2023 (8) TMI 807 - AT - Income Tax

Set off of brought forward unabsorbed depreciation - Claim denied as assessee s acceptance of rejection of set off of brought forward depreciation in Asst. Year 2004-05 - HELD THAT - As one of the reasons for CIT(A) for denying benefit of set off of unabsorbed depreciation was the assessee s acceptance of rejection of set off of brought forward depreciation in Asst. Year 2004-05 but assessee has now demonstrated before us, that it was allowed this claim in Asst. Year 2004-05 by the ITAT in its order passed 2019 (11) TMI 1342 - ITAT AHMEDABAD . This basis for the Revenue rejecting the assessee s claim to set off of unabsorbed depreciation in the present year therefore does not survive. Rejection of the claim of set off on the ground that there is no brought forward unabsorbed depreciation at all - The details submitted by the assessee pertained to the unabsorbed depreciation of each year. As per the details there was no unabsorbed depreciation pertaining to Asst. Year 2002-03 to 2005-06 and that does not mean that earlier year depreciation had all being absorbed. The ld. CIT(A) has mis-appreciated facts of the case, and in view of the same, we hold that the assessee is entitled to claim of unabsorbed brought-forward depreciation to be set off against income from other sources as available during the year. Appeals of the assessee are allowed.

Summary

Issues Involved:
1. Denial of set off of brought forward unabsorbed depreciation.
2. Initiation of penalty proceedings under section 271(1)(c) of the IT Act.
3. Charging of interest under sections 234B, 234C, and 234D of the Income Tax Act, 1961.

Summary:

1. Denial of Set Off of Brought Forward Unabsorbed Depreciation:
The primary issue in all three appeals was the denial of set off of brought forward unabsorbed depreciation. The ITAT had previously held that the assessee was entitled to set off brought forward unabsorbed depreciation against other incomes, even if no business activities were carried out, relying on the Supreme Court decision in CIT Vs. Virmani Industries P. Ltd. However, due to the lack of records indicating the specific years to which the depreciation pertained, the claim was initially denied. Upon reassessment, the AO again denied the claim, distinguishing the assessee's case from the Virmani Industries case. The ITAT noted that the assessee's claim was allowed in the second round for the Asst. Year 2004-05, and therefore, there was no reason for the AO to deny the claim in the current year. The ITAT concluded that the assessee is entitled to set off the brought forward unabsorbed depreciation against income from other sources.

2. Initiation of Penalty Proceedings Under Section 271(1)(c):
The learned Commissioner of Income Tax (Appeals) had dismissed the ground relating to the initiation of penalty proceedings under section 271(1)(c) of the IT Act. However, this specific issue was not elaborated upon in the provided judgment text.

3. Charging of Interest Under Sections 234B, 234C, and 234D:
The Commissioner of Income Tax (Appeals) had confirmed the charging of interest under sections 234B, 234C, and 234D of the Income Tax Act, 1961. Similar to the penalty proceedings, this issue was not further detailed in the judgment provided.

Conclusion:
The ITAT allowed all the appeals of the assessee, concluding that the assessee is entitled to the claim of unabsorbed brought-forward depreciation to be set off against income from other sources as available during the year. The decision was pronounced on 29th March 2023 at Ahmedabad.