GM gets relief in tax liability case from HC
Aug 27, 2012:
General Motors (GM) India Limited, Indian subsidiary of US-based auto giant General Motors Corporation Group, has got relief from Gujarat High Court in connection with a tax liability case filed against it by the Income Tax (I-T) Department.
General Motors (GM) India Limited, Indian subsidiary of US-based auto giant General Motors Corporation Group, has got relief from Gujarat High Court in connection with a tax liability case filed against it by the Income Tax (I-T) Department.
A division bench of Justice V M
Sahai and Justice N V Anjaria quashed notices issued to the company by I-T
authorities ordering fresh assessment of its income tax return for assessment
year 2006-07 and held that the income tax officials erred in issuing notices to
the petitioner company.
The court further held that that
GM was entitled to get the benefit of unabsorbed depreciation of past years. It
further held that the company was eligible to get the depreciation set off
against the profits of subsequent years. While deciding the important issue of
depreciation, the bench ruled, “Current depreciation is deductible in the first
place from the income of the business to which it relates. If such amount is
larger than the amount of the profits of the business, then such excess comes
for absorption from the profits and gains from any other businesses carried out
by the assessee (GM).”
It added, “If a balance is left
out even thereafter, that becomes deductible from out of income from any other
source under any other heads of income during that year. In case there is still
balance left over, it is to be treated as unabsorbed depreciation and it is
taken to the next succeeding year.”
GM India, manufacturing cars
under brand name Chevrolet, had filed the petition before high court early this
year and challenged the notice issued by the income tax department for
reassessment of income return for assessment year 2006-07 in March, 2011. The
company had sought interference of the court in holding that the income tax
department had wrongly assessed its income for financial year 2006-07 to the
tune of Rs 53 crore, whereas it had claimed nil tax for the period.
The company’s turnover in 2006-07
was Rs 1884.51 crore, on which it showed a profit of 55 crores. It however
declared it’s total taxable income as nil under e-filing.
The case was sent to scrutiny, in
which the revenue authorities held that they had reasons to believe to assess
additional income of Rs 53 crores, upon which the company would have to pay
tax. The company raised it’s objections to such findings with the Dispute
Resolution Panel in Ahmedabad which issued direction to the Assessing Officer
in August 2010 to make additions under the provisions of Section 144C (6) of
the Income Tax Act.
The officer made additions under
various heads to the income of the Company, and allowed unabsorbed depreciation
of assessment year 1997-98 of Rs 43. 60 crore and accepted the total income at
nil. The relevant additions were made to the income of the Company but the same
was set off against various unabsorbed losses and unabsorbed depreciation of
the previous year.
However, the Company got notice
from the I-T department in March 2011 seeking reassessment of its return of
assessment year 2006-07. The I.T. officials had reasoned that the Company was
not entitled for set off of depreciation of 1997-98 against profits for year
2006-07. GM objected to the decision of I-T department and after there was no
resolution on the issue with the I-T department, the former approached high
court early this year.
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Depreciation is done to find out the exact value of that asset. Stamp duty is the tax paid on the transfer of an asset, such as real estate, between two parties.Tax depreciation report is a legislated planning requirement .
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