M/s Liberty Plywood Pvt. Ltd., Ambala Cantt. V. ACIT, Ambala

ITA 727/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64084 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 06-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Unexplained investment; Unexplained expenditure; Capital asset; Business income; Revision of order; Depreciation; Loose papers; Deemed to accrue or arise in india; Cost of acquisition; Fair market value; Capital receipt; Unabsorbed depreciation
• Section: 69C; 133A; 32; 69; 56; 263; 12

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 727/CHD/2012 ASSESSMENT YEAR : 2005-06 M/S LIBERTY PLYWOOD P LTD V A.C.I.T. AMBALA 66, THE MALL AMBALA CANTT AABCL 0562 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUDHIR SEHGAL RESPONDENT BY: SHRI J.S. NAGAR DATE OF HEARING 3.12.2012 DATE OF PRONOUNCEMENT 17.12.2012 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A), PANCHKULA DATED 1.5.2012. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS I N CONFIRMING THE TAXABILITY OF INCOME SURRENDERED DUR ING SURVEY U/S 133A OF INCOME-TAX ACT, 1961 AS DEEMED INCOME AS PER THE FOLLOWING DETAILS: UNACCOUNTED CASH FOUND AND SURRENDERED U/S 69A RS. 50,00,000/- UNACCOUNTED INVESTMENTS SURRENDERED U/S 69B RS. 75,000/- UNACCOUNTED EXPENDITURE SURRENDERED U/S 69C RS. 12,50,000/- TOTAL SURRENDERED INCOME RS. 70,00,000/- 2. THAT THE LD. CIT(A) PANCHKULA HAS ERRED IN LAW A ND FACTS OF THE CASE IN CONFIRMING THE SET OFF OF DISA LLOWANCE MADE OF UNABSORBED DEPRECIATION BY THE ASSESSING OF FICER AGAINST THE SURRENDERED INCOME. 2 3. BRIEF FACTS OF THE CASE ARE THAT ORIGINALLY THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING INCOME OF RS. 17,26,270/-. A SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSES SEE ON 4.3.2005 AND AN ADDITIONAL INCOME OF RS. 70,00,000/ - WAS SURRENDERED. BI-FURCATION OF THE SURRENDER INCOME IS AS UNDER: STOCK RS. 7,50,000 EXPENDITURE AS DETAILED IN LOOSE PAPERS I.E. DIESEL, WAGES ETC. RS. 12,50,000/- CASH IN HAND RS. 50,00,000/- TOTAL RS. 70,00,000/- ASSESSMENT WAS COMPLETED BY DCIT, AMBALA DETERMININ G THE TOTAL INCOME AT RS. 32,66,090. LATER ON THE ASSESS MENT RECORDS WERE EXAMINED BY THE LD. COMMISSIONER ,PANC HKULA WHEREIN HE FOUND THAT THE ASSESSMENT ORDER IS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD . CIT PASSED AN ORDER U/S 263 DATED 3.12.2008 AND OPINED THAT SU RRENDERED INCOME OF RS. 70.00 LAKHS SHOULD BE TREATED AS DEEM ED INCOME U/S 69, 69A, 69B OF THE ACT AND THEREFORE, SAME WA S NOT ELIGIBLE TO BE SET OFF AGAINST CARRY FORWARD BUSINE SS LOSS OR DEPRECIATION IN VIEW OF THE DECISION OF HON'BLE GUJ ARAT HIGH COURT IN CASE OF FAKIR MOHMED HAJI HASAN V CIT, 247 ITR 290. THOUGH THE ORDER U/S 263 WAS CHALLENGED BEFORE THE TRIBUNAL, THE TRIBUNAL OBSERVED THAT THE ASSESSMENT ORDER WAS DEFINITELY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, HOWEVER, THE CIT HIMSELF WAS NOT CORRECT IN OBSERVI NG THAT SURRENDERED INCOME SHOULD BE TREATED AS DEEMED INCO ME U/S 69, 69A, 69B OF THE ACT. ACCORDINGLY THE TRIBUNAL HELD THAT SUCH A CONCLUSION CAN BE DRAWN ONLY AFTER NECESSARY ENQUIRY AND ACCORDINGLY THE MATTER WAS SENT TO THE FILE OF ASSESSING OFFICER FOR CONDUCTING ENQUIRIES. WHEN THE ASSESSM ENT 3 PROCEEDINGS WAS TAKEN UP AGAIN IN VIEW OF THE REVIS IONARY ORDER U/S 263 AS WELL AS THE ORDER OF THE TRIBUNAL, IT WAS MAINLY SUBMITTED BEFORE THE ASSESSING OFFICER THAT OUT OF A SUM OF RS. 70.00 LAKHS, RS. 57.50 LAKHS WAS DISCLOSED IN THE P ROFIT AND LOSS ACCOUNT UNDER THE HEAD TOTAL SALES AND OTHER INCOME AND BALANCE OF RS. 12.50 LAKHS WAS SURRENDERED ON ACCOU NT OF EXPENDITURE AND WAS ADDED TO THE TAXABLE INCOME I N THE COMPUTATION. IT WAS FURTHER SUBMITTED THAT THE DEC ISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF FAKIR MOHMED HAJI HASAN V CIT (SUPRA) SHOULD NOT