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2015 (7) TMI 982 - ITAT HYDERABAD

2015 (7) TMI 982 - ITAT HYDERABAD - [2015] 42 ITR (Trib) 138 (ITAT [Hyd]) - Carry forward depreciation to assessee disallowed u/s. 154/ rws 263 - CIT(A) allowed claim - Held that:- The restriction of eight years was removed. Even though Special Bench decision of the ITAT in the case of DCIT Vs. Times Guaranty Ltd., [2010 (6) TMI 516 - ITAT, MUMBAI ] was relied on by the CIT at the time of passing the order u/s. 263, subsequently, Hon'ble Gujarat High Court in the case of General Motors India Pvt .....

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Nos. 1478 & 1480/HYD/2013 - Dated:- 30-6-2015 - B. Ramakotaiah, AM,J. For the Appellant : Shri Rajat Mitra, DR For the Respondent : Shri M V Anil Kumar, AR ORDER These two are Revenue's appeals against the order of the Commissioner of Income Tax (Appeals)-II, Hyderabad dated 21-08-2013, for Assessment Years (AYs) 2004-05 & 2006-07 allowing the carry forward depreciation to assessee disallowed u/s. 154/ rws 263 of the Income Tax Act [Act]. 2. Briefly stated, assessee is a company in which .....

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ation was not correct. He accordingly set aside the orders u/s. 154 and directed the AO to modify the order accordingly. AO passed consequential order denying the depreciation which was appealed before the CIT(A) who by the impugned orders considered assessee's submissions and noted the amendment brought out by Finance Act, 2001 as supported by Circular of 14 of 2001 dt. 22-11-2001 and also the decision of Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd., Vs. DCIT .....

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of action u/s. 154 is upheld by the jurisdictional ITAT". 3. The material Ground No.2 is with reference to the carried forward depreciation of earlier years and Ground No.3 is with reference to the fact that CIT(A) should have dismissed the appeal as the order was passed consequent to the order u/s. 263 which was upheld by the jurisdictional ITAT. 4. Ld. DR referring to the sequence of events submitted that order of the CIT u/s. 263 was subject matter of appeal before the Hon'ble ITAT .....

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.CIT(A) decided the issue on merits of the contentions. Be that as it may, as the law stands now, assessee is entitled for set-off of carried forward depreciation. This is analysed in the order of the CIT(A) in para 6, which is extracted as under: "6. The information on record, submissions of the appellant are carefully considered. As per the Finance Act 1996 the unabsorbed depreciation can be carried forward for the next 8 subsequent years. This amendment takes effect from 01.04.1997 and t .....

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hall be added to the amount of the allowance for depreciation of assessment year 1997-98 and deemed to be part of the allowance for this year. In other words, the unabsorbed depreciation allowance of assessment year 1996-97 shall be added to the allowance of 1997-98 and will be deemed to be the allowance of that year. The limitation of eight years shall start from the assessment year 1997-98. 23.6 These amendments take effect from the 1st day of April, 1997, and win accordingly, apply in relatio .....

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t years. 30.2 With a view to enable the industry to conserve sufficient funds to replace plant and machinery, especially in an era where obsolescence takes place so often, the Act has dispensed with the restriction of 8 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, n .....

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and subsequent years. " 6.2 The Hon'ble Gujarat High Court had discussed the issue of carrying forward of unabsorbed depreciation at length in the case of General Motors India Pvt. Ltd., Vs. DCIT in the order dated 23.08.2012 and held that the unabsorbed depreciation can be carried forward to the subsequent years without any restriction. Referring to amendment through Finance Act, 2001 the Hon'ble Gujarat High Court held that "accordingly the amendment dispenses with the restri .....

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he unabsorbed depreciation allowance worked out in A. Y.1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence keeping in view the purpose of amendment of section 32(2) of the Act a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fa .....

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