2018 (12) TMI 1687 - AT - Income Tax

Carry forward of unabsorbed depreciation - claim of set-off of carried forward depreciation brought forward from AY 95-96 to AY 2001-2002 - HELD THAT - Issue clearly covered by the decision of the Jurisdiction HC in Gujarat Themis Biosyn Ltd. 2014 (5) TMI 194 - GUJARAT HIGH COURT and General Motors 2012 (8) TMI 714 - GUJARAT HIGH COURT in favour of the assessee as it has clearly been held therein that in view of circular no. 14 of 2001 the unabsorbed depreciation for the intervening period of and from AY 95-96 to AY 2001-02 got carried forward to AY 02-03 and thereafter got merged therewith and became part thereof thus eligible for further and unrestricted carry forward . No error in the finding of CIT(A) holding that the assessee is held eligible for unlimited carry forward and set-off of depreciation as claimed subject however to the correct quantum and quantification of such carry forward on the basis of such claims made and allowed in respective returns of income filed for AY 1995-96 to 2001-02 to be properly verified by the AO. Therefore this ground of appeal of the revenue is dismissed. Fresh claim of business expenses - claim made for the first time in return u/s 153A - in original return same was considered as deferred revenue expenditure and 1/10th of deferred revenue expenditure were written off - HELD THAT - The provisions of the act which would be otherwise applicable in the case of an return filed in the regular course u/s. 139(1) would also continue to apply in the case of a return filed u/s. 153A. We are fully inclined with the findings of the CIT(A) that the claim made for the first time in return u/s 153A is arising out of the AO s own action of disallowance in subsequent years and is thus bona-fide and rightly made and clearly allowable in the facts and circumstances It is demonstrated from the detail of expenses that except ROC fees and listing expenses the expenses are revenue in nature and AO has not given any basis that the expenditure is capital in nature. After considering the above we are inclined with the Ld.CIT(A) that because of disallowing the original claim of deferred revenue expenses the assessee has rightly raised the alternate claim of expenses incurred during the year under consideration for the first time under 153A proceedings. In the light of the facts and circumstances we do not find any error in the decision of ld. CIT(A) therefore the same is dismissed.

Summary

Issues Involved:
1. Carry forward of unabsorbed depreciation.
2. Fresh claim of business expenses.

Detailed Analysis:

First Ground of Appeal: Carry Forward of Unabsorbed Depreciation of ?3,74,81,609/-

Facts and Proceedings:
- A search action under section 132 of the Income Tax Act was conducted on the assessee on March 28, 2012.
- The assessee filed its return of income on January 28, 2013, declaring total income at nil.
- The assessing officer (AO) noticed that the assessee claimed unabsorbed depreciation from previous years, including assessment years 1995-96 and 1996-97, and carried forward the entire depreciation loss of ?6,32,30,622/-.
- The AO determined that unabsorbed depreciation prior to assessment year 2003-04 could not be claimed after eight years, limiting the carry forward amount to ?2,57,49,013/- for assessment year 2007-08.

CIT(A) Decision:
- The CIT(A) allowed the claim of the assessee, stating that unabsorbed depreciation from assessment years 1995-96 to 2001-02, as per the amended section 32(2) effective from April 1, 2002, could be carried forward and set off without any time limit.
- The CIT(A) relied on the decisions of the Gujarat High Court in Gujarat Themis Biosyn Ltd. and General Motors India (P) Ltd., which held that unabsorbed depreciation from earlier years merged with the depreciation of assessment year 2002-03 and could be carried forward indefinitely.

Tribunal Findings:
- The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered by the jurisdictional High Court's rulings.
- The Tribunal cited the Gujarat High Court's decision in General Motors India (P) Ltd., which clarified that unabsorbed depreciation available as of April 1, 2002, could be carried forward indefinitely.
- The Tribunal also referenced the ITAT Ahmedabad's decision in Gujarat Lease Finance Ltd., which supported the assessee's claim.

Conclusion:
- The Tribunal dismissed the revenue's appeal, affirming that the assessee was eligible for unlimited carry forward and set-off of unabsorbed depreciation, subject to verification of the correct quantum by the AO.

Second Ground of Appeal: Fresh Claim of Business Expenses of ?62,11,877/-

Facts and Proceedings:
- The assessee incurred certain revenue expenses during the year, which were capitalized as deferred revenue expenditure and claimed as 1/10th from assessment year 2008-09 onwards.
- The AO disallowed these expenses, considering them as prior period expenses and rejecting the fresh claim made during the assessment proceedings under section 153A.
- The assessee argued that these expenses were of revenue nature and should be allowed as they were incurred for business purposes.

CIT(A) Decision:
- The CIT(A) allowed the claim, noting that the AO disallowed the deferred revenue expenses in subsequent years without proper justification.
- The CIT(A) concluded that the fresh claim was bona fide, arising from the AO's own disallowance, and should be allowed under section 37(1), except for ROC fees and listing expenses of ?1,19,212/- which were capital in nature.

Tribunal Findings:
- The Tribunal agreed with the CIT(A), stating that the AO had not provided a basis for considering the expenses as capital in nature.
- The Tribunal referenced the Bombay High Court's decision in CIT vs. B.G. Shirka Construction Technology Pvt. Ltd., which held that returns filed under section 153A should be treated as returns under section 139, allowing for fresh claims.
- The Tribunal found that the expenses were indeed revenue in nature and incurred for business purposes, and the fresh claim was rightly made under section 153A proceedings.

Conclusion:
- The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the fresh claim of business expenses, subject to the exclusion of ROC fees and listing expenses.

Final Judgment:
- All seven appeals (IT(SS)A Nos. 110 to 115 & 816/Ahd/2016) filed by the revenue were dismissed.
- The Tribunal pronounced the order in the open court on December 13, 2018.