By allowing the claim of unabsorbed brought-forward depreciation to be adjusted against the income from other sources, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) granted relief to Petrofils Co-operative Limited.
The Single Bench member Annapurna Gupta noted that the Commissioner of Income Tax (Appeals) has misappreciated the facts of the case.
The assessee’s counsel asserted that the present appeal was taken up in the second round after the first round’s decision to not allow the brought-forward unabsorbed depreciation from prior years to be set off against the current year’s tax liability due to the assessee’s lack of economic activity since 1997–1998.
Furthermore, it was claimed that the Income Tax Appellate Tribunal had ruled in the first round that the assessee had an entitlement to deduct brought-forward unabsorbed depreciation from prior years from other incomes, even if it had engaged in no commercial activity.
Additionally, since the claim was initially denied by the ITAT, the assessee did not contest the claim’s denial in A.Y. 2004-05, and since the claim was now allowed in A.Y. 2004-05, there was no justification for the Assessing Officer to deny the claim of set-off of brought-forward unabsorbed depreciation against other incomes in the contested year.
After considering the rival submissions, the panel observed that one of the reasons for the Commissioner of Income Tax (Appeals) denying the benefit of set-off of unabsorbed depreciation was the assessee’s acceptance or rejection of set-off of brought forward- depreciation in Asst.Year 2004-05.
Further, the bench noted the details submitted by the assessee pertained to the unabsorbed depreciation of each year. As per the details, there was no unabsorbed depreciation pertaining to A.Y. 2002-03 to 2005-06 and that does not mean that earlier year depreciation had all been absorbed.
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