BE FOLLOWED IN THE PRESENT CASE BECAUSE IN THAT CASE ASSESSEE WAS NOT ABLE TO EXPLA IN THE SOURCE OF ACQUISITION OF GOLD WHEREAS IN THE PRESEN T CASE THE SOURCE WAS BUSINESS ONLY. IT WAS CONTENDED THAT IN THE SCHEME OF ACT INCOME CAN BE ASSESSED UNDER THE HEADS GIVEN IN SECTION 14 AND WHATEVER DOES NOT FALL UNDER THESE H EADS, CANNOT BE ASSESSED. RELIANCE WAS PLACED ON THE DEC ISION OF HON'BLE BOMBAY HIGH COURT IN CASE OF KEVALCHAND NEE MCHAND MEHTA V. CIT, 67 ITR 804 (BOM) AS WELL AS THE DECIS ION OF HON'BLE SUPREME COURT IN CASE OF CIT V. D.P. SANDHU BROS. CHEMBUR P. LTD. 273 ITR 1. SOME OTHER CASE LAWS WE RE ALSO RELIED. IT WAS FURTHER SUBMITTED THAT AS PER SECTI ON 32(2) IF UNABSORBED DEPRECIATION CANNOT BE SET OFF DURING A PARTICULAR YEAR OWNING TO INSUFFICIENCY OF PROFITS THE SAME, W OULD BE ADDED TO THE DEPRECIATION IN THE FOLLOWING YEAR WHI CH MEANS IT BECOMES CURRENT DEPRECIATION IN THE FOLLOWING YEAR. 4. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBM ISSIONS DID NOT FIND FORCE IN THE SAME BECAUSE DURING THE C OURSE OF SURVEY PROCEEDINGS NO DOCUMENTS HAVE BEEN IMPOUNDED BY THE DEPARTMENT SHOWING THAT THE ASSESSEE HAD SOME OTHER BUSINESS ACTIVITY FROM WHERE HE HAD DRAWN THE INCOM E. IT WAS 4 FURTHER OBSERVED THAT DEEMED INCOME U/S 69, 69A, 69 B AND 69C ARE TO BE TREATED SEPARATELY AS DEEMED INCOME AND A RE NOT ASSESSABLE UNDER ANY HEAD OF THE INCOME. HE ALSO O BSERVED THAT SECTION 14 ITSELF USED THE EXPRESSION SAVE AS OTHERWISE PROVIDED BY THIS ACT, CLEARLY SHOWS THAT SCOPE OF DEEMED INCOME COVERED BY SCHEME OF SECTIONS 69, 69A, 69B AND 69C WERE TO BE TREATED SEPARATELY BECAUSE THIS KIND OF INCOME IS N OT INCOME FROM HEAD LIKE SALARY, HOUSE PROPERTY, BUSINESS PROFITS OR CAPITAL GAINS ETC. FOR THIS RELIANCE WAS PLACED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF FAKIR MOHMED HAJI HASAN V CIT (SUPRA). SINCE INCOME SURRENDERED DURING SURVEY WAS ALSO NOT RECORDED IN THE BOOKS OF ACCOUNT THEREFORE, NO DEDUCTION OR SET OFF OF LOSS OR DEPRECIATION CAN BE ALLOWED. ACCORDINGLY S URRENDER INCOME WAS ASSESSED SEPARATELY AS UNDER: ADD UNACCOUNTED CASH FOUND AND SURRENDERED U/S 69A RS. 50,00,000/- UNACCOUNTED INVESTMENTS SURRENDERED U/S 69B RS. 7,50,000/- UNACCOUNTED EXPENDITURE SURRENDERED U/S 69C RS. 12,50,000/- 5. BEFORE THE LD. CIT(A) SUBMISSIONS MADE BEFORE TH E ASSESSING OFFICER WERE REITERATED. 6. THE LD. CIT(A) DID NOT FIND FORCE IN THESE SUBMI SSIONS AND DECIDED THE ISSUE AGAINST THE ASSESSEE VIDE PARA 3. 3 AND 3.1 WHICH IS AS UNDER: 3. THE FACTS AS WELL AS THE SUBMISSIONS OF THE APPE LLANT HAVE BEEN CONSIDERED BY THE UNDERSIGNED. THE CASES CITED ARE DISTINGUISHED ON FACTS. SURVEY WAS CONDUCTED AT THE BUSINESS PREMISE S OF THE APPELLANT ON 04.03.2006 JUST BEFORE THE CLOSE OF THE F.V> 200 5-06. THE APPELLANT SURRENDERED AN ADDITION INCOME OF RS.70 LACS ON ACC OUNT OF EXCESS CASH RS.50 LACS, EXCESS STOCK RS.7,50,000/- AND EXP ENSES AS PER LOOSE PAPERS RS.12,50,0007-. THE ADDITIONAL INCOME WAS 5 ASSESSED AS DEEMED INCOME BY THE APPELLANT U/S 69/4 , 69B & 69 AS UNDER :- UNACCOUNTED CASH FOUND & SURRENDERED U/S 69/4 50,00 ,0007- UNACCOUNTED INVESTMENT SURRENDERED U/S 69B 7,50,000 /- UNACCOUNTED EXPENDITURE SURRENDERED U/S 69C CASH 12 ,50,000/-. THE INCOME SURRENDERED/ DETERMINED U/S 69, 69/\, 69 B A 69C IS TO BE TREATED SEPARATELY AS 'DEEMED INCOME'' AND IS NOT ASSESSABLE UNDER ANY OTHER HEAD OF INCOME. THEREFOR E NO SET OFF IS ALLOWABLE TO THE APPELLANT AGAINST THIS INCOME IN V IEW OF THE APPELLANT AGAINST THIS INCOME IN VIEW OF THE JUDGMENT OF HON' BLE GUJRAT HIGH COURT IN THE CASE OF FAKIR MOHAMMED HAII HASAN F 20021 24 7 ITR 290 (GUJ.) 3.1 THE APPELLANT'S PLEA THAT INCOME CAN BE ASSESSE D ONLY UNDER FIVE HEADS OF INCOME AS PER SECTION 14 IS NOT ACCEPTABL E IN VIEW OF THE OPENING WORDS OF SECTION .