2015 (8) TMI 374 - AT - Income Tax

Proceedings u/s 154 - AO disallowed the brought forward of unabsorbed depreciation allowance - CIT(A) directed the AO to allow the assessee s claim of adjusting unabsorbed depreciation for the AY 1999-2000 from the house property income - Held 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. And 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. Thus, the finding of the Ld. CIT(A) is based on the decision of Hon ble Gujarat High Court in the case of General Motors India P. Ltd (2012 (8) TMI 714 - GUJARAT HIGH COURT), and no contrary decision of any other High Court has been brought to our notice, hence such a finding of the CIT(A) is upheld. Further, as held by the High Court the unabsorbed depreciation becomes the current year depreciation, which can very well be set off against any source under any of the other heads of income during that year. - Decided against revenue. Disallowance of business loss - CIT(A) deleted disallowance - Held that - As the provisions of the Act the assessee can set of business loss within eight years. As this business loss is within eight years, the appellant is eligible for the set off of the business loss - no infirmity in such an order of Ld. CIT(A). Even from the computation of income it is seen that under the head profits and gains of business or profession , assessee has claimed brought forward business losses of AY 2004-05. The ground raised by the revenue that it has been claimed against Income from House Property is misconceived. - Decided against revenue.

Summary

Issues:
1. Set-off of unabsorbed b/f depreciation for AY 1999-2000 against income from house property for AY 2007-08.
2. Entitlement to c/f Short Term Capital Loss of Rs. 14,48,840/- for AY 2005-06.
3. Allowing b/f business loss for AY 2004-05 to be set-off against income from house property for AY 2007-08.

Issue 1 - Set-off of unabsorbed b/f depreciation for AY 1999-2000 against income from house property for AY 2007-08:
The appeal by the Revenue challenged the CIT(A)'s decision to allow the set-off of unabsorbed b/f depreciation for AY 1999-2000 against income from house property for AY 2007-08. The AO disallowed this set-off, citing provisions of the Income Tax Act regarding the carry-forward and set-off of unabsorbed depreciation. However, the CIT(A), relying on the decision of the Hon'ble Gujarat High Court in the case of General Motors India P Ltd., directed the AO to permit the adjustment based on the amended provisions of the Act. The High Court clarified that unabsorbed depreciation from AY 1997-98 to 2001-02 could be carried forward indefinitely and set off against profits of subsequent years without any time limit. The Tribunal upheld the CIT(A)'s decision, emphasizing that unabsorbed depreciation becomes current year depreciation and can be set off against any income source under different heads.

Issue 2 - Entitlement to c/f Short Term Capital Loss of Rs. 14,48,840/- for AY 2005-06:
This issue was not addressed by the CIT(A) as it did not arise from the order. The Tribunal dismissed this ground as misconceived since it was not part of the CIT(A)'s decision.

Issue 3 - Allowing b/f business loss for AY 2004-05 to be set-off against income from house property for AY 2007-08:
The AO disallowed the business loss of AY 2004-05 without providing reasons, but the CIT(A) directed that the assessee could set off the business loss within eight years, as per the Act. The Tribunal found no fault in the CIT(A)'s decision, noting that the business loss falls within the permissible period for set-off. The Revenue's contention that the business loss was claimed against income from house property was dismissed as misconceived. The Tribunal upheld the CIT(A)'s order on this issue, emphasizing that the business loss set-off was valid within the prescribed time frame.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on the issues related to the set-off of unabsorbed depreciation and business loss. The Tribunal found no merit in the Revenue's contentions and affirmed the CIT(A)'s interpretations based on relevant legal provisions and precedents.