Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 93982 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-07-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
18-03-2015
Assessment Year
2006-2007
Appeal Filed On
29-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'#$ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1203/PN/2013 #% & '& / ASSESSMENT YEAR : 2006-07 MERCEDES - BENZ INDIA PRIVATE LIMITED, (FORMERLY KNOWN AS DAIMLER CHRYSLER INDIA PRIVATE LIMITED), E-3, MIDC CHAKAN, PHASE-III, CHAKAN INDUSTRIAL AREA, KARULI & NIGHOJE, TAL.-KHED, PUNE-410501 PAN : AABCM1789L . / APPELLANT (% V/S. COMMISSIONER OF INCOME TAX V, PUNE . / RESPONDENT / APPELLANT BY : SHRI PRAMOD ACHUTHAN / DEPARTMENT BY : MS. M.S. VERMA ) DATE OF HEARING :24-06-2015 / DATE OF PRONOUNCEMENT :31-07-2015 *) ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX-V, PUNE DATED 25-03-2013 PA SSED U/S. 263(1) OF THE OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) FOR THE ASSESSMENT YEAR 2006-07. THE MAIN ISSUE RAISED BY THE ASSESSEE IN 2 ITA NO. 1203/PN/2013, A.Y. 2006-07 APPEAL IS AGAINST THE JURISDICTION ASSUMED BY COMMISSIONER OF INCOME TAX FOR INITIATING REVISION PROCEEDINGS U/S. 263 OF THE ACT. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN T HE BUSINESS OF MANUFACTURING OF AUTOMOBILES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 27-11-2006 DECLARING T OTAL INCOME OF RS.25,14,19,400/- UNDER REGULAR PROVISIONS AND RS.66,65,50,59 8/- U/S. 115JB OF THE ACT. IN THE INCOME RETURNED, THE ASSESSEE HAD CLAIMED SET OFF OF BROUGHT FORWARD LOSSES/DEPRECIATION. THE ASSESSING OFFIC ER VIDE ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 144C DATED 28 -10-2010 ACCEPTED THE CLAIM OF ASSESSEE WITH RESPECT TO BROUGHT FORWARD LOSSES AND DEPRECIATION. THE COMMISSIONER OF INCOME TAX (APPEALS) ISSUED SHOW C AUSE NOTICE TO THE ASSESSEE U/S. 263 ON 08-03-2013 ON THE GROUND THAT THE BROUGHT FORWARD DEPRECIATION LOSS FOR THE ASSESSMENT YEA RS 1996-97 AND 1997-98 CANNOT BE ALLOWED TO BE SET OFF IN THE ASSESSM ENT YEAR 2005-06. THE RELEVANT EXTRACT OF THE SHOW CAUSE NOTICE IS REPRODUCED HERE -IN-UNDER: IN YOUR CASE, IT IS SEEN THAT, RETURN OF INCOME DE CLARING TOTAL INCOME RS.25,14,19,400/- UNDER REGULAR PROVISIONS AND DECL ARING TAX LIABILITY OF RS.66,65,50,598/- UNDER 115JB OF THE INCOME TAX ACT WERE FILED THE SCRUTINY ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) R.W.S. 14 4C(13) DETERMINING THE TAXABLE INCOME AT RS.88,21,27,827/- AFTER ADJUSTMEN T MADE BY TRANSFER PRICING AUTHORITY UNDER VARIOUS HEADS. AGAINST THIS INCOME SET OFF OF B/F BUSINESS LOSSES OF RS.27,48,19,358/- AND UNABSORBED DEPRECIATION OF RS.32,44,92,804/- AGGREGATING TO RS.59,93,12,162/- PERTAINING TO AY 1996-97 TO 2000-01 WERE ALLOWED AND FINALLY THE TOT AL INCOME WAS COMPUTED AT RS.28,28,15,665/-. AS PER SECTION 72 OF THE INC OME TAX ACT, NO BUSINESS LOSS CAN BE CARRIED FORWARD AND SET OFF AGAINST ANY OTHER HEADS OF INCOME EXCEPT UNDER THE HEAD BUSINESS OR PROFESSION AND IN VIEW OF SECTION 32 UNABSORBED DEPRECIATION CANNOT BE CARRIED FORWARD F OR INDEFINITE PERIOD W.E. FROM 2002-03 AND CAN HE SET OFF ONLY AGAINST BUSINE SS INCOME. UNABSORBED DEPRECIATION RELEVANT TO AY 1997-98 TO 2001-02 CANN OT BE CARRIED FORWARD AND SET OFF AGAINST ANY OTHER HEADS OF INCOME EXCEP T INCOME WIDER THE HEAD