DCIT 3(2), MUMBAI V. KOTAK MAHINDRA BANK LTD, MUMBAI

ITA 8523/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3305 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 15-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALATHI SRIDHARAN
• Assessee Lawyers: F V IRANI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Recovery proceedings; Depreciation; Earning of tax free income; Question of law; Speculation loss; Bad and doubtful debts; Unabsorbed depreciation; Provision of bad debts
• Section: 144; 143(3); 50C; 14A

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORES/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./ I.T.A./8523/MUM/2011 , / ASSESSMENT YEAR: 2003-04 DCIT-3(2), 6 TH FLOOR, ROOM NO.608 AAYAKAR BHAVAN MUMBAI-400 020. VS. M/S. KOTAK MAHINDRA BANK LTD. 36-38A, NARIMAN BHAVAN 227, NARIMAN POINT MUMBAI-400 021. PAN: AAACK 4409 J ./ I.T.A./3114/MUM/2008 , / ASSESSMENT YEAR: 2004-05 M/S. KOTAK MAHINDRA BANK LTD. MUMBAI. VS. DCIT-3(2), MUMBAI-400 020. ./ I.T.A./3506/MUM/2008 , / ASSESSMENT YEAR: 2004-05 DCIT-3(2), MUMBAI. VS. M/S. KOTAK MAHINDRA BANK LTD. MUMBAI-400 020. ./ I.T.A./3115/MUM/2008 , / ASSESSMENT YEAR: 2005-06 M/S. KOTAK MAHINDRA BANK LTD. MUMBAI. VS. DCIT-3(2), MUMBAI-400 020. ./ I.T.A./3507/MUM/2008 , / ASSESSMENT YEAR: 2005-06 DCIT-3(2), MUMBAI. VS. M/S. KOTAK MAHINDRA BANK LTD. MUMBAI-400 020. ./ I.T.A./3116/MUM/2008 , / ASSESSMENT YEAR: 2006-07 M/S. KOTAK MAHINDRA BANK LTD. MUMBAI. VS. DCIT-3(2), MUMBAI-400 020. ./ I.T.A./3508/MUM/2008 , / ASSESSMENT YEAR: 2006-07 DCIT-3(2), MUMBAI. VS. M/S. KOTAK MAHINDRA BANK LTD., MUMBAI-400 020. ( !' /APPELLANT ) ( #$!' / RESPONDENT ) REVENUE BY: MS. MALATHI SRIDHARAN ASSESSEE BY: F.V. IRANI / DATE OF HEARING: 10.03.2016 / DATE OF PRONOUNCEMENT: 16.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH - CHALLENGING THE ORDERS OF CIT.S (A),THE ASSESSEE A ND THE ASSESSING OFFICERS (AO.S) HAVE FILED APPEALS FOR THE ABOVE MENTIONED ASSESSMENT YE ARS.AS MOST OF THE ISSUES ARE COMMON IN ALL THE APPEALS FOR THE SAKE OF CONVENIENCE WE ARE ADJUDICATING ALL THE APPEALS BY A SINGLE COMMON ORDER. 2. ASSESSEE-COMPANY, IS ENGAGED IN THE BUSINESS OF BAN KING AND FINANCIAL SERVICES.THE DETAILS OF FILING OF RETURNS, RETURNED INCOME, ETC. CAN BE SUMMARISED IN FOLLOWING MANNER: A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) DT. OF ORDERS OF CIT(A) 2003-04 28.11.2003 75,49,00,368/- 29.06.2009 89,35, 89,050/- 16.09.2011 2004-05 31.10.2004 118,14,23,918/- 22.12.2006 118,2 3,84,780/- 18.3.2008 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 2 2005-06 31.10.2005 96,38,60,130/- 23.3.2007 99,10,6 0,035/- 18.3.2008 2006-07 29.11.2006 177,01,69,230/- 28.11.2007 192,1 2,96,090/- 18.3.2008 8523 /MUM/2011(A.Y.2003-04): 3. FIRST GROUND OF APPEAL DEALS WITH DISALLOWANCE OF B AD DEBTS.WHILE COMPLETING THE ASSESSMENT U/S. 143(3) R.W.S.147/263 OF THE ACT,THE AO REDUCED THE BAD DEBTS, AMOUNTING TO RS.2. 