TMI Blog2012 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... d and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. CIT was not justified by passing order invoking Section 263 of the Act by holding that the unabsorbed depreciation of assessment year 1997- 98 and 1998-99 set off by the learned AO in the relevant assessment year is erroneous and prejudicial to the interest of the revenue and thereby canceling the assessment order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e views, the same cannot be considered to be erroneous or prejudicial to the interest of the revenue as has been held by the Hon ble Supreme Court in the case of Malabar Industrial Company Ltd. 243 ITR 83 and such order cannot be revised u/s 263 of the Act. It is submitted that it be so held now. 3. The learned CIT failed to appreciate that even on merits of the case, the allowance of set-off of depreciation for A.Ys. 1997-98 and 1998-99 against the income for A. Y. 2007-08 has to be granted to the appellant as the appellant is entitled to such set off of unabsorbed depreciation in view of the fact that position of law as on the first day of the Assessment Year is to be seen for such treatment as has been held by the Hon ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re wrongly set off against the long term capital gain of the present previous year. It was contended by the learned AR that the provisions of section 32 (2) of the Act which restricted the carry forward of unabsorbed depreciation allowance to eight subsequent assessment years, was applicable only up to assessment year 2001-02 and that with effect from 01-04-2002 i.e. assessment year 2002-03 onwards the conditions restricting the carry forward up to eight years was no longer on the statute. Since, the assessment year in question was 2007-08, the action of the learned AO in allowing the set off of brought forward depreciation pertaining to assessment year 1997-98 and 1998-99 against the income of assessment year 2007-08 was not erroneous. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43 (3) of the Act was neither erroneous nor prejudicial to the interest of the revenue. The learned AR further submitted that when the issue under consideration, more than one view is possible and when one of the possible view is adapted by the AO, the same cannot be considered to be an order erroneous or prejudicial to the interest of the revenue as held by the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd., reported in 243 ITR 83. With the above submissions the learned AR prayed that the order passed by the learned CIT may be quashed. 4. The learned DR vehemently argued that though on merit the issue of unabsorbed depreciation is held to be in favour of the assessee by the decision of the Hon ble Jurisdictional High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This amendment has become applicable from assessment year 2002-03 and subsequent years meaning that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (assessment year 2002-03) will be dealt within accordance with the provisions of section 32(2) as it stood before the said amendment. If the intention of the Legislature has been to allow the unabsorbed depreciation allowance worked out in assessment year 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001, it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence, a purposive and harmonious interpretation has to be taken keeping in view the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next year. Where there is current depreciation for such succeeding year, the unabsorbed depreciation is added to the current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. It is held that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A. Y. 2002- 03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And onc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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