TMI Blog2014 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... y, undertaken by the respondents - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 15825 of 2012 - - - Dated:- 9-4-2014 - Honourable Mr.Justice Akil Kureshi And Ms Justice Sonia Gokani Mr Rk Patel, Advocate for the Petitioner(s) Mr Nitin K Mehta, Advocate for the Respondent(s) ORAL JUDGMENT Ms Justice Sonia Gokani Challenge in this petition is to proceedings of reassessment by way of notice under section 148 of the Income Tax Act, 1961 ( the Act hereinafter) in the following factual background. The petitioner-assessee is engaged in the business of manufacturing corrugated boxes. It filed return of income for the assessment year 2007-08 declaring total loss of ₹ 2.02 crores (rounded off). The same was set off against the business loss of the assessment year 1999-2000 and remaining business loss and unabsorbed depreciation, loss was carried forward for set off in subsequent assessment years. This was though scrutinized by the Assessing Officer and the assessment was framed under section 143(3) of the Act, the Assessing Officer, initiated the process of reassessment by issuing notice dated 21st March 2012 and the reason for reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the undersigned has reason to believe that the income chargeable to tax for the year under consideration has escaped assessment as per the provisions of section 147 of the I.T.Act. 3. You are having unabsorbed depreciation loss of ₹ 17,54,57,695/- of A.Y. 1997-98 and ₹ 17,92,65,382/- of A.Y. 1998-99 (total ₹ 35,47,23,077/-). Further it is noticed that you have shown the said unabsorbed depreciation loss of ₹ 35,47,23,077/- as loss pertaining to A.Y. 2000-01 and has carried forward the same for set off in subsequent assessment years. Since the depreciation loss was of A.Y. 1997-98 and 1998-99, it can be set off in eight succeeding assessment years only i.e. loss of A.Y. 1997-98 can be set off up to A.Y. 2005- 06 and depreciation loss pertaining too 1998-99 requires can be set off up to A.Y. 2006-07. Since the depreciation loss of ₹ 35,47,23,077/- of A.Y. 1997-98 and 1998-99 is not set off within eight succeeding assessment years, carried forward of the same beyond the period of eight years was irregular. In view of the above, you are shown caused as to why the set off of unabsorbed depreciation of ₹ 35,47,23,077/- of A.Y. 1997-98 and 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of business loss which has been carried forward from the assessment year 1996-97 onwards and in view of the embargo under section 72(3) of the Act, such loss cannot be allowed to be carried forward beyond a period of eight years. We have heard learned counsel Shri R.K.Patel for the petitioner and learned counsel Shri Nitin Mehta for the Revenue. The decision in the case of General Motors Pvt. Ltd. (supra) has been pressed into service by the petitioner, relevant part of which requires reproduction at this stage. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to 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 Assessing Officer, 8 years expired in the A.Y. 2005-06 and only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly 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 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 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 assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng it on hire for tourists, or (ii) outside in the assessees 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. The CBDT 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 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 Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.1997-98 upto the A.Y.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 Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. This Court in Tax Appeal No.3 of 2014 had examined the very issue whether unabsorbed depreciation could be carried forward and set off after a period of eight years. Relying on the decision of General Motors P. Ltd. (supra), it has been held thus: We notice that in the instant case, the Tribunal while dealing with this case has noted that the carry forward of unabsorbed depreciation concerning A.Y. 2001-02 and assessment years prior there ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