- 'SAVE AS OTHERWISE PROV IDED BY THIS ACT'. DEEMED INCOME IS NOT COVERED UNDER MY OF THE HEADS U/S 14 I.E. I) SALARY II) INCOME FROM HOUSE PROPERTY III) PROFITS GAINS OF BUSINESS OR PROFESSION IV) CAPITAL GAINS V) INCOME FROM OTHER SOURCES THE SURRENDERED INCOME HAS BEEN ASSESSED AS 'DEEMED INCOME 1 ON ACCOUNT OF UNACCOUNTED CASH U/S 69A, UNACCOUNTED INVESTMENT U/S 69B AND 'UNACCOUNTED EXPENDITURE U/S 69C OF THE IT. ACT, 19 61 BECAUSE NATURE AND SOURCE OF ACQUISITION, INVESTMENT OR EXP ENDITURE ARE NOT ACCOUNTED/KNOWN. THEREFORE CORRESPONDING DEDUCTIONS ARE NOT ATTRACTED IN THE CASE OF DEEMED INCOME. THERE IS NO QUESTION OF ALLOWANCE OF UNABSORBED DEPRECIATION AGAINST DEEMED INCOME ON AC COUNT OF SURRENDER. THEREFORE THE ADDITION IS SUSTAINED AND CLAIM OF SE T OFF OF UNABSORBED DEPRECIATION IS DISALLOWED. AS A RESULT THESE GROUN DS ARE DISMISSED. 7 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE INCOME SURRENDERED DURING SURVEY CAN NOT BE ASS ESSED AS DEEMED INCOME U/S 69, 69A, 69B AND 69C OF THE ACT I F NATURE OF SOURCE CAN BE PROPERLY IDENTIFIED. IN THIS REGA RD HE RELIED ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN CASE OF FASHION WORD V ACIT, ITA NO. 1634/AHD/2006 (COPY OF THE ORDER IS FILED AT PAPER BOOK PAGE 9 TO 22). IN THA T CASE THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF F AKIR 6 MOHMED HAJI HASAN V CIT (SUPRA) WAS CONSIDERED AND IT WAS OBSERVED THAT THERE SEEMS TO BE SOME MISUNDERSTANDI NG IN THE INTERPRETATION OF THE DECISION OF HON'BLE HIGH COUR T. IT WAS FURTHER OBSERVED AS UNDER: THE EXPRESSION NATURE AND SOURCE USED IN THIS SE CTION SHOULD BE UNDERSTOOD TO MEAN REQUIREMENT OF IDENTIFICATION OF SOURCE AND IS GENUINENESS . WHERE THE ASSESSEE IS ABLE TO EXPLAIN NATURE AND SO URCE OF INVESTMENT/EXPENDITURE AND ALSO IF THEY ARE RECO RDED IN THE BOOKS OF ACCOUNT THEN SUCH INVESTMENT/EXPENDITU RE WILL NOT BE TREATED AS DEEMED INCOME BUT WHERE INVESTMENT/EXPENDITURE IS NOT RECORDED IN THE BOOKS OF ACCOUNT. HE FURTHER RELIED ON THE DECISION OF HON'BLE SUPREM E COURT IN CASE OF CIT V. D.P. SANDHU BROS. CHEMBUR P. LTD. WH EREIN IT WAS OBSERVED AS UNDER: SECTION 56 PROVIDES FOR THE CHARGEABILITY OF INCOM E OF EVERY KIND WHICH HAS NOT TO BE EXCLUDED FROM THE T OTAL INCOME UNDER THE ACT, ONLY IF IT IS NOT CHARGEABLE TO INCOME TAX UNDER ANY OF THE HEADS SPECIFIED IN SEC TION 14 ITEMS A TO E. THEREFORE, IF THE INCOME IS INCL UDED UNDER ANY ONE OF THE HEADS. 8 THE LD. COUNSEL OF THE ASSESSEE FURTHER ARGUED TH AT AS PER SECTION 32(2) IF UNABSORBED DEPRECIATION CAN NOT BE SET OFF IN A YEAR UNDER CONSIDERATION THEN THE SAME WOULD BE ADD ED TO THE DEPRECIATION ALLOWANCE OF THE FOLLOWING PREVIOUS YE AR WHICH MEANS IT WOULD BECOME CURRENT DEPRECIATION OF THE N EXT YEAR. SUCH DEPRECIATION CAN BE ADJUSTED OR SET OFF AGAINS T ANY HEAD OF THE INCOME. IN THIS REGARD HE RELIED ON THE DEC ISION OF HON'BLE MADRAS HIGH COURT IN CASE OF CIT V. 291 ITR 258. HE ALSO RELIED ON THE DECISION OF AHMEDABAD BENCH OF T HE TRIBUNAL IN CASE OF ITO V. HYTAISUN MAGNETICS LTD. ITAS NO. 2897 & 2898/AHD/2008 (COPY OF ORDER FILED AT PAGE 1 TO 8 O F PAPER BOOK) WHEREIN IT WAS OBSERVED AS UNDER: 7 WE FIND THAT IT IS NOT IN DISPUTE THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE HAD INCOME OF RS. 2,34,10,540/- ASSESSED UNDER THE HEAD INCOME FROM O THER SOURCES IN VIEW OF PROVISIONS OF SECTION 69 OF THE ACT. FURTHER IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 10.1 3 CRORES IN ASSESSMENT YEAR 1993-94 , RS. 1.59 CRORE S IN ASSESSMENT YEAR 1994-95 AND RS. 68.14 LAKHS IN ASSESSMENT YEAR 1995-96 WHICH IS AVAILABLE FOR SET OFF AGAINST INCOME OF THE CURRENT YEAR. AS PER PROVISI ONS OF SECTION 32(2) UNABSORBED DEPRECIATION ARE DEEMED AS PART OF CURRENT YEARS DEPRECIATION TO THE EXTENT O F AVAILABLE INCOME. FURTHER THERE IS NO PROVISIONS U NDER THE INCOME TAX ACT TO