2021 (8) TMI 515 - HC - Income Tax

Period of limitation for carrying forward of Unabsorbed depreciation loss prior to assessment year - beyond the eight year period mandated under the provisions of Section 32 - HELD THAT - We find that the substantial questions of law, raised in the present appeal, were considered by this Court in the case of CIT vs. Sanmar Speciality Chemicals Ltd. 2020 (9) TMI 770 - MADRAS HIGH COURT 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 against the Revenue.

Summary

Issues:
Interpretation of provisions related to set off of unabsorbed depreciation against long term capital gains and other income.

Analysis:
The High Court of Madras heard an appeal filed by the Revenue challenging an order related to the set off of unabsorbed depreciation loss against long term capital gains for the assessment year 2007-08. The substantial questions of law raised in the appeal questioned the Tribunal's decision regarding the set off of unabsorbed depreciation loss from assessment years 1999-2000 to 2001-2002 against long term capital gains beyond the 8-year limit specified in the Income Tax Act. The Court referred to previous judgments, including one from the Bombay High Court, emphasizing the availability of unabsorbed depreciation for set off against income under any head, even without the condition of the same business continuity. The Court also cited a decision from the Punjab & Haryana High Court supporting the set off of unabsorbed depreciation against long term capital gains and other sources. Another judgment from the Bombay High Court favored the assessee, allowing the set off of unabsorbed depreciation against income under any head, including long term capital gains. The Court upheld the Tribunal's decision, citing the Gujarat High Court's ruling that unabsorbed depreciation available to an assessee on a specific date will be dealt with according to the relevant provisions, without any limit on carry forward and set off. Ultimately, the Court dismissed the tax case appeal, answering the substantial question of law against the Revenue and providing no costs.

This comprehensive analysis of the judgment highlights the interpretation of provisions related to the set off of unabsorbed depreciation against long term capital gains and other income, as discussed and decided by the High Court of Madras in this case.