TMI Blog2020 (7) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial question of law, as claimed by the Revenue Department - T.C.A.No.415 of 2017 - - - Dated:- 29-7-2020 - HON'BLE DR. JUSTICE VINEET KOTHARI AND HON'BLE MR. JUSTICE KRISHNAN RAMASAMY For appellant: Mr. Karthik Ranaganathan For respondent: Mr. Sandeep Bagmar ORDER (Made by DR.VINEET KOTHARI, J.) whereby the learned Tribunal allowed the benefit of carry forward of losses under Section 72(A) of the Act to the respondent Assessee which is the amalgamated company in respect of the brought forward losses of the amalgamating company viz., M/s. Confectionary Specialties Limited (for short, M/s.CSL ) 3. The following purported substantial questions of law are raised by the Revenue for our consideration :- 1. Whether on the facts and circumstances of the case the Appellate Tribunal is correct in law in holding that Unabsorbed depreciation relating to the assessment year 2001-02 and assessment years prior thereto can be set off in subsequent years, without any limit, as per the amended provision of section 32[2] of the Income Tax Act? 2. Whether the Tribunal was correct in deleting the dis-allowance on the claim of setting off of brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation relating to assessment years prior to 1986-87 and that in the current assessment year viz. 2008-09 unabsorbed depreciation prior to the assessment year 2000-01 cannot be set off. For this purpose, he relied on the judgment of the Tribunal Special Bench, Mumbai in the case of Times Guaranty Ltd. (40 SOT 14). The Commissioner of Income-tax (Appeals) confirmed the same. Against this, the assessee is in appeal before us. 9. We have heard both the parties. It is brought to our notice that the same issue was considered by the Gujarat High Court in the case of CIT vs. (44 taxmann.com 204), wherein they considered their earlier judgment in the case of General Motors India (P.) Ltd. v. DCIT(354 ITR 244), wherein it was held as under: 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. In view of this, we are of the opinion that carry forward of unabsorbed depreciation concerning assessment year 2001-02 and assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantiate the above, the relevant factual information is tabulated below for your kind reference - Sl.No. Particulars Quintals 1 Installed Capacity ascertained by CSL only for evaluating synergies on amalgamation 12,000 2 As per Rule 9C level of production to be achieved by fourth year of amalgamation, being AY 2007-08 is atleast 50% of installed capacity of CSL 6,000 3 Production of toffees by Lotte India in FY 2002-03, prior to amalgamation A 61,885 4 Production of toffees by Lotte India in AY 2007-08, being the fourth year since amalgamation B 89,428 5 Actual increase in production archived by Lotte India consequent to amalgamation in AY 2007-08 (B-A) 27,543 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' year i.e. AY 2007-08 and it has also continued to maintain the minimum level of production upto 5th year i.e. AY 2008-09. 6. The relevant provisions of Section 72A read with Rule 9C are very clear in this regard. These provisions clearly stipulate that after the merger, within four years, the amalgamated company should achieve at least 50% of the installed capacity of production. Though the learned Tribunal, in its order, has not discussed the facts and figures as discussed by the Commissioner of Income Tax (Appeals) in its order quoted above, it has observed that the non filing of prescribed Form No.62 for the third Assessment Year, after amalgamation, namely AY 2006-07, is not relevant, because the mark of 50% of installed capacity of production can be achieved at any point of time within four years after the date of merger, which is 01.04.2003 in the present case. Even though the exact date of crossing over the mark of 50% cannot be ascertainable in the present case, but the fact is undisputed that in the fourth year, the amalgamated company achieved more than 100% of its installed capacity of production. We do not think that the requirement of filing of the requisit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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