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Dhadda Diamonds Pvt. Ltd. Versus ITO 5 (1) (3)

2015 (3) TMI 1136 - ITAT MUMBAI

Set off of unabsorbed depreciation - Held that:- This decision of the Hon’ble Gujarat High Court has been followed in several decisions rendered by the Co-ordinate Benches of the Tribunal. Respectfully following the ratio of Hon’ble Gujarat High Court, we direct the AO to allow the set off of unabsorbed depreciation pertaining to the A.Y. 1997-98 to 2000-01 in the respective A.Ys. 2005-06 to 2008-09 in accordance with the decision of General Motors India Pvt. Ltd. (2012 (8) TMI 714 - GUJARAT HIG .....

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2007-08 & 2008- 09. The sole issue raised in the grounds of appeal in all the years are that, Ld. CIT(A) has erred in law and on facts in upholding the order of the AO that unabsorbed depreciation for the following years have lapsed in view of the provisions of section 32(2) and therefore, will not be available for set off:- A.Y. 2005-06 A.Y. 2006-07 A.Y. 2007-08 A.Y. 2008-09 Rs.5,60,855/- for the A.Y. 1997-98 Rs.5,49,314/- for the A.Y. 1998-99 Rs.7,35,730/- For the A.Y. 1999-2000 ₹ 24 .....

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rection to the AO to allow the set off as per the provisions of the law. In the order giving effect to the Ld. CIT(A) order, assessing officer allowed the set off of unabsorbed business losses prior to setting of unabsorbed depreciation and also worked out the business losses and depreciation which were allowed to be carried forward. However, he held that unabsorbed depreciation for the assessment years, where 8 years have lapsed will not be set off/carried forward as the same has lapsed as per .....

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rt in the case of General Motors India Pvt. Ltd. Vs. CIT reported in (2013) 354 ITR 244. He also informed that SLP against said decision filed by the Revenue has also been dismissed. Further following the said decision of the Hon ble Gujarat High Court, Co-ordinate Benches of Mumbai Tribunal have followed the decision of Hon ble Gujarat High Court and held that unabsorbed depreciation could be allowed to be carried forward and set off, after a period of 8 years without any limit. The copy of suc .....

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n have held that the unabsorbed depreciation for the A.Y. 1997-98; A.Y. 1998-99; A.Y. 1999- 2000 and A.Y. 2000-01 shall be considered as lapsed in the A.Y. 2005- 06, A.Y. 2006-07, A.Y. 2007-08 and A.Y. 2008-09 respectively because 8 years have lapsed. The Special Bench in the case of Times Guarantee Ltd. in para 38 of the judgment came to the following conclusion:- 38. The legal position of current and brought forward unadjusted/unabsorbed depreciation / allowance in the three periods, is summar .....

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, like current depreciation. B. In the second period (i.e. assessment years 1997-98 to 2001- 02) (i) Brought forward unadjusted .depreciation allowance for and up to assessment year 1996-97 (hereinafter called the 'First unadjusted depreciation allowance'), which could not be set off up to assessment year 1996-97, shall be carried forward for set off against income under any head for a maximum period of eight assessment years starting from assessment year 1997-98. (ii) Current depreciati .....

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r immediately succeeding the assessment year for which it was first computed, to be set off only against the income under the head 'Profits and gains of business or profession'. C. In the third period (i.e., assessment year 2002-03 onwards) (i) 'First unadjusted depreciation allowance' can be set off up to assessment year 2004-05, that is, the remaining period out of maximum period of eight assessment years [as per B(i) above] against income under any head. (ii) 'Second unabs .....

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d unadjusted depreciation allowance') shall be carried forward to the following year. (iv) The 'Third unadjusted depreciation allowance' shall be deemed as depreciation under section 32( 1), that is depreciation for the current year in the following year(s) to be set off against income under any head, like current depreciation, in perpetuity. However, in a later decision, the Hon ble Gujarat High Court vide order dated 23.08.2012 in the case of General Motors India Pvt. Ltd (supra), .....

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icable from assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment: HHad the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent asses .....

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ssessee or the revenue. But if the legislature 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 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 3 .....

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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, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed .....

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