TaxTMI 
TaxTMI 
2021 (12) TMI 264
X X X X Extracts X X X X
X X X X Extracts X X X X
....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? b) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, "C" Bench Kolkata has correctly interpreted the provision of Section 32(2) of the Income Tax Act, 1961 by allowing unlimited carry forward of unabsorbed depreciation for periods when there has been restrictions on such carry forward to eight Assessment Years prior to amendment made in Finance Act, 2001?" We have heard Ms. Sucharita Biswas, learned Counsel for the appellant/revenue and Mr. J.P. Khaitan, learned senior counsel for the respondent/assessee. 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. reported in [2020] 428 ITR 237 (Mad) identical issue was considered wherein the Court noted various decisions of the other High Courts a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cient 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 India unless it is used (i) in the business of running it on hire for tourists, or (ii) outside India in the assessee's business or profession in another country. 30.4 The Act has allowed depreciation allowance on all imported motor cars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly apply in relation to the assessment year 2002-2003 and subsequent years." 8. From paragraph 30.2 of the above circular, it is clear that the restriction of 8 years for carry forward and set- off of unabsorbed depreciation was dispensed with, with a view to enable the industries to cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es entitled for a benefit within 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.Ys. 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.Ys. 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 ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gainst the income under any other head even where the business was not carried on. Clause 22 of the said circular which is relevant is as under: "22. Requirement of continuance of same business for set-off of unabsorbed depreciation dispensed with: 22.1 Under the existing provisions of sub- section (2) of section 32 of the Income-tax Act, carried forward unabsorbed depreciation is allowed to be set-off against profits and gains of business or profession of the subsequent year, subject to the condition that the business or profession for which depreciation allowance was originally computed continued to be carried on in that year. A similar condition in section 72 for the purpose of carry forward and set-off of unabsorbed business loss was removed last year. 22.2 With a view to harmonise the provisions relating carry forward and set-off of unabsorbed depreciation and unabsorbed loss, the Act has dispensed with the condition of continuance of same business for the purpose of carry forward and set-off of unabsorbed depreciation. 22.3 This amendment will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....computation shall be made accordingly." 4. Having heard the learned counsel for parties and having perused the documents on record, we do not find any error in the order of the Appellate Tribunal. Gujarat High Court in the case of General Motors India (P.) Ltd. (supra) had considered somewhat similar issue, of course in the backdrop of the assessee's challenge to a notice of reopening of the assessment. The Gujarat High Court had held and observed as under- "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 ye....