M/s. Goodyear South Asia Tyres Pvt. Ltd., Aurangabad V. CIT, Circle 1, Aurangabad

ITA 1212/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89060 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: GIRISH DAVE MS KADAMBARI DAVE
• Keywords: Business income; Depreciation; Principle of natural justice; Question of law; Reason to believe; Unabsorbed depreciation
• Section: 143(3); 32; 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1212/PN/2013 ASSESSMENT YEAR: 2007-08 M/S. GOODYEAR SOUTH ASIA TYRES PVT LTD., H-18, MIDC INDUSTRIAL AREA, WALUJ, AURANGABAD. . APPELLANT PAN: AABCG5544P VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD . RESPONDENT APPELLANT BY : SHRI GIRISH DAVE, MS.KADAMBARI DAVE RESPONDENT BY : SHRI A.K. MODI, CIT DATE OF HEARING : 11-03-2015 DATE OF PRONOUNCEMENT : 25-03-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT, AURANGABAD, DATED 22.03.2013 RELATING TO ASSESSMENT YEAR 2007-0 8 AGAINST ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) (A) THAT THE IMPUGNED ORDER OF THE CIT, IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT, IS AGAINST LAW AND HENCE LIABLE TO BE QUASHED. (B) THAT THE CIT GROSSLY ERRED IN LAW IN IGNORING T HE SETTLED LAW THAT THE POWER UNDER SECTION 263 OF THE ACT IS A STRINGENT P ROVISION AND CANNOT BE USED AS A CORRECTIVE PROVISION. 2) (A) THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ERRED IN EXERCISING HIS POWERS UNDER SECTION 263 OF THE A CT WITHOUT APPRECIATING THAT THE VIEW TAKEN BY THE LD. ASSESSING OFFICER (' AO') IN HIS ORDER PASSED UNDER SECTION 143(3) OF THE ACT IS A PLAUSIB LE VIEW. ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 2 (B) THAT THE CIT GROSSLY ERRED IN IGNORING A CATENA OF JUDGMENTS WHICH HAVE HELD THAT IF THE VIEW TAKEN BY THE AO IS A PLA USIBLE VIEW, THEN HE HAS NOT COMMITTED AN 'ERROR' SO AS TO INVOKE THE PROVIS IONS OF S. 263 OF THE ACT. (C) THAT THE CIT GROSSLY ERRED IN LAW IN HOLDING TH AT THE POWER OF REVISION UNDER SECTION 263 OF THE ACT CAN BE INVOKED EVEN IN CASES WHERE THE ISSUE INVOLVED IS A DEBATABLE ISSUE. 3) (A) THAT THE CIT GROSSLY ERRED IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE AO IS PREJUDICIAL TO THE INTEREST OF REVENUE. (B) THAT THE CIT GROSSLY ERRED IN NOT APPRECIATING THAT THE AO HAS ALREADY DISALLOWED THE IMPUGNED CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS.83,53,70,425 IN THE SUBSEQUENT ASSESSMENT YEAR 2 008-09 AND HENCE EVEN IF THE SAID UNABSORBED DEPRECIATION IS ALLOWED TO CARRIED FORWARD IN THE RELEVANT ASSESSMENT YEAR I.E. 2007-08, NO PREJU DICE WOULD BE CAUSED TO THE INTEREST OF THE REVENUE. (C) THAT THE CIT ERRED IN LAW IN HOLDING THE ASSESS MENT ORDER AS PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT O F AN ERROR IN COMPUTATION MADE BY THE AO AMOUNTING TO RS. 35,93,947 WITHOUT A PPRECIATING THAT THE SAID ERROR IN COMPUTATION HAS TAX NEUTRAL IMPACT AN D DOES NOT PREJUDICE THE INTEREST OF REVENUE. THE CIT HAS ERRED IN IGNOR ING THE SETTLED LAW THAT THE ERRORS NOT CAUSING PREJUDICE TO THE INTERESTS O F THE REVENUE CANNOT FORM A SUBJECT MATTER FOR INITIATING 263 PROCEEDING S. 4) (A) THAT THE CIT WITHOUT ANY BASIS GROSSLY ERRE D IN HOLDING THAT THE AO MADE THE ASSESSMENT WITHOUT APPLICATION OF MIND ON THE BASIS OF HYPOTHETICAL GROUNDS WITHOUT VERIFYING THE FACTS AN D DRAWING INCORRECT CONCLUSIONS ON THE BASIS OF WRITTEN SUBMISSIONS FIL ED BY THE APPELLANT. (B) THAT THE CIT ERRED IN IGNORING THE FACT THAT AL L THE RELEVANT DETAILS WITH RESPECT TO CARRY FORWARD OF UNABSORBED DEPRECIATION WERE PROVIDED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHIC H WERE DULY CONSIDERED BY THE AO WHILE PASSING THE ASSESSMENT O RDER. (C) THAT THE CIT ALSO ERRED IN IGNORING THE PLETHOR A OF JUDGMENTS CITED BY THE APPELLANT IN THIS REGARD. 5) (A) WITHOUT PREJUDICE TO ABOVE, THE CIT ERRED I N DIRECTING THE AO TO RESTRICT THE APPELLANT'S CLAIM OF CARRY FORWARD OF UNABSORBE D DEPRECIATION OF RS.83,53,70,425 PERTAINING TO AY 1995-96 TO 1998-99 TO BE CARRIED FORWARD TO AY 2007-08. (B) WITHOUT PREJUDICE TO ABOVE, THE CIT ERRED IN HO LDING THAT THE UNABSORBED DEPRECIATION FOR AY 1995-96 TO 1998-99 C ANNOT BE CARRIED FORWARD BEYOND 8 YEARS. (C) WITHOUT PREJUDICE TO ABOVE, THE CIT ERRED IN NO T FOLLOWING THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERA L MOTORS, WHICH BEING THE ONLY HIGH COURT DECISION ON THIS ISSUE IS BINDI NG ON THE CIT (D) THAT THE CIT GROSSLY ERRED IN DISTINGUISHING TH E JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS ON FRIVOLOUS GROUNDS. (E) WITHOUT PREJUDICE TO ABOVE, THE CIT ERRED IN RE LYING ON THE JUDGMENT OF SPECIAL BENCH OF THIS HON'BLE TRIBUNAL IN THE CASE OF TIMES GUARANTY FOR DISALLOWING THE APPELLANT'S CLAIM FOR CARRY FORWARD OF UNABSORBED DEPRECIATION OF AY 1995-96 TO 1998-99 WITHOUT APPRE CIATING THAT THE SPECIAL BENCH JUDGMENT WAS RENDERED ON DIFFERENT SE T OF FACTS AS COMPARED TO THAT OF THE APPELLANT. ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 3 THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR MODI FY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF T HE APPEAL, IF IT IS CONSIDERED NECESSARY. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF AUTOMOTIVE TY RES, TUBES & FLAPS AT AURANGABAD. THE ASSESSEE HAD FURNISHED RETURN OF I NCOME DECLARING NIL INCOME. THEREAFTER, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 144C OF THE ACT VIDE ORDER DATED 30.12.2010 ON ASSESSED INCOME OF RS.35,93,947/-. THE SAID ADDITION WAS ADJUSTED BY THE ASSESSING OFFICER AGAINST THE BUSINESS LOSSES FOR ASSESSMENT YEAR 1999-2000 AND TOTAL INCOME WAS DETERMINED AT NIL. 5. THE COMMISSIONER ON VERIFICATION OF THE ASSESSME NT RECORDS HAD REASON TO BELIEVE THAT THE ORDER PASSED BY THE ASSESSING O FFICER WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN AS TO HOW THE ENTIRE UNABSO RBED BUSINESS LOSS FOR ASSESSMENT YEAR 1999-2000 WAS ADJUSTED AGAINST THE PROFITS DETERMINED FOR ASSESSMENT YEAR 2007-08. ON VERIFICATION OF CASE R ECORDS, IT WAS NOTED BY THE COMMISSIONER THAT THE ASSESSEE HAD CLAIMED CARRY FO RWARD OF UNABSORBED DEPRECIATION OF RS.140.25 CRORES FOR ASSESSMENT YEA RS 1995-96 TO 1999-2000 IN FINANCIAL YEAR 2006-07. HOWEVER, UNDER THE PROVISI ONS OF THE ACT AND IN THE LIGHT OF RATIO LAID DOWN BY SPECIAL BENCH OF MUMBAI TRIBU NAL IN DCIT VS. M/S. TIME GUARANTY LIMITED VIDE ITA NOS.4917 & 4918/MUM/2008, THE UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEARS 1995-96 T O 1999-2000 WERE TO BE DEALT WITH AS PER THE PROVISIONS OF SECTION 32(2) OF THE ACT AS APPLICABLE FOR THOSE YEARS AND THUS, THE CARRY FORWARD OF UNABSORBED DEPRECIAT ION OF ASSESSMENT YEARS 1995-96 TO 1999-2000 CLAIMED IN ASSESSMENT YEAR 200 7-08 WAS NOT PERMISSIBLE AND DESERVED TO BE DISALLOWED. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED, THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS WHICH WERE T AKEN ON RECORD AND EVEN ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 4 THE RELIANCE PLACED UPON VARIOUS DECISIONS BY THE A SSESSEE WERE CONSIDERED BY THE COMMISSIONER. THE COMMISSIONER WAS OF THE VIEW THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE WERE TOTALLY DIFFERENT FROM TH E FACTS OF THE PRESENT CASE AS IN THE PRESENT CASE, THE ASSESSING OFFICER HAD PASS ED THE ORDER ON THE BASIS OF HYPOTHETICAL GROUNDS WITHOUT VERIFYING THE GROUNDS AND THUS, INCORRECT CONCLUSION HAD BEEN DRAWN BY HIM WITHOUT APPLICATION OF MIND. THE COMMISSIONER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPR EME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC) AND OBSERVED THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS NOT ONLY ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND THE ASSESSEES CONTENTION I N THIS REGARD, WAS WITHOUT ANY SUBSTANCE AND WAS TO BE REJECTED. 6. IN RESPECT OF THE ISSUE RAISED VIDE SHOW CAUSE N OTICE ISSUED UNDER SECTION 263 OF THE ACT, THE COMMISSIONER OBSERVED THAT SET OFF OF BROUGHT FORWARD BUSINESS LOSSES FOR ASSESSMENT YEAR 1999-2000 AGAIN ST THE ADDITIONS MADE IN FINANCIAL YEAR 2006-07 WERE ERRONEOUS AND ALSO PREJ UDICIAL TO THE INTEREST OF REVENUE SINCE THE ENTIRE UNABSORBED BUSINESS LOSSES HAD BEEN ADJUSTED AGAINST THE SAID INCOME. THE COMMISSIONER THUS DIRECTED TH E ASSESSING OFFICER TO ADJUST THE INCOME DETERMINED FOR THE YEAR UNDER APP EAL AT RS.35,93,947/- AGAINST THE UNABSORBED BUSINESS LOSS FOR ASSESSMENT YEAR 2000-01. THE COMMISSIONER FURTHER OBSERVED THAT THE UNABSORBED DEPRECIATION LOSS FOR A.Y. 2000-01 TO THE EXTENT OF RS.3,24,73,391/- HAS ALREA DY BEEN SET OFF BY THE ASSESSEE IN THE COMPUTATION OF INCOME AND BALANCE B USINESS LOSS FOR A.Y. 2001- 02 AMOUNTING TO RS.7,07,63,721/- HAS BEEN ALLOWED T O BE CARRIED FORWARD. THE ADDITIONS MADE FOR A.Y. 2007-08 DETERMINING INCOME AT RS.35,93,947/- NEEDS TO BE SET OFF AGAINST THE BALANCE UNABSORBED BUSINESS LOSS FOR A.Y. 2000-01 AND BALANCE BUSINESS LOSS RS.6,71,69,774/- (7,07,63,721 35,93,947) REQUIRES TO BE CARRIED FOR SUBSEQUENT YEARS. THE AO IS DIRECTED T O VERIFY AND GIVE NECESSARY EFFECT TO THE SUBSEQUENT YEARS CONSEQUENT TO THIS O RDER. ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 5 7. WITH REGARD TO THE CLAIM OF CARRY FORWARD UNABSO RBED DEPRECIATION FOR ASSESSMENT YEARS 1995-96 TO 1999-2000, THE ASSESSEE HAD RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN GENERAL M OTORS INDIA PVT. LTD. VS. DCIT (2013) 354 ITR 244 (GUJ), WHEREIN IT HAS BEEN HELD THAT UNABSORBED DEPRECIATION FOR ASSESSMENT YEARS 1996-97 TO 2001-0 2 WHEN CARRIED FORWARD TO ASSESSMENT YEAR 2002-03 BECOMES A PART OF UNABSORBE D DEPRECIATION OF ASSESSMENT YEAR 2002-03 AND SHALL HAVE TO BE DEALT WITH IN ACCORDANCE WITH PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED B Y FINANCE ACT, 2001, WHICH PROVIDES FOR CARRY FORWARD OF UNABSORBED DEPRECIATI ON, WITHOUT ANY TIME LIMITATION. THE COMMISSIONER WAS OF THE VIEW THAT THERE WAS ONLY DECISION OF HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA) ON THE SAID ISSUE, THE SAME WAS NOT ACCEPTABLE FOR THE REASON THAT IN THE CASE OF PATIL VIJAYKUMAR AND ORS. VS. UNION OF INDIA & ANR. (1985) 151 ITR 48 (KAR) AND ALSO IN THE CASE OF GEOFFREY MANNERS & CO. LTD. VS. CIT (1996) 221 ITR 695 (BOM), IT WAS HELD THAT THE DECISION OF HONBLE HIG H COURT IS NOT BINDING ON ANOTHER HIGH COURT AND ALSO NOT BINDING ON TRIBUNAL IN OTHER STATES. THE COMMISSIONER FURTHER OBSERVED THAT THE ISSUE BEFORE THE UNDERSIGNED IS THAT AS TO WHETHER THE UNABSORBED DEPRECIATION FOR A.Y. 199 5-96 TO 1999-2000 IS ALLOWED TO BE CARRIED FORWARD IN VIEW OF THE AMENDE D PROVISIONS OF SECTION 32(2) OF THE ACT AND NOT UNABSORBED DEPRECIATION FOR A.Y. 2002-03. FURTHER, RELIANCE WAS PLACED ON THE CIRCULAR NO.762 ISSUED BY CBDT AN D IN THE LIGHT OF THE SAID CIRCULAR AS WELL AS THE DECISION OF THE SPECIAL BEN CH OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTEE LTD. (SUPRA), THE COMMISSIONER WAS OF THE VIEW THAT THE UNABSORBED DEPRECIATION FOR ASSESSMENT YEARS 1995-9 6 AND 1996-97 NEEDS TO BE ADDED FOR ALLOWANCE FOR ASSESSMENT YEAR 1997-98 AND DEEMED TO BE THE ALLOWANCE OF ASSESSMENT YEAR 1997-98. THE UNABSORB ED DEPRECIATION FOR ASSESSMENT YEARS 1995-96 TO 1998-99 WAS NOT ALLOWED TO BE CARRIED FORWARD FOR ASSESSMENT YEAR 2007-08, WHICH WAS BEYOND PERIOD OF EIGHT YEARS FROM THE ASSESSMENT UNDER CONSIDERATION. THEREFORE, UNABSOR BED DEPRECIATION FOR ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 6 ASSESSMENT YEARS 1995-96 TO 1998-99 TOTALING RS.83 ,53,70,415/- WAS HELD TO BE NOT ALLOWED TO BE CARRIED FORWARD FOR SUBSEQUENT YE ARS. THE ASSESSING OFFICER WAS THUS, DIRECTED TO RESTRICT THE CLAIM OF UNABSOR BED DEPRECIATION TO BE ALLOWED TO BE CARRIED FORWARD FOR THE YEAR UNDER CONSIDERAT ION, WHILE GIVING EFFECT TO THE ORDER PASSED UNDER SECTION 263 OF THE ACT. 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT THE ISSUE ON SUBSTANTIAL BASIS IN THE PRESENT CASE HAS BEEN SETTLED BY THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA). IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED R EPRESENTATIVE FOR THE ASSESSEE THAT THE EXERCISE OF REVISIONARY POWER UND ER SECTION 263 OF THE ACT BY THE COMMISSIONER IS MIS-PLACED, IN VIEW OF THE SAID RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA). FURTHER, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN MILTONS PVT. LIMITED VS. CIT, IN ITA N O.3019/MUM/2012, ORDER DATED 22.05.2013, WHEREIN SIMILAR ISSUE OF EXERCISE OF JU RISDICTION UNDER SECTION 263 OF THE ACT VIS--VIS CLAIM OF SET OFF OF UNABSORBED DE PRECIATION RELATING TO ASSESSMENT YEARS 1995-96, 1998-99 ITSELF AGAINST TH E INCOME FOR ASSESSMENT YEAR 2007-08, AROSE AND IN TURN RELYING ON THE RATI O LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD . VS. DCIT (SUPRA) AND ALSO CONSIDERING THE RATIO LAID DOWN BY THE SPECIAL BENC H OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTEE LTD. (SUPRA), IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO AS SESSMENT YEAR 1995-96 ONWARDS. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF COMMISSIONER. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE, THE COMMISSIONER HAD EXERCISED REVISIONARY POWERS UNDER ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 7 SECTION 263 OF THE ACT HOLDING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER TO BE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, WHERE THE ASSESSING OFFICER HAD ALLOWED THE SET OFF OF BROUGH T FORWARD UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEARS 1995-96 T O 1998-99 TO BE SET OFF AGAINST THE ASSESSED INCOME DETERMINED IN ASSESSMEN T YEAR 2007-08. THE COMMISSIONER WAS OF THE VIEW THAT IN VIEW OF THE RA TIO LAID DOWN BY THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTE E LTD. (SUPRA), THE UNABSORBED DEPRECIATION RELATING TO YEARS UP TO 199 7-98 COULD NOT BE SET OFF AGAINST THE INCOME ARISING IN ASSESSMENT YEAR 2007- 08 BECAUSE OF THE AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT. HOWEVER, T HE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA) HAD REVERSED THE RATIO LAID DOWN BY THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN DCI T VS. TIMES GUARANTEE LTD. (SUPRA) AND CONSEQUENTLY, IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO THE CLAIM OF SET OFF OF UNABSORBED DEPRECIATION RELATIN G TO ASSESSMENT YEARS UP TO 1997-98 AGAINST THE INCOME ARISING IN THE LATER YEA RS AFTER CONSIDERING THE AMENDED PROVISIONS OF THE ACT. 11. WE FIND THAT IDENTICAL ISSUE OF SET OFF OF UNAB SORBED DEPRECIATION RELATING TO ASSESSMENT YEARS UP TO 1997-98 AGAINST INCOME DE TERMINED IN ASSESSMENT YEAR 2008-09 AROSE BEFORE THE TRIBUNAL IN THE CASE OF M/S. SAB M ILLER BREWERIES PVT. LTD. VS. ACIT, ITA NO.1176/PN/2013, ORDER DATE D 27.02.2015. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT I N GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA), IT WAS HELD THAT THE ORDER P ASSED BY THE ASSESSING OFFICER WAS NOT PREJUDICIAL TO THE INTEREST OF REVENUE AND CONSEQUENTLY EXERCISE OF POWER UNDER SECTION 263 OF THE ACT WAS QUASHED BY T HE TRIBUNAL. UNDER THE PROVISIONS OF SECTION 263 OF THE ACT, IT IS THE SAT ISFACTION OF TWIN CONDITIONS OF THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, JUSTIFIES THE EXERCISE OF REVISIONARY POWER BY THE COMMISSIONER. BOTH THE TWIN CONDITIONS HAVE TO BE SATISFIED SIMULTANEOUSLY BEFO RE JURISDICTION UNDER SECTION ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 8 263 OF THE ACT CAN BE EXERCISED. IN CASE, EITHER O F THE TWO CONDITIONS IS NOT SATISFIED, THEN THE ORDER OF COMMISSIONER PASSED UN DER SECTION 263 OF THE ACT IS INVALID. 12. THE TRIBUNAL IN M/S. SAB MILLER BREWERIES PVT. LTD. VS. ACIT (SUPRA) OBSERVED AS UNDER:- 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. UNDER THE PROVISIONS OF SECTION 263 OF THE ACT, THE COMMI SSIONER IS EMPOWERED TO EXERCISE HIS JURISDICTION WHERE THE ASSESSMENT O RDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND IS ALSO PREJUDIC IAL TO THE INTEREST OF REVENUE. BEFORE EXERCISING THE REVISIONARY POWER U NDER SECTION 263 OF THE ACT, THE COMMISSIONER HAS TO COME TO A FINDING THAT THE ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER IS ALSO PREJU DICIAL TO THE INTEREST OF REVENUE. IN OTHER WORDS, BOTH THE CONDITIONS OF TH E ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E ARE TO BE FULFILLED IN CASE THE COMMISSIONER WISHES TO EXERCISE THE JURISD ICTION UNDER SECTION 263 OF THE ACT. THE COURTS HAVE TIME AND AGAIN DEL IBERATED UPON THE ISSUE OF WHEN AND WHERE THE ASSESSMENT ORDER CAN SA ID TO BE ERRONEOUS AND SUCH ERRONEOUS ORDER IF IT HAS RESULTED IN ESCA PEMENT OF INCOME FROM BEING BROUGHT TO TAX, THEN SUCH ORDER IS PREJUDICIA L TO THE INTEREST OF REVENUE. THE HONBLE SUPREME COURT IN MALABAR INDU STRIES COMPANY LTD V CIT 243 ITR 83 (SC) HAS HELD AS UNDER:- 'THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS P ASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE, RE VENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UN DERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CO NFINED TO LOSS OF TAX. THE HIGH COURT OF CALCUTTA IN DAWJEE DADABHOY AND CO. V. S. P. JAIN [1957] 31 ITR 872. THE HIGH COURT OF KARNATAKA IN CIT V. T. NARAYANA PAI [1975] 98 ITR 422, THE HIGH COURT OF BOMBAY IN CIT V. GABRIEL INDIA LTD. [1993] 203 ITR 108 AND THE HIGH COURT OF GUJARAT IN CIT V. SMT. MINALBEN S. PARIKH [1995] 21 5 ITR 81 TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKATAKRISHNA RICE COMPANY V. CIT [1987] 163 ITR 129 INTERPRETING 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 'THE HIGH COURT HELD (PAGE 138) : 'IN THIS CONTEXT, IT MUST BE REGARDED AS INVOLVING A