Budge Budger Refineries Ltd., Kolkata V. DCIT, Central Circle - XXVII, Kolkata, Kolkata

CO 98/KOL/2010

• Counselvise Citation: [2016] 119 COUNSELVISE.COM (IT) 3263 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 8 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 28-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: A K TIBREWAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUSDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1389 / KOL / 2010 & C.O. NO.98/KOL/2010 (A/O ITA NO.1389/KOL/2010) ASSESSMENT YEAR :2001-02 DY. COMMISSIONER OF INCOME TAX, C.C. XXVII, 5 TH FLOOR, 18, RABINDRA SARANI, KOLKATA-700 001 BUDGE BUDGE REFINERIES LTD., 23B, A..GHOSH ROAD, BUDGE BUDGE, KOLKATA-700 137 [ AABCB 2880 M ] V/S . V/S . M/S BUDGE BUDGE REFINERIES LTD., 23B, A.M.GHOSH ROAD, BUDGE BUDGE, KOLKATA-700 137 DCIT, CC-XXVII, KOLKATA /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI A.K.TIBREWAL, FCA /BY RESPONDENT SHRI G.MALLIKARJUNA, CIT-DR /DATE OF HEARING 15.03.2016 ! /DATE OF PRONOUNCEMENT 19.04.2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE AND CROSS OBJECTION (CO ) BY ASSESSEE ARE ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, KOLKATA IN APPEAL NO.103/CC-XXVII/CIT(A)C-II/KOL/09-10 DATED 1 9.03.2010. ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE-XXVII , KOLKATA U/S 153A/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 31.07.2009 FOR ASSESSMENT YEAR 2001-02. ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 2 2. AT THE TIME OF HEARING BOTH APPEAL AND CO OF ASS ESSEE ARE HEARD TOGETHER AND ARE BEING DISPOSED BY WAY OF CONSOLIDA TE ORDER FOR THE SAKE OF BREVITY. FIRST WE TAKE UP REVENUES APPEAL ITA NO. 1389/KOL/ 2010. 3. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPE AL : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE BUSINESS LOSS OF RS.45,53 ,906/- TO SET OFF AGAINST THE INCOME OF ASSESSMENT YEAR 2001-02 I.E. BEYOND EIGHT YEARS WITHOUT APPRECIATING THE PROVISIONS OF SECTION 72(3) OF THE ACT. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE CORRECT POSITION OF C ARRY FORWARD OF DEPRECIATION AND LOSS FROM A.Y 2000-01 CAN BE DECIDED IN APPEAL FOR A.Y 2001-02 WHICH IS NOT CONFORMITY OF THE PROVISIONS OF SECTION 31(12) OF THE ACT AND ALSO THE APPEAL BEFORE HIM WAS FOR A.Y 2001-02. THE EFFECTIVE ISSUE RAISED BY REVENUE IN GROUND NUM BER 1 & 2 IS THAT LD CIT(A) ERRED IN DECIDING THE ISSUE OF CARRIED FORWA RD DEPRECIATION AND LOSS PERTAINING TO THE ASSESSMENT YEAR 2000-01 IN THE AP PEAL FOR THE ASSESSMENT YEAR 2001-02. BEFORE COMING TO THE SPECIFIC ISSUE LET US UNDERSTA ND THE BRIEF HISTORY OF THE CASE. THE ASSESSEE WAS HAVING BROUGHT FORWARD LOSSE S AND UNABSORBED DEPRECIATION FOR THE EARLIER YEARS AS DEPICTED IN T HE TAX AUDIT REPORT OF THE ASSESSMENT 2000-01 WHICH IS REPRODUCED BELOW:- DETAILS OF UNABSORBED BUSINES S LOSSES & DEPRECIATION YEAR ENDING ASST. YEAR BUSINESS LOSS B/F ADJ UST BUSINESS LOSS C/F DEPR B/F ADJUST DEPR C/F TOTAL 31.03.98 98-99 1846932 1846932 212475 212475 2059 407 31.03.99 99-00 221678 221678 193374 193374 415052 31.03 97 1997-98 2121308 2121308 __ __ 2121308 31.03.96 1996-97 363988 363988 246369 246369 6103 57 31.03.91 1992-93 9602352 9602352 594253 594253 10 196605 31.03.92 1991-92 1645342 1645342 -- -- 