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TMI Blog2017 (2) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record. In view of the above, we are reproducing hereunder the relevant portion of the order on quantum addition dated 26/06/2015 for ready reference and analysis:- "Out of these two appeals, one appeal filed by the assessee is against the order of CIT(A)-40, Mumbai, dated 24.08.2011 relating to assessment year 2005-06 against the order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. The assessee also filed another appeal against the order of CIT(A)-40, Mumbai, dated 12.03.2012 relating to assessment year 2008-09 against order passed under section 143(3) of the Income Tax Act, 1961. 2. Both the appeals relating to the same assessees were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. In ITA No.7492/M/2011, the assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income-tax (Appeals) erred in upholding the action of the learned Assistant Commissioner of Income-tax (hereinafter referred to as "the Assessing Officer") in reopening the assessment under section 148. The appellant submits that the order passed under section 143(3) r.w.s. 147 of the Act is illegal, nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gamated company for the previous year in which amalgamation was affected. The appellant submits that the amalgamation was affected in the assessment year under appeal and hence the set off of brought forward unabsorbed depreciation ought to be allowed by the Assessing Officer. 2. The learned Commissioner of Income-tax (Appeals) erred in not directing the Assessing Officer to exclude interest on loan (taken for the purpose of business) while calculating disallowance under section 14A. 3) The appellant submits that Assessing Officer be directed:- (a) to allow set-off of unabsorbed brought forward depreciation in respect of assessment years 1994-95 to 1998-99 aggregating to Rs. 7,23,04,034/-of the amalgamating company SPL Polymers Ltd.; (b) to exclude interest on loan (taken for the purpose of business) while calculating disallowance under section 14A. 4. Each of the above grounds of appeal are independent and without prejudice to each other. 5. First, we shall take up the appeal in ITA No.3947/Mum/2012 filed by the assessee relating to assessment year 2008-09. 6. The issue raised by the assessee vide ground of appeal No.1 is against the non-allowance of set off of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The Assessing Officer was of the view that the unabsorbed depreciation of the amalgamating company pertaining to assessment years 1994-95 to 1998-99 shall not be deemed to be the unabsorbed depreciation of the amalgamated company, since the unabsorbed depreciation losses of the above mentioned assessment years could not be carried forward and set off beyond 8 years as per the provisions of section 32(2) of the Act, applicable to the relevant assessment years, when the losses were determined. Referring to the provisions of section 32(2) of the Act as substituted by the Finance (No.2) Act, 1996 w.e.f. 01.04.1997 and also referring to the substitution of sub-section (2) of section 32 by the Finance Act, 2001 w.e.f. 01.04.2002, the Assessing Officer held that the brought forward unabsorbed depreciation losses of the amalgamating company pertaining to assessment years 1994-95 to 1998-99 aggregating to Rs. 7,23,04,034/- shall not be allowed to the assessee i.e. amalgamated company. Reliance in this regard was placed on the decision of Special Bench of Mumbai Tribunal in M/s. Times Guaranty Ltd. in ITA Nos.4917 & 4918/Mum/2008, order dated 30.06.2010. 8. The CIT(A) upheld the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) 104. 10. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 11. We have heard the rival contentions and perused the record. The assessee during the year under consideration, pursuant to the scheme of amalgamation between the assessee and its subsidiary company SPL Polymers Ltd., the business and all assets & liabilities of the erstwhile SPL Polymers Ltd. were transferred to and vested with the assessee company w.e.f. 01.07.2007. The claim of the assessee was that the business losses and unabsorbed depreciation losses of SPL Polymers Ltd. were to be set off against the profits of the assessee as the said company was taken over by the assessee. The Assessing Officer at pages 1 and 2 of assessment order has tabulated the details of business losses and unabsorbed depreciation to be carried forward for set off in the subsequent years. The perusal of the tabulated details reflects that vis-à-vis unabsorbed depreciation of SPL Polymers Ltd., the same related to assessment years 1994-95 to 1998-99 and thereafter to 2000-01 and 2001-02 and further from assessment years 2004-05 to 2006-07. The unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt that had the intention of the Legislature been to allow the unabsorbed depredation allowance worked out in the assessment year 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by the Finance Act, 2001, it would have incorporated a provision to that effect. 14. The Hon'ble Gujarat High Court had considered the issue at length and had observed as under:- "30. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to the assessment year 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 the Finance Act, 2001 ? The reason given by the Assessing Officer under section 147 is that section 32(2) of the Act was amended by the Finance (No. 2) Act of 1996, with effect from the assessment year 1997-98 and the unabsorbed depreciation for the assessment year 1997-98 could be carried forward up to the maximum period of eight years from the year in which it was first computed. According to the Assessing Officer, eight years expired in the assessment year 2005-06 and only till then, the assessee was eligible to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the income under any other head, if any, assessable for that assessment year; (iii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and clause (ii), the amount 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 setoff, 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 assessment years specified in sub-clause (b) shall not apply in case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Company (Special Provisions) Act, 1985 (1 of 1986), and ending with the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 business or profession in another country. 30.4 The Act has allowed depreciation allowance on all imported motor cars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." 37. The Central Board of Direct Taxes Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of eight years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from the assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (the assessment year 2002-03), will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (the assessment year 2002-03), will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001. And once Circular No. 14 of 2001 clarified that the restriction of eight years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from the assessment year 1997-98 up to the assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by the Finance Act, 2001, and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. For the aforesaid reasons, this writ petition succeeds and is allowed. The 41 n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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