2015 (3) TMI 1136 - AT - Income Tax

Set off of unabsorbed depreciation - Held that - This decision of the Hon ble Gujarat High Court has been followed in several decisions rendered by the Co-ordinate Benches of the Tribunal. Respectfully following the ratio of Hon ble Gujarat High Court, we direct the AO to allow the set off of unabsorbed depreciation pertaining to the A.Y. 1997-98 to 2000-01 in the respective A.Ys. 2005-06 to 2008-09 in accordance with the decision of General Motors India Pvt. Ltd. (2012 (8) TMI 714 - GUJARAT HIGH COURT ). Accordingly, the ground raised by the assessee in all the appeals are treated as allowed.

Summary

Issues:
Sole issue raised in grounds of appeal: Whether unabsorbed depreciation for specific years has lapsed under section 32(2) and will not be available for set off.

Detailed Analysis:

1. Background and AO's Decision:
The Assessee, engaged in trading diamonds, challenged the AO's decision regarding unabsorbed depreciation set off. The AO disallowed carrying forward unabsorbed depreciation for years where 8 years had lapsed. The Ld. CIT(A) directed AO to allow set off per law but upheld the disallowance based on a Special Bench decision in Times Guarantee Ltd.

2. Assessee's Argument and Legal Precedents:
Assessee argued against the Special Bench decision citing a Gujarat High Court ruling in General Motors India Pvt. Ltd. The Gujarat HC clarified that post-amendment by Finance Act 2001, unabsorbed depreciation could be carried forward without an 8-year limit. Co-ordinate Benches in Mumbai Tribunal followed this ruling.

3. Adjudication and Conclusion:
The Tribunal analyzed the AO and Ld. CIT(A) findings based on the Special Bench decision. Referring to the Gujarat HC ruling, the Tribunal held that unabsorbed depreciation from specific years should be allowed for carry forward and set off without any limit. The Tribunal directed the AO to follow the General Motors India Pvt. Ltd. judgment, allowing the set off of unabsorbed depreciation for the relevant years.

4. Final Decision and Other Grounds:
The Tribunal allowed the Assessee's appeals partly, directing the AO to permit the set off of unabsorbed depreciation for the specified years. Other grounds related to lack of opportunity and non-consideration of submissions were dismissed as they were not argued. The appeals were treated as partly allowed, with the order pronounced on March 25, 2015.

In conclusion, the Tribunal's decision aligned with the Gujarat HC ruling, ensuring the Assessee's unabsorbed depreciation for specific years could be carried forward and set off without any time limit, contrary to the earlier Special Bench decision.