Tribunal allows set-off of unabsorbed depreciation from earlier years against current income

The Tribunal upheld the CIT(A)'s decision to allow the set off of unabsorbed depreciation from AY 1999-2000 against the income of AY 2008-09. The Tribunal dismissed the Revenue's appeal, citing the Gujarat High Court's ruling allowing indefinite carry forward and set off of unabsorbed depreciation post the amendment of Section 32(2) by Finance Act, 2001.

---

---

Issues Involved:
1. Set off of brought forward unabsorbed depreciation from Assessment Year (AY) 1999-2000 against the income of AY 2008-09.

Issue-wise Detailed Analysis:

1. Set off of brought forward unabsorbed depreciation from AY 1999-2000 against the income of AY 2008-09:

The Revenue's appeal contested the order of the Commissioner of Income Tax (Appeals) [CIT(A)] allowing the assessee’s claim of set off of brought forward unabsorbed depreciation amounting to Rs. 2,95,27,925/- from AY 1999-2000 against the income of AY 2008-09. The Assessing Officer (AO) had disallowed this set off on the grounds that, as per Section 32(2) applicable to AY 1999-2000, unabsorbed depreciation could only be carried forward for a maximum period of 8 years. Since this period expired in AY 2007-08, the AO concluded that the assessee was not entitled to set off the unabsorbed depreciation against the income of AY 2008-09.

The assessee appealed against the AO's decision to the CIT(A), who ruled in favor of the assessee. The CIT(A) relied on the judgment of the Hon'ble Gujarat High Court in the case of General Motors India P. Ltd. vs. DCIT, which held that unabsorbed depreciation concerning AY 2001-02 and prior years could be set off in subsequent years without any time limit.

In the Tribunal, the Authorised Representative (AR) for the assessee reiterated that the issue was covered by the Gujarat High Court's judgment in CIT vs. Gujarat Themis Biosyn Ltd., which also referenced the General Motors India P. Ltd. case. The Departmental Representative (DR) supported the AO's decision but could not counter the AR's submissions effectively.

The Tribunal reviewed the records and the cited judgments. The Tribunal observed that the AO had denied the set off based on the ITAT Special Bench's decision in DCIT vs. Times Guarantee Ltd., which had held that unabsorbed depreciation for AY 1999-2000 could only be carried forward up to AY 2007-08. However, the CIT(A) had correctly applied the Gujarat High Court's ruling, which allowed the carry forward of unabsorbed depreciation without any time limit post the amendment of Section 32(2) by Finance Act, 2001.

The Tribunal noted that the Gujarat High Court, in the case of Gujarat Themis Biosyn Ltd., had confirmed that unabsorbed depreciation from AY 1997-98 to AY 2001-02 could be carried forward indefinitely and set off against the income of subsequent years. The Tribunal agreed with the CIT(A)'s reliance on this judgment and found no reason to interfere with the CIT(A)'s order.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the set off of unabsorbed depreciation from AY 1999-2000 against the income of AY 2008-09. The Tribunal's decision was pronounced in open court on 7th February 2017.

---