TMI Blog2014 (5) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... hri I. P. Bansal, (JM) And Sanjay Arora (AM),JJ. For the Appellant : Shri Preetam Singh For the Respondent : Shri Kirit Kamdar ORDER Per I. P. Bansal,JM: All these appeals are filed by Revenue and they are directed against a consolidated order dated 4.10.2012 passed by ld. CIT(A) in respect of assessment years 1997-98 to 2002-03. Grounds of appeal in all these appeals are identical and therefore, for the sake of convenience, we reproduce below the grounds of appeal taken by revenue in the assessment year 1997-98. 1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in allowing the carry forward of unabsorbed depreciation to the assessee pertaining to AYs 1997-98 to 2002-03 without appreciating the legal position outlined by Hon ble ITAT Special Bench (Mumbai) in the case of DCIT V/s Times Guaranty Ltd. (ITA Nos. 4917 and 4918/Mum/2008, AYrs. 2003-04 and 2004-05) in respect of current and brought forward unadjusted /unabsorbed depreciation allowance in three periods, the first period being 1996-97, second period being AYrs 1997-98 to 2001-02 and third period from AY 2002-03 onwards 2. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. Central Board of Direct Taxes Circular clarified the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of eight years for carry-forward and set off of unabsorbed deprecation , therefore any unabsorbed depreciation available to assessee on the date 1.4.2002(assessment year 2002-03), will be dealt with in accordance with the provision of section 32(2) as amended by the Finance Act, 2001 and not by provisions of section 32(2) as it stood before the said amendment. The department is aggrieved hence filed aforementioned grounds of appeal for each of the year. 3. As it can be seen from the grounds of appeal, it is the grievance of Revenue that the ld. CIT(A) has committed an error in holding that unabsorbed depreciation relating to AYs 1997-98 to 2002-03 available for setting off for a period beyond than 8 years. For contesting of such action of ld. CIT(A), it has been mentioned in the grounds of appeal that while holding so the ld. CIT(A) has ignored the legal position laid down by Special Bench of ITAT in the case of DCIT V/s Times Guaranty Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as it existed up to the assessment year 2001-02 is completely substituted by new provisions effective from assessment year 2002-03 and such amendment does not make any reference about as to how the unabsorbed deprecation relating to assessment year 1997-98 to 2001-02 will be dealt with and such position shows and proves that the sustentative provisions as existed before the amendment hold good so far the treatment to be given to the unabsorbed depreciation relating to assessment years 1997-98 to 2001-02 are concerned, as per the law as applicable in provisions/period. Thus, according to the ld.DR the unabsorbed depreciation allowance as determined for set off in succeeding assessment years as per provisions of section 32(2) of the Act as applicable to assessment year 1997-98 and assessment year 2001-02 are to be considered as part of the unabsorbed deprecation for setting off in assessment year 1997-98 and further 7 more assessment years only and not beyond that. It is the contention of the ld. DR that as per settled law when the provisions of Act are not ambiguous, no further interpretation can be extended as Rule of strict interpretation will be applicable. He contended that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was pleaded by ld. DR that amended provisions vide Finance Act, 2001 are prospective and not retrospective. Therefore, he pleaded that the order passed by ld. CIT(A) should be set aside and that of AO be restored. 6. On the other hand, it was submitted by ld. AR that none of the decisions rendered by Hon ble Madras High Court and relied upon by ld. DR relates to amendment brought into statute by Finance Act, 2001. He submitted that all the three decisions relied upon by ld DR of Hon ble Madras High Court were relating to interpretations of provisions of section 32(2) as existed for a period from assessment year 1997-98 to 2001-02. He submitted that the decision of Special Bench of ITAT in the case of Times Guaranty Ltd (supra) has discussed the amendment brought into the statute by Finance Act, 2001 but the said view of Special Bench has been reversed by Hon ble Gujarat High Court in the case of General Motors India P. Ltd (supra). He submitted that apart from afore mentioned decision of Honb le Gujarat High Court which is rendered for interpretation of provisions of section 32(2) as amended by Finance Act, 2001, there is no other decision rendered by any other High Court. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue on merit can be considered and, in the event of taking a view in favour of the assessee on the said issue, Ground No. 3 4 would become academic and even Ground No. 1 would become academic and if the Bench is not inclined to accept Ground No. 1 as academic in nature it can even dismiss as not pressed in the event of accepting the plea of the assessee with regard to Ground No. 2. Adverting our attention to the decision of Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd. Vs. DCIT (Special Civil Application No. 1773 of 2012 dated 23.8.2012); it was contended that from A.Y. 1997- 98 to 2001-02 there was restriction with regard to carry forward of unabsorbed depreciation but the Legislature, in its wisdom, withdrew such restriction by the Finance Act, 2001 wherein the provisions as stood before 1997-98 was restored in which event, the assessee would be entitled to claim set off of unabsorbed depreciation allowance pertaining to A.Y. 1995-96 onwards against income, if any, of the current year. He further submitted that the ITAT Special Bench, Mumbai in the case of DCIT Vs. Times Guaranty Ltd. (2010) 131 TTJ 257 (Mum)(SB) was of the opinion that depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be carried forward and set off after a period of eight years or it would be governed by Section 32 as amended by Finance Act 2001? The reason given by the Assessing Officer under section 147 is that Section 32(2) of the Act was amended by Finance Act No. 2 of 1996 w.e.f. A.Y. 1997-98 and the unabsorbed depreciation for the A.Y. 1997-98 could be carried forward up to the maximum period of 8 years from the year in which it was first computed. According to the Assessing Officer, 8 years expired in the A.Y. 2005-06 and only till then, the assessee was eligible to claim unabsorbed depreciation of A.Y. 1997-98 for being carried forward and set off against the income for the A.Y. 2005-06. But the assessee was not entitled for unabsorbed depreciation of Rs. 43,60,22,158/- for A.Y. 1997- 98, which was not eligible for being carried forward and set off against the income for the A.Y. 2006-07. 33. Prior to the Finance Act No. 2 of 1996 the unabsorbed depreciation for any year was allowed to be carry forward indefinitely and by a deeming fiction became allowance of the immediately succeeding year. The Finance Act No. 2 of 1996 restricted the carry forward of unabsorbed depreciation and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time limit of eight assessment years specified in sub-clause (b) shall not apply in case of a company for the assessment year beginning with the assessment year relevant 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 Company (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. 36. The aforesaid provision was introduced by Finance (No. 2) Act, 1996 and further amended by the Finance Act, 2000. The provision introduced by Finance (No. 2) Act was clarified by the Finance Minister to be applicable with prospective effect. 37. Section 32(2) of the Act was amended by Finance Act, 2001 and the provision so amended reads as under :- Where, in the assessment of the assessee, full effect cannot be given to any allowance un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means 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 not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 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 keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. 8. Thus, it was pleaded by ld. AR that ld. CIT(A) did not commit any error as what has been allowed by ld. CIT(A) is in accordance with law which is explained in the decision of Hon ble Gujarat High Court in the case of General Motors India P. Ltd (supra). 9. We have heard both the parties and their contentions have been carefully considered. It is the contention of ld DR that amended provisions of Section 32(2) as applicable from assessment year 2002-03 should not be made applicable to the unabsorbed depreciation carried forward by the assessee from earlier years. To support such contention, the ld. DR has relied mainly on the decision of Special Bench of the Tribunal in the case of Times Guaranty Ltd (supra) which is directly on the issue. However, subsequently on the same issue the Hon ble Gujarat High Court has rendered the decision in the case of General Motors India P. Ltd(supra). Considering the decision of Hon ble Gujarat High Court, despite there being existing decision of Special Bench of Mumbai Bench, the Mumbai Benches have ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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