BUSINESS OR PROFESSION FOR MORE THAN EIGHT ASSESSME NT YEARS IMMEDIATELY SUCCEEDING THE AY FOR WHICH THE LOSS WAS FIRST COMP UTED. SIMILARLY B/F 3 ITA NO. 1203/PN/2013, A.Y. 2006-07 UNABSORBED DEPRECIATION ALLOWANCE FOR AND UPTO AY 1 996-97, WHICH COULD NOT BE SET OFF UPTO AY 1996-97 SHALL BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT ASSESS MENT YEARS STARTING FROM AY 1997-98 TO AY 2004-05. IN THE INSTANT CASE , DEPRECIATION LOSS BROUGHT FORWARDED AT RS.2,61,05,488/- AND RS.5,99,1 1,218/- FOR THE AY 96-97 AND 97-98 RESPECTIVELY. THIS BROUGHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE PERTAINING TO AY 96-97 AND 97-98 TOTALING TO AMOUNT OF RS.8,60,16,666/- SHALL NOT BE CARRIED FORWARD UPTO AY 2005-06. AS THE ABOVE ISSUES HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2006-2007 UNDER SECTION 143(3) RWS 144C(13), THE ACTION OF THE ASSESSING OF FICER APPEARS TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN RESPONSE TO NOTICE THE ASSESSEE FILED REPLY ON 22-03 -2013 CITING VARIOUS JUDGMENTS AND SUBMITTED THAT THE ASSESSEE CAN CARRY FORWARD UNABSORBED DEPRECIATION OF PREVIOUS YEARS AND CAN SET O FF THE SAME IN THE IMPUGNED ASSESSMENT YEAR. HOWEVER, THE COMMISSIONER OF I NCOME TAX VIDE IMPUGNED ORDER REJECTED THE CONTENTIONS OF THE ASSESSE E AND HELD THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE; WHETHER THE CLAIM MADE BY THE ASSESSEE WAS FACTUALLY CORRECT AND ALSO WHETHER RE LEVANT CONDITIONS ARE FULFILLED AS PER THE PROVISIONS OF SECTION 72 AND SECTION 32 O F THE ACT OR NOT? THE ASSESSING OFFICER IN HIS ORDER HAS CATEGORICALLY MENTION ED THAT DUE TO LIMITATION OF TIME THE ASSESSEES VERSION OF BROUGHT FORWARD LOSSES IS RELIED UPON AND ALLOWED THE CLAIM OF THE ASSESSEE. THE FINDINGS OF THE ASSESSING OFFICER ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. SHRI PRAMOD ACHUTHAN APPEARING ON BEHALF OF THE ASSES SEE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX HAS ERRED IN EXERC ISING THE JURISDICTION U/S. 263 OF THE ACT AND DIRECTING THE ASSESSIN G OFFICER TO REDO THE ASSESSMENT. IN THE SHOW CAUSE NOTICE THE COMMISS IONER OF INCOME TAX HAS HELD THAT THE ASSESSEE HAS WRONGLY CARRIED FORWARD UNABSORBED 4 ITA NO. 1203/PN/2013, A.Y. 2006-07 DEPRECIATION RELEVANT TO ASSESSMENT YEARS 1996-97 AND 1997-98 UP TILL ASSESSMENT YEAR 2006-07. THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF CO-ORDIN ATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF M/S. SAB MILLER BREWERIES PVT. LTD. VS. ACIT IN ITA NO. 1176/PN/2013 FOR ASSESSMENT YEAR 2008 -09 DECIDED ON 27-02-2015, WHEREIN IDENTICAL ISSUE OF UNABSORBED DEPRECIA TION WAS RAISED IN REVISION PROCEEDINGS U/S. 263. THE TRIBUNAL BY PLACING RE LIANCE ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENE RAL MOTORS INDIA PVT. LTD. VS. DCIT REPORTED AS 354 ITR 244 (GUJ) AND VA RIOUS OTHERS JUDGMENTS SUPPORTING THE SIMILAR VIEW HAD ALLOWED THE CLAIM OF THE ASSESSEE THEREIN. THE TRIBUNAL FURTHER HELD THAT THE COMMISSIONER O F INCOME TAX HAS ERRED IN EXERCISING REVISIONARY POWERS U/S. 263 OF THE ACT. 4. ON THE OTHER HAND, MS. M.S. VERMA REPRESENTING THE DE PARTMENT VEHEMENTLY SUPPORTED THE ORDER OF COMMISSIONER OF INCOM E TAX. THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX RIGHTLY AS SUMED THE JURISDICTION U/S. 263 OF THE ACT. IN THE PRESENT CASE, TH E