CONCEPTION OF ACTS OR OR DERS WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVENUE. THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASSED BY THE INCOME-TA X OFFICER, WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSESS MENTS, WHICH ON A BROAD RECKONING, THE COMMISSIONER MIGHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRATION.' IN OUR VIEW, THIS ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 9 INTERPRETATION IS TOO NARROW TO MERIT ACCEPTANCE. T HE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVE NUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSE QUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS AR E POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHIC H THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW.' 22. IN THE FACTS OF THE PRESENT CASE, THE COMMISSIO NER WAS OF THE VIEW THAT THE CONCLUSION DRAWN BY THE ASSESSING OFFICER ON THE BASIS OF WRITTEN SUBMISSIONS FILED BY THE ASSESSEE WAS WITHOUT APPLI CATION OF MIND. IN VIEW THEREOF, THE ORDER WAS HELD TO BE BOTH ERRONEO US AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE COMMISSIONER THEREAFT ER, REFERRED TO THE RATIO LAID DOWN BY THE SPECIAL BENCH OF MUMBAI TRIB UNAL IN DCIT VS. TIMES GUARANTEE LTD. (SUPRA) ON THE INTERPRETATION OF PROVISIONS OF SECTION 32(2) OF THE ACT AND OBSERVED THAT UN-ABSORBED DEPR ECIATION RELATING TO ASSESSMENT YEAR 1999-2000 CANNOT BE SET OFF AGAINST THE BUSINESS INCOME OF ASSESSMENT YEAR 2008-09. THE COMMISSIONE R HELD THAT IN VIEW OF THE PROVISIONS OF SECTION 32(2) OF THE ACT APPLI CABLE FOR ASSESSMENT YEAR 1999-2000, THE UNABSORBED DEPRECIATION FOR ASS ESSMENT YEAR 1999- 2000 AMOUNTING TO RS.5,41,84,430/- NEEDS TO BE DISA LLOWED. THE ASSESSING OFFICER WAS THUS, DIRECTED TO DISALLOW TH E CLAIM OF UNABSORBED DEPRECIATION TO THE EXTENT OF RS.5.41 CRORES WHILE GIVING EFFECT TO THE ORDER OF COMMISSIONER. 23. IN RESPECT OF THE SECOND ISSUE RAISED VIS--VIS THE MANAGEMENT / LICENSE FEES PAID TO SAB MILLER MANAGEMENT (IN) BV NETHERLANDS, THE ISSUE WAS SET-ASIDE TO THE FILE OF ASSESSING OFFICE R TO VERIFY THE ISSUE AND DECIDE THE SAME. 24. IN THE APPEAL FILED BY THE ASSESSEE, THE OBJECT ION HAS BEEN RAISED AGAINST SUCH INVOKING OF JURISDICTION BY THE COMMIS SIONER IN HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON BOTH THE ACCOUNTS. A S THE VARIOUS COURTS HAVE HELD THE TWIN CONDITIONS OF THE ORDER BEING ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ARE TO BE FULFILLED AND IN CASE ANY ONE OF THE CONDITIONS ARE NOT SO FULFILLED, THEN EVEN IF THE O THER CONDITION IS FULFILLED, THE REVISIONARY POWERS CANNOT BE EXERCISED BY THE C OMMISSIONER. 25. WE SHALL FIRST TAKE UP THE FIRST ISSUE OF SETTI NG OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION RELATING TO A.Y. 1999-2000 AGAINST THE BUSINESS INCOME FOR ASSESSMENT YEAR 2008-09. 26. THE CASE OF THE ASSESSEE BEFORE COMMISSIONER WA S THAT THE SAID SET OFF OF UNABSORBED DEPRECIATION CARRIED FORWARD FROM ASSESSMENT YEAR 1999-2000 COULD BE SET OFF AGAINST THE BUSINESS INC OME FOR ASSESSMENT ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 10 YEAR 2008-09. RELIANCE IN THIS REGARD WAS PLACED O N THE RATIO LAID DOWN BY THE DELHI BENCH OF TRIBUNAL IN JAI USHIN LTD. VS DCIT (2008) 117 TTJ (DEL) 330, WHEREIN IT WAS HELD THAT THE ISSUE RELAT ING TO SETTING OFF THE UNABSORBED DEPRECIATION OF ASSESSMENT YEAR 1999-200 0 AGAINST THE INCOME FOR ASSESSMENT YEAR 2003-04 IS REQUIRED TO B E CONSIDERED AND DECIDED IN ACCORDANCE 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 COMMISSION ER WAS THAT THE DECISION IN DCIT VS. TIMES GUARANTY LIMITED (SUPRA) WAS HEARD BEFORE THE HONBLE BOMBAY HIGH COURT 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. THE 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 THE SPECIAL BEN CH OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTY LIMITED (SUPRA) , VIDE ORDER DATED 30.06.2010, WHEREIN IT WAS HELD THAT THE UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1997-98 TO 1999-00 IS TO BE DEAL T 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 RELIED UPON BY THE ASSESSEE WAS NOT RELEVANT AND THE DECISION OF THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN DCIT VS. TIMES GUARANTY LIMITED (SUPRA) HAD TO BE A PPLIED. 27. THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTOR S INDIA PVT. LTD. VS. DCIT (2013) 354 ITR 244 (GUJ) VIDE JUDGMENT DAT ED 23.08.2012 HAD ELABORATED UPON THE ISSUE OF CLAIM OF UNABSORBED DE PRECIATION AND THE LAW APPLICABLE AND ALSO THE EFFECT OF AMENDMENT TO SECTION 32(2) OF THE ACT BY THE FINANCE ACT, 2001 AND IT WAS HELD THAT T HE AMENDMENT MADE TO SECTION 32(2) OF THE ACT BY THE FINANCE ACT, 2001 W AS APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. IT W AS FURTHER HELD THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO THE ASSESS EE ON THE FIRST DAY OF APRIL, 2002 WOULD BE DEALT IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED BY THE FINANCE ACT, 200 1 AND NOT BY THE PROVISIONS OF SECTION 32(2) OF THE ACT AS IT STOOD BEFORE THE SAID AMENDMENT. IT WAS FURTHER HELD BY THE HONBLE GUJA RAT HIGH COURT THAT HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPREDATION ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER TH E AMENDMENT OF SECTION 32(2) BY THE FINANCE ACT, 2001, IT WOULD HA VE INCORPORATED A PROVISION TO THAT EFFECT. 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 ASSES SMENT YEAR 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SE CTION 32 AS AMENDED BY THE FINANCE 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 1996, WIT H EFFECT FROM THE ASSESSMENT YEAR 1997-98 AND THE UNABSORBED DEPR ECIATION FOR THE ASSESSMENT YEAR 1997-98 COULD BE CARRIED FORWAR D UP TO THE MAXIMUM PERIOD OF EIGHT YEARS FROM THE YEAR IN WHIC H IT WAS FIRST COMPUTED. ACCORDING TO THE ASSESSING OFFICER, EIGHT YEARS EXPIRED IN THE ASSESSMENT YEAR 2005-06 AND ONLY TILL THEN, THE ASSESSEE WAS ELIGIBLE TO CLAIM UNABSORBED DEPRECIATION OF TH E ASSESSMENT YEAR 1997-98 FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 11 INCOME FOR THE ASSESSMENT YEAR 2005-06. BUT THE ASS ESSEE WAS NOT ENTITLED FOR UNABSORBED DEPRECIATION OF RS.43,6 0,22,158 FOR THE ASSESSMENT YEAR 1997-98, WHICH WAS NOT ELIGIBLE FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE ASSE SSMENT 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 F ORWARD INDEFINITELY AND BY A DEEMING FICTION BECAME ALLOWA NCE OF THE IMMEDIATELY SUCCEEDING YEAR. THE FINANCE (NO. 2) AC T OF 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DEPRECIA TION AND SET-OFF TO A LIMIT OF EIGHT YEARS, FROM THE ASSESSMENT YEAR 1997-98. CIRCULAR NO. 762, DATED FEBRUARY 18, 1998 (SEE [199 8] 230 ITR (ST.) 12), ISSUED BY THE CENTRAL BOARD OF DIRECT TA XES (CBDT) IN THE FORM OF EXPLANATORY NOTES CATEGORICALLY PROVIDED, T HAT THE UNABSORBED DEPRECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FULL EFFECT CANNOT BE GIVEN IN THAT PREVIOUS YEAR S HALL 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 TH E ASSESSMENT YEAR 1996-97 WOULD BE ADDED TO THE ALLO WANCE OF THE ASSESSMENT YEAR 1997-98 AND THE LIMITATION OF EIGHT YEARS FOR THE CARRY FORWARD AND SET OFF OF SUCH UNABSORBED DEPREC IATION WOULD START FROM THE ASSESSMENT 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, RE AD 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 PROFI TS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR OWING TO THE PROFITS OR GAINS BEING LESS THAN THE ALLOWANCE, THE N, THE ALLOWANCE OR THE PART OF ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN (HEREINAFTER REFERRED TO AS UNABSORBED DEPRECIATION 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 ASSESSABLE 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 HE AD, 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 AMOUNT OF ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWAR D TO THE FOLLOWING ASSESSMENT YEAR, AND (A) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI NS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HI M AND ASSESSABLE FOR THAT ASSESSMENT YEAR ; ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 12 (B) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT BE WHOLLY SO SETOFF, THE AMOUNT OF UNABSORBED DEPRE CIATION ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD T O THE FOLLOWING ASSESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSM ENT YEAR FOR WHICH THE AFORESAID ALLOWANCE WAS FIRST CO MPUTED: PROVIDED THAT THE TIME LIMIT OF EIGHT ASSESSMENT YE ARS SPECIFIED IN SUB-CLAUSE (B) SHALL NOT APPLY IN CASE OF A COMPANY FOR THE ASSESSMENT YEAR BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY U NDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIA L COMPANY (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986), AND END ING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR I N 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 CLA USE (GA) OF SUB-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 FINANC E ACT, 2000. THE PROVISION INTRODUCED BY THE FINANCE (NO. 2) ACT WAS CLARIFIED BY THE FINANCE MINISTER TO BE APPLICABLE WITH PROSPECT IVE EFFECT. 