Whether the Appellate Tribunal has erred in law and on facts in allowing carry forward of unabsorbed depreciation following Circular No. 14 of 2001 without appreciating that the amendment to the Finance Act was prospective?
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 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.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. This tax appeal under Section260A of the Income Tax Act, 1961 [for short ‘The Act, 1961’] is at the instance of the revenue and directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad ‘C’ Bench, Ahmedabad dated 13/12/2018 in the IT(SS)No.112/AHD/2016 for the A.Y.2008-09.
2. The revenue has proposed the following two taxguru.in questions of law the consideration of this Court:
[A] Whether the Appellate Tribunal has erred in law and on facts in allowing carry forward of unabsorbed depreciation following Circular No.14 of 2001 without appreciating that the amendment to the Finance Act was prospective?
[B] Whether the Appellate Tribunal has erred in law and on facts in holding that the assessee is entitled to claim of deferred revenue expenditure of Rs.18,82,326/ by not appreciating that the assessee would get double benefit by way of one tenth of expenditure once the fresh claims in A.Y.2006-07 and 2007-08 are allowed?
3. So far as the first question is concerned, the same is squarely covered by the decision of this Court in the case of General Motors India Private Limited Vs. Deputy Commissioner of Income Tax reported in 354 ITR 244. So far as the second question as proposed by the revenue is concerned, Mr. Bhatt, the learned senior counsel appearing for the appellant invited our attention to the order passed by the Commissioner of Income tax [Appeals], Ahmedabad, wherein, in para7 of the order, the following has been observed.
“7. Consequently, the appellant’s ground for allowing 1/10th of amortized expenses for A.Y.08-09 to 12-13 would stand dismissed.”
4. In view of what has been observed by the Commissioner of Income tax [Appeals], Mr. Bhatt pointed out that the second question as proposed would not survive.
5. In such circumstances, this appeal fails and is hereby dismissed.