2018 (4) TMI 1422 - AT - Income Tax

Unabsorbed depreciation carry forward beyond eight years as per section 32(2) - Held that - Carry forward of unabsorbed depreciation concerning impugned assessment years could be set off in subsequent years without any set time limit. See case of Gujarat Lease Finance Ltd. 2017 (5) TMI 1555 - ITAT AHMEDABAD Depreciation on Agmark Charges intangible asset - Held that - Agmark is a kind of brand which certify the quality benchmark for all agricultural products produced in India. Agmark certification process helps to make certified all the agricultural products to be available in the market. India exports its large number of agricultural products and commodities which are required to be certified under AGMARK Act as per the World Trade Organization (WTO). It is provided to those agricultural products that have passed through quality tests as mark of reliable products. Corporate intellectual property including items such as patents trademarks copyrights and business methodologies are intangible assets as are goodwill and brand recognition. In view of the above we consider that Agmark is also a kind of brand recognition therefore the same is of the nature of intangible asset on which the depreciation is to be allowed. Reopening of assessment u/s 147 - Held that - We are inclined with the findings of the Ld.CIT(A) that the assessing officer has carried out the fresh assessment as per the direction of Hon ble High Court therefore we do not find any error in the decision of the Ld.CIT(A) on this issue. Accordingly this ground of appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Unabsorbed Depreciation Carry Forward Beyond Eight Years
2. Reopening of Assessment under Section 147
3. Classification of Agmark Charges as Capital Expenditure
4. Rectification of Mistake Apparent from Record

Issue-Wise Detailed Analysis:

1. Unabsorbed Depreciation Carry Forward Beyond Eight Years:
The primary issue was whether unabsorbed depreciation from AY 2001-02 could be carried forward beyond eight years as per Section 32(2) of the Income Tax Act. The assessee declared a loss and carried forward depreciation of ?38,01,74,402 beyond eight years. The Assessing Officer (AO) disallowed this in the reassessment order, citing Section 32(2). The CIT(A) allowed the appeal, referencing the Gujarat High Court's decision in General Motors India (P.) Ltd. vs. DCIT, which clarified that the amendment by Finance Act, 2001 allowed unabsorbed depreciation to be carried forward indefinitely. The ITAT upheld the CIT(A)'s decision, noting that the restriction of eight years had been dispensed with, and the unabsorbed depreciation from AY 1997-98 to 2001-02 could be carried forward without any limit.

2. Reopening of Assessment under Section 147:
The assessee contended that the reopening of the assessment under Section 147 was invalid as all relevant details had been scrutinized during the original assessment under Section 143(3). The CIT(A) dismissed the appeal, noting that the Gujarat High Court had set aside the original assessment and directed the AO to dispose of the objections raised by the assessee. The ITAT concurred with the CIT(A), stating that the AO had acted per the High Court's directions, and thus, the reopening was valid.

3. Classification of Agmark Charges as Capital Expenditure:
The AO treated Agmark charges of ?27,70,753 as a capital expenditure, allowing depreciation at 25%, resulting in a disallowance of ?20,78,065. The CIT(A) upheld this classification, stating that Agmark certification provided a benefit of enduring nature and classified it as an intangible asset under Section 32(1)(ii). The ITAT agreed, noting that Agmark certification is akin to brand recognition, which qualifies as an intangible asset eligible for depreciation.

4. Rectification of Mistake Apparent from Record:
The assessee claimed a donation of ?11,00,000 was wrongly added back to the income and sought rectification. The AO rejected the rectification application, stating no apparent mistake from the record. The CIT(A) dismissed the appeal, noting no order under Section 154 was on record, and the proper appeal process was not followed. The ITAT restored the issue to the AO for fresh consideration, directing verification of details and providing the assessee with an opportunity to present their case.

Conclusion:
The ITAT dismissed the revenue's appeals (ITA Nos. 1993 and 1994/Ahd/2016) and one of the assessee's appeals (ITA No. 2000/Ahd/2016), while allowing the other assessee's appeal (ITA No. 2001/Ahd/2016) for statistical purposes. The judgment emphasized the indefinite carry forward of unabsorbed depreciation post-amendment, validated the reopening of assessments under judicial directions, upheld the classification of Agmark charges as capital expenditure, and mandated a fresh review of the rectification claim.