K. Raviraja Pandian, J.:— The appeal is filed against the order of the Income-tax Appellate Tribunal, Madras “C” Bench, dated February 2, 2007, made in I.T.A No. 1964.Mds/2003 for the assessment year 2000-01.
2. The facts of the case culminating in filing of the above appeal culled out from the statement of facts contained in the memorandum of appeal go as follows:
For the assessment year 2000-01, the assessee had set off the prior years business loss and unabsorbed depreciation against short-term capital gains. Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) allowed the claim of the assessee and directed the Assessing Officer to set off the claim. The Revenue filed second appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal following the decision of the Delhi Special Bench in the case of Uttam Air Products v. Deputy CIT, [2006] 99 TTJ 718 allowed the appeal in favour of the assessee.
3. The correctness of the said order is canvassed by the Revenue by filing the present appeal by formulating the following question of law.
“Whether, in the facts and circumstances of the case, the Tribunal was right in allowing the set off of prior years business loss and unabsorbed depreciation against short-term capital gains?”
4. We heard, the argument of the learned counsel appearing for the Revenue, who in all his fairness submitted that the question of law framed in this appeal is covered against the Revenue in the case of Commissioner Of Income-Tax v. Pioneer Asia Packing P. Ltd., [2009] 310 ITR 198 (Mad) decided by this court on November 21, 2007, in T.C (A) No. 1423 of 2007.
5. As per the amended provisions of section 32(2) of the Act, with effect from April 1, 1997, if the income from business for the assessment year is insufficient to absorb the depreciation allowance of that assessment year, the amended provision permits absorption of depreciation allowance of a business against profits and gains of any other business of the same assessment year. When the depreciation allowance of a business of the assessment year is not absorbed by any other business of the same assessment year, then the remaining unabsorbed depreciation allowance could be set off against the income under any other head, that is assessable for the same assessment year. In the event of depreciation allowance of the year is unable to be absorbed by any other business income or from income under any other head in the same assessment year, the remaining unabsorbed depreciation allowance shall be carried forward to the following year and (a) unabsorbed allowance shall be set off against the profits and gains of any business carried by a person, (b) if the unabsorbed depreciation allowance cannot be wholly set off so, it shall be allowed to be carried forward for the following eight assessment years immediately succeeding the assessment year in which it was first computed.
6. The proviso provides that the business to which depreciation allowance is related to must be carried on in the succeeding year so as to allow such set off. Thus, by the amendment, the deeming fiction of treating the earlier years' unabsorbed depreciation as current year depreciation was removed. The period available for absorbing the unabsorbed depreciation against the profit of the succeeding years was limited to eight years. The clarification of the Finance Minister in Parliament is also to the effect that inasmuch as the cumulated unabsorbed depreciation brought forward as on April 1, 1997, could still be set off against the taxable business profit or income under any other head for the assessment year 1997-98 and seven subsequent years vide [1996] 222 ITR (St.) 36. Circular of the Central Board of Direct Taxes No. 762, dated February 18, 1998 ([1998] 230 ITR (St.) 12) also clarifies the issue to the following effect (page 27):
“Sub-section (2) of section 32, as it existed up to the assessment year 1996-97, provided that the unabsorbed depreciation of a year shall be added to the, amount of the allowance for depreciation of the following previous year and deemed to be part of that allowance. Therefore, the unabsorbed depreciation allowance, if any, of the assessment year 1996-97 shall be added to the amount of the allowance for depreciation of the assessment year 1997-98 and deemed to be part of the allowance for this year. In other words, the unabsorbed depreciation allowance of the assessment year 1996-97 shall be added to the allowance of 1997-98 and will be deemed to be-the allowance of that year. The Limitation of eight years shall start from the assessment year 1997-98.”
7. In view of the above position of law, we are of the view that the Tribunal has rightly come to the conclusion that the assessee is entitled to the unabsorbed depreciation brought forward as on April 1, 1997, and could be set off against the business profits.
8. For the foregoing reasons, the appeal is dismissed as no question of law, much less a substantial question of law is involved.