2016 (3) TMI 1297 - AT - Income Tax

Carry forward of unabsorbed depreciation - Held that - Unabsorbed depreciation of AY.1997-98 could be allowed to be carry forward and set off after a period of 8 years in view of the amended section 32(2) of the Act. Respectfully following case of General Motors (I) Pvt.Ltd. 2012 (8) TMI 714 - GUJARAT HIGH COURT we uphold the order of the FAA in allowing carry forward - Decided in favour of assessee.

Summary

Issues Involved:
1. Carry forward of unabsorbed depreciation.
2. Re-opening of the assessment under section 147 of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Carry Forward of Unabsorbed Depreciation:

The primary issue in this case revolves around the carry forward of unabsorbed depreciation. The assessee-company filed its return of income declaring total income at NIL after setting off brought forward losses of earlier years. The Assessing Officer (AO) reopened the assessment under section 148 and completed it under section 143(3) read with section 147, determining the income at NIL but disallowed the carry forward of unabsorbed depreciation amounting to ?1.17 crores for Assessment Years (AY) 1997-98 to 1999-2000, citing the restriction of carrying forward depreciation for more than 8 years as per the decision in the case of Times Guarantee Ltd.

The assessee appealed to the First Appellate Authority (FAA), arguing that the unabsorbed depreciation should be allowed to be carried forward beyond 8 years as per the Gujarat High Court’s decision in the case of General Motors India (P) Ltd. The FAA agreed with the assessee, holding that the restriction of 8 years was dispensed with from AY 2002-03, and unabsorbed depreciation from AY 1997-98 to AY 2001-02 became part of AY 2002-03 and could be carried forward indefinitely. The FAA relied on the Gujarat High Court’s judgment and other Tribunal decisions, allowing the appeal in favor of the assessee.

The Departmental Representative supported the AO’s order, while the Authorized Representative referred to various cases supporting the assessee’s stance, including General Motors (I) Ltd. and Bajaj Hindustan Ltd.

Upon reviewing the submissions, the Tribunal upheld the FAA’s order, citing the Gujarat High Court’s detailed judgment which clarified that unabsorbed depreciation available on 1st April 2002 would be governed by the amended section 32(2) of the Act, allowing it to be carried forward indefinitely without any time limit. The Tribunal noted that various Benches had followed this judgment, and thus, the carry forward and set off of unabsorbed depreciation beyond 8 years was permissible.

2. Re-opening of the Assessment under Section 147:

The last ground of appeal concerned the reopening of the assessment under section 147. The FAA had held that the reopening was bad in law. However, since the Tribunal decided the primary issue on merits, it did not adjudicate the jurisdictional issue of reopening, treating it as infructuous.

Conclusion:

The appeal filed by the AO was dismissed. The Tribunal upheld the FAA’s decision, allowing the carry forward of unabsorbed depreciation beyond 8 years, in line with the Gujarat High Court’s judgment in the case of General Motors (I) Pvt. Ltd. The issue of reopening the assessment was not adjudicated, as it was rendered infructuous by the decision on merits.

Order Pronouncement:

The order was pronounced in the open court on 30th March 2016.