TMI Blog2016 (5) TMI 1138X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year. A decision recorded by the Income-tax Officer who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. Relying on the aforesaid judgments, we have no hesitation in upholding the order of learned CIT(A). Whether unabsorbed depreciation up to the Assessment Year 1996-97 will be added to the depreciation allowance of 1997-98 and that such unabsorbed depreciation could be carried forward for set off for a maximum period of eight years from the Assessment year 1997- 98 - Held 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 once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from assessment year 1997-98 up to the assessment year 2001- 02 got carried forward to the assessment year2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee was having a taxable profit for the assessment year 2000-01 for an amount of ₹ 82,17,845.00. In the tax audit report the above profit was set off against the unabsorbed depreciation of earlier years of ₹ 86,65,509.00 and the balance amount of unabsorbed depreciation of ₹ 4,47,664.00 was allowed to be carried forward to the subsequent years. From the above facts, it is clear that the assessee has made a mistake in the tax audit report by adjusting the taxable profit for the AY 2000-01 of ₹ 82,17,845.00 against the unabsorbed depreciation of earlier years and the same was allowed by the then AO. As per law, the assessee was to claim the set off of brought forward business loss and unabsorbed depreciation in the following sequence : 1. Depreciation for the Current Year 2. Unabsorbed business loss of the earlier years 3. Unabsorbed depreciation of the earlier years It is important to note that for the assessment year 2000-01 there was a taxable profit of ₹ 82,17,845/- which should have been adjusted from the business loss of ₹ 9602352/- for the assessment year 1992-93 as it was the last year for the set off against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auditor has made a mistake in this regard then Assessing Officer should have applied the correct sequence of set off as per law and calculated the business loss and depreciation available for set off in Assessment Year 2001-02 after correctly setting off the same against the business loss and depreciation for Assessment Year 2000-01. Appellant has relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Manmohan Das reported in 59 ITR 699. In this case the assessee had not preferred any appeal against the order of Assessing Officer in respect of Assessment year 1950-51 where Assessing Officer had not allowed the carry forward of certain losses claimed by the assessee. However, Hon'ble Supreme Court held that for the purpose of set off of income of Assessment Year 1951-52 the allowability of carry forward of losses of Assessment Year 1950-51 has to be decided in the assessment of Assessment Year 1951-52 and the decision of Assessing Officer in respect of non carry forward of losses in the assessment of Assessment Year 1950-51 is not binding. In present case, it is not the Assessing Officer but the auditor who made a mistake in the audit report of Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentions of both the parties and perused the materials available on record. Before us Ld. AR submitted a paper book which is running from pages 1 to 97 and stated that the AO has relied on the tax audit report for working out the business loss and unabsorbed depreciation without considering the year-wise detail of such losses and unabsorbed depreciation available with Revenue authorities. The AO was to allow the brought forward business loss and unabsorbed depreciation in the following sequence. 1. Depreciation for the Current Year 2. Unabsorbed business loss of the earlier years 3. Unabsorbed depreciation of the earlier years Ld AR relied on the order of learned CIT(A) and stated that the issue may be decided on merit. On the other hand, Ld DR submitted that in many cases the proof for filing the return of income has not been furnished by the assessee which is the precondition for setting off the loss. As per law the return of income must have been filed within the due date as specified under section 139(1) of the Act for claiming the set off of the loss of that year and he simply relied on the order of AO. From the facts of the case we find that the auditor of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s CO is that Ld. CIT(A) erred in holding that the unabsorbed depreciation upto the AY 1996-97, for this, assessee has raised following ground:- 3) That the learned Commissioner of Income Tax (Appeals) erred in holding that the unabsorbed depreciation up to the Assessment Year 1996-97 will be added to the depreciation allowance of 1997-98 and that such unabsorbed depreciation could be carried forward for set off for a maximum period of eight years from the Assessment year 1997- 98. Regarding the dispute of unabsorbed depreciation and its carry forward to the subsequent years, we rely in the decision of Hon ble High Court of Gujrat in the case of General Motors India Pvt. Ltd. Vs DCIT 25 taxmann.com 364 where it was held as under:- Prior to the Finance Act No. 2 of 1996, the unabsorbed depreciation for any year was allowed to be carry forward indefinitely and by a deeming fiction became allowance of the immediately succeeding year. The finance Act No 2 of 1996 restricted the carry forward of unabsorbed de and set-off to a limit of 8 years, from the assessment year 1997-98. CBDT Circular No. 762 dated 18- 2-1998 in the form of Explanatory Notes categoricall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment years 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 assessment year 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years. [Para 37] 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 in excess than the amount of the profits of that business, then such excess should be adjusted against the profits and gains from any other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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