2019 (3) TMI 2043 - AT - Income Tax

Time limit for set off of unabsorbed depreciation - AO observed that Sec. 32(2) does not permit depreciation to be carried forward for more than eight years - HELD THAT - As carefully considered the order passed by the Coordinate Bench in 2018 (4) TMI 1422 - ITAT AHMEDABAD as held restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y. 1997-98 up to the A.Y. 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. Thus carry forward of unabsorbed depreciation concerning impugned assessment years could be set off in subsequent years without any set time limit. See Gujarat Lease Finance Ltd 2017 (5) TMI 1555 - ITAT AHMEDABAD Decided in favour of the assessee.

Summary

Issues Involved:
1. Disallowance of depreciation under section 32.
2. Interpretation of provisions regarding carry forward of unabsorbed depreciation.
3. Application of judicial precedents in similar cases.

Analysis:

Issue 1: Disallowance of depreciation under section 32
The appeal by the Revenue was against the order deleting the disallowance of depreciation of Rs. 38,01,74,420 under section 32. The Assessing Officer (AO) disallowed the depreciation as the time limit for set off of business loss and unabsorbed depreciation had expired. However, the Commissioner of Income Tax (Appeals) allowed the claim based on the judgment of the High Court in a similar case. The Tribunal upheld the decision, referring to the amendment by Finance Act, 2001, which removed the restriction of 8 years for carry forward and set off of unabsorbed depreciation.

Issue 2: Interpretation of provisions regarding carry forward of unabsorbed depreciation
The Tribunal analyzed the provisions of section 32(2) as amended by Finance Act, 2001, and the Circular No. 14 of 2001 to allow the carry forward of unabsorbed depreciation beyond 8 years. It emphasized that the legislative intent was to enable businesses to conserve funds for replacing plant and machinery. The Tribunal held that unabsorbed depreciation from assessment year 1997-98 to 2001-02 could be carried forward without any time limit, as clarified by the circular.

Issue 3: Application of judicial precedents in similar cases
The Tribunal relied on the judgment of the High Court in cases like General Motors India Pvt. Ltd. vs. DCIT and CIT vs. Gujarat Themis Biosyn Ltd. to support its decision. The Tribunal also considered the decision of a Coordinate Bench in a similar case involving identical issues. Based on these precedents, the Tribunal dismissed the Revenue's appeal and upheld the order of the Commissioner of Income Tax (Appeals).

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the carry forward of depreciation, citing legislative intent, circular clarifications, and judicial precedents as the basis for its decision.