PROHIBIT SET OFF OF CURRENT Y EARS BUSINESS LOSS AGAINST INCOME OF THE ASSESSEE WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . SECTION 70 DOES NOT PROHIBIT SUCH SET OFF. 9 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE STR ONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AS WELL AS THE LD. CIT(A). HE RELIED ON THE DECISION OF HON'BLE PUNJA B & HARYANA HIGH COURT IN CASE OF M/S KIM PHARMA (P) LTD. V. CI T, ITA NO. 106 OF 2011 (O&M) WHEREIN THE COURT HELD THAT IN CA SE OF SURRENDERED INCOME BROUGHT FORWARD LOSSES CAN NOT B E SET OFF UNDER SECTIONS 70 & 71 OF THE ACT AGAINST THE SURRE NDERED INCOME. 10 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. THE MAIN CONTROVERSY INVOLVED IS WHETHER THE SURRENDER INCOM E AMOUNTING TO RS. 70.00 LAKHS SHOULD BE TREATED AS B USINESS INCOME SO AS TO SET OFF BROUGHT FORWARD LOSSES U/S 70 OF THE ACT AS WELL AS THE DEPRECIATION U/S 32(2). AS FAR AS T HE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT V. D.P. SANDHU BROS. CHEMBUR P. LTD. (SUPRA) IS CONCERNED, WE FIND THAT FACTS IN THAT CASE ARE TOTALLY DIFFERENT. IN THAT CASE THE ASSESSEE HAD SOLD TENANCY RIGHTS FOR RS. 35.00 LAKHS WHICH WERE CLAIMED TO BE NON-TAXABLE. HOWEVER, THE ASSESSING OFFICER ASS ESSED THE SAME AS INCOME FROM OTHER SOURCES U/S 10(3) OF THE ACT. ON ASSESSEES APPEAL THE COMMISSIONER HELD THAT THE SU M WAS 8 TAXABLE UNDER THE HEAD CAPITAL GAIN. HE DETERMIN ED THE COST OF ACQUISITION ON THE BASIS OF FAIR MARKET VALUE AND SUBJECTED THE RECEIPT FOR TENANCY RIGHTS AFTER REDUCING THE C OST OF SUCH RIGHTS AS ASSESSABLE UNDER THE HEAD CAPITAL GAIN. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THOUGH THE INCOME WA S ASSESSABLE UNDER THE HEAD CAPITAL GAIN BUT SINCE THERE WAS NO COST OF ACQUISITION AND THEREFORE, FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT V. B.C. SRINIV ASA SETTY, 128 ITR 294 IT WAS HELD THAT SINCE THE CAPITAL GAIN CAN NOT BE COMPUTED, THE SAME WAS NOT TAXABLE. ON REVENUES A PPEAL TO THE HIGH THE ISSUE WAS DECIDED AGAINST THE DEPARTME NT. WHEN THIS MATTER TRAVELED TO THE HON'BLE SUPREME COURT A FTER DETAILED DISCUSSION, IT WAS HELD THAT TENANCY RIGHT S CONSTITUTED CAPITAL ASSETS. WHILE DEALING WITH THE ALTERNATIVE ARGUMENT OF THE REVENUE THAT SALE TENANCY RIGHTS SHOULD BE TAXA BLE UNDER THE HEAD OF INCOME FROM OTHER SOURCES THE HON'BLE A PEX COURT OBSERVED AT PLACITUM 14 TO 16 AS UNDER:- SECTION 14 OF THE INCOME-TAX ACT, 1961 AS IT STOOD AT EH RELEVANT TIME SIMILARLY PROVIDED THAT ALL INCOME S HALL FOR THE PURPOSE OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME BE CLASSIFIED UNDER SIX HEADS OF INCOM E, NAMELY:- (A) SALARIES; (B) INTEREST ON SECURITIES; (C) INCOME FROM HOUSE PROPERTY; (D) PROFITS AND GAINS OF BUSINESS OR PROFESSION; (E) CAPITAL GAINS; (F) INCOME FROM OTHER SOURCES UNLESS OTHERWISE, PROVIDED IN THE ACT HAS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THE ACT, ONLY IF IT IS NOT CHARGEABLE TO INCOME TAX UNDER ANY OF THE HEADS SPECIFIED IN SECT ION 14, ITEMS A TO E. THEREFORE, IF THE INCOME IS INCLUDE D UNDER ANY ONE OF THE HEADS, IT CANNOT BE BROUGHT TO TAX U NDER THE RESIDUARY PROVISIONS OF SECTION 56. THERE IS NO DISPUTE THAT A TENANCY RIGHT IS A CAPIT AL ASSET THE SURRENDER OF WHICH WOULD ATTRACT SECTION 45 SO THAT THE VALUE RECEIVED WOULD BE CAPITAL RECEIPT AND ASSESSABLE IF AT ALL ONLY UNDER ITEM E OF SECTION 1 4. THAT BEING SO, IT CANNOT BE TREATED AS A CASUAL OR NON- RECURRING RECEIPT U/S 10(3) AND BE SUBJECTED TO TA X U/S 9 56. THE ARGUMENT OF THE APPELLANT THAT EVEN IF THE INCOME CANNOT BE CHARGEABLE U/S 45, BECAUSE OF THE INAPPLICABILITY OF THE COMPUTATION PROVIDED U/S 48, IT COULD STILL IMPOSED TAX UNDER THE RESIDUARY HEAD AS THUS UNACCEPTABLE. IF THE INCOME CANNOT BE TAXED U/S 45 , IT CANNOT BE TAXED AT ALL. (SEE S.G. MERCANTILE CORPO RATION P. LTD. V CIT (1972) 83 ITR 700 (S.C). 