84 CRORES FROM THE PROVISION OF BAD DEBTS OF RS.7.12 CRORES AND ACCORDINGLY ALLOWED NO BAD DEBTS.HE HELD THAT BAD DEBTS WERE ALLOWABLE TO THE EXTENT THEY WERE IN EXCESS OF PROVISION FOR BAD DEBTS,THAT PROVISIONS HAD ALREADY BEEN ALLOWED,THAT THE PROVISIONS OF SEC.36(II), 36(1)(VII)(A) AND 36(1)(VIII) OF THE AC T WERE CLEAR IN THAT REGARD. THE ASSESSEE HAD CLAIMED THAT IT HAD NO OPENING BALANCE OR PROVISION FOR BAD AND DOUBTFUL DEBTS, THAT THE BAD DEBTS WERE TO BE REDUCED FROM OPENING BALANCE OF PR OVISIONS OF BAD AND DOUBTFUL DEBTS, THAT IT WAS ENTITLED TO MAKE CLAIM FOR FULL AMOUNT OF BA D DEBTS,THAT THE PROVISIONS FOR THE BAD DEBTS EXISTED ON THE LAST DAY OF THE YEAR.HOWEVER THE AO CONSIDERED THE CURRENT YEARS PROVISION FOR BAD AND DOUBTFUL DEBTS AND MADE AN ADDITION OF RS.2.84 CRORES. 3.1. DURING THE APPELLATE PROCEEDINGS,BEFORE THE FIRST A PPELLATE AUTHORITY (FAA) THE ASSESSEE MADE ELABORATE SUBMISSIONS AND REFERRED TO INSTRUCT ION NO.17/2008 DT.26.11.2008. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE ,THE FAA HELD THAT THERE WAS NO OPENING BALANCE OF PROVISION FOR BAD AND DOU BTFUL DEBTS AS ON 11.4.2003, THAT INSTRUCTION NO.17/2008 PROVIDED THAT OPENING BALANC E HAD TO BE CONSIDERED FOR THE PURPOSE OF ALLOWING BAD DEBTS IN EXCESS OF THE PROVISIONS OF ALLOWING BAD DEBTS.HE REFERRED TO THE ORDER OF TRIBUNAL DELIVERED IN THE CASE OMAN INTERNATIONA L AND ORDERS OF HIS PREDECESSORS FOR THE EARLIER YEARS.FINALLY, HE HELD THAT ONLY OPENING BA LANCE AS ON 1.4.2002 WAS TO BE CONSIDERED FOR ALLOWING BAD DEBTS WRITTEN OFF IN EXCESS OF THE PROVISIONS, THAT THE OPENING BALANCE ON THAT DATE WAS NIL, THAT THE ENTIRE CLAIM OF THE ASSESSEE UNDER THE HEAD BAD DEBTS AMOUNTING TO RS.2, 84, 86,343/- WAS TO BE ALLOWED. 3.2. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPOR TED THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE(AR) STATED THAT THE ISSUE STANDS COVERED BY THE CASES OMAN INTERNATIONAL(2013-TII-11-HC-MUM-ITNL/INCOME TAX AP PEAL (LOD) NO.1889 OF 2012 DT.26. 2.2013),UTI BANK LTD.(256CTR76);ABU DHABI COMMERCIA L BANK(ITA/3462,3857,4022/ MUM/2010 DT.20.07.2012.HE ALSO REFERRED TO THE INST RUCTION NO.17/2008,DATED 26.11.2008, ISSUED BY THE CBDT.THE AR STATED THAT A REQUEST UND ER RULE 27 OF THE ITAT RULES, 1963, RULES SHOULD BE TAKEN ON RECORD SUPPORTING THE ORDE R OF THE FAA. 3.3. WE FIND THAT IN THE CASE OF UTI BANK LTD.