2017 (5) TMI 155 - AT - Income Tax

Set-off of unabsorbed depreciation - scope of rectification u/s 154 - whether the unabsorbed depreciation, which remained to be adjusted beyond Assessment Year 2001-02, be allowed to set off in perpetuity or the maximum period is 8 years? - Held that- whether or not the amendment to Sec. 32 of the Act, has prospective or retrospective effect on the application of the current year s depreciation and unabsorbed business loss and depreciation for the purpose of computation of income tax, is a disputed question of law and the Hon ble Supreme Court in the case of T.S. Balram vs Wockhardt Brothers 1971 (8) TMI 3 - SUPREME Court has held that such disputed questions do not fall in the category of mistake apparent from record , as such, such matters will not be available for rectification u/s 154 of the Act. Placing reliance on the decision of the jurisdictional High Court in the case of General Motor India 2012 (8) TMI 714 - GUJARAT HIGH COURT , the ld. CIT(A) held that Any unabsorbed depreciation available to the 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, and 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. The ld. CIT(A) was perfect in his reasoning basing on the binding precedents and we do not see any illegality or irregularity in the finding reached by ld. CIT(A) on this aspect - appeal dismissed - decided against Revenue.

Summary

Issues involved:
- Interpretation of unabsorbed depreciation adjustment period beyond Assessment Year 2001-02

Analysis:
1. The appeals challenged orders passed by the Commissioner of Income Tax (Appeals) regarding unabsorbed depreciation adjustment for Assessment Years 2007-08 and 2008-09.
2. The main issue was whether unabsorbed depreciation beyond 2001-02 should be allowed to set off in perpetuity or limited to 8 years.
3. The Assessing Officer rectified a mistake under Section 154 of the Income Tax Act, disallowing unabsorbed depreciation from 1999-2000.
4. The Commissioner held that the disallowance was not a mistake and allowed carry forward of unabsorbed depreciation without any limit based on the Finance Act, 2001.
5. The Revenue appealed, arguing that the Commissioner's decision was incorrect and that unabsorbed depreciation should be limited to 8 years.
6. The argument presented was that the issue required deliberation and did not fall under the category of a mistake apparent from the record for rectification under Section 154.
7. The Commissioner relied on legal precedents and held that the disputed issue did not qualify for rectification under Section 154, allowing carry forward of unabsorbed depreciation without any limit.
8. The Tribunal confirmed the Commissioner's decision, stating that the reasoning was impeccable based on binding precedents, and dismissed the Revenue's appeals.

This detailed analysis covers the interpretation of unabsorbed depreciation adjustment beyond Assessment Year 2001-02, addressing the arguments presented by both parties and the legal basis for the decision reached by the Tribunal.