2017 (7) TMI 1407 - AT - Income Tax

Disallowance of set off of unabsorbed depreciation pertaining to the earlier year - HELD THAT - Hon ble Gujarat High Court in the case of General Motor (India) Pvt. Ltd. 2012 (8) TMI 714 - GUJARAT HIGH COURT as held that after the amendment made vide the Finance Act, 2001, the balance of unabsorbed depreciation revived back into life and became eligible for carry forward and set off along with other parts of unabsorbed depreciation available to the credit of the assessee. This issue is thus squarely thus covered in favour of the assessee by the said decision of Hon ble Gujarat High Court and in the absence of any contrary decision, brought to our notice that the learned DR which is in favour of the revenue on this issue, we respectfully follow the same and uphold the impugned order of the Ld. CIT(A) allowing the claim of the assessee for set off of unabsorbed depreciation pertaining to A.Y. 1997-08 to 2000-01. Disallowance of provisions made for non-moving/obsolete stock and spares - HELD THAT - Altogether new stand was taken by the assessee before the Ld. CIT(A) that the provision for non-moving/obsolete stock and spares to the extent of ₹ 2,80,01,392/- actually pertained to the difference in physical and book stock as found on physical verification - As submitted that this new stand taken by the assessee for the first time before him however, was accepted by the Ld. CIT(A) without giving any opportunity to the AO to verify the same and this position clearly evident from the impugned order of the Ld. CIT(A) is not disputed even by the learned counsel for the assessee. We, therefore, consider it fair and proper and in the interest of justice to set aside the impugned order of the Ld. CIT(A) and on this issue the matter to the file of the AO for deciding the same afresh after verifying the stand of the assessee that the provision for non-moving/obsolete stock and spares actually was on account of difference in physical and book stock as found on physical verification. Ground No. 2 and 3 of the revenue s appeal are accordingly treated as allowed as statistical purposes.

Summary

Issues Involved:
1. Deletion of addition made by AO on account of disallowance of claim for set off of unabsorbed depreciation.
2. Deletion of addition made by AO on account of disallowance of provisions for non-moving/obsolete stock and spares.

Analysis:

Issue 1: Deletion of addition made by AO on account of disallowance of claim for set off of unabsorbed depreciation:
The appeal was filed by the revenue against the order of Ld. CIT(A) regarding the deletion of addition made by the AO on account of disallowance of the claim for set off of unabsorbed depreciation. The AO disallowed the claim for set off of unabsorbed depreciation pertaining to earlier years. However, the Ld. CIT(A) deleted the disallowance and allowed the claim based on the decision of the Hon'ble Gujarat High Court. The ITAT Kolkata upheld the decision of the Ld. CIT(A) citing the amendment made in the Finance Act, 2001, which allowed the balance of unabsorbed depreciation to be carried forward and set off. Since there was no contrary decision in favor of the revenue, the ITAT Kolkata dismissed the Revenue's appeal.

Issue 2: Deletion of addition made by AO on account of disallowance of provisions for non-moving/obsolete stock and spares:
The AO disallowed the provision made by the assessee for non-moving/obsolete stock and spares, considering it as a contingent liability. The Ld. CIT(A) allowed the claim of the assessee for deduction on this issue. The ITAT Kolkata noted that the Ld. CIT(A) accepted a new stand taken by the assessee without giving an opportunity to the AO to verify it. Therefore, the ITAT Kolkata set aside the Ld. CIT(A)'s order and remanded the matter to the AO for fresh consideration after verifying the stand of the assessee regarding the provision for non-moving/obsolete stock and spares. The Revenue's appeal was treated as partly allowed for statistical purposes.

In conclusion, the ITAT Kolkata upheld the deletion of the addition made by the AO on the claim for set off of unabsorbed depreciation based on the decision of the Hon'ble Gujarat High Court. However, the ITAT Kolkata remanded the issue of provisions for non-moving/obsolete stock and spares back to the AO for fresh consideration.