(SUPRA),TH E HONBLE GUJARAT HIGH COURT HAS DEALT THE ISSUE IN LIGHT OF THE INSTRUCTION NO.17/2 008 DATED 26.11.2008. WE ARE REPRODUCING THE HEAD NOTES OF THE SAID DECISION AND THE SAME RE ADS AS UNDER :- 14. FROM THE ABOVE STATUTORY PROVISIONS, IT CAN BE SEENTHAT IN ADDITION TO THE DEDUCTION AVAILABLE TO AN ASSESSEE UNDER SECTION 36(1)(VII) F OR BAD DEBTS, IN CASE OF SPECIAL CLASS OF BANKS MENTIONED IN CLAUSE (VIIA), DEDUCTIONS SUBJEC T TO FULFILMENT OF CERTAIN CONDITIONS IS AVAILABLE IN RESPECT OF ANY PROVISION FOR BAD AND D OUBTFUL DEBTS. ONE OF THE RESTRICTIONS IS OF LIMITING SUCH DEDUCTION TO A MAXIMUM OF A SPECIFIED PERCENTAGE OF TOTAL INCOME OF THE ASSESSEE COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND NOT EXCEEDING PRESCRIBED PERCENTAGE OF AGGREGATE AVERAGE ADVANCE MADE BY THE RURAL BRANCHES OF SUCH BANK. FROM THE DECISION OF THE APEX COURT IN THE CA SE OF CATHOLIC SYRIAN BANK LTD. (SUPRA), IT CAN BE GATHERED THAT UNDER CLAUSE (VII) OF SUB-SECT ION (1) OF SECTION 36, DEDUCTION IS MADE 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 3 AVAILABLE IN COMPUTATION OF TAXABLE PROFITS OF ALL SCHEDULED COMMERCIAL BANKS IN RESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTFUL DEBTS RELATING TO ADVANCES MADE BY THEM IN THE RURAL BRANCHES. SUCH DEDUCTION IS LIMITED TO A SPEC IFIED PERCENTAGE OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES. THE APEX COURT HELD THAT THE DEDUCTION ON THE ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS IS DISTINCT AND INDEPENDENT OF THE PROVISIONS OF SECTION 36(1)(VII) RELATING TO ALLOWANCE OF THE BAD DEBTS. CONTENTION OF THE REVENUE THAT THE BANKS COVERED BY CLAUSE (VIIA) WERE NOT ENTITLED TO DEDUC TION UNDER SECTION 36(1)(VII) WAS REJECTED. THE COURT HELD THAT PROVISO TO SECTION 36(1)(VII) W OULD ENSURE THAT THERE WOULD BE NO DOUBLE BENEFIT OF DEDUCTION IN SUCH CASES. 15. IN THE PRESENT CASE, HOWEVER, THE QUESTION OF M ETHOD OF OPERATION OF PROVISO TO SECTION 36(1(VII) ARISES. SUCH PROVISO AS NOTED, PROVIDES T HAT IN CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES, THE AMOUNT OF DEDUCTION RELATING TO ANY SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH DEBT OR PART TH EREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE U NDER THAT CLAUSE. THE REVENUE'S CONTENTION IS THAT BY VIRTUE OF SUCH PROVISO, THE C LAIM OF THE ASSESSEE FOR DEDUCTION FOR DEBTS WRITTEN OFF, SHOULD BE REDUCED BY THE CLOSING BALAN CE OF THE ASSESSEE IN HIS ACCOUNT FOR THE PROVISION OF BAD AND DOUBTFUL DEBTS. ON THE OTHER H AND, THE ASSESSEE CONTENDS THAT SUCH DIMINUTION SHOULD BE LIMITED TO THE OPENING BALANCE OF SUCH ACCOUNT. 