1645342 31.03.90 1990-91 6704433 6704433 780223 780223 74 84656 31.03.89 1989-90 5041893 5041893 2625627 2625627 7667520 EARLIER YEAR --- 8665509 8217845 IN AY 00- 01 447664 447664 ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 3 FROM THE ABOVE THAT IT WAS OBSERVED THAT THE ASSESS EE WAS HAVING A TAXABLE PROFIT FOR THE ASSESSMENT YEAR 2000-01 FOR AN AMOUN T OF RS. 82,17,845.00. IN THE TAX AUDIT REPORT THE ABOVE PROFIT WAS SET OFF A GAINST THE UNABSORBED DEPRECIATION OF EARLIER YEARS OF RS.86,65,509.00 AN D THE BALANCE AMOUNT OF UNABSORBED DEPRECIATION OF RS. 4,47,664.00 WAS ALLO WED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE HAS MADE A MISTAKE IN THE TAX AUDIT REPORT BY ADJUSTING THE TAXABLE PROFIT FO R THE AY 2000-01 OF RS. 82,17,845.00 AGAINST THE UNABSORBED DEPRECIATION OF EARLIER YEARS AND THE SAME WAS ALLOWED BY THE THEN AO. AS PER LAW, THE AS SESSEE WAS TO CLAIM THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSO RBED DEPRECIATION IN THE FOLLOWING SEQUENCE : 1. DEPRECIATION FOR THE CURRENT YEAR 2. UNABSORBED BUSINESS LOSS OF THE EARLIER YEARS 3. UNABSORBED DEPRECIATION OF THE EARLIER YEARS IT IS IMPORTANT TO NOTE THAT FOR THE ASSESSMENT YEA R 2000-01 THERE WAS A TAXABLE PROFIT OF RS. 82,17,845/- WHICH SHOULD HAVE BEEN ADJUSTED FROM THE BUSINESS LOSS OF RS. 9602352/- FOR THE ASSESSMENT Y EAR 1992-93 AS IT WAS THE LAST YEAR FOR THE SET OFF AGAINST THE AFORESAID INC OME OF THE ASSESSMENT YEAR 2000-01 AS PER THE PROVISION OF SECTION 72(3) OF TH E ACT. HOWEVER THE ASSESSEE CHOSE TO ADJUST THE TAXABLE PROFIT OF RS. 82,17,845/- AGAINST THE UNABSORBED DEPRECIATION OF EARLIER YEARS AMOUNTING TO RS. 86,65,509/-. NOW COMING TO THE SPECIFIC ISSUE OF THE CASE BEFORE US PERTAINING TO THE AY 2001-02, THE AO DURING THE ASSESSMENT PROCEEDINGS H AS OBSERVED THAT FOR THE RELEVANT AY ASSESSEE HAD TAXABLE PROFIT OF RS.1 ,34,40,624/- WHICH WAS ADJUSTED AGAINST THE BROUGHT FORWARD LOSSES AND UNA BSORBED DEPRECIATION OF RS.3,26,47,911/-. AS A RESULT OF AFORESAID ADJUSTME NT THE ASSESSEE FILED ITS RETURN OF INCOME BY DECLARING A LOSS OF RS. 1,92,07 ,287/-. HOWEVER, THE AO DURING ASSESSMENT PROCEEDINGS DISREGARDED THE AMOUN T OF BROUGHT FORWARD ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 4 LOSS OF RS. 2,29,94,020/- PERTAINING TO THE ASSESSM ENT YEARS 1989-90 TO 1992- 93 FOR SET OFF BY HOLDING THAT SET OFF UNDER SECTIO N 72(3) OF THE ACT IS NOT ALLOWED BEYOND THE EIGHT ASSESSMENT YEARS IMMEDIATE LY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE LOSS WAS COMPUTED. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 4.1 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSIONS OF THE APPELLANT. I FIND THAT THE DISPUTE HAS ARISEN ON AC COUNT OF SET OFF OF THE INCOME OF ASSESSMENT YEAR 2000-01 AGAINST THE BROUGHT FORW ARD LOSSES AND BROUGHT FORWARD DEPRECIATION OF EARLIER YEARS. IN ASSESSMEN T YEAR 2000-01, APPELLANT HAS RETURNED A BUSINESS INCOME OF RS.82,17,845/- AN D IN THE TAX AUDIT REPORT FILED IN FORM 3CD WITH THIS RETURN OF INCOME, AT PARA 25 OF THIS REPORT, THE AUDITOR HAS SET OFF THE INCOME OF RS.82,17,845 WITH THE DEPRECIATION OF ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 1989-90 C LUBBED TOGETHER AT RS.86,65,509. THIS SET OFF LEFT THE DEPRECIATION OF ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 1989-90 AT RS.86,65,509 RS.82,17, 845 = RS.447664/- FOR THE NEXT ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2001 -02, WHICH IS THE ASSESSMENT YEAR UNDER APPEAL. THE APPELLANT HAS ARG UED BEFORE THE UNDERSIGNED THAT THE SET OFF OF INCOME OF RS.82,17, 845/- OF ASSESSMENT YEAR 2000-01 SHOULD HAVE BEEN MADE AGAINST THE BUSINESS LOSS OF RS.9602352/- OF ASSESSMENT YEAR 1992-93 INSTEAD OF THE DEPRECIATION S OF ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 1989-90 AND IF AUDITOR HAS MADE A MISTAKE IN THIS REGARD THEN ASSESSING OFFICER SHOULD HAVE APPLIED T HE CORRECT SEQUENCE OF SET OFF AS PER LAW AND CALCULATED THE BUSINESS LOSS AND DEPRECIATION AVAILABLE FOR SET OFF IN ASSESSMENT YEAR 2001-02 AFTER CORREC TLY SETTING OFF THE SAME AGAINST THE BUSINESS LOSS AND DEPRECIATION FOR ASSE SSMENT YEAR 2000-01. APPELLANT HAS RELIED ON THE DECISION OF HON'BLE SUP REME COURT IN THE CASE OF CIT VS. MANMOHAN DAS REPORTED IN 59 ITR 699. IN THIS CASE THE ASSESSEE H AD NOT PREFERRED ANY APPEAL AGAINST THE ORDER OF ASSES SING OFFICER IN RESPECT OF ASSESSMENT YEAR 1950-51 WHERE ASSESSING OFFICER HAD NOT ALLOWED THE CARRY FORWARD OF CERTAIN LOSSES CLAIMED BY THE ASSESSEE. HOWEVER, HON'BLE SUPREME COURT HELD THAT FOR THE PURPOSE OF SET OFF OF INCOME OF ASSESSMENT YEAR 1951-52 THE ALLOWABILITY OF CARRY FORWARD OF L OSSES OF ASSESSMENT YEAR 1950-51 HAS TO BE DECIDED IN THE ASSESSMENT OF ASSE SSMENT YEAR 1951-52 AND THE DECISION OF ASSESSING OFFICER IN RESPECT OF NON CARRY FORWARD OF LOSSES IN THE ASSESSMENT OF ASSESSMENT YEAR 1950-51 IS NOT BINDING. IN PRESENT CASE, IT IS NOT THE ASSESSING OFFICER BUT THE AUDIT OR WHO MADE A MISTAKE IN THE AUDIT REPORT OF ASSESSMENT YEAR 29000-01 BY STATING THAT DEPRECIATION OF ASSESSMENT YEARS PRIOR TO 1989-90 OF RS. 447664/- A RE AVAILABLE FOR CARRY FORWARD AND BUSINESS LOSS OF RS.9602352/- OF ASSESS MENT YEAR 1992-93 IS AVAILABLE FOR CARRY FORWARD. THE PRIORITY OF CARRY FORWARD AND SET OFF OF BUSINESS LOSS OVER DEPRECIATION IS MENTIONED IN SECTION 72(2 ) OF THE IT ACT AND THEREFORE THE CORRECT POSITION OF CARRY FORWARD OF DEPRECIATION AND BUSINESS LOSS AFTER ASSESSMENT YEAR 2000-01 IS THAT THE DEPR ECIATION OF ASSESSMENT YEARS PRIOR TO 1989-90 OF RS.8665509/- ARE AVAILABL E FOR CARRY FORWARD AND ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 5 BUSINESS LOSS OF RS.13,84,507/- (AFTER SETTING OFF THE INCOME OF RS.82,17,845 FROM LOSS OF RS.96,02,352) OF ASSESSMENT YEAR 1992- 93 COULD BE AVAILABLE FOR CARRY FORWARD TO ASSESSMENT YEAR 2001-02 BUT AS THE CARRY FORWARD WILL BE FOR 9 TH YEAR, NIL BUSINESS LOSS OF ASSESSMENT YEAR 1992-93 CAN BE CARRIED FORWARD TO ASSESSMENT YEAR 2001-02. IN VIEW OF THE ABOVE MENTIONED JUDGEMENT OF HON'BLE SUPREME COURT THE CORRECT POSI TION OF SUCH CARRY FORWARD OF DEPRECIATION AND LOSS FROM ASSESSMENT YE AR 2000-01 CAN BE DECIDED IN THE APPEAL OF ASSESSMENT YEAR 2001-02. T HE CARRY FORWARD OF DEPRECIATION AND BUSINESS LOSS FROM EARLIER ASSESSM ENT YEARS FOR THE ASSESSMENT YEAR 2001-02 AS MENTIONED BY ASSESSING O FFICER IN THE ASSESSMENT ORDER THEREFORE STANDS CORRECTED AS UNDE R:- ASSESSMENT YEAR BUSINESS LOSS DEPRECIATION 1999-00 221678 193374 1998-99 1846932 212475 1997-98 2121308 --- 