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TMI Blog2021 (7) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... DURAISWAMY, J. Challenging the order passed in I.TA.No.458/Mds/2014 in respect of the Assessment Year 2007-08 on the file of the Income Tax Appellate Tribunal, Chennai, C Bench, the Revenue has filed the above appeal. 2.It is the case of the assessee that for the Assessment Year 2007-08, the return of income was filed on 26.10.2007, admitting business loss of ₹ 65,22,677/- and carried forward loss of ₹ 18,39,06,826/-, which included depreciation allowance of ₹ 17,73,84,149/-. The case was selected for scrutiny and notice under Section 143(2) was issued on 18.09.2008 and after due process of hearing, the assessment order under Section 143(3) was issued on 22.12.2009, accepting the loss return of ₹ 65,22,677/- and determining the losses carried forward for set off against future profits as ₹ 18,39,06,826/-. The Assessing Officer, thereafter, on 01.02.2011, proposed to withdraw under Section 154 of the Income Tax Act, the depreciation allowance of ₹ 13,71,60,209/-, as according to him, the depreciation relating to the Assessment Year 1997-98 and 1998-99 are required to be withdrawn. The assessee, by their letter dated 22.03.2011, has objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed the above Tax Case Appeal raising the following substantial questions of law: (i)Whether the Tribunal was right in law in holding that the assessment made u/s. 153C r/w Sec. 143(3) is valid especially when there are no incriminating materials seized warranting such an assessment on the appellant? (ii)Whether the Tribunal is right in not confirming the view of the Assessing Officer that the business income arising out of sale of fixed assets is to be treated only as short term capital gains under section 50 of the Income-tax Act even though the depreciable assets were sold? (iii)Whether the Tribunal was right in law in holding that the unabsorbed depreciation relating to Assessment Year 1997-98 to 2000-2001 is not eligible for set off against any income of the appellant for the Assessment Year 2005-06? 6.1.Mr. R. Sivaraman, learned counsel appearing for the appellant submitted that he is not making any submission with regard to questions of law Nos. 1 and 2 and therefore, this court need not give any finding with regard to the same in this Tax Case. The learned counsel made his submission only with regard to 3rd question of law i.e. with regard to unabsorbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is covered by the decisions of the Hon'ble Apex Court and the Division Benches of this court. 8.Since the learned counsel appearing for the appellant has not made any submission with regard to the questions of law Nos. 1 and 2, we are not adverting to any finding with regard to the same. In view of the submissions made by the learned counsel on either side, following the Judgments passed by the Hon'ble Apex Court and the Division Benches of this court, cited supra , the order passed by the Income-tax Appellate Tribunal is liable to be set aside. Accordingly, the same is set aside. The 3rd question of law is decided in favour of the appellant. The Tax Case Appeal stands allowed. No costs. Consequently, the connected Miscellaneous Petition is closed. (ii)[2020] 122 taxmann.com 212 (Madras) [Commissioner of Income Tax, Chennai Vs. Sanmar Speciality Chemicals Ltd.] wherein the Division Bench held as follows: ... 3.The appeal was admitted on 2-12-2019 on the following substantial question of law : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for carry forward of the deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also clarified that in computing the profits and gains of business or profession for any previous year, deduction of depreciation under section 32 shall be mandatory. 30.3 Under the existing provisions, no deduction for depreciation is allowed on any motor car manufactured outside India unless it is used (i) in the business of running it on hire for tourists, or (ii) outside India in the assessee's business or profession in another country. 30.4 The Act has allowed depreciation allowance on all imported motor cars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly apply in relation to the assessment year 2002-2003 and subsequent years. 8. From paragraph 30.2 of the above circular, it is clear that the restriction of 8 years for carry forward and setoff of unabsorbed depreciation was dispensed with, with a view to enable the industries to conserve sufficient funds to replace plant and machinery. 9. The learned Senior Standing Counsel appearing for the Revenue would point out that those amendments took place with effect from 1-4-2002 and would accordingly apply in relation to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or profession for any previous year, deduction of depreciation under section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Ys. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Ys. 2002-03 then it would be carried forward till the time it is set-off against the profits and gains of subsequent years. 38.Therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of section 32 of the Income-tax Act, carried forward unabsorbed depreciation is allowed to be set-off against profits and gains of business or profession of the subsequent year, subject to the condition that the business or profession for which depreciation allowance was originally computed continued to be carried on in that year. A similar condition in section 72 for the purpose of carry forward and set-off of unabsorbed business loss was removed last year. 22.2 With a view to harmonise the provisions relating carry forward and set-off of unabsorbed depreciation and unabsorbed loss, the Act has dispensed with the condition of continuance of same business for the purpose of carry forward and set-off of unabsorbed depreciation. 22.3 This amendment will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years. 9. The CIT(A) and the Tribunal, thus, rightly allowed unabsorbed depreciation relevant to the assessment year 1996-97 to be set-off against the income from long term capital gains and income from other sources for the assessment year 2001-2002.' 13. Recently, in the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee's challenge to a notice of reopening of the assessment. The Gujarat High Court had held and observed as under - 38 Therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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