yes unabsorbed dep can be set off against salary income as it is coverd under sec 32(2) and there is no where mentioned in the act that unabsorbed dep cannot be set off against salray...

yes

not at all

Originally posted by : vineeta
	sett of losses says  salary cant be sett off by any head...be clear about that

 100 % Correct...

 Best Regards

K.Ilayaraja.

i am damn sure that unabsorbed depreciation can never be set off against salaries...

Ilayaraja sir is to the point....

Yes arvind.....

Best Regards

K.Ilayaraja

No, not at all.

it can be sett off against salary income

hi ilayaraja,

           I give due respect to the point given by u. I am asking this for academic interest. can u please specify the source of ur answer. Coz, there is no such point in the Income tax Act,1961. Hence, we generally set off unabsorbed dep. in Salaries.That to unabsorbed dep. is covered in Sec.32(2). No such point is given in that section. had there been an intention to disallow set off of unabsorbed dep. against salaries, there would have been an explicit statement in Sec.32(2)( As the case of Loss from profits and gains)

Hello Ilayaraja sir...

I made some enquiries.....

There is no restriction in the IT act.... but the restriction is there in the Return preparing excel utility on the IT dept site.....

That software is supposed to be provided by TAXMANN and largely reflects the views of the authors of taxmann publications...

Apparently, there is another software - WINMAN, which allows the unabsorbed depreciation to be set off against salary.... set off has been accepted by department as well..

Sir, this is a controversial issue,
and i think if there were indeed a restriction intended, the sec 71(2A)  would have been amended.

no unabsorbed depreciation cannot be set off against salary income and it can be carried forward for unlimited years .

For Academic purpose – Dr.V.K.S

Unabsorbed depreciation

Legal perspective

Section 32(2) says that where the depreciation could not be set off against the profits and gains chargeable to tax, then it could not be set off against income under other heads. If the incomes under other heads are insufficient, then the ‘unabsorbed depreciation’ has to be carried forward to subsequent year for set off.

When it is carried forward it becomes ‘current’ depreciation of that year and hence eligible for set off against business income and also against any other head of income. Even depreciation of discontinued business could be set off against continued business income and other incomes.

However, whether it could be set off against salary income is somewhat dicey in view of in Section 71(2A) though the law prevents only the set off of business loss against salary income and not depreciation.

The Supreme Court in Virmani Industries Private Limited vs. CIT – 216 ITR 607, has categorically stated that the unabsorbed depreciation brought forward can be set-off against any other Head of Income.

What section 71(2A) prohibits is only the set off of loss under the head profits and gains of business or profession against salary and such loss will not include the unabsorbed depreciation of the current year which is dealt with in section 32(2) separately and can be set off against salary income.

In so far as unabsorbed depreciation is concerned the scheme of section 32(2) is that unabsorbed depreciation is first to be set off against income from other businesses and thereafter to be set off against income from other heads in the same year. The balance of unabsorbed depreciation is thereafter to be carried forward and aggregated with the depreciation of the subsequent year and if there is no depreciation in the subsequent year, to be treated as the depreciation of the subsequent year. Therefore one can see that the deprecation that is brought forward from an earlier year becomes a part of the depreciation of the current year. This would therefore mean that the brought forward unabsorbed depreciation which becomes a part of the current depreciation would get the same treatment as the current depreciation and can be set off against the salary income except that the brought forward unabsorbed deprecation cannot be set off before set off of current depreciation on the basis of the law laid down by the Supreme Court in CIT v Mother India Refrigeration Industries Private Limited [1985] 155 ITR 711 (SC). In the light of the above discussion it can be seen that even the brought forward unabsorbed deprecation can be set off against the current year’s salary income notwithstanding the provisions of section 71(2A). In this context a reading of the decision of the Supreme Court in CIT v Virmani Industries Private Limited [1995] 216 ITR 607 (SC) though rendered prior to the insertion of section 71(2A) would be of help

I, personally, cannot subscribe to the argument that depreciation or unabsorbed depreciation can be set off against salary income since it is not covered by sec. 72. Income of the assessees is computed under five heads. needless to mention that depreciation comes under business head. Therefore, depreciation, either current or unabsorbed comes under this head and to that extent loss will be arrived. Section 32 also comes in between  section 30 to 38 thorugh which varisous expenses incurred by the assessee are allowable. Therefore, the depreciation either current or brought forward will be computed under the head business and after arriving at a loss under this head the will go to adjust the income arrived under other heads. Income is to be computed as per the provisions of the act. If sections 70 to 80 are not there in the statute then there is no possibility claiming any set off. Therefore, the income is to be first arrived at under each head and then set off. Therefore, the depreciation cannot be set off against salary. If courts decideds otherway, then it will be accepted.   

That is unabsorbed or current depreciation cannot be set off against salaries as per the restriction enacted through 71(2A) of the Act.

So Explicit clarity is not provided as to whether depreciation or unabsorbed dep could be set off against salary income.

For exam purpose :

Explicit clarity is not provided in sec.32(2) as to whether depreciation or unabsorbed dep could be set off against salary income.

We can go for positive or negative … but note is must.

Majority of the text books says,

Unabsorbed dep cannot be set off against salary income.

For ex. Dr.V.K.S.