Pg 1 Of 4 v. Deputy Commissioner Of Income-Tax Reported In 354Itr 244 (Gujarat

dik IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. INCOME TAX APPEAL NO. 1337 OF 2016 Pr. Commissioner of Income Tax ...Appellant vsM/s Gunnebo India Pvt. Ltd. ...Respondent. ..... Mr Suresh Kumar for the Appellant. Mr Sunil Lala a/w Ms Shilpa Denavalvi a/w Mr Sameer Dalal for the Respondent. ..... CORAM : AKIL KURESHI & B.P.COLABAWALLA, JJ. FEBRUARY 11, 2019. P.C. : The Revenue has filed this appeal challenging the Judgment of the Tribunal. The following questions of law are presented for our consideration. “1) Whether on the facts and in the circumstances of the case, the ITATis right in allowing set off of unabsorbed depreciation of prioramounting to Rs.6,01,66,399/- against long term capital gainwithout properly appreciation the legal provision as laid down bysection 71 of the Act as per which brought forward loss cannot beset against income from capital gain?is right in allowing set off of unabsorbed depreciation of prioramounting to Rs.6,01,66,399/- against long term capital gainwithout properly appreciation the legal provision as laid down bysection 71 of the Act as per which brought forward loss cannot beset against income from capital gain? 2) Whether on the facts and in the circumstances of the case, the ITAT isright in deleting the addition of Rs.58,18,028/- on account of shortterm capital gain an sale of building without appreciating the factvalue of building taken by the AO was clearly mentioned in the saledeed?right in deleting the addition of Rs.58,18,028/- on account of shortterm capital gain an sale of building without appreciating the factvalue of building taken by the AO was clearly mentioned in the saledeed? 2The respondent – assessee is a private limited company. The issues arise for the Assessment Year ( “A.Y.” for short) 2008-09.Question No.1 pertains to the claim of the assessee for setting off of Pg 1 of 4 8.itxa.1337.2016.db.docunabsorbed depreciation or prior period amounting to Rs.6.01 Croresagainst Long Term Capital Gain. CIT(A) while reversing the decisionof the Assessing Officer (“A.O.” for short) granted the relief to theassessee referring to the provisions of Section 32(2) of the IncomeTax Act, 1961 (“IT Act” for short) read with Sections 70, 71 and 72thereof. CIT (A) also placed reliance on a decision of the DivisionBench of the Gujrat High Court in the case of General Motors India(P) Ltd. Vs Deputy Commissioner of Income-tax reported in 354ITR 244 (Gujarat). 3The Revenue carried the matter in appeal. The AppellateTribunal dismissed the appeal of the Revenue making the followingobservations- Pg 1 of 4 8.itxa.1337.2016.db.docunabsorbed depreciation or prior period amounting to Rs.6.01 Croresagainst Long Term Capital Gain. CIT(A) while reversing the decisionof the Assessing Officer (“A.O.” for short) granted the relief to theassessee referring to the provisions of Section 32(2) of the IncomeTax Act, 1961 (“IT Act” for short) read with Sections 70, 71 and 72thereof. CIT (A) also placed reliance on a decision of the DivisionBench of the Gujrat High Court in the case of General Motors India(P) Ltd. Vs Deputy Commissioner of Income-tax reported in 354ITR 244 (Gujarat). 3The Revenue carried the matter in appeal. The AppellateTribunal dismissed the appeal of the Revenue making the followingobservations- “16. We have observed that the current year's depreciation is allowed to beset off against the income from business as well as against the otherheads of income and unabsorbed depreciation in carry forward andbecome part of the depreciation of the subsequent year and the totaldepreciation becomes current year's depreciation as per section 32(1)of the Act, which is allowed to be set off against the income under anyhead of income. As per the provisions of section 32(2) of the Actr.w.s. 70, 71 and 72 of the Act, it becomes very clear that the totaldepreciation comprising of the depreciation of the relevant assessmentyear along with the unabsorbed depreciation of the earlier yearsbecomes the total current year's depreciation which is allowed to beset off against income under any head of income including Long TermCapital Gain. Accordingly, we find no reason to interfere with theorder of CIT(A) qua this issue and the same is hereby upheld. Wealso hold that as per provisions of section 72 of the Act, theunabsorbed business loss ( other than speculative loss) of earlier yearsshall be allowed to be set off only against the profits and gains frombusiness carried on by the assessee of the current year and so on. Weorder accordingly. However, our above decision with respect toground no. (i) and (ii) raised in memo of appeal filed by Revenueset off against the income from business as well as against the otherheads of income and unabsorbed depreciation in carry forward andbecome part of the depreciation of the subsequent year and the totaldepreciation becomes current