Section 32(2) at the time decision on the subject was delivered
by SC in Vermani Industries 216 ITR 607 was similar to provisions as exist post
amendmend w.e.f AY 2002-03 [Para 9 of Vermani Industries].It was held by apex court overruling Madras High Court in
East Asiatic in Para 13 of its Judgement
that :
1.
Since section 72(1) specifically required same
business to be continued, for setting of loss and since there is no similar provision there in 32(2), there is no requirement that same business be continued for
setting off unabsorbed depreciation
2.
Also held that there is no requirement that same
asset(s) on which unabsorbed depreciation is sought to be allowed as deduction
should continue.
3.
Regarding continuance of business , supreme
court held that two views are possible in so far as 32(2) says that unabsorbed
depreciation to be added to depreciation allowance for the year. However ,
since 32(2) also says that if there is no depreciation allowance for the year,
unabsorbed depreciation shall be deemed to be deprecation allowance for the year,
hence there is no requirement for continuance of business.
Further it was held by SC in
Jaipuria China Clay Mines (P) Ltd 59 ITR 555 [Para 7] that words “profits or
gains” used in 32(2) are different from” profits or gains of business or
profession”, hence there is no requirement for continuance of business u/s 32(2)
Karnatka High Court in Karnataka
Instrade Corporation Ltd. [2015] 62 taxmann.com 239 (Karnataka)
09-10-2015,hence following supreme court Judgements and its own
judgement in Kapila Textiles 129 ITR 458, held that unabsorbed depreciation to
be allowed against profits arising from sale of building, plant and machinery
taxable u/s 41(2)
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