M/s Oswal Spinning & Weaving Mills Ltd., Ludhiana V. ACIT, Ludhiana

ITA 785/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6818 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 03-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 13-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGALCIT
• Assessee Lawyers: H O ARORA
• Keywords: Depreciation; Commercial expediency; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.785 & 1093/CHD/2016 (ASSESSMENT YEARS : 2008-09 & 2009-10) M/S OSWAL SPINNING & VS. THE A.C.I.T., WEAVING MILLS LTD., CIRCLE 5(1), PLOT NO.92, INDUSTRIL AREA A, LUDHIANA. NEAR KWALITY CHOWK, LUDHIANA. PAN: AAACO1971H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.O. ARORA RESPONDENT BY : SHRI RAVI SARANGAL,CIT DR DATE OF HEARING : 31.08.2017 DATE OF PRONOUNCEMENT : 28.09.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THESE TWO APPEALS HAVE BEEN PREFERRED BY THE SAME ASSESSEE AGAINST SEPARATE ORDERS OF LD. CIT(APPEALS )-2, LUDHIANA DATED 31.3.2016 AND 25.7.2016 RELATING TO ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. 2. WE SHALL FIRST BE TAKING UP THE APPEAL OF THE AS SESSEE IN ITA NO.785/CHD/2016. ITA NO.785/CHD/2016: 3. THE GROUND NOS.1 AND 6 RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THAT THE IMPUGNED ORDER HAS BEEN PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT PROPER APPLICATION OF MIND, AS SUCH IT IS NOT SUSTAINA BLE IN LAW AND FACTS OF THE CASE. 2 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY AND/OR ADD NEW GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 4. THE ABOVE GROUNDS ARE GENERAL AND NEED NO ADJUDICATION. 5. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDE R: 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS.64,43, 680/- MADE ON ACCOUNT OF INTEREST CLAIMED U/S 36 (1) (III) OF THE IT. ACT, 1961. THE DISALLOWANCE CONFIRMED IS NOT BAS ED ON PROPER APPRAISAL OF FACTS AND LAW IN THE MATTER. 6. THIS GROUND RELATES TO DISALLOWANCE MADE ON ACCO UNT OF INTEREST CLAIMED, U/S 36(1)(III) OF THE INCOME T AX ACT, 1961 (IN SHORT THE ACT), AMOUNTING TO RS.64,43,68 0/-. 7. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAD GIVEN LOANS AND ADVANCES TO THE FO LLOWING PARTIES: NAME AMOUNT PURPOSE 1.OSWAL AGROILS LTD. 1,42,524/- PROMOTION OF THE COMPANY 2. ADINATH TRADERS PVT.LTD. 1,83,5 5,583/ - ADVANCE FOR PURCHASES 3. NEMINATH TEXTILE PVT.LTD. 1,42,39,795/ - ADVANCE FOR PURCHASES 4. OSWAL OIL MILLS 46,15,820/ - ADVANCE FOR PURCHASES 5. OSWAL OVERSEAS 1,63,43,620/ - ADVANCE FOR PURCHASES 6. OSPIN TRAD ERS P. 1,95,00,379/ - ADVANCE FOR PURCHASES 7,31,97,721/ - 8. ON BEING ASKED TO EXPLAIN THE BUSINESS EXPEDIENC Y FOR THE SAME, THE ASSESSEE STATED THAT THE LOANS AND AD VANCES FROM SERIAL NOS.2 TO 5 WERE OUTSTANDING FOR BUSINES S TRANSACTION OF SALE/PURCHASE. FURTHER THE ASSESSEE STATED 3 THAT THE LOANS AND ADVANCES PERTAINING TO M/S OSWAL AGROILS LTD. WAS OLD BALANCE AND DISALLOWANCE OF INTEREST O N ACCOUNT OF THE SAME MADE U/S 36(1)(III) OF THE ACT FOR EARL IER YEARS HAD BEEN DELETED BY THE CIT(APPEALS), LUDHIANA AS P ER ORDER DATED 20.8.2010. