INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - AO allowed carry forward of unabsorbed depreciation beyond a period of eight years -

Pr. CIT invoked revisionary jurisdiction under section 263 on the reasoning that allowing excess carry forward of unabsorbed depreciation beyond a period of eight years, was erroneous and prejudicial to the interest of revenue in view of amendment made in sub-section (2) of section 32 by the Finance (No. 2) Act, 1996 with effect from 1-4-1997. Tribunal quashed the order of Pr. Commissioner. Held: Any unabsorbed depreciation available to an assessee on 1-4-2002 (assessment year 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 restriction of 8 years for carry forward and set-off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from assessment year 1997-98 up to the assessment year 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. Accordingly, order passed by AO was not erroneous and prejudicial. Thus Tribunal rightly quashed the order of Pr. Commissioner to the interest of Revenue.

Followed:Malabar Industrial Co. Ltd. v. Commissioner of Income Tax (2000) 109 Taxman 66 (SC) : 2000 TaxPub(DT) 1227 (SC), Peerless General Finance & Investment Co. Ltd. v. Commissioner of Income Tax (2016) 73 Taxman.com 258 (SC) : 2016 TaxPub(DT) 0593 (SC), Commissioner of Income Tax, Chennai v. Sanmar Speciality Chemicals Ltd. (2020) 122 taxmann.com 212 (Madras) : 2020 TaxPub(DT) 3852 (Mad-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

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