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TMI Blog2013 (10) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... e is engaged in the business of manufacturing of Organo Phosphorous Chemicals and offered income under the head "Business Income". For the assessment year 2005-06, assessee filed original return of income on 24.10.2005 declaring total income at "NIL" computed under normal provisions of Income Tax Act, 1961 (the Act) and book profit at Rs.37,40,800/- computed under section 115JB of the Act. However, for the assessment year 2006-07, the assessee filed original return of income on 24.11.2006 declaring total income at "NIL" computed under normal provisions of Income Tax Act, 1961 (the Act) and book profit at Rs.56,30,430/- computed under section 115JB of the Act. 5. The assessee claimed unabsorbed depreciation loss of earlier years. As per order of assessment year 2004-05, there was a carried forward depreciation loss pertaining to Assessment Year 1997-98 amounting to Rs.2,18,62,113/-. During the assessment year 2005-06, the assessee claimed set off of such loss amounting to Rs.44,85,842/-. The AO has stated that as per legal position, remaining loss of Rs.1,73,76,271/- pertaining to Assessment Year 1997-98 was not eligible for carry forward and to claim set off against business incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, the business or profession for which the allowance was computed should continue to be carried on by the assessee during the previous year relevant to assessment year in which the set off is claimed. The exercise of carrying forward such unabsorbed depreciation allowance is to be continued upto 8 assessment years immediately succeeding assessment year for which the aforesaid depreciation allowance was first computed. Thus, the amount of unabsorbed depreciation allowance which could not be set off against the income under any head in the year in which the allowance was first computed, shall be eligible to be carried forward for set off only against income under the head "Profit and gains of business or profession" to the following assessment years(s) not more than eight assessment years immediately succeeding the assessment year for which it was first computed. 8. AO has stated that the position as stated in section 32(2) of the Act that for the second period was diluted as the provision of section 32 (2) as amended by Finance (No.2) Act, 1996 with effect from 1.4.1997 had been substituted by Finance (No.1) Act, 2001 with effect from 1.4.2002. The effect of the said amendment by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ximum period of eight assessment years from the A.Y. immediately succeeding the AY for which it was computed, to be set off only against the income under the head "Profit and gains of business or profession". C. In the third period (i.e. A.Y. 2002-03 onwards). (i) 'First unadjusted depreciation allowance' can be set off upto A.Y. 2004-05, that is, the remaining period out of maximum period of eight A.Y.s [as per B(i) above) against income under any head. (ii) 'Second unabsorbed depreciation allowance' can be set off only against the income under the head 'Profits and gains of business or profession' within a period of eight A.Ys. succeeding the A.Y. for which it was first computed (iii) Current depreciation for the year u/s 32(1), for each year separately, starting from A.Y. 2002-03 can be set off against income under any head. Amount of depreciation allowance not so set off (hereinafter called the 'Third unadjusted depreciation allowance) shall be carried forward to the following year. (iv) The 'Third unadjusted depreciation allowance' shall be deemed as depreciation u/s 32(1), that is depreciation for the current year in the following year(s) to be set off against income und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, part of the depreciation allowance for the succeeding year and so on without any time-limit. what s.32(2) as operative upto and including asst.yr.1996-97 contemplates is that current depreciation is deductible, in the first place, from the income at the business to which it relates; if such depreciation amount is larger than the amount of the profits of that business, then such excess is deductible from the profits or gains of any other business/es, if any, carried on by the assessee, and if a balance is left even thereafter, that comes for absorption from the income from any source under any of the other heads of income during that year; and in case there is still a balance left over, it is to be treated as unabsorbed depreciation and it shall be carried forward to the next succeeding year, and where there is current depreciation for such succeeding year, the unabsorbed depreciation brought forward from earlier year is added to the current depreciation for such, succeeding year and is deemed, by legal fiction, a part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for succeeding year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding assessment years and there is no restriction of 8 years as stipulated in the amended provision of section 32(2) as amended by Finance (No.2) Act, 1996 w.e.f.1.4.1997 as the said amended provision had been substituted by Finance (No.1) Act, 2001 w.e.f. 1.4.2002. It was submitted before the ld. CIT(A) that unabsorbed depreciation for AY 1997-98 amounting to Rs. 1,73,76,271/- and unabsorbed depreciation for assessment year 1998-99 amounting to Rs.52,48,058/- be allowed to be set off against the profit of business for assessment years 2005-06 and 2006-07 respectively. 12. However, ld. CIT(A) did not accept the said contention of the assessee and by following his order for the assessment years 2008-09 and 2009-10 dated 16.9.2011 (correct date is 15.9.2011) confirmed the action of AO. Copy is placed on record. Hence, these appeals before the Tribunal. 13. During the course of hearing, ld. AR made his submissions on the lines of the submissions as made before the authorities below. He has further submitted that the similar issue is covered by the order of the Hon'ble Gujarat High Court in the case of General Motors India Pvt. V/s DCIT, dated 23.8.2012 in Special Civil Application ..... X X X X Extracts X X X X X X X X Extracts X X X X
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