Bhima Sahakari Sakhar Karkhana Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 1998/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85119 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Rectification of order; Unabsorbed depreciation
• Section: 32; 147; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1998/PN/2013 ASSESSMENT YEAR : 200 4 - 05 BHIMA SAHAKARI SAKHAR KARKHANA LTD., A/P. MADHUKARNAGAR, PATAS, TAL.-DAUND, PUNE VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. AAATB1781B APPELLANT BY: SHRI PRAMOD SHINGTE RESPONDENT BY: SHRI RAJESH DAMOR DATE OF HEARING : 14-10-2014 DATE OF PRONOUNCEMENT : 21-10-2014 ORDER PER R.S. PADVEKAR, JM:- THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNE D ORDER OF THE LD. CIT(A)-I, PUNE DATED 20-09-2013 FOR TH E A.Y. 2004-05. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS: 1. ON THE FACT AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, PU NE HAS ERRED IN DISALLOWING THE UNABSORBED DEPRECIATION PERT AINING TO A.Y. 1995-1996 OF RS.3,99,31,863/- SHALL BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS STARTING FROM A.Y. 1997-1998 I .E. UPTO 2004-2005. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDE R. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN MANUFACTUR E AND SALE OF SUGAR AND ITS BYE PRODUCTS. FOR THE YEAR UNDER CONS IDERATION, AN ORDER GIVING EFFECT TO ORDER OF CIT(A)-I, PUNE WAS PASSED U/S. 250 OF THE ACT ON 05-10-2009 WHEREIN INCOME WAS COMPUTED AT RS.1,20,91,661/- WHICH WAS ADJUSTED AGAINST UNABSORBED DEPRECIATION PERTAINING TO A.Y.1995-96. IN THE SAME ORDER , 2 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE REMAINING UNABSORBED DEPRECIATION AND BUSINESS LOSS FOR EA RLIER YEARS AGGREGATING TO RS.66,60,38,005/- WAS QUANTIFIED AND A LLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS. THE ASSESS ING OFFICER FOUND THAT THE SAID UNADJUSTED DEPRECIATION AND BUSINESS LOSSES FOR EARLIER YEARS OF RS.66,60,38,005/-, WHICH WAS ALLOWED TO BE CA RRIED FORWARD TO SUBSEQUENT YEARS, INCLUDES UNABSORBED DEPREC IATION PERTAINING TO A.Y. 1995-96 OF RS.3,99,31,863/-. THE ASSESSIN G OFFICER IS OF THE VIEW THAT AS PER SEC. 32 OF THE INCOME TAX ACT, 1961, AS AMENDED FROM TIME TO TIME, BROUGHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE FOR AND UP TO A.Y. 1996-97, WHICH COU LD NOT BE SET OFF UP TO A.Y. 1996-97 SHALL BE CARRIED FORWARD FOR S ET OFF FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS FROM A.Y. 1997-9 8 TO A.Y. 2004-05, IT IS HELD BY THE ASSESSING OFFICER THAT AS T HE UNADJUSTED DEPRECIATION OF RS.3,99,31,863/- PERTAINED TO A. Y. 1995- 96, THE SAME CAN BE CARRIED FORWARD ONLY UP TO A.Y. 200 4-05 CONSIDERING LIMITATION OF EIGHT YEARS AS PER SEC. 32 OF THE A CT. FOR TAKING SUCH A VIEW, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION OF THE SPECIAL BENCH ITAT MUMBAI IN THE CASE OF DC IT VS. TIMES GUARANTY LTD. 133 TTJ 257. ACCORDINGLY, THE ASSES SING OFFICER PASSED THE RECTIFICATION ORDER U/S. 154 OF THE ACT W HEREIN BROUGHT FORWARD LOSSES OF THE EARLIER YEARS WERE REVISE D AT RS.62,61,06,142/- EXCLUDING THE UNABSORBED DEPRECIATION OF RS.3,99,31,863/- FOR THE A.Y. 1995-96. 3. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT(A). THE ASSESSEE PLACED HIS HEAVY RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GENERAL MOTORS INDIA (P.) LTD. VS. DCIT 354 ITR 244 (GUJ.). THE CIT (A) REFERRED TO THE DECISION OF THE ITAT SPECIAL BENCH, MUMBA I IN THE CASE OF DCIT, CIRCLE 1(3) VS. TIMES GUARANTY LTD. 133 TTJ 2 57. THE CIT(A) ALSO REFERRED TO THE DECISION OF THE HON'BLE HIGH CO URT OF 3 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE MADRAS IN THE CASE OF CIT VS. S & S POWER SWITCHGEAR LT D. 318 ITR 187 AND FINALLY HE REJECTED THE PLEA OF THE ASSESSEE. NO W, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. COUNSEL RELIED ON THE FOLLOWIN G DECISIONS: