9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (2) TMI 159 - AT - Income TaxSet-off of unabsorbed depreciation pertaining to AYs 1997-98 to 1999-2000 - beyond the period of eight assessment years - CIT(A) reversed the stand of Ld. AO and held that the unabsorbed depreciation available to the assessee as on 01.04.2002 could be carry forward and set-off for any number of years - HELD THAT - Unabsorbed depreciation of AYs 1997-98 to 1999-2000 would become part of depreciation of AY 2002-03 and subsequent years and therefore the same could be set-off during any number of years. The same was as per the ratio laid down by Hon ble Gujarat High Court in the case of General Motors India (P) Ltd. 2012 (8) TMI 714 - GUJARAT HIGH COURT wherein Hon ble High Court referred to Board s Circular No. 14 of 2001 and held that any unabsorbed depreciation as available to the assessee as on 01.04.2002 shall be dealt with in accordance with the provisions of Sec. 32(2) as amended by Finance Act. 2001 and not by the provisions of Sec. 32(2) as it stood before the amendment. See KMC SPECIALITY HOSPITALS INDIA LTD. 2021 (7) TMI 868 - MADRAS HIGH COURT and M/S. HARVEY HEART HOSPITALS LTD. 2021 (1) TMI 296 - MADRAS HIGH COURT as held unabsorbed depreciation pertaining to the assessment year can be carry forward and adjusted after the lapse of eight assessment years in view of the section 32(2) as amended by the Finance Act 2001. - Decided against revenue. Disallowance u/s. 14A r.w.r. 8D - Mandation of recording satisfaction - assessee had earned exempt income and already offered suo-moto disallowance - AO was directed to make the aforesaid disallowance while computing income under normal provisions as well as while computing Book-Profits u/s. 115JB - HELD THAT - AO has failed to record any objective satisfaction as to why the assessee s stand was not acceptable having regards to the accounts of the assessee as per the mandate of Sec.14A. This jurisdictional requirement was not satisfied by Ld. AO in the present case and Ld. AO straightway proceeded to compute disallowance as per Rule 8D. The application of Rule 8D in our considered opinion was not mechanical or automatic. It is also settled law that disallowance made u/s. 14A could not exceed the exempt income earned by the assessee. Further disallowance u/r 8D(2)(iii) was to be computed only by considering those investments which have yielded exempt income during the year. See M/S. REDINGTON (INDIA) LTD. case 2017 (1) TMI 318 - MADRAS HIGH COURT Thus on the given facts and circumstances of the case we direct Ld. AO to record an objective satisfaction as to why the disallowance made by the assessee was not sufficient or acceptable. If Ld. AO is satisfied then he could proceed to apply Rule 8D and compute the disallowance subject to our observation made in preceding paras. Needless to add that adequate opportunity of hearing shall be granted to the assessee. MAT Adjustment u/s 115JB - We would also hold that the adjustment of disallowance u/s. 14A could not be made while computing Book Profits u/s. 115JB as per the decision of Special Bench of Delhi Tribunal in ACIT V/s Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI and M/S. SOBHA DEVELOPERS LTD. 2021 (1) TMI 378 - KARNATAKA HIGH COURT .
Issues Involved:
1. Unabsorbed Depreciation 2. Disallowance under Section 14A Issue-wise Detailed Analysis: 1. Unabsorbed Depreciation: The primary issue revolves around whether the unabsorbed depreciation from Assessment Years (AYs) 1997-98 to 1999-2000 can be carried forward and set off against income for AY 2008-09 and subsequent years. The Tribunal initially allowed the set-off, but the Revenue contested this, arguing that the eight-year limitation for carrying forward unabsorbed depreciation had expired. The Hon'ble High Court remitted this issue back to the Tribunal for reconsideration, emphasizing the need to consider the Supreme Court's decision in Peerless General Finance and Investment Co. Ltd. v. CIT (380 ITR 165). During the re-adjudication, the Tribunal noted that the Finance Act, 2001, amended Section 32(2) to allow unabsorbed depreciation to be carried forward indefinitely from AY 2002-03 onwards. The Tribunal referred to various judicial precedents, including the Gujarat High Court's decision in General Motors India (P) Ltd. v. DCIT (354 ITR 244), which supported the view that unabsorbed depreciation as of 01.04.2002 could be carried forward indefinitely. The Tribunal concluded that the unabsorbed depreciation from AYs 1997-98 to 1999-2000 could be carried forward and set off against income for AY 2008-09 and subsequent years. Furthermore, the Tribunal found that the decision in Peerless General Finance and Investment Co. Ltd. was not directly applicable to the present case, as it dealt with the head of income against which unabsorbed depreciation could be adjusted, rather than the period for which it could be carried forward. The Tribunal upheld the CIT(A)'s decision to allow the set-off of unabsorbed depreciation for AYs 1997-98 to 1999-2000 against income for AY 2008-09. 2. Disallowance under Section 14A:The second issue pertains to the disallowance of expenditure under Section 14A of the Income Tax Act, which deals with expenses incurred in relation to earning exempt income. The Tribunal had previously directed the Assessing Officer (AO) to restrict the disallowance to the extent of exempt income earned by the assessee, following the Delhi High Court's decision in Joint Investments Private Limited v. CIT (372 ITR 694). Both the Revenue and the assessee appealed this decision. The Hon'ble High Court remitted this issue back to the Tribunal, highlighting the need for the AO to record objective satisfaction regarding the correctness of the assessee's claim of expenditure related to exempt income. The Tribunal noted that the AO had failed to record such satisfaction and had mechanically applied Rule 8D without proving any infirmity in the disallowance made by the assessee. The Tribunal emphasized that the application of Rule 8D is not automatic and must be preceded by the AO's objective satisfaction. The Tribunal referred to the Supreme Court's decision in Godrej & Boyce Manufacturing Co. Ltd. v. DCIT (394 ITR 449), which held that the AO must be satisfied with the correctness of the assessee's claim before applying Rule 8D. The Tribunal also cited various other judicial precedents supporting the view that disallowance under Section 14A cannot exceed the exempt income earned by the assessee and that investments yielding no exempt income should be excluded from the disallowance computation. The Tribunal directed the AO to record objective satisfaction regarding the sufficiency of the assessee's disallowance and, if satisfied, to apply Rule 8D subject to the Tribunal's observations. Additionally, the Tribunal held that disallowance under Section 14A could not be adjusted while computing Book Profits under Section 115JB, following the Special Bench decision in ACIT v. Vireet Investment (P) Ltd. (165 ITD 27) and the Karnataka High Court's decision in Sobha Developers Ltd. v. DCIT (125 Taxmann.com 72). Conclusion:The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes. The Tribunal directed the AO to re-examine the disallowance under Section 14A in light of the Tribunal's observations and judicial precedents. Order Pronounced on 21st January, 2022.
|
