TaxTMI 
TaxTMI 
2016 (5) TMI 1021
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....4-95, 1995-96 & 1996-97 aggregating Rs. 8,77,48,743/- without appreciating the observation put forward by the Assessing Officer. 2. That on the facts and circumstances of the case, Ld. CIT(Appeal) was not justified in allowing the carry forward of un absorbed depreciation for the A.Y. 1994-95, 1995-96 & 1996-97 aggregating Rs. 8,77,48,743/- in view of the amendment by the Finance Act, 2001 with effect from 01.04.2002 substituting the old Section 32(2) of the I.T. Act, 1961. 3. That on the facts and circumstances of the case and also in view of amended provision of law, the unabsorbed depreciation upto assessment year 1996-97 was eligible for set off, up to assessment year 2004-05 only." 3. The grounds of appeal raised by the revenue in ITA No.816/Kol/13 reads as follows: 1. That on the facts and circumstances of the case, Ld. CIT(Appeal) was not justified in allowing the carry forward of unabsorbed depreciation for the A.Y. 1997-98 amounting Rs. 3,24,68,197/- without appreciating the observation put forward by the Assessing Officer. 2. That on the facts and circumstances of the case, Ld. CIT(Appeal) was not justified in allowing the carry forw....
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....f Income Tax (hereinafter referred to as the 'then AO') had disallowed certain expenses and/or claims of the Respondent. In the said Order the then AO had not discussed about the allowability of carry forward of the aforesaid unabsorbed depreciation. Subsequently, the Ld. Income Tax Officer (hereinafter referred to as 'AO') issued notice under section 148 on 31-03-2011 initiating reassessment proceedings. Thereafter, as per specific request of the Respondent, reasons for re- opening of assessment were provided to the Respondent vide letter dated 19-10-2011. In the said letter the AO has contended that the Respondent is not entitled to carry forward the depreciation loss for AY. 1994-95~ 996-97 as per the amended provisions applicable for the said assessment year. 6. For A.Y.2005-06 the Assessee filed its original return of income for the assessment year under consideration on 31-10-2005 declaring a total loss of Rs. 18,85,68,536/-. Subsequently, the said return was revised on 30-03-2007 declaring a total loss of Rs. 19,97,11,536/-. In the said return the appellant had claimed, inter alia, carry forward of unabsorbed deprecation for A. Y. 1997-98 amounting to Rs. ....
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....he 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 the allowance for that previous year, and so on for the succeeding previous years." 9. A glance at this provision indicates that if there are sufficient profits or gains to adjust full depreciation allowance for the current year under s. 32(1) of the Act, then it will be adjusted accordingly. If however there are no profits or gains at all or they are insufficient to accommodate the depreciation allowance for the year in full, then subject to the provisions of ss. 72(2) and 73(3), the amount of such unadjusted allowance, to which effect has not been given, shall be added to the amount of depreciation allowance for the following previous year and deemed to be part of depreciation allowance for that previous year and so on for eternity. 10. The provisions of s. 32(2) as substituted by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997 (hereinafter called the "second period") read as under : "(2) Where in the assessment of the assessee full effect....
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....l Companies (Special Provisions) Act, 1985 (1 of 1986)." 11. A bare perusal of this provision indicates that where the amount of depreciation allowance under s. 32(1) for the current year of a business cannot be absorbed fully or partly due to inadequacy of profits or gains from such business, then such allowance or part of it which remained unabsorbed, is to be referred to as "unabsorbed depreciation allowance". Such unabsorbed depreciation allowance is to be set off firstly against the income under the head "Profits and gains of business or profession" from any other business or profession carried on by the assessee for that assessment year. If such business profit is also insufficient to absorb the unabsorbed depreciation allowance, then the remaining amount shall be set off against income under other heads, as mentioned in s. 14 of the Act assessable for that assessment year. This exercise of setting off the unabsorbed depreciation allowance against any head of income is restricted to the year in which the claim for depreciation has arisen under s. 32(1). If however income of the assessee under all heads is insufficient to absorb the unabsorbed depreciation allowance, then s....
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....see for carry forward of unabsorbed depreciation for 94-95 to 96-97 for set off after the period of 8 years cannot be allowed because unabsorbed depreciation for AY 94-95 and 95-96 totalling Rs. 8,77,48,743 becomes current year depreciation of AY 96-97 and as per the law applicable from AY 1996-97 (Second period) unabsorbed depreciation can be carry forward and set off only upto a period of 8 years. The period of 8 years would i.e., upto 2003-04 and from AY 2004-05 these unabsorbed depreciation cannot be carry forward for set off. Similar reasoning was adopted by the AO for withdrawing carry forward of unabsorbed depreciation of Rs. 3,24,68,197/- of AY 1997-98 claimed in AY 2005-06. 14. The position of unabsorbed depreciation for AY 1994-95 till 2003-04 is given as an annexure to this order for better appreciation of facts. The AO was of the view that the carry forward of unabsorbed depreciation for AY. 1994-95, AY. 19 5-96 and A.Y. 1996-97 to subsequent years aggregating to Rs. 8,77,48,743/- on the ground that the same is not allowable to be carried forward to subsequent years under the provisions of the Act. Under the amended provisions the above unabsorbed depreciation were e....
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....h cannot be so set off as per (ii) above, hereinafter called the 'Second unabsorbed depreciation allowance' shall be carried forward for a maximum period of eight assessment years from the assessment year immediately succeeding the assessment year for which it was first computed, to be set off only against the income under the head 'Profits and gains of business or profession'. C. In the third period (i.e. asst. yr. 2002-03 onwards). (i) 'first unadjusted depreciation allowance' can be set off upto asst. yr. 2004- 05, that is, the remaining period out of maximum period of eight assessment years (as per B(i) above) against income under any head. (ii) 'second unabsorbed depreciation allowance' can be set off only against the income under the head 'Profits and gains of business or profession' within a period of eight assessment years succeeding the assessment year for which it was first computed. (iii) current depreciation for the year under s. 32(1), for each year separately, starting from asst. yr. 2002-03 can be set off against income under any head. Amount of depreciation allowance not so set off (hereinafter called the 'Third u....
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....e Jurisdictional Tribunal in the case of Bengal Tea & Fabrics Limited (ITA No 467/koll2012) dated 26th July, 2012 for the AY 2008-09, wherein the question arose as to whether in view of the amended provisions of section 32(2) of the Act the assessee would be entitled to set off the unabsorbed depreciation for the AYs 1997-98 and 1998-99 against the income of the AY 2008-09 (i.e. beyond assessment years 2004-05/2005-06). The Hon'ble Kolkata Tribunal after analyzing and accepting the principles of the decisions of the Hon'ble Karnataka High Court in the case of Karnataka Cooperative Milk producers Federation Ltd. -vs.- DC IT (2011) 53 DTR 81 (Kar) and Hon'ble Amritsar Tribunal in the case of ITO -vs- Suraj Solvent Vanaspati Industries Ltd. (2008) 16 DTR 492 (Amritsar) and further accepting the fact that since there is no contrary decision of the Hon'ble Calcutta High Court on the aforesaid issue has held that the Assessing officer had taken a correct view of the amended provisions of the section 32(2) of the Act to allow the assessee to carry forward the depreciation allowance for the previous year 2004-05 and 2005-06. Reliance was also placed on the decision of the H....