Tribunal Allows Set Off of Unabsorbed Depreciation Against Capital Gains

The Tribunal upheld the CIT(A)'s decision to allow the assessee to set off unabsorbed depreciation against long term capital gain for the assessment year 2009-10. Relying on the judgment of the Gujarat High Court, the Tribunal dismissed the revenue's appeal, confirming the set off. The Tribunal found no reason to interfere with the lower authorities' order, leading to the dismissal of both the revenue's appeal and the assessee's cross objection. The decision was pronounced in Chennai on 30th November 2016.

---

---

Issues: Set off unabsorbed depreciation against long term capital gain

Analysis:
1. The appeal was filed by the revenue against the order of CIT(A) -1, Chennai dated 11.02.2016, relating to the assessment year 2009-10. The only issue for consideration was the set off of unabsorbed depreciation against long term capital gain.

2. The assessing officer disallowed the claim of the assessee to set off unabsorbed depreciation against long term capital gain. The department representative relied on a decision of the Special Bench of Mumbai ITAT in the case of DCIT Vs. Times Guarantee Ltd., which disallowed the claim. However, the CIT(A) allowed the claim based on the judgment of the Gujarat High Court in General Motors P Ltd. Vs. DCIT. The department representative argued that the revenue had filed a special leave petition against the Gujarat High Court judgment, questioning the CIT(A)'s decision.

3. The assessee's representative cited previous Tribunal decisions in favor of allowing such claims, including one in the assessee's own case for the assessment year 2007-08. The Tribunal had also allowed a similar claim in another case. The representative argued that the CIT(A) rightly allowed the claim based on consistent Tribunal decisions and the Gujarat High Court judgment.

4. After considering the submissions, the Tribunal found that the unabsorbed depreciation was correctly set off against long term capital gain in the assessment year 2007-08 based on the Gujarat High Court judgment. The Tribunal preferred the Gujarat High Court judgment over the decision of the Mumbai Special Bench. Consequently, the Tribunal upheld the CIT(A)'s decision to allow the claim of the assessee.

5. The Tribunal concluded that there was no reason to interfere with the lower authorities' order, confirming the decision to allow the set off. As a result, the appeal of the revenue was dismissed. Subsequently, the cross objection by the assessee was also dismissed as it became infructuous in light of the Tribunal's decision.

6. In the final result, both the appeal of the revenue and the cross objection of the assessee were dismissed by the Tribunal. The order was pronounced on 30th November, 2016, in Chennai.

---