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TMI Blog2016 (5) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... ions against the very same order of the CIT(A). ITA No.815 816/Kol/13: (Revenue's appeals) 2. The issue raised by the Revenue in both the appeals are identical and arise out of identical facts and circumstances. The grounds of appeal raised by the Revenue in ITA No.815/Kol/13 reads as follows: 1. That on the facts and circumstances of the case, Ld. CIT(Appeal) was not justified in allowing the carry forward of unabsorbed depreciation for the A.Y. 1994-95, 1995-96 1996-97 aggregating ₹ 8,77,48,743/- without appreciating the observation put forward by the Assessing Officer. 2. That on the facts and circumstances of the case, Ld. CIT(Appeal) was not justified in allowing the carry forward of un absorbed depreciation for the A.Y. 1994-95, 1995-96 1996-97 aggregating ₹ 8,77,48,743/- in view of the amendment by the Finance Act, 2001 with effect from 01.04.2002 substituting the old Section 32(2) of the I.T. Act, 1961. 3. That on the facts and circumstances of the case and also in view of amended provision of law, the unabsorbed depreciation upto assessment year 1996-97 was eligible for set off, up to assessment year 2004-05 only. 3. The g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to be carried forward. The details of brought forward loss in respect of the aforesaid assessment years have been reported by the Tax Auditors in Annexure - XI of the Tax Audit Report for the relevant year. 5. The case was selected for scrutiny and notices under section 143(2) and 142(1) of the Act were issued to the Respondent. The assessment was completed under section 143(3) of the Act vide order dated 27-12-2006 determining a total loss of ₹ 18,01,39,205/-. In the aforesaid order under section 143(3) the Ld. Assistant Commissioner of Income Tax (hereinafter referred to as the 'then AO') had disallowed certain expenses and/or claims of the Respondent. In the said Order the then AO had not discussed about the allowability of carry forward of the aforesaid unabsorbed depreciation. Subsequently, the Ld. Income Tax Officer (hereinafter referred to as 'AO') issued notice under section 148 on 31-03-2011 initiating reassessment proceedings. Thereafter, as per specific request of the Respondent, reasons for re- opening of assessment were provided to the Respondent vide letter dated 19-10-2011. In the said letter the AO has contended that the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997 (hereinafter called the first period ) read as under : (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under cl. (ii) of sub-s. (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-s. (2) of s. 72 and sub-s. (3) of s. 73, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years. 9. A glance at this provision indicates that if there are sufficient profits or gains to adjust full depreciation allowance for the current year under s. 32(1) of the Act, then it will be adjusted accordingly. If however there are no profits or gains at all or they are insufficient to accommodate the depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-s. (1) of s. 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.--For the purposes of this clause, 'net worth' shall have the meaning assigned to it in cl. (ga) of sub-s. (1) of s. 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). 11. A bare perusal of this provision indicates that where the amount of depreciation allowance under s. 32(1) for the current year of a business cannot be absorbed fully or partly due to inadequacy of profits or gains from such business, then such allowance or part of it which remained unabsorbed, is to be referred to as unabsorbed depreciation allowance . Such unabsorbed depreciation allowance is to be set off firstly against the income under the head Profits and gains of business or profession from any other business or profession carried on by the assessee for that assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years . 13. The above provision in fact, is reinforcement of the provision as existing in the first period. Thus the law as existing in the second period was completely taken back and as a result of that the provision as prevailing in the first period was restored. The AO was of the view that the claim of the Assessee for carry forward of unabsorbed depreciation for 94-95 to 96-97 for set off after the period of 8 years cannot be allowed because unabsorbed depreciation for AY 94-95 and 95-96 totalling ₹ 8,77,48,743 becomes current year depreciation of AY 96-97 and as per the law applicable from AY 1996-97 (Second period) unabsorbed depreciation can be carry forward and set off only upto a period of 8 years. The period of 8 years would i.e., upto 2003-04 and from AY 2004-05 these unabsorbed depreciation cannot be carry forward for set off. Similar reasoning was adopted by the AO for withdrawing carry forward of unabsorbed depreciation of ₹ 3,24,68, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'First unadjusted depreciation allowance'), which could not be set off upto asst. yr. 1996-97, shall be carried forward for set off against income under any head for a maximum period of eight assessment years starting from asst. yr. 1997-98. (ii) current depreciation for the year under s. 32(1) (for each year separately starting from asst. yr. 1997-98 upto 2001-02) can be set off firstly against business income and then against income under any other head. (iii) amount of current depreciation for asst. yrs. 1997-98 to 2001-02 which cannot be so set off as per (ii) above, hereinafter called the 'Second unabsorbed depreciation allowance' shall be carried forward for a maximum period of eight assessment years from the assessment year immediately succeeding the assessment year for which it was first computed, to be set off only against the income under the head 'Profits and gains of business or profession'. C. In the third period (i.e. asst. yr. 2002-03 onwards). (i) 'first unadjusted depreciation allowance' can be set off upto asst. yr. 2004- 05, that is, the remaining period out of maximum period of eight assessment years (as per B(i) above) agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat High Court in the case of CIT - vs.- Gujarat Themis Biosyn Ltd. (2014) 44 taxmann.com 204 (Guj.). In this case the Hon'ble High Court upheld the view taken by the ITAT wherein, following the decision of the Hon'ble Gujarat High Court in the case of General Motors Ltd. (supra), it was held that carry forward of unabsorbed depreciation concerning AY. 2001-02 and assessment years prior thereto can be set off in subsequent years without any set time limit. 18. Reference was further made to the decision of the Hon'ble Jurisdictional Tribunal in the case of Bengal Tea Fabrics Limited (ITA No 467/koll2012) dated 26th July, 2012 for the AY 2008-09, wherein the question arose as to whether in view of the amended provisions of section 32(2) of the Act the assessee would be entitled to set off the unabsorbed depreciation for the AYs 1997-98 and 1998-99 against the income of the AY 2008-09 (i.e. beyond assessment years 2004-05/2005-06). The Hon'ble Kolkata Tribunal after analyzing and accepting the principles of the decisions of the Hon'ble Karnataka High Court in the case of Karnataka Cooperative Milk producers Federation Ltd. -vs.- DC IT (2011) 53 DTR 81 (Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is squarely covered by the Kolkata Tribunal's decision in the case of Bengal Tea fabrics Ltd. (supra). Thus., respectfully following the ratio decided by the Jurisdictional Appellate Tribunal, assessee's appeal on ground no.4 and 5 are allowed. 20. Aggrieved by the order of the CIT(A), the revenue has preferred the present appeals before the Tribunal. 21. We have heard the submissions of the learned DR who relied on the order of the AO. The learned counsel for the Assessee relied on the order of the CIT(A). 22. We have considered the rival submissions and are of the view that in the light of the decision of the Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd. (supra) which has the effect of overruling the decision of the Special Bench in the case of Times Gurantee (supra) and also on the basis of other decisions referred by the Assessee before CIT(A), the order of the CIT(A) does not call for any interference. Accordingly, the appeals by the revenue are dismissed. 23. Since the appeals by the revenue are dismissed, the cross objections in which the Assessee has challenged the validity of initiation of reassessment proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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