2015 (5) TMI 223 - HC - Income Tax

Addition u/s 68 set off against unabsorbed depreciation - Held that - On considering the decision of the Hon'ble Supreme Court in case of D.P. Sandu Bros. Chembur (P) Ltd. (2005 (1) TMI 13 - SUPREME Court ) which is on the point no error has been committed by the Tribunal in dismissing the appeal confirming the order passed by the learned CIT (Appeals) holding and/or permitting the addition made under section 68 of the Act liable to be set off against unabsorbed depreciation. - Decided against revenue.

Summary

Issues:
1. Interpretation of Section 68 of the Income Tax Act, 1961 regarding the set off against unabsorbed depreciation.
2. Validity of the decision of the learned Tribunal and the learned CIT (Appeals) in allowing the set off of brought forward depreciation loss against income determined under Section 68 of the Act.
3. Conflict between the decision of the Hon'ble Supreme Court and the Division Bench of the High Court.

Analysis:
1. The case involved a dispute regarding the set off of unabsorbed depreciation against income determined under Section 68 of the Income Tax Act, 1961. The assessee had filed a return of income for AY 2004-2005 showing a total loss, and the assessment resulted in certain additions and disallowances. Subsequently, the case was reopened under section 147 of the Act, and the set off of brought forward depreciation loss was disallowed. The learned CIT (Appeals) allowed the set off, citing section 32 of the Act, which was upheld by the learned Tribunal.

2. The revenue, feeling aggrieved by the decision of the learned CIT (Appeals), appealed before the Tribunal. The Tribunal, relying on the decision of the Hon'ble Supreme Court in the case of CIT Vs. D.P. Sandu Bros. Chembur (P) Ltd., held that the amount deemed as income under Section 68 is assessable as income from other sources, allowing the set off against unabsorbed depreciation. The Tribunal's decision was based on the interpretation of Section 14 and Section 56 of the Income Tax Act, 1961.

3. The appellant heavily relied on a decision of the High Court in a previous case, but the Court noted the conflict between the High Court decision and the Supreme Court decision in the case of D.P. Sandu Bros. Chembur (P) Ltd. The Court emphasized that they are bound to follow the decision of the Hon'ble Supreme Court, which held that income deemed under Section 68 falls under the head 'income from other sources,' allowing for the set off of unabsorbed depreciation against it. Consequently, the Court found no error in the decision of the Tribunal and the learned CIT (Appeals).

4. Ultimately, the Court concluded that no substantial questions of law arose in the present tax appeal, leading to the dismissal of the appeal. The judgment confirmed the decision to allow the set off of brought forward depreciation loss against income determined under Section 68 of the Act, in line with the interpretation provided by the Hon'ble Supreme Court.

This detailed analysis of the judgment highlights the interpretation of Section 68, the application of relevant provisions, and the precedence set by the Supreme Court in resolving the dispute regarding the set off of unabsorbed depreciation.