IN THE ITAT PUNE BENCH ‘B’

Deputy Commissioner of Income-tax, Circle I, Nashik

v.

Sunil M. Kankariya

MUKUL SHRAWAT, JUDICIAL MEMBER

AND K.G. BANSAL, ACCOUNTANT MEMBER

IT APPEAL NO. 350 (PN) OF 2003

[Assessment year 1997-98]

January 17, 2007

Section 44AE, read with section 32, of the Income-tax Act, 1961 - Transporters - Assessment year 1997-98 - Whether since unabsorbed depreciation falls under section 32(2), which is within debarred claims as per sub-section 3 of section 44AE, assessee is not entitled to set off unabsorbed depreciation while computing income under section 44AE - Held, yes

FACTS

The assessee, a transporter, claimed set off of brought forward depreciation against the current year’s income which was filed under section 44AE. The Assessing Officer rejected the assessee’s claim on the ground that the income had been returned under section 44AE. The Commissioner (Appeals), however, directed the Assessing Officer to allow the assessee’s claim.

On revenue’s appeal:

HELD

The set off of unabsorbed depreciation falls under section 32 and not under section 72. Next comes the applicability of section 44AE, wherein sub-section(1) provides that notwithstanding anything to the contrary contained in section 28 to section 43C in the case of an assessee who owns not more than 10 goods carriages and engages in the business of plying, the income of such business shall be deemed to be aggregate profits from the goods carriages owned by the assessee as computed in accordance with the sub-section (2) of this section. For the purpose of the computation of income, section 44AE, sub-section (2) provides the amount of a fixed income for every month or a part of month. Finally comes the applicability of sub-section (3) of section 44AE.

This sub-section debars an assessee to again claim any deduction which falls under sections 30 to 38. This is a deeming provision stating that the deductions which had fallen under these sections shall be deemed to have already been given full effect and no further deduction shall be allowed. Since the unabsorbed depreciation falls under section 32(2), which is within the debarred claims as per sub-section(3) of section 44AE, therefore, the assessee is not entitled for set off of unabsorbed depreciation while computing the income under section 44AE. Therefore, the assessee was not entitled for set off of unabsorbed depreciation because he had opted to compute the transport business income under section 44AE in the absence of maintenance of books of accounts. [Para 6.1]

Accordingly, the finding of the Commissioner (Appeals) was to be reversed and action of the Assessing Officer was to be confirmed. [Para 6.2]