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M/s. Petrofils Cooperative Ltd. Versus ACIT, Cir. 2 (2) Baroda

2017 (1) TMI 773 - ITAT AHMEDABAD

Carry forward of depreciation - Held that:- We direct the AO to allow carry forward of depreciation which has not been allowed to the assessee because unabsorbed depreciation upto 1997-98 would become depreciation of the current year and it is to be treated in accordance with law. See General Motors India P. Ltd. Vs. DCIT [2012 (8) TMI 714 - GUJARAT HIGH COURT ] - ITA.No.1416/Ahd/2013 - Dated:- 12-1-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER For The Assessee : Shri J.P. Shah, AR For The Revenue : .....

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.AO has noticed the details of unabsorbed business loss as well as unabsorbed depreciation. Such details are as under: A.Y. Unabsorbed business loss Unabsorbed depreciation 1992-93 - 1367.82 1993-94 - 1321.41 1994-95 - 193.37 1995-96 1021.82 917.48 1996-97 616.65 4133.97 1997-98 4951.56 5637.53 1998-99 1543.36 2345.97 1999-00 4699.03 4377.36 2000-01 5233.51 202.86 2001-02 14885.04 181.59 2002-03 633.48 - 2003-04 162.29 -. 2004-05 145.42 - 2005-06 345.51 - Total 34355.47 20679.36 4. According to .....

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rded any independent finding in this year. The ld.CIT(A) has simply relied upon his order in the Asstt.Year 2007-08 and 2008-09. The assessee has brought to notice of the ld.CIT(A), decision of the Hon ble jurisdictional High Court in the case of General Motors India P. Ltd. Vs. DCIT reported in 354 ITR 244 (Guj). Inspite of this decision being brought to notice of the ld.CIT(A), he did not take cognizance of the decision and did not adjudicate the issue on merit. To my mind it is not a correct .....

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A.Y. 1997-98 could be allowed to be carried forward and set off after a period of eight years or it would be governed 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 Assess .....

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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 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 ef .....

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01. 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 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 allowanc .....

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mount of allowance not so set off shall be carried forward to the following assessment year and- (a) it shall be set off against 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 s .....

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relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.- For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of subsection (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. 34. 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 w .....

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able 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 succe .....

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machinery, specially 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, no deduction for depreciation is allowed on any motor car manufactured outside India unless it is us .....

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stry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses 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 th .....

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terpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to 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 c .....

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. 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, if any, carried on by the assessee. If a balan .....

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