The ACIT, Panchmahal Circle, Godhra V. The Panchmahal Steel Ltd., Panchmahal

ITA 3018/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6139 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APRANA M AGRAWAL
• Assessee Lawyers: M J SHAH
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 32; 147; 148; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA.NO.3018/AHD/2014 / ASSTT. YEAR: 2006-2007 ACIT, PANCH MAHAL CIRCLE GODHRA. VS. THE PANCHMAHAL STEEL LTD. GIDC, KALOL, PANCH MAHALS PAN : AABCP 2643 Q ( APPLICANT ) ( RESPONENT ) REVENUE BY : APRANA M. \AGRAWAL, CIT-DR ASSESSEE BY : SHRI M.J. SHAH / DATE OF HEARING : 11/01/2018 / DATE OF PRONOUNCEMENT: 01/02/2018 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-VI, BARODA DATED 1.8.2014 PASSED FOR THE ASSTT.YEAR 2006-07. 2. THE REVENUE HAS TAKEN THREE GROUNDS OF APPEAL, W HICH CONTAINED SUB- GROUNDS. HOWEVER, IN BRIEF, ITS GRIEVANCE ARE OF T WO FOLDS VIZ. (I) THE LD.CIT(A) HAS ERRED IN QUASHING REOPENING OF ASSESS MENT, AND (B) THE LD.CIT(A) HAS ERRED IN GRANTING SET OFF OF UNABSORB ED DEPRECIATION BROUGHT FORWARD FROM THE ASSTT.YEAR 1997-98 IN THE PRESENT ASSESSMENT YEAR. FIRST WE TAKE SECOND FOLD OF GRIEVANCE. ITA NO.3018/AHD/2014 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED RETURN OF INCOME ON 26.12.2006 DECLARING TOTAL INCOME AT NIL. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT O N 31.12.008. THEREAFTER, ORDER UNDER SECTION 154 WAS PASSED ON 23.3.2010. T HEREAFTER, THE LD.AO HAS ISSUED A NOTICE UNDER SECTION 148 ON 13.02.2012 AND REOPENED THE ASSESSMENT. ONLY BASIS FOR WHICH THE ASSESSMENT ORDER WAS REOPE NED BY THE AO WAS THAT THE ASSESSEE HAS UNABSORBED DEPRECIATION OF RS.6,18 ,58,111/- FOR THE ASSTT.YEAR 1997-98 AND THIS BROUGHT FORWARD UNABSOR BED DEPRECIATION WAS ELIGIBLE TO BE BROUGHT FORWARD FOR EIGHT ASSESSMENT YEARS STARTING FROM ASSTT.YAR 1998-9 I.E. UPTO THE ASSTT.YEAR 2005-06. THE AO WAS OF THE VIEW THAT THIS UNABSORBED DEPRECIATION OF ASSTT.YEAR 199 7-98 WAS WRONGLY BROUGHT FORWARD TO AND SET OFF AGAINST THE INCOME OF ASSESS MENT YEAR N2006-07. ACCORDING TO THE AO, THERE WAS AN AMENDMENT BY FINA NCE ACT, 2001. PRIOR TO THAT, THE ASSESSEE COULD CLAIM ALLOWANCE OF UNABSOR BED DEPRECIATION UPTO 8 YEARS. THUS, THE TIME LIMIT OF 8 YEARS FOR THE CAR RY FORWARD AND SET OFF OF SUCH UNABSORBED DEPRECIATION STARTED FROM ASSTT.YEAR 199 7-98, WOULD EXPIRE IN THE ASSTT.YEAR 2004-05. THE ASSESSEE CANNOT CLAIM SET OFF OF SUCH UNABSORBED DEPRECIATION PERTAINED TO THE ASSTT.YEAR 1997-98 TH E ASSTT.YEAR 2006-07. ON ACCOUNT OF THIS INTERPRETATION OF LAW, HE REOPENED THE ASSESSMENT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE PLEADED BEFORE THE AO THAT THIS ISSUE HAS BEEN RESOLVED BY THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA LTD. 354 ITR 244. COP Y OF THIS DECISION WAS BROUGHT TO THE NOTICE OF THE AO, BUT THE LD.AO JUST OBSERVED THAT FACTS ARE DISTINGUISHABLE AND DID NOT FOLLOW THIS DECISION. HE DISALLOWED THE CLAIM OF THE ASSESSEE AND THEREAFTER COMPUTED TOTAL INCOME A T NIL. IN OTHER WORDS, HE HAD REDUCED THE CARRY FORWARD OF UNABSORBED DEPRECI ATION AND LOSS FOR THE SUBSEQUENT YEAR. ON APPEAL, THE LD.CIT(A) HAS ALLO WED THE CLAIM OF ASSESSEE ITA NO.3018/AHD/2014 3 AFTER RELYING ON VARIOUS JUDGEMENTS INCLUDING DECIS ION IN THE CASE OF GENERAL MOTORS INDIA LTD. (SUPRA). 