2019 (2) TMI 1872 - HC - Income Tax

Set off of unabsorbed depreciation of prior against long term capital gain - HELD THAT - As decided in General Motors India (P) Ltd 2012 (8) TMI 714 - GUJARAT HIGH COURT any unabsorbed depreciation available to an assessee on 1st April 2002 (asst. yr. 2002-03) will be dealt with in accordance with the provisions of s. 32(2) as amended by Finance Act 2001. And 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 asst yr. 1997-98 up to the asst. yr. 2001-02 got carried forward to the asst. yr. 2002-03 and became part thereof it came to be governed by the provisions of s. 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. Short term capital gain - Whether ITAT is right in deleting the addition on account of short term capital gain an sale of building without appreciating the fact value of building taken by the AO was clearly mentioned in the sale deed? - HELD THAT - The assessee had sold the land along with the building thereon referred to as SEML property. The assessee had valued the land and the building separately and claimed depreciation on the constructed property. The sale consideration of Rs. 51.18 Lacs attributed to the building was offered to tax but at the same time the assessee also claimed depreciation on the constructed property. The Tribunal accepted such depreciation however subject to rider of revaluation of the another property referred as Ambaturr which also forms part of the block of depreciable assets. No error in the order of the Tribunal. No questions of law arises

Summary

Issues:
1. Set off of unabsorbed depreciation against long term capital gain.
2. Addition of short term capital gain on sale of building.

Issue 1: Set off of unabsorbed depreciation against long term capital gain:
The case involved the question of whether the Income Tax Appellate Tribunal (ITAT) was correct in allowing the set off of unabsorbed depreciation of prior years against long term capital gain. The assessee, a private limited company, claimed this set off for the Assessment Year 2008-09. The Commissioner of Income Tax (Appeals) reversed the decision of the Assessing Officer and granted relief to the assessee based on provisions of the Income Tax Act, 1961. The ITAT upheld the decision of the CIT(A), stating that as per the provisions of the Act, total depreciation from the relevant assessment year along with unabsorbed depreciation from earlier years can be set off against income under any head, including Long Term Capital Gain. The Tribunal dismissed the Revenue's appeal, emphasizing that unabsorbed business loss of earlier years can be set off against profits and gains from the current year. The High Court, after considering relevant precedents, found no error in the ITAT's order and dismissed the appeal.

Issue 2: Addition of short term capital gain on sale of building:
The second issue revolved around the Assessing Officer's objection to the assessee not offering the entire sale consideration of immovable property to Capital Gain Tax. The assessee had sold a property comprising land and a building, known as SEML property. While the sale consideration attributed to the building was offered to tax, the assessee also claimed depreciation on the constructed property. The Tribunal accepted the depreciation claim but imposed a condition related to the revaluation of another property, Ambaturr, which was part of the depreciable assets block. The High Court found no error in the Tribunal's order and concluded that no questions of law arose in this matter. Therefore, the appeal was dismissed with no order as to costs.

In summary, the High Court of Bombay upheld the ITAT's decision regarding the set off of unabsorbed depreciation against long term capital gain, citing relevant provisions of the Income Tax Act and precedents. Additionally, the Court found no fault in the Tribunal's ruling on the addition of short term capital gain on the sale of a building, leading to the dismissal of the appeal.