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE STATING THAT THE ASSESSE E HAD FAILED TO EXPLAIN HOW THE BUSINESS PURPOSE WAS SERV ED BY ADVANCING THESE LOANS. HE FURTHER POINTED OUT THAT THE ASSESSEE COMPANY WAS A SICK UNIT INCURRING LOSSES O F MORE THAN RS.46 CRORES AND IT HAD AVAILED SECURED AND UN SECURED LOANS AMOUNTING TO RS.43.87 CRORES FOR WHICH INTERE ST OF RS.5.16 CRORES HAD BEEN PAID. THE ASSESSING OFFICE R ALSO POINTED OUT THAT THE LOANS HAD BEEN GIVEN TO COMPAN Y IN WHICH THE RELATIVES OF THE DIRECTORS OF THE ASSESSE E COMPANY WERE DIRECTORS. HE FURTHER STATED THAT HAD THE ASS ESSEE NOT ADVANCED THESE MONEYS, HE WOULD HAVE INCURRED MINIM UM INTEREST EXPENDITURE. THE ASSESSING OFFICER, THEREF ORE, DISALLOWED INTEREST PERTAINING TO AFORESAID ADVANCE S U/S 36(1)(III) OF THE INCOME TAX ACT,1961,COMPUTING THE SAME AT RS.64,43,680/- 9. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE REITERA TED THE CONTENTIONS MADE BEFORE THE ASSESSING OFFICER. THE LD.CIT(APPEALS) UPHELD THE ORDER OF THE ASSESSING O FFICER STATING THAT THE ASSESSEE HAD CONTENDED THAT THE AD VANCES WERE GIVEN AGAINST PURCHASE OF PROPERTY WHICH HAD N OT BEEN ACQUIRED DURING THE YEAR AND SINCE ADMITTEDLY, THE PURCHASE AND SALE OF PROPERTY WAS NOT THE BUSINESS OF THE AS SESSEE, 4 THE DISALLOWANCE OF INTEREST MADE WAS WARRANTED. T HE RELEVANT FINDINGS OF THE LD.CIT(APPEALS) AT PARA 4. 4 & 3.8 OF THE ORDER ARE AS UNDER: 4.4 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSION.I HAVE ALSO GONE THROUGH ASSESSMENT ORDER.IT IS AN ADMITTED FACT THAT PURCHASE AND SALE OF PROPERTIES IS NOT THE BUSINESS OF THE APPELLANTS COMPANY.THE APPELLANT HAS CONTENDED THAT THE ADVANCES WERE GIVEN AGAINST PURCHASE OF PROPERTY WHICH HAS NOT BEEN ACQUIRED DURING THE YEAR,HENCE CANNOT BE TERMED THAT THE SAME HAS BEEN PUT TO USE. . . . 3.8 AFTER CAREFUL CONSIDERATION OF ALL THE FACTS, I AM ALSO INCLINED TO AGREE WITH THE CONTENTION OF ID. AO. IN THE CA SE OF THESE ADVANCES THE APPELLANT HAS CLEARLY FAILED TO ADDUCE EVIDENCE W.R.T. ANY COMMERCIAL EXPEDIENCY AS THIS IS NOT THE BUSINESS OBJECT OF APPELLANT CONCERN . SO ADVANCING THIS HUGE AMOUNT WITHOUT BRINGING ANY FACT S OF BUSINESS EXPEDIENCY IS NOT ALLOWABLE. THE BUSINESS PURPOSE OF THESE ADVANCES ARE NOT CLEAR AS THE APPELLANT HAS FAILED TO CONTROVERT ANY LOGIC BEHIND THE SE ADVANCES. THE APPELLANT COMPANY IS A SICK UNIT. THE APPELLANT HAS ADVANCED HUGE AMOUNT TO THOSE CO., WHEREIN RELATED SET OF DIRECTORS OR CONCERNS ARE IN VOLVED. THE ADVANCE GIVEN BY THE APPELLANT COULD NOT BE SATISFACTORILY EXPLAINED AS THERE IS NO ELEMENT OF COMMERCIAL EXPEDIENCY. 10. