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Set off of depreciation against income from salary

Ishan Jain (Student) (50 Points)

30 December 2013

I am having doubt whether it is possible to set off depreciation (from proprietary business) against income from salary or not?

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14 Replies

CA Hemang Shah (PRACTICE) (658 Points)
Replied 31 December 2013

Business loss cant be setoff against salary income....but unabso depreciation is allowance ...so depre can b setoff.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 31 December 2013

Loss from business can not be set off agaisnt Income from salary.Here depreciation loss is different from business loss for the purpose of carrying and bought forward of losses but not for the purpose of set off .so depreciation is also a loss on account of assets used in business,so what ever nomenclature may be,it is business loss and can not be set off against Income from salary

CA Mayur Agarwal (Chartered Accountant) (47 Points)
Replied 31 December 2013

Agree with Nuli Swami. Allowing such set-off will lead to absurdity and beat the whole purpose of not allowing setoff of Business Loss with Salary.

CA Mayur Agarwal (Chartered Accountant) (47 Points)
Replied 31 December 2013

Agree with Nuli Swamy. Allowing such setoff will lead to absurdity. It will also beat the whole purpose of restricting setoff of Business Loss with salary

Jacky (Accountant & CA Final Student) (320 Points)
Replied 31 December 2013

Agree with Nuli Swampy As wen u ll setoff amt. Of Depn Actually u r setting off business loss & not depn alone "Sec 72 says loss under head B&p can be setoff in c.y against any income except salary."

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Ishan Jain (Student) (50 Points)
Replied 31 December 2013

Thanks all for reply. I really appreciate your help. But as per opinion of many renowned DT lecturers, set off of depreciation is not covered under section 72. It is covered under section 32(2). And as per this section, set off of depreciation is allowed against any head of income.

ashay shah (1) (24 Points)
Replied 31 December 2013

agree with nuli swampy.depreciation cannot be set off against any income other than bussiness income. in case of unabsorbed depreciation of preceeding ay it can only be eligible for set off against any income other than salary.

Bhavin J. M. Dedhia (Chartered Accountant) (47 Points)
Replied 31 December 2013

Dear Ishan Jain,

The distinction between sec.32(2) and sec.72 is "only" with respect to carry forward of the unabsorbed depreciation and business loss over given number of years and that it does not govern set off.

Further unabsorbed depreciation was never considered as something that does not fall under profits and gains of business.

Hence for the purpose of provision of sec. 71(2A) loss under the head PGBP would also cover the unabsorbed depreciation - hence unabsorbed depreciation could not be set off agains the income from salary.

Further, Chennai ITAT in the case of Chandrakumar vs. ACIT (129 TTJ 489) has disallowed the set off unabsorbed depreciation against the salary income.

Regards.

Ishan Jain (Student) (50 Points)
Replied 31 December 2013

Thanks Bhavin.. Your reply was really helpfull.

CA Akant Agrawal (self) (30 Points)
Replied 31 December 2013

the taxpayer is eligible to set off depreciation against business income and any head of income both in the year of claim and when it is carried forward. There is no time limit for carry forward and set off of depreciation.