TMI Blog2016 (3) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... case are that the original assessment u/s.143(3)of the Act was completed on 07.12.2009 determining the income of the assessee at Rs. NIL, after setting off of brought forward losses of earlier years. Subsequently, the assessment was reopened by issue of notice under section 148 of the act and the assessment u/s.143(3)r.w.s.147 was completed on 27/12/2012, determining the income of the assessee same as the original assessment i.e.at Rs NIL. However, in the reopened assessment unabsorbed depreciation pertaining to AY.1997-98 to AY.1999-2000, amounting to ₹ 1.17 crores was not allowed to be carried forward. While completing the assessment, the AO held that depreciation pertaining to AY.1997-98 could not be carried forward for more than 8 AY.s i.e.,it could not be carried forward beyond AY. 2007-08. The AO relied upon the decision of the Special Bench delivered in the case of Times Guarantee Ltd.(40SOT14).The claim of the assessee for carry-forward of unabsorbed depreciation ₹ 1,17,14,644/- was rejected by the AO. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him, the assessee contended that it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward. He further mentioned that in the case of Arch Fine Chemicals Ltd.(supra), the Tribunal had followed the judgment of General Motors (I)Pvt.ltd.(supra).Following the decisions of the Arch Fine Chemicals Ltd. and Associated Cables Pvt. Ltd. allowed the appeal filed by the assessee. 4.Before us, the Departmental Representative(DR)supported the order of the AO. The Authorised Representative(AR)referred to the cases of General Motors(I)Ltd., Bajaj Hindustan Ltd.(47taxmann.com333) dt.17.4.14, and Smith and Nephew Healthcare(P) Ltd. (50 taxmann.com420 dt.15.1.14). 5.We have heard the rival submissions and perused the material before us. We find that the Hon ble Gujarat High Court has dealt with the issue at length as under. 32.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the assessment of the assessee, full effect cannot be given to any allowance under subsection (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of sec tion 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 the allowance of that previous year, and so on for the succeeding previous years. 38. The purpose of this amendment has been clarified by the Central Board of Direct Taxes in Circular No. 14 of 2001 (see [2001] 252 ITR (St.) 65, 90). The relevant portion of the said Circular reads as under : Modification of provisions relating to depreciation 30.1 Under the existing provisions of section 32 of the Income-tax Act, carry forward and set off of unabsorbed depreciation is allowed for eight assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning to the side of the 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 for any previous year, deduction of depreciation under section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by the 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. 40. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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