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. WE DEEM IT APPROPRIATE TO TAKE N OTE OF THE FININGS RECORDED BY THE AO IN PARA 8. 8. I HAVE GONE THROUGH THE SUBMISSION OF THE ASSESS EE. HOWEVER, THE SAME IS NOT TENABLE IN LAW. THE POINT WISE EXPLANATION OF T HE SAME IS GIVEN HEREUNDER: 8.01 IT IS ASSESSEE'S INTERPRETATION THAT AMENDMENT IN SECTION 32(2) BY THE FINANCE (NO. 2) ACT, 1996 COULD NOT AFFECT THE UNAB SORBED DEPRECIATION AS IT STOOD AT THE END OF THE ASSESSMENT YEAR 1997-98. HO WEVER, IT WAS NOT THE CASE. THE AMENDMENT WAS BROUGHT TO RESTRICT THE SET OFF OF UNABSORBED DEPRECIATION ON PAR WITH OTHER LOSSES. HENCE, FOLLO WING THE AMENDMENT, IN THE PRESENT CASE THE LIMITATION OF 8 YEARS FOR THE CARRY-FORWARD AND SET-OFF OF SUCH UNABSORBED DEPRECIATION WOULD START FROM A.Y. 1998-99 AND EXPIRE IN A.Y. 2005-06. 8.02 SECONDLY, THE ASSESSEE HAS RELIED UPON PROVISO TO SUB-CLAUSE (B) TO SECTION 32 (2) AND TRIED TO EXCLUDE YEARS DURING WH ICH THE NET WORTH OF THE COMPANY BECAME NEGATIVE. HOWEVER, THIS ARGUMENT OF THE ASSESSEE IS NOT TENABLE IN VIEW OF THE AMENDMENT IN SECTION 32(2) O F THE ACT BY THE FINANCE ACT, 2001 SINCE THE SAID PROVISO IS DELETED AND NO MORE APPLICABLE FOR THE CURRENT ASSESSMENT YEAR. 8.03 THIRDLY, THE ASSESSEE RELIED UPON THE DECISION OF JURISDICTION HIGH COURT IN CASE OF GENERAL MOTORS (GM) INDIA LTD. V. DCIT. HOWEVER, THE SAME IS NOT APPLICABLE IN THE CASE OF ASSESSEE SINCE THE FA CTS ARE DIFFERENT. 9. IN VIEW OF THE ABOVE, I AM SATISFIED THAT THE AS SESSEE HAS WRONGLY BROUGHT FORWARD AND SET OFF UNABSORBED DEPRECIATION OF A.Y. 1997-98 AMOUNTING TO RS. 6,18,58,111/-. ACCORDINGLY, B/F UNABSORBED DEPR ECIATION GIVEN SET OFF IN A.Y. 2006-07 IS HEREBY WITHDRAWN AND TOTAL INCOME O F THE ASSESSEE IS RECOMPUTED AS UNDER: TOTAL INCOME AS PER ORDER U/S 250 OF THE I.T. ACT DATED 30.10.2009 BEFORE ADJUSTMENT OF BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION 22,87,69,135 ITA NO.3018/AHD/2014 4 LESS: 1) BROUGHT FORWARD UNABSORBED 5 ,78,12,779 DEPRECIATION OF A.Y. 98-99 2) BROUGHT FORWARD UNABSORBED 4 ,65,23,357 DEPRECIATION FOR A.Y. 99-00 3) BROUGHT FORWARD UNABSORBED 3 ,78,88,662 DEPRECIATION FOR A.Y. 00-01 4) BROUGHT FORWARD UNABSORBED 3.40,8 9,996 17,63.14.794 DEPRECIATION FOR A.Y. 01-02 5,24,54,341 LESS: UNABSORBED DEPRECIATION FOR A.Y. 2002-03. 3 ,50,41,868 3,50,41,868 REVISED TOTAL INCOME 1,74,12,473 RECALCULATE TAX. GIVE CREDIT OF PRE-PAID TAXES, AFT ER VERIFICATION. CHARGE INTEREST U/S 234B, 234C AND 234D OF THE IT ACT, IF APPLICABLE. ISSUED DEMAND NOTICE AND CHALLAN ACCORDINGLY. 5. THUS, THE CONSTRUCTION OF PROVISION VIZ. SECTION 32(2) AT THE END OF THE LD.AO IS AGAINST INTERPRETATION MADE BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE JUDGMENT OF GENERAL MOTORS INDIA P.LTD. (SUP RA). BEFORE AVERTING TO THE REASONING GIVEN BY THE AO, WE DEEM IT APPROPRIA TE TO TAKE NOTE OF FINDING OF THE HONBLE GUJARAT HIGH COURT ON THIS ISSUE. I T READS AS UNDER: 30. THE LAST QUESTION WHICH ARISES FOR CONSIDERATIO N 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 3 2 AS AMENDED BY FINANCE ACT 2001? THE REASON GIVEN BY THE ASSESS ING 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 TH E YEAR IN WHICH IT WAS FIRST COMPUTED. ACCORDING TO THE ASSES SING OFFICER, 8 YEARS EXPIRED IN THE A.Y. 2005-06 AND ONLY