Peerless General Finance and Investment Co. Ltd. vs. CIT [2016] 380 ITR 165 (SC)
The Tribunal had held that under the provisions of section 32(2)(iii)(a) and (b) the amount of unabsorbed depreciation allowance shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; if not wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed.
The Tribunal further held that since in this case, business income after adjusting brought forward business loss had been determined at nil, therefore, in the absence of any other business income, the amount of brought forward unabsorbed depreciation allowance shall not be set off from the other income, i.e., income from “house property” and “Other Sources” and shall be carried forward to the following assessment year(s) as per the provisions of section 32(2)(iii)(a) and (b) of the Income-tax Act, 1961.
The High Court admitted the appeal on the following questions:
(i) Whether, on the facts and in the circumstances of the case, the Tribunal erred in construing the amendment of section 32(2) by the Finance (No.2) Act, 1996, as retrospective in effect so as to preclude the assessee’s claim for adjustment of accumulated unabsorbed depreciation allowance brought forward as on the 1st April, 1997, from earlier years against income from house property and income from other sources for the assessment year 1998-99 ?
(ii) Whether the assurance of the Finance Minister in Parliament that set off of the cumulative unabsorbed depreciation brought forward from earlier years as on April 1st, 1997, can be set off against the profits and gains of a business or profession or any other income of the taxpayer for the assessment year 1997-98 and subsequent year forms part of the legislative intent and any construction contrary thereto is erroneous?
The High Court held that the provisions introduced suggest that where the unabsorbed depreciation allowance could not be wholly set off against the profits and gains, if any, of any business or profession carried on by the assessee, the unabsorbed depreciation allowance could be set off from the income under any other head during the assessment year 1997-98. If the unabsorbed depreciation allowance could only be wholly set off during the assessment year 1997-98, the left over could only be set off against the profits and gains, if any, of the business or profession in the assessment year 1998-99.
The High Court therefore answered both the question in the negative and in favour of the Revenue.
On further appeal, the Supreme Court dismissed the SLP subject to the observation that the unabsorbed depreciation as on April 1, 1997, can be set off against the income from any head for the immediate assessment year following April 1, 1997 and thereafter if there still is any unabsorbed depreciation the same can be set off only against the business income for a period of eight assessment years.