11 THUS IT IS CLEAR FROM THE ABOVE THAT ONCE THE IT EM OF RECEIPT IS HELD TO BE FALLING UNDER A PARTICULAR HE AD THEN THE SAME CANNOT BE CHARGED ALTERNATIVELY UNDER ANOTHER HEAD PARTICULARLY UNDER THE HEAD INCOME FROM OTHER SOUR CES. THIS OBSERVATION CAN NOT LEAD TO THE CONCLUSION IF INCOM E DOES NOT BELONG TO A PARTICULAR HEAD SAME CANNOT BE CHARGED AT ALL. AS FAR AS THE DECISION OF AHMEDABAD BENCH OF THE TRIBU NAL IN CASE OF FASHION WORD V ACIT, ITA NO. 1634/AHD/2006 (SUPR A) IS CONCERNED INTERPRETING THE DECISION OF HON'BLE HIGH COURT IN CASE OF FASHION WORD V ACIT, ITA NO. 1634/AHD/2006 (SUPRA) HAS TO GIVE A WAY TO INTERPRETATION PUT ON THE SAME DECISION BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF M/S KIM PHARMA (P) LTD. V. CIT, ITA NO. 106 OF 2011 (O&M), HON'BLE HIGH COURT CLEARLY HELD THAT SURRENDERED INCOME CAN BE TAXED AS DEEMED INCOME WITHOUT SETTING OFF OF THE LOSSES U/S 70 & 71. WE ARE BOUND TO FOLLOW THE DECISION OF HON'BLE PUNJ AB & HARYANA HIGH COURT AND FOLLOWING THE SAME, WE HOLD THAT SURRENDERED INCOME HAS TO BE ASSESSED SEPARATELY A S DEEMED INCOME. 12 COMING TO THE ISSUE OF SETTING OFF OF DEPRECIATI ON U/S 32(2), FIRST OF ALL IT HAS TO BE NOTICED THAT THE D ECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF M/S KIM PHARMA (P) LTD. V. CIT, (SUPRA) HELD THAT SURRENDER ED INCOME DURING THE SURVEY HAS TO BE ASSESSED SEPARATELY AS DEEMED INCOME AND SET OFF OF LOSSES U/S 70 & 71 WAS NOT PO SSIBLE 10 AGAINST SUCH INCOME. HOWEVER, IT IS CLEAR THAT THI S DECISION DOES NOT DEAL WITH THE ISSUE OF SETTING OFF OF DEPR ECIATION U/S 32(2). SECTION 32(2) READS AS UNDER: 32(2) WHERE, IN THE ASSESSMENT OF THE ASSESSEE, F ULL 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 T HAT PREVIOUS YEAR, OR 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 WHI CH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIO US YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLO WANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIO US YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS.] THE PLAIN READING OF THE ABOVE CLEARLY SHOWS THAT I F THE DEPRECIATION CANNOT BE FULLY ADJUSTED AGAINST PROFITS AND GAINS CHARGEABLE IN THE RELEVANT YEAR BECAUSE OF INEFFICIENCY OF THE PROFITS THEN THE SAME WOULD BE ADDLED TO THE DEPRECIATION OF THE FOLLOWING YEAR. THIS MEANS THAT UNABSORBED D EPRECIATION WHICH CAN NOT BE SET OFF IN A PARTICULAR YEAR, WOULD BECOME CURRENT DEPRECIATION IN THE FOLLOWING YEAR AND THERE IS NO RESTRICTION AGAINST SUCH SET O FF. THEREFORE, UN-ABSORBED DEPRECIATION WHICH IS CARRY FORWARD AS CURRENT DEPR ECIATION U/S 32(2) IS CLEARLY AVAILABLE FOR SETTING OFF AND SIMILAR VIEW WAS TAKE N BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN CASE OF ITO V. HYTAISUN MAGNETICS L TD. ITAS NO. 2897 & 2898/AHD/2008 HELD AS UNDER: WE FIND THAT IT IS NOT IN DISPUTE THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE HAD INCOME OF RS. 2,34,10,540/- ASSESSED UNDER THE HEAD INCOME FROM O THER SOURCES IN VIEW OF PROVISIONS OF SECTION 69 OF THE ACT. FURTHER IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 10.1 3 CRORES IN ASSESSMENT YEAR 1993-94 , RS. 1.59 CRORE S IN ASSESSMENT YEAR 1994-95 AND RS. 68.14 LAKHS IN ASSESSMENT YEAR 1995-96 WHICH IS AVAILABLE FOR SET OFF AGAINST INCOME OF THE CURRENT YEAR. AS PER PROVISI ONS OF SECTION 32(2) UNABSORBED DEPRECIATION ARE DEEMED AS PART OF CURRENT YEARS DEPRECIATION TO THE EXTENT O F AVAILABLE INCOME. FURTHER THERE IS NO PROVISIONS U NDER THE INCOME TAX ACT TO PROHIBIT SET OFF OF CURRENT Y EARS BUSINESS LOSS AGAINST INCOME OF THE ASSESSEE WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . SECTION 70 DOES NOT PROHIBIT SUCH SET OFF. 11 13 HOWEVER, THIS PROVISION HAS BEEN AMENDED TWICE W .E.F. 1.41997 BY FINANCE ACT (NO. 2 OF 