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2016 (9) TMI 1077 - AT - Income TaxAddition on account of carried forwarded unabsorbed depreciation - CIT(A) deleted the addition - Held that:- Perusal of provisions of s. 32(2) as substituted by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997 (hereinafter called the "second period") says if income of the assessee under all heads is insufficient to absorb the unabsorbed depreciation allowance, then such amount is to be carried forward to the following assessment year to be set off against the income arising under the head ‘Profits and gains of business or profession’. Not only that, the business or profession for which the allowance was computed should continue to be carried on by the assessee during the previous year relevant to assessment year in which the set off is claimed. The exercise of carrying forward such unabsorbed depreciation allowance is to be continued upto eight assessment years immediately succeeding assessment year for which the aforesaid depreciation allowance was first computed. From here it follows that the amount of unabsorbed depreciation allowance which could not be set off against income under any head in the year in which the allowance was first computed, shall be eligible to be carried forward for set off only against income under the head ‘Profits and gains of business or profession’ to the following assessment year(s) not more than eight assessment years immediately succeeding the assessment year for which it was first computed. The provisions of Sec.32(2) as substituted by the Finance Act, 2001 w.e.f. 1st April, 2002, applicable for AY 2004-05 & 2005-06 ) Assessment years under consideration (hereinafter called the "third period") reads as under : "(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-s. (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 being less than the allowance, then, subject to the provisions of sub-s. (2) of s. 72 and sub-s. (3) of s. 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 the allowance for that previous year, and so on for the succeeding previous years". The CIT(A) rightly accepted the stand taken on behalf of the Assessee and reversed the action of the AO. We are of the view that in the light of the decision of the Hon’ble Gujarat High Court in the case of General Motors India Pvt. Ltd. wherein held that carry forward of unabsorbed depreciation concerning AY. 2001-02 and assessment years prior thereto can be set off in subsequent which has the effect of overruling the decision of the Special Bench in the case of Times Gurantee (2010 (6) TMI 516 - ITAT, MUMBAI ) wherein it was held that unabsorbed depreciation prior to the period 1997-98 can be carried forward for set off against the income for a maximum of eight years starting from the A.Y. 1997-98 and also on the basis of other decisions referred to above, the order of the CIT(A) does not call for any interference - Decided in favour of assessee
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