2016 (7) TMI 30 - AT - Income Tax

Carry forward unabsorbed depreciation against the profits and gains of subsequent years without any limit - Held that - CIT (A) has rightly decided the issue in the light of the judgments of the Hon ble Gujarat High court in the case of General Motors (India) Pvt. Ltd. (2012 (8) TMI 714 - GUJARAT HIGH COURT ). Therefore, we do not see any reason to interfere with the order of ld. CIT (A) wherein held Any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the 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 upto 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 - Decided in favour of assessee

Summary

Issues:
1. Allowance of carry forward unabsorbed depreciation without limit.
2. Allowance of unabsorbed depreciation from earlier years against current income.
3. Right to amend grounds of appeal before hearing.

Analysis:

Issue 1:
The primary issue in this appeal concerns the direction to allow the carry forward of unabsorbed depreciation without any limit. The Revenue challenged the direction given by the ld. CIT (A) to permit the carry forward of unabsorbed depreciation of a specific amount against the Profits and Gains of subsequent years without imposing any limit. The ld. D/R supported the AO's decision, arguing against the direction. Conversely, the counsel for the assessee cited judgments from the Hon'ble Gujarat High Court in support of their position.

Issue 2:
The crux of the matter revolves around whether unabsorbed depreciation from an earlier assessment year can be carried forward and set off against the income of the current year without any restrictions. The ld. CIT (A) based their decision on judgments from the Hon'ble Gujarat High Court, specifically citing the cases of General Motors India Pvt. Ltd. vs. DCIT and Ausom Enterprises Ltd. vs. DCIT. The CIT (A) highlighted the amendments to Section 32(2) by the Finance Act, 2001, which allowed for the carry forward and set off of unabsorbed depreciation without a time limit, starting from the assessment year 2002-03.

The CIT (A) emphasized that the legislative intent behind the amendment was to enable businesses to conserve funds for replacing plant and machinery, thereby removing the previous restriction of eight years for carrying forward unabsorbed depreciation. The judgment clarified that unabsorbed depreciation from earlier years could be carried forward indefinitely and set off against future profits without any limitation. The CIT (A) concluded that the unabsorbed depreciation for the relevant assessment year should be governed by the amended provisions of Section 32(2) and be available for set off against subsequent years' profits without restrictions.

The Tribunal upheld the decision of the CIT (A), stating that the judgments of the Hon'ble Gujarat High Court were applicable to the present case. The Tribunal found no reason to interfere with the CIT (A)'s order and confirmed the allowance of the carry forward of unabsorbed depreciation without limit. Consequently, the appeal by the Revenue was dismissed.

Issue 3:
The third ground of appeal, which was general in nature, did not require specific adjudication, and hence, was not addressed in detail. The Tribunal pronounced the order confirming the dismissal of the Revenue's appeal based on the above analysis and legal interpretations.