ITAT order: Unabsorbed Depreciation related to AY can be carried forward and set off in the Later Year

The Income Tax Appellate Tribunal (ITAT) in Mumbai held that unabsorbed depreciation pertaining to assessing year AY 1997-98 to AY 2001-02 can be carried forward and set off in the later years.

Facts of the case:

The assessee company is engaged in the business of project engineering and manufacturing of TPE.
The Assessing Officer(AO), during the course of assessment proceedings, required the assessee to furnish the ledger of creditors, original purchase bills with delivery challans, lorry receipts, original sale bills with delivery challans, lorry receipts, original inward register and outward register for the year under consideration i.e. FY 2010-11. The

Assessing Officer(AO) also asked the assessee to produce the ledger of creditors, original purchase bills with delivery challans, lorry receipts and original sale bills with delivery challans, lorry receipts, original inward register and outward register for AY 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11.

The Assessing Officer(AO) noted that the carry forward and set off of unabsorbed depreciation was claimed beyond 8 years and therefore, he disallowed the set off of brought forward losses of unabsorbed depreciation amounting to 66,79,03,134/-.

Interpretation of law:

The Tribunal comprising of Judicial Member, Mahavir Singh, and Accountant Member, M Balaganesh pronounced order against ATV Projects India Limited.

The Finance Act, 2001 has amended Section 32(2) which prior to the amendment had a limit of eight years for the carry forward of depreciation. This restriction was brought in, by Finance Act, 1996. It is notable that prior to that amendment also, there was no restriction or cap in the carrying forward of depreciation.

Conclusion

Relying upon the decision of Gujarat High Court has in the case of General Motors India Pvt. Ltd the Tribunal came into the conclusion that the unabsorbed depreciation pertaining to AY 1997-98 to 2001-02 will be carried forward to AY 2002-03 and as a result became part thereof in terms of the provisions of section 32(2) as amended by Finance Act, 2001.

Accordingly, it will be available for carrying forward and set off against the profits and gains of subsequent years, without any limits.

For other related order of ITAT, refer here – https://capage.in/

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