DEAR SHAFAF,

It cannot be setoff..

But act says Depreciation can set off any head of income ...i think their is no specification for salary

Dear Shafaf,

Unabsorbed depreciation is not deductible from income chargeable under the head "income from salaries"

Pls tell Under which section ?

Unabsorbed depreciation is can't set off from income chargeable under the head "income from salaries"

no u cannot sett off unabsorbed depn against salary

But there is a case law...pls clarify ....

Interhead set off of depreciation loss against salary income

Provisions of Sec 32(2) governs interhead set off, carry forward and set off of depreciation

In CIT vs Jaipuria China Clay Mines (P) Ltd [(1966) 59 ITR 555(SC)] Supreme Court decided as follows:

“Depreciation (unabsorbed) ® Carry forward and set off ® Unabsorbed depreciation allowance (i.e., not actually allowed due to profit, being less than the depreciation allowance) ® To be deducted from the total income along with the current year’s depreciation ® Depreciation could be set off against income other than business income. Words “no profits or gains chargeable for that year “are not confined to profits and gains derived from the business whose income is being computed under s.10 (2) IT Act, 1922 [corresponding to S.32 (2) of the new IT Act, 1961] - Sec 24(2) IT Act, 1922 [corresponding to S.72 of the new IT Act, 1961] only deals with losses other than the losses due to depreciation”

See also

• CIT vs Vrmani Industries Pvt Ltd.Etc.Etc [(1995) 216 ITR 607 (SC)]
• Rajapalayam Mills Ltd vs CIT [(1978) 115 ITR 777 (SC)]

Further consequent to the interpretations of sec 32(2) by Supreme Court in above cases, Sec 32(2) was amended with changed provisions of interhead set off, carry forward and set off to nullify the effect of judgment. [Finance (No 2) Act 1996 w.e.f 1.4.1997]. However, another amendment was done and the old provisions were restored (Finance Act 2001 w.e.f. 1.4.2002). Thus, on a bare reading of the above referred cases along with the amendments referred above, it will be clear that interhead set off, carry forward and set off of depreciation allowance is governed by 32(2).

The Finance Act 2004 inserted subsection 2A in Sec 71 and as per the amendment; business loss cannot be setoff against income from salary. However, as discussed above, interhead setoff of depreciation allowance is governed by section 32(2). Therefore, the amendment of section 71 has no effect on the interhead set off of depreciation allowance.

 sec 32

in singhania see para no.109.9

ok...

can u explain that ? PLs

Hi Shafaf,

 Unabsorbed deprecaition cant be setoff against Salary in come by the prov of setoff & Carry forward

 Yes it can be set off from salary head, unabsorbed depreciation can be set off by any head. the section by which it can be set off is Section 32(2).

Section 32(2) "In which The unabsorbed Depreciation can be carried forward for any number of assesment year and set off against income under any other head."

Hi Shafaf

While dealing with unabosrbed dep, one should kept in mind the following points:

1. Dep allowance of the PY is first deductible from income chargeable under the head PGBP.

2. If Dep allowance is not fully deductible under the head PGBP because of absence or inadeqaucey of profit, it is deductible from income (OTHER THAN INCOME FROM SALARY) chargeable under other haeds of the income for the same AY.

3. If Dep allowance is still unabsorbed, it can be carried forward to the subsequent AY,

THEREFORE UNABSORBED DEP CAN NOT BE SET OFF FROM SALARY

very nice

Unabsorbed depreciation is can't set off from income chargeable under the head "income from salaries"

 Unabsorbed depreciation settoff income from salary head only upto A.Y. 2004-05 & after a.y. 2004-05  Unabsorbed depreciation not settoff "income from salary " and setoff only other than salary.