2015 (5) TMI 186 - AT - Income Tax

Claim of brought forward of unabsorbed depreciation - change in shareholding - applicability of restriction u/s 79 - Carry forward losses already exhausted - Held that - Assessee is not carrying forward and setting off any loss but has unabsorbed depreciation, which is guided by the provisions of section 32(2) and not section 79. In view of the factual position on record of the AO, the submissions made before the undersigned and in view of the ratio laid down in the case of Subhulaxmi Mills Ltd. 1995 (9) TMI 2 - SUPREME Court by the Hon'ble Supreme Court the grounds of appeal are allowed. The AO is directed to allow the appellant the claim of set off of carried forward unabsorbed depreciation - Decided against Revenue.

Summary

Issues:
Appeal against the allowance of brought forward unabsorbed depreciation.

Analysis:
The Revenue filed an appeal against the order of the Ld. CIT(A) allowing the claim of brought forward unabsorbed depreciation. The Revenue contended that the claim was not allowable under section 79 of the Income Tax Act, 1961, due to the exhaustion of carry forward losses and a change in shareholding. On the other hand, the assessee argued that the brought forward losses were specifically related to unabsorbed depreciation and not general business losses, hence, section 79 was not applicable. The assessee relied on the decision of the Hon'ble Supreme Court in CIT Vs. Shubh Laxmi Mills Ltd. to support their position. Various High Courts, including Kerala and Madras, had also followed the Supreme Court's interpretation. The ITAT examined the arguments presented by both parties and reviewed the relevant case laws.

The ITAT found that the Ld. CIT(A) had investigated the matter thoroughly and determined that the carry forward loss was indeed due to unabsorbed depreciation and not general business losses. Citing the precedent set by the Hon'ble Supreme Court in CIT Vs. Subhlaxmi Mills Ltd., the ITAT agreed that section 79 of the Income Tax Act applied only to carry forward and set off of losses, not to unabsorbed depreciation. The Ld. CIT(A) had carefully considered the facts and legal principles involved, leading to the conclusion that section 79 was not applicable in this case. The ITAT upheld the decision of the Ld. CIT(A) and dismissed the appeal filed by the Revenue.

In conclusion, the ITAT affirmed the order of the Ld. CIT(A) regarding the allowance of the claim for brought forward unabsorbed depreciation. The decision was based on a thorough analysis of the facts, legal provisions, and relevant case laws, including the interpretation provided by the Hon'ble Supreme Court. The ITAT found no errors in the Ld. CIT(A)'s decision and therefore rejected the Revenue's appeal.