ASSESSING OFFICER HAD NOT MADE ANY VERIFICATIONS BEFORE ACCEPTING THE CLAIM O F THE ASSESSEE OF CARRY FORWARD OF DEPRECIATION. THE LD. DR PRAYED FOR DISMISS ING THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. A PERUSAL OF THE SHOW CAUSE NOTICE U/S. 263 WHICH HAS BEEN REPRODUCED IN PARA 2 ABOVE WOULD SHOW THAT THE COMMISSIONER OF INCOME TAX HAS ASSU MED JURISDICTION U/S. 263 ONLY ON THE GROUND THAT THE ASSESSING OFFICER H AS ACCEPTED THE CLAIM OF THE ASSESSEE TO CARRY CORWARD AND SET OFF UNAB SORBED DEPRECIATION OF ASSESSMENT YEARS 1996-97 AND 1997-98. ACCORDING TO THE COMMISSIONER OF INCOME TAX UNABSORBED DEPRECIATION RELEVANT TO ASSES SMENT YEARS 1996- 5 ITA NO. 1203/PN/2013, A.Y. 2006-07 97 TO 1997-98 CANNOT BE CARRIED FORWARD AND SET OFF AG AINST ANY OTHER HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD BUSINESS OR PRO FESSION FOR MORE THAN 8 ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASS ESSMENT YEARS FOR WHICH THE DEPRECIATION WAS COMPUTED. 6. WE DO NOT CONCUR WITH THE ABOVE OBSERVATIONS OF TH E COMMISSIONER OF INCOME TAX. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA) HAS HELD THAT CIRCULAR NO. 1 4 OF 2001 HAS CLARIFIED THAT RESTRICTION OF 8 YEARS FOR CARRY FORWARD AN D SET OFF OF UNABSORBED DEPRECIATION HAS BEEN DISPENSED WITH. THE U NABSORBED DEPRECIATION FROM ASSESSMENT YEAR 1997-98 UP TO ASSESS MENT YEAR 2001-02 CAN BE CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 . THE HON'BLE HIGH COURT FURTHER HELD THAT UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 7. BEFORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF M/S. SAB MILLER BREWERIES PVT. LTD. VS. ACIT (SUPRA) AN IDENTICAL ISSUE, WHEREIN PROCEEDINGS U/S. 263 WERE INITIATED TO DENY THE CARRY FOR WARD AND SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1999-2000 WAS RAISED. THE CO-ORDINATE BENCH AFTER CONSIDERING THE JUD GMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P VT. LTD. VS. DCIT (SUPRA) AND VARIOUS OTHER DECISIONS HELD THAT THE ASSESSE E CAN SET OFF UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 199 9-2000 IN ASSESSMENT YEAR 2008-09. THE TRIBUNAL FURTHER HELD THAT THE C OMMISSIONER OF INCOME TAX HAS WRONGLY ASSUMED JURISDICTION U/S. 263 TO DENY THE BENEFIT OF UNABSORBED DEPRECIATION TO THE ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IS REPRODUCED HERE-IN-BELOW: 6 ITA NO. 1203/PN/2013, A.Y. 2006-07 26. THE CASE OF THE ASSESSEE BEFORE COMMISSIONER W AS THAT THE SAID SET OFF OF UNABSORBED DEPRECIATION CARRIED FORWARD FROM ASS ESSMENT YEAR 1999-2000 COULD BE SET OFF AGAINST THE BUSINESS INCOME FOR AS SESSMENT YEAR 2008-09. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAI D DOWN BY THE DELHI BENCH OF TRIBUNAL IN JAI USHIN LTD. VS DCIT (2008) 117 TT J (DEL) 330, WHEREIN IT WAS HELD THAT THE ISSUE RELATING TO SETTING OFF THE UNA BSORBED DEPRECIATION OF ASSESSMENT YEAR 1999-2000 AGAINST THE INCOME FOR AS SESSMENT YEAR 2003-04 IS REQUIRED TO BE CONSIDERED AND DECIDED IN ACCORDA NCE WITH THE PROVISIONS OF SE.32(2) AS AMENDED W.E.F. 32(2) BY THE FINANCE ACT 2001 WHICH ARE APPLICABLE TO THAT YEAR. ANOTHER ASPECT RAISED BY THE ASSESSEE BEFORE THE COMMISSIONER WAS THAT THE DECISION IN DCIT VS. TIMES GUARANTY LIMITED (SUPRA) WAS HEARD BEFORE THE HONBLE BOMBAY HIGH CO URT AND A QUESTION OF LAW HAD BEEN ADMITTED BY THE