9911796707
TMI Blog2014 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, initiated the process of reassessment by issuing notice dated 21st March 2012 and the reason for reopening of such assessment essentially revolves around the question of depreciation loss of 1997-98 and 1998-99 to be set off up to eight succeeding assessment years and not beyond such period, by giving following reasons: "2. Vide above referred to letter, you have sought a copy of the reasons recorded for the initiation of assessment proceedings. In this regard, the reason of the initiation of assessment proceedings is as under: "On examination of the assessment record, it has been found that the assessee company engaged in the business of manufacturing corrugated boxes filed its return of income for A Y 2007-08 on 31.10.07 declaring total loss of Rs. 2,02,14,896/- and the same was set off against business loss of A Y 1999-2000 and the remaining business loss/unabsorbed depreciation, loss carried forward for set off in subsequent assessment years. On verification of the case records, it is found that the assessee is having unabsorbed depreciation loss of Rs. 17,54,57,695/- of A.Y. 1997-98 and of Rs. 17,92,65,382/- of A.Y. 1998-99 (total Rs. 35,47,23,077/-). Further it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Rs. 35,47,23,077/- of A.Y. 1997-98 and 1998-99 should not disallowed as per the provisions of section 32(2(iii)(b)) of the Act as amended by the Finance (No.2) Act, 1996 with effect from 1st April 1997. In view of the above, you are requested to furnish your submissions/comments and attend the office of the undersigned on 26/07/20-12 at 4.00 p.m. Failure to comply with the requirement of this notice may result in invoking the penal and other legal provisions of I.T.Act,1961. Authorized Representative without proper authorization of the assessee will not be allowed to represent the case. Adjournment will not be given in normal circumstances." This was objected to by the petitioner-assessee by raising objections vide communication dated 14th August 2012 citing various judicial pronouncements and urging the Assessing Officer not to continue with the proceedings of reassessment by dropping the notice issued. By an order dated 31st October 2012, the Assessing Officer disposed of the objections by holding that the objections raised were found incorrect both in facts and law and the notice issued by the Assessing Officer on the basis of material on record was in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 thereof. So, the unabsorbed depreciation allowance of A.Y. 1996- 97 would be added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. 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. 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. 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 be, shall be added to the amount of the allowance for depreciation for the following previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reto can be set off in subsequent years without any set time limit, considering the decision in the case of General Motors India P. Ltd. (supra) wherein this Court has held that carry forward of unabsorbed depreciation prior to assessment can be set off in subsequent years without setting time limit. The Tribunal has rightly applied the law to the facts of the instant case. No question of law therefore arises in the present Tax appeal for our consideration. Tax Appeal is resultantly dismissed." In wake of discussion made here in above, it can be concluded that judicial pronouncement on the subject is very clear that carry forward of unabsorbed depreciation can be set off beyond the period of eight subsequent years without any set time limit. Reopening of assessment, as could be noticed from the reasons recorded particularly emphasized that the unabsorbed depreciation had been carried forward by the petitioner beyond a period of eight years resulting into the income escaping the assessment and therefore, the Assessing Officer at the time of issuance of the notice of reopening in absence of any judicial pronouncement on the subject may have assumed jurisdiction, when the issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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