J.K. LAKSHMI CEMENT LTD.,KOLKATA vs. CIT, CENTRAL - I, KOLKATA, KOLKATA

This appeal by the assessee against the order of Commissioner of Income Tax (Central-I) Kolkata in appeal No.cit(C-I)/263/JK Lakshmi Cement Ltd./Tech/11-12/Kol/6446-48 dated 27/28.09.2011. Assessment was framed by ACIT,CC-VI, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 19.11.2009 for assessment year 2007-08.

Facts of the case are that assessee is a Limited Company is engaged in business of manufacturing and sale of cement. Assessee has shown unabsorbed depreciation amounting to Rs.228,77,86,812/- in the year under consideration. This depreciation pertains to AY beginning from AY 1992-93 to 2001-02. As per the law unabsorbed depreciation can be carried forward upto eight years. Ld. CIT found from the assessment order of AO that the issue of unabsorbed depreciation has not been examined by AO. Therefore, Ld. CIT opined that the order of AO is erroneous and prejudicial to the interest of revenue. Accordingly, Ld. CIT issued show cause notice u/s. 263 of the Act for certain clarification on the issue as discussed above. Assessee submitted that for the relevant AY 2007-08 no set off of the unabsorbed depreciation relating to AYs 1992-93 to 2001-02 have been claimed by assessee. Besides the above, assessee submitted that AO in his order for relevant to AY 2007-08 has already held that unabsorbed depreciation pertaining to assessment year beginning from 1992-93 to 2001-02 for an amount of Rs.228,77,86,812/- not available to be carried forward. However, assessee has gone in appeal before Ld. CIT(A) against the assessment order which is sub judice. In view of above, assessee submitted that the issue of unabsorbed depreciation which was carried forward from the earlier years do not make the order of AO is erroneous and prejudicial to the interest of revenue. Assessee also submitted that the restriction for claiming the unabsorbed depreciation has been removed with effect from 01.04.2002. Now as per the provisions of the Act the unabsorbed depreciation carry forward up to any number of years. However, Ld. CIT disregarded the claim of assessee by observing that unabsorbed depreciation of Rs.228,77,86,812/- for AYs 1992-93 to 2001-02 was wrongly allowed to be carried forward by the order of AO because as per the provision u/s 32 sub-section 2 of the Act became effective only from 01.04.2002 and JK Lakshmi Cement Ltd. v. CIT-C-I, KOL Page 3 unabsorbed depreciation of Rs. 228,77,86,812.00 pertains to AY prior to the amendment in the IT Act. Accordingly, Ld. CIT held that the order of AO is erroneous and prejudicial to the interest of revenue. Hence, the order of the AO was set aside with a direction to pass afresh order in the light of above discussion accordingly after giving reasonable opportunity of being heard to assessee.

Aggrieved, assessee preferred an appeal before us.

We have heard rival submissions of both the side and perused the materials available on record. Ld. AR submitted paper book which is running from pages 1 to 29 and relied on the order passed by AO whereas Ld. DR relied on the order passed by Ld. CIT. From the aforesaid discussion, we find that assessee’s claim of unabsorbed depreciation pertaining to AYs beginning from 1992-93 to 2001-02 for an amount of Rs.228,77,86,812/- which was allowed to be carried forward by AO in his order for the relevant AY i.e. 2007- 08 but Ld. CIT found that unabsorbed depreciation was not allowable to be carried forward for a period more than 8 years. Therefore, Ld. CIT opined that matter to be restored to file of AO for fresh adjudication. We further find that same issue has been decided by Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd. vs. DCIT (2013) 354 ITR 244 (Guj) and head- note of extract portion is reproduced below:- “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 not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision.

This ground of assessee’s appeal is allowed.

In the result, assessee’s appeal is allowed. Order pronounced in the open court 05/02/2016 Sd/- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- /02/2016 कोलकाता । JK Lakshmi Cement Ltd. v. CIT-C-I, KOL Page 5