TMI Blog2002 (4) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... forward losses could not be set off against income under the head "Capital gains". 3. Against the "adjustment", the assessee filed application under section 154 as also a revised return and in the latter the business losses were bifurcated into (i) Business Loss and (ii) Unabsorbed Depreciation. The plea was that set off be allowed in respect of brought forward unabsorbed depreciation. 4. The Assessing Officer considered the submissions made and referring to the provisions of section 32(2) as amended by Finance Act, 1996 w.e.f. 1-4-1997, he opined that the income under the head capital gains could not be equated with the profits and gains of any business or profession against which a set off could be allowed in respect of unabsorbed depreciation. It was noted in the order under section 154 that carry forward of business loss was already allowed against business income. 5. In rejecting the assessee's stand, the ld. Assessing Officer referred to the provisions of section 32(2)(iii)(a) inserted w.e.f. 1-4-1997 and also relied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Express Newspapers Ltd. [1964] 53 ITR 250, more precisely the following observations:-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Dy. CIT[1998] 99 Taxman 326 (Ahd.)(Mag.) 19. Thermax Babcock Wilcox Ltd. v. Dy. CIT[2000] 73 ITD 5 (Pune). 8. The further submissions of the ld. counsel as summarized from the written note filed before the Tribunal were:-- (i) The gain of Rs.37,24,826 was not short term capital gain under section 45 in view of the provisions of section 41(2) of the Income tax Act, which were introduced simultaneously w.e.f. 1-4-1998. That the capital gain arising from sale of depreciable assets was to be assessed as business profits under section 41(2); (ii) That the unabsorbed depreciation was required to be set off because the assessee carried on the business in the current year and the unabsorbed depreciation would become part of the current year's depreciation in the light of the judgment of the Hon'ble Supreme Court in the case of Mother India Refrigeration Industries 155 ITR 711; (iii) That making an adjustment under section 143(1)(a) cast a greater responsibility on the Assessing Officer as he was to ensure that whatever was allowable was to be allowed although not claimed and in case the Assessing Officer was to treat the gain arising from sale of depreciable assets as givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced w.e.f. 1-4-1997 were quite clear since the unabsorbed depreciation could be set off only against the profits and gains of any business or profession carried on by an assessee but under no circumstances could it be set off against income under the head capital gains; (vi) When there was no ambiguity in a provision than nothing was to be read further into it; (vii) Vis-a-vis the speech of the Hon'ble Finance Minister nothing was inserted in the section itself which ultimately came on the statute book; (viii) "Prima facie inadmissible" meant vis-a-vis provisions of section 143(1)(a) and the Assessing Officer was empowered to make an "adjustment" on the basis of information furnished by the assessee itself; and (ix) The arguments raised on behalf of the assessee went beyond the pale of section 143(1)(a) and were more in the realm of section 143(3) proceedings. 12. In conclusion, it was urged that the orders passed by the tax authorities be upheld. 13. Reliance was placed on:-- (i) M. Rangaswamy v. CWT[1996] 221 ITR 39 (Mad.) (ii) CITv. Smt. Shun Chui AI[1995] 216 ITR 154 (Gauhati) (iii) CIT v. D.P.S. (I.) (P.) Ltd. [1996] 222 ITR 371 (Cal.). (iv) CITv. Champaru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediately succeeding the assessment year for which the aforesaid allowance was first computed. 17. The ld. counsel has referred to the speech of the Hon'ble Finance Minister vis-a-vis the aforesaid change in law but in our opinion the provision which ultimately found its way to the Act has to be interpreted and this is what we propose to do. 18. We now refer to section 50, which deals with the transfer of depreciable assets and the treatment to be given to the surplus arising therefrom. The said section states that the excess shall be deemed to be the capital gains arising from the transfer of short term capital assets vis-a-vis the calculation set out in items I to III. 19. The main thrust of the revenue's case is that the assessee has earned capital gains on transfer of depreciable assets and has shown the same as such and therefore considering the provisions of section 32(2)(iii) the unabsorbed brought forward depreciation cannot be set off against such capital gains. We may mention at this stage that section 41(2) omitted w.e.f.1-4-1988was reintroduced w.e.f.1-4-1998and any surplus arising under the said section is necessarily to be treated as income from business or prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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