9911796707
TMI Blog2014 (7) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... ia by disallowing expenditure claimed on account of leave encashment under S.43B(f) of Rs. 7,22,394; and by making addition of Rs. 1,36,21,500 under the head 'other sources' on account of suppression of receipts towards sale of land. While computing the income of the assessee under the normal provisions of the Act, the Assessing Officer has not allowed the claim of the assessee for set off of carried forward unabsorbed depreciation of Rs. 13,31,02,785, relating to assessment years 1996-97 to 2001-02, against the income of the year under appeal, on the ground that the said depreciation can be carried forward only for eight years for allowing set off. He also noted that such eight years period has lapsed in the present case, and hence the said unabsorbed depreciation cannot be set off against the income for the assessment year 2008-09. 3. On appeal, the CIT(A), taking note of the elaborate submissions of the assessee in the light of the successive amendments to S.32(2) of the Act, noted that the 1996 amendment was prospective and by the same logic the amendment made in 2001 was also prospective, and consequently, he held that from the assessment year 1997-98 to 2001-02, the limit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as it existed prior to 1.4.1997 and to the legal position applicable originally. He submitted that the decision of the Gujarat High Court in the case of General Motors India Pvt. Ltd. V/s. DCIT (2012 - 25 Taxmann.com.364) is clearly applicable to the facts of the present case, and it has been categorically held in that case that unabsorbed depreciation pertaining to assessment years upto 1999-2000 is to be set off, even though such carry forward is for more than eight years, and the view taken by the Revenue authorities to the contrary as to applicability of the said decision is not correct. 9. The Learned Departmental Representative, on the other hand, besides contesting the grounds of the assessee in its appeal, reiterated the submitted that the CIT(A) ought not to have allowed the brought forward depreciation pertaining to assessment year 2000-01 and 2001-02 to be set off against the income of the year under consideration. 10. We heard the parties, perused the material on record as well as the orders of the Revenue authorities on this issue. We have also examined the ratio laid down by the Hon'ble Gujarat High Court in the case of General Motors India Ltd. V.s. DCIT (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 31. 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 set-off to a limit of 8 years, from the A.Y.1997- 98. Circular No.762 dated 18.2.1998 issued by the Central Board of Direct Taxes (CBDT) in the form of Explanatory Notes categorically provided, that the unabsorbed depreciation allowance for any previous year to which full effect cannot be given in that previous year shall be carried forward and added to the depreciation allowance of the next year and be deemed to be part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 34. 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. 35. 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 under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable for that previous year, 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-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No.14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod. However, it appears, this issue has been considered in assessee's own case by the ITAT in ITA No.145/Hyd/2013, vide order dated 31.7.2013 for the preceding assessment year, viz. 2007-08. Therefore, unabsorbed deprecation, if any, quantified in assessment year 2007-08 shall be carried forward for set off in the impugned assessment year as well as subsequent assessment years. We direct accordingly. Accordingly, while grounds raised by the assessee deserve to be allowed, the ground raised by the Department in its appeal on this issue, being devoid of merit, is rejected. 12. The next issue involved only in the appeal of the assessee relates to the addition of Rs. 7,22,394, in terms of S.43B(f) with regard to provision for leave encashment. 13. We have heard the parties and perused the orders of the Revenue authorities on this issue. An examination of the provision of S.43B(f), makes it clear that deduction on account of any amount paid by an employer to its employee in lieu of any leave at the credit of the employee will be allowed only on actual payment basis. Undisputedly, in the present case, the assessee has made only a provision and amount claimed as deduction has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip. There is no relationship of Vendee and Vendor. The agreement of sale can be construed from date of agreement of sale i.e. 27/03/2006 but not the date of earlier agreement i.e.. in 2001 as claimed by the assessee company. Accordingly, the Sale Deed was executed on 20th day of November, 2007 for the said land for total consideration of Rs. 96 lakhs but not the market value was at Rs. 2,32,21,500/- on which stamp duty was paid. Hence, the assessee's contention that it has entered the agreement of sale long ago in 2001 and the rate agreed was dates back to that time, is rejected............." With the above observations, and referring to and relying on the provisions of S.50C of the Act, the Assessing Officer treated the differential amount of Rs. 1,36,21,500 (difference between the market value of the land sold in terms of Explanation 2 of provisions of S.50C read with S.47A of the Stamp Act of Rs. 2,32,21,500, and sale consideration offered by the assessee of Rs. 96,00,000) as assessee's income from other sources. As noted above, the CIT(A), though upheld the view taken by the Assessing Officer in adopting the sale consideration at Rs. 2,32,21,500 by applying the provisions of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts which have been clearly brought in para 7.2 of the impugned order of the CIT(A), which have been discussed above. Though the assessee has initially entered into an agreement in the year 2001 for the sale of the land in question, the same was never acted upon and that agreement lapsed by the passage of time and non-fulfilment of the terms thereof by the parties to the same. Thereafter, another agreement of sale was executed on 27.3.2006. However, the final sale deed transferring the property was registered on 20.11.2007 and the registering authority valued the property at Rs. 2,32,21,500 for the purpose of stamp duty valuation, whereas the assessee while computing the capital gain, has disclosed the sale consideration at Rs. 96 lakhs. Therefore, there being understatement of value of the property, as compared to the stamp duty value taken by the registering authority, the provisions of S.50C is clearly attracted. Further, on an examination of the registered sale deed, it becomes clear that the assessee delivered the vacant physical possession of the scheduled property to the purchaser only on the execution of sale deed on 20.11.2007. Therefore, 'transfer' as per S.2(47) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the head under which the gain on the sale of property is to be assessed, is concerned, we are of the view that it is thoroughly misconceived. The Assessing Officer himself invoked the provisions of S.50C of the Act, which falls in Section E of 'Chapter IV', which deals with computation of capital gains, and not in Section F of Chapter IV, which deals with computation of income from 'other sources'. Having thus invoked the provisions of S.50C of the Act, the Assessing Officer cannot treat the gain on sale of property, as income of the assessee from other sources. In this view of the matter, we find no infirmity in the impugned order of the CIT(A) on this aspect as well. We accordingly uphold the same, rejecting the grounds of the Revenue in this behalf. 20. The last grievance of the assessee, in its appeal, contained in ground No.4, is against the action of the Assessing Officer in adding back provision of Rs. 7,22,394 for leave encashment while computing the book profit under S.115JB of the Act, which has been sustained by the CIT(A). 21. The CIT(A) has rejected the ground of the assessee on this aspect, vide penultimate para of the impugned order, viz. Para 8, observing as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue was examined by the Apex Court in the case of Bharat Earth Movers Ltd. (supra). The Apex Court, after considering the judicial pronouncement on the subject found that meeting the liability incurred by the company under the leave encashment scheme proportionate with entitlement earned by employees of the company inclusive of officers and the staff subject to ceiling of accumulation as applicable on the relevant date is entitled to deduction out of the gross receipt for the accounting year during which the provision is made for the liability. The Apex Court specifically observed that the liability is not a contingent liability. In view of the judgment of the Apex Court, the provision made for leave encashment cannot be considered to be a contingent liability. Therefore, there is no question of any addition. By respectfully following the judgment of the Apex Court in the case of Bharat Earth Movers Ltd. (supra), the orders of the lower authorities are set aside and the addition made by the Assessing Officer to the extent of Rs. 2,74,000 is deleted." Respectfully following the above decision of the Cochin Bench of the Tribunal, apart from the decision of the Apex Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
