TaxTMI 
TaxTMI 
2016 (3) TMI 1411
X X X X Extracts X X X X
X X X X Extracts X X X X
....er in withdrawing the set off of unabsorbed depreciation amounting to Rs. 23,69,592/-. 3. Brief facts of the case are that the assessee is engaged in the business of manufacture of finished leathers filed its return for the assessment year 2006-07 on 25.11.2006 declaring Nil income. subsequently it was noticed by the learned Assessing Officer that the assessee had carried forward the unabsorbed depreciation loss of Rs. 23,69,592/- pertaining to the assessment year 1997-98 which was beyond eight years and set off the same in the relevant assessment year 2006-07, which is not permissible as per the provisions of the Act, therefore he reopened the assessment by invoking provisions of section 147 of the Act.. While doing so, the learned Assessing Officer placed reliance in the decision of the Mumbai Special Bench of the Tribunal in the case of DCIT Vs. Times Guarantee in ITA No.4917 & 4918/Mum/2008 dated 30.06.2010. Ground No.1: Validity of reopening of assessment under section 147 of the Act:- 4. On the issue of reopening beyond the period of four years, the learned Commissioner of Income Tax (Appeals) held the issue in favour of the Revenue since it came to the knowled....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve said Special Bench decision of the Tribunal directed the Assessing Officer to disallow unabsorbed depreciation prior to assessment year 2002-03 i.e. from the assessment year 1999-2000 to 2001-02 which was set off against long term capital gains against which the assessee is in appeal before us. 8. At the time of hearing, the counsel for the assessee submits that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd. Vs. DCIT, wherein the Hon'ble Gujarat High Court held that unabsorbed depreciation from 1997-98 upto assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof and was available for carry forward and set off against profits and gains of subsequent years without any limit whatsoever. He also places reliance on the Mumbai Bench of this Tribunal in the case of M/s. Arch Fine Chemicals Vs. ACIT in ITA No.2414 & 2415/Mum/2012 dated 9.10.2013 where similar view was taken by the Tribunal following the decision of the Hon'ble Gujarat High Court in the case of General Motors India Pvt.Ltd. (supra). 9. The Departmental Represen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d depreciation would start from A.Y. 1997- 98. 33. 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 subsection (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 which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be,- (i) shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (ii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year; (iii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and Clause (ii), the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." 36. 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 conserve sufficient funds to replace plant and machinery, specially in an era where obsolescence takes place so often, the Act has dispensed with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The Act has also clarified that in computing the profits and gains of business or profession for any previous year, deduction of depreciation under section 32 shall be mandatory. 30.3 Under the existing provisions, no deduction for depreciation is allowed on any motor car manufactured outside Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 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. 38. 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 becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the ....