2019 (7) TMI 124 - AT - Income Tax

Carry forward of unabsorbed depreciation - restriction of eight years - HELD THAT - The CBDT Circular No. 14 of 2001 has clarified that the restriction of eight years for carry forward and set off of depreciation has been dispensed with. Assessee has brought to our notice that the Special Bench decision 2010 (6) TMI 516 - ITAT, MUMBAI has been reversed by the Hon ble Bombay High Court. In appeal titled Times Guarantee Limited Vs. DDIT (supra), after considering the decision in the case of CIT Vs. Hindustan Unilever Pvt. Ltd. 2016 (7) TMI 1245 - BOMBAY HIGH COURT decided the issue in favour of assessee/appellant. Thus, the decision of Special Bench in case of Times Guarantee Limited does not hold water as on today. Claim of carry forward of unabsorbed business loss of amalgamating company and set off of the same against business income of assessee - HELD THAT - The provisions of section 72A(2) lays down certain conditions to be complied with before the accumulated loss/unabsorbed depreciation of amalgamating company are carried forward and set off against the business income of amalgamated company. A perusal of order dated 12-04-2013 passed by the AO giving effect is ambiguous in specifying the conditions as envisaged u/s. 72A(2) that are not complied with. Similarly, in the impugned order the findings of CIT (Appeals) are cryptic on this issue. It is not emanating either from the order of AO or from the order of CIT(Appeals) the conditions set out u/s. 72A that have been complied/not complied by the assessee. Assessee has brought to our notice that the Revenue is approaching the BIFR for modification of scheme for which the liberty has been granted by the Hon ble Apex Court. Thus, we deem it appropriate to restore this issue to the file of AO to decide the same afresh by passing speaking order after considering the revised directions of BIFR, if any and after affording reasonable opportunity of hearing to the assessee, in accordance with law. Hence, ground No. 2 of the appeal is allowed for statistical purpose. Addition on account of depreciation on non compete fees - no claim of deprecation was made in return - HELD THAT - Assessee in return of income for the impugned assessment year has not claimed deduction in respect of depreciation on non compete fees (intangible asset). The assessee raised claim of depreciation on intangible asset by placing reliance on the order of CIT (A) for assessment year 2006-07 in First Appellate proceedings. The assessee s claim was rejected. AO while giving effect to the order of CIT (Appeals) made addition of the claim made by assessee without realizing the fact that no such claim was made in return of income and the claim made during First Appellate stage was rejected. Since, the claim was not made in the return of income, no addition was warranted. We find merit in the submissions of assessee. The findings of CIT (A) in deleting the addition are upheld and ground No. 3 of the appeal by the Revenue is dismissed sans merit.

Summary

Issues Involved:
1. Carry forward of unabsorbed depreciation for assessment years 1993-94 to 1999-2000.
2. Carry forward of unabsorbed business loss of amalgamating company M/s. Orient Vegetexpro Limited.
3. Depreciation claim on non-compete fees (intangible asset).

Detailed Analysis:

1. Carry forward of unabsorbed depreciation for assessment years 1993-94 to 1999-2000:
The Revenue contested the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] allowing the assessee to carry forward unabsorbed depreciation amounting to ?131,63,54,679/- for the assessment years 1993-94 to 1999-2000. The Assessing Officer (AO) had disallowed this based on the Mumbai Tribunal's decision in the case of Times Guaranty Limited. However, the CIT(A) granted relief to the assessee by following the Gujarat High Court's decision in General Motors India (P.) Ltd. v. Deputy Commissioner of Income Tax, which allowed unabsorbed depreciation to be carried forward beyond eight years. The Tribunal noted that the Special Bench decision in Times Guaranty Limited had been reversed by the Bombay High Court, thus supporting the CIT(A)'s decision. Consequently, the Tribunal dismissed this ground of appeal by the Revenue.

2. Carry forward of unabsorbed business loss of amalgamating company M/s. Orient Vegetexpro Limited:
The Revenue challenged the CIT(A)'s decision to allow the assessee to carry forward unabsorbed business loss amounting to ?8,24,94,154/- of the amalgamating company M/s. Orient Vegetexpro Limited. The AO had rejected this claim, stating that the conditions under section 72A(2) of the Income Tax Act were not fulfilled. The CIT(A) allowed the claim without detailed findings. The Tribunal observed that the AO's order was ambiguous regarding the specific conditions not met under section 72A(2). Given that the Revenue was seeking modification of the scheme from the BIFR as per the Supreme Court's directions, the Tribunal restored this issue to the AO for a fresh decision, considering any revised directions from the BIFR.

3. Depreciation claim on non-compete fees (intangible asset):
The Revenue disputed the deletion of an addition of ?18,28,125/- on account of depreciation on non-compete fees. The assessee had not claimed this depreciation in the return of income but raised it during the appellate proceedings based on the CIT(A)'s order for the assessment year 2006-07. The AO, while giving effect to the CIT(A)'s order, added this amount, misunderstanding that the claim was not made in the return of income. The Tribunal found merit in the assessee's submission that since no such claim was made in the return, no addition was warranted. The Tribunal upheld the CIT(A)'s decision to delete the addition.

Conclusion:
The Tribunal dismissed the Revenue's appeal regarding the carry forward of unabsorbed depreciation and the depreciation claim on non-compete fees. However, it restored the issue of carry forward of unabsorbed business loss of the amalgamating company to the AO for a fresh decision, considering any revised directions from the BIFR. The appeal was partly allowed for statistical purposes.