Tribunal: Mixed Ruling on Tax Appeal - Favorable Decision on Unabsorbed Depreciation, Adverse on Brought Forward Losses

The Tribunal partially allowed the appeal, affirming the rectification of the set off of brought forward losses but rejecting the rectification regarding the unabsorbed depreciation set off. The decision favored the assessee on the issue of unabsorbed depreciation but ruled against the assessee on the issue of brought forward losses.

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Issues:
1. Validity of rectification order u/s.154 of the Income-tax Act, 1961 regarding set off of unabsorbed depreciation.
2. Allowability of unabsorbed depreciation for A.Yrs. 1997-98 and 1998-99 for set off against income of A.Y. 2008-09.
3. Admissibility of set off of brought forward losses against current year's income.

Analysis:
1. The appeal challenged the order by the CIT(A)-5, Pune, upholding the Assessing Officer's order u/s.154 of the Income-tax Act, 1961 for the assessment year 2008-09. The AO observed discrepancies in the original assessment where unabsorbed depreciation totaling &8377; 1,70,61,242/- for A.Yrs. 1997-98 and 1998-99 was claimed by the assessee for set off against the income of A.Y. 2008-09. The AO contended that this claim was not eligible due to section 32(2) of the Act. The assessee cited judgments of the Hon'ble Gujarat High Court and Mumbai Tribunal to support their claim. The AO found no brought forward losses available for set off against the current year's income and disallowed the unabsorbed depreciation set off.

2. The Tribunal noted that proceedings u/s.154 are not suitable for debatable issues. Citing the judgment of the Hon'ble Gujarat High Court in General Motors India P.Ltd. Vs. DCIT, it was established that unabsorbed depreciation as on 01-04-2002 should be dealt with as per the amended provisions of section 32(2) by the Finance Act, 2001. The Tribunal found that the Hon'ble Gujarat High Court had ruled in favor of the assessee in similar cases, concluding that rectification u/s.154 was not warranted for the unabsorbed depreciation of A.Yrs. 1997-98 and 1998-99. However, the Tribunal upheld the rectification order disallowing the set off of brought forward losses, as there were no such losses available for set off against the current year's income.

3. The Tribunal partially allowed the appeal, affirming the rectification of the set off of brought forward losses but rejecting the rectification regarding the unabsorbed depreciation set off. The decision was based on the non-availability of brought forward losses for set off and the applicability of the Hon'ble Gujarat High Court's judgment on unabsorbed depreciation. The appeal was concluded on 03rd September, 2020, in favor of the assessee on the issue of unabsorbed depreciation but against the assessee on the issue of brought forward losses.

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