HONBLE HIGH COURT AND WHERE THE MATTER WAS DEBATABLE, IT WAS NOT SUBJECT TO RECTIFICATION. TH E COMMISSIONER ON THE OTHER HAND, WAS OF THE VIEW THAT THE DECISION RELIED UPON BY THE ASSESSEE IN JAI USHIN LTD. VS DCIT (SUPRA) HAD BEEN CONSIDERED BY T HE SPECIAL BENCH OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTY LIMITED ( SUPRA), VIDE ORDER DATED 30.06.2010, WHEREIN IT WAS HELD THAT THE UNAB SORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1997-98 TO 1999-00 IS T O BE DEALT WITH THE PROVISIONS OF SEC.32(2) AS APPLICABLE FOR A.Y. 1997 -98 TO 1999-00. IN VIEW THEREOF, THE COMMISSIONER HELD THAT THE CASE LAW RE LIED UPON BY THE ASSESSEE WAS NOT RELEVANT AND THE DECISION OF THE SPECIAL BE NCH OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTY LIMITED (SUPRA) HAD TO BE AP PLIED. 27. THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTOR S INDIA PVT. LTD. VS. DCIT (2013) 354 ITR 244 (GUJ) VIDE JUDGMENT DATED 2 3.08.2012 HAD ELABORATED UPON THE ISSUE OF CLAIM OF UNABSORBED DE PRECIATION AND THE LAW APPLICABLE AND ALSO THE EFFECT OF AMENDMENT TO SECT ION 32(2) OF THE ACT BY THE FINANCE ACT, 2001 AND IT WAS HELD THAT THE AMENDMEN T MADE TO SECTION 32(2) OF THE ACT BY THE FINANCE ACT, 2001 WAS APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. IT WAS FURTHER HELD THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO THE ASSESSEE ON THE FIRST DAY OF APRIL, 2002 WOULD BE DEALT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED BY THE FINANCE ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) OF THE ACT AS IT STOOD BEFORE THE SAID AMENDMENT. IT WAS FURT HER HELD BY THE HONBLE GUJARAT HIGH COURT THAT HAD THE INTENTION OF THE LE GISLATURE BEEN TO ALLOW THE UNABSORBED DEPREDATION 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 HA VE INCORPORATED A PROVISION TO THAT EFFECT. 7 ITA NO. 1203/PN/2013, A.Y. 2006-07 28. THE HONBLE GUJARAT HIGH COURT HAD CONSIDERED T HE ISSUE AT LENGTH AND HAD OBSERVED AS UNDER:- 30. THE LAST QUESTION WHICH ARISES FOR CONSIDERATI ON IS THAT WHETHER THE UNABSORBED DEPRECIATION PERTAINING TO THE ASSESSMEN T YEAR 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A P ERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY THE F INANCE ACT, 2001 ? THE REASON GIVEN BY THE ASSESSING OFFICER UNDER SECTION 147 IS THAT SECTION 32(2) OF THE ACT WAS AMENDED BY THE FINANCE (NO. 2) ACT OF 1 996, WITH EFFECT FROM THE ASSESSMENT YEAR 1997-98 AND THE UNABSORBED DEPRECIA TION FOR THE ASSESSMENT YEAR 1997-98 COULD BE CARRIED FORWARD UP TO THE MAXIMUM PERIOD OF EIGHT YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED. ACCORDING TO THE ASSESSING OFFICER, EIGHT YEARS EXPIRED IN THE ASSES SMENT YEAR 2005-06 AND ONLY TILL THEN, THE ASSESSEE WAS ELIGIBLE TO CLAIM UNABSORBED DEPRECIATION OF THE ASSESSMENT YEAR 1997-98 FOR BEING CARRIED FORWA RD AND SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 2005-06. BUT THE ASS ESSEE WAS NOT ENTITLED FOR UNABSORBED DEPRECIATION OF RS.43,60,22,158 FOR THE ASSESSMENT YEAR 1997-98, WHICH WAS NOT ELIGIBLE FOR BEING CARRIED F ORWARD AND SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 2006-07. 