16. WE NOTICE THAT IN THIS RESPECT THE PROVISION IS SILENT. WE MAY THEREFORE RECORD THAT THE INTERPRETATION ADOPTED BY THE TRIBUNAL IN THE IMPUG NED JUDGMENT WOULD ORDINARILY GIVE RISE TO A QUESTION OF LAW PARTICULARLY WHEN IT IS POINTE D OUT THAT THERE IS NO PREVIOUS DECISION OF ANY HIGH COURT ON THE SUBJECT. HOWEVER, THE ISSUE H AS BEEN MADE SUFFICIENTLY CLEAR BY THE CBDT CIRCULAR NO.17/2008 DATED 26-11-2008. IN THE S AID CIRCULAR, THIS VERY ISSUE HAS BEEN EXAMINED AND CLARIFIED IN THE FOLLOWING MANNER:- '2. IN A RECENT REVIEW OF ASSESSMENT OF BANKS CARRI ED OUT BY C&AG, IT HAS BEEN OBSERVED THAT WHILE COMPUTING THE INCOME OF BANKS UNDER THE HEAD 'PROFI T AND GAINS OF BUSINESS & PROFESSION', DEDUCTIONS OF LARGE AMOUNTS UNDER DIFFERENT SECTIONS ARE BEING ALLOWED BY THE ASSESSING OFFICERS WITHOUT PROPER VERIFICATION, LEADING TO SUBSTANTIAL LOSS OF REVENU E. IT IS, THEREFORE, NECESSARY THAT ASSESSMENTS IN THE CASES OF BANKS ARE COMPLETED WITH DUE CARE AND AFTE R PROPER VERIFICATION. IN PARTICULAR,DEDUCTIONS UND ER THE PROVISIONS REFERRED TO BELOW SHOULD BE ALLOWED ONLY AFTER A THOROUGH EXAMINATION OF THE CLAIM ON FACTS AND ON LAW AS PER THE PROVISIONS OF THE I.T. ACT, 1961. (I) UNDER SECTION 36(1)(VII) OF THE ACT, DEDUCTION ON ACCOUNT OF BAD DEBTS WHICH ARE WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE IS AD MISSIBLE. HOWEVER, THIS SHOULD BE ALLOWED ONLY IF T HE ASSESSEE HAD DEBITED THE AMOUNT OF SUCH DEBS TO THE PROVISION FOR BAD AND DOUBTFUL DEBT ACCOUNT UNDER SECTION 36(1)(VIIA) OF THE ACT, AS REQUIRED BY SECT ION 36(2)(V) OF THE ACT. (II) WHILE CONSIDERING THE CLAIM FOR BAD DEBTS U/S 36(1)(VII), THE ASSESSING OFFICER SHOULD ALLOW ONL Y SUCH AMOUNT OF BAD DEBTS WRITTEN OFF AS EXCEEDS THE CREDIT BALANCE AVAILABLE IN THE PROVISION FOR BAD & DOUBTFUL DEBT ACCOUNT CREATED U/S 36(1)(VIIA) OF TH E ACT. THE CREDIT BALANCE FOR THIS PURPOSE WILL BE THE OPENING CREDIT BALANCE I.E., THE BALANCE BROUGHT FO RWARD AS ON 1ST APRIL OF THE RELEVANT ACCOUNTING YEAR.' 17. AS ALREADY NOTED, IN ABSENCE OF SUCH CLARIFICAT ION BYCBDT, WE WOULD HAVE BEEN INCLINED TO ADMIT THE APPEALS. HOWEVER, WHEN SUCH CIRCULAR I SSUED UNDER SECTION 119(2) OF THE ACT CLARIFIES THE POSITION BEYOND ANY DOUBT, WE HAVE NO REASON TO ENTERTAIN THE REVENUE'S APPEALS. AS ALREADY NOTED, THE STATUTORY PROVISION IS SILENT ON THE PRECISE METHOD OF WORKING OUT THE DEDUCTION. IT IS BY NOW WELL-SETTLED THAT SUCH CIRC ULARS ISSUED BY THE BOARD IN EXERCISE OF ITS STATUTORY POWERS UNDER SECTION 119(2) OF THE ACT, M AY HAVE THE EFFECT OF RELAXING THE RIGOURS OF A STATUTORY PROVISION. IN THE CASE OF CATHOLIC S YRIAN BANK