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2018 (1) TMI 547 - HC - Income TaxCarry forward depreciation for a number of years - whether the interpretation of Section 32(2) of the Income Tax Act 1961 ( the Act ) as amended by Finance Act 2001 could be given effect to beyond the period of eight years prior to its commencement? - Held that - In General Motors India Pvt. Ltd. (2012 (8) TMI 714 - GUJARAT HIGH COURT) the entire history of the legislation was considered by the Gujarat High Court including the reasons for the Finance Act No.2 of 1996 the amendment of 2001-brought into force with effect from 01.04.20002 as well as the circular of the Central Board of Direct Taxes (Circular No.14 of 2001). This Court is in agreement with the reasoning of the Gujarat High Court. The rationale for the amendment appears to be that the restriction against set off and carry forward limited to 8 years beyond which the benefit could not be claimed under provisions of the Income Tax Act was for the reasons deemed appropriate by the Parliament. The limit was imposed in 1996 through Finance Act No.2. As the Gujarat High Court observed Had the intention of Parliament being really to restrict the benefit (of unlimited carry forward prospectively) there were more decisive ways of doing so-such as an expressed provision or an exception or proviso etc. The absence of any such legislative devise meant that provisions had to be construed in its own term and not so as to restrict the benefit or advantage it sought to confirm. The reasoning in Motor & General Finance Ltd. (supra) does not call for reexamination.
Issues involved:
1. Interpretation of Section 32(2) of the Income Tax Act, 1961 regarding the carry forward of depreciation beyond eight years. Detailed Analysis: Issue 1: Interpretation of Section 32(2) of the Income Tax Act, 1961 The main issue in this case revolved around the interpretation of Section 32(2) of the Income Tax Act, 1961, specifically regarding the carry forward of depreciation beyond the period of eight years. The Assessing Officer disallowed the depreciation claimed for Assessment Year 2010-11, citing that the amendment removing the cap was prospective and effective only from 01.04.2002. However, the CIT(A) reversed this decision, relying on various precedents. The ITAT upheld the decision of the CIT(A) and referred to a judgment by the Gujarat High Court which was also followed by the Delhi High Court in a previous case. The Gujarat High Court's judgment highlighted the legislative history and intent behind the amendment to Section 32(2) of the Act. The court emphasized that the restriction of eight years for carry forward and set off of unabsorbed depreciation had been dispensed with by the amendment, allowing unlimited carry forward and set off against profits and gains of subsequent years. The court reasoned that the absence of any legislative provision restricting the benefit indicated that the provisions should be construed liberally to allow the intended advantage to the assessee. The Delhi High Court agreed with the reasoning of the Gujarat High Court, stating that if the intention of Parliament was to restrict the benefit of unlimited carry forward prospectively, it would have done so explicitly. The court concluded that the provisions should be interpreted in a manner that does not restrict the benefit intended for the assessee. Therefore, the Court dismissed the appeal, affirming the decisions of the lower authorities and upholding the interpretation of Section 32(2) of the Act as allowing the carry forward of depreciation without any time limit beyond eight years. In conclusion, the judgment clarified the interpretation of Section 32(2) of the Income Tax Act, 1961, emphasizing the importance of legislative intent and the need for a liberal construction of provisions to benefit the assessee. The Court's decision aligned with previous judgments and upheld the unlimited carry forward of depreciation beyond eight years as allowed by the amended provision.
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