I. CIT VS. MANMOHAN DAS, 59 ITR 699 (SC) II. GENERAL MOTORS INDIA (P.) LTD. VS. DCIT, 354 ITR 244 (GUJ) 5. THE LD. COUNSEL SUBMITS THAT THE DECISION OF THE ITAT SPECIAL BENCH , MUMBAI IN THE CASE OF DCIT , CIRCLE 1(3) VS. TIMES GUARANTY LTD. (SUPRA) AS WELL AS THE DECISION OF THE HON'BLE HIGH COUR T OF MADRAS IN THE CASE OF CIT VS. PIONEER ASIA PACKING (P) LTD. 310 ITR 198 WHICH IS AGAINST THE ASSESSEE BUT IN THE SUBSEQUEN T DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GENERAL MOTORS INDIA (P.) LTD. VS. DCIT (SUPRA), THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HE SUBMITS THAT THE CLAIM OF THE SET OF F OF THE UNABSORBED DEPRECIATION CAN BE EXAMINED BY THE ASSESSIN G OFFICER IN THE YEAR IN WHICH THE SET OFF IS CLAIMED. FOR THE SAID P ROPOSITION HE RELIED ON THE DECISION IN THE CASE OF CIT VS. MANMOHAN DAS (SUPRA). 6. PER CONTRA, THE LD. DR SUPPORTED THE ORDER OF THE A UTHORITIES BELOW. WE FIND THAT IN THE CASE OF GENERAL MOTORS INDIA (P .) LTD. VS. DCIT (SUPRA) THE HON'BLE HIGH COURT OF GUJARAT HAS CONSID ERED THE ISSUE ARISING FROM THIS APPEAL IN THE LIGHT OF THE CIRCULAR ISSU ED BY THE CBDT AS WELL AS THE CONSEQUENTIAL RESPECTIVE AMENDMENTS: 30. THE LAST QUESTION WHICH ARISES FOR CONSIDERATION IS THAT WHETHER THE UNABSORBED DEPRECIATION PERTAINING TO TH E ASSESSMENT YEAR 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS O R IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY THE FINANCE AC T, 2001? 4 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE THE REASON GIVEN BY THE ASSESSING OFFICER UNDER SEC TION 147 IS THAT SECTION 32(2) OF THE ACT WAS AMENDED BY THE FIN ANCE (NO. 2) ACT OF 1996, WITH EFFECT FROM THE ASSESSMENT YEAR 1997-98 AND THE UNABSORBED DEPRECIATION FOR THE ASSESSMENT Y EAR 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 ASSESSMENT YEAR 2005-06 AND ONLY TILL THEN, THE ASSESSEE WAS ELIGI BLE TO CLAIM UNABSORBED DEPRECIATION OF THE ASSESSMENT YEAR 1997-98 FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE I NCOME FOR THE ASSESSMENT YEAR 2005-06. BUT THE ASSESSEE WAS NOT ENT ITLED FOR UNABSORBED DEPRECIATION OF RS.43,60,22,158 FOR THE ASSESSMENT YEAR 1997-98, WHICH WAS NOT ELIGIBLE FOR BE ING CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 2006-07. 31. PRIOR TO THE FINANCE (NO. 2) ACT OF 1996 THE UNAB SORBED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FOR WARD INDEFINITELY AND BY A DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR. THE FINANCE (NO. 2) ACT OF 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DEPRECIATION AND SET- OFF TO A LIMIT OF EIGHT YEARS, FROM THE ASSESSMENT YEA R 1997-98. CIRCULAR NO. 762, DATED FEBRUARY 18, 1998 ISSUED BY TH E CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THE FORM OF E XPLANATORY NOTES CATEGORICALLY PROVIDED, THAT THE UNABSORBED DEP RECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FULL EFFECT CA NNOT BE GIVEN IN THAT PREVIOUS YEAR SHALL BE CARRIED FORWARD A ND ADDED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR AND B E DEEMED TO BE PART THEREOF. 32. SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF THE ASSESSMENT YEAR 1996-97 WOULD BE ADDED TO THE ALLOWANCE OF THE ASSESSMENT YEAR 1997-98 AND THE LIMITATION OF EIGH T YEARS FOR THE CARRY FORWARD AND SET OFF OF SUCH UNABSORBE D DEPRECIATION 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, 200 1, READ AS UNDER: 'WHERE IN THE ASSESSMENT OF THE ASSESSEE FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER CLAUSE (II) OF SUB-SECTION (1) IN ANY PREVIOUS YEAR OWNING TO THERE BEING NO PROFITS OR GA INS CHARGEABLE FOR THAT PREVIOUS YEAR OR OWING TO THE PR OFITS OR GAINS BEING LESS THAN THE ALLOWANCE, THEN, THE ALLOWANCE OR THE PART OF ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN (HEREINAF TER 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 ASSESS ABLE FOR THAT ASSESSMENT YEAR ; (II) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT 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, ASSESS ABLE FOR THAT ASSESSMENT YEAR ; 5 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE (III) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT BE WHOLLY SET OFF UNDER CLAUSE (I) AND CLAUSE (II), THE AMOUNT OF ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR, AND- (A) IT 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 ; (B) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OF UNABSORBED DEPRECIATION ALLO WANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING AS SESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMME DIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE AFORES AID ALLOWANCE WAS FIRST COMPUTED : PROVIDED THAT THE TIME LIMIT OF EIGHT ASSESSMENT YEARS SPECIFIED IN SUB-CLAUSE (B) SHALL NOT APPLY IN CASE OF A COMPANY FOR THE ASSESSMENT YEAR BEGINNING WITH THE ASSESSMENT YEAR R ELEVANT 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, 198 5 (1 OF 1986), AND ENDING WITH THE ASSESSMENT YEAR RELEVANT T O THE PREVIOUS YEAR IN WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION.-FOR THE PURPOSES OF THIS CLAUSE, 'NET WOR TH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA) OF SUB -SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL P ROVISIONS) ACT, 1985.' 34. THE AFORESAID PROVISION WAS INTRODUCED BY THE F INANCE (NO.2) ACT, 1996, AND FURTHER AMENDED BY THE FINANCE A CT, 2000. THE PROVISION INTRODUCED BY THE FINANCE (NO. 2) ACT WAS CL ARIFIED BY THE FINANCE MINISTER TO BE APPLICABLE WITH PROSPECTI VE EFFECT. 35. SECTION 32(2) OF THE ACT WAS AMENDED BY THE FINA NCE ACT, 2001, AND THE PROVISION SO AMENDED READS AS UNDER: 'WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREV IOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARG EABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHAR GEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB- SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTI ON 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PRE VIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE OF THAT PREVIOUS YEAR, AND SO ON FOR THE SUC CEEDING PREVIOUS YEARS.' 6 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIE D BY THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO. 14 OF 2 001. THE RELEVANT PORTION OF THE SAID CIRCULAR READS AS UNDER: 'MODIFICATION OF PROVISIONS RELATING TO DEPRECIATIO N 30.1 UNDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME- TAX ACT, CARRY FORWARD AND SET OFF OF UNABSORBED DEP RECIATION IS ALLOWED FOR EIGHT ASSESSMENT YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE S UFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WHERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISPEN SED WITH THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AN D SET OFF OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED TH AT IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROF ESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER S ECTION 32 SHALL BE MANDATORY. 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FOR DEPRECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNNIN G IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESSEE'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 A PRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE A SSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS.' 37. THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR CLARI FIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACH INERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRI CTION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSO RBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM THE A SSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT AN Y UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON T HE 1ST