2016 (10) TMI 1315 - AT - Income Tax

Set off unabsorbed deprecation - As per AO under the old provision unabsorbed depreciation could be considered only for eight years - As per CIT (Appeals) amendment made by Finance Act 2001 w.e.f. 01.04.2002 reinstated the old provision and according to him the assessee was eligible for carried forward depreciation for the assessment year 1997-1998 that amended provisions would apply - HELD THAT - In our opinion the issue stand settled by virtue of jurisdictional High Court judgment in the case of CIT vs. Pioneer Asia Packing P. Ltd 2007 (11) TMI 285 - MADRAS HIGH COURT as held Tribunal has rightly come to the conclusion that the assessee is entitled to the unabsorbed depreciation brought forward as on April 1 1997 and could be set off against the business profits and in order to give effect to that finding the case was remitted to the file of the Assessing Officer for verification as to how much depreciation was available up to April 1 1997 that could be included in the income of the assessee. Accordingly we are of the opinion that ld. Commissioner of Income Tax (Appeals) is justified in taking a view that assessee was eligible for carried forward deprecation for the assessment year 1997-1998. Addition u/s.43B (b) or u/s.40A(7)(b) - provision made for gratuity - HELD THAT - As in the case of CIT vs. Common Wealth Trust (P) Ltd Anr 2004 (4) TMI 51 - KERALA HIGH COURT and CIT vs. Bechtel India (P) Ltd 2007 (11) TMI 2 - HIGH COURT DELHI had held that harmonious construction of Sec. 40A(7) (b) and Sec. 43B(b) of the Act could clearly indicate that the legislature never intended to take away the benefit conferred under clause (b) of Sec. 40A(7) of the Act through the provisions of Sec. 43B(b) . So far as additional depreciation is concerned balance of additional depreciation remaining after the claim of 50% in one year could be allowed in succeeding year by virtue of judgment in the case of Rittal India Pvt. Ld 2016 (1) TMI 81 - KARNATAKA HIGH COURT . We therefore of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in allowing the claim of the assessee in both years. Appeals of the Revenue stand dismissed.

Summary

Issues:
1. Appeal against the order of ld. Commissioner of Income Tax (Appeals) for the assessment years.
2. Department's appeal on the directions to allow set off unabsorbed depreciation.
3. Interpretation of the amended provisions of section 32(2) of the Income Tax Act, 1961.
4. Disallowance of provision for gratuity under Sec. 43B(b) of the Act.
5. Allowance of balance of additional depreciation claimed by the assessee.

Analysis:

1. The Department appealed against the order of the ld. Commissioner of Income Tax (Appeals) for the assessment years, specifically focusing on the issue of allowing set off unabsorbed depreciation. The Department contended that the Special Bench decision in the case of DCIT vs. Time Guaranty restricted unabsorbed depreciation as per provisions prior to the amendment to Sec.32 of the Act. However, the ld. Commissioner of Income Tax (Appeals) ruled in favor of the assessee, citing the Gujarat High Court judgment in the case of General Motors India Pvt. Ltd vs. DCIT, which reinstated the old provision through an amendment by the Finance Act, 2001. The Tribunal upheld the decision, referring to the jurisdictional High Court judgment in the case of CIT vs. Pioneer Asia Packing P. Ltd, which clarified the provisions regarding the absorption and carry forward of unabsorbed depreciation.

2. In the appeal for the assessment year 2012-2013, the Department raised concerns regarding the disallowance of the provision for gratuity under Sec. 43B(b) of the Act and the direction to allow additional depreciation claimed by the assessee. The ld. Assessing Officer disallowed the provision made for gratuity, asserting that only actual payments were eligible for deduction under the relevant sections. On the other hand, the assessee claimed balance of additional depreciation, which was initially allowed in the previous year. The ld. Commissioner of Income Tax (Appeals) supported the assessee's claims, referring to relevant case laws and judgments.

3. The Tribunal analyzed the contentions raised by both parties and examined the legal provisions and precedents. It was observed that the harmonious construction of Sec. 40A(7)(b) and Sec. 43B(b) of the Act allowed for the provision of gratuity to be considered for deduction, as confirmed by judgments of the Kerala High Court and Delhi High Court. Additionally, the Tribunal noted that the balance of additional depreciation remaining after a partial claim in one year could be allowed in the succeeding year, as per the judgment of the Karnataka High Court in the case of Commissioner of Income Tax vs. Rittal India Pvt. Ltd. Consequently, the Tribunal upheld the decision of the ld. Commissioner of Income Tax (Appeals) and dismissed the appeals of the Revenue for the assessment year 2012-2013.

In conclusion, the Tribunal's detailed analysis and application of relevant legal provisions and precedents resulted in the dismissal of the Revenue's appeals, affirming the decisions of the ld. Commissioner of Income Tax (Appeals) in both instances.