Facts of the Case

The present appeals were filed by the Revenue before the Delhi High Court challenging the allowability of carry forward of unabsorbed depreciation beyond eight years. The dispute arose in light of the amendment brought by the Finance Act, 2001, which removed the earlier restriction of eight years for carry forward of unabsorbed depreciation.

The Revenue contended that such extended carry forward should not be permitted, whereas the assessee, Central Electronics, claimed the benefit of indefinite carry forward as per the amended provisions.

 

Issues Involved

  • Whether unabsorbed depreciation can be carried forward beyond eight years in view of the amendment introduced by the Finance Act, 2001.
  • Whether the issue raises any substantial question of law warranting consideration by the High Court.

 

Petitioner’s Arguments (Revenue)

  • The Revenue challenged the allowance of carry forward of unabsorbed depreciation beyond the earlier statutory limit of eight years.
  • It was argued that the benefit of amendment should not be interpreted in a manner that allows indefinite carry forward in the present case.

 

Respondent’s Arguments (Assessee)

  • The assessee relied upon the amended provisions of Section 32(2) of the Income Tax Act.
  • It was contended that post amendment by the Finance Act, 2001, the restriction of eight years was removed, thereby allowing indefinite carry forward of unabsorbed depreciation.
  • Reliance was placed on judicial precedent supporting such interpretation.

Court Findings / Order

  • The Delhi High Court observed that the issue is already covered against the Revenue by its earlier judgment in Pr. CIT vs British Motor Car Co. (1934) Ltd. (2018) 400 ITR 569 (Delhi).
  • The Court held that no substantial question of law arises for consideration in the present appeals.
  • Accordingly, both appeals filed by the Revenue were dismissed without any order as to costs.

Important Clarification

  • The judgment reinforces that after the amendment by the Finance Act, 2001, unabsorbed depreciation can be carried forward indefinitely.
  • It confirms that settled legal position cannot be re-agitated where precedent clearly governs the issue.

Sections Involved

  • Section 32(2) of the Income Tax Act, 1961
  • Finance Act, 2001 (Amendment relating to depreciation carry forward)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8325-DB/SKN30112018ITA13482018_160421.pdf

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