M/s Bhullar Oxygen Pvt. Ltd, Amritsar. V. The Income Tax Officer, Amritsar.

ITA 663/ASR/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7819 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Depreciation; Period of limitation; Unabsorbed depreciation
• Section: 143(3); 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 663/(ASR)/2015 ASSESSMENT YEAR: 2010-11 PAN: AAACB6547J M/S BHULLAR OXYGEN PVT. LTD., 96-97, FOCAL POINT, AMRITSAR. VS. INCOME TAX OFFICER, WARD 4(1), AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PADAM BAHL (C.A. ) RESPONDENT BY: SH. RAHUL DHAWAN (D. R.) DATE OF HEARING: 09.08.2017 DATE OF PRONOUNCEMENT: 11.09.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), AMRITSAR DATED 16.10.2015 FOR ASST. YEAR: 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-2, AMRITSAR HAS GROSSLY ERRED IN CONFIRMING THE ADDITI ON OF RS.6,81,920/- MADE BY THE INCOME TAX OFFICER, WARD 4(1), AMRITSAR UNDER THE HEAD ELECTRICITY CHARGE 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR HAS FAILED TO APPRECIATE THAT NO SUCH ADHO C DISALLOWANCE COULD BE MADE BY THE ASSESSING OFFICER , WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSES SEE U/S 145(3) OF THE INCOME TAX ACT, 1961 PARTICULARLY WHE N THE EXPENSES WERE FULLY VOUCHED. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS)-2, AMRITSAR HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER, WARD -4(1), AMRITSAR IN DISALLO WING ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 2 UNABSORBED DEPRECIATION OF RS.33,65,948/- BENEFIT O F WHICH WAS NEVER CLAIMED BY THE ASSESSEE. 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR HAS FAILED TO APPRECIATE THAT THE UNABSORBED DEPREC IATION BROUGHT FORWARD WAS LEGALLY ALLOWABLE TO BE CARRIED FORWARD U/S 32 OF THE INCOME TAX ACT, 1961. 3. AT THE OUTSET, THE LD. AR ARGUING ON FIRST GROU ND OF APPEAL SUBMITTED THAT ASSESSING OFFICER HAD MADE ADHOC DIS ALLOWANCE OUT OF ELECTRICITY CHARGES WITHOUT REJECTION OF BOOKS OF A CCOUNT AND WHEREAS THE ORDER WAS PASSED U/S 143(3) OF THE ACT, AND THEREFO RE HE ARGUED THAT ADHOC DISALLOWANCE WITHOUT INVOKING THE PROVISIONS OF 145(3) WAS NOT WARRANTED. RELIANCE IN THIS RESPECT WAS PLACED ON T HE FOLLOWING CASE LAWS: (I) THE BATALA CO-OP SUGAR MILLS LTD. VS. THE DCI T, CIRCLE-2, AMRITSAR IN ITA NO. 179 & 180 DATED 03.07.2008 (II) ALUMAUNIUM INDUSTRIES (PRIVATE) LTD. VS. CIT 20 TAXMAN 184 (GAU) (III) INTERNATIONAL FOREST CO. VS. CIT-------- 101 ITR 721 (J&K) [ ARGUING UPON THE NEXT GRIEVANCE, THE LD. AR SUBMIT TED THAT ASSESSEE HAD CLAIMED UNABSORBED DEPRECIATION AMOUNT ING TO RS.33,65,948/- FOR THE YEAR 1997-98 TO 2002-03 WHIC H THE ASSESSING OFFICER HAD DISALLOWED WHEREAS THE ASSESSEE WAS ELI GIBLE FOR CARRY FORWARD OF THE DEPRECIATION AS PER AMENDED PROVISIO NS OF SECTION 32(2) OF THE ACT. ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 3 4. THE LD. AR SUBMITTED THAT THE ASSESSEE WAS ELIGI BLE FOR CARRY FORWARD OF THE UNABSORBED DEPRECIATION AS SUCH DEPR ECIATION BECOMES THE DEPRECIATION OF CURRENT YEAR AS DECIDED IN THE FOLLOWING CASE LAWS: (I) ITO VS. SURAJ SOLVENT AN VANASPATI INDUSTRIES LTD. 16 DTR 492 (ASR.) (II) GENERAL MOTORS INDIA (P) LTD. VS. DCIT IN SPEC IAL CIVIL APPLICATION NO. 1 773 OF 2012 5. THE LD. DR ON THE OTHER HAND SUBMITTED THAT THER E WERE TWO OTHER UNITS BELONGING TO ASSESSEE WHICH WERE IN THE SAME OR ADJOINING PREMISES AND THE ASSESSEE MUST HAVE USED THE ELECTR ICITY CONNECTION FROM THE METER INSTALLED AT ASSESSEES PREMISES FOR THESE TWO UNITS AND THEREFORE THE ASSESSING OFFICER HAD RIGHTLY MADE AD DITION. 6. AS REGARDS THE CLAIM FOR UNABSORBED DEPRECIATION , THE LD. DR SUBMITTED THAT BEFORE ASSESSING OFFICER THE ASSESSE E HAD FILED REVISED CHART OF UNABSORBED DEPRECIATION AND IN THE REVISED CHART THE ASSESSEE SURRENDERED THE CLAIM OF UNABSORBED DEPRECIATION OF THE YEARS 1997-98 TO 2002-03 AND THEREFORE IT WAS ARGUED THAT AUTHORI TIES BELOW HAD RIGHTLY DISALLOWED THE SAME. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. AS REGARDS THE FIRST GRIEVANCE OF THE ASSESSEE, WE FIND THAT ASSESSING OFFICER HAS COMPLETED ASSESSMENT U/S 143(3) OF THE ACT AND NO WHERE IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT. HE HAS MADE THE ADDITION ON A DHOC BASIS BY JUST IMAGINING THAT ASSESSEE MIGHT HAVE USED THE ELECTRI CITY OF ASSESSEE IN ITS ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 4 OTHER UNITS. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL OTHER THAN HIS ASSUMPTION. WE FIND THAT IN THE CASE OF M/S BATALA CO-OPERATIVE SUGAR MILLS LTD. VS. DCIT, THE HON'BLE AMRITSAR BENCH IN ITA NO. 179 & 180/ASR/2008 HAS DECIDED SIM ILAR ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEES BOOKS OF ACCOUNT ARE AUDITED UNDER SECTION 44AB OF THE INCOME-TAX ACT, 1961 AND AT THE TIME OF ASSESSMENT, THE ASSESSEE HAD PRODUCED BOOKS OF ACCO UNT, DOCUMENTS AND VARIOUS DETAILS AND INFORMATION NECES SARY FOR THE PURPOSE OF ASSESSMENT. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT. THERE IS CATEGORICAL FINDING GIVEN BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PRODUCED BOOKS OF ACC OUNT IN SUPPORT OF THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER IN ITS ASSESSMENT ORDER DATED 28.12.2006 HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THERE IS NO FINDING GIV EN BY THE ASSESSING OFFICER IN ITS ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNT ARE NOT RELIABLE OR UNVERIFIABLE. HENCE, IT IS INFE RRED THAT THE ASSESSEES BOOKS OF ACCOUNT ARE NOT AT ALL REJECTED . THE ASSESSING OFFICER CANNOT MAKE ANY ESTIMATE ADDITION WITHOUT R EJECTING THE BOOKS OF ACCOUNT. IF THE ASSESSING OFFICER WAS TO M AKE ANY ADDITION FIRST OF ALL HE WAS REQUIRED TO REJECT THE BOOKS OF ACCOUNT WHICH HE HAS FAILED TO DO SO. HENCE, IN OUR OPINION, THERE I S NO QUESTION OF MAKING ANY AD-HOC DISALLOWANCE TOWARDS CONSUMPTION OF BAGASSE. ACCORDINGLY, THE ADDITION IS UNWARRANTED. THE GROUN D TAKEN BY THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIB UNAL WE HOLD THAT THE DISALLOWANCE WAS NOT WARRANTED, THEREFORE GROUN D NO. 1 AND 2 OF THE APPEAL IS ALLOWED. AS REGARDS THE UNABSORBED DEPRECIATION OF RS.33,65 ,948/- WE FIND THAT THE UNABSORBED DEPRECIATION CLAIM RELATES TO T HE ASSESSMENT YEAR 1997-98 AND 2002-03. FOR THE FIRST YEAR OF 1997-98, THE PERIOD OF LIMITATION AS PER THE ORIGINAL PROVISIONS EXPIRES I N ASSESSMENT YEAR 2005- 06 WHICH IS AFTER THE DATE OF AMENDMENT OF SECTION 32(2) WITH EFFECT FROM ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 5 01.04.2002. AS PER THE AMENDED PROVISIONS OF SECTIO N 32(2) THE UNABSORBED DEPRECIATION OF EARLIER YEAR BECOMES THE PART OF DEPRECIATION OF CURRENT YEAR AND THEREFORE IS ELIGIBLE FOR ADJUS TMENT AGAINST THE OTHER INCOME. THIS ASPECT HAS BEEN EXAMINED BY HONBLE TR IBUNAL AMRITSAR BENCH IN THE CASE OF INCOME TAX OFFICER VS. SURAJ S OLVENT AND VANASPATI INDUSTRIES LTD. AND WHEREIN THE HON'BLE TRIBUNAL HA S HELD THAT BROUGHT FORWARD DEPRECIATION BECOMES PART OF CURRENT YEAR D EPRECIATION AND CAN BE ADJUSTED AGAINST OTHER SOURCE OF INCOME. SIMILAR FINDINGS HAS BEEN MADE BY THE HON'BLE HIGH COURT OF GUJARAT IN THE CA SE OF SPECIAL CIVIL APPLICATION NO. 1773 IN THE CASE OF GENERAL MOTORS INDIA (P) LTD. FOR THE SAKE OF CONVENIENCE, THE FINDINGS OF THE HON'BLE HI GH COURT ARE REPRODUCED BELOW: 30. THE LAST QUESTION WHICH ARISES FOR CONSIDERATI ON 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 A S AMENDED BY FINANCE ACT 2001? THE REASON GIVEN BY THE ASSESSING OFFICER UNDER SECTION 147 IS THAT SECTION 32(2) OF THE ACT WAS AM ENDED BY FINANCE ACT NO.2 OF 1996 W.E.F. A.Y. 1997-98 AND TH E 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 YEA RS EXPIRED IN THE A.Y. 2005-06 AND ONLY TILL THEN, THE ASSESSEE WAS E LIGIBLE TO CLAIM UNABSORBED DEPRECIATION OF A.Y. 1997-98 FOR BEING C ARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE A.Y. 2005-06 . BUT THE ASSESSEE WAS NOT ENTITLED FOR UNABSORBED DEPRECIATI ON OF RS.43,60,22,158/- FOR A.Y. 1997-98, WHICH WAS NOT E LIGIBLE FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOM E FOR THE A.Y. 2006-07. 