2012 (1) TMI 324 - AT - Income Tax

Summary

Issues Involved:
The appeal filed by the Revenue against the order of the ld. CIT(A) XII, Chennai dated 27.07.2011 for the assessment year 2003-04 regarding the claim of brought forward depreciation losses from the assessment years 1983-84 to 1995-96 and their set off against the business profits of the current assessment year.

Issue 1: Claim of Brought Forward Depreciation Losses

The Revenue contended that the ld. CIT(A) erred in allowing the claim of brought forward depreciation losses from the assessment years 1983-84 to 1995-96 and their set off against the business profits of the current assessment year 2003-04, citing the time limit for carry forward and set off for unabsorbed depreciation losses expiring in the assessment year 2001-02.

The ld. CIT(A) observed that the unabsorbed depreciation losses computed for assessment years up to 1993-94 do not lapse by the assessment year 2001-02 due to the provisions of sec.32(2) of the Income Tax Act. The circular No.762 dt. 18.02.1998 issued by the CBDT clarified that the unabsorbed depreciation of A.Y. 1996-97 will be added to the depreciation allowance of A.Y. 1997-98, extending the period of limitation to start from A.Y. 1997-98.

The decision was supported by the Hon'ble Madras High Court in the case of CIT v. Pioneer Asia Packing (P) Ltd. The ld. CIT(A) held that the assessee is entitled to carry forward unabsorbed depreciation allowance from A.Y. 1997-98 to A.Y. 2003-04 and set it off against the income of A.Y. 2003-04, in line with the decision in CIT vs. S & S Power Switchgear Ltd. (218 CTR 701)(Mad).

Conclusion:
The appeal of the Revenue was dismissed as the ld. CIT(A) correctly allowed the claim of brought forward depreciation losses based on the provisions of sec.32(2) and the CBDT circular, supported by the decision of the Hon'ble Madras High Court.