THE CARRYING FORWARDS OF BUSINESS LOSSES AND DO NOT APPLY TO THE CARRYING FORWARDS OF UNABSORBED DEPRECIATION. 6. THE COMMISSIONER (APPEALS) ERRED IN HOLDING TH AT THE ADJUSTMENT MADE U/S 143(1) FALLS WITHIN THE SCOPE OF SECTION 1 43(1) 7. THE ORDER OF THE COMMISSIONER (APPEALS) IS BAD IN LAW AND WITHOUT JURISDICTION. 13. THE FACTS AND ISSUES INVOLVED IN THIS APPEAL IS IDENTICAL TO THE FACTS AND ISSUES, WHICH WE HAD ALREADY CONSIDERED I N ITA NO.3596/MUM/2018 FOR AY 2014-15. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS IN ITA NO.3596/MUM/2018 SHALL MUTATIS MUTANDIS APPLY TO THIS APPEAL AS WELL. THEREFORE, F OR SIMILAR REASONS, WE REJECT GROUND TAKEN BY THE ASSESSEE TO CHALLENGE FINDINGS OF THE AO AS WELL AS THE LD. CIT(A), IN REJECTING SET OFF OF UNOBSORBED DEPRECIATION AGAINST SALARY INCOME. HOWEVER, DIRECT THE LD. AO TO EXAMINE THE PROVISIONS CONTAINED IN SECTION 72(2) & (3) OF THE I.T.ACT, 1961 TO CARRY FORWARD SAID UNABSORBED DEPR ECIATION TO SUBSEQUENT YEARS, IF THE CONDITIONS PRESCRIBED THER EIN ARE FULFILLED. ACCORDINGLY, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 14. AS A RESULT, BOTH APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 /01/ 2020 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NOS.3596 & 4423/MUM/2018 HARBANS SINGH BAWA 12 MUMBAI ; DATED: 10 /01/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//