31. PRIOR TO THE FINANCE ACT NO.2 OF 1996 THE UNABS ORBED 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 ACT NO.2 O F 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DEPRECIA TION AND SET-OFF TO A LIMIT OF 8 YEARS, FROM THE A.Y. 1997-98. CIRCU LAR NO.762 DATED 18.2.1998 ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES (CBDT) IN THE FORM OF EXPLANATORY NOTES CATEGORICALLY PROVIDE D, THAT THE ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 6 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 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 SUC H 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 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-SECTION ( 1) IN ANY PREVIOUS YEAR OWNING TO THERE BEING NO PROFITS OR GAINS CHAR GEABLE FOR THAT PREVIOUS YEAR OR OWING TO THE PROFITS OR GAINS BEIN G LESS THAN THE ALLOWANCE, THEN, THE ALLOWANCE OR THE PART OF ALLOW ANCE 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 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, ASSES SABLE FOR THAT ASSESSMENT YEAR; (III) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT 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 FOLLOWIN G 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 A LLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLL OWING ASSESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMEN T YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FO R WHICH THE AFORESAID 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 ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BEC OME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 7 INDUSTRIAL COMPANY (SPECIAL PROVISIONS) ACT, 1985 ( 1 OF 1986) AND ENDING WITH THE ASSESSMENT YEAR RELEVANT TO THE PRE VIOUS 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 WORTH SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA) OF SUB-SE CTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISI ONS) 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 T HE FINANCE MINISTER TO BE APPLICABLE WITH PROSPECTIVE EFFECT. 35. SECTION 32 (2) OF THE ACT WAS AMENDED BY FINANC E 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 F OR THAT PREVIOUS YEAR, OWING TO THE PROFITS OR GAINS CHARGEABLE BEIN G LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-S ECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73, THE A LLOWANCE 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 ALLOWAN CE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DE EMED 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 YE AR, AND SO 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 200 1. 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 DEPREC IATION 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 DISP ENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OF F OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN CO MPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOU S YEAR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. 30.3. UNDER THE EXISTING PROVISIONS, NO DEDUCTION F OR 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. ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 8 30.4 THE ACT HAS ALLOWED DEPRECIATION ALLOWANCE ON ALL IMPORTED MOTOR CARS ACQUIRED ON OR AFTER 1 ST APRIL, 2001. 30.5 THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1 ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS ESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE A MENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT D ISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD A ND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABL E FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSE E ON 1ST DAY OF APRIL, 2002 (A.Y. 2002- 03) WILL BE DEALT WITH I N ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINAN CE ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT ST OOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEE N TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT A. Y.1 997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER TH E AMENDMENT OF SECTION 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT S NOT CONTAIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AME NDMENT OF SECTION 2(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND R EASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLA TURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED F OR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNO T BE DENIED. HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINE SS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UN DER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SE CTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSO RBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997-9 8, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SU CCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART T HEREOF COULD NOT BE SET OFF TILL THE A.Y. 2002-03 THEN IT WOULD BE C ARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAIN S OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOU NT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORP TION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINE SS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EV EN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOUR CE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN C ASE THERE IS A STILL ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 9 BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBE D DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THER E IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCE EDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATI ON BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 2(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 A ND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, TH E UNABSORBED DEPRECIATION FROM A.Y. 1997-98 UPTO THE A.Y.2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME P ART 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 O F SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND JU DICIAL PRECEDENTS WE HOLD THAT ASSESSEE WAS ELIGIBLE FOR A DJUSTMENT OF UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 199 7-98 TO 2002-03. WE FURTHER FIND THAT ASSESSEE AT ITS OWN HAD FILED REVISED DEPRECIATION CHART AND WHEREIN IT HAD SURRENDERED THE UNABSORBED DEPRECIATION RELATED TO THESE YEARS. HOWEVER WE ARE OF THE VIEW THAT WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TO PASS O RDER AND ALLOW DEDUCTIONS AS PER THE PROVISIONS OF LAW. THE QUANTU M OF UNABSORBED DEPRECIATION WAS NOT VERIFIED BY ASSESSING OFFICER. THEREFORE WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE OFFICE OF THE ASSESSING OFFICER WHO IN THE LIGHT OF OUR OBSERVATIONS AND ON THE BAS IS OF RECORD AVAILABLE WILL EXAMINE AT THE QUANTUM OF UNABSORBED DEPRECIAT ION RELATED TO THESE YEARS AND WILL ALLOW ACCORDINGLY AS PER LAW. IN VIE W OF THE GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 663(ASR)/2015 ASSESSMENT YEAR: 2010-11 10 8. IN NUTSHELL, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.09.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11.09.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER