The Commissioner Of Income Tax,Chennai v. M/S.best & Crompton Engineering Ltd.,28, Industrial Estate,Ambattur, Chennai-600 098

IN THE HIGH COURT OF JUDICATURE AT MADRAS The Honourable Mr.Justice T.S.SIVAGNANAMandThe Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP The Commissioner of Income tax,Chennai. ..Appellant/Respondent -vs- M/s.Best & Crompton Engineering Ltd.,28, Industrial Estate,Ambattur, Chennai-600 098. ..Respondent/Appellant Appeal under Section 260A of the Income Tax Act, 1961against the order dated 19.02.2014 made in I.T.A.No.457/Mds/2012on the file of the Income Tax Appellate Tribunal 'B' Bench,Chennai for the assessment year 2007-08 and against the orderdated 26.12.2011 in I.T.A.No.617/09-10/A.III on the file of theCommissioner of Income Tax (Appeals)III, Chennai and against theorder dated 18.12.2009 GIR/PAN No. /2007-2008 on thefile of the Assistant Commissioner of Income Tax, Chennai. For Respondent :Mr.S.Gopalakrishnan This appeal, by the Revenue, filed under Section 260A of theIncome Tax Act, 1961, is directed against the order dated19.02.2014 made in I.T.A.No.457/Mds/2012 on the file of theIncome Tax Appellate Tribunal 'B' Bench, Chennai for theassessment year 2007-08. 2.The appeal was admitted on 01.12.2014, on the followingsubstantial questions of law:- https://hcservices.ecourts.gov.in/hcservices/ “1) Whether on the facts and in thecircumstances of the case the Tribunal was rightin holding that the unabsorbed depreciation lossprior to assessment year 2002-2003, viz., fromthe assessment years 1999-2000 to 2001-2002 couldbe set off against the long term capital gainseven though as per the provisions of the IncomeTax Act the above loss could be set off only fora period of 8 years succeeding the assessmentyear for which it was first computed? And 2) Is not the finding of the Tribunal bad bydirecting the Assessing Officer to set off theunabsorbed depreciation prior to assessment year1997-1998 especially when the intention of theLegislature was to grant depreciation againstother income upto 8 years only succeeding theassessment year for which it was first computed?” 3.Heard Ms.R.Hemalatha, learned Senior Standing Counsel forthe appellant/Revenue and Mr.S.Gopalakrishnan, learned counselfor the respondent/assessee. 4.On going through the facts and circumstances, we find thatthe substantial questions of law, raised in the present appeal,were considered by this Court in the case of CIT vs. SanmarSpeciality Chemicals Ltd. reported in (2020) 428 ITR 237(Madras). The relevant portion of the judgment reads asfollows:- “11. A similar issue was considered by aDivision Bench of the Bombay High Court in thecase of CIT v. Bajaj Hindustan Ltd. [IT AppealNos. 134 to 136 and 140, 141 and 148 of 2018,dated 13-6-2018] following the decision in thecase of CIT v. Hindustan Unilever Ltd. [2016] 72taxmann.com 325/[2017] 394 ITR 73 (Bom.). Thespecial leave petition filed by the Revenueagainst the above decision was dismissed by theHon'ble Supreme Court in the decision in Pr. CITv. Bajaj Hindustan Ltd. [SLP (C) Diary No. 48020of 2018, dated 25-1-2019]. 12. In the decision of the Punjab & HaryanaHigh Court in the case of CIT v. G.T.M.Synthetics Ltd. [2013] 30 taxmann.com 83/[2012]347 ITR 458], an identical issue was consideredin the following terms :'8. The effect of omission of the aforesaidproviso was enumerated by the Central Board ofDirect Taxes, vide Circular No. 794 dated 9-8-2000 [(2000) 245 ITR (Statute)] 21 that theunabsorbed depreciation allowance could be set- off against the income under any other head evenwhere the business was not carried on.Clause 22 of the said circular which isrelevant is as under:"22. Requirement of continuance of samebusiness for set-off of unabsorbed depreciationdispensed with: off against the income under any other head evenwhere the business was not carried on.Clause 22 of the said circular which isrelevant is as under:"22. Requirement of continuance of samebusiness for set-off of unabsorbed depreciationdispensed with: 22.1 Under the existing provisions of sub-section (2) of section 32 of the Income-tax Act,carried forward unabsorbed depreciation isallowed to be set-off against profits and gainsof business or profession of the subsequent year,subject to the condition that the business orprofession for which depreciation allowance wasoriginally computed continued to be carried on inthat year. A similar condition in section 72 forthe purpose of carry forward and set-off ofunabsorbed business loss was removed last year. 22.2 With a view to harmonise the provisionsrelating carry forward and set-off of unabsorbeddepreciation and unabsorbed loss, the Act hasdispensed with the condition of continuance ofsame business for the purpose of carry forwardand set-off of unabsorbed depreciation. 22.3 This amendment will take effect from 1stApril, 2001, and will, accordingly, apply inrelation to the assessment year 2001-2002 andsubsequent years." 9. The CIT(A) and the Tribunal, thus, rightlyallowed unabsorbed depreciation relevant to theassessment year 1996-97 to be set-off against theincome from long term capital gains and incomefrom other sourcesfor the assessment year 2001-2002.' 