Madras High Court Allows Unabsorbed Depreciation To Be Carried Forward

Madras High Court Allows Unabsorbed Depreciation To Be Carried Forward

The Court dismissed Income Tax authorities appeal that the question of law in carry forward case was already decided against the Revenue Authorities

The Madras High Court upheld the order of the Income Tax Appellate Tribunal by confirming that the Respondent – Assessee was entitled to carry forward the unabsorbed depreciation beyond eight years.

The Division Bench of the High Court of Madras, comprising Justices M. Duraiswamy and R. Hemalatha, dealt with the matter titled Commissioner of Income Tax v M/s KMC Speciality Hospitals India Ltd.

The Appellant – Commissioner of Income Tax had preferred the tax case appeal against the order of the Income Tax Appellate Tribunal wherein it was held that the Respondent – Assessee was entitled to carry forward the unabsorbed depreciation of ₹13,71,60,209 pertaining to the Assessment Years 1997-1998 and 1998-99 and set it off against the income of Assessment Year 2007-08.

The Appellant – Commissioner submitted that this matter involved a substantial question of law regarding the amendment w.e.f. 2002-03 removing the cap of eight years for carry forward of depreciation.

However, the Court noted that this question of law had already been decided against the Revenue authorities and in favour of the assessee by this Court in the matter of Harvey Heart Hospitals Ltd v Assistant Commissioner of Income Tax, [2021] 127 taxmann.com 805 (Madras), wherein it was held that the unabsorbed depreciation relating to Assessment Year 1997-98 to 2000-2001 was eligible for set off against any income of the assessee for the Assessment Year 2005-06.

The bench considered another judgment which dealt with the aforesaid question of law, titled as Commissioner of Income Tax, Chennai Vs. Sanmar Speciality Chemicals Ltd [2020] 122 taxmann.com 212 (Madras), wherein it was held that the assessee was entitled to carry forward the depreciation loss pertaining to the Assessment Year 1997-98 to the Assessment Year 2006-07, which was beyond the mandated eight-year period.

The Court, in view of the aforesaid judgments, dismissed this appeal since the question of law was already decided against the Revenue – Authorities and in favour of the assessee.