TILL T HEN, THE ASSESSEE WAS ELIGIBLE TO CLAIM UNABSORBED DEPRECIAT ION OF A.Y. 1997-98 FOR BEING CARRIED FORWARD AND SET OFF AGAIN ST THE INCOME FOR THE A.Y. 2005-06. BUT THE ASSESSEE WAS NOT ENTI TLED FOR UNABSORBED DEPRECIATION OF RS.43,60,22,158/- FOR A. Y. 1997-98, WHICH WAS NOT ELIGIBLE FOR BEING CARRIED FORWARD AN D SET OFF AGAINST THE INCOME FOR THE A.Y. 2006-07. ITA NO.3018/AHD/2014 5 31. PRIOR TO THE FINANCE ACT NO.2 OF 1996 THE UNABS ORBED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FORWARD INDEFI NITELY AND BY A DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR. THE FINANCE ACT NO.2 OF 1996 RESTRICTED THE CARRY F ORWARD 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 EXPLANA TORY NOTES CATEGORICALLY PROVIDED, THAT THE UNABSORBED DEPRECI ATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FULL EFFECT CANNOT BE GI VEN IN THAT PREVIOUS YEAR SHALL BE CARRIED FORWARD AND ADDED TO THE DEPR ECIATION 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 L IMITATION OF 8 YEARS FOR THE CARRY-FORWARD AND SET-OFF OF SUCH UNABSORBE D 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 SECTI ON PRIOR TO ITS AMENDMENT BY 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-SEC TION (1) IN ANY PREVIOUS YEAR OWNING TO THERE BEING NO PROFITS OR G AINS CHARGEABLE FOR THAT PREVIOUS YEAR OR OWING TO THE P ROFITS OR GAINS BEING LESS THAN THE ALLOWANCE, THEN, THE ALLOWANCE OR THE PART OF ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN (HEREI NAFTER 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 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, ASSES SABLE 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 FOLL OWING ASSESSMENT YEAR AND ITA NO.3018/AHD/2014 6 (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 SET OFF, THE AMOUNT OF UNABSORBED DEPRECIATION A LLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWIN G ASSESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMM EDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE AFORES AID ALLOWANCE WAS FIRST COMPUTED: PROVIDED THAT THE TIME LIMIT OF EIGHT ASSESSMENT YE ARS SPECIFIED IN SUBCLAUSE (B) SHALL NOT APPLY IN CASE OF A COMPANY FOR THE ASSESSMENT YEAR BEGINNING WITH THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COM PANY 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 ASSESSMEN T YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ENTIRE N ET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMU LATED LOSSES. 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 COM PANIES (SPECIAL PROVISIONS) ACT, 1985. 34. THE AFORESAID PROVISION WAS INTRODUCED BY FINAN CE (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 PROSPECT IVE EFFECT. 35. SECTION 32 (2) OF THE ACT WAS AMENDED BY FINANCE AC T, 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 G AINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OWING TO T HE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THE N, 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 ALL OWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE , SHALL BE ITA NO.3018/AHD/2014 7 ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATI ON FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF TH AT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE ALLOWANCE OF THAT PREVIOUS YEAR, AND S O ON FOR THE SUCCEEDING PREVIOUS YEARS. 