2013 (7) TMI 974 - AT - Income Tax

Summary

Issues involved:
The judgment involves the issue of whether the assessee company is eligible for the claim of set off of brought forward losses pertaining to the assessment years 1988-89 to 2000-01, and specifically focuses on the interpretation of provisions related to unabsorbed depreciation u/s 32(2) of the Income Tax Act.

Details of the Judgment:

1. The Revenue appealed against the order of CIT(A)-III, Hyderabad for the assessment year 2007-08, challenging the excess claim of brought forward losses by the assessee. The AO disallowed the claim of set off of brought forward losses to the extent of Rs. 6,44,14,801/- pertaining to AYs 1988-89 to 2000-01. The AO held that the assessee is not eligible for the claim based on the legal position of unabsorbed depreciation in different periods.

2. The CIT(A) partially allowed the appeal, holding that the depreciation pertaining to assessment years 1999-2000 and 2000-01 is eligible for set off against the income for AY 2007-08 as it falls within a period of 8 assessment years. The AO was directed to recompute the depreciation accordingly, deciding the issue partly in favor of the appellant.

3. The assessee further appealed, arguing that unabsorbed depreciation up to assessment year 1998-99 should be allowed to be set off against the income of AY 2007-08. The counsel relied on the decision of the Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd. vs. DCIT [2012 - 25 Taxmann.com 364].

4. The Tribunal considered the arguments of both parties and referred to the decision of the Punjab & Haryana High Court and the Gujarat High Court. It was noted that the restriction of 8 years for carry forward and set off of unabsorbed depreciation has been dispensed with from AY 2002-03. The unabsorbed depreciation up to AY 2001-02 is governed by the earlier provisions of section 32(2), while the unabsorbed depreciation from AY 2002-03 could be set off by the assessee in AY 2007-08.

5. Consequently, the Tribunal directed the AO to consider the unabsorbed depreciation of the assessee from AY 2002-03 till AY 2006-07 to be set off in AY 2007-08, partially allowing the appeal of the assessee.

6. The judgment was pronounced in the open court on 31/07/2013 by the Appellate Tribunal ITAT Hyderabad, comprising Shri Chandra Poojari, Accountant Member, and Smt. Asha Vijayaraghavan, Judicial Member.