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2019 (6) TMI 731 - AT - Income TaxRectification of mistake u/s 154 - assessee was allowed set off of unabsorbed depreciation for A.Y 2001-02 which was not allowable as the time limit of 8 years for set off has lapsed as per the provision of section 32(2)(iii) - HELD THAT - The issue is therefore no more res integra and following the legal proposition so laid down, in the instant case, unabsorbed depreciation for AY 2001-02 and earlier years got carried forward to AY 2002-03 and becomes part thereof and will be governed by the provisions of section 32(2) as amended by the Finance Act, 2001 and will be available for carry forward and set off against the profits and gains of subsequent years including the impunged assessement year 2015-16. See M/S EMGEE CABLES COMMUNICATIONS LTD. 2017 (5) TMI 716 - ITAT JAIPUR , M/S. GINNI INTERNATIONAL LTD. 2018 (1) TMI 246 - RAJASTHAN HIGH COURT , GENERAL MOTORS INDIA PVT. LTD 2012 (8) TMI 714 - GUJARAT HIGH COURT and BRITISH MOTOR CAR CO. (1934) LTD. 2018 (1) TMI 547 - DELHI HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Whether the order under Section 154 passed by the AO is sustainable in law. 2. Whether unabsorbed depreciation from AY 2001-02 and earlier years can be set off in AY 2015-16 despite the time limit of 8 years for set off having lapsed. Detailed Analysis: Issue 1: Order under Section 154 The assessee challenged the order under Section 154 passed by the AO, arguing that there was no "mistake apparent from record" within the meaning of Section 154 of the Income Tax Act, 1961. The AO had issued a notice under Section 154 to rectify the mistake that allowed the set-off of unabsorbed depreciation of ?15,34,000 for AY 2001-02, which was not allowable as the 8-year time limit for set-off had lapsed according to Section 32(2)(iii) of the Act. The AO rejected the assessee's contention that the restriction of 8 years had been dispensed with by the amendment to Section 32(2) by the Finance Act, 2001, and clarified by Circular No. 14/2001. The AO held that the amended provisions were applicable from AY 2002-03 and subsequent years, thus denying the set-off of unabsorbed depreciation for AY 2001-02 and earlier years. Issue 2: Set-off of Unabsorbed Depreciation The assessee argued that the matter was covered by the decision of the Hon'ble Gujarat High Court in General Motors India vs. DCIT (2013) 354 ITR 244, which held that unabsorbed depreciation could be carried forward and set off in subsequent years without any time limit. This position was further supported by the Hon'ble Jurisdictional High Court in Pr. CIT, Alwar vs. M/s Ginni International Ltd., Alwar, where the SLP filed by the Department was dismissed by the Hon'ble Supreme Court of India. Similar views were taken by the Coordinate Bench in ACIT vs. Emgee Cables & Communication Ltd. and by the ld. CIT(A)-4, Jaipur in another case. The Tribunal noted that the matter was undisputedly covered in favor of the assessee by the decisions of the Hon'ble Gujarat High Court and the Hon'ble Rajasthan High Court. The Tribunal referred to the decision in ACIT vs. Emgee Cables & Communication Ltd., where it was held that the amended Section 32(2) by the Finance Act, 2001, would apply to unabsorbed depreciation from AY 2000-01 and AY 2001-02, allowing it to be carried forward and set off without any time limit. The Tribunal cited the Hon'ble Gujarat High Court's detailed analysis, which clarified that the amendment to Section 32(2) by the Finance Act, 2001, intended to allow unabsorbed depreciation from AY 1997-98 to AY 2001-02 to be carried forward indefinitely. The amendment aimed to enable the industry to conserve funds for replacing plant and machinery, thus dispensing with the 8-year restriction for carry forward and set off of unabsorbed depreciation. Following these precedents, the Tribunal concluded that unabsorbed depreciation for AY 2001-02 and earlier years could be carried forward to AY 2002-03 and subsequent years, including AY 2015-16, without any time limit. Therefore, the assessee's claim for set-off of unabsorbed depreciation for AY 2001-02 in AY 2015-16 was allowed. Conclusion: In light of the above discussions and the entirety of facts and circumstances, the Tribunal decided in favor of the assessee and against the Revenue for both appeals. The order pronounced in the open Court on 31/05/2019 allowed both appeals of the respective assessees.
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