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2012 (11) TMI 21 - AT - Income TaxRevisionary powers used by CIT(A) - order of the A.O. was erroneous - allowance of set-off of unabsorbed depreciation by AO - Held that - As decided in GENERAL MOTORS INDIA PVT. LTD Versus DEPUTY COMMISSIONER OF INCOME-TAX 2012 (8) TMI 714 - GUJARAT HIGH COURT 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, thus 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. CIT was not justified by passing order invoking Section 263 of the Act by holding that the unabsorbed depreciation of assessment year 1997- 98 and 1998-99 set off by the learned AO in the relevant assessment year is erroneous and prejudicial to the interest of the revenue and thereby canceling the assessment order passed u/s 143(3) - in favour of assessee.
Issues:
1. Validity of order passed by CIT u/s 263 of the IT Act for the assessment year 2007-08. 2. Allowance of set-off of unabsorbed depreciation for A.Ys. 1997-98 and 1998-99 against the income for A.Y. 2007-08. 3. Entitlement of BIFR registered company to specific treatment as per the scheme sanctioned by BIFR. Issue 1: The appeal challenged the order of the learned CIT-II, Baroda passed u/s 263 of the IT Act for the assessment year 2007-08. The assessee raised five grounds in the appeal, but the learned AR did not press ground No.2 and ground No.5, leading to their dismissal. The effective grounds were No.1, 3, and 4. The appellant contended that the order passed by the learned CIT was bad in law as the order of the learned A.O. was not erroneous or prejudicial to the interest of revenue. The appellant argued that the CIT erred in applying provisions of section 263 to the allowance of set-off of unabsorbed depreciation, which was a possible view taken by the A.O. The appellant also argued that the CIT failed to appreciate the entitlement to set off depreciation based on the position of law at the beginning of the Assessment Year. Furthermore, the appellant claimed that being a BIFR registered company, they were entitled to specific treatment under the BIFR scheme, challenging the CIT's assumption of jurisdiction to revise the order. Issue 2: The dispute revolved around the allowance of set-off of unabsorbed depreciation for A.Ys. 1997-98 and 1998-99 against the income for A.Y. 2007-08. The A.O. had allowed the set-off, considering it permissible under the law. However, the CIT held this action to be unsustainable, as it exceeded the stipulated period for carry forward of depreciation. The learned AR argued that the A.O. had appropriately considered the issue during assessment proceedings, and the Hon'ble Jurisdictional High Court had ruled in favor of allowing the carry forward and set off of unabsorbed depreciation beyond the eight-year limit. The AR emphasized that when more than one view is possible, and one view is adopted by the A.O., it cannot be deemed erroneous or prejudicial to revenue. The DR contended that the CIT's decision was valid, despite the favorable ruling by the High Court. Issue 3: Regarding the entitlement of the BIFR registered company to specific treatment under the BIFR scheme, the appellant argued that the CIT had wrongly assumed jurisdiction to revise the order under section 263 of the Act. The AR highlighted that the A.O. had appropriately considered and allowed the claim of the appellant during the assessment proceedings. The AR further supported their position by citing relevant case law and circulars to substantiate the entitlement to carry forward and set off unabsorbed depreciation. The Tribunal, after considering the arguments and legal precedents, concluded that the CIT's order was not justified, and the unabsorbed depreciation set off by the A.O. was not erroneous or prejudicial to revenue. Consequently, the Tribunal quashed the order passed by the CIT under section 263 of the Act and disposed of the appeal in favor of the assessee. This detailed analysis of the judgment from the Appellate Tribunal ITAT, Ahmedabad, provides a comprehensive understanding of the issues raised, arguments presented, and the final decision rendered by the Tribunal.
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