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2022 (1) TMI 369 - AT - Income TaxRectification of mistake u/s 154 - limitation period - HELD THAT - No order can be made after the expiry of four years from the end of the Financial Year in which orders sought to be amended was passed. In this case, the Assessing Officer sought to amend the order dated 25/3/2013. Hence, the limitation would start from 1/4/2014 and would expire on 31st March, 2017. However, impugned order is dated 16/3/2016. Therefore, the grounds of the assessee are devoid of any merit. Hence, dismissed. Disallowance of depreciation - setting off of unabsorbed depreciation as claimed denied - HELD THAT - We find that the Ld. CIT(A) has relied upon the judgment of the Special Bench of this Tribunal in the case of DCIT VS. Times Guaranty Ltd 2010 (6) TMI 516 - ITAT, MUMBAI However, the Hon'ble Madras High Court has ruled in favour of the assessee in the case of CIT Vs. Tamil Nadu Small Industries Corporation Ltd. 2021 (7) TMI 849 - MADRAS HIGH COURT Therefore, respectfully, following the judgment of the Hon'ble Madras High Court in the case of CIT Vs. Tamil Nadu Small Industries Corporation Ltd. We hereby direct the Assessing Officer to delete the disallowance and allow setting off of unabsorbed depreciation as claimed by the assessee.
Issues:
1. Legality and jurisdiction of rectification order u/s. 154/143(3)/250 of the Income Tax Act, 1961. 2. Time limitation for rectification u/s. 154 and its calculation. 3. Disallowance of set off of unabsorbed depreciation under section 32(2). 4. Merit of the disallowance of depreciation by the Ld. CIT(A). 5. Error in computation of disallowance of carry forward of depreciation. Issue 1 - Legality and jurisdiction of rectification order u/s. 154/143(3)/250: The appeal challenged the rectification order dated 16.03.2016 by the Assessing Officer (AO) under sections 154/143(3)/250 of the Income Tax Act, 1961. The appellant contended that the order was illegal, without jurisdiction, and barred by time limitation. The appellant argued that the order was beyond the prescribed four-year limit under section 154(7) of the Act. However, the Tribunal dismissed the grounds as the order was issued within the statutory time limit. Issue 2 - Time limitation for rectification u/s. 154 and its calculation: The Tribunal clarified that the time limitation for passing an order under section 154 starts from the end of the financial year in which the original order was passed. In this case, the AO sought to amend an order dated 25/3/2013, making the limitation period expire on 31st March 2017. Since the impugned order was dated 16/3/2016, it was within the statutory time limit, leading to the dismissal of the appellant's arguments. Issue 3 - Disallowance of set off of unabsorbed depreciation under section 32(2): The dispute involved the disallowance of set off of unabsorbed depreciation amounting to ?3,83,54,673 for Assessment Years 1995-96, 1996-97, and 1998-99 against the profits of Assessment Year 2007-08. The AO denied the set off based on the interpretation of section 32(2) of the Act. However, the Tribunal, following the judgment of the Hon'ble Madras High Court, directed the AO to delete the disallowance and allow the setting off of unabsorbed depreciation as claimed by the assessee. Issue 4 - Merit of the disallowance of depreciation by the Ld. CIT(A): The Ld. CIT(A) had declined the claim of the assessee regarding the disallowance of depreciation, relying on the judgment of the Special Bench of the Tribunal. However, the Tribunal, in line with the decision of the Hon'ble Madras High Court, directed the AO to delete the disallowance and allow the setting off of unabsorbed depreciation as claimed by the assessee. Issue 5 - Error in computation of disallowance of carry forward of depreciation: Since the Tribunal allowed the setting off of unabsorbed depreciation as claimed by the assessee, the ground related to the error in the computation of disallowance of carry forward of depreciation became infructuous and was dismissed. The general nature of Ground No. 9 required no separate adjudication. In conclusion, the Tribunal partly allowed the appeal of the assessee, directing the AO to delete the disallowance and allow the setting off of unabsorbed depreciation as claimed. The decision was pronounced on 31st December 2021 after a Virtual Hearing in the presence of both parties.
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