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Assessing Officer disallowed claim for set off of unabsorbed depreciation/business loss observing that unabsorbed depreciation cannot be carried forward for set off by another person other than the person who has incurred depreciation on his fixed assets. we hold that since the proprietary concern was succeeded by the legal heirs and the proprietary business was carried on by the legal heirs of the deceased by converting the same into partnership firm there is an inheritance of business and therefore, as per the provisions of the section 78(2) of the Act assessee is entitled to setoff business loss/unabsorbed depreciation of the proprietary concern against income of the successor partnership firm. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the revenue.

Shanti Prime Publication Pvt. Ltd.

Section 78 of Income Tax Act, 1961— Assessing Officer disallowed claim for set off of unabsorbed depreciation/business loss observing that unabsorbed depreciation cannot be carried forward for set off by another person other than the person who has incurred depreciation on his fixed assets.

we hold that since the proprietary concern was succeeded by the legal heirs and the proprietary business was carried on by the legal heirs of the deceased by converting the same into partnership firm there is an inheritance of business and therefore, as per the provisions of the section 78(2) of the Act assessee is entitled to setoff business loss/unabsorbed depreciation of the proprietary concern against income of the successor partnership firm. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the revenue.

The first common ground in the cross objection is that the Ld. CIT(A) erred in rejecting the additional ground in respect of expenses/debts which were not claimed in the return of income.

Held that— On hearing both the sides and respectfully following the decision of the Hon'ble Bombay High Court in the case of the CIT v. Prudvi Brokers & Shareholders Pvt. Ltd (supra), we restore the claim of the assessee in respect of expenses/debts, to the file of the Ld. CIT(A) who shall decide on merits after providing adequate opportunity of being heard to the assessee.

The second ground in the cross objection filed for the A.Y. 2013-14 and 2014-15 is against adhoc disallowance sustained by the Ld. CIT(A) to the extent of Rs. .4,89,472/- and Rs. .2,00,000/- respectively on account of various expenses.

Held that— we find that the Assessing Officer for the A.Y. 2013-14 while completing the assessment made disallowance @10% of loading and unloading expenses, hawali charges incurred by the assessee observing that cash component and element of personal use in the aforesaid expenses cannot be ruled out keeping in view the nature of business of the assessee firm that is transportation, the Ld. CIT(A) sustained the disallowance to the extent of 5% of the expenses as against 10% disallowed by the Assessing Officer. Similarly, for the A.Y. 2014-15 the Ld. CIT(A) restricted the disallowance to Rs. .2,00,000/- as against 10% disallowed by the Assessing Officer. Considering the submissions of both the parties and taking the totality of facts and circumstances into consideration we direct the Assessing Officer to restrict the disallowance to Rs. .2,00,000/- for both the assessment years i.e. 2013-14 and 2014-15 to meet the ends of justice.[INCOME TAX OFFICER – 17 (2) (4) , MUMBAI VERSUS M/S. NARSHI NENSHI & SONS AND (VICE-VERSA)][2020] 21 ITCD Online (8) [ITAT MUMBAI]

Assessing Officer disallowed claim for set off of unabsorbed depreciation/business loss observing that unabsorbed depreciation cannot be carried forward for set off by another person other than the person who has incurred depreciation on his fixed assets. we hold that since the proprietary concern was succeeded by the legal heirs and the proprietary business was carried on by the legal heirs of the deceased by converting the same into partnership firm there is an inheritance of business and therefore, as per the provisions of the section 78(2) of the Act assessee is entitled to setoff business loss/unabsorbed depreciation of the proprietary concern against income of the successor partnership firm. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the revenue.

Shanti Prime Publication Pvt. Ltd.

The first common ground in the cross objection is that the Ld. CIT(A) erred in rejecting the additional ground in respect of expenses/debts which were not claimed in the return of income.