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2016 (7) TMI 830 - ITAT AHMEDABAD

2016 (7) TMI 830 - ITAT AHMEDABAD - TMI - Carry forward of business loss - Held that:- Since, the assessee is not entitled to carry forward any loss for more than 8 assessment years and since the ld. counsel has conceded ground is accordingly dismissed - Decided against assessee. - Set off of unabsorbed depreciation - Held that:- Respectfully following the decision of General Motors India (P.) Ltd. [2012 (8) TMI 714 - GUJARAT HIGH COURT ] we direct the A.O to allow set off/carry forward of u .....

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t more interest than from the bank. If the companies are paying the same rate of interest as the bank are paying then the public would not see any benefit in making deposits with the Company and they will go for bank interest. Further, by no stretch of imagination rate of interest of 15% can be considered as excessive. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition - Decided in favour of assessee - ITA. No: 1384/AHD/2012 - Dated:- 11-7-2016 - .....

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of business loss of ₹ 74,44,271/-. 2. That, on facts and in law, the ld. CIT(A) has grievously erred in not allowing either set-off or carry forward of unabsorbed depreciation amounting to ₹ 3,17,82,254/-. 3. That the ld. CIT(A) has grievously erred in confirming the disallowance of ₹ 3,00,544/- out of interest payment. 3. At the very outset, the ld. counsel for the assessee fairly conceded that the grievance raised vide ground no. 1 is misplaced inasmuch as the claim of set of .....

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ed by the Finance (No. 2) Act, 1996 with effect from 1st April, 1997. According to the revenue authorities, the said amendment is applicable in the case of assessee and, therefore, the assessee is not allowed to carry forward unabsorbed depreciation for more than 8 assessment years immediately succeeding the assessment years for which the aforesaid allowance was first computed. 6. This issue is no more res integra and has been settled in favour of the assessee and against the revenue by the deci .....

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for the period A.Y. 1997-98 to 2000-01 i.e. more than eight years in contravention to the provisions of the unamended provisions of section 32(2)(iii)(b) as stood in the assessment years 1997-98 to 2000-2001?" 7. The Hon ble High Court observed as under:- 3.This very issue has been decided by this Court in the case of General Motors India P. Ltd. v. Dy. CIT [2013] 354 ITR 244/[20121 25 taxmann.com 364/210 Taxman 20 (Guj.)fMag.). While deciding the question of reopening of the notice, this C .....

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by Section 32 as amended by Finance Act 2001? The reason given by the Assessing Officer under section 147 is that Section 32(2) of the Act was amended by Finance Act No.2 of 1996 w.e.f. A.Y. 1997-98 and the unabsorbed depreciation for the A.Y. 1997-98 could be carried forward up to the maximum period of 8 years from the year in which it was first computed. According to the Assessing Officer, 8 years expired in the A.Y. 2005-06 and only till then, the assessee was eligible to claim unabsorbed dep .....

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cceeding 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.I997-98. 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 ye .....

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ect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year owning to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be, (i) shall be set off against the profits and gains, if any, of any business or profession carried on .....

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nst the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed: Provided that the time limit of eight ass .....

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es. Explanation.- For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985." The aforesaid provision was introduced by Finance (No.2) Act, 1996 and further amended by the Finance Act, 2000. The provision introduced by Finance (No.2) Act was clarified by the Finance Minister to be applicable with prospective effect. Section 32 (2) of the Act was a .....

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ction (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." The purpose of this amendment has been clarified by Central Board of Direct Taxes i .....

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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, no deduction for depreciation is allowed on any motor car manufactured outside India unless it is used (i) in the business of running it on hire for tourists, or (ii) outside in the assessee's busine .....

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penses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable 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. Had the intention of the Legis .....

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o be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee 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 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 fo .....

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ns of subsequent years. 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, 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 th .....

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uch succeeding year. We are of the considered opinion 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 A.Y.I997-98 up to the A.Y.2001-02 got carried forwa .....

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et off/carry forward of unabsorbed depreciation as claimed by the assessee. Ground no. 2 is accordingly allowed. 9. Ground no. 3 relates to the disallowance of ₹ 3,00,544/- out of interest payment. 10. On scrutinizing the financial statements of the assessee, the A.O found that the assessee has paid interest @ 15% to the parties listed in the register maintained u/s. 301 of the Companies Act. The A.O. called for the details of interest paid to the parties and also to show cause why interes .....

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