TMI Blog2017 (4) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever See case of General Motors India Pvt. Ltd [2012 (8) TMI 714 - GUJARAT HIGH COURT] - Decided aganst Revenue. - I.T.A. 2309/Mum/2015 - - - Dated:- 5-4-2017 - Sh. Rajendra, Accountant Member And C. N. Prasad, Judicial Member Revenue by : Ms. Arju Goradia-DR Assessee by : Ms. Usha Gopalan ORDER Per Rajendra A. M. Challenging the order dated 13/02/2015 of CIT(A)-9, Mumbai, the Assessing Officer (AO)has filed the present appeal. Assessee-company, engaged in the business of manufacturing of textiles and handloom, filed its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to earlier years, that the payment made to the directors was a tax avoidance tool, it had failed to justify the expenditure, that the payment was made to a related party. Invoking the provisions of section 40A(2)(b) of the Act he held that remuneration of ₹ 8 lakhs was justifiable. Finally, he made a disallowance of ₹ 22 lakhs under the provisions of section 40A(2) of the Act. 3. 1. During the appellate proceedings, the assessee made submissions before the FAA and relied upon the case of Hive Communication (P. ) Ltd. (201taxman 99). After considering the available material, he held that remuneration paid to directors was in excess as per the market and business exigencies, that the disallowance made by AO was on a higher side. Accordingly, he directed the AO to restrict the disallowance to ₹ 10 lakhs. 3. 2. Before us, the DR stated that there was no justification for abnormal rise in the remuneration to the directors, that provisions of section 40A(2)(b) were applicable. The AR stated that while deciding the appeal filed by assessee in ITA 2893/Mum/ 2015, dt. 9. 12. 2016, the Tribunal had restored the issue to the file of FAA for fresh adjudication. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, we direct the FAA to pass a speaking and reasoned order after providing a reasonable opportunity to the assessee. Second Ground is decided in favour of the AO, in part. 4. Last Ground of appeal is about allowing the carryforward of unabsorbed depreciation for AY 2000-01 and 2001-02 aggregating to ₹ 64. 58 lakhs. While computing the assessment the AO did not allow depreciation for the above mentioned two AY. s, relying upon the decision of the Tribunal in the case of Times Guarantee Ltd. After considering the submission of the assessee and following the judgment of the Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd. (354ITR244) he allowed the appeal of the assessee. 4. 1. Before us, the DR stated that matter could be decided on merits. The AR relied upon the judgment of General Motors India Pvt. Ltd. (supra). We would like to reproduce the judgment of Hon'ble Gujarat High Court in the case of General Motors and it reads as under :- 32. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to the assessment year 1997-98 could be allowed to be carried forward and set off after a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any pre vious 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 busi ness or profession carried on by him and assessable for that assess ment 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 amount of allowance not so set off shall be carried forward to the following assessment year, and- (a) it 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 ; (b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 eight 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 eight 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 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, 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 unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (the assessment year 2002-03), will be dealt with in accordance with the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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