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE STAT ED THAT THE LD.CIT(APPEALS) HAD TOTALLY MIS-APPRECIATED THE FACTS OF THE CASE AS REPEATEDLY POINTED OUT BY THE ASSESSEE BEFORE THE AO AND THE CIT(A). THE LD. COUNSEL FOR ASSESSEE PO INTED OUT THAT THE ASSESSEE HAD REPEATEDLY CONTENDED THAT IT WAS IN THE BUSINESS OF MANUFACTURING AND TRADING OF EDIBLE OILS AND SOLVENT OILS AND THE SAID ADVANCES PERTAINED TO SAL E MADE TO 5 THE SAID PARTIES. THE LD. COUNSEL FOR ASSESSEE POI NTED OUT TO THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER A ND CIT(APPEALS) IN THIS REGARD. THE LD. COUNSEL FOR A SSESSEE THEREAFTER POINTED OUT THAT THE LD.CIT(APPEALS) HAD MIS- APPRECIATED THE FACTS BY STATING THAT THE SAID ADVA NCES WERE GIVEN AGAINST PURCHASE OF PROPERTY AS CONTENDED BY THE ASSESSEE. THE LD. COUNSEL FOR ASSESSEE STATED, THE REFORE, THAT THE ISSUE HAD NOT BEEN CONSIDERED IN THE CORRE CT BACKDROP OF THE FACTS OF THE CASE. 11. THE LD. DR, FAIRLY AGREED WITH THIS CONTENTION OF THE ASSESSEE. 12. HAVING HEARD BOTH THE PARTIES AND HAVING GONE T HROUGH THE ORDER OF THE LD.CIT(APPEALS), WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT THE LD.CIT(APPEALS) HAS MIS-APPRECIATED THE FACTS OF TH E CASE. UNDOUBTEDLY, ALL ALONG IT WAS THE CASE OF THE ASSES SEE THAT THE SAID ADVANCES HAS BEEN GIVEN ON ACCOUNT OF BUSI NESS TRANSACTION OF SALE/PURCHASE MADE. EVIDENCE IN THI S REGARD BY WAY OF LEDGER ACCOUNT OF THE PARTIES HAVE ALSO B EEN FILED AND THE SAID FACT FINDS MENTION IN THE LETTERS SUBM ITTED TO THE LD.CIT(A) PLACED AT PAPER BOOK PAGE NO. 43. BUT THE LD.CIT(APPEALS) ADJUDICATED THE ISSUE BY TOTALLY MI S-STATING THE FACT THAT THE ADVANCES WERE MADE FOR PURCHASE O F THE PROPERTY. IN VIEW OF THE SAME, WE CONSIDER IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF THE LD.CIT(APPEALS) TO ADJUDICATE THE ISSUE AFRESH IN THE LIGHT OF SUBMISS IONS AND EVIDENCES FILED BY THE ASSESSEE AND CORRECTLY APPRE CIATING 6 THE FACTS OF THE CASE. WE MAY ADD THAT THE ASSESSE E BE GIVEN DUE OPPORTUNITY OF HEARING IN THIS REGARD. THE GROUND OF APPEAL NO.2, THEREFORE, STANDS ALLO WED FOR STATISTICAL PURPOSES. 13. GROUND NOS.3 AND 4 RAISED BY THE ASSESSEE READS AS UNDER: 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) IS NOT JUSTIFIED IN CONFIRMING LD. ASSESSING OF FICER'S ACTION IN HOLDING THAT UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1999-2000, 2000- 2001 AND 2001-02 IS NOT ELIGIBLE FOR CARRIED FORWARD FOR AND SET OFF IN SUBSEQUENT YEARS. PROVISIONS OF SECT ION 32 (2) OF THE L.T. ACT, 1961 HAVE BEEN MISCONSTRUED AN D MISAPPLIED IN THE APPELLANT'S CASE. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FAILED TO CONSIDER APPELLANT'S CONTENTION THAT THEY AR E SICK INDUSTRIAL UNIT, AS SUCH THE AMENDED PROVISION S OF SECTION 32 (2) OF THE L.T. ACT, 1961 ARE NOT APPLICA BLE. PROVISO OF SECTION 32 (2) OF THE L.T. ACT, 1961 HAS N OT BEEN CONSTRUED AND APPRAISED PROPERLY IN THE APPELLANT'S CASE, WHICH HAS RESULTED IN ERRONEOUS ORDER AND UNTENABLE CONCLUSION. 