2014 (10) TMI 1072 - AT - Income Tax

Brought forward depreciation - Disallowance made as unabsorbed depreciation can be carried forward only for eight assessment years - scope of Section 32 as amended by Finance Act 2001 - HELD THAT - As respectfully following the decision of General Motors India (P.) Ltd 2012 (8) TMI 714 - GUJARAT HIGH COURT hold that in the present case the unabsorbed depreciation is covered by the provisions of Section 32(2) of the Act, as amended by Finance Act, 2001 and is therefore available for carry forward and set off against the profits and gains of subsequent years. We, thus, allow this ground of the assessee.

Summary

Issues:
1. Re-opening of assessment under Section 148 of the Income-tax Act.
2. Disallowance of brought forward depreciation of Rs.16,04,96,163.
3. Recomputation of Net Short Term Capital Gain.

Issue 1: Re-opening of assessment under Section 148:
The appeal was filed against the order of the Commissioner of Income-tax (Appeals) confirming the re-opening of assessment under Section 148 of the Income-tax Act for the assessment year 2007-08. The assessee contended that the re-opening was not justified. The Tribunal did not adjudicate on this issue as it was decided in favor of the assessee based on the decision related to the carry forward of unabsorbed depreciation.

Issue 2: Disallowance of brought forward depreciation:
The Assessing Officer disallowed the claim of the assessee for carrying forward unabsorbed depreciation of Rs.16,04,96,163 under Section 32(2) of the Act. The Commissioner of Income-tax (Appeals) upheld the disallowance. The assessee argued that the amended Section 32(2) applied from April 1, 2002, and allowed for the carry forward of unabsorbed depreciation without any limit. The Tribunal referred to the decision of the Gujarat High Court in a similar case and held that the unabsorbed depreciation could be carried forward and set off against income of subsequent years. Consequently, this ground was decided in favor of the assessee.

Issue 3: Recomputation of Net Short Term Capital Gain:
The third ground raised by the assessee regarding the re-computation of Net Short Term Capital Gain was not pressed and hence did not require adjudication. The appeal was partly allowed based on the decision in favor of the assessee regarding the disallowance of brought forward depreciation.

In summary, the Tribunal ruled in favor of the assessee on the issue of disallowance of brought forward depreciation, allowing the unabsorbed depreciation to be carried forward and set off against income of subsequent years. The other issues related to the re-opening of assessment and re-computation of Net Short Term Capital Gain were either not adjudicated or not pressed, respectively.