Case BriefsHigh Courts

Gujarat High Court: A Division Bench of J.B. Pardiwala and A.C. Rao, JJ. dismissed a tax appeal filed under Section 260-A of the Income Tax Act, 1961 (ITA) against an order passed by the Income Tax Appellate Tribunal on 25-05-2018 for the Assessment Year 2007-08.

The appellant asked the High Court to address the following substantial question of law:

(a) Whether ITAT has erred in law in allowing carry forward of unabsorbed depreciation for the AYs 1996-97, 1997-98 and 1998-99 beyond the period of eight AYs in contravention of applicable provisions being section 32(2)(iii)(b) of the ITA as amended by Finance (No.2) Act, 1996?

(b) Whether ITAT should not have directed the Assessing Officer to allow carry forward of unabsorbed depreciation after verification of carry forward of unabsorbed depreciation for the AYs as mentioned above by holding that carry forward of unabsorbed depreciation prior to assessment can be set off in subsequent years without setting time limit?

The questions of law as proposed by the appellant were not res integra for the High Court as they had discussed these issues in General Motors (India) (P) Ltd. v. CIT, 2012 SCC OnLine Guj 6101, wherein, the Court held that Section 32(2) of ITA was amended by the Finance (No.2) Act of 1996, with effect from the AY 1997-98 and the unabsorbed depreciation for the AY 1997-98 could be carried forward up to the maximum period of eight years from the year in which it was first computed. When eight years expired in the AY 2005-06, the assessee would be eligible to claim unabsorbed depreciation of the AY 1997-98 for being carried forward and set off against the income for the AY 2005-06. But the assessee was not entitled to unabsorbed depreciation for the AY 1997-98, which was not eligible for being carried forward and set off against the income for the AY 2006-07.

Based on this judgment, the Court dismissed the Tax Appeal.[Principal Commissioner of Income Tax v. SNS Textiles Ltd., 2019 SCC OnLine Guj 1478, decided on 05-08-2019]

Case BriefsHigh Courts

Punjab and Haryana High Court: This order disposed of five appeals filed by revenue under Section 260-A of Income Tax Act, 1961 before a Division Bench of Ajay Kumar Mittal and Avneesh Jhingan, JJ., against the order passed by Income Tax Appellate Tribunal where the Tribunal had quashed the order of the Commissioner of Income Tax (CIT), canceling the registration of assessee-Trust.

Facts of the case are that the assessee i.e. Improvement Trust, was a Trust constituted under the Punjab Town Improvement Act, 1922 and was granted registration under Section 12-AA of the Act. The definition of ‘charitable purpose’ under Section 2(15) of the Act was amended by Finance Act, 2008 after which a show cause notice was issued to the assessee-Trust to show cause as to why registration should not be cancelled. CIT had held that the activities of the assessee were not for charitable purpose within the amended provision of Section 2(15) of the Act and thus its registration was cancelled. Hence, the appeal was filed before the Tribunal but the same was dismissed.

Assessee contended that though they were earning some profits the same were used for public utilities. Whereas Revenue submitted that assessee’s activities do not fall under charitable purposes but of a developer and builder.

High Court was of the view that CIT was not correct in canceling the registration under Section 12-AA of the Act as the funds were used for charitable purpose. It was found that the selling of the plots was merely an ancillary activity carried out for the improvement of the area and the same cannot be equated with carrying of the business of colonizer or developer. Further, there was no provision that the activities of charitable purposes have to be undertaken only by donations or by financial aid of the government. The Court favoured the assessee-Trust and stated the activities of Trust to be of charitable purposes. Therefore, the appeals were dismissed. [CIT v. Improvement Trust, 2018 SCC OnLine P&H 3861, dated 01-08-2018]