2017 (5) TMI 1555 - AT - Income Tax

Dispute over Unabsorbed Depreciation Carry Forward

The case involved a dispute over the allowance of carrying forward unabsorbed depreciation beyond 8 years under the Income Tax Act. The CIT(A) permitted ... Brought forward unabsorbed depreciation beyond 8 years - Held that:- As perused the judicial pronouncement of Hon’ble Gujarat High Court in the case of CIT vs. Gujarat Themis Biosyn Ltd. [2014 (5) TMI 194 - GUJARAT HIGH COURT] in which after considering the judgment given in General Motors India (P) Ltd [2012 (8) TMI 714 - GUJARAT HIGH COURT] it was held that carry forward of unabsorbed depreciation concerning impugned assessment years could be set off in subsequent years without any set time limit. - Decided against revenue Issues:1. Allowance of brought forward unabsorbed depreciation beyond 8 years.2. Interpretation of Section 32(2)(iii)(b) of the Income Tax Act.3. Applicability of judicial precedents in determining the carry forward of unabsorbed depreciation.Issue 1: Allowance of brought forward unabsorbed depreciation beyond 8 yearsThe case involved an appeal by the Revenue against the order of the CIT(A) allowing the assessee to carry forward unabsorbed depreciation of a significant amount beyond 8 years, specifically pertaining to Assessment Year (A.Y.) 2000-01. The assessing officer initially permitted the carry forward, but later, through an order under section 154 of the Income Tax Act, disallowed it beyond 8 years. The CIT(A) overturned this decision, citing a judgment by the Hon'ble Gujarat High Court in the case of General Motors (I) Pvt. Limited. The High Court's decision clarified that the Finance Act No. 2 of 1996 restricted the carry forward of unabsorbed depreciation to 8 years from the assessment year 1997-98. The court emphasized that the legislative intent was to allow the unabsorbed depreciation for specific assessment years to be carried forward without any time limit. The CIT(A) directed the assessing officer to allow the set off and carry forward of depreciation without any limit, relying on the High Court's decision.Issue 2: Interpretation of Section 32(2)(iii)(b) of the Income Tax ActThe assessing officer had disallowed the brought forward unabsorbed depreciation for A.Y. 2000-01 based on subsection 2(iii)(b) of Section 32 of the Income Tax Act, which limits the carry forward to 8 assessment years succeeding the initial determination. However, the CIT(A) found that the present issue aligned with the decision of the Hon'ble Gujarat High Court in the General Motors case. The High Court's interpretation emphasized the legislative amendments introduced by the Finance Acts of 1996 and 2000, clarifying that unabsorbed depreciation could be carried forward without any time limit post-2002. The CIT(A) concluded that the legislative intent was to enable the carry forward and set off of unabsorbed depreciation for specific assessment years without imposing an 8-year restriction.Issue 3: Applicability of judicial precedents in determining the carry forward of unabsorbed depreciationThe Tribunal considered the judicial pronouncements of the Hon'ble Gujarat High Court in the General Motors case and the CIT vs. Gujarat Themis Biosyn Ltd. case. These judgments highlighted that unabsorbed depreciation could be set off in subsequent years without any specific time limit, aligning with the legislative intent post the Finance Act amendments. The Tribunal, after reviewing these precedents and the detailed findings of the CIT(A), upheld the decision to dismiss the Revenue's appeal. The Tribunal found no reason to interfere with the CIT(A)'s decision based on the established judicial interpretations and legislative intent regarding the carry forward of unabsorbed depreciation.This detailed analysis of the judgment highlights the key issues of the case, the interpretations of relevant legal provisions, and the application of judicial precedents in determining the outcome of the appeal.