2016 (6) TMI 1130 - AT - Income Tax

Tribunal Upholds Carry Forward of Unabsorbed Depreciation

The Tribunal upheld the CIT(A)'s decision to allow the carry forward of unabsorbed depreciation for AY 1994-95 to 1999-2000, dismissing the revenue's ... Carry forward of unabsorbed depreciation - Held that:- As relying in assessee’s own case for AYs 2004-05 and 2005-06 wherein held 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 carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. Issues:Allowing carry forward of unabsorbed depreciation for AY 1994-95 to 1999-2000 without appreciating AO's observation; Effect of amendment by Finance Act, 2001 on unabsorbed depreciation; Eligibility of unabsorbed depreciation for set off against income.Analysis:The appeal concerns the carry forward of unabsorbed depreciation for AY 1994-95 to 1999-2000. The AO disallowed the carry forward beyond certain years, but the CIT(A) allowed it based on the assessee's claim and previous case law. The revenue challenged this decision, arguing that the amendment by the Finance Act, 2001 impacted the eligibility for carry forward. The Tribunal noted that the issue was previously addressed in the assessee's case for AYs 2004-05 and 2005-06, where it was held that unabsorbed depreciation could be carried forward without any time limit post the amendment.The Tribunal referred to various judicial precedents, including the Gujarat High Court's decision in General Motors India Pvt. Ltd., which clarified that unabsorbed depreciation could be carried forward without a time limit post the amendment. The Tribunal also considered the decision in Bengal Tea & Fabrics Limited, where it was held that the assessee could set off unabsorbed depreciation from AYs 1997-98 and 1998-99 against income of AY 2008-09, beyond the initial time limit. The CIT(A) allowed the claim based on these precedents, and the Tribunal upheld this decision, dismissing the revenue's appeal.The Tribunal concluded that the CIT(A)'s decision was in line with judicial precedents and did not warrant interference. Therefore, the revenue's appeal was dismissed, affirming the allowance of carry forward of unabsorbed depreciation for the relevant assessment years. The order was pronounced on 01.06.2016.