year's depreciation as per section 32(1)of the Act, which is allowed to be set off against the income under anyhead of income. As per the provisions of section 32(2) of the Actr.w.s. 70, 71 and 72 of the Act, it becomes very clear that the totaldepreciation comprising of the depreciation of the relevant assessmentyear along with the unabsorbed depreciation of the earlier yearsbecomes the total current year's depreciation which is allowed to beset off against income under any head of income including Long TermCapital Gain. Accordingly, we find no reason to interfere with theorder of CIT(A) qua this issue and the same is hereby upheld. Wealso hold that as per provisions of section 72 of the Act, theunabsorbed business loss ( other than speculative loss) of earlier yearsshall be allowed to be set off only against the profits and gains frombusiness carried on by the assessee of the current year and so on. Weorder accordingly. However, our above decision with respect toground no. (i) and (ii) raised in memo of appeal filed by Revenue Pg 2 of 4 should be read in conjunction with and subject to our findings withrespect to ground no. (iii) and (iv) which are decided by us in thepreceding para's of this order and the computation shall be madeaccordingly." 4Having heard the learned counsel for parties and havingperused the documents on record, we do not find any error in theorder of the Appellate Tribunal. Gujarat High Court in the case ofGeneral Motors India (P) Ltd.(supra) had considered somewhatsimilar issue, of course in the backdrop of the assessee's challenge toa notice of reopening of the assessment. The Gujarat High Court had held and observed as under - Pg 2 of 4 should be read in conjunction with and subject to our findings withrespect to ground no. (iii) and (iv) which are decided by us in thepreceding para's of this order and the computation shall be madeaccordingly." 4Having heard the learned counsel for parties and havingperused the documents on record, we do not find any error in theorder of the Appellate Tribunal. Gujarat High Court in the case ofGeneral Motors India (P) Ltd.(supra) had considered somewhatsimilar issue, of course in the backdrop of the assessee's challenge toa notice of reopening of the assessment. The Gujarat High Court had held and observed as under - “38Therefore, it can be said that, current depreciation is deductible inthe first place from the income of the business to which it relates. If suchdepreciation amount is larger than the amount of the profits of that business,then such excess comes for absorption from the profits and gains from anyother business or business, if any, carried on by the assessee. If a balance isleft even thereafter, that becomes deductible from out of income from anysource under any of the other heads of income during that year. In case thereis a still balance left over, it is to be treated as unabsorbed depreciation and itis taken to the next succeeding year. Where there is current depreciation forsuch succeeding year the unabsorbed depreciation is added to the currentdepreciation for such succeeding year and is deemed as part thereof. If,however, there is no current depreciation for such succeeding year, theunabsorbed depreciation becomes the depreciation allowance for suchsucceeding year. We are of the considered opinion that any unabsorbeddepreciation available to an assessee on 1[st] April, 2002 (asst. yr. 2002-03)will be dealt with in accordance with the provisions of s. 32(2) as amendedby Finance Act, 2001. And once the Circular No. 14 of 2001 clarified thatthe restriction of 8 years for carry forward and set off of unabsorbeddepreciation had been dispensed with, the unabsorbed depreciation fromasst, yr. 1997-98 up to the asst. yr. 2001-02 got carried forward to the asst.yr. 2002-03 and became part thereof, it came to be governed by theprovisions of s. 32(2) as amended by Finance Act, 2001 and were availablefor carry forward and set off against the profits and gains of subsequentyears, without any limit whatsoever.” Pg 3 of 4 6Question No.2 relates to the A.O.'s objections to theassessee not offering the entire sale consideration of immovableproperty to Capital Gain Tax. The assessee had sold the land alongwith the building thereon referred to as SEML property. The assesseehad valued the land and the building separately and claimeddepreciation on the constructed property. The sale consideration ofRs.51.18 Lacs attributed to the building was offered to tax, but at thesame time the assessee also claimed depreciation on the constructedproperty. The Tribunal accepted such depreciation, however subjectto rider of revaluation of the another property referred as Ambaturrwhich also forms part of the block of depreciable assets. 7We do not find any error in the order of the Tribunal. Noquestions of law arises. In the result the appeal is dismissed. Noorder as to costs. (B.P.COLABAWALLA, J.) (AKIL KURESHI, J.) Pg 4 of 4