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIE D 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 DEPRECIATIO N 30.1 UNDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, CARRY FORWARD AND SET OFF OF UNABSO RBED 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, SP ECIALLY IN AN ERA WHERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE AC T HAS DISPENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE ACT HAS ALS O CLARIFIED THAT IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UN DER SECTION 32 SHALL BE MANDATORY. 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FO R DEPRECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTUR ED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNN ING IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESSEES BUSINES S 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 APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO T HE 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 C ONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 Y EARS FOR CARRY ITA NO.3018/AHD/2014 8 FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBS EQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002- 0 3) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND NOT BY THE PROVISI ONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT . HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNAB SORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 O NLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AM ENDMENT OF SECTION 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE IN CORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONT AIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AME NDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOU S INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TA XING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GI VING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECT ION WITHOUT LEANING TO THE SIDE OF 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 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 H AD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUC TION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. T HEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE A VAILABLE IN THE A.Y. 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 A.Y. 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE T IME 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 FIRST PLACE FROM THE INCOME OF TH E 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 ITA NO.3018/AHD/2014 9 AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE N EXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIAT ION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOME S 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 SEC TION 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 DIS PENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO T HE A.Y.2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT Y EAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AG AINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 39. FOR THE AFORESAID REASONS, THIS WRIT PETITION S UCCEEDS AND IS ALLOWED. THE NOTICE ISSUED UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, DATED 29.3.2011 ANNEXURE A AN D THE ASSESSMENT ORDER DATED 27.12.2011 PASSED BY THE ASS ESSING OFFICER ANNEXURE F RESPECTIVELY TO THE WRIT PETITIO N ARE QUASHED. RULE IS MADE ABSOLUTE. THE PARTIES SHALL BEAR THEIR OWN COSTS. 