TaxTMI 
TaxTMI 
2014 (5) TMI 555
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....17 and 4918/Mum/2008, AYrs. 2003-04 and 2004-05) in respect of current and brought forward unadjusted /unabsorbed depreciation allowance in three periods, the first period being 1996-97, second period being AYrs 1997-98 to 2001-02 and third period from AY 2002-03 onwards" 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the AO be restored" 2. The impugned orders passed by Assessing Officer are dated 7.2.2012 and vide these orders he has given effect to the orders passed by ld. CIT(A). In these orders the AO has held that unabsorbed deprecation in the hands of the assessee from the assessment years 1990-91 to assessment year 2001-02 can only be carried forward for setting off up to the 8 assessment years. Aggregate of such depreciation is a sum of Rs.74,67,77,206/- and is described in the following chart : Assessment Year Depreciation in Rs. 1990-91 5,07,02,859 1991-92 10,44,28,389 1992-93 13,59,71,162 1993-94 11,67,74,923 1996-97 16,16,03,381 1997-98 15,87,64,896 2001-02 1,85,21,596 74,67,77,206 The aforementioned unabsorbed depreciation, according t....
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....nty Ltd (2010) 40 SOT 14 (Mum)(SB). 4. In addition to what has been contested in the grounds of appeal, the ld. CIT, DR who has represented the matter before us has also submitted written submissions. The sum and substance of which is as follows : (i) Ld. DR has explained the prevailing statutory position relating to the provisions of section 32(2). According to the submissions of ld. DR, the position as prevailed up the assessment year 1996-97 is as under : * It could be carried forward for any number of subsequent assessment years without limit; * It could be set off against income under any head of such subsequent assessment years; * It was not necessary that the same business to which it relates should be continued to be carried on by the assessee. In fact even if no business was carried on by the assessee in the subsequent years the benefit of set off was nonetheless available" The position as it is applicable from assessment year 1997-98 to 2001-02 is as under : * Unabsorbed depreciation was allowed to be carried forward for a maximum of 8 subsequent years immediately following the year to which it relates; * The unabsorbed depreciation could be set of....
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....d that AO in the present case, has held that carried forward and set off of such unabsorbed depreciation will be only up to the period of 8 years and such observations of AO are in accordance with law as was applicable up to the assessment year 2001-02. He submitted that even circular issued by CBDT dated 9.11.2001 has specifically mentioned that the amendment will be applicable in relation to assessment year 2002-03 and subsequent years and thus it was pleaded by ld. DR that unabsorbed depreciation relating to assessment year 1997-98 to 2001-02 would qualify for carried forward and set off but would be subject to the conditions stipulated u/s 32(2) as it existed up to assessment year 2001-02. To contend that provisions of section 32(2) as applicable from assessment year 1997-98 to assessment year 2001-02 will govern the carried forward and set off of unabsorbed deprecation related to assessment years 1997-98 to 2001- 02, the ld. CIT DR has relied on the following decisions : "i) DCIT V/s Times Guaranty Ltd 40 SOT 14 (ITAT-SB-MUM) ii) CIT V/s RPIL Signalling Systems Ltd 328 ITR 283 (Mad) iii) CIT V/s Pioneer Asia Packaging Pvt Ltd 310 ITR 198 (Mad) iv) CIT V/s S & S Pow....
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....ourt. He submitted that in view of the decision of Hon'ble Gujarat High Court, ITAT, Mumbai Bench subsequent to decision of Special Bench of ITAT in the case of Times Guaranty Ltd (supra) has followed the decision of Hon'ble Gujarat High Court in the case of General Motors India P. Ltd (supra) in place of Special Bench Decision. For this purpose, reference was made to the decision of ITAT Mumbai Bench in the case of Hindustan Unilever Ltd V/s Addl. CIT (2012) 28 Taxmann.com 142(Mum-Trib) order dated 10.12.2012, wherein it has been held that unabsorbed depreciation of marketing company for assessment years 1996-97 and 1997-98 amounting to Rs.5,63,66,551/- and Rs.8,97,30,340/- respectively would be allowable in respect of assessment year 2006-07. The ld. AR also pointed out that the decision of the Special Bench in the case of Times Guaranty Ltd (supra) was specifically relied upon by revenue in the said case and has been discussed by the Tribunal in paras 74 and 75 of the order. The ld. AR further pointed out that subsequently vide order dated 22.5.2013, Mumbai Bench of the Tribunal in the case of Milton's Pvt Ltd V/s CIT-6 in ITA No.3019/Mum/2012 (AY 2007-08) has held that conseque....
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....preciation pertaining to A.Y. 1997-98 to 2001-02 cannot be carried forward beyond 8 years as the law stood at that point of time but subsequent to the aforementioned Judgement Hon'ble Gujarat High Court had taken a view that intention of the Legislature was to allow unabsorbed depreciation allowance for an indefinite period of time since it was for enabling the industry to conserve sufficient funds to replace plant and machinery and, bearing in mind the intention of incentive, restriction of 8 years was dispensed with by an amendment. Subsequent to the decision of Hon'ble Gujarat High Court, ITAT "K" Bench, Mumbai in the case of Hindustan Unilever Ltd. (22 ITR 737) followed the decision of Hon'ble Gujarat High Court in preference to the decision of the Special Bench; since there is no contrary decision of any other High Court. Learned counsel for the assessee submitted that the Assessing Officer in proceedings u/s. 143(3) of the Act had originally accepted the claim of set off of carried forward unabsorbed depreciation which is in consonance with the view taken by Hon'ble Gujarat High Court and, hence view taken by the Assessing Officer cannot be said to be erroneou....
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....on and set-off to a limit of 8 years, from the A.Y. 1997-98. Circular No. 762 dated 18.2.1998 issued by the Central Board of Direct Taxes (CBDT) in the form of Explanatory Notes categorically provided, that the unabsorbed depreciation allowance for any previous year to which full effect cannot be given in that previous year shall be carried forward and added to the depreciation allowance of the next year and be deemed to be part thereof. 34. So, the unabsorbed depreciation allowance of A.Y. 1996-97 would be added to the allowance of A.Y. 1997-98 and the limitation of 8 years for the carry-forward and set-off of such unabsorbed depreciation would start from A.Y. 1997-98. 35. We may now examine the provisions of section 32(2) of the Act before its amendment by Finance Act 2001. The section prior to its amendment by Finance Act, 2001, read as under:- "Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year owning to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to....
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....wance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable for that previous year, owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be allowance of that previous year, and so on for the succeeding previous years." 38. The purpose of this amendment has been clarified by Central Board of Direct Taxes in the Circular No.14 of 2001. The relevant portion of the said Circular reads as under :- "Modification of provisions relating to depreciation 30.1 Under the existing provisions of section 32 of the Income-tax Act, carry forward and set off of unabsorbed depreciation is allowed for 8 assessment years. 30.2 With a view to enable the industry to co....
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....ithin the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No.14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years. 40. Therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that b....
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.... have taken a view that in view of subsequent decision of Hon'ble Gujarat High Court, the decision of Special Bench of Tribunal in the case of Times Guaranty Ltd (supra) cannot be followed. For this purpose reference has been made by ld. AR to the decision of Mumbai Bench i.e. in the case Hindustan Unilever Ltd (supra) and Milton's Pvt Ltd (supra). The relevant portion of the decision in the case of Milton's Pvt Ltd. has already been reproduced. No contrary decision has been brought to our notice. 10. So far as it relates to reliance by ld. DR on the decisions of Hon'ble Madras High Court in the cases of (i) RPIL Signalling Systems Ltd (ii) Pioneer Asia Packaging Pvt Ltd and (iii) S & S Power Switchgear Ltd (supra), it may be mentioned that these decisions related to amendment brought into the statute from assessment year 1997-98 and none of the decisions relates to amendment brought into statute by Finance Act, 2001, relevant to assessment year 2002-03 onwards. Whereas the decision of the Hon'ble Gujarat High Court in the case General Motors India P. Ltd (supra) is directly on the amendment brought into statute by Finance Act, 2001 relates to assessment year 2002-03 onwards and....