TMI Blog2016 (6) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... part thereof and it came to be governed by the provisions of sec. 32(2) as amended by the Finance Act, 2001 and were available for carry forward and set off against income of subsequent years without any limit and which has the effect of overruling the decision of the Special Bench in the case of Times Gurantee (2010 (6) TMI 516 - ITAT, MUMBAI ) as relied upon by CIT(A) and also on the basis of other decisions referred by the Assessee before us, the order of the CIT cannot be sustained. Section 263 requires the satisfaction of two conditions viz. (i) the order sought to be revised is erroneous; and (ii) it is prejudicial to the interests of Revenue. If one of them is absent i.e. if the order sought to be revised is erroneous but not prejudicial to the interest of Revenue or if it is not erroneous but is prejudicial to the interests of Revenue, the provisions of section 263(1) of the Act are not attracted as the phrase ‘prejudicial to the interests of Revenue’ is to be read in conjunction with an ‘erroneous’ order passed by the Assessing Officer. When an Assessing Officer adopts one of the courses permissible in law and it has resulted in loss of Revenue, or where two views are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessment years 1996-97, 1997-98, 1998-99 and 2000-01 ought to be disallowed and the AO should look into this issue afresh and pass necessary order as per law. 4. Aggrieved by the order of the CIT, the Assessee is in appeal before the Tribunal. We have heard the submissions of the learned DR, who relied on the order of the CIT. The learned counsel for the Assessee explained the law on the issue as will be discussed in the subsequent paragraphs of this order and submitted that the order of the CIT has to be quashed. 5. To appreciate the issue that arises for consideration in this appeal, the provisions of Sec.32(2) of the Income Tax Act, 1961 (Act) as it existed at three different point of time need to be set out. The provisions of s. 32(2) prior to the amendment made by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997 (hereinafter called the first period ) read as under : (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under cl. (ii) of sub-s. (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 being less than the allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, of any business or profession carried on by him and assessable for that assessment year; (b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed : Provided that the business or profession for which the allowance was originally computed continued to be carried on by him in the previous year relevant for that assessment year : Provided further that the time-limit of eight assessment years specified in sub-cl. (b) shall not apply in the 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-s. (1) of s. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s first computed. 9. The provisions of Sec.32(2) as substituted by the Finance Act, 2001 w.e.f. 1st April, 2002, applicable for AY 2004-05 2005-06 ) Assessment years under consideration (hereinafter called the third period ) reads as under : (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-s. (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 being less than the allowance, then, subject to the provisions of sub-s. (2) of s. 72 and sub-s. (3) of s. 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years . 10. The above provision in fact, is reinforcement of the provision as existing in the first period. Thus the law as existing in the second period was completely taken back and as a result o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t off against income under any head for a maximum period of eight assessment years starting from asst. yr. 1997-98. (ii) current depreciation for the year under s. 32(1) (for each year separately starting from asst. yr. 1997-98 upto 2001-02) can be set off firstly against business income and then against income under any other head. (iii) amount of current depreciation for asst. yrs. 1997-98 to 2001-02 which cannot be so set off as per (ii) above, hereinafter called the Second unabsorbed depreciation allowance shall be carried forward for a maximum period of eight assessment years from the assessment year immediately succeeding the assessment year for which it was first computed, to be set off only against the income under the head Profits and gains of business or profession . C. In the third period (i.e. asst. yr. 2002-03 onwards). (i) first unadjusted depreciation allowance can be set off upto asst. yr. 2004- 05, that is, the remaining period out of maximum period of eight assessment years (as per B(i) above) against income under any head. (ii) second unabsorbed depreciation allowance can be set off only against the income under the head Profits and gains of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew taken by the ITAT wherein, following the decision of the Hon'ble Gujarat High Court in the case of General Motors Ltd. (supra), it was held that carry forward of unabsorbed depreciation concerning AY. 2001-02 and assessment years prior thereto can be set off in subsequent years without any set time limit. 14. Reference was further made to the decision of the Hon'ble Jurisdictional Tribunal in the case of Bengal Tea Fabrics Limited (ITA No 467/koll2012) dated 26th July, 2012 for the AY 2008-09, wherein the question arose as to whether in view of the amended provisions of section 32(2) of the Act the assessee would be entitled to set off the unabsorbed depreciation for the AYs 1997-98 and 1998-99 against the income of the AY 2008-09 (i.e. beyond assessment years 2004-05/2005-06). The Hon'ble Kolkata Tribunal after analyzing and accepting the principles of the decisions of the Hon'ble Karnataka High Court in the case of Karnataka Cooperative Milk producers Federation Ltd. -vs.- DC IT (2011) 53 DTR 81 (Kar) and Hon'ble Amritsar Tribunal in the case of ITO vs- Suraj Solvent Vanaspati Industries Ltd. (2008) 16 DTR 492 (Amritsar) and further accepting the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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