DAY OF APRIL, 2002 (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 PRO VISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSO RBED DEPRECIATION ALLOWANCE WORKED OUT IN THE ASSESSMENT Y EAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EV EN AFTER THE AMENDMENT OF SECTION 32(2) BY THE FINANCE ACT, 2 001, IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE, KEEPING IN VIEW THE PURPOSE OF THE AMENDMENT OF SECTION 32(2) OF THE ACT , A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE T AKEN. WHILE CONSTRUING THE TAXING STATUTES, RULE OF STRICT INTERPR ETATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE O F THE ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFI T WITHIN 7 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN T HE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENI ED. HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SE CTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROF ESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER S ECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTIO N 32(2) AS AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE ASSE SSMENT YEARS 1997-98, 1999-2000,2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORB ED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TI LL THE ASSESSMENT YEAR 2002-03 THEN IT WOULD BE CARRIED FORW ARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIAT ION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGE R THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EX CESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSE SSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTI BLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HE ADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BA LANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION F OR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, H OWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDIN G YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOW ANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED O PINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTIO N 32(2) AS AMENDED BY THE FINANCE ACT, 2001. AND ONCE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM THE ASSESSMENT YEAR 1997-98 UP TO THE ASSESSMENT YEAR 20 01-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 A ND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE P ROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001, AN D WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 7. EVEN IF THE HON'BLE HIGH COURT OF MADRAS HAS TAKEN A CONTRARY VIEW OF THIS ISSUE BUT SO FAR AS THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GENERAL MOTORS INDIA (P.) LTD. VS. DCIT (SUPRA) IS CONCERNED IT IS LATEST DECISION AND IN OUR H UMBLE OPINION IF THERE ARE CONTRARY DECISIONS OF THE HIGH COURTS THE DECISION WHICH IS IN FAVOUR OF THE ASSESSEE IS TO APPLY. WE, THEREFORE, FOLLOWING THE LEGAL PRINCIPLES LAID DOWN IN THE CASE OF GENERAL M OTORS 8 ITA NO. 1998/PN/2013, BHIMA SAHAKARI SAKHAR KARKHAN A LTD., PUNE INDIA (P.) LTD. VS. DCIT (SUPRA), ALLOW THE GROUND TAKEN BY T HE ASSESSEE. MOREOVER, HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MANMOHAN DAS (SUPRA) HAS OBSERVED THAT THE SET OFF OF THE CLAIM OF LOSSES CAN BE EXAMINED BY THE ASSESSING OFFICER IN THE YE AR IN WHICH SET OFF OF THE LOSSES IS ACTUALLY CLAIMED. WE, THEREFORE, ALLOW THE GROUND TAKEN BY THE ASSESSEE AND ALLOW THE CARRY FORWA RD OF THE UNABSORBED DEPRECIATION OF THE EARLIER YEARS. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNC ED IN THE OPEN COURT ON 21-10-2014 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 21 ST OCTOBER, 2014 RK/PS/SATISH COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PU NE 4 THE CIT - I, PUNE 5 6 THE DR, ITAT, A BENCH, PUNE. GUARD FILE. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE