2019 (2) TMI 1678 - AT - Income Tax

Tribunal upholds CIT(A) decision on unabsorbed depreciation, allows perpetual utilization for assessee

The Tribunal upheld the ld.CIT(A)'s decision and dismissed the Revenue's appeal regarding the deletion of an addition of unabsorbed depreciation. The ... Carry forward of unabsorbed depreciation - effect of amendment to section 32(2) w.e.f. 1.4.2002 - merger of pre-amendment unabsorbed depreciation into the post-amendment year - perpetual availability of merged unabsorbed depreciation until utilizedCarry forward of unabsorbed depreciation - effect of amendment to section 32(2) w.e.f. 1.4.2002 - merger of pre-amendment unabsorbed depreciation into the post-amendment year - Validity of the addition disallowing claimed carry forward unabsorbed depreciation and correctness of CIT(A)'s deletion of that addition. - HELD THAT: - The Tribunal examined the AO's restriction of carry forward unabsorbed depreciation on the basis that the amendment to section 32(2) limited computation after expiry of eight years, and the CIT(A)'s contrary view that, by virtue of the amendment with effect from Asstt.Year 2002-03, unabsorbed depreciation of earlier years merged into the depreciation of Asstt.Year 2002-03 and thereafter survived until utilized. The Tribunal found the view of the CIT(A) to be in accordance with the decision of the jurisdictional High Court in General Motors Ltd. Vs. DCIT , and, relying upon that precedent, held that the unabsorbed depreciation prior to Asstt.Year 2002-03 became part of Asstt.Year 2002-03 and remained available for set-off subsequently. Applying that legal principle to the facts, the Tribunal found no merit in the Revenue's appeal against deletion of the addition and upheld the order of the CIT(A). [Paras 3, 4, 5]Tribunal dismissed the Revenue's appeal and confirmed deletion of the addition disallowing carry forward unabsorbed depreciation.Final Conclusion: Appeal dismissed; CIT(A)'s direction to recompute set-off and carry forward of unabsorbed depreciation in accordance with the view that pre-2002-03 unabsorbed depreciation merged into Asstt.Year 2002-03 and remains available until utilised is upheld. Issues:Appeal against deletion of addition of unabsorbed depreciation by the ld.CIT(A)Analysis:The Revenue appealed to the Tribunal against the order of the ld.CIT(A)-12, Ahmedabad for the Assessment Year 2013-14. The appeal was regarding the deletion of an addition of Rs. 5,17,72,276 made by the Assessing Officer (AO) on account of disallowance of carry forward unabsorbed depreciation. The AO had directed the assessee to provide details of brought forward business loss and unabsorbed depreciation, and upon examination, restricted the carry forward unabsorbed depreciation and business loss to Rs. 75,05,867 based on the amendment in section 32(2) of the Income Tax Act, 1961. However, the ld.CIT(A) disagreed with the AO's view. The ld.CIT(A) noted that post the amendment in section 32(2) from the Assessment Year 2002-03, the unabsorbed depreciation from earlier years would merge with the depreciation for the current year and would be available to the assessee perpetually until utilized. Thus, the ld.CIT(A) directed the AO to recompute the set off and carry forward of unabsorbed depreciation accordingly.Upon the hearing, no representative appeared on behalf of the assessee. The Tribunal, with the assistance of the ld. DR, reviewed the case and found that the ld.CIT(A)'s decision was consistent with the judgment of the Hon'ble jurisdictional High Court in the case of General Motors Ltd. Vs. DCIT, wherein it was held that unabsorbed depreciation from previous years would merge with the current year's depreciation and remain available indefinitely. Relying on this precedent, the Tribunal dismissed the Revenue's appeal, finding no merit in it.In conclusion, the Tribunal upheld the ld.CIT(A)'s decision and dismissed the Revenue's appeal. The order was pronounced in the Court on 4th February 2019 at Ahmedabad.