By Jagdish D. Shah, Jagdish T. Punjabi Chartered Accountants
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(I ) Section 32(2) – Unabsorbed depreciationpertaining to assessment year 2002-03 or before can be set-off after a period of eight years.
(ii) Section 115JB – In the absence of exempt income addition to book profit applying provisions of section 14A cannot be made.
Facts:
Following issues amongst others were raised before the tribunal:
i). Whether the unabsorbed depreciation of Rs 4.39 crore which pertained to the assessment years 1999-2000 and 2000-01, can be set off against business income during the current assessment year;
ii) I n the absence of exempt income whether disallowance u/s. 115JB on the ground that the amount pertained to disallowance u/s.14A, can be made.
The assessee’s claim for set-off against business income of unabsorbed depreciation brought from the assessment year 1999-2000 and 2000-01, aggregating to Rs. 4.39 crore, was rejected by the AO as according to him the unabsorbed depreciation pertaining to the assessment years prior to the assessment year 2002-03 could only be carried forward for eight subsequent assessment years. For the purpose, he relied on a Special Bench decision of the Delhi Tribunal in thecase of DCIT vs. Times Guaranty Limited [(2010) 4 ITR (Trib) 210 MumbaiSB]. On appeal, the CIT(A) upheld the decision of the AO.
Applying the provisions of Clause (f) of Explanation to section 115JB(2) the AO disallowed expense of Rs. 2 lakh u/s. 14A. On appeal, the CIT(A) confirmed the order. Before the Tribunal, the assessee contended that since it has not earned any exempt income during the year, the disallowance u/s. 115JB was not called for. While the revenue relied on the orders of the lower authorities and contended that once the assessee has on its own accepted this disallowance, the adjustment u/s. 115JB in respect thereof was only a natural corollary thereto.
Held:
i) Re: Depreciation: The Tribunal referred to the decision of the Gujarat high court in the case of General Motors India Pvt. Ltd. vs. DCIT [(2013) 354 ITR 244(Guj)] and noted its “considered opinion” to the effect that “any unabsorbed depreciation available to an assessee on 1st day of April 2002 will be dealt with in accordance with the provisions of section 32(2) asamended by Finance Act, 2001”. Accordingly, it observed that the legal position is that the restriction of eightyears, which was in force till the law was amended by the Finance Act 2001 w.e.f. 2002-03, does not come into play. Further, relying on the decisions in the cases of Tej International Pvt.Ltd.vs. DCIT[(2000) 69 TTJ 650] and ACIT vs. Aurangabad Holiday Resorts Pvt. Ltd. [(2007) 118 ITD 1], the Tribunal accepted the plea of the assessee.
ii) Re: Disallowance u/s 14A: Relying on the Delhi High Court’s decision in the case of CIT vs. Holcim India Pvt. Ltd. [2014 TIOL 1586 HC DEL IT] wherein it is held that unless there is an exempt income, disallowance u/s. 14 A cannot be invoked, the Tribunal accepted the assessee’s pleas and held that adjustment under Clause (f) of Explanation to section 115JB (2) cannot be made.
