Tribunal allows unlimited carry forward of unabsorbed depreciation beyond 8 years

The Tribunal upheld the decision of the Ld. CIT (A) and dismissed the revenue's appeal. It affirmed the allowance of carry forward of unabsorbed depreciation beyond 8 years, interpreting the provisions enacted in the Finance Act 1988-89 in favor of the assessee. The Tribunal held that the Finance Act 2001 reinstated the original provisions regarding the set off of unabsorbed depreciation, allowing for unlimited carry forward without restriction on the number of years. This judgment was pronounced on 13-12-2019.

---

---

Issues:
1. Allowance of carry forward of unabsorbed depreciation for more than 8 years.
2. Interpretation of provisions enacted in Finance Act 1988-89 regarding limitation on carry forward of depreciation.

Analysis:
1. The appeal was filed by the revenue against the order passed by the Ld. CIT (A) for the assessment year 2011-12. The Ld. AO had made additions to the assessment, including disallowance of employees' contribution to PF/ESI and extra set off of unabsorbed business/depreciation loss. The Ld. CIT (A) partly deleted these additions, leading to the revenue filing an appeal.

2. The main contention revolved around the allowance of carry forward of unabsorbed depreciation for more than 8 years. The Ld. CIT DR argued that the provisions of section 32 of the Act restricted the carry forward and set off of unabsorbed depreciation to only 8 subsequent assessment years. However, the Tribunal observed that the amendment made by the Finance Act 2001 reinstated the original provisions regarding the set off of unabsorbed depreciation. The Tribunal referred to various decisions, including the case of Karnataka Co-Operative Milk Producers Federation Ltd vs. DCIT, to support the view that the restriction of limiting the claim to an 8-year period was no longer applicable. The Tribunal upheld the view of the Ld. CIT (A) and dismissed the grounds raised by the revenue.

3. Regarding the interpretation of provisions enacted in the Finance Act 1988-89, the Tribunal found that the original provisions regarding the set off of unabsorbed depreciation had been restored by the Finance Act 2001. This restoration allowed for the set off of unabsorbed depreciation against profits and gains of subsequent years without any limitation on the number of years for carry forward. The Tribunal's decision was based on the legislative intent to revert to the original provisions, thereby extending the benefit of set off without any restrictive period.

4. In conclusion, the Tribunal upheld the decision of the Ld. CIT (A) and dismissed the appeal filed by the revenue. The judgment was pronounced on 13-12-2019, affirming the allowance of carry forward of unabsorbed depreciation beyond 8 years and interpreting the provisions enacted in the Finance Act 1988-89 in favor of the assessee.

---