Tribunal denies depreciation set-off for non-usage, advises separate challenges for each year

The Tribunal upheld the CIT(A)'s decision denying the assessee's entitlement to set off unabsorbed depreciation for AY 1998-99 onwards due to non-usage of assets, specifically noting the lack of readiness and passive use. The CIT(A)'s directions for remedial actions by the AO were confirmed, with the Tribunal advising the assessee to challenge these actions separately for each relevant year. The appeal for AY 2011-12 was dismissed as the assessee failed to provide adequate evidence supporting asset readiness or passive use during the disputed years.

---

---

Issues Involved:
1. Entitlement to set off carried forward depreciation from AY 1998-99 onwards against income for AY 2011-12 and onwards.
2. Validity of CIT(A)'s decision on non-usage of assets during FY 1997-98 to 2008-09.
3. Jurisdiction of CIT(A) in giving directions for depreciation pertaining to AY 1998-99 to 2009-10.
4. Requirement for AO to allow set off of depreciation loss of earlier years in the Return of income for AY 2011-12.

Detailed Analysis:

Issue 1: Entitlement to Set Off Carried Forward Depreciation
- The assessee, a private limited company, initially engaged in aqua farming, claimed set off of unabsorbed depreciation for AY 1996-97 to 2009-10. The AO denied the set off, citing the discontinuation of the aqua culture business.
- The CIT(A) allowed the set off for AY 1996-97 and 1997-98 but denied it for AY 1998-99 onwards due to non-operation of the business.
- The Tribunal upheld the CIT(A)'s decision, noting that the assets were not kept in a ready-for-use condition and there was no passive use.

Issue 2: Validity of CIT(A)'s Decision on Non-Usage of Assets
- The CIT(A) elaborated on the legislative history and judicial pronouncements, concluding that "passive use" and "ready-to-use" do not apply to assets lying idle without business re-start.
- The CIT(A) found no evidence of maintenance or readiness of the assets for business use during the relevant periods.
- The Tribunal confirmed the CIT(A)'s findings, noting the lack of contrary evidence from the assessee.

Issue 3: Jurisdiction of CIT(A)
- The CIT(A) directed the AO to take necessary actions, including reopening assessments for AY 2010-11 and succeeding years, to disallow unabsorbed depreciation from AY 1998-99 onwards.
- The Tribunal held that the assessee should challenge the AO's actions for the respective years separately and confined its examination to AY 2011-12.

Issue 4: Requirement for AO to Allow Set Off
- The Tribunal noted that the CIT(A) had already allowed the set off for AY 1996-97 and 1997-98, and dismissed the appeal for AY 2011-12.
- The Tribunal confirmed that the assessee had not provided sufficient evidence to support the claim of asset readiness or passive use for the disputed years.

Conclusion:
The Tribunal dismissed the appeal, confirming the CIT(A)'s decision that the assessee is not entitled to set off unabsorbed depreciation for AY 1998-99 to 2009-10 due to non-usage of assets. The CIT(A)'s directions for remedial measures by the AO were upheld, and the assessee was advised to challenge such measures separately for the respective years.

---