Tribunal allows carry forward of unabsorbed depreciation without time limit

The Tribunal allowed the assessee's appeals concerning the set-off of carry forward depreciation for the assessment years 2009-10 and 2010-11. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to permit the set-off of unabsorbed depreciation without the eight-year restriction, based on judicial precedents and legislative amendments removing such limitations. The Tribunal upheld this decision, allowing the assessee to carry forward unabsorbed depreciation from 1997-98 to 2001-02 without time constraints. All appeals were allowed, and the order was issued on June 9, 2017.

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Issues:
Set-off of carry forward depreciation of earlier years.

Analysis:
The judgment involves four appeals by the assessee against similar orders for the assessment years 2009-10 and 2010-11. The Commissioner of Income Tax (Appeals) considered both appeals preferred on orders under sections 143(1) and 154 of the Income Tax Act. The common issue in all four appeals is the set-off of carry forward depreciation of earlier years. The returns processed mechanically by the Central Processing Centre did not allow the set-off depreciation due to deficiencies in placing the claims in respective columns. The assessee's application under section 154 was rejected, leading to appeals on both intimation under section 141 and order under section 154 for each assessment year. The only issue taken up for further appeal was the set-off of depreciation. The CIT(A) directed the Assessing Officer to examine the contentions and claim of the assessee and allow the set-off of unabsorbed depreciation, subject to certain limitations. The CIT(A) analyzed the provisions of Section 32(2) as amended by the Finance Acts of 1996 and 2001, directing that the depreciation for AY 1997-98 remaining unabsorbed will not be carried forward beyond eight years, which the assessee contested.

The judgment referred to the decision of the Hon'ble Gujarat High Court in General Motors India P. Ltd. v. Dy. Commissioner of Income Tax, which held that unabsorbed depreciation can be carried forward without any restriction. It emphasized that the amendment through the Finance Act of 2001 removed the restriction of eight years for carrying forward unabsorbed depreciation. The judgment also cited the case of Motor and General Finance Ltd. v. Income Tax Officer and Another, which stated that the amendment by the Finance Act of 2002 removed the cap on carrying forward depreciation, allowing for unlimited carry forward from April 1, 2002. Based on these judicial pronouncements and the Co-ordinate Bench decision, the Tribunal held that the assessee is entitled to set-off unabsorbed depreciation from 1997-98 to 2001-02 without the restriction of eight years. The Assessing Officer was directed to modify the orders accordingly if not already done. Consequently, all appeals were allowed, and the order was pronounced on June 9, 2017.

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