Section 79A — the law in short
What the courts have decided on section 79A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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M/s Sivasakthi Threads v Deputy Commissioner of Income-tax
High CourtHelps taxpayerNo later treatment found
A survey during a search on a connected group threw up excess stock, and it was added for AY 2007-08. The department says my unabsorbed depreciation cannot be set off against it, and now cites section 79A. Is that right?
No, on both counts, for a year before AY 2022-23. The Madras High Court held that unabsorbed depreciation carried forward takes the character of current year depreciation under s.32(2) and, read with ss.71 and 72, can be set off against income of the current year other than capital gains — including an addition of unaccounted stock in business; and it recorded that s.79A, inserted by the Finance Act 2022 with effect from 1 April 2022, does not assist the Revenue for an earlier year.
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Statutory position — section 79A: no set-off against undisclosed income found in a search, requisition or survey, from AY 2022-23
CBDT Circulars & InstructionsCuts both ways
A search threw up unaccounted stock and cash and the Assessing Officer has added it. I have a large brought-forward loss and unabsorbed depreciation sitting there. Can I set them off against the addition?
For AY 2022-23 and every later year, no. Section 79A, inserted by the Finance Act 2022 (Act No. 6 of 2022) with effect from 1 April 2022, says that where, consequent to a search under s.132, a requisition under s.132A or a survey under s.133A other than s.133A(2A), the total income of any previous year includes undisclosed income, no set-off of any loss — brought forward or of the current year — and no set-off of unabsorbed depreciation under s.32(2) shall be allowed against that undisclosed income under any provision of the Act.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
