Section 32(2) TREATMENT OF 'UNABSORBED
Meaning of Unabsorbed Depreciation
business/profession are allowed
to debit the depreciation expenditure while calculating their income u/h 'business/profession'.
However, such expenditure can be debited only to the
extent income is available
The balance amount of depreciation that cannot be debited
is referred to as 'unabsorbed depreciation'.
Example: PGBP income before
debiting current year depreciation is Rs 1,00,000
and current year depreciation
expenditure turns out to be Rs 1,60,000. In this case,
depreciation to the extent of Rs 1,00,000 would be debited
to P&L A/c
and balance Rs 60,000 would
be referred to as 'unabsorbed depreciation'.
Treatment of Unabsorbed Depreciation
Unabsorbed depreciation of a particular year is allowed
to be set-off in the
same year against
income under any other head except
If unabsorbed depreciation cannot be adjusted in the some year, it is allowed
to be cif for indefinite period of time (ie for an unlimited period)
and in the subsequent years,
such unabsorbed depreciation shall be allowed
set-off against any income other
than casual income.
If any assessee has b/f business
losses as well as b/f unabsorbed depreciation, a rational taxpayer
would first adjust business losses
and unabsorbed depreciation afterwards.
Mr X has business income
of Rs 10,00,000 for PY 18-19 and
has b/f business losses of Rs 8,00,000
and b/f unabsorbed depreciation for Rs 5,00,000
pertaining to past periods.
In this case, b/f business
loss would be adjusted
first and unabsorbed depreciation would be adjusted subsequently to the extent
of Rs 2,00,000. Unabsorbed depreciation of Rs 3,00,000
would be carried forward to the next AY.
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