2017 (6) TMI 549 - AT - Income Tax

Set-off of carry forward depreciation of earlier years - Held that - As in the case of General Motors India P. Ltd., Vs. Dy. Commissioner of Income Tax 2012 (8) TMI 714 - GUJARAT HIGH COURT 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:
Set-off of carry forward depreciation of earlier years.

Analysis:
The judgment involves four appeals by the assessee against similar orders for the assessment years 2009-10 and 2010-11. The Commissioner of Income Tax (Appeals) considered both appeals preferred on orders under sections 143(1) and 154 of the Income Tax Act. The common issue in all four appeals is the set-off of carry forward depreciation of earlier years. The returns processed mechanically by the Central Processing Centre did not allow the set-off depreciation due to deficiencies in placing the claims in respective columns. The assessee's application under section 154 was rejected, leading to appeals on both intimation under section 141 and order under section 154 for each assessment year. The only issue taken up for further appeal was the set-off of depreciation. The CIT(A) directed the Assessing Officer to examine the contentions and claim of the assessee and allow the set-off of unabsorbed depreciation, subject to certain limitations. The CIT(A) analyzed the provisions of Section 32(2) as amended by the Finance Acts of 1996 and 2001, directing that the depreciation for AY 1997-98 remaining unabsorbed will not be carried forward beyond eight years, which the assessee contested.

The judgment referred to the decision of the Hon'ble Gujarat High Court in General Motors India P. Ltd. v. Dy. Commissioner of Income Tax, which held that unabsorbed depreciation can be carried forward without any restriction. It emphasized that the amendment through the Finance Act of 2001 removed the restriction of eight years for carrying forward unabsorbed depreciation. The judgment also cited the case of Motor and General Finance Ltd. v. Income Tax Officer and Another, which stated that the amendment by the Finance Act of 2002 removed the cap on carrying forward depreciation, allowing for unlimited carry forward from April 1, 2002. Based on these judicial pronouncements and the Co-ordinate Bench decision, the Tribunal held that the assessee is entitled to set-off unabsorbed depreciation from 1997-98 to 2001-02 without the restriction of eight years. The Assessing Officer was directed to modify the orders accordingly if not already done. Consequently, all appeals were allowed, and the order was pronounced on June 9, 2017.