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TMI Blog2015 (9) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... (A.Y. 2002-03) is applicable to the present case, without appreciating that the unabsorbed depreciation in the case pertained to A.Y.1997-98 and 1998-99, which are being governed by the provisions of section 32(2) of the Income Tax Act as amended by the Finance Act No.2, 1996 w.e.f. A.Y. 1997- 98? [2] That the assessee has filed return of income at Rs.Nil for A.Y. 2007-08 which was assessed under section 143(3) on 24.12.2009 on total income of Rs. 1,11,85,117/-. That the Commissioner of Income Tax - II, Vadodara was of the opinion that the assessment order dated 24.12.2009 was erroneous in so far as it was prejudicial to the interests of the revenue on account of incorrect allowance of set off of unabsorbed depreciation, a show-cause notice under section 263 dated 26.10.2010 was issued to the assessee calling upon it to show cause why the assessment may not be cancelled and the A.O. may not be directed to reframe the assessment. That by order dated 30.03.2012, learned Commissioner of Income Tax held that the order dated 24.12.2009 passed by the A.O. was erroneous or prejudicial to the interests of the revenue on account of incorrect allowance of set off of unabsorbed deprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal, however, learned counsel appearing of behalf of the appellant - revenue has requested to consider the question on merits with respect to the set off claimed by the assessee of unabsorbed depreciation, keeping the question of law open. [6] Heard Mr.K. M. Parikh, learned counsel appearing on behalf of the appellant - revenue. On considering the impugned judgment and order passed by the learned ITAT, it appears that the learned ITAT has quashed and set aside the order passed by the learned Commissioner relying upon the decision of the Division Bench of this Court in the case of General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax (supra). It is the contention on behalf of the revenue that at the relevant time when the learned Commissioner exercised powers under section 263 of the Act and took the order passed by the A.O. in suo motu revision under section 263 of the Act, the decision of the Division Bench of this Court was not there and, therefore, the learned Commissioner rightly interfered with the order passed by the A.O. which was found to be prejudicial to the interests of revenue and therefore, it is requested to quash and set aside the impugned judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of the immediately succeeding year. The Finance Act No.2 of 1996 restricted the carry forward of unabsorbed depreciation and set-off to a limit of 8 years, from the A.Y.1997-98. Circular No.762 dated 18.2.1998 issued by the Central Board of Direct Taxes (CBDT) in the form of Explanatory Notes categorically provided, that the unabsorbed depreciation allowance for any previous year to which full effect cannot be given in that previous year shall be carried forward and added to the depreciation allowance of the next year and be deemed to be part thereof. 32. So, the unabsorbed depreciation allowance of A.Y. 1996- 97 would be added to the allowance of A.Y. 1997-98 and the limitation of 8 years for the carry-forward and set-off of such unabsorbed depreciation would start from A.Y. 1997-98. 33. We may now examine the provisions of section 32(2) of the Act before its amendment by Finance Act 2001. The section prior to its amendment by Finance Act, 2001, read as under:- "Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of subsection (1) in any previous year owning to there being no profits or gains chargeable for that previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as under :- "Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (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 for that previous year, owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 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 allowance of that previous year, and so on for the succeeding previous years." 36. The purpose of this amendment has been clarified by Central Board of Direct Taxes in the Circular No.14 of 2001. The relevant portion of the said Circular reads as under :- "Modification of provisions relating to depreciation 30.1 Under the existing provisions of section 32 of the Income-tax Act, carry forward and set off of unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No.14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001- 02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years. 38. Therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of this Court in the case of General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax (supra), as such, Special Leave to Appeal was preferred before the Hon'ble Supreme Court and the same came to be dismissed by the Hon'ble Supreme Court on the ground of delay and kept the question of law open, this Court may consider the question of law raised on merits is concerned, the same cannot be accepted. It is required to be noted that as such, consideration of the question raised with respect to set off of unabsorbed depreciation on merits, there is a direct decision of the Division Bench of this Court in the case of General Motors India (P) Ltd Vs. Deputy Commissioner of Income Tax (supra). Against the said decision, the Special Leave to Appeal was preferred and the same came to be dismissed on the ground of delay and the Hon'ble Supreme Court kept the question of law open. Therefore, it can not be said that the said question of law is kept open by the Hon'ble Supreme Court to consider subsequently by this Court - Coordinate Bench. It can be said that the said question of law is kept open by the Hon'ble Supreme Court to consider subsequently in other cases by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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