1996 (12) TMI 131 - AT - Income Tax

Summary

Issues:
- Disallowance of carry forward of unabsorbed depreciation for assessment year 1985-86
- Applicability of sections 72 and 139(3) to unabsorbed depreciation
- Distinctions between unabsorbed losses and unabsorbed depreciation

Analysis:
The judgment involves three appeals filed by the revenue against a consolidated order of the ld. CIT(A) for the assessment years 1985-86, 1986-87, and 1987-88. The appeals were considered together due to common grounds. The assessee, a Private Limited Company deriving income from printing newspapers, filed returns for the three years with declared losses. The assessments were completed, disallowing the benefit of carry forward of loss for the assessment year 1985-86 due to a late return filing. The ld. CIT(A) partly allowed the appeals, directing the benefit of carry forward of unabsorbed depreciation to be allowed for 1985-86, which could be set off against profits of subsequent years. The revenue appealed to the Tribunal, arguing that sections 72 and 139(3) were applicable to unabsorbed depreciation, citing a Supreme Court decision.

The Tribunal carefully considered the submissions and relevant sections, agreeing with the ld. CIT(A) that the assessee was entitled to carry forward unabsorbed depreciation despite the late return filing for 1985-86. It was noted that section 139(3) did not cover carry forward of unabsorbed depreciation under section 32(2), making timely return filing irrelevant for this purpose. The Tribunal found merit in the ld. CIT(A)'s view that unabsorbed depreciation was governed by section 32(2) and not by section 72(1). The Tribunal highlighted the distinction between unabsorbed depreciation and unabsorbed loss, emphasizing that unabsorbed depreciation could be carried forward without any time limit, unlike unabsorbed loss which had an 8-year limit.

The Tribunal also addressed the revenue's reliance on the Supreme Court decision, emphasizing that the specific treatment for carry forward of unabsorbed depreciation under section 32(2) differentiated it from common commercial principles. The Tribunal concluded that the unabsorbed depreciation of 1985-86 was eligible for carry forward under section 32(2), affirming the ld. CIT(A)'s order for all three years. Consequently, all three departmental appeals were dismissed.