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TMI Blog2017 (9) TMI 2034X X X X Extracts X X X X X X X X Extracts X X X X ..... of earlier year becomes the part of depreciation of current year and therefore is eligible for adjustment against the other income. This aspect has been examined in the case of Income Tax Officer Vs. Suraj Solvent and Vanaspati Industries Ltd. [ 2008 (10) TMI 663 - ITAT AMRITSAR] and wherein has held that brought forward depreciation becomes part of current year depreciation and can be adjusted against other source of income. Similar findings has been made by the Hon ble High Court of Gujarat in the case of Special Civil Application No. 1773 in the case of General Motors India (P) Ltd. [ 2012 (8) TMI 714 - GUJARAT HIGH COURT] We hold that assessee was eligible for adjustment of unabsorbed depreciation for the assessment year 1997-98 to 2002-03. We further find that assessee at its own had filed revised depreciation chart and wherein it had surrendered the unabsorbed depreciation related to these years. However we are of the view that while completing the assessment, the AO has to pass order and allow deductions as per the provisions of law. The quantum of unabsorbed depreciation was not verified by AO - Therefore we deem it appropriate to remit this issue back to the office of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. AR submitted that assessee had claimed unabsorbed depreciation amounting to Rs. 33,65,948/- for the year 1997-98 to 2002-03 which the Assessing Officer had disallowed whereas the assessee was eligible for carry forward of the depreciation as per amended provisions of section 32(2) of the Act. 4. The Ld. AR submitted that the assessee was eligible for carry forward of the unabsorbed depreciation as such depreciation becomes the depreciation of current year as decided in the following case laws: "(i) ITO Vs. Suraj Solvent an Vanaspati Industries Ltd. 16 DTR 492 (Asr.) (ii) General Motors India (P) Ltd. Vs. DCIT in special Civil Application No. 1773 of 2012" 5. The Ld. DR on the other hand submitted that there were two other units belonging to assessee which were in the same or adjoining premises and the assessee must have used the electricity connection from the meter installed at assessee's premises for these two units and therefore the Assessing Officer had rightly made addition. 6. As regards the claim for unabsorbed depreciation, the Ld. DR submitted that before Assessing Officer the assessee had filed revised chart of unabsorbed depreciation and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and 2 of the appeal is allowed. As regards the unabsorbed depreciation of Rs. 33,65,948/- we find that the unabsorbed depreciation claim relates to the assessment year 1997-98 and 2002-03. For the first year of 1997-98, the period of limitation as per the original provisions expires in assessment year 2005-06 which is after the date of amendment of section 32(2) with effect from 01.04.2002. As per the amended provisions of section 32(2) the unabsorbed depreciation of earlier year becomes the part of depreciation of current year and therefore is eligible for adjustment against the other income. This aspect has been examined by Hon'ble Tribunal Amritsar Bench in the case of Income Tax Officer Vs. Suraj Solvent and Vanaspati Industries Ltd. and wherein the Hon'ble Tribunal has held that brought forward depreciation becomes part of current year depreciation and can be adjusted against other source of income. Similar findings has been made by the Hon'ble High Court of Gujarat in the case of Special Civil Application No. 1773 in the case of General Motors India (P) Ltd. For the sake of convenience, the findings of the Hon'ble High Court are reproduced below: "3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be,- (i) shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (ii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year; (iii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and Clause (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and-- (a) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, carry forward and set off of unabsorbed depreciation is allowed for 8 assessment years. 30.2 With a view to enable the industry to conserve sufficient funds to replace plant and machinery, specially in an era where obsolescence takes place so often, the Act has dispensed with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The Act has 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 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 2002-03 and subsequent years." 37. The CBDT Circular clarifies the intent of the amendment that it is for enabling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y. 1997-98 upto the A.Y. 2001-02 got carrie ..... 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