LTD. (SUPRA) ITSELF, THE APEX COURT TOUCHED ON THE EFFECT OF THE CIRCULAR ISSUED BY THE BOARD. IT WAS OBSERVED AS UNDER:- 'NOW, WE SHALL PROCEED TO EXAMINE THE EFFECT OF THE CIRCULARS WHICH ARE IN FORCE AND ARE ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (FOR SHORT, 'THE BOAR D') IN EXERCISE OF THE POWER VESTED IN IT UNDER SECTION 119 OF THE ACT. CIRCULARS CAN BE ISSUED BY THE BOARD TO EXPLAIN OR TONE DOWN THE RIGOURS OF LA W AND TO ENSURE FAIR ENFORCEMENT OF ITS PROVISIONS. T HESE CIRCULARS HAVE THE FORCE OF LAW AND ARE BINDIN G ON THE INCOME-TAX AUTHORITIES, THOUGH THEY CANNOT B E ENFORCED ADVERSELY AGAINST THE ASSESSEE. NORMALLY, THESE CIRCULARS CANNOT BE IGNORED A CIRCU LAR MAY NOT OVERRIDE OR DETRACT FROM THE PROVISIONS OF THE ACT BUT IT CAN SEEK TO MITIGATE THE RIGOUR O F A PARTICULAR PROVISION FOR THE BENEFIT OF THE ASS ESSEE IN CERTAIN SPECIFIED CIRCUMSTANCES. SO LONG AS THE CIRCULAR IS IN FORCE, IT AIDS THE UNIFORM AND PROPE R 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 4 ADMINISTRATION AND APPLICATION OF THE PROVISIONS OF THE ACT.(REFER TO UCO BANK V. CIT (1999) 4 SCC 599).' 18. IN CASE OF UCO BANK V/S. COMMISSIONER OFINCOME TAX REPORTED IN 237 ITR 889 THE SUPREME COURT IN CONNECTION WITH EFFECT OF CIRCULAR S ISSUED BY THE BOARD UNDER SECTION 119 OF THE ACT OBSERVED: 'SUCH INSTRUCTIONS MAY BE BY WAY OF RELAXATION OF A NY OF THE PROVISIONS OF THE SECTIONS SPECIFIED THER E OR OTHERWISE. THE BOARD, THUS, HAS POWERS, INTER AL IA, TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE A FAIR ENFORCEMENT OF ITS PROVISIONS, BY ISSUING CIRC ULARS IN EXERCISE OF ITS STATUTORY POWERS UNDER SEC TION 119 WHICH ARE BINDING ON THE AUTHORITIES IN THE ADM INISTRATION OF THE ACT. UNDER SECTION 119(2)(A),HOWEVER, THE CIRCULARS AS CONTEMPLATED TH EREIN CANNOT BE ADVERSE TO THE ASSESSEE. THUS, THE AUTHORITY WHICH WIELDS THE POWER FOR ITS OWN ADVANT AGE UNDER THE ACT IS GIVEN THE RIGHT TO FORGO THE ADVANTAGE WHEN REQUIRED TO WIELD IT IN THE MANNER I T CONSIDERS JUST BY RELAXING THE RIGOUR OF THE LAW OR IN OTHER PERMISSIBLE MANNERS AS LAID DOWN IN SECTIO N 119. THE POWER IS GIVEN FOR THE PURPOSE OF JUST, PROPER AND EFFICIENT MANAGEMENT OF THE WORK OF ASSE SSMENT AND IN PUBLIC INTEREST. IT IS A BENEFICIAL POWER GIVEN TO THE BOARD FOR PROPER ADMINISTRATION OF FISCAL LAW SO THAT UNDUE HARDSHIP MAY NOT BE CAUSED TO THE ASSESSEE AND THE FISCAL LAWS MAY BE C ORRECTLY APPLIED. HARD CASES WHICH CAN BE PROPERLY CATEGORISED AS BELONGING TO A CLASS, CAN THUS BE GI VEN THE BENEFIT OF RELAXATION OF LAW BY ISSUING CIRCULARS BINDING ON THE TAXING AUTHORITIES.' RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT AND THE O THER JUDGMENTS REFERRED TO BY THE AR,WE HOLD THAT THERE IS NO LEGAL OR ACTUAL INFIRMITY IN THE ORDER OF THE FAA.THEREFORE, CONFIRMING HIS ORDER,WE DECIDE GROUND NO.1 AGAINST THE AO.AS F AR AS ,REQUEST MADE UNDER RULE 27 IS CONCERNED ,WE WANT TO MENTION THAT WE HAVE ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE THEREFORE REQUEST MADE BY IT WOULD NOT SUR VIVE. ITA NO.3114/M/2008(A.Y.04-05): 4. THE FIRST GROUND OF APPEAL DEALS WITH DISALLOWANCE OF PROPORTIONATE DEPRECIATION ON PREMISES GIVEN ON RENT/LEASE. DURING THE COURSE OF HEARING BEFORE US THE AR DID NOT PRESS THE GROUND.HENCE, SAME STANDS DISMISSED AS NOT PRESSED. 4.1. NEXT GROUND OF APPEAL IS ABOUT DENIAL OF SET OFF OF BROUGHT FORWARD CAPITAL LOSS AGAINST SHORT TERM CAPITAL GAIN U/S. 74 OF THE ACT AMOUNTIN G TO RS.2.16 CRORES.DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD EARN ED SHORT TERM CAPITAL GAIN AMOUNT OF RS. 2,16,760,177/- AND HAD OFFERED IT FOR TAX ,THAT VID E ITS NOTE NO.15 IT HAD CLAIMED A SET OFF OF LONG TERM CAPITAL LOSS, THAT IN THE NOTE TO THE RET URN OF INCOME THE ASSESSEE HAD MENTIONED THAT IT HAD A CAPITAL LOSS OF RS.8.11 CRORES BROUGHT FOR WARD FROM AY. 2003-04, THAT DURING THE YEAR THERE IS SHORT TERM CAPITAL GAIN OF RS.2.16 CRORES. CONSIDERING THESE FACTS,HE HELD THAT THE PROVISIONS OF SECTION 74 OF THE ACT WERE PROSPECTIV E AND COULD NOT CHANGE THE CHARACTER OF PAST LOSSES,THAT CAPITAL LOSSES WERE BROUGHT FORWAR D FROM AY.2000-01,THAT THE AMENDED PROVISIONS OF SECTION 74 WERE NOT APPLICABLE TO THE BROUGHT FORWARD CAPITAL LOSSES,THAT AMENDMENT WAS APPLICABLE FOR THE AY.2003-04,THAT FA A IN ONE OF THE GROUP CASES HAD DECIDED THE ISSUE AGAINST THE ASSESSEE.FINALLY, HE DENIED THE ASSESSEE CLAIM AND TAXED THE DISPUTED AMOUNT FULLY. 4.2. IN THE APPELLATE PROCEEDINGS,THE FAA FOLLOWING THE ORDER OF HIS PREDECESOR FOR THE AY. 03-04,HELD THAT CLAIM OF THE ASSESSEE WAS NOT JUSTI FIABLE, THAT SET OFF OF BROUGHT FORWARD LOSSES COULD NOT BE ALLOWED AGAINST SHORT TERM CAPITAL GAI NS FOR THE YEAR UNDER CONSIDERATION. 4.4. DURING THE COURSE OF HEARING BEFORE US THE AR CONTE STED THAT SIMILAR ISSUE HAD ARISEN IN THE CASE OF ONE OF THE GROUP ENTITIES I.E. KOTAK MA HINDRA CAPITAL CO.LTD.(ITANO. 521/ MUM/ 2007-AY 2003-04,DT.10.8.2012).WE FIND THAT THE SPEC IAL BENCH WAS CONSTITUTED TO DECIDE THE FOLLOWING QUESTION OF LAW . 