2018 (2) TMI 1902 - HC - Income Tax

Set off of unabsorbed depreciation - carry forward of unabsorbed depreciation allowances even after completion of eight years - scope of amendment of section 32 (2) - HELD THAT - As decided in M/S. HINDUSTAN UNILEVER LTD 2016 (7) TMI 1245 - BOMBAY HIGH COURT CBDT circular No.14 of 2001 dated 22nd November, 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) as amended by the Finance Act of 2001. The Circular No.14 of 2001 issued by the CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001-02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002-03 onwards. Also see ACCURA POLYTECH P. LTD. 2017 (12) TMI 866 - GUJARAT HIGH COURT - no substantial question of law arises.

Summary

Issues:
1. Whether unabsorbed depreciation allowances can be worked out even after eight subsequent assessment years.
2. Whether the decision of a non-jurisdictional High Court can be relied upon to allow unabsorbed depreciation allowances.

Analysis:
1. The appellant contended that unabsorbed Depreciation Allowance could not be calculated after eight subsequent assessment years due to the amendment of Section 32(2) of the Finance Act, 2001. The respondent, however, relied on the judgment of the jurisdictional High Court in a similar case to argue that the issue was settled. The court noted that the Tribunal's decision was in line with the Gujarat High Court's ruling in General Motors India (P.) Ltd. v. Dy. CIT, which allowed unabsorbed depreciation to be set off if still unabsorbed on a specific date. The CBDT circular No. 14 of 2001 clarified the treatment of unabsorbed depreciation, removing the eight-year restriction. As no conflicting decision was presented, the court found no merit in the appellant's argument and dismissed the appeal.

2. The court referenced another judgment by the Gujarat High Court in Principal Commissioner of Income-tax v. Accura Polytech (P.) Ltd., which supported the allowance of unabsorbed depreciation beyond eight years. Based on the consistent legal position established by the Gujarat High Court and the CBDT circular, the court concluded that no substantial question of law arose in the present case. Consequently, the Income Tax Appeal was dismissed, and no costs were awarded.