2015 (9) TMI 336 - HC - Income Tax

Court Upholds Tribunal's Decision on Income Tax Appeal (2)

COMMISSIONER OF INCOME TAX I Versus ITEGRA ENGINEERING INDIA LTD

The court dismissed the revenue's appeal, upholding the Tribunal's decision to quash the order under Section 263 of the Income Tax Act. The court affirmed ... Review u/s 263 - incorrect allowance of set off of unabsorbed depreciation - as per CIT(A) incorrect allowance of set off of unabsorbed depreciation by AO and permitting the carry forward of depreciation allowance relating to A.Ys. 1997-98 and 1998-99 beyond the stipulated quarantine period of eight years and setting off the same against the income of A.Y. 2007-08 is unsustainable in law - Tribunal quashing the order u/s.263 holding that the review of assessment was merely on change of opinion - Held that:- It is required to be noted that at the relevant time, when the learned ITAT passed the impugned judgment and order, there was direct decision of jurisdictional High Court rendered in the case of General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax (2012 (8) TMI 714 - GUJARAT HIGH COURT) wherein held 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, thus 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, which was binding to the learned ITAT. Under the circumstances, it cannot be said that the learned ITAT has committed any error and/or illegality and following binding decision of this Court in the case of General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax (supra) in passing the impugned judgment and order. - Decided in favour of assessee. Issues Involved:1. Legality of the Tribunal's decision to quash the order under Section 263 of the Income Tax Act based on the argument of 'change of opinion.'2. Applicability of the amendment brought in Section 32(2) of the Income Tax Act from 01/04/2002 to the unabsorbed depreciation of Assessment Years 1997-98 and 1998-99.Detailed Analysis:Issue 1: Legality of Tribunal's Decision to Quash the Order under Section 263The revenue challenged the Tribunal's decision to quash the order under Section 263 of the Income Tax Act, arguing that the Tribunal failed to appreciate that the revision of assessment was not merely a change of opinion but was made for the correct interpretation of law. The Commissioner of Income Tax had issued a show-cause notice under Section 263, asserting that the assessment order dated 24.12.2009 was erroneous and prejudicial to the interests of the revenue due to the incorrect allowance of set-off of unabsorbed depreciation. The Commissioner held that the action of the Assessing Officer (A.O.) in permitting the carry forward of depreciation allowance beyond the stipulated quarantine period of eight years was unsustainable in law. The Tribunal, however, quashed this order by relying on the decision in General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax, which was binding at the time.Issue 2: Applicability of Amendment in Section 32(2)The Tribunal held that the amendment brought in Section 32(2) effective from 01/04/2002 was applicable to the present case, allowing the carry forward and set-off of unabsorbed depreciation beyond eight years. The revenue argued that the unabsorbed depreciation for A.Y. 1997-98 and 1998-99 should be governed by the provisions of Section 32(2) as amended by the Finance Act No.2 of 1996, which limited the carry forward to eight years. The Tribunal, however, relied on the General Motors India (P) Ltd case, which clarified that the unabsorbed depreciation available on 01/04/2002 would be governed by the amended Section 32(2) and could be carried forward indefinitely.Tribunal's Reliance on General Motors India (P) Ltd CaseThe Tribunal's decision was based on the Division Bench's ruling in General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax, which held that any unabsorbed depreciation available on 01/04/2002 would be governed by the amended Section 32(2) and could be carried forward indefinitely. The Tribunal found that the A.O. had adopted a 'possible view' which was correct as per the jurisdictional High Court's decision.Revenue's Argument and Court's ResponseThe revenue contended that the Tribunal's reliance on the General Motors India (P) Ltd case was misplaced since the decision was not available when the Commissioner exercised powers under Section 263. The court, however, noted that the Tribunal was bound by the jurisdictional High Court's decision at the time of passing its judgment. The court further observed that the Special Leave to Appeal against the General Motors India (P) Ltd decision was dismissed by the Supreme Court on the ground of delay, keeping the question of law open for future cases, but not for reconsideration by the High Court.ConclusionThe court concluded that the Tribunal did not commit any error in allowing the appeal and quashing the order under Section 263, as it correctly followed the binding decision in General Motors India (P) Ltd. The court dismissed the revenue's appeal, affirming that no substantial question of law arose in this case.Judgment:The appeal is dismissed, upholding the Tribunal's decision to quash the order under Section 263 and affirming the applicability of the amended Section 32(2) for carry forward and set-off of unabsorbed depreciation.