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2022 (2) TMI 159 - ITAT CHENNAISet-off of unabsorbed depreciation pertaining to AYs 1997-98 to 1999-2000 - beyond the period of eight assessment years - CIT(A) reversed the stand of Ld. AO and held that the unabsorbed depreciation available to the assessee as on 01.04.2002 could be carry forward and set-off for any number of years - HELD THAT:- Unabsorbed depreciation of AYs 1997-98 to 1999-2000 would become part of depreciation of AY 2002-03 and subsequent years and therefore, the same could be set-off during any number of years. The same was as per the ratio laid down by Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd. [2012 (8) TMI 714 - GUJARAT HIGH COURT] wherein Hon'ble High Court referred to Board's Circular No. 14 of 2001 and held that any unabsorbed depreciation as available to the assessee as on 01.04.2002 shall be dealt with in accordance with the provisions of Sec. 32(2) as amended by Finance Act. 2001 and not by the provisions of Sec. 32(2) as it stood before the amendment. See KMC SPECIALITY HOSPITALS INDIA LTD.[2021 (7) TMI 868 - MADRAS HIGH COURT] and M/S. HARVEY HEART HOSPITALS LTD. [2021 (1) TMI 296 - MADRAS HIGH COURT] as held unabsorbed depreciation pertaining to the assessment year can be carry forward and adjusted after the lapse of eight assessment years in view of the section 32(2) as amended by the Finance Act, 2001. - Decided against revenue. Disallowance u/s. 14A r.w.r. 8D - Mandation of recording satisfaction - assessee had earned exempt income and already offered suo-moto disallowance - AO was directed to make the aforesaid disallowance while computing income under normal provisions as well as while computing Book-Profits u/s. 115JB - HELD THAT:- AO has failed to record any objective satisfaction as to why the assessee's stand was not acceptable, having regards to the accounts of the assessee, as per the mandate of Sec.14A. This jurisdictional requirement was not satisfied by Ld. AO in the present case and Ld. AO straightway proceeded to compute disallowance as per Rule 8D. The application of Rule 8D, in our considered opinion, was not mechanical or automatic. It is also settled law that disallowance made u/s. 14A could not exceed the exempt income earned by the assessee. Further, disallowance u/r 8D(2)(iii) was to be computed only by considering those investments which have yielded exempt income during the year. See M/S. REDINGTON (INDIA) LTD. case [2017 (1) TMI 318 - MADRAS HIGH COURT] Thus on the given facts and circumstances of the case, we direct Ld. AO to record an objective satisfaction as to why the disallowance made by the assessee was not sufficient or acceptable. If Ld. AO is satisfied, then he could proceed to apply Rule 8D and compute the disallowance subject to our observation made in preceding paras. Needless to add that adequate opportunity of hearing shall be granted to the assessee. MAT Adjustment u/s 115JB - We would also hold that the adjustment of disallowance u/s. 14A could not be made while computing Book Profits u/s. 115JB as per the decision of Special Bench of Delhi Tribunal in ACIT V/s Vireet Investment (P) Ltd.[2017 (6) TMI 1124 - ITAT DELHI] and M/S. SOBHA DEVELOPERS LTD. [2021 (1) TMI 378 - KARNATAKA HIGH COURT].
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