TMI Blog2011 (7) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... s speech clearly indicated that there was no substantial change and that the only difference was that now limitation of 8 years would be applicable - Decided in favour of the assessee - ITA No.42 of 2007,ITA Nos.46, 52, 53 & 57 of 2007. - - - Dated:- 8-7-2011 - Mr. Justice Deepak Gupta, Mr. Justice Sanjay Karol, JJ. For the Appellant(s).: Mr.Vinay Kuthiala Mrs.Vandana Kuthiala, Advocates. For the Respondents: Mr.Rupesh Jain, Advocate with S/Sh.S.S. Panta Paresh Sharma, Advocates. Deepak Gupta, J. 1. These appeals are being disposed of by a common judgment since all these appeals have been admitted on the following substantial questions of law: 1.Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that depreciation on vehicles is allowable as a deduction against the interest income earned, even when such income had been held by the Tribunal to be income chargeable under the head other sources under section 56 of the Income Tax Act and in spite of the express provisions of Section 57 of the Act? 2.Whether the Tribunal was correct in law in holding that the unabsorbed depreciation in the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation is concerned the amendment would not apply and un-amended provisions of Section 32 would continue to apply and consequently held that the un-absorbed depreciation accumulated on April, 1997 could be set off against the income of subsequent years even if the income be from other sources. 7. The Revenue has now challenged these orders and the basic questions which arise for consideration are whether the income from interest could be said to be income from business or from other sources and secondly whether the un-amended provisions of Section 32(2) would apply to benefit the assessee or it is the amended provisions which would apply and what is the effect of the amendment. 8. Section 32(2) of the Act, as it stood before its amendment which came into effect from 1.4.1997, reads as follows: (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year, owing to their being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), and ending with the assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.- For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). 10. The Finance Minister while moving the amendment in Parliament relating to this clause stated thus: 4. Clause 11 of the Bill seeks to amend section 32 of the Income-tax Act, 1961, relating to depreciation. During the course of discussion on the General Budget, a number of Hon ble members have expressed their apprehension that the proposed amendment limiting carry forward of unabsorbed depreciation to 8 years will adversely affect the growth of industry. Similar apprehensions have been raised in a large number of post-budget memoranda. I would like to allay these fears. The proposed amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Company is a juristic entity and incorporated under the Indian Companies Act. It will have to fulfill its obligations imposed upon it by the Companies Act till it is wound up. Therefore, some staff will have to be maintained. It cannot be said that the business has come to an end. In this behalf reference may be made to the judgment of the Madras High Court in Commissioner of Income-Tax vs. Vellore Electric Corporation Ltd., (2000) 243 ITR 529 and a judgment of the Calcutta High Court reported in Commissioner of Income Tax vs. Karanpura Collieries Ltd. (1993) 201 ITR 498. 13. Therefore, once the Company is in existence the assessee can seek depreciation. Reliance placed by the Revenue on the first proviso of Section 32(2) is totally misplaced. Therefore, as far as question No.1 is concerned the same is answered in favour of the assessee and against the Revenue. 14. Coming to Question No.2, a Division Bench of the Madras High Court in Commissioner of Income-Tax vs. Pioneer Asia Packing P. Ltd. (2009) 310 ITR 198 (Mad) considered this point at length. It was held that as per the amended provisions of Section 32(2) of the Act, with effect from April 1, 1997, if the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess profits and if these were not sufficient against the income obtained under any other head for the assessment year 1997-98 and subsequent assessment years. Thus, the amendment only provides that the benefit of brought forward assessment could be set off; firstly against income from profits and gains of business; secondly from income under any other head and this benefit could be taken for a period of 8 years alone. 17. The main contention of the Revenue is that since the hotel was not in existence therefore the un-absorbed depreciation became part of the depreciation for the assessment year 1998-99 and now could not be set off against the income from other sources. We are unable to accept this contention. The fact is that this was depreciation of the previous year and the Finance Minister in his speech clearly indicated that there was no substantial change and that the only difference was that now limitation of 8 years would be applicable. Therefore, we find no merit in the contention of the revenue. 18. In view of the above discussion, both the questions are answered in favour of the assessee and against the revenue. The appeals are disposed of in the aforesaid terms. N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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