INCOME TAX ACT, 1961

Section 32(2)

Depreciation - Unabsorbed depreciation - Applicability of eight years limit - Unabsorbed depreciation available to an assessee on 1-4-2002 (assessment year 2002-03)

AO reopened assessment on the ground that unabsorbed depreciation pertaining to assessment years 1997-98, 1998-99 and 1999-2000, was allowed in the assessment order though not allowable beyond 8 years as per section 32(2). Assessee challenged disallowance made by AO Tribunal deleted the same. Revenue approached High Court.Held: Unabsorbed depreciation available to an assessee on 1-4-2002 (assessment year 2002-03) would be dealt with in accordance with provisions of section 32(2) as amended by Finance Act, 2001 and once the Circular No. 14 of 2001 clarified that restriction of eight years for carry forward and set-off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from assessment year 1997-98 up to assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof and came to be governed by provisions of section 32(2) as amended by Finance Act, 2001 and was available for carry forward and set-off against the profits and gains of subsequent years, without any limit, whatsoever. Therefore, disallowance was deleted.

Followed:Judgment, dt. 6-7-2021 made TCA. No.62 of 2015 : 2021 TaxPub(DT) 3932 (Mad-HC) and CIT v. KMC Speciality Hospitals India Ltd. [Formerly Sea Horse Hospitals P. Ltd.) No.6, Royal Road, Trichy].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

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