13. Recently, in the decision of a DivisionBench of the Bombay High Court in the case of Pr.CIT v. Gunnebo India (P.) Ltd. [2019] 104 CCH227, the issue was considered in favour of theassessee after referring to the decision of theDivision Bench of the Gujarat High Court in thecase of General Motors India (P.) Ltd., whereinthe relevant portions read thus : "3. The Revenue carried the matter in appeal.The Appellate Tribunal dismissed the appeal ofthe Revenue making the following observations:- "16. We have observed that the current year'sdepreciation is allowed to be set-off against theincome from business as well as against the otherheads of income and unabsorbed depreciation incarry forward and become part of the depreciation of the subsequent year and the total depreciationbecomes current year's depreciation as persection 32(1) of the Act, which is allowed to besetoff against the income under any head ofincome. As per the provisions of section 32(2) ofthe Act r.w.s. 70, 71 and 72 of the Act, itbecomes very clear that the total depreciationcomprising of the depreciation of the relevantassessment year along with the unabsorbeddepreciation of the earlier years becomes thetotal current year's depreciation which isallowed to be set off against income under anyhead of income including long term capital gain.Accordingly, we find no reason to interfere withthe order of CIT(A) qua this issue and the sameis hereby upheld. We also hold that as perprovisions of section 72 of the Act, theunabsorbed business loss (other than speculativeloss) of earlier years shall be allowed to beset-off only against the profits and gains frombusiness carried on by the assessee of thecurrent year and so on. We order accordingly.However, our above decision with respect toground nos. (i) and (ii) raised in memo of appealfiled by Revenue should be read in conjunctionwith and subject to our findings with respect toground nos. (iii) and (iv) which are decided byus in the preceding para's of this order and thecomputation shall be made accordingly." 4. Having heard the learned counsel forparties and having perused the documents onrecord, we do not find any error in the order ofthe Appellate Tribunal. Gujarat High Court in thecase of General Motors India (P.) Ltd. (supra)had considered somewhat similar issue, of coursein the backdrop of the assessee's challenge to anotice of reopening of the assessment. TheGujarat High Court had held and observed asunder:- "38 Therefore, it can be said that, currentdepreciation is deductible in the first placefrom the income of the business to which itrelates. If such depreciation amount is largerthan the amount of the profits of that business,then such excess comes for absorption from theprofits and gains from any other business orbusiness, if any, carried on by the assessee. Ifa balance is left even thereafter, that becomesdeductible from out of income from any sourceunder any of the other heads of income during that year. In case there is a still balance leftover, it is to be treated as unabsorbeddepreciation and it is taken to the nextsucceeding year. Where there is currentdepreciation for such succeeding year theunabsorbed depreciation is added to the currentdepreciation for such succeeding year and isdeemed as part thereof. If, however, there is nocurrent depreciation for such succeeding year,theunabsorbeddepreciationbecomesthedepreciation allowance for such succeeding year.We are of the considered opinion that anyunabsorbed depreciation available to an assesseeon 1st April, 2002 (asst. yr. 2002-03) will bedealt with in accordance with the provisions ofsection 32(2) as amended by Finance Act, 2001.And once the Circular No. 14 of 2001 clarifiedthat the restriction of 8 years for carry forwardand set-off of unabsorbed depreciation had beendispensed with, the unabsorbed depreciation fromasst. yr. 1997-98 up to the asst. yr. 2001- 02got carried forward to the asst. yr. 2002-03 andbecame part thereof, it came to be governed bythe provisions of section 32(2) as amended byFinance Act, 2001 and were available for carryforward and set-off against the profits and gainsof subsequent years, without any limitwhatsoever."14. In our considered view, the abovedecisions will clearly enure to the benefit ofthe respondent - assessee. 15. Accordingly, the above tax case appeal isdismissed and the substantial question of law isanswered against the Revenue. No costs.” 5.Following the above decision, the substantial questions oflaw, raised in this appeal, are answered against the Revenue.Consequently, the tax case appeal is dismissed. No costs. Assistant Registrar(CS-III) True Copy Sub-Assistant Registrar abr To 1.Income Tax Appellate Tribunal 'B' Bench, Chennai. 2.The Commissioner of Income Tax (Appeals)IIINo.121 Mahathma Gandhi RoadChennai 600 034.No.121 Mahathma Gandhi RoadChennai 600 034. 3.The Assistant Commissioner of Income TaxCompany Circle I(2), Chennai 34.Company Circle I(2), Chennai 34. +1 CC to Mr.T. Ravi Kumar, Advocate sr 37912. T.C.A.No.844 of 2014 SJ(CO)SP(25/08/2021)