2021 (1) TMI 296 - HC - Income Tax

Assessment u/s 153C - Unabsorbed depreciation - whether eligible for set off against any income of the appellant - HELD THAT - The Hon ble Supreme Court in the Judgment reported in Commissioner of Income tax v. Bajaj Hindustan Ltd 2019 (1) TMI 1843 - SC ORDER held that unabsorbed depreciation pertaining to the assessment year 1997-98 to 2001-02 can be carry forward and adjusted after the lapse of eight assessment years in view of the section 32(2) as amended by the Finance Act 2001. Appellant also submitted that the 3rd questions of law raised in the present Tax Case Appeal is covered by the above decisions of the Hon ble Apex Court and the Division Benches of this court hence the Tax Case Appeal should be allowed. In view of the submissions made by the learned counsel on either side following the Judgments passed by the Hon ble Apex Court and the Division Benches of this court the order passed by the Income Tax Appellate Tribunal is liable to be set aside. Accordingly the same is set aside. The 3rd question of law is decided in favour of the appellant.

Summary

Issues Involved:
Challenge to the order of the Income Tax Appellate Tribunal for the assessment year 2005-06 regarding the treatment of unabsorbed depreciation, business income from sale of fixed assets, and jurisdiction under sections 153C and 143(3) of the Income Tax Act.

Analysis:

1. Jurisdiction under Sections 153C and 143(3):
The appellant challenged the validity of the assessment made under section 153C read with section 143(3) of the Income Tax Act, arguing that no incriminating materials were seized to warrant such an assessment. The appellant raised a substantial question of law regarding the validity of the assessment. The court, following precedents and submissions made by both parties, set aside the order of the Income Tax Appellate Tribunal and decided in favor of the appellant, allowing the Tax Case Appeal.

2. Treatment of Business Income from Sale of Fixed Assets:
The appellant contended that the business income arising from the sale of fixed assets should not be treated as short-term capital gains under Section 50 of the Income Tax Act, especially when depreciable assets were sold. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's view, leading to the appellant's appeal before the Income Tax Appellate Tribunal. However, the court did not delve into this issue as the appellant's counsel did not make submissions regarding it.

3. Unabsorbed Depreciation Set-Off:
The main contention revolved around whether the unabsorbed depreciation from the assessment years 1997-98 to 2000-01 could be set off against the income of the appellant for the assessment year 2005-06. The appellant argued that based on various judicial decisions, including those by the Hon'ble Supreme Court and Division Benches of the High Court, the unabsorbed depreciation could be carried forward without any time limit. Citing relevant case laws, the court agreed with the appellant's submissions and allowed the Tax Case Appeal, deciding in favor of the appellant.

In conclusion, the High Court of Madras, comprising Hon'ble Mr. Justice M. Duraiswamy and Hon'ble Mrs. Justice T.V. Thamilselvi, set aside the order of the Income Tax Appellate Tribunal and allowed the Tax Case Appeal based on the issues of jurisdiction under sections 153C and 143(3) and the eligibility of unabsorbed depreciation set-off. The court's decision was influenced by relevant legal precedents and arguments presented by both parties, ultimately ruling in favor of the appellant on the substantial questions of law raised in the appeal.