2017 (4) TMI 1381 - HC - Income Tax

Appeal to Extend Depreciation Set-Off Period: Legal Analysis on Pre-Amendment Eligibility

The High Court admitted the appeal to determine the correctness of the ITAT's decision allowing the carry forward and set-off of unabsorbed depreciation ... We admit this Appeal on the following substantial questions of law: “A. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in directing the Assessing Officer to allow carry forward and set-off unabsorbed depreciation of A.Y. 1994-95 to 1998-99 against the profits of A.Y. 2007-08 without appreciating that as per the provisions of Section 32(2) as they stood prior to the amendment by Finance Act, 2001 w.e.f. 01.04.2002, such unabsorbed depreciation was eligible for carry forward and set-off against business profits only for a further period of eight years?” B Whether the Hon'ble ITAT was justified in directing the Assessing Officer to allow carry forward and set-off of unabsorbed depreciation of A.Y. 1997-94 to 1998-99 against the profits of A.Y. 3007-08 by relying on the decision in the case of General Motors India (P) Ltd. vs. DCIT [2012 (8) TMI 714 - GUJARAT HIGH COURT] without appreciating that though the Hon'ble Supreme Court has dismissed the Department's SLP, it has neither upheld the Hon'ble High Court's view nor answered the Revenue's question?” Issues:1. Whether the ITAT was justified in directing the Assessing Officer to allow carry forward and set-off unabsorbed depreciation against profits of a different assessment year.2. Whether the ITAT was justified in relying on a specific case without considering the Supreme Court's dismissal of the Department's SLP.Analysis:1. The High Court admitted the appeal based on substantial questions of law regarding the ITAT's decision on allowing the carry forward and set-off of unabsorbed depreciation from A.Y. 1994-95 to 1998-99 against the profits of A.Y. 2007-08. The appellant questioned the eligibility of such depreciation for carry forward and set-off beyond a specific period as per Section 32(2) before the amendment by the Finance Act, 2001. The Court will examine the legal and factual aspects to determine the correctness of the ITAT's direction.2. The second issue involves the ITAT's decision to allow the carry forward and set-off of unabsorbed depreciation from A.Y. 1994-95 to 1998-99 against the profits of A.Y. 2007-08 based on a specific case, General Motors India (P) Ltd. vs. DCIT. The appellant raised concerns regarding the Supreme Court's dismissal of the Department's SLP and the lack of a clear stance on the High Court's view or the Revenue's question. The Court will assess whether the ITAT's reliance on the mentioned case was appropriate in the absence of a definitive stance from the Supreme Court.The Court directed the preparation of a complete paper book for the appeal and ordered the original record to be summoned for inspection. The case will be heard along with another Income Tax Appeal, and the Assessee waived service. The Court's detailed analysis will provide clarity on the legal implications of the ITAT's decisions and the application of relevant provisions in the given circumstances.