1996) AND AGAINST ON 1.4.2002 BY FINANCE ACT, 2001. CERTAIN RESTRICTION S WERE INTRODUCED AGAIN SET OFF OF BY SUCH UNABSORBED DEPR ECIATION. CONTROVERSY ALSO AROSE IN THIS RESPECT. ULTIMATELY THE MATTER TRAVELED TO THE SPECIAL BENCH OF THE TRIBUNAL IN CA SE OF DCIT V. TIMES GUARANTY LTD. (2010) 4 ITR (TRIB ) 210 (MU M)(SB). IN THIS CASE IT WAS HELD AS UNDER:- UNDER SECTION 32(2) OF THE INCOME-TAX ACT, 1961, P RIOR TO ITS SUBSTITUTION, BY THE FINANCE (NO. 2) ACT, 1996 WITH EFFECT FROM A PRIL 1,1997 THE CURRENT DEPRECIATION UNDER SECTION 32(1) COULD BE ADJUSTED AGAINST INCOME UNDER ANY HEAD INCLUDING 'CAPITAL GAINS' AN D 'INCOME FROM HOUSE PROPERTY' IN THE SAME YEAR. IF THERE REMAINE D SOME UNADJUSTED DEPRECIATION ALLOWANCE, THAT WAS CARRIED FORWARD IN THE FOLLOWING YEAR(S) FOR SET OFF AGAINST INCOME UNDER ANY OTHER HEADS JUST L IKE CURRENT DEPRECIATION ALLOWANCE UNDER SECTION 32(1) PERTAINING TO SUCH YE AR. UNDER SUB-SECTION (2) OF SECTION 32 AS SUBSTITUTED BY THE FINANCE (NO. 2) ACT, 1996, WITH EFFECT FROM APRIL 1,1997, THE SCOPE OF SET-OFF OF THE BROUGHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE WAS RESTR ICTED TO THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION'. UNDER CLAUSE (I) OF SUBSTITUTED SUB-SECTION (2), TH E UNABSORBED DEPRECIATION ALLOWANCE COULD BE SET OFF AGAINST 'PROFITS AND GAI NS' OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE FOR THAT ASSE SSMENT YEAR. UNDER CLAUSE (II) OF SUB-SECTION (2) IF THE UNABSOR BED DEPRECIATION ALLOWANCE COULD NOT BE WHOLLY SET OFF UNDER CLAUSE (I), THE AMOUNT NOT SO SET OFF COULD BE SET OFF FROM THE 'INCOME UNDER ANY OTHER HEAD', IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR. THE PROVISION FOR CARRY FORWARD AND SET-OFF OF UNAB SORBED DEPRECIATION FOR ANY NUMBER OF YEARS AGAINST INCOME UNDER ANY HEAD, WAS FURTHER DILUTED BY WAY OF CLAUSE (III)(B) TO SECTIO N 32(2) RESTRICTING THE RIGHT TO SET-OFF OF UNABSORBED DEPRECIATION FOR A P ERIOD OF NOT MORE THAN EIGHT ASSESSMENT YEARS SUCCEEDING THE ASSESSMENT YEAR IN WHICH THE ALLOWANCE WAS FIRST COMPUTED. THIS PART OF THE PROVISION DID NOT DEAL WITH THE TREATMENT OF UNADJUSTED BROUGHT FORWARD DEPRECIATIO N ALLOWANCE FOR AND UP TO THE ASSESSMENT YEAR 1996-97. THE FINANCE MINISTE R CLARIFIED THE AMENDMENT AS PROSPECTIVE INASMUCH AS THE CUMULATIVE UNABSORBED DEPRECIATION BROUGHT FORWARD AS ON APRIL 1, 1997, C OULD BE SET OFF AGAINST TAXABLE PROFITS OR INCOME UNDER ANY OTHER H EAD FOR THE ASSESSMENT YEAR 1997-98 AND SEVEN SUBSEQUENT ASSESS MENT YEARS. IN OTHER WORDS, THE PERIOD OF EIGHT YEARS UNDER CLAUSE (III) (B) OF SECTION 32(2) CAME TO BE RECKONED FROM ASSESSMENT YEAR 1997-98 IRRESPECTI VE OF THE FACT THAT THE UNADJUSTED BROUGHT FORWARD DEPRECIATION AROSE IN AN EARLIER ASSESSMENT YEAR. THUS, ON THE STRENGTH OF THE CLARIFICATION GI VEN BY THE FINANCE MINISTER, THE UNADJUSTED DEPRECIATION BROUGHT FORWARD UP TO A PRIL 1,1997 BECAME ELI- GIBLE FOR SET OFF NOT ONLY AGAINST THE BUSINESS INC OME BUT ALSO AGAINST INCOME UNDER OTHER HEADS IN EIGHT ASSESSMENT YEARS. TWO LIKE EXPRESSIONS ARE USED IN SUB-SECTION (2), V IZ, FIRSTLY, 'PROFITS OR GAINS ' IN THE MAIN PART OF SUB-SECTION (2) AND THEN, 12 'PROFITS AND GAINS' IN CLAUSE (I). THE EXPRESSION ' PROFITS AND GAINS' AS USED IN CLAUSE (I) OR (III)(A) REFERS ONLY TO INCOM E UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. SECTION 32(2) WAS AGAIN SUBSTITUTED BY THE FINANCE ACT, 2001 WITH EFFECT FROM APRIL 1, 2002 RESTORING THE PROVIS ION AS PREVAILING PRIOR TO THE AMENDMENT MADE BY THE FINANCE (NO. 2) ACT, 1996 WI TH EFFECT FROM APRIL 1,1997. SUB-SECTION (2) OF SECTION 32 IS A SUBSTANTIVE PROV ISION AND NOT A PROCEDURAL ONE. IT IS SETTLED LEGAL POSITION THAT THE AMENDMENT TO A S UBSTANTIVE PROVISION IS NORMALLY PROSPECTIVE UNLESS EXPRESSLY STATED OTHERW ISE OR IT APPEARS