14. THE ISSUE IN THE PRESENT GROUND PERTAINS TO CAR RY FORWARD OF DEPRECIATION PERTAINING TO ASSESSMENT YE ARS 1997- 98 TO 2001-02 FOR SETTING OFF AGAINST PROFITS ,AS PER SECTION 32(2) OF THE ACT. 15. BRIEFLY STATED, THE ASSESSEE HAD DURING THE IMP UGNED YEAR BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION FROM PRECEDING YEARS, PERUSAL OF THE D ETAILS OF WHICH SHOWED THAT THE ASSESSEE HAD BROUGHT FORWARD UNABSORBED DEPRECIATION PERTAINING TO THE PERIOD 19 97-98 TO 2001-02. THE ASSESSING OFFICER HELD THAT THE UNABS ORBED DEPRECIATION FOR THIS PERIOD COULD NOT BE ALLOWED T O BE 7 CARRIED FORWARD FOR MORE THAN 8 YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR TO WHICH THEY PERTAI NED AS PER THE PROVISIONS OF SECTION 32(2) OF THE ACT. HE , THEREFORE, DENIED CARRIED FORWARD OF UNABSORBED DEPRECIATION PERTAINING TO THE AFORESAID PERIOD PLACING RELIANCE ON THE JUDGMENT OF THE SPECIAL BENCH OF THE I.T.A.T. IN TH E CASE OF DCIT VS. TIMES GUARANTY LTD. IN ITA NOS.4917 & 4918/MUMBAI/2008. THE LD.CIT(APPEALS) UPHELD THE O RDER OF THE ASSESSING OFFICER STATING THAT EVEN THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S LIBERTY PLYWOOD P. LTD. VS. ACIT IN ITA NO.727/CHD/2012 DATED 17.12.2012 HA D DECIDED THE ISSUE IN FAVOUR OF THE REVENUE. 16. BEFORE US, THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ISSUE HAS BEEN ADJUDICATED NOW BY VARIOUS HIGH COURTS IN FAVOUR OF THE ASSESSEE AND ALSO BY THE I.T.A.T. , DELHI & KOLKATTA BENCH. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE FOLLOWING DECISIONS IN THIS REGARD : 1) GENERAL MOTORS INDIA (P) LTD. VS. DCIT 354 ITR 244 (GUJ). 2) MINDA SAI LTD. VS. ITO, 167 TTJ 689 (DEL) 3) JCT LIMITED VS. CIT-IV, KOLKATA (2016) 159 ITD 983 4) KARNATAKA CO-OPERATIVE MILK PRODUCERS FEDERATION LTD. VS. DCIT (2011) 53 DTR (KAR) 81 17. THE LD.DR ON THE OTHER HAND, RELIED UPON THE OR DER OF THE LD.CIT(APPEALS). 18. WE HAVE HEARD CONTENTIONS OF BOTH THE PARTIES. THE ISSUE IN THE PRESENT GROUND PERTAINS TO CARRY FORWA RD OF 8 UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YE AR 1997-98 TO 2001-02 AS PER THE PROVISIONS OF SECTION 32(2) OF THE ACT. 19. TO UNDERSTAND THE ISSUE CORRECTLY THE PROVISION S OF SECTION 32(2) OF THE INCOME TAX ACT, 1961 AS IT EXI STED AT VARIOUS POINTS OF TIME NEEDS TO BE SET OUT. BEGINNI NG WITH THE PERIOD PRIOR TO THE AMENDMENT MADE BY FINANCE ( NO.2) ACT, 1996 W.E.F. 1 ST APRIL,1997 AS PER SECTION 32(2), IN THE EVENTUALITY OF INSUFFICIENT PROFITS AND GAINS TO AD JUST THE DEPRECIATION ALLOWANCE FOR A YEAR, THEN SUBJECT TO THE PROVISIONS OF SECTION 72(2) AND 73(3), THE AMOUNT O F SUCH UNADJUSTED ALLOWANCE WOULD BE ADDED TO THE AMOUNT O F DEPRECIATION ALLOWANCE FOR THE FOLLOWING YEAR DEEMI NG IT TO BE PART OF THE SAME AND SO ON FOR ETERNITY. 20. THE FINANCE (NO.2) ACT, 1996,SUBSTITUTED THE PR OVISION OF SECTION 32(2) RESTRICTING THE CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION AGAINST INCOME ARISING UNDE R THE HEAD BUSINESS AND PROFESSION, TO EIGHT ASSESSMENT Y EARS IMMEDIATELY SUCCEEDING ASSESSMENT YEAR FOR WHICH TH E AFORESAID DEPRECIATION ALLOWANCE WAS COMPUTED. 21. FINANCE ACT, 2001, FURTHER SUBSTITUTED THE PROV ISION OF SECTION 32(2) W.E.F. 1 ST APRIL 2002 REINFORCING THE PROVISION AS IT EXISTED INITIALLY I.E. PRIOR TO ITS SUBSTITUT ION BY FINANCE (NO.2)ACT 1996, ALLOWING CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION IN ETERNITY WITH NO RESTRIC TION ON THE PERIOD. 9 22. THE REVENUE IN THE PRESENT CASE HAS INTERPRETED THE SECTION, AS AMENDED AT VARIOUS POINTS OF TIME, SO AS TO HOLD THAT THE RESTRICTION APPLICABLE TO THE TIME PERIOD OF CARRYING FORWARD AND SETTING OFF UNABSORBED DEPRECIATION PER TAINING TO THE PERIOD 1996-97-2000-01,WOULD NOT BE DILUTED BY THE LATER AMENDMENT TO THE SECTION. IN EFFECT MEANING T HAT UNABSORBED DEPRECIATION RELATING TO THIS PERIOD WOU LD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF ONLY FOR SUCCEEDING EIGHT YEARS. THIS VIEW WAS EXPRESSED BY THE SPECIA L BENCH DECISION OF ITAT MUMBAI IN THE CASE OF TIMES GUARAN TY (SUPRA). BUT AS RIGHTLY POINTED OUT BY LD.COUNSEL F OR THE ASSESSEE THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD. (SUPRA) HAS CATEGORIC ALLY HELD THAT THE DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF 8 YEARS. THE HONBLE HIGH COURT HELD THAT THE UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 01-04- 2002 WOULD BE DEALT WITH IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT ,2001 AN D NOT BY THE PROVISION OF SECTION 32(2) AS IT STOOD BEFORE T HE AMENDMENT. REFERENCE WAS ALSO MADE TO THE CBDT CI RCULAR NO. 14 OF 2001 VIDE WHICH IT WAS CLARIFIED THAT TH E RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OF F OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH. T HE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER: 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUF FICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY 10 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 T HE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE AC T, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STO OD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATUR E BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED O UT 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. HENC E KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION H AS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND RE ASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LE ANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGIS LATURE 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 CANNOT BE DENIED. HOWEVER, CIRCULAR NO.14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAI NS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCT ION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THER EFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANC E 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, A ND 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 T HE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATIO N IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LAR GER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS C OMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSES SEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTI BLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHE R HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALAN CE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION F OR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HO WEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDIN G YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOW ANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED O PINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASS ESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AM ENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 11 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENS ED 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 GOVERN ED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANC E ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OF F AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT AN Y LIMIT WHATSOEVER. 23. EVEN THE DELHI BENCH OF THE I.T.A.T. IN THE CAS E OF MINDA SAI LTD. (SUPRA) AND THE KOLKATTA BENCH OF T HE ITAT IN THE CASE OF JCT LTD.(SUPRA) AFTER TAKING INTO CO NSIDERATION THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF GENERAL MOTORS INDIA (P) LTD. (SUPRA) HAS REITERATE D THE ABOVE PROPOSITION. 24. IN THE LIGHT OF THE ABOVE JUDICIAL PRECEDENCE , ESPECIALLY THE GUJARAT HIGH COURT IN THE CASE OF GE NERAL MOTORS INDIA PVT.LTD. (SUPRA), WE HOLD THAT THE ASS ESSEE IS ENTITLED TO CARRY FORWARD UNABSORBED DEPRECIATION P ERTAINING TO ASSESSMENT YEARS 1997-98 TO 2001-02. GROUND NOS.3 AND 4 RAISED BY THE ASSESSEE THEREFO RE STAND ALLOWED. 25. GROUND NO.5 RAISED BY THE ASSESSEE READS AS UND ER: 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) IS NOT JUSTIFIED IN CONFIRMING FOLLOWING EXPENSES INCURRED BY THE APPELLANT FOR BUSINESS PURPOSES:- (A) RS. 82,661/- OUT OF PUJA AND SHAGUN EXPENSES. (B) RS. 50,000 OUT OF TRAVELLING EXPENSES. 26. THE ABOVE GROUND WAS NOT PRESSED BEFORE US BY T HE LD.COUNSEL FOR THE ASSESSEE CONSIDERING THE SMALLNE SS OF THE AMOUNT. IN VIEW OF THE SAME, GROUND NO.5 IS DISMIS SED AND 12 AT THE SAME TIME, WE MAY ADD THAT IT SHOULD NOT BE CONSIDERED AS A PRECEDENT FOR IDENTICAL ISSUE RAISE D IN ANY OTHER YEAR FOR THE ASSESSEE. 27. IN EFFECT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED. ITA NO.1093/CHD/2016: 28. THE ASSESSEE IN THIS APPEAL HAS RAISED FOLLOWIN G GROUNDS: 1. THAT THE IMPUGNED ORDER HAS BEEN PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT PROPER APPLICATION OF MIND, AS SUCH IT IS NOT SUSTAINA BLE IN LAW AND FACTS OF THE CASE. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS.16,46, 045/- (WRONGLY MENTIONED AS RS.64,43,680/-) MADE ON ACCOUNT OF INTEREST CLAIMED U/S 36 (1) (III) OF THE IT. ACT, 1961. THE DISALLOWANCE CONFIRMED @ 10% AGAINST 12% MADE BY THE LD. ASSESSING OFFICER OUGHT TO HAVE BEEN DELETED ENTIRELY. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT HAS ADVANCED HUGE AMOUNTS TO THOSE COMPANIES WHEREIN RELATED SET OF DIRECTORS OR CONCERNS ARE INVOLVED, THE FACTS OF TH E CASE HAVE NOT BEEN APPRAISED PROPERLY, WHICH HAS RESULTED IN UNTENABLE CONCLUSION AND MISPLACED FINDING. PROV ISIONS OF SECTION 36 (1) (III) OF THE IT. ACT, 1961 HAVE BEEN MISCONSTRUED AND MISAPPLIED IN THE MATTER. THE DISALLOWANCE CONFIRMED IS BASED ON SURMISES AND ON RECORDS. