2009 (7) TMI 920 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the Commissioner's direction to set off unabsorbed depreciation for computing profits u/s 10B.
2. Set-off of unabsorbed depreciation for assessment years 1994-95 to 1996-97 against the income of assessment year 2005-06.

Summary:

Issue 1: Validity of the Commissioner's direction to set off unabsorbed depreciation for computing profits u/s 10B

In the first four appeals, the assessee contested the revision orders passed by the Commissioner of Income-tax (CIT) u/s 263 of the Income-tax Act, 1961. The CIT had directed the Assessing Officer (AO) to adjust unabsorbed depreciation while computing the profits eligible for deduction u/s 10B. The assessee argued that this direction was not justified.

The Tribunal examined the issue in detail, referencing previous decisions by the Income-tax Appellate Tribunal (ITAT) in similar cases, such as ITC Technologies (P.) Ltd. v. Dy. CIT and Ford Business Services Centre (P.) Ltd. v. Asstt. CIT. The Tribunal concluded that the benefit of section 10B should be allowed before setting off brought forward losses and unabsorbed depreciation. Therefore, the direction of the CIT to adjust unabsorbed depreciation was found to be unsustainable in law. The Tribunal set aside the CIT's direction and upheld the AO's original computation.

Issue 2: Set-off of unabsorbed depreciation for assessment years 1994-95 to 1996-97 against the income of assessment year 2005-06

In the appeal for the assessment year 2005-06, the assessee challenged the denial of set-off of unabsorbed depreciation from the assessment years 1994-95 to 1996-97 against the income of 2005-06. The Tribunal referred to the definition of "relevant assessment year" and the Board's Circular No. 794, which clarified that deductions under section 10B should only consider years where the benefit was claimed and allowed.

The Tribunal found that since the assessee had not claimed deduction u/s 10B for the years 1994-95 to 1996-97, the unabsorbed depreciation from those years could be set off against the income of 2005-06. The Tribunal directed the AO to allow the set-off of unabsorbed depreciation for the assessment years 1994-95 to 1996-97 against the income of 2005-06.

Conclusion:

The revision appeals filed by the assessee were partly allowed, and the regular appeal for the assessment year 2005-06 was allowed. The Stay Petitions filed by the assessee were dismissed as infructuous.