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 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, THE N, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SEC TION 72 AND SUB-SECTION (3) OF SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS TH E CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWAN CE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DE EMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH A LLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE O F THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOU S YEARS.' 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIE D BY THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO. 14 OF 2001 (SEE [2001] 252 ITR (ST.) 65, 90). THE RELEVANT PORTION OF THE SAID CIRCULAR READS 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 UNABSO RBED DEPRECIATION IS ALLOWED FOR EIGHT ASSESSMENT YEARS. ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 13 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFF ICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WHERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HA S DISPENSED WITH THE RESTRICTION OF EIGHT YEARS FOR C ARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN COMPUTING THE PROFITS AND GAINS O F BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF D EPREDATION UNDER SECTION 32 SHALL BE MANDATORY. 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FOR DEPRECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTUR ED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESS EE'S BUSINESS OR PROFESSION IN ANOTHER COUNTRY. 30.4 THE ACT HAS ALLOWED DEPRECIATION ALLOWANCE ON ALL IMPORTED 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 T HE ASSESSMENT 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 INDUST RY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF EIGHT Y EARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM THE ASSESSMENT YEAR 2002-03 AND SUB SEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2002 (THE ASSE SSMENT 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 THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPREDATION; ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFT ER THE AMENDMENT OF SECTION 32(2) BY THE FINANCE 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 PURPOS IVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CO NSTRUING 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 AS SESSEE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECT ION 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 BUSI- NESS 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 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 FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSOR BED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF T ILL THE ASSESSMENT ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 14 YEAR 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT 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 WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LA RGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH E XCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHE R BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT O F INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME D URING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, I T IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THER EOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATIO N ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSE E ON THE 1ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), W ILL 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 FORWA RD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, TH E 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 F INANCE ACT, 2001, AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF 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 O F THE INCOME-TAX ACT, 1961, DATED MARCH 29, 2011, ANNEXURE A AND THE ASSESSMENT ORDER DATED DECEMBER 27, 2011, PASSED BY THE ASSESS ING OFFICER ANNEXURE F RESPECTIVELY TO THE WRIT PETITION ARE QU ASHED. RULE IS MADE ABSOLUTE. THE PARTIES SHALL BEAR THEIR OWN COS TS. 29. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE H ONBLE GUJARAT HIGH COURT IN CIT VS. GUJARAT THEMIS BIOSYN LTD. (2014) 44 TAXMANN.COM 204 (GUJ) VIDE JUDGMENT DATED 24.02.2014. THE VISAKHAP ATNAM BENCH OF THE TRIBUNAL IN JCIT VS. M/S. ALUFLUORIDE LTD IN ITA NO .134/VIZAG/2013 RELATING TO ASSESSMENT YEAR 2007-08, VIDE ORDER DATED 05.03. 2014 APPLYING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT I N GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA), HELD THAT THE BENEFIT O F SET OFF OF UNABSORBED DEPRECIATION OF ASSESSMENT YEARS 1997-98 AND 1998-9 9 COULD BE ALLOWED AGAINST THE INCOME RELATING TO ASSESSMENT YEAR 2007 -08. IN APPLYING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT, THE TRIBUNAL HELD THAT THE RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REP RESENTATIVE FOR THE REVENUE ON THE DECISION OF HYDERABAD BENCH OF THE T RIBUNAL 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 SWITCHGEAR LTD. (SUPRA) WAS NOT CORRECT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE BEFORE US HAD ALSO PLACED RELIANCE ON THE DECISIONS OF DHARTI DREDGING & INFR ASTRUCTURE LTD. VS. ADDL.CIT (SUPRA) AND FURTHER IN NINESTAR ENTERPRISE S (P.) LTD. VS. ACIT ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 15 (2013) 30 TAXMANN.COM 57 (HYD.) AND ALSO HONBLE MA DRAS 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 RELA TING TO ASSESSMENT YEAR 1999-2000 AGAINST THE INCOME ARISING IN THE YE AR UNDER APPEAL I.E. ASSESSMENT YEAR 2008-09 IS OVER RULED BY THE ONLY D ECISION BROUGHT 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 DECISION WAS AVAILABLE ON THE ISSUE, THEN T HE HIGH COURTS DECISION HAD TO BE FOLLOWED IN PREFERENCE TO THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL. THIS WAS THE DECISION OF THIRD MEMBER IN THE CASE OF KANEL 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 ARISIN G IN ASSESSMENT YEAR 2008-09 IS TO BE SET OFF AND CONSEQUENTLY, THE ORDER PASSED BY THE ASSESSING OFFICER IN THIS REGARD CANNOT BE SAID TO BE PREJUDICIAL TO THE INTEREST OF REVENUE. CONSEQUENTLY, THE REVISIONARY POWERS EXERCISED BY THE COMMISSIONER AGAINST THE ORDER OF ASSESSMENT WH ICH IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE, EVEN WHERE THE ORDER PA SSED BY THE ASSESSING OFFICER WAS ERRONEOUS, CANNOT BE EXERCISED, SINCE T HE TWIN CONDITIONS HAVE NOT BEEN FULFILLED IN THE CASE. IN VIEW THERE OF, WE REVERSE THE DIRECTIONS OF THE COMMISSIONER IN THIS REGARD AND U PHOLD THE ORDER OF ASSESSING OFFICER IN ALLOWING THE SET OFF OF UNABSO RBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1999-2000 AMOUNTING TO RS.5,41,84,430/- CLAIMED AGAINST THE BUSINESS INCOME FOR ASSESSMENT YEAR 2008-09 IN COMPUTATION OF INCOME. THE DIRECTIONS OF THE COMMI SSIONER IN THIS REGARD ARE THUS, REVERSED AND THE ORDER OF ASSESSING OFFIC ER IS RESTORED. 13. IN VIEW OF THE ISSUE ARISING IN THE PRESENT CAS E BEING IDENTICAL TO THE ISSUE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN M/S. SAB M ILLER BREWERIES PVT. LTD. VS. ACIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASO NING, WE HOLD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IN THE PRESENT CASE IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE SINCE THE ISSUE HAS BEEN SETTLE D IN FAVOUR OF THE ASSESSEE BY THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS IN DIA PVT. LTD. VS. DCIT (SUPRA) AND THE ASSESSEE IS ENTITLED TO THE CLAIM O F SET OFF OF UNABSORBED DEPRECIATION RELATING TO EARLIER YEARS UP TO 1998-9 9 AGAINST THE INCOME DETERMINED IN ASSESSMENT YEAR 2007-08 AND EVEN IF T HE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND THE TWIN CONDIT IONS OF ORDER BEING PREJUDICIAL TO THE INTEREST OF REVENUE UNDER SECTIO N 263 OF THE ACT BEING NOT ITA NO.1212/PN/2013 M/S. GOODYEAR SOUTH ASIA TYRES PVT. LTD. 16 SATISFIED, THE EXERCISE OF JURISDICTION UNDER SECTI ON 263 OF THE ACT BY THE COMMISSIONER IS INVALID AND HENCE, THE ORDER OF COM MISSIONER IN THIS REGARD IS QUASHED. THE GROUNDS OF APPEAL RAISED BY THE ASSES SEE ARE THUS, ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 25 TH MARCH, 2015 GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT, AURANGABAD; 4) THE DR B BENCH, I.T.A.T., PUNE; 5) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE