Venkateshwara Leathers Pvt Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2161/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7800 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Reopening of assessment; Depreciation; Reason to believe; Unabsorbed depreciation
• Section: 143(3); 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2161/MDS/2015 ( / ASSESSMENT YEAR:2006-07) M/S. VENKATESHWARA LEATHERS PVT.LTD., 147, VEPERY HIGH ROAD, PERIAMET, CHENNAI-600 003. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(4), CHENNAI-34. PAN:AAACV1181G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.S.SRIRAMAN, ADVOCATE /RESPONDENT BY : MR. A.V.SREEKANTH, JCIT /DATE OF HEARING : 13 TH JANUARY, 2016 /DATE OF PRONOUNCEMENT : 23 RD MARCH, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS)- 11, CHENNAI, DATED 28.09.2015 IN ITA NO. 12/CIT(A)- 11/2014-15 PASSED UNDER SECTION 143(3) R.W.S 147 & 250(6) OF THE ACT FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IN ITS APPEAL HAS RAISED SEVERAL EL ABORATE GROUNDS, HOWEVER, THE CRUXES OF THE ISSUES ARE AS F OLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN UPHOLDING THE REOPENING OF ASSESSMENT UNDER SECTION 143(3) R.W.S 147 OF THE ACT. 2 ITA NO.2161 /MDS/2015 II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER IN WITHDRAWING THE SET OFF OF UNABSORBED DEPRECIATION AMOUNTING TO ` 23,69,592/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF FINISHED LEATHERS FILED ITS RETURN FOR THE ASSESSMENT YEAR 2006-07 ON 25.11.200 6 DECLARING NIL INCOME. SUBSEQUENTLY IT WAS NOTICED B Y THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD CAR RIED FORWARD THE UNABSORBED DEPRECIATION LOSS OF RS.23,6 9,592/- PERTAINING TO THE ASSESSMENT YEAR 1997-98 WHICH WAS BEYOND EIGHT YEARS AND SET OFF THE SAME IN THE REL EVANT ASSESSMENT YEAR 2006-07, WHICH IS NOT PERMISSIBLE A S PER THE PROVISIONS OF THE ACT, THEREFORE HE REOPENED TH E ASSESSMENT BY INVOKING PROVISIONS OF SECTION 147 OF THE ACT.. WHILE DOING SO, THE LEARNED ASSESSING OFFICER PLACE D RELIANCE IN THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. TIMES GUARANTEE IN ITA NO.4 917 & 4918/MUM/2008 DATED 30.06.2010. GROUND NO.1 : VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT:- 3 ITA NO.2161 /MDS/2015 4. ON THE ISSUE OF REOPENING BEYOND THE PERIOD OF F OUR YEARS, THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HELD THE ISSUE IN FAVOUR OF THE REVENUE SINCE IT CA ME TO THE KNOWLEDGE OF THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED DEDUCTION BY WAY OF CARRY FORW ARD OF UNABSORBED DEPRECIATION BEYOND THE PERIOD OF EIGHT YEARS. HE FURTHER PLACED RELIANCE IN VARIOUS DECISIONS WHI CH ARE CITED IN HIS ORDER WHILE ARRIVING AT SUCH CONCLUSIO N. ON THIS ISSUE, WE DO NOT FIND IT NECESSARY TO INTERFERE WIT H THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BECAUSE IT CAME TO THE NOTICE OF THE LEARNED ASSESS ING OFFICER THAT THE ASSESSEE HAD CLAIMED THE BENEFIT O F CARRY FORWARD OF UNABSORBED DEPRECIATION BEYOND THE PERIO D OF EIGHT YEARS WHICH WAS NOT PERMISSIBLE DURING THE IN TERVENING FEW ASSESSMENT YEARS. THEREFORE THE LEARNED A.O HAD A VALID REASON TO BELIEVE THAT INCOME HAD ESCAPED TO BE TAXED IN THE HANDS OF THE ASSESSEE. HENCE, WE UPHOLD THE DECISION OF THE REVENUE ON THIS ISSUE. GROUND NO.2: WITHDRAWING THE BENEFIT OF SET OFF OF UNABSORBED DEPRECIATION AMOUNTING TO ` 23,69,592/-. 4 ITA NO.2161 /MDS/2015 5. THE LEARNED ASSESSING OFFICER HAD WITHDRAWN THE BENEFIT OF UNAUTHORIZED DEPRECIATION WHICH WAS BEYO ND THE PERIOD OF EIGHT YEARS, RELYING ON THE DECISION OF T HE SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS . TIMES GUARANTEE (SUPRA), WHICH WAS UPHELD BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR THE SAME REASON. HOWEVER, ON THIS ISSUE THIS BENCH OF THE TRIBUNAL H AS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE IN THE CASE M/S. WESTERN CROMPTON ENGINEERING LD. VS. ACIT VIDE ORDE R DATED 19 TH FEBRUARY 2014. THE GIST OF THE SAME IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 7. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ACCEPTING ENHANCEMENT PROPOSAL OF THE ASSESSING OFFICER AND DENYING SET OFF OF UNABSORBED DEPRECIATION PRIOR TO THE ASSESSMENT YEAR 1997-98 BASED ON THE DECISION OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. TIMES GUARANTY LTD. IN ITA NO.4917 AND 4918/MUM/2008 DATED 30.06.2010. IN THE COURSE OF PROCEEDINGS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSING OFFICER BY LETTER DATED 29.07.2010 PROPOSED FOR ENHANCEMENT OF INCOME BY WAY OF REDUCTION IN THE QUANTUM OF CARRIED FORWARD DEPRECIATION TO BE SET OFF AGAINST LONG TERM CAPITAL GAINS REFERRING TO THE DECISION O F 5 ITA NO.2161 /MDS/2015 SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TIMES GUARANTEE LTD. (SUPRA). THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ABOVE SAID SPECIAL BENCH DECISION OF THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO DISALLOW UNABSORBED DEPRECIATION PRIOR TO ASSESSMENT YEAR 2002-03 I.E. FROM THE ASSESSMENT YEAR 1999-2000 TO 2001-02 WHICH WAS SET OFF AGAINST LONG TERM CAPITAL GAINS AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 8. AT THE TIME OF HEARING, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, WHEREIN THE HONBLE GUJARAT HIGH COURT HELD THAT UNABSORBED DEPRECIATION FROM 1997-98 UPTO ASSESSMENT YEAR 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF AND WAS AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST PROFITS AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. HE ALSO PLACES RELIANCE ON THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. ARCH FINE CHEMICALS VS. ACIT IN ITA NO.2414 & 2415/MUM/2012 DATED 9.10.2013 WHERE SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT.LTD. (SUPRA). 9. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF LOWER AUTHORITIES ON THIS ISSUE. 10. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON. ON READING OF THE ORDER OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA), WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE. THE HONBLE HIGH COURT CONSIDERING THE ISSUE ELABORATELY HELD AS UNDER:- 6 ITA NO.2161 /MDS/2015 30. THE LAST QUESTION WHICH ARISES FOR CONSIDERATION IS THAT WHETHER THE UNABSORBED DEPRECIATION PERTAINING TO A.Y. 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY FINANCE ACT 2001? THE REASON GIVEN BY THE ASSESSING OFFICER UNDER SECTION 147 IS THAT SECTION 32(2) OF THE ACT WAS AMENDED BY FINANCE ACT NO.2 OF 1996 W.E.F. A.Y. 1997-98 AND THE UNABSORBED DEPRECIATION FOR THE A.Y. 1997-98 COULD BE CARRIED FORWARD UP TO THE MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED. ACCORDING TO THE ASSESSING OFFICER, 8 YEARS EXPIRED IN THE A.Y. 2005-06 AND ONLY TILL THEN, THE ASSESSEE WAS ELIGIBLE TO CLAIM UNABSORBED DEPRECIATION OF A.Y. 1997-98 FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE A.Y. 2005-06. BUT THE ASSESSEE WAS NOT ENTITLED FOR UNABSORBED DEPRECIATION OF RS.43,60,22,158/- FOR A.Y. 1997-98, WHICH WAS NOT ELIGIBLE FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE A.Y. 2006-07. 31. PRIOR TO THE FINANCE ACT NO.2 OF 1996 THE UNABSORBED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FORWARD INDEFINITELY AND BY A DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR. THE FINANCE ACT NO.2 OF 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DEPRECIATION AND SET-OFF TO A LIMIT OF 8 YEARS, FROM THE A.Y.1997-98. CIRCULAR NO.762 DATED 18.2.1998 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THE FORM OF EXPLANATORY NOTES 7 ITA NO.2161 /MDS/2015 CATEGORICALLY PROVIDED, THAT THE UNABSORBED DEPRECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FULL EFFECT CANNOT BE GIVEN IN THAT PREVIOUS YEAR SHALL BE CARRIED FORWARD AND ADDED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR AND BE DEEMED TO BE PART THEREOF. 32. SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF A.Y. 1996-97 WOULD BE ADDED TO THE ALLOWANCE OF A.Y. 1997-98 AND THE LIMITATION OF 8 YEARS FOR THE CARRY- FORWARD AND SET-OFF OF SUCH UNABSORBED DEPRECIATION WOULD START FROM A.Y. 1997- 98. 33. WE MAY NOW EXAMINE THE PROVISIONS OF SECTION 32(2) OF THE ACT BEFORE ITS AMENDMENT BY FINANCE ACT 2001. THE SECTION PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2001, 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 GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR OWING TO THE PROFITS OR GAINS BEING LESS THAN THE ALLOWANCE, THEN, 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; 8 ITA NO.2161 /MDS/2015 (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, ASSESSABLE FOR THAT ASSESSMENT YEAR; (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 ASSESSABLE FOR THAT ASSESSMENT YEAR; (B) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OF UNABSORBED DEPRECIATION ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE AFORESAID 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 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 IN WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. 9 ITA NO.2161 /MDS/2015 EXPLANATION.- FOR THE PURPOSES OF THIS CLAUSE, NET WORTH SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA) OF SUB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985. 34. THE AFORESAID PROVISION WAS INTRODUCED BY FINANCE (NO.2) ACT, 1996 AND FURTHER AMENDED BY THE FINANCE ACT, 2000. THE PROVISION INTRODUCED BY FINANCE (NO.2) ACT WAS CLARIFIED BY THE FINANCE MINISTER TO BE APPLICABLE WITH PROSPECTIVE EFFECT. 35. SECTION 32 (2) OF THE ACT WAS AMENDED BY FINANCE ACT, 2001 AND THE PROVISION SO AMENDED READS AS UNDER :- WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE ALLOWANCE OF THAT PREVIOUS 10 ITA NO.2161 /MDS/2015 YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIED BY CENTRAL BOARD OF DIRECT TAXES IN THE CIRCULAR NO.14 OF 2001. THE RELEVANT PORTION OF THE SAID CIRCULAR READS AS UNDER :- MODIFICATION OF PROVISIONS RELATING TO DEPRECIATION 30.1 UNDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION IS ALLOWED FOR 8 ASSESSMENT YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WHERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISPENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECTION 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 RUNNING IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESSEES BUSINESS OR PROFESSION IN ANOTHER COUNTRY. 11 ITA NO.2161 /MDS/2015 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 APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. 37. THE 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. THE AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2002- 03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002- 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY 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 DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS 12 ITA NO.2161 /MDS/2015 TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO.14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE A.Y. 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 DEPRECIATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE 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 DURING THAT 13 ITA NO.2161 /MDS/2015 YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT 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 THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997- 98 UPTO THE A.Y.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 FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 14 ITA NO.2161 /MDS/2015 6. FOLLOWING THE ABOVE DECISION OF THE CHENNAI BENC H OF THE TRIBUNAL, WE HEREBY DIRECT THE LEARNED ASSESSIN G OFFICER TO ALLOW THE BENEFIT OF CARRY FORWARD UNABSORBED DE PRECIATION BEYOND THE PERIOD OF EIGHT YEARS AMOUNTING TO RS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 23 RD MARCH, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 23 RD MARCH, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /