Tribunal rules in favor of assessee, dismisses revenue's appeal on unabsorbed depreciation.

The Tribunal allowed the assessee's appeal, directing the deletion of additions under Sections 145A and 50C. The revenue's appeal against the carry forward and set-off of unabsorbed depreciation for Assessment Years 1996-97 to 2001-02 was dismissed, upholding the CIT(A)'s decision.

---

---

Issues Involved:
1. Addition of Rs. 1,02,12,123 under Section 145A of the Income Tax Act on account of increase in MODVAT credit.
2. Addition of Rs. 39,83,500 under Section 50C on account of sale of property below stamp duty valuation.
3. Carry forward and set-off of unabsorbed depreciation pertaining to Assessment Years 1996-97 to 2001-02.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 1,02,12,123 under Section 145A on account of increase in MODVAT credit:
The assessee challenged the addition of Rs. 1,02,12,123 made by the Assessing Officer (A.O.) under Section 145A of the Income Tax Act, arguing that the MODVAT credit was consistently valued using the same method for the last 15 years. The A.O. had added the difference between the closing debit balance and the opening balance to the value of closing stock, which was confirmed by the CIT(A). However, the Tribunal referred to the assessee's case for A.Y. 2011-12, where the CIT(A) had relied on the Hon’ble Supreme Court decision in CIT Vs. Indo Nippon Chemicals 261 ITR 275, which stated that MODVAT credit does not amount to chargeable income. The Tribunal directed the A.O. to delete the addition, considering the consistent valuation method and the Supreme Court's ruling.

2. Addition of Rs. 39,83,500 under Section 50C on account of sale of property below stamp duty valuation:
The assessee contended that the addition under Section 50C was unjustified as the property sold was a depreciated asset in an unusable condition, and the company was a Sick Industrial Company under BIFR, necessitating the sale at a lower value to cut down costs and repay loans. The A.O. had made the addition, which was upheld by the CIT(A). However, the Tribunal found that the assessee had made a distress sale due to financial constraints and the unusable condition of the asset. The Tribunal set aside the CIT(A)'s order and directed the A.O. to delete the addition, recognizing the financial difficulties and the condition of the asset.

3. Carry forward and set-off of unabsorbed depreciation pertaining to Assessment Years 1996-97 to 2001-02:
The revenue appealed against the CIT(A)'s decision to allow the carry forward and set-off of unabsorbed depreciation for A.Y. 1996-97 to 2001-02. The CIT(A) had relied on the Hon’ble Gujarat High Court decision in General Motors India Pvt. Ltd. vs. CIT (354 ITR 244), which allowed the carry forward of unabsorbed depreciation without any limits. The Tribunal upheld the CIT(A)'s decision, noting that the Hon’ble Supreme Court in CIT Vs. Associated Cables (P) Ltd (2019) 105 taxmann.com 114 had dismissed the SLP filed by the Revenue against the Bombay High Court's order on a similar issue. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal.

Conclusion:
The Tribunal allowed the assessee's appeal, directing the deletion of additions under Sections 145A and 50C, and dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the carry forward and set-off of unabsorbed depreciation for the specified assessment years. The order was pronounced in the open court on 09.06.2021.

---