Belated Return Not a Bar on Carry Forward of Depreciation: ITAT Confirms Rs. 2.38 Crore as Unabsorbed Depreciation [Read Order]
The Tribunal relied on the assessee’s return showing Rs. 2.38 crore in Schedule UD as unabsorbed depreciation, with Schedule CFL reflecting no business loss, thereby confirming the claim as depreciation loss alone
ITAT Ahmedabad, Depreciation, ITAT Confirms
ITAT Ahmedabad, Depreciation, ITAT Confirms
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has held that a belated return does not restrict the carry forward of unabsorbed depreciation.
In a case involving a disputed loss of Rs. 2.38 crore, the Tribunal confirmed that the amount was unabsorbed depreciation under Section 32(2) of the Income TaxAct, 1961, and not business loss, thereby allowing it to be carried forward despite delayed filing.
The appeal was filed by the Assistant Commissioner of Income Tax (ACIT) against Elecon Engineering Company Ltd., Anand, for the Assessment Year 2020-21.
The assessee, engaged in manufacturing industrial gears and couplings, had filed its return belatedly under Section 139(4) of the Income Tax Act, 1961, due to Covid-19 disruptions. In this return, it claimed carry forward of unabsorbed depreciation amounting to Rs. 2.38 crore. The Centralized Processing Centre (CPC) initially allowed the claim.
However, the Assessing Officer (AO), through a rectification order under Section 154 read with Section 143(1), denied it by treating the claim as business loss requiring compliance with Section 139(1).
The Revenue Authorities represented by Kakoli Uttam Ghosh, argued that the assessee’s claim was in the nature of a business loss. As per Section 139(1), only returns filed within the prescribed due date allow the benefit of carrying forward business losses. The AO stated that allowing the assessee to carry forward the said amount would be contrary to the statutory mandate.
The Assessee represented by M. K. Patel, submitted that the disputed amount was unabsorbed depreciation and not a business loss. He relied on Section 32(2) of the Income Tax Act, 1961, which permits unabsorbed depreciation to be carried forward without the condition of timely filing of return under Section 139(1).
Supporting his claim, the assessee highlighted financial figures showing depreciation of Rs. 28.88 crore against profits of Rs. 24.59 crore, leaving Rs. 4.29 crore unabsorbed, of which Rs. 2.38 crore remained after permissible set-offs. Judicial precedents, including ACIT vs. Anil Printers Ltd. (ITAT Mumbai) and CIT vs. Govind Nagar Sugar Ltd. (Delhi High Court), were cited to reinforce the position.
The Bench consisting of Judicial Member, Sanjay Garg and Accountant Member, Annapurna Gupta upheld the findings of the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre.
The Tribunal held that the loss in question was indeed unabsorbed depreciation, governed exclusively by Section 32(2). Therefore, it could be carried forward even when the return was filed belatedly.
The Tribunal noted key documentary evidence from the assessee’s return of income Schedule UD reflecting the carry forward of unabsorbed depreciation of Rs. 2.38 crore, and Schedule CFL, which showed no business losses carried forward. These records, along with the financial computations, confirmed that the amount related solely to unabsorbed depreciation and not to business loss.
Therefore, the Tribunal dismissed the Revenue’s appeal.
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