TMI Blog2014 (1) TMI 1908X X X X Extracts X X X X X X X X Extracts X X X X ..... f the tribunal and high court(supra), since we have already held that the impugned brought forward unabsorbed depreciation pertaining to assessment year 1996-97 is entitled to be set off in the impugned assessment year as well, it emerges that there is only one interpretation possible which favours the assessee. So, the case law of Malabar Industrial Co. Ltd. (supra) goes against case of the Revenue. Jurisdiction u/s 263 cannot be stretched beyond reasons in show cause notice. We reiterate that there are only two reasons in the show cause notice i.e impugned depreciation of assessment year 1996-97 could not have been set off in assessment year 2007-08 and other one is that the depreciation had been wrongly allowed to be set off by the Assessing Officer against short term capital gains - In view of the case law of General Motors India (P) Ltd. (supra) [ 2012 (8) TMI 714 - GUJARAT HIGH COURT] , both reasons are no more sustainable. Similarly, we also see n No reason to agree with the arguments of the Revenue that since the CIT has only directed the Assessing Officer to reframe the assessment after examining the issue afresh need not be disturbed in the instant appeal as the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd vs DCIT in I.T.A.No. 1937/Mum/2012 dated 24.7.2013. (v) DCIT vs Andhra Petrochemicals Ltd [2010] 123 ITD 89(Visakha). (vi) Reliance Jute Industries Ltd vs CIT [1979] 120 ITR 921 (SC). (vii) Jai Ushin Ltd vs DCIT [2009] 117 ITD 1 (Delhi). (viii) CIT vs Max India Ltd [2007] 295 ITR 282(SC) Accordingly, acceptance of appeal has been prayed for. 3. The Revenue in its arguments strongly justifies the order of the CIT in section 263 proceedings. It submits that since impugned brought forward unabsorbed depreciation of the assessment year 1996-97 had been wrongly allowed to be set off by the Assessing Officer, the CIT has appropriately exercised his jurisdiction vested u/s 263 of the Act. Similarly, it is also argued that the Assessing Officer had failed to conduct necessary enquiry before framing regular assessment, the only recourse open to the CIT was to invoke section 263 jurisdiction. It places reliance on the case law of 243 ITR 83(SC) Malabar Industrial Co. Ltd. vs CIT, [2010]4 ITR (Trib) 210(Mumbai) (SB) DCIT vs Times Guaranty Ltd., and [2011] 337 ITR 56 (Delhi) CIT vs Eastern Medikit Ltd. and prays for upholding the CIT s order. 4. The assessee/compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad of income other than Profits and gains of Business. In reply, the assessee quoted section 32(2) amended vide Finance Act, 1997, removing the deeming fiction of unabsorbed depreciation pertaining to preceding assessment years as that of current years depreciation and also speech of the Finance Minister tendered in the Parliament clarifying that the unabsorbed depreciation would be allowed to be set off against taxable income under any head. Its further submission was that such depreciation could be set off even beyond eight years period as well and for that matter, it could be taken to unlimited period of time. Per assessee, the present was a debatable issue which could not be subject matter of section 263 proceedings. It also highlighted the fact that being a sick unit declared by the BIFR order dated 7.9.2007, aforesaid time limit of eight years would not apply in its case. 6. It transpires to us from the CIT s order that he has not concurred with the assessee s aforesaid pleadings. By quoting decision of [2010] 4 ITR (Trib) 210 (Mumbai)(SB) DCIT vs Times Guaranty Ltd., he holds that since the impugned unabsorbed depreciation pertains to assessment year 1996-97, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff within the same year as per (i) above shall be deemed as depreciation under section 32(1), that is depreciation for the current year in the following year(s) to be set off against income under any head, like current depreciation. (B) In the second period (i.e., assessment years 1997-98 to 2001-02) (i) Brought forward unadjusted depreciation allowance for and up to the assessment year 1996-97 (hereinafter called the first unadjusted depreciation allowance ), which could not be set off upto the assessment year 1996-97, shall be carried forward for set off against income under any head for a maximum period of eight assessment years starting from the assessment year 1997-98. (ii) Current depreciation for the year under section 32(1) (for each year separately starting from the assessment years 1997- 98 up to 2001-02) can be set off firstly against business income and then against income under any other head. (iii) Amount of current depreciation for the assessment years 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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. 31. 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 setoff 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. . 32. So, the unabsorbed depreciation allowance of A.Y. 1996-97 would be added to the allowance of A.Y. 1997-98 and the limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 34. 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. 35. 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 year and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent assessment 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 succeed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t we are dealing with a case of interpretation of a taxing statute. There is no quarrel between the parties about facts of the case. Rather the issue between them is about interpretation of section 32(2) as it stood before and after 1.4.1997 upto amendment introduced by the Finance Act, 2001. That being the case, the necessary interpretation of the relevant provision made by the tribunal , high court or for that matter, hon'ble apex court would govern the question raised hereinabove. Therefore, we accept the arguments of the assessee and hold that the Assessing Officer had rightly found it entitled for set off of the impugned unabsorbed depreciation. 9. This leaves with the other case law quoted by the Revenue of Malabar Industrial Co. Ltd and that of hon'ble Delhi high court (supra). In our view, the former one holds that where two views are possible, the one taken by the Assessing Officer in framing assessment has to be upheld in section 263 proceedings. Keeping in mind the facts and circumstances of the instant case and in view of contradictory views of the tribunal and high court(supra), since we have already held that the impugned brought forward unabsorbed depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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