2018 (8) TMI 1805 - HC - Income Tax

Carry forward and set-off unabsorbed depreciation - whether unabsorbed depreciation was eligible for carry forward and set-off against business profits only for a further period of eight years? - HELD THAT - By a separate order in The Pr. CIT v/s. Associated Cables Pvt. Ltd. 2018 (8) TMI 521 - BOMBAY HIGH COURT wherein restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. No separate submissions specific to this appeal have been made by the Revenue. Therefore, for the reasons stated therein, the substantial questions raised in this appeal, have to be answered in favour of the Respondent-Assessee and against the Appellant-Revenue.

Summary

Issues:
1. Allowance of carry forward and setoff unabsorbed depreciation of A.Y. 1997-98 to 1998-99 against profits of A.Y. 2008-09.
2. Justification of the Tribunal's direction to allow carry forward and setoff unabsorbed depreciation of A.Y. 1997-98 to 1999-2000 against profits of A.Y. 2008-09.

Issue 1:
The High Court of Bombay, in the cited judgment, addressed the challenge under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (Tribunal) dated 31st December, 2013, concerning the Assessment Year 2008-09. The appeal questioned the Tribunal's decision to allow the carry forward and setoff of unabsorbed depreciation from Assessment Years 1997-98 to 1998-99 against the profits of the year 2008-09. The appellant contended that the Tribunal erred in directing the Assessing Officer to permit such setoff without considering the limitations imposed by Section 32(2) prior to the amendment by the Finance Act, 2001. The appellant argued that the unabsorbed depreciation was only eligible for carry forward and setoff against business profits for a further period of eight years. However, the High Court, after considering the arguments, dismissed the appeal in favor of the respondent-assessee. The court upheld the Tribunal's decision, thereby allowing the carry forward and setoff of unabsorbed depreciation as directed.

Issue 2:
In the same judgment, the High Court of Bombay also examined the justification of the Tribunal's direction to allow the carry forward and setoff of unabsorbed depreciation from Assessment Years 1997-98 to 1999-2000 against the profits of the year 2008-09. The appellant questioned the Tribunal's reliance on the decision in the case of General Motors India (P) Ltd. v/s. DCIT without acknowledging the Supreme Court's stance on the matter. The appellant argued that the Supreme Court neither upheld the High Court's view nor answered the Revenue's question, thus casting doubt on the validity of the Tribunal's decision. However, the High Court, after a thorough review, dismissed the appeal in line with its decision on the first issue. The court found in favor of the respondent-assessee, upholding the Tribunal's direction to allow the carry forward and setoff of unabsorbed depreciation against the profits of the relevant year. Consequently, the High Court dismissed the appeal, emphasizing that the substantial questions raised were to be answered in favor of the respondent and against the appellant.

This comprehensive analysis of the High Court of Bombay's judgment highlights the issues surrounding the allowance of carry forward and setoff of unabsorbed depreciation against profits for the relevant assessment year. The court's decision, based on the interpretation of relevant provisions and precedents, favored the respondent-assessee, ultimately leading to the dismissal of the appeal.