2017 (4) TMI 1382 - HC - Income Tax

The appeal is, therefore, admitted on the following substantial questions of law (1) Whether on the facts and circumstances of the case and in law, the Hon ble ITAT was justified in directing the Assessing Officer to allow carry forward and set-off of unabsorbed depreciation of A.Y. 1997-98 to 1998-99 against the profits of A.Y. 2008-09 without appreciating that as per the provisions of Section 32(2) as they stood prior to the amendment by Finance Act, 2001 w.e.f. 01.04.2002, such unabsorbed depreciation was eligible for carry forward and set-off against business profits only for a further period of appreciating that though the Hon ble Supreme Court has dismissed the Department s SLP, it has neither upheld the Hon ble High Court s view nor answered the Revenue s question?

Summary

Issues Involved:
1. Justification of ITAT's direction to allow carry forward and set-off of unabsorbed depreciation.
2. Interpretation of Section 32(2) prior to the amendment by Finance Act, 2001.
3. Impact of Supreme Court's dismissal of Department's SLP on the High Court's view.

Analysis:

1. Justification of ITAT's direction: The High Court considered whether the ITAT was justified in directing the Assessing Officer to allow carry forward and set-off of unabsorbed depreciation of A.Y. 1997-98 to 1998-99 against the profits of A.Y. 2008-09. The Court noted that the ITAT's decision was based on treating similar questions as substantial questions of law and admitting the appeal on those grounds.

2. Interpretation of Section 32(2): The Court delved into the interpretation of Section 32(2) as it stood prior to the amendment by the Finance Act, 2001 w.e.f. 01.04.2002. It examined whether unabsorbed depreciation was eligible for carry forward and set-off against business profits only for a further period, considering the provisions before the mentioned amendment. The Court analyzed the implications of the pre-amendment provisions and their application to the case at hand.

3. Impact of Supreme Court's dismissal: The judgment also addressed the impact of the Supreme Court's dismissal of the Department's SLP. It highlighted that the dismissal did not explicitly uphold the High Court's view nor answer the Revenue's question. This aspect added a layer of complexity to the case, requiring a thorough examination of the legal implications of the Supreme Court's decision on the matter.

In conclusion, the High Court's judgment involved a detailed analysis of the ITAT's direction regarding the carry forward and set-off of unabsorbed depreciation, the interpretation of Section 32(2) before the 2001 amendment, and the implications of the Supreme Court's dismissal of the Department's SLP. The Court's decision encompassed a nuanced understanding of the legal provisions and their application to the specific circumstances of the case, highlighting the complexities involved in tax law interpretation and judicial decision-making.