TMI Blog2017 (3) TMI 1575X X X X Extracts X X X X X X X X Extracts X X X X ..... be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001. And once Circular No. 14 of 2001 clarified that the restriction of eight years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from the assessment year 1997-98 up to the assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by the Finance Act, 2001, and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. See General Motors India Private Ltd. case [2012 (8) TMI 714 - GUJARAT HIGH COURT ] - Decided in favour of assessee. - I.T.A. No. 1867/Mum/2015, C.O. No. 12/Mum/2016 - - - Dated:- 8-3-2017 - Rajendra (Accountant Member) And Pawan Singh (Judicial Member) For the Revenue : Mahesh Kumar-DR For the Assessee : Dhanesh Bafna and Aliasgar Rampurwala-AR ORDER Rajendra (Accountant Member) Challenging the direction of the Dispute Resolution Panel (DRP), Mumbai dated 27.11.14, the Assessing Officer (AO) has filed the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schott Glass (Rs.) I. Income: Indenting segment 38,330,635 Manufacturing 1,459,245,318 Total Income 1,497,575,953 II. Expenditure Indenting segment 29,491,872 Manufacturing 1,529,003,400 Total Expenditure 558,4985,271 Manufacturing segment -non operating expenditure 120,912,768 Manufacturing segment-total operating expenditure 1,408,090,632 Operating profit-manufacturing segment 51,154,686 Manufacturing-net cost+mark-up 3.63 Manufacturing- operating profit/operating revenue 3.51 The TPO considered three comparables and computed PLI of comparables at 25.83%. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken from 09/10/2009 to 23/11/2009, that the companies regular business was production of tubes for pharmaceutical packaging, that the solar trial activity was an exception to its regular business, that the company had made provision for impairment of assets of ₹ 13.90 crore as per AS - 28, that the expenses were exceptional. The DRP directed the TPO to exclude the losses in ST run-up in computing the PLI of manifesting segment. It was further held that expenses/income under the head non-operating transactions had to be excluded for arriving at the correct PLI. The DRP issued further directions to re-compute the adjustments. 3.2. During the course of hearing before us, the Departmental Representative (DR) referred to the pages 10,25,160 and 162 of the paper book and stated that the auditor had mentioned only two segments, that assessee had shown three segments, that loss of ₹ 1.31 crores was taken to P L account, that it had not been taken separately, that the auditor had not qualified the ST activity as extraordinary item. The Authorised Representative (AR) contended that the directors report and in the notes of accounts there was specific mention about extraordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the assets used for the solar trial activity considering no use in near future. Considering the above, we are of the opinion there is no need to interfere with the order of the DRP with regard to computation of PLI. It had rightly held that ST activity was an extraordinary item and was not part of the regular business of the assessee and that there was impairment of assets. Therefore, upholding the order of the DRP, we dismiss both the grounds. 4. Next two grounds of appeal are about claim for set off of brought forward unabsorbed depreciation. During the assessment proceedings, the AO found that the assessee had claimed set off of unabsorbed depreciation aggregating ₹ 2.86 crore (Rs. 1.93 crore brought forward from AY. 1999-2000 and ₹ 93.5 lakhs from AY. 200- 01), that it had also carried forward the balance unabsorbed depreciation of AY. 2000-01 and 2001-02. Referring to the decision of the Special Bench of the Tribunal in the case of Times Guarantee Ltd. (40 SOT14), the AO held that the claim of set off and carry forward of balance unabsorbed depreciation pertaining to AY.s 1997-98 to 2001-02 to was not allowable, that the unabsorbed depreciation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was eligible to claim unabsorbed depreciation of the assessment year 1997-98 for being carried forward and set off against the income for the assessment year 2005-06. But the assessee was not entitled for unabsorbed depreciation of ₹ 43,60,22,158 for the assessment year 1997-98, which was not eligible for being carried forward and set off against the income for the assessment year 2006-07. 33. Prior to the Finance (No. 2) Act 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 (No. 2) Act of 1996 restricted the carry forward of unabsorbed depreciation and set-off to a limit of eight years, from the assessment year 1997-98. Circular No. 762, dated February 18, 1998 (see [1998] 230 ITR (St.) 12 ), 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 36. The aforesaid provision was introduced by the Finance (No.2) Act, 1996, and further amended by the Finance Act, 2000. The provision introduced by the Finance (No. 2) Act was clarified by the Finance Minister to be applicable with prospective effect. 37. Section 32(2) of the Act was amended by the 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 subsection (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-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 32(2) as amended by the Finance Act, 2001, and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in the assessment year 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by the 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 the amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing the 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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