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 5 WHETHER THE PROVISIONS OF SECTION 74 WHICH DEAL WI TH CARRYFORWARD AND SET OFF OF LOSSES UNDER THE HEAD CAPITAL GAINS AS AMENDED BY F INANCE ACT 2002 WILL APPLY ONLY TO THE UNABSORBED CAPITAL LOSS FOR THE AY 03-04 AND ON WARDS OR WILL ALSO APPLY TO THE UNABSORBED CAPITAL LOSSES RELATING TO THE ASSESSMEN T YEARS PRIOR TO THE AY 2003-04. THE TRIBUNAL HAD DEALT THE ISSUE AS UNDER : 36.THE ISSUE INVOLVED IN THE PRESENT CASE, IN OUR OPINION, HOWEVER IS DIFFERENT INASMUCH AS THERE IS NO DISPUTE ABOUT THE FACT THAT THE PROVISI ONS OF SEC.74(1) AS AMENDED W.E.F. 1.4.2003 ARE APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDE RATION THAT IS AY 2003-04. THE DISPUTE HOWEVER IS THAT, HAVING REGARD TO THE LANGUAGE USED IN THE SAID PROVISIONS, WHETHER SECTION 74(1) AS AMENDED W.E.F. 1.4.2003 DEAL WITH CARRY FO RWARD AND LONG-TERM CAPITAL LOSS FOR AY 2003-04 ONWARDS OR IT GOVERNS THE CARRY FORWARD AND SET OFF OF CARRY FORWARD OF SUCH LOSS RELEVANT TO THE PERIOD PRIOR TO AY 2003-04. IN THIS REGARD, WE HAVE ALREADY HELD THAT GOING BY THE LANGUAGE USED IN THE AMENDED PROVISIONS OF SEC. 74(1), THE SAME ARE APPLICABLE ONLY IN RESPECT OF CARRY FORWARD AND SET OFF OF LONG TERM C APITAL LOSS RELATING TO AY 2003- 04 AND ONWARDS AND THE CARRY FORWARD AND SET OFF OF SUCH L OSS RELATING TO THE PERIOD PRIOR TO 2003-04 CONTINUED TO GOVERN BY SEC.74(1) AS IT STOOD PRIOR TO THE AMENDMENT MADE W.E.F. 1.4.2003. IN OUR OPINION, THIS ISSUE INVOLVED IN THE PRESENT CAS E IS MORE SIMILAR TO THE ISSUE INVOLVED IN THE CASE OF GOVIND DAS AND OTHERS VS. ITO (SUPRA) DECID ED BY THE HONBLE SUPREME COURT AND RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF THE ASSESSEES CASE. IT IS PERTINENT TO NOTE HERE THAT THE SAID DECISION WAS RENDERED BY THE BENCH OF THREE JUDGES OF SUPREME COURT AND THAT TOO ON 18TH DECEMBER, 1975 THAT IS WELL BE FORE THE DECISION RENDERED BY THE BENCH OF TWO JUDGES OF HONBLE APEX COURT IN THE CASE OF REL IANCE JUTE AND INDUSTRIES LTD ON OCTOBER 10, 1979. 37. IN THE CASE OF GOVINDDAS & ORS. (SUPRA), THE HU F WAS A PARTNER IN THE EXPORT FIRM AND IN THE MINING FIRM. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS FOR THE AY 1957-58, THE CLAIM WAS MADE ON BEHALF OF THE MEMBERS OF THE HUF THAT T HEY HAD EFFECTED THE PARTIAL PARTITION OF THEIR IMMOVABLE PROPERTY ON 15TH NOVEMBER, 1955. TH IS CLAIM WAS ACCEPTED BY THE AO AFTER DUE ENQUIRY AND FINDING WAS RECORDED BY HIM IN THE ORDER OF ASSESSMENT. CONSEQUENT TO ITS PARTIAL PARTITION, THE HUF CEASED TO BE A PARTNER I N THE EXPORT FIRM AND THE MINING FIRM AND TWO MEMBERS OF THE HUF NAMELY GULABDAS AND HIS SON GOVINDDAS CONTINUED TO BE PARTNERS IN THESE TWO FIRMS IN THEIR INDIVIDUAL CAPACITY. THE R ESULT WAS THAT FROM AND AFTER THE ASSESSMENT YEAR 1957-58, NO PART OF THE INCOME OF THE EXPORT F IRM OR THE MINING FIRM WAS INCLUDED IN THE ASSESSMENT OF THE HINDU UNDIVIDED FAMILY. THE