TaxTMI 
TaxTMI 
2017 (9) TMI 2034
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....rred in confirming the action of the Income Tax Officer, Ward-4(1), Amritsar in disallowing unabsorbed depreciation of Rs. 33,65,948/- benefit of which was never claimed by the assessee. 4. That the Commissioner of Income Tax (Appeals)-2, Amritsar has failed to appreciate that the unabsorbed depreciation brought forward was legally allowable to be carried forward u/s. 32 of the Income Tax Act, 1961." 3. At the outset, the Ld. AR arguing on first ground of appeal submitted that Assessing Officer had made ad hoc disallowance out of electricity charges without rejection of books of account and whereas the order was passed u/s. 143(3) of the Act, and therefore he argued that ad hoc disallowance without invoking the provisions of 145(3) was not warranted. Reliance in this respect was placed on the following case laws: "(i) The Batala Co-op Sugar Mills Ltd. Vs. The DCIT, Circle-2, Amritsar in ITA No. 179 & 180 dated 03.07.2008 (ii) Alumaunium Industries (Private) Ltd. Vs. CIT 20 Taxman 184 (Gau) (iii) International Forest Co. Vs. CIT--------101 ITR 721 (J & K)" Arguing upon the next grievance, the Ld. AR submitted that assessee had claimed unabsorbed depreciation amounting to R....
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.... was completed u/s. 143(3) of the I.T. Act. There is categorical finding given by the Assessing Officer that the assessee has produced books of account in support of the claim of the assessee. The Assessing Officer in its assessment order dated 28.12.2006 had not rejected the books of account of the assessee and there is no finding given by the Assessing Officer in its assessment order that the books of account are not reliable or unverifiable. Hence, it is inferred that the assessee's books of account are not at all rejected. The Assessing Officer cannot make any estimate addition without rejecting the books of account. If the Assessing Officer was to make any addition first of all he was required to reject the books of account which he has failed to do so. Hence, in our opinion, there is no question of making any ad-hoc disallowance towards consumption of bagasse. Accordingly, the addition is unwarranted. The ground taken by the assessee is allowed." Respectfully following the above order of the Tribunal we hold that the disallowance was not warranted, therefore ground No. 1 and 2 of the appeal is allowed. As regards the unabsorbed depreciation of Rs. 33,65,948/- we find th....
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....unabsorbed depreciation 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 32. 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. 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 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 par....
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....y allowance 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." 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 ....
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....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. 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 ded....