1996-97 363988 246369 1992-93 594253 1991-92 ---- 1990-91 780223 1989-90 2625627 EARLIER YEARS 8665509 TOTAL 4553906 13317830 BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR SU BMITTED A PAPER BOOK WHICH IS RUNNING FROM PAGES 1 TO 97 AND STATED THAT THE AO HAS RELIED ON THE TAX AUDIT REPORT FOR WORKING OUT THE BUSINESS LOSS AND UNABSORBED DEPRECIATION WITHOUT CONSIDERING THE YEAR-WISE DETAIL OF SUCH LO SSES AND UNABSORBED DEPRECIATION AVAILABLE WITH REVENUE AUTHORITIES. TH E AO WAS TO ALLOW THE BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPREC IATION IN THE FOLLOWING SEQUENCE. 1. DEPRECIATION FOR THE CURRENT YEAR 2. UNABSORBED BUSINESS LOSS OF THE EARLIER YEARS 3. UNABSORBED DEPRECIATION OF THE EARLIER YEARS LD AR RELIED ON THE ORDER OF LEARNED CIT(A) AND STA TED THAT THE ISSUE MAY BE DECIDED ON MERIT. ON THE OTHER HAND, LD DR SUBMITTE D THAT IN MANY CASES THE PROOF FOR FILING THE RETURN OF INCOME HAS NOT BEEN FURNISHED BY THE ASSESSEE ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 6 WHICH IS THE PRECONDITION FOR SETTING OFF THE LOSS. AS PER LAW THE RETURN OF INCOME MUST HAVE BEEN FILED WITHIN THE DUE DATE AS SPECIFIED UNDER SECTION 139(1) OF THE ACT FOR CLAIMING THE SET OFF OF THE L OSS OF THAT YEAR AND HE SIMPLY RELIED ON THE ORDER OF AO. FROM THE FACTS OF THE CA SE WE FIND THAT THE AUDITOR OF THE ASSESSEE HAS ADJUSTED THE PROFIT FOR THE ASSESS MENT YEAR 2000 -01 AGAINST THE UNABSORBED DEPRECIATION OF EARLIER YEARS PRIOR TO THE ASSESSMENT YEARS 1989-90. FOR THE SAME ASSESSMENT YEAR THERE WAS BRO UGHT FORWARD BUSINESS LOSS FOR THE ASSESSMENT YEAR 1992-93 WHICH WAS AVAI LABLE FOR SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 2000-01 AND FOR THIS LOSS THE PROFIT FOR THE ASSESSMENT YEAR 2000-01 WAS THE LAST YEAR FOR SET O FF. BUT THE AUDITOR OF THE ASSESSEE DID NOT DO SO. AS A RESULT THE LOSS FOR TH E ASSESSMENT YEAR 1992-93 GOT LAPSED AND WAS NOT ALLOWED TO BE CARRIED FORWAR D IN THE SUBSEQUENT YEAR IN TERMS OF THE PROVISION OF SECTION 72(3) OF THE A CT. HOWEVER IN THE SUBSEQUENT YEAR I.E. AY 2001-02 THERE WAS PROFIT AN D THE ASSESSEE CLAIMED THE SET OFF OF THE LOSS OF EARLIER YEARS INCLUDING THE LOSS OF THE ASSESSMENT YEAR OF 1992-93 BUT THE AO DENIED THE SAME. HOWEVER THE CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE. NOW, THE FOLLOWING QUESTIONS ARISE BEFORE US FOR ADJUDICATION WHETHER THE MISTAKE COMMITTED BY THE AUDITOR IN THE ASSESSMENT YEAR 2000-01 CAN BE RECTIFIED IN THE ASSESSMENT YEAR 2001-02. 6. IN OUR CONSIDERED VIEW THE AO WHILE FRAMING THE ASSESSMENT ON THE ASSESSEE SHOULD APPLY THE PROVISIONS OF THE INCOME TAX ACT CORRECTLY. THE ASSESSEE SHOULD NOT BE DEPRIVED FROM THE BENEFIT OF THE PROVISIONS OF THE INCOME TAX ACT ON ACCOUNT ON THE MISTAKE COMMITTED BY THE AUDITOR OF THE COMPANY. IN THIS CONNECTION WE ARE ALSO PUTTING OUR RELIANCE IN THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. MANMOHAN DAS (1966) 59 ITR 699 (SC) WHEREIN HAS HELD WHETHER THE LOSS IN ANY Y EAR MAY BE CARRIED FORWARD TO THE FOLLOWING YEAR AND SET OFF AGAINST T HE PROFITS AND GAINS OF THE SUBSEQUENT YEAR UNDER SECTION 24(2) HAS TO BE DETER MINED BY THE INCOME-TAX OFFICER WHO DEALS WITH THE ASSESSMENT OF THE SUBSEQ UENT YEAR. A DECISION RECORDED B THE INCOME-TAX OFFICER WHO COMPUTES THE LOSS IN THE PREVIOUS YEAR ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 7 THAT THE LOSS CANNOT BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR IS NOT BINDING ON THE ASSESSEE. RELYING ON THE AFORESA ID JUDGMENTS, WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF LEARNED CIT(A) . HENCE THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. COMING TO ASSESSEES CO NO. 98/KOL/2010 . 7. DURING THE COURSE OF HEARING BEFORE US, LD. AR D ID NOT PRESS FOR GROUND NO.1 & 2 SAME STAND DISMISSED AS NOT PRESSED. 8. COMING TO GROUND NO.3 OF ASSESSEES CO IS THAT L D. CIT(A) ERRED IN HOLDING THAT THE UNABSORBED DEPRECIATION UPTO THE A Y 1996-97, FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND:- 3) THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN HOLDING THAT THE UNABSORBED DEPRECIATION UP TO THE ASSESSMENT YEAR 1996-97 WILL BE ADDED TO THE DEPRECIATION ALLOWANCE OF 1997-98 AND THAT SUCH UNABSORBED DEPRECIATION COULD BE CARRIED FORWARD FOR SET OFF FOR A MAXIMUM PERIOD OF EIGHT YEARS FROM THE ASSESS MENT YEAR 1997- 98. REGARDING THE DISPUTE OF UNABSORBED DEPRECIATION AN D ITS CARRY FORWARD TO THE SUBSEQUENT YEARS, WE RELY IN THE DECISION OF HONBL E HIGH COURT OF GUJRAT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS DCIT 25 TAXMANN.COM 364 WHERE IT WAS HELD AS UNDER:- PRIOR TO THE FINANCE ACT NO. 2 OF 1996, THE UNABSOR BED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FORWARD INDEFINITELY A ND BY A DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR . THE FINANCE ACT NO 2 OF 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DE AND SET-OFF TO A LIMIT OF 8 YEARS, FROM THE ASSESSMENT YEAR 1997-98. CBDT CIRCULAR NO. 762 DATED 18- 2-1998 IN THE FORM OF EXPLANATORY NOTES CATEGORICAL LY PROVIDED, THAT THE UNABSORBED DEPRECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FULL EFFECT CANNOT BE GIVEN IN THAT PREVIOUS YEAR SHALL BE CARR IED FORWARD AND ADDED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR AND E D EEMED TO BE PART THEREOF. [PARA 31] SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF ASSESS MENT YEAR 1996-97 WOULD BE ADDED TO THE ALLOWANCE OF ASSESSMENT YEAR 1997-98 AND THE LIMITATION OF 8 YEARS FOR THE CARRY-FORWARD AND SET -OFF OF SUCH UNABSORBED DEPRECIATION WOULD START FROM ASSESSMENT YEAR 1997- 98. [PARA 32] THE PROVISION OF SECTION 32(2) WAS INTRODUCED BY FI NANCE (NO. 2) ACT, 1996 AND FURTHER AMENDED BY THE FINANCE ACT, 2000. THE P ROVISION INTRODUCED BY ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 8 FINANCE (NO. 2) ACT WAS CLARIFIED BY THE FINANCE MI NISTER TO BE APPLICABLE WITH PROSPECTIVE EFFECT. [PARA 34] THE SAID CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND, ACCORDINGLY, THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THIS AMENDMENT HAS BECOME APPLICABLE FROM ASSESSMENT YEA R 2002-03 AND SUBSEQUENT YEARS MEANING THAT ANY UNABSORBED DEPREC IATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (ASSESSMENT YEAR 2002-03) WILL BE DEALT WITHIN ACCORDANCE WITH THE PROVISIONS OF SECTION 32 (2) AS AMENDED BY FINANCE ACT, 2001 AND NOT BY THE PROVISIONS OF SECT ION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. IT THE INTENTION OF THE LEGISL ATURE HAS BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN ASS ESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFT ER THE AMENDMENT OF SECTION 32(2) BY FINANCE ACT, 2001, IT WOULD HAVE I NCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE T AKEN KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF SECTION 32(2). WHILE CONSTR UING 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 FAI LS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF SECTION BY THE CLEAR WORDS USED IN SECTION, THE BENEFIT ACCRUING T O THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIF IED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINE SS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECT ION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMEND ED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE A VAILABLE IN THE ASSESSMENT YEARS 1997- 98, 1999-2000, 2000-01 AND 2 001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSOR BED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE ASSESSMENT YE AR 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. [PARA 37] THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATIO N IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT R ELATES. IF SUCH DEPRECIATION AMOUNT IS IN EXCESS THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS SHOULD BE ADJUSTED AGAINST THE PROFITS AND G AINS FROM ANY OTHER BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INC OME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBE D DEPRECIATION AND IT IS TAKEN TO THE NEXT YEAR. WHERE THERE IS CURRENT DEPRECIATI ON FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION IS ADDED TO THE C URRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEED ING YEAR. IT IS HELD THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSE E ON 1ST DAY OF APRIL, 2002 (A. Y. 2002-03) WILL BE DEALT WITH IN ACCORDAN CE WITH THE PROVISIONS OF ITA NO.1389/KOL/2010 & CO 98/KOL/2010 A.Y. 200 1-02 DCIT CC-XXVII KOL. V. M?S BUDGE BUDGE REFINERIE S LTD. PAG E 9 SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEAR S FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM ASSESSMENT YEAR 1997-98 UP TO THE ASSESSMENT YEAR 2001- 02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR2002-0 3 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS O F SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY F ORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEAS, WITHOUT A NY LIMIT WHATSOEVER. [PARA 38] FOR THE AFORESAID REASONS, THIS WRIT PETITION SUCCE EDS AND IS ALLOWED. [PARA 39] TAKING A CONSISTENT VIEW OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA) WE ALLOW GROUND NO.3 OF ASSESSEES CO. IN THE RESULT, ASSESSEES CO IS PARTLY ALLOWED. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED AN D THAT OF ASSESSEES CO IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 19/ 04/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP '#$- 19 / 04 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S BUDGE BUDGE REFINERIES LTD. 23B, A.M. GHOSH ROAD, BUDGE BUDGE, KOLKATA-700 137 2. /REVENUE-DCIT, CC-XXVII, 5 TH FL, 18, RABINDRA SARANI, KOLKATA-01 3.#,#-. / / CONCERNED CIT KOLKATA 4. /- / CIT (A) KOLKATA 5.2 3455-., -.!, / DR, ITAT, KOLKATA 6.489:; / GUARD FILE. BY ORDER/ , /TRUE COPY/ /# -.!,