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TMI Blog2015 (12) TMI 1682X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The only issue to be decided in this appeal is as to whether the assessee is entitled to carry forward the unabsorbed depreciation of Rs. 2,61,32,164/- pertaining to Asst Year 1996-97 and earlier and whether such adjustment of non-granting of set off of such losses could be made in an order u/s 154 of the Act. 3. The brief facts of this issue is that the return of income for the Asst Year 2007- 08 was filed by the assessee on 31.10.2007 declaring total income of Rs. 54,20,232/- under the head 'profits and gains from business or profession' and claimed the same to be set off against the brought forward business losses of Asst Year 1999-2000. The assessment was completed u/s 143(3) by the Learned AO on 23.11.2009. The total income was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nadjusted depreciation allowance can only be set off upto Asst Year 2004-05 and not thereafter. 3.1. The assessee vide its letter dated 9.3.2011 explained that the Learned AO should have adjusted the brought forward business losses for the Asst Year 1997-98 and onwards in preference to set off of the unabsorbed depreciation. The Learned AO however, while passing the rectification order u/s 154 allowed the claim for setting off the unabsorbed business losses for the Asst Year 1999-2000 as against the assessee's claim for set off the unabsorbed business losses brought forward from Asst Year 1997- 98 and onwards. The Learned AO in the order passed u/s 154 by placing reliance on the decision of the Mumbai Tribunal in the case of Times Guaranty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was amended by Finance Act 2001 with effect from 1.4.2002 reintroducing the old version of section 32(2). He argued that the Explanatory Memorandum to Finance Act 2001 clearly states that the amended section 32(2) of the Act is prospective in nature and is effective only from Asst Year 2002-03 and hence in this scenario, the assessee could get the benefit of set off of brought forward unabsorbed deprecation losses for an infinite period only in respect of losses arising from Asst Year 2002-03 onwards and not for earlier years. He placed reliance on the judgements of Hon'ble Madras High Court in the case of CIT vs Pioneer Asia Packing P Ltd reported in 310 ITR 198 (Mad) and CIT vs S&S Power Switchgear Ltd reported in 318 ITR 187 (Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions and perused the case laws relied upon by both the counsels. We find that the section 32(2) of the Act pursuant to the amendment in Finance Act 1996 curtailed the benefit of carry forward of unabsorbed depreciation loss to a period of 8 years and brought the said provision at par with the unabsorbed business losses. This provision was in force till Asst Year 2001-02. Again the Finance Act 2001 with effect from Asst Year 2002-03 amended Section 32(2) of the Act and restored back to the original version of the section as it stood prior to amendment by Finance Act 1996, allowing the benefit of carry forward of losses to an infinite period and treating the same different from that of unabsorbed business losses. We find from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n incorporated by the Finance Act 2001 in section 32(2) of the Act restricting the allowability of carry forward of unabsorbed depreciation loss upto Asst Year 1996-97 as available to be set off only for a period of 8 years. Hence we hold that the purposive and harmonious interpretation has to be taken keeping in view the intention of the amendment of section 32(2) of the Act by Finance Act 2001. We hold that 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 the 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 sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Packing P Ltd reported in 310 ITR 198 (Mad) and CIT vs S&S Power Switchgear Ltd reported in 318 ITR 187 (Mad). We find that the issue before the Hon'ble Madras High Court and decision rendered thereon is as below:- As a result of the amendment of section 32(2) of the Income Tax Act, 1961, with effect from April 1, 1997, the deeming fiction of treating the earlier years unabsorbed depreciation as the current year's depreciation was removed. The period available for absorbing the unabsorbed depreciation against the profit of the succeeding years wsa limited to eight years. Held accordingly, that the Tribunal was right in its conclusion that the unabsorbed depreciation brought forward as on April 1, 1997, could be set off against the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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