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TMI Blog2019 (6) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT (A) is wrong and has erred in law in confirming the action of Ld. AO in holding that the unabsorbed brought forward depreciation of AY 2001-02 & of earlier years cannot be set off in A.Y 2015-16 as the time limit for set off within 8 years has lapsed as per provisions of section 32(2)(iii) of the I.T. Act, 1961 while as per law in view of amendment made in sub section 2 of section 32 of I.T. Act, 1961 by the Finance Act, 2001, b/f unabsorbed depreciation of A.Y 2001-02 and of earlier years shall become current year depreciation from A.Y 2002-03 and as such can be set off against income under any head in any year and can be carried forward indefinitely." 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of mining and dealing in sand stone items. The assessment was completed u/s 143(3) read with section 153B(1)(b) wherein unabsorbed depreciation brought forward from earlier years was allowed. Thereafter, the AO issued a notice u/s 154 seeking to rectify the mistake that the assessee was allowed set off of unabsorbed depreciation of Rs. 15,34,000/- for A.Y 2001-02 which was not allowable as the time limit of 8 years for set off has lap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar matter in case of ACIT vs. Emgee Cables & Communication Ltd. (supra) wherein it was held as under:- "3. In its solitary ground of appeal, the Revenue has challenged the action of ld. CIT(A) in directing to allow set off of unabsorbed depreciation pertaining to A.Y. 2000-2001 and A.Y 2001-02 from income under the head "income from other sources" pertaining to the year under consideration in view of the amendment effected by the Finance Act 2001 which has been stated to be applicable from A.Y. 2002-03 only. 3.1 It is noted that the provision of section 32(2) of the Act which deals with the set off of unabsorbed depreciation has been subject to several amendments in the past and the latest amendment which is in consideration has been brought in by the Finance Act 2001. In the instant case, the question that arises for consideration is how should the provision of section 32(2) should be applied regarding set off of unabsorbed depreciation pertaining to A.Y 2000-01 and AY 2001- 2002 when the pre-amended law was applicable and which has now been claimed to be set off at the point of time i.e. in A.Y 2009-10 when post amendment law was applicable. The Assessing Officer has relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f unabsorbed depreciation is allowed for 8 years. 30.2 With a view to enable the industry to conserve sufficient funds to replace plant and 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 u/s 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 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 CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such 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. 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. 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." 3.3 On perusal of the above decision, it is noted that the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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