ITO 13(3)(3), MUMBAI vs. VIJAY VISION P.LTD, MUMBAI

The Revenue in its appeal has raised the following grounds: - “1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) is right in directing the Assessing Officer to allow set-off of carried forward depreciation of A.Y. – 1997-98, 1998-99, 1999-2000 and 2000-01 from the income of A.Y. 2007-08, 2008-09 and 2009- 10, relying upon the decision of the confidence Petroleum (A. Y: 2009-10) M/s. Vijay Vision Pvt. Ltd. India Ltd., When the appeal of the Revenue in the case of Confidence Petroleum India Ltd., is pending with the Hon'ble Bombay High Court? 2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) is right in relying on the circular no. 14 of 2001, wherein it is mentioned that ‘the Act has dispensed with the restriction of 8 years for carry forward and set-off of unabsorbed depreciation’’ 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? 3. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.

The appellant craves leave to add, amend or alter all or any of the grounds of appeal

Ld.DR vehemently supported the orders of the Assessing Officer.

We have heard the rival submissions, perused the orders of the authorities below. We find that that the Assessing Officer while completing the assessment denied the setoff of unabsorbed depreciation relevant to Assessment Years 1997-98 and 2000-2001 for the reason that such unabsorbed depreciation can be carried forward only to eight Assessment Years immediately succeeding Assessment Year for which the loss was first computed and setoff against any other heads of income. Therefore, he held that unabsorbed depreciation for the Assessment Years 1998-99 and 1999-2000 cannot be adjusted against the income for Assessment Year 2009-10 as eight years have already lapsed. Accordingly, the unabsorbed depreciation of ₹.55,54,310/- brought forward from Assessment Year 1999-2000 was disallowed.

On appeal Ld.CIT(A) following the decision of the Mumbai Bench in the case of Arch Fine Chemicals v. ACIT in ITA.No. 2414 and 2415/Mum/2012, where the Tribunal followed the decision of the Hon'ble Gujarat High Court in the case of General Motors India Pvt Ltd., the (A. Y: 2009-10) M/s. Vijay Vision Pvt. Ltd. Ld.CIT(A) allowed the claim of the assessee to adjust the unabsorbed depreciation and carried forward unabsorbed depreciation for Assessment Year 2000-01 and earlier years as current depreciation and allowed to be set-off against business income in the current Assessment Year. We have also gone through the decision of the Hon'ble Jurisdictional High Court and find that the issue has been covered in favour of the assessee. The question raised before the Hon'ble Jurisdictional High Court is as under: “7. Whether on facts and in circumstances of the case and in law the Tribunal was right in directing to allow the set off of brought forward depreciation losses of amalgamating company for the Assessment Years 1996-97 and 1997-98 i.e. for the period prior to amendment in sub section (2) of Section 32 of the Act w.e.f 01.04.2002?”. The Hon'ble Jurisdictional High Court with regard to this question held as under: “6. Regarding question No. 7 (a) The impugned order of the Tribunal has allowed the respondent - assessee's appeal on the issue of allowing unabsorbed depreciation pertaining to Assessment Year 1996-97 and 1997-98 which was carried forward to be set off in the subject Assessment Year. (b) The grievance of the Appellant is that in view of the fetter (of eight years) in carrying forward depreciation for Assessment Year 1997-98 upto Assessment Year 2002-03, The set off of the same cannot be allowed in this Assessment year. (c) We find that the impugned order of the Tribunal while allowing the Assessee - respondents' claim follows the decision of the Gujarat High Court in General Motors India (P) Ltd v. Dy. CIT [2013] 354 ITR 244/[2012] 210 Taxman 20/25 taxmann.com 364 wherein on identical facts it was held that the unabsorbed depreciation for the (A. Y: 2009-10) M/s. Vijay Vision Pvt. Ltd. Assessment Year 1997-96 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001 The above decision also placed upon the CBDT circular No. 14 of 2001 dated 22nd November 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) of the Act as amended by the Finance Act of 2001. Moreover, the Circular No. 14 of 2001 issued by The CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001 -02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002-03 onwards No decision contrary to the decision of the Gujarat High Court has been shown to us. It is clarified that although the decision of the Gujarat High Court was rendered in context of re-opening notice it has also examined the issue on merits and drew support from the CBDT circular which is beneficial to the assessee to conclude as aforesaid. Nothing has been shown to us to indicate why the decision of the Gujarat High Court in General Motors (India) Ltd. should not be followed in the present facts. (d) In the above view question No.7 as raised does not give rise to any substantial question of law. Thus not entertained.”

Therefore, as could be seen from the above the Hon'ble Jurisdictional High Court held that no substantial question of law arises against the Tribunal order in allowing set-off of unabsorbed depreciation pertaining to Assessment Years 1996-97 and 1997-98 beyond eight years against the income of the assessee in subsequent years. While holding so the Hon'ble Jurisdictional High Court considered the decision of the Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd v. Dy. CIT [354 ITR 244]. Therefore, in view of the above discussion we uphold the order of the Ld.CIT(A) and reject the grounds raised by the Revenue.