TMI Blog2013 (10) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... d in disallowing unabsorbed depreciation of Rs.4,76,81,470/- pertaining to AYs 1997-98 to 1999 -2000 against the business income of AY 2008-09; 2. The ld. CIT(A) erred in not considering the appellant s submissions of applicability of the law as prevailing on the first day of the Assessment year also supported by the orders of various superior courts. 2. Assessee filed return of income declaring taxable income of Rs.NIL and book profit u/s 115JB of ₹ 4,41,29,438/-. In the re turn of income the assessee claimed set off of brought forward unabsorbed depreciation of earlier years amounting to Rs.14,97,78,668/- which includes brought forward un absorbed depreciation of earlier assessment years 1997-98 to 1999-2000 of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of th e Legislature being to allow the unabsorbed depreciation allowance worked out in A.Y . 1997-98 only for eight subsequent assessment years even after the amendmen t to section 32(2) by Finance (No.1) Act, 2001 it would have incorporated a provi sion to that effect. However, it does not contain any such provision. Their Lordships h ave held that the provision of section 32(2) as amended by Finance (No.1) Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Ys. 1997- 98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried forward till the time it is set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so on for the succeeding previous year, which means unabsorbed d epreciation up to assessment year 2001-02 could be carried forward for set off for i ndefinite period. We consider it prudent to reproduce para 8 of the said order as u nder : 8. On reading the provisions of section 32(2) as i t stood prior to the amendment made by the Finance (No. 2) Act, 1996, i.e., operative up to and including assessment year 1996-97, it is seen that where, in the assessment of assessee, full effect cannot be given to the deprec iation allowance owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the all owance, then subject to the provisions of sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier year is added to the current depreciation for such, succeeding year and is deemed, by legal fiction, a part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for succeeding year. In this view of the matter, section 32(2) contained an inde pendent provision for setting off unabsorbed depreciation carried forward from a preceding year. The unabsorbed depreciation can be allowed to be carrie d forward and set off against income from other sources in a subsequent year notw ithstanding the fact that the business in respect of which it arose ceased to exist in the year of such set off. However, certain restrictions have been put, f or and from asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 1-4- 2002 has restored the sub-section (2) of section 32 as it stood in the assessment year 1996-97. In other words, the restrictions impo sed by the Finance (No. 2) Act, 1996 with effect from 1-4-1997 in the matter o f set-off of unabsorbed depreciation has been dispensed with by substitutin g the section 32(2) by the Finance Act, 2001 with effect from 1-4-2002 and status quo ante i.e., status quo of section 32(2) as existed prior to the amendment made by Finance (No. 2) Act, 1996 with effect from 1-4-1997 has been restored. Further, the said issue has also been considered by ITAT, Mumbai Bench in the case of M/s Arch Fine Chemicals Pvt.Ltd.V/s ACIT in ITA No s.2414 and 2415/Mum/2012(AYs 2005-06 2006-07) order dated 9.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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