SO BY NECESSARY IMPLICATION. IT IS NOWHERE SEEN EIT HER FROM THE NOTES ON CLAUSES OR MEMORANDUM EXPLAINING THE PROVISION O F THE FINANCE BILL 2001, THAT SUBSTITUTION OF SUB-SECTION (2) OF SECTION 32 IS RETROSPECTIVE. THEREFORE, THE SUBSTANTIVE PROVISION CONTAINED IN S ECTION 32(2) AS SUBSTITUTED BY THE FINANCE ACT, 2001 WITH EFFECT FROM APRIL 1, 200 2, IS PROSPECTIVELY APPLICABLE TO THE ASSESSMENT YEAR 2002-03 ONWARDS. SECTION 32(2) IS A DEEMING PROVISION AND BY A LEGAL FICTION, THE AMOUNT OF DEPRECIATION ALLOWANCE UNDER SECTION 32(1) WHICH IS NOT FULLY ABSORBED AGAINST INCOME FOR THAT YEAR IS DEEMED TO BE PART OF THE DE PRECIATION ALLOWANCE FOR THE SUCCEEDING YEAR(S). A DEEMING PROVISION CANNOT BE E XTENDED BEYOND THE PURPOSE FOR WHICH IT IS INTENDED. SECTION 32(1) DEALS WITH DEPRECIATION ALLOWANCE FOR THE CURRENT YEAR. IT IS ONLY WHEN THE ASSESSMENT OF THE ASSESSEE FROM ASSESSMENT YEAR 2002-03 ONWARDS IS MADE IN WHICH DEPRECIATION ALLOW ANCE FOR THE CURRENT YEAR UNDER SECTION 32(1) CANNOT BE GIVEN FULL EFFECT, OW ING TO THE INADEQUACY OF PROFITS, THAT THE DIRECTIVE OF THE DEEMING PROVISIO N UNDER SECTION 32(2) SHALL APPLY. WHEREVER THERE IS MENTION OF LOSS UNDER A PARTICULA R HEAD FOR THE CURRENT YEAR WHICH IS SOUGHT TO BE SET OFF AGAINST THE INCOME UNDER TH E SAME HEAD OR OTHER HEADS OF THE INCOME FOR THAT VERY YEAR, THE WORDS 'CANNOT BE ' AND 'HAS NOT BEEN' HAVE BEEN BROUGHT INTO PLAY. THE WORDS, 'CANNOT BE' AND 'HAS NOT BEEN' USED IN THE PRESENT TENSE IN SECTION 32(2) SUGGEST THAT THE REFERENCE T O DEPRECIATION ALLOWANCE UNDER SECTION 32(1), WHICH COULD NOT BE ADJUSTED DUE TO I NADEQUACY OF PROFITS, IS FOR THE CURRENT YEAR ALONE STARTING FROM ASSESSMENT YEAR 20 02-03 ONWARDS. THE BROUGHT FORWARD UNABSORBED DEPRECIATION OF EARLIER YEARS CANNOT BE INCLUDED WITHIN THE SCOPE OF SECTION 32(2). IN SECTION 32(2) THE DEPRECIATION ALLOWANCE FOR THE CURRENT YEAR TO WHICH FULL EFFECT CANNOT BE GIVEN DUE TO THE PAUCITY OF PROFIT S, HAS BEEN REFERRED TO AS 'UNABSORBED DEPRECIATION ALLOWANCE'. SUCH UNA BSORBED DEPRECIATION ALLOWANCE FOR THE ASSESSMENT YEARS 199 7-98 TO 2001-02 STRICTLY COMES UNDER SECTION 32(2) AS 'UNABSORBED DEPRECIATI ON ALLOWANCE'. AS THE LANGUAGE OF THIS DEEMING PROVISION DOES NOT TALK OF ANY BROUGHT FORWARD 'UNABSORBED DEPRECIATION ALLOWANCE' OR DEPRECIATION ALLOWANCE WHICH COULD NOT BE GIVEN EFFECT TO IN THE EARLIER YEARS THAT RESULTANT LY BECAME PART OF SECTION 32(2), THERE IS NO QUESTION OF EXPANDING THE SCOPE OF THE LEGAL FICTION. THE PURPOSE OF A LEGAL FICTION IN SECTION 32(2) IS TO MAKE THE UNABSORBED CARRIED FORWARD DEPRECIATION PARTAKE OF THE SAME CH ARACTER AS THE CURRENT DEPRECIATION IN THE FOLLOWING YEAR. IN OTHER WORDS THE OBJECT OF THE PROVISION IS TO TREAT THE WHOLE OR PART OF THE DEPRECIATION A LLOWANCE UNDER SECTION 32(1), WHICH COULD NOT BE ADJUSTED IN THE FIRST YEA R, AS THE CURRENT DEPRECIATION UNDER SECTION 32(1) IN THE SECOND YEAR . IN THE SECOND YEAR, SUCH DEPRECIATION OF FIRST YEAR BECOMES PART AND PA RCEL OF DEPRECIATION UNDER SECTION 32(1) OF THE SECOND YEAR. IF AGAIN IN THE S ECOND YEAR, THE TOTAL OF DEPRECIATION UNDER SECTION 32(1) (INCLUDING THE AMO UNT OF ALLOWANCE WHICH CAME FROM FIRST YEAR AND BECAME DEP RECIATION 13 UNDER SECTION 32(1) IN THE SECOND YEAR) CANNOT BE A BSORBED, IT SHALL BECOME CURRENT DEPRECIATION FOR THE THIRD YEAR TO B E DEALT WITH IN THE SAME MANNER AS THE AMOUNT OF DEPRECIATION IN THE THIRD Y EAR AND SO ON. ONCE THE UNABSORBED DEPRECIATION FOR THE FIRST YEAR IS GIVEN THE CHARACTER OF CURRENT DEPRECIATION IN THE SECOND YEAR, THE PURPOSE OF SEC TION 32(2) IS FULFILLED. THE 'UNABSORBED DEPRECIATION ALLOWANCE' OF THE PERIOD A FTER SUBSTITUTION BY THE FINANCE (NO. 2) ACT, 1996 CANNOT BE GIVEN THE CHARA CTER OF CURRENT DEPRECIATION IN THE ASSESSMENT YEARS AFTER SUBSTITU TION WITH EFFECT FROM APRIL 1, 2002. CIT V. MOTHER INDIA REFRIGERATION INDUSTRIES P. LTD . [1985] 155 ITR 711 (SC) RELIED ON. THEREFORE, THE LAW PREVAILING AS ON THE 1ST APRIL O F THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS DOES NOT PERMIT THE BR OUGHT FORWARD UN- ABSORBED DEPRECIATION ALLOWANCE OF THE PERIOD AFTER SUBSTITUTION BY THE FINANCE (NO. 2) ACT, 1996 TO ASSUME THE CHARACTER O F DEPRECIATION UNDER SECTION 32(1) IN THESE ASSESSMENT YEARS. IF THERE IS BOTH REPEAL OF THE OLD PROVISION AND SI MULTANEOUS INSERTION OF A NEW PROVISION IN ITS PLACE, IT IS CALLED 'SUBSTITUT ION'. BUT FOR THE RELAXATION GIVEN BY THE FINANCE MINISTE R IN PARLIAMENT, THE BROUGHT FORWARD UNADJUSTED DEPRECIA TION OF THE PERIOD PRIOR TO THE AMENDMENT MADE BY THE FINANCE (NO. 2) ACT, 1996 WITH EFFECT FROM APRIL 1,1997 WOULD HAVE ELAPSED. THERE IS NO S UCH CONCESSION GIVEN BY THE FINANCE MINISTER WHILE SUBSTITUTING THE PROV ISIONS OF SECTION 32(2) WITH EFFECT FROM APRIL 1, 2002. THEREFORE, THE BROU GHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE OF THE PERIOD AFTER SUBSTITU TION BY THE FINANCE (NO. 2) ACT, 1996 CANNOT BE TREATED AS THE CURRENT DEPRE CIATION IN THE ASSESSMENT YEARS UNDER CONSIDERATION. THE POSITION CAN BE SUMMED UP AS FOLLOWS : FOR THE ASSESSMENT YEARS 1997-98 TO 2001-02 BROUGHT FORWARD UNADJUSTED DEPRECIATION ALLOWANCE FOR AND UP TO ASSESSMENT YEA R 1996-97 (THE 'FIRST UNADJUSTED DEPRECIATION ALLOWANCE'), WHICH COULD NO T BE SET OFF UP TO ASSESSMENT YEAR 1996-97, SHALL BE CARRIED FORWARD F OR SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 1997-98. CURRENT DEPR ECIATION FOR THE YEAR UNDER SECTION 32(1) (FOR EACH YEAR SEPARATELY START ING FROM ASSESSMENT YEARS 1997-98 UP TO 2001-02) CAN BE SET OFF FIRSTLY AGAINST BUSINESS INCOME AND THEN AGAINST INCOME UNDER ANY OTHER HEAD . THE AMOUNT OF CURRENT DEPRECIATION FOR ASSESSMENT YEARS 1997-98 T O 2001-02 WHICH CANNOT BE SO SET OFF, THE 'SECOND UNABSORBED DEPREC IATION ALLOWANCE', SHALL BE CARRIED FORWARD FOR A MAXIMUM PERIOD OF EIGHT AS SESSMENT YEARS FROM THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH IT WAS FIRST COMPUTED, TO BE SET OFF ONLY AGAINST THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION'. FOR THE ASSESSMENT YEAR 2002-03 ONWARDS THE 'FIRST UNADJUSTED DEPRECIATION ALLOWANCE' CAN BE SET OFF UP TO ASSESS MENT YEAR 2004-05, THAT IS, THE REMAINING PERIOD OUT OF MAXIM UM PERIOD OF EIGHT ASSESSMENT YEARS AGAINST INCOME UNDER ANY HEA D. THE 'SECOND UNABSORBED DEPRECIATION ALLOWANCE' CAN BE SET OFF O NLY AGAINST THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' WITHIN A PERIOD OF EIGHT ASSESSMENT YEARS SUCCEEDING THE ASSESSMENT YEAR FOR WHICH IT WAS FIRST COMPUTED. CURRENT DEPRECIATION FOR THE YEAR U NDER SECTION 32(1), FOR EACH YEAR SEPARATELY, STARTING FROM ASSESSMENT YEAR 2002-03 CAN BE SET OFF AGAINST INCOME UNDER ANY HEAD. THE AMOUNT OF DEPREC IATION ALLOWANCE NOT SO SET OFF (THE 'THIRD UNADJUSTED DEPRECIATION ALLO WANCE') SHALL BE CARRIED FORWARD TO THE FOLLOWING YEAR. THE 'THIRD UNADJUSTE D DEPRECIATION ALLOWANCE' 14 SHALL BE DEEMED DEPRECIATION UNDER SECTION 32(1), T HAT IS DEPRECIATION FOR THE CURRENT YEAR IN THE FOLLOWING YEAR(S) TO BE SET OFF AGAINST INCOME UNDER ANY HEAD, LIKE CURRENT DEPRECIATION, IN PERPETUITY. 14 FROM THE ABOVE IT IS CLEAR THAT UNABSORBED DEPRE CIATION FOR THE BLOCK OF ASSESSMENT YEAR 1997-98 TO 2001-02 WHICH COULD NOT HAVE BEEN SET OFF EARLIER, CANNOT BE ALLO WED TO BE SET OFF NOW. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO ONLY ALLOW SET OFF OF UNABSORBED DEPRE CIATION WHICH IS OUTSIDE THE BLOCK OF ASSESSMENT YEAR 1997-98 TO 2001-02. 15 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 17.12.2012. SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 17 .12. 2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 15