31. PRIOR TO THE FINANCE (NO. 2) ACT OF 1996 THE UN ABSORBED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FORWARD INDEFINITE LY AND BY A DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEED ING YEAR. THE FINANCE (NO. 2) ACT OF 1996 RESTRICTED THE CARRY FORWARD OF UNAB SORBED 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 (S T.) 12), ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THE FORM OF EXPLANATORY NOTES CATEGORICALLY PROVIDED, THAT THE UNABSORBED DEPRECI ATION 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 ALLOW ANCE OF THE NEXT YEAR AND BE DEEMED TO BE PART THEREOF. 32. SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF TH E ASSESSMENT YEAR 1996-97 WOULD BE ADDED TO THE ALLOWANCE OF THE ASSE SSMENT YEAR 1997-98 AND THE LIMITATION OF EIGHT YEARS FOR THE CARRY FOR WARD AND SET OFF OF SUCH UNABSORBED DEPRECIATION WOULD START FROM THE ASSESS MENT YEAR 1997-98. 33. WE MAY NOW EXAMINE THE PROVISIONS OF SECTION 32 (2) OF THE ACT BEFORE ITS AMENDMENT BY THE FINANCE ACT, 2001. THE SECTION , PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 2001, READ AS UNDER : 'WHERE IN THE ASSESSMENT OF THE ASSESSEE FULL EFFEC T CANNOT BE GIVEN TO ANY ALLOWANCE UNDER CLAUSE (II) OF SUB-SECTION (1) IN ANY PREVIOUS YEAR OWNING TO THERE BEING NO PROFITS OR GAINS CHARGEABL E FOR THAT PREVIOUS YEAR OR OWING TO THE PROFITS OR GAINS BEING LESS TH AN THE ALLOWANCE, THEN, THE ALLOWANCE OR THE PART OF ALLOWANCE TO WHI CH EFFECT HAS NOT 8 ITA NO. 1203/PN/2013, A.Y. 2006-07 BEEN GIVEN (HEREINAFTER REFERRED TO AS UNABSORBED D EPRECIATION ALLOWANCE), AS THE CASE MAY BE, (I) SHALL BE SET OFF AGAINST THE PROFITS AND GAINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESS ABLE FOR THAT ASSESSMENT YEAR ; (II) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNO T BE WHOLLY SET OFF UNDER CLAUSE (I), THE AMOUNT NOT SO SET OFF SHALL BE SET OFF FROM THE INCOME UNDER ANY OTHER HEAD, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR; (III) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANN OT BE WHOLLY SET OFF UNDER CLAUSE (I) AND CLAUSE (II), THE AMOUN T OF ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING A SSESSMENT YEAR, AND (A) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI NS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESS ABLE FOR THAT ASSESSMENT YEAR ; (B) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT BE WHOLLY SO SETOFF, THE AMOUNT OF UNABSORBED DEPRECIATION AL LOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSES SMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEE DING THE ASSESSMENT YEAR FOR WHICH THE AFORESAID ALLOWANCE W AS FIRST COMPUTED: PROVIDED THAT THE TIME LIMIT OF EIGHT ASSESSMENT YE ARS SPECIFIED IN SUB-CLAUSE (B) SHALL NOT APPLY IN CASE OF A COMP ANY FOR THE ASSESSMENT YEAR BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANY (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986), AND ENDING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR I N WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEE DS THE ACCUMULATED LOSSES. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA) OF S UB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985.' 34. THE AFORESAID PROVISION WAS INTRODUCED BY THE F INANCE (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. 9 ITA NO. 1203/PN/2013, A.Y. 2006-07 35. SECTION 32(2) OF THE ACT WAS AMENDED BY THE FIN ANCE ACT, 2001, AND THE PROVISION SO AMENDED READS AS UNDER : 'WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFF ECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVI OUS 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 PAR T 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 TH E FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE OF THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PR EVIOUS YEARS.' 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIE D BY THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO. 14 OF 2001 (S EE [2001] 252 ITR (ST.) 65, 90). THE RELEVANT PORTION OF THE SAID CIRCULAR READ S AS UNDER : 'MODIFICATION OF PROVISIONS RELATING TO DEPRECIATIO N 30.1 CINDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N IS ALLOWED FOR EIGHT ASSESSMENT YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFF ICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WH ERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISPENSED WITH TH E RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED D EPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN COMPUTING THE PROFITS AN D GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPR EDATION UNDER SECTION 32 SHALL BE MANDATORY. 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FOR DEP RECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNNING IT ON HIRE FOR TOURI STS, OR (II) OUTSIDE IN THE ASSESSEE'S BUSINESS OR PROFESSION IN ANOTHER COUNTR Y. 30.4 THE ACT HAS ALLOWED DEPRECIATION ALLOWANCE ON ALL I MPORTED MOTOR CARS ACQUIRED ON OR AFTER 1ST APRIL, 2001. 30.5 THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1ST APRI L, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS ESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS.' 37. THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR CLAR IFIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO C ONSERVE SUFFICIENT FUNDS TO 10 ITA NO. 1203/PN/2013, A.Y. 2006-07 REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AME NDMENT DISPENSES WITH THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AN D SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBE D DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2 002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH 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 TH E INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPREDATIO N; ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSE QUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY THE FI NANCE ACT, 2001, IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEV ER, 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 HARMONIOU S INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING THE TAXING STATUTES, RULE O F 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 ASSESS EE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEA R WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENI ED. 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 YE AR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. T HEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE ASSESSMENT YEARS 1997- 98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FO RWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART T HEREOF COULD NOT BE SET OFF TILL THE ASSESSMENT YEAR 2002-03 THEN IT WOULD BE C ARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBS EQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE 40 FIRST PLACE FROM THE INCOME OF THE BUSINESS TO W HICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF TH E PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROF ITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY T HE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURIN G THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED A S UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE I S CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT 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 AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION T HAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DA Y OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACC ORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINAN CE ACT, 2001. AND ONCE 11 ITA NO. 1203/PN/2013, A.Y. 2006-07 CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICT ION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM THE ASSESSMENT YEAR 19 97-98 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 O F SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. FOR THE AFORESAID REASONS, THIS WRIT PETITION SUCCE EDS AND IS ALLOWED. THE 41 NOTICE ISSUED UNDER SECTION 148 OF THE INC OME-TAX ACT, 1961, DATED MARCH 29, 2011, ANNEXURE A AND THE ASSESSMENT ORDER DATED DECEMBER 27, 2011, PASSED BY THE ASSESSING OFFICER ANNEXURE F RE SPECTIVELY TO THE WRIT PETITION ARE QUASHED. RULE IS MADE ABSOLUTE. THE PA RTIES SHALL BEAR THEIR OWN COSTS. 29. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE HO NBLE GUJARAT HIGH COURT IN CIT VS. GUJARAT THEMIS BIOSYN LTD. (2014) 44 TAXMANN.COM 204 (GUJ) VIDE JUDGMENT DATED 24.02.2014. THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN JCIT VS. M/S. ALUFLUORIDE LTD IN ITA NO.134/VIZA G/2013 RELATING TO ASSESSMENT YEAR 2007-08, VIDE ORDER DATED 05.03.201 4 APPLYING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN GENE RAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA), HELD THAT THE BENEFIT OF SET OFF OF UNABSORBED DEPRECIATION OF ASSESSMENT YEARS 1997-98 AND 1998-99 COULD BE ALLOW ED AGAINST THE INCOME RELATING TO ASSESSMENT YEAR 2007-08. IN APPLYING T HE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT, THE TRIBUNAL HELD THAT THE RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN DHARTI DREDGING & INFRASTRUCTURE LTD. VS. ADDL.CIT (SUPRA) & HONBLE MADRAS HIGH COURT IN CIT VS. PIONEER ASIA PACKING (P.) LTD., (SUPRA) AND CIT VS. S&S POWER SW ITCHGEAR LTD. (SUPRA) WAS NOT CORRECT. THE LEARNED DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE BEFORE US HAD ALSO PLACED RELIANCE ON THE DECISIONS OF DHA RTI DREDGING & INFRASTRUCTURE LTD. VS. ADDL.CIT (SUPRA) AND FURTHE R IN NINESTAR ENTERPRISES (P.) LTD. VS. ACIT (2013) 30 TAXMANN.COM 57 (HYD.) AND A LSO HONBLE MADRAS HIGH COURT IN CIT VS. PIONEER ASIA PACKING (P.) LTD ., (SUPRA) AND CIT VS. S&S POWER SWITCHGEAR LTD. (SUPRA). IN VIEW OF THE SAME BEING CONTRARY TO THE ONLY DECISION OF HONBLE GUJARAT HIGH COURT ON THE ISSUE FOR ALLOWANCE OF SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1999- 2000 AGAINST THE INCOME ARISING IN THE YEAR UNDER A PPEAL I.E. ASSESSMENT YEAR 2008-09 IS OVER RULED BY THE ONLY DECISION BRO UGHT TO OUR NOTICE OF THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA). 