6. A BARE PERUSAL OF THE ABOVE FINDING WOULD INDICA TE THAT THE HONBLE HIGH COURT HAS PROPOUNDED THAT ANY UNABSORBED DEPRE CIATION AVAILABLE TO AN ASSESSEE ON FIRST DAY OF APRIL, 2002 I.E. ASSTT.YEA R 2002-03 WILL BE DEALT WITH IN ACCORDANCE WITH PROVISION OF SECTION 32(2) AS AM ENDED BY FINANCE ACT, 2001. THE HONBLE HIGH COURT HAS OBSERVED THAT UNA BSORBED DEPRECIATION FOR EARLIER YEARS UPTO ASSTT.YEAR 2001-02 GOT CARRIED F ORWARD TO THE ASSTT.YEAR 2002-03 AND WOULD BECOME PART THEREOF. IT WILL BEC OME DEPRECIATION OF CURRENT YEAR I.E. THE ASSTT.YEAR 2002-03 AND IT WIL L BE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST PROFIT OR GAIN OF SUBSE QUENT YEARS WITHOUT ANY ITA NO.3018/AHD/2014 10 TIME LIMIT WHATSOEVER. IN OTHER WORDS, IF THIS INT ERPRETATION IS APPLIED ON THE FACTS OF THE PRESENT CASE, THEN, UNABSORBED DEPRECI ATION OF THE ASSTT.YEAR 1995-96 AND 1996-97 WOULD BECOME DEPRECATION OF THE ASSTT.YEAR 2002-03 AFTER AMENDMENT, BECAUSE 8 YEARS HAVE NOT EXPIRED U PTO THE ASSTT.YEAR 2002- 03. THIS AMOUNT WILL BECOME DEPRECATION OF ASSTT.Y EAR 2002-03, AND THEREAFTER IT WOULD BE CARRIED FORWARD FOR SUBSEQUE NT YEARS AND WILL BE SET OFF AGAINST PROFIT AND GAINS OF SUBSEQUENT YEARS WITHOU T ANY LIMITATION OF ALLEGED 8 YEARS. WE HAVE EXTRACTED THE FINDING OF THE LD.A O WHERE THE LD.AO HAS APPLIED THIS LIMITATION OF 8 YEARS FROM THE ASSTT.Y EAR 1997-98 AND HELD THAT IT WILL EXPIRE IN ASSTT.YEAR 2004-05. THE AO HAS COMM ITTED AN ERROR BY TAKING THE LIMIT IN THIS MANNER. HE HAS TO COMPUTE 8 YEAR S UTPO THE ASSTT.YEAR 02- 03, AND THEREAFTER IT WOULD BECOME CURRENT UNABSORB ED DEPRECIATION IN THE ASSTT.YEAR 2002-03 WHICH WILL BE AVAILABLE FOR SET OFF IN SUBSEQUENT YEAR WITHOUT ANY RESTRICTION OF LIMITATION OF YEARS. TH US, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) AS FAR AS SECOND FOLD OF CONTENTION IS CO NCERNED. 7. AS FAR AS FIRST FOLD OF CONTENTION IS CONCERNED, WE FIND THAT NOTICE UNDER SECTION 148 WAS ISSUED ON 13.2.2012 I.E. AFTER EXPI RY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR. THERE WAS A SCRUTINY ASSES SMENT UNDER SECTION 143(3) OF THE ACT. PROVISO APPENDED TO SECTION 147 PUTS A RESTRICTION ON THE POWERS OF AO TO REOPEN THE ASSESSMENT BY ISSUANCE OF NOTIC E UNDER SECTION 148 IN THE CASES WHERE 4 YEARS HAVE EXPIRED AND SCRUTINY ASSES SMENT UNDER SECTION 143(3) WAS MADE. IN SUCH CASES, UNLESS, THE INCOME OF THE ASSESSEE HAS ESCAPED FROM THE ASSESSMENT ON ACCOUNT OF FAILURE O F THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY, NO NOTICE UNDER SECTION 148 COULD BE ISSUED. IN THE PRESENT CASE, ALL THESE FACTS WERE ALSO IN T HE KNOWLEDGE OF THE AO WHEN HE PASSED THE ASSESSMENT UNDER SECTION 143(3). THE RE IS NO FAILURE AT THE END ITA NO.3018/AHD/2014 11 OF THE ASSESSEE. THEREFORE, THE LD.CIT(A) HAS RIGH TLY HELD THAT REOPENING OF THE ASSESSMENT IS BAD IN LAW. TAKING INTO CONSIDER ATION ALL THESE FACTS, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A). APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 1 ST FEBRUARY, 2018 AT AHMEDABAD. SD/- SD/- ( PRADIP KUMAR KEDIA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER