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2018 (5) TMI 748 - AT - Income TaxRejection of claim of the assessee for set off unabsorbed depreciation relating to A.Y. 1998-99 & 1999-2000 - allowed to be carried forward and set off after a period of eight years OR governed by Section 32 as amended by Finance Act 2001? - Held that - This issue has been decided in favour of the assessee in the case of General Motors India (P) Ltd. Vs. DCIT 2012 (8) TMI 714 - GUJARAT HIGH COURT 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 - Decided in favour of assessee.
Issues:
1. Rejection of claim of the assessee for set off unabsorbed depreciation relating to A.Y. 1998-99 & 1999-2000. 2. Validity of reopening of assessment. Analysis: Issue 1: Rejection of claim of the assessee for set off unabsorbed depreciation: The appeal pertains to the rejection of the assessee's claim for set off unabsorbed depreciation for A.Y. 1998-99 & 1999-2000. The Assessing Officer reopened the assessment due to the allowance of unabsorbed depreciation from years prior to A.Y. 2002-03, which was limited to 8 years as per section 32(2). Both the Assessing Officer and the CIT(A) rejected the claim based on the decision in DCIT Vs. Times Guaranty Ltd. However, the ITAT noted the decision of the Hon'ble Gujarat High Court in General Motors India (P) Ltd. Vs. DCIT, which allowed carry forward of unabsorbed depreciation indefinitely before the Finance Act No.2 of 1996. The ITAT favored the assessee based on the Gujarat High Court's decision, setting aside the CIT(A)'s order and directing the Assessing Officer to allow the set off for A.Ys. 1998-99 & 1999-2000. Issue 2: Validity of reopening of assessment: The ITAT did not delve into the issue of the validity of reopening the assessment since the first issue was decided in favor of the assessee. As the primary issue was resolved in favor of the assessee based on the Gujarat High Court's decision, the ITAT did not find it necessary to address the validity of the initiation of reassessment proceedings. Consequently, the appeal filed by the assessee was treated as allowed. In conclusion, the ITAT ruled in favor of the assessee regarding the rejection of the claim for set off unabsorbed depreciation for A.Y. 1998-99 & 1999-2000, following the decision of the Hon'ble Gujarat High Court. The ITAT did not address the validity of reopening the assessment due to the favorable decision on the primary issue.
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