| Question And Answer | |
|---|---|
| Subject: | Additional Depreciation U/Sec. 32(1)(iia) and Provisions of Sec. 115BAA |
| Category: | Income-Tax |
| Querist: | Ruchi Bhansali |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | depreciation |
| Date: | March 28, 2022 |
Assessee is Private Limited company . For A.Y. 2020-21, has opted to be taxed U/SEc. 115BAA of the Act. For The A.Y. 2019-20, assessee has paid the tax as per regular provisions. In the A.Y. 2019-20, there was unutilised additional depreciation u/s 32(1)(iia) of the Act. The assessee company as per the proviso to section 32(1) of the Act and proviso to section 115BAA, wherein it is provided that, where there is a depreciation allowance in respect of a block of a asset which has not been given full effect to prior to the AY beginning on first day of April, 2020, corresponding adjustment shall be made to the WDV of such block as on 01.04.2019 in the prescribed manner, if the option under sub-section (5) is exercised for PY relevant to AY beginning on 01.04.2020.
In view of above proviso to section 115BAA, the company has claimed the balance depreciation for AY 2019-2020, which was not allowed in the AY 2019-2020 as per proviso to section 32(1) of the Act. In the year 2021. The assessing officer has rejected the contention on the ground that since the assessee has opted to be taxed u/s 115BAA, the assessee is not eligible for claim of carry forward unutilised additional depreciation for A.Y 2019-2020.
Whether the action of the AO is justified in law?
Please guide.
Depreciation under section 32(1)(iia) of the Income-tax Act, 1961 (Act) will not be allowed to an assessee opting for special rate of tax under section 115BAA of the Act. Furthermore, section 115BAA(2)(ii) of the Act clarifies that set off or carry forward of such depreciation will also not be allowed. The said proviso is to adjust for unabsorbed depreciation in the case where the assessee opts for section 115BAA of the Act and cannot utilize the unabsorbed depreciation.