2019 (8) TMI 463 - HC - Income Tax

Carry forward of unabsorbed depreciation beyond the period of eight assessment years - HELD THAT - The questions of law as proposed by the Revenue are no longer res integra in view of the decision of this Court in the case of General Motors India Pvt. Ltd. vs. Dy CIT 2012 (8) TMI 714 - GUJARAT HIGH COURT , held that 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 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. The decision in General Motors India Pvt. Ltd. (supra), later came to be followed by this Court in the case of Pr. CIT v. Panchmahal Steel Ltd. 2018 (9) TMI 1815 - GUJARAT HIGH COURT . The SLP preferred by the Revenue before the Supreme Court 2019 (4) TMI 225 - SC ORDER against the order passed in Panchmahal Steel Ltd (supra) has been dismissed

Summary

Issues:
1. Carry forward of unabsorbed depreciation beyond the specified period under section 32(2)(iii)(b) of the Income Tax Act, 1961.
2. Allowance of carry forward of unabsorbed depreciation without setting a time limit.

Analysis:
The Tax Appeal under Section 260-A of the Income Tax Act, 1961 was filed by the Revenue against the order of the Income Tax Appellate Tribunal, Surat Bench, Surat, for the Assessment Year 2007-08. The substantial questions of law proposed by the Revenue revolved around the allowance of carry forward of unabsorbed depreciation beyond the stipulated eight assessment years and the absence of a time limit for setting off unabsorbed depreciation. The Court referred to the decision in the case of General Motors India Pvt. Ltd. vs. Deputy Commissioner of Income-Tax, where it was established that unabsorbed depreciation could only be carried forward up to a maximum of eight years from the year in which it was first computed, as per the provisions of section 32(2) of the Act. This interpretation was further affirmed in the case of Principal Commissioner of Income-tax v. Panchmahal Steel Ltd.

The Court noted that the questions of law raised by the Revenue were no longer res integra in light of the precedents set by previous judgments. Specifically, the decision in General Motors India Pvt. Ltd. clarified the limitations on carrying forward unabsorbed depreciation beyond the prescribed period. It was emphasized that the unabsorbed depreciation for a particular assessment year could not be set off against income beyond the maximum period of eight years from the year in which it was initially computed. The Court also highlighted that the Supreme Court had dismissed the Special Leave Petition (SLP) filed by the Revenue against a similar decision in the case of Panchmahal Steel Ltd., further solidifying the legal position on the matter.

Consequently, the Court concluded that the Tax Appeal failed to present any new grounds or arguments that deviated from the established legal principles laid down in previous judgments. As a result, the appeal was dismissed, affirming the decision of the Income Tax Appellate Tribunal and upholding the limitations on the carry forward and set off of unabsorbed depreciation as per the provisions of the Income Tax Act, 1961.