TMI Blog2021 (8) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... he following substantial questions of law:- (i) Whether on the facts and circumstances of the case and in law, Tribunal was right and justified in holding that unabsorbed depreciation loss pertaining to assessment year 1997-98 could be set off against income of assessment year 2006-07? (ii) Is not the finding of the Tribunal directing the Assessing Officer to set off the unabsorbed depreciation pertaining to assessment year 1997-98 based, especially when the intention of the legislature was not to carry forward the unabsorbed depreciation beyond eight years from the year of computation? 3.Heard Mr.M.Swaminathan, learned Senior Standing Counsel assisted by Ms.V.Pushpa, learned Junior Standing Counsel for the appellant and Mr.A.S.Sriraman, learned counsel for the respondent. 4.It is not in dispute that the substantial questions of law framed for consideration have been answered against the Revenue in the case of CIT vs. Sanmar Speciality Chemicals Ltd. [T.C.A.No.358 of 2018, dated 14.09.2020]. The relevant paragraphs of the judgment read as follows:- 4. The short issue, which falls for consideration, is as to whether, in the facts and circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (ii) outside India 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- 2003 and subsequent years. 8. From paragraph 30.2 of the above circular, it is clear that the restriction of 8 years for carry forward and set off of unabsorbed depreciation was dispensed with, with a view to enable the industries to conserve sufficient funds to replace plant and machinery. 9. The learned Senior Standing Counsel appearing for the Revenue would point out that those amendments took place with effect from 01.4.2002 and would accordingly apply in relation to the assessment year 2002-03 and the subsequent years whereas in the assessee's case, the depreciation loss, which they sought to carry forward is for the assessment year 1997-98. 10. The proper manner, in which, the modification has to be understood, is to the effect that from the assessment year 2002-03, if the eight years' period was not lapsed, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years. 38. 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 such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there 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, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed business loss was removed last year. 22.2 With a view to harmonise the provisions relating carry forward and set off of unabsorbed depreciation and unabsorbed loss, the Act has dispensed with the condition of continuance of same business for the purpose of carry forward and set off of unabsorbed depreciation. 22.3 This amendment will take effect from 1st April, 2001, and will, accordingly, apply in relation to the assessment year 2001- 2002 and subsequent years. 9. The CIT(A) and the Tribunal, thus, rightly allowed unabsorbed depreciation relevant to the assessment year 1996-97 to be set off against the income from long term capital gains and income from other sources for the assessment year 2001-2002. 13. Recently, in the decision of a Division Bench of the Bombay High Court in the case of PCIT Vs. Gunnebo India Pvt. Ltd. [reported in (2019) 104 CCH 0227], the issue was considered in favour of the assessee after referring to the decision of the Division Bench of the Gujarat High Court in the case of General Motors India (P) Ltd., wherein the relevant portions read thus : 3. The Revenue carried the matter in appeal. The Appellate Tribunal dismissed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there 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, 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 April, 2002 (asst. yr. 2002-03) will be dealt with in accordance with the provisions of s. 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 asst. yr. 1997-98 up to the asst. yr. 2001- 02 got carried forward to the asst. yr. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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