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING LD. ASSESSING OFFICER'S ACT ION IN HOLDING THAT UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1999-2000,2000-2001 AND 2001-02 IS NOT ELIGIBLE FOR CARRIED FORWARD FOR SET OFF IN SUBSEQUENT YEARS. PROVISIONS OF SECTION 32 (2) OF THE IT. ACT,1961 HAVE BEEN MISCONSTRUED AND MISAPPLIED IN TH E APPELLANT'S CASE. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING LD. ASSESSING OFFICER'S ACT ION IN HOLDING THAT UNABSORBED DEPRECIATION PERTAINING TO 13 ASSESSMENT YEARS 1999-2000,2000-2001 AND 2001-02 IS NOT ELIGIBLE FOR CARRIED FORWARD FOR SET OFF IN SUBSEQUENT YEARS. PROVISIONS OF SECTION 32 (2) OF THE IT. ACT,1961 HAVE BEEN MISCONSTRUED AND MISAPPLIED IN TH E APPELLANT'S CASE. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS.41,29 9/- ON ACCOUNT OF PUJA EXPENSES. EXPENSES INCURRED FOR BUSINESS PURPOSE HAVE WRONGLY BEEN DISALLOWED, ALTHOUGH THE APPELLANT HAS NEVER AGREED FOR THE ADDITIO N. 7. THAT THE ADDITIONS AND DISALLOWANCES CONFIRMED B Y THE LD. COMMISSIONER(APPEALS) ARE MISPLACED, UNTENABLE, CONTRARY TO LAW AND IN ANY CASE THESE ARE HIGHLY EXCESSIVE. THE ORDER IS DEVOID OF JUDICIOUS AND RAT IONAL APPROACH. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY AND/OR ADD NEW GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 29. GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL AND HENCE NEEDS NO ADJUDICATION. 30. GROUND NOS. 2 AND 3 RAISED BY THE ASSESSEE IN T HIS APPEAL RELATE TO DISALLOWANCE MADE ON ACCOUNT OF IN TEREST CLAIMED U/S 36(1)(III) OF THE ACT AND IS IDENTICAL TO GROUND NO.2 RAISED BY THE ASSESSEE IN ITA NO.785/CHD/2016. IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THE FAC TS IN THE IMPUGNED YEAR WERE IDENTICAL TO THAT IN THE PRE CEDING YEAR, DECIDED BY US ABOVE IN ITA NO.785/CHD/2016.SI NCE IN THAT CASE THE ISSUE HAS BEEN RESTORED BACK TO THE C IT(A) TO DECIDE IT AFRESH, THE DECISION RENDERED THEREIN WIL L APPLY MUTATIS MUTANDIS IN THESE GROUNDS ALSO AND ACCORDIN GLY THE ISSUE IN THE SAID GROUNDS ARE RESTORED BACK TO BE DECIDED AFRESH BY THE CIT(A).WE MAY ADD THAT PROPER OPPORTUNITY BE GIVEN TO THE ASSESSEE IN THIS REGARD . 14 GROUND NO.2 & 3 OF THE APPEAL ARE, THEREFORE, ALLOW ED FOR STATISTICAL PURPOSES. 31. GROUND NOS.4 AND 5 RAISED BY THE ASSESSEE IN T HIS APPEAL RELATE TO CARRY FORWARD FOR DEPRECIATION PER TAINING TO ASSESSMENT YEARS 1997-98 TO 2001-02 AS PER SECTION 32(2) OF THE ACT, AND IT WAS COMMON GROUND BETWEEN BOTH THE PARTIES THAT THEY WERE IDENTICAL TO GROUND NOS. 3 AND 4 RAI SED BY THE ASSESSEE IN ITA NO.785/CHD/2016.THE DECISION RENDER ED THEREIN WILL THEREFORE APPLY WITH EQUAL FORCE IN TH ESE GROUNDS ALSO. GROUND NOS.4 & 5 ARE, THEREFORE, ALLOWED. 32. GROUND NO.6 RAISED BY THE ASSESSEE IS NOT PRESS ED AND IS IDENTICAL TO GROUND NO.5 RAISED BY THE ASSESSEE IN ITA NO.785/CHD/2016 AND THE DECISION RENDERED THEREIN W ILL APPLY MUTATIS MUTANDIS IN THIS GROUND ALSO. GROUND NO.6 THEREFORE STANDS DISMISSED. 33. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH SEPTEMBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH