2021 (12) TMI 264 - HC - Income Tax

Tribunal upholds extended depreciation carryforward, dismissing revenue's appeal

COMMISSIONER OF INCOME TAX, (LARGE TAXPAYERS UNITS), KOLKATA Versus M/s. HINDUSTAN COPPER LIMITED

The Tribunal's interpretation of Section 32(2) of the Income Tax Act, 1961 was upheld, allowing the assessee to carry forward unabsorbed depreciation ... Carry forward of unabsorbed depreciation - beyond the eight year period mandated under the provisions of Section 32 - scope of amended provisions - Whether subsequent amendment of Assessment Year 2001-02 has allowed the depreciation of Assessment Year 1997-98, 1998-99, 1999-2000 and 2000-01 to be carried forward for unlimited period and can be claimed to be set off Assessment Year 2008-09? - HELD THAT:- The issue involved in this case is no longer res integra and has been settled in several decisions. It is brought to our notice by the learned senior counsel for the respondent that in the case of Commissioner of Income Tax vs. Sanmar Speciality Chemicals Ltd. [2020 (9) TMI 770 - MADRAS HIGH COURT] identical issue was considered wherein the Court noted various decisions of the other High Courts and in particular the decision of the High Court of Gujarat in General Motors India P. Ltd. [2012 (8) TMI 714 - GUJARAT HIGH COURT] as well as the circular no.14 of 2001 dated 9th November, 2001 issued by the Central Board of Direct Taxes (CBDT) and granted relief to the assessee as held restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. - Decided against the Revenue Issues Involved:1. Interpretation of Section 32(2) of the Income Tax Act, 1961.2. Carry forward and set-off of unabsorbed depreciation beyond the eight-year period.Issue-wise Detailed Analysis:1. Interpretation of Section 32(2) of the Income Tax Act, 1961:The core issue revolves around whether the Tribunal was correct in permitting the assessee to carry forward the depreciation loss from the assessment year 1997-98 to the assessment year 2008-09, beyond the eight-year period mandated under Section 32 of the Act. The Tribunal's decision was challenged by the revenue, which argued that the carry forward should be restricted to eight years as per the pre-amendment provisions.The respondent cited the case of Commissioner of Income Tax vs. Sanmar Speciality Chemicals Ltd., where the Madras High Court, referencing various High Court decisions including the Gujarat High Court's ruling in General Motors India P. Ltd. vs. DCIT, and CBDT Circular No. 14 of 2001, granted relief to the assessee. The circular clarified that the restriction of eight years for carrying forward unabsorbed depreciation was removed to help industries conserve funds for replacing plant and machinery. The amendment, effective from April 1, 2002, allowed for unlimited carry forward of unabsorbed depreciation.2. Carry forward and set-off of unabsorbed depreciation beyond the eight-year period:The revenue's contention was based on the Calcutta High Court's decision in Peerless General Finance & Investment Co. Ltd. vs. CIT, where the assessee was denied relief. However, the Supreme Court dismissed the special leave petition against this decision. Despite this, the Tribunal's decision was supported by several other High Court rulings and CBDT Circular No. 14 of 2001, which emphasized the removal of the eight-year restriction starting from the assessment year 2002-03.The Tribunal's decision was further supported by the Gujarat High Court in General Motors India P. Ltd. vs. DCIT, which stated that any unabsorbed depreciation available on April 1, 2002, would be governed by the amended Section 32(2) and could be carried forward without any time limit. This interpretation was echoed by the Bombay High Court in CIT vs. Bajaj Hindustan Ltd., where the Supreme Court dismissed the revenue's special leave petition, and by the Punjab & Haryana High Court in CIT vs. G.T.M. Synthetics Ltd., which allowed unabsorbed depreciation to be set off against income from other heads.In conclusion, the Tribunal's interpretation of Section 32(2) was upheld, allowing the assessee to carry forward unabsorbed depreciation beyond the previously mandated eight-year period. The appeal filed by the revenue was dismissed, and the substantial questions of law were answered against the revenue, affirming the Tribunal's decision in favor of the assessee.