30. ANOTHER ASPECT OF THE ISSUE IS THAT WHERE THERE IS ONLY JUDGMENT OF HIGH COURT THOUGH NOT JURISDICTIONAL HIGH COURT AND WHEN NO CONTRARY HIGH COURTS 12 ITA NO. 1203/PN/2013, A.Y. 2006-07 DECISION WAS AVAILABLE ON THE ISSUE, THEN THE HIGH COURTS DECISION HAD TO BE FOLLOWED IN PREFERENCE TO THE DECISION OF SPECIAL B ENCH OF THE TRIBUNAL. THIS WAS THE DECISION OF THIRD MEMBER IN THE CASE OF KAN EL OIL & EXPORTS INDUSTRIES LTD. REPORTED IN 126 TTJ 158 (AHM) (TM). 31. APPLYING THE RATIO LAID DOWN BY THE HONBLE GUJ ARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA) TO THE FACTS OF THE PRESENT CASE, THE ISSUE OF ALLOWABILITY OF UNABSORBED DEPRE CIATION RELATING ASSESSMENT YEAR 1999-2000 AGAINST THE INCOME ARISING IN ASSESS MENT YEAR 2008-09 IS TO BE SET OFF AND CONSEQUENTLY, THE ORDER PASSED BY TH E ASSESSING OFFICER IN THIS REGARD CANNOT BE SAID TO BE PREJUDICIAL TO THE INTE REST OF REVENUE. CONSEQUENTLY, THE REVISIONARY POWERS EXERCISED BY T HE COMMISSIONER AGAINST THE ORDER OF ASSESSMENT WHICH IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE, EVEN WHERE THE ORDER PASSED BY THE ASSESSING OFFICE R WAS ERRONEOUS, CANNOT BE EXERCISED, SINCE THE TWIN CONDITIONS HAVE NOT BE EN FULFILLED IN THE CASE. IN VIEW THEREOF, WE REVERSE THE DIRECTIONS OF THE COMM ISSIONER IN THIS REGARD AND UPHOLD THE ORDER OF ASSESSING OFFICER IN ALLOWING T HE SET OFF OF UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1999-2000 AMOUNTING TO RS.5,41,84,430/- CLAIMED AGAINST THE BUSINESS INCOM E FOR ASSESSMENT YEAR 2008-09 IN COMPUTATION OF INCOME. THE DIRECTIONS O F THE COMMISSIONER IN THIS REGARD ARE THUS, REVERSED AND THE ORDER OF ASSESSIN G OFFICER IS RESTORED. 8. WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS IDENTICA L TO THE ONE ALREADY ADJUDICATED BY THE TRIBUNAL IN THE CASE OF M/S. SAB MILLER BREWERIES PVT. LTD. VS. ACIT (SUPRA). ACCORDINGLY, WE HOLD T HAT THERE IS NO INFIRMITY IN THE ORDER OF ASSESSING OFFICER IN ALLOWING THE ASSES SEE TO CARRY FORWARD UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR S 1996-97 AND 1997-98 TO BE SET OFF AGAINST THE PROFIT OF THE ASSESSEE FROM BUSINESS OR PROFESSION FROM ASSESSMENT YEAR 2006-07. 9. THE ASSESSEE IN APPEAL HAS RAISED 4 GROUNDS. GROUN DS NO. 1 AND 4 ARE GENERAL IN NATURE AND THUS, REQUIRE NO ADJUDICATION. THE LD.AR OF THE ASSESSEE HAS NOT PRESSED GROUND NO. 3 RELATING TO JUR ISDICTION U/S. 263 ASSUMED BY COMMISSIONER OF INCOME TAX OVER THE ORDER O F DRP. ACCORDINGLY, GROUND NO. 3 IS DISMISSED AS NOT PRESSED. TH E LD. AR OF THE 13 ITA NO. 1203/PN/2013, A.Y. 2006-07 ASSESSEE HAS CONFINED HIS SUBMISSIONS TO GROUND NO. 2 WHE REIN HE HAS CHALLENGED THE ORDER OF COMMISSIONER OF INCOME TAX IN ASS UMING JURISDICTION U/S. 263. THIS ISSUE HAS ALREADY BEEN ADJUDICA TED ABOVE IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ACCEPTE D IN AFORESAID TERMS AND THE IMPUGNED ORDER IS SET ASIDE. ORDER PRONOUNCED ON FRIDAY, THE 31 ST DAY OF JULY, 2015 AT PUNE. SD/- SD/- ( / R.K. PANDA) ( ! ' / VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER # PUNE; $% /DATED : 31 ST JULY, 2015 RK/PS *+,#-. / '- # COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & ' ( / THE CIT-V, PUNE 4 . !)* ++,- , ,- , . / 0 123 , # DR, ITAT, A BENCH, PUNE 5 . * 4 5 # GUARD FILE. // ! + //TRUE COPY// *% / BY ORDER, #%0 1) PRIVATE SECRETARY, ' /ITAT, PUNE
