Unabsorbed depreciation

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Monil Shah (Querist)
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30 April 2009 Can anyone guide me about What is Unabsorbed depreciation?
How it is calculated?
please explain with some example

How we an differenate between unabsorbed business loss and Unabsorbed depreciation?

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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30 April 2009 Unabsorbed depreciation [Sec. 32(2)]
Meaning
Depreciation which could not be fully deducted from profits and gains of current year of business or profession (due to insufficient profit), is termed as unabsorbed depreciation
Treatment
The unabsorbed depreciation can be deducted from income under any other head (except with Casual income and Salaries) of the same assessment year.
If depreciation still remains unabsorbed, it can be carried forward for indefinite period and can be set off against any income (except with Casual income and Salaries) of the assessee.
Notes
1. It is not necessary that the same business should be continued.
2. For set-off purpose following order is to be followed:
• Current year depreciation;
• Brought forward business loss;
• Unabsorbed depreciation
3. Unabsorbed depreciation shall be (subject to sec. 72 and sec. 73) added to the amount of the depreciation for the following previous year and deemed to be the depreciation-allowance for that previous year, and so on for the succeeding previous years.
4. Unabsorbed depreciation shall be allowed to be carried forward for any number of years and such carried forward unabsorbed depreciation may be set off against any income, other than salary income and winning from lotteries, cross word puzzles, etc.
5. Unabsorbed depreciation can be carried forward even return of income has not been filed.

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