Gujarat High Court

Principal Commissioner Of Income Tax-1 vs M/S. Micro Melt Pvt. Ltd on 1 December, 2023

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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      C/TAXAP/782/2023                             ORDER DATED: 01/12/2023

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             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                         R/TAX APPEAL NO. 782 of 2023

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                PRINCIPAL COMMISSIONER OF INCOME TAX-1
                                 Versus
                        M/S. MICRO MELT PVT. LTD.
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Appearance:
MR KARAN G SANGHANI(7945) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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 CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
       and
       HONOURABLE MR. JUSTICE NIRAL R. MEHTA

                               Date : 01/12/2023

                                ORAL ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

[1] By this Tax Appeal under Section 260A of the Income Tax

Act, 1961 (for short, "the Act"), the the appellant - Revenue has

raised the following substantial questions of law arising out of the

order dated 16th June 2023 passed by the Income Tax Appellate

Tribunal, Rajkot Bench, Rajkot (for short, "the Tribunal") in I.T.A.

No.41/Rjt/2023 for the Assessment Year 2005-06:

"[A] "Whether in the facts of the case and in law, the Appellate Tribunal was justified in confirming the finding given by the Ld. CIT(A) allowing the carried forward and set off of unabsorbed depreciation even though the assessee had claimed carried forward business loss in computation of total income filed with the return of income for A.Y. 2005-06?

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[B] "Whether in the facts of the case as well as in law, the Appellate Tribunal was justified in confirming the finding given by the Ld. CIT(A) allowing carried forward and set off of unabsorbed depreciation without any limitation of period?

[C] "Whether in the facts of the case as well as in law, the Appellate Tribunal was justified in dismissing appeal without considering the fact that the issue involved has not reached its finality before the Hon'ble Apex Court?"

[2] The only issue which came up for consideration before the

CIT(A) as well as the Tribunal was whether the assessee was

entitled to claim set off of unabsorbed depreciation for the

Assessment Year 1995-96 in the relevant assessment year i.e. 2005-

2006.

[3] The Assessing Officer passed an order dated 18 th October

2010 under Section 154 of the Act to rectify the mistake in the

assessment order dated 7th December 2007 passed under Section

143(3) of the Act so as to disallow the claim of set off of business

loss of Rs.8,33,500/- for the Assessment Year 1996-97 on the

ground that the assessee was not eligible for set off of business loss

as the immediate succeeding eight assessment years expired in the

Assessment Year 2004-05.

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[4] Being aggrieved, the assessee preferred an appeal before the

CIT(A) and submitted that the assessee filed its return of income

for the Assessment Year 1996-97 declaring total loss of

Rs.8,90,812/- which consists of depreciation loss of Rs.8,78,248/-

and business loss of Rs.12,564/- and out of the same, unabsorbed

depreciation amounting to Rs.8,33,500/- was set off by the assessee

against return income for the Assessment Year 1996-97. The

CIT(A) allowed the appeal of the assessee on the ground that the

assessee was entitled to set off of unabsorbed depreciation of the

Assessment Year 1996-97 in the relevant Assessment Year 2005-06

in view of judicial pronouncements cited by the assessee including

the decision rendered by this Court in the case of General Motors

India (P) Ltd vs. Deputy Commissioner of Income Tax [Special Civil

Application No.1773 of 2012 decided on 23 rd August 2012). The

CIT(A) directed the Assessing Officer to verify the claim made by

the assessee that the amount which is the subject matter of appeal

is unabsorbed depreciation of business loss and if the Assessing

Officer arrives at a finding that the amount is unabsorbed

depreciation, the Assessing Officer was directed to allow set off in

accordance with law.

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[5] The CIT(A), vide order dated 21st December 2022,

considering the decision of this Court in the case of General Motors

India (P) Ltd. (supra), held that the assessee was entitled to set off

of unabsorbed depreciation for the Assessment Year 1996-97 in the

relevant Assessment Year i.e. 2005-06. The CIT (A), in para 5.3 of

order dated 21st December 2022, has observed as under:

"5.3 In its submission the assesse has also relied upon the judgment of jurisdictional High Court of Gujarat in case of M/S General Motors India Pvt. Ltd. vs. DCIT (SPECIAL CIVIL APPLICATION No 1773 2012). In the aforesaid judgment the Hon'ble High Court in para 38 has observed as under:

"We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1 st 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 up to 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."

[6] Being aggrieved by the order passed by the CIT(A), the

appellant - Revenue preferred an appeal before the Tribunal. The

Tribunal, vide order dated 16th June 2022, after considering the

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reasons given by the CIT(A) as well as the decision of this Court in

the case of General Motors India (P) Ltd. (supra), held that the

CIT(A) has not erred in facts and in law in allowing the appeal of

the assessee as the assessee made a valid claim of unabsorbed

depreciation.

[7] This Court in the case of General Motors India (P) Ltd.

(supra), in para 38, held as under:

"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 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

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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."

[8] It is pointed out by the learned advocate for the appellant-

Revenue that the Hon'ble Supreme Court, in the case of Principal

Commissioner of Income-tax, Vadodara 1 vs. Petrofiles Cooperative

Ltd reported in [2021] 130 taxmann.com 191 (SC), upheld the

decision of this Court in the case of General Motors India (P) Ltd

(supra) and dismissed the Special Leave Petition filed by the

Revenue and passed the following order on 28th January 2021:

"1. In view of the judgments on the interpretation of Section 32(2) of the Income Tax Act delivered by Delhi High Court, Gujarat High Court, Madras High Court and Bombay High Court, upheld by this Court by special leave petitions being dismissed, we do not agree with the learned Additional Solicitor General that the question of law has to be determined in these special leave petitions.