ASSES SMENTS OF THE EXPORT FIRM AND THE MINING FIRM FOR ASSESSMENT YEARS 1950-51 TO 1956-57 WERE R EOPENED AFTER THE NEW ACT CAME INTO FORCE AND REASSESSMENTS WERE MADE ENHANCING THE ASSESSABL E INCOME OF THE TWO FIRMS IN ACCORDANCE WITH THE PROCEDURE PROVIDED IN THE NEW ACT. CONSEQU ENT UPON THE REASSESSMENTS, NOTICES WERE ISSUED TO HUF FOR ASSESSMENTS OF ITS INCOME FOR ASS ESSMENT YEARS 1950-51 TO 1956-57 SINCE IT WAS A PARTNER IN THESE TWO FIRMS DURING THOSE YEARS . THE INCOME-TAX OFFICER AFTER FOLLOWING THE REQUISITE PROCEDURE PASSED AN ORDER OF REASSESSMENT FOR EACH OF THE ASSESSMENT YEARS 1950-51 TO 1956-57 ENHANCING THE ASSESSABLE INCOME OF THE H UF. CONSEQUENT TO THE ENHANCEMENT OF ASSESSABLE INCOME OF THE HUF, THE ITO DETERMINED TH E SEVERAL LIABILITY OF THE MEMBERS OF THE HUF U/S.171(7) OF THE NEW ACT BY APPORTIONING THE T AX ASSESSED ON THE HUF FOR ASSESSMENT YEARS 1950-51 TO 1956-57. THIS LEAD TO THE FILING O F THE PETITION BY EACH OF THE MEMBERS OF THE HUF IN THE BOMBAY HIGH COURT. THE PETITIONER DID NO T OBJECT TO THE RECOVERY OF TAX LIABILITY OF THE HUF FROM OUT OF THE JOINT FAMILY PROPERTY WHICH HAD COME TO THEIR HANDS ON THE PARTIAL PARTITION. THEIR ARGUMENT HOWEVER WAS THAT THEY WER E NOT JOINTLY OR SEVERALLY LIABLE FOR THE TAX LIABILITY AND THE ITO WAS NOT ENTITLED TO PROCEED A GAINST THEM PERSONALLY FOR RECOVERY OF ANY SHARE OF THE TAX LIABILITY AS PER THE PROVISIONS AN D SUB-SEC.(6) AND SUB-SEC.(7) OF SEC.171 OF THE NEW ACT. THE PRINCIPLE CONTENTION OF THE PETITIONER S WAS THAT THE SAID PROVISIONS OF THE NEW ACT HAD NO APPLICATION WHERE THE ASSESSMENT OF THE HUF WAS MADE UNDER THE PROVISIONS OF THE OLD ACT OF 1922 AND AT THE TIME WHEN TAX WAS SOUGHT TO BE RECOVERED, THE FAMILY HAD ALREADY EFFECTED THE PARTIAL PARTITION. THIS CONTENTION WAS REJECTED BY THE HONBLE BOMBAY HIGH COURT. THE HONBLE SUPREME COURT, HOWEVER, ACCEPTED THE CL AIM OF THE ASSESSEE AND HELD THAT THE 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 6 ASSESSMENTS OF THE HUF FOR THE ASSESSMENT YEARS 195 0-51 TO 1956-57 HAVING BEEN COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THE OLD ACT WHICH INCLUDED SEC.25A, THE AO WAS NOT ENTITLED TO AVAIL THE PROVISIONS ENACTED IN SUB-SEC. (6) AND SUB-SEC.(7) OF SEC.121 OF THE NEW ACT FOR THE PURPOSE OF RECOVERY OF THE TAX OR ANY PART THEREOF PERSONALLY FORM ANY MEMBERS OF THE JOINT FAMILY INCLUDING THE PETITIONER. 38. AT THE TIME OF HEARING BEFORE US, THE LD. DR HA S CONTENDED THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOVINDDAS (SUPRA) WAS RENDERED ON THE INTERPRETATION OF THE PROVISIONS OF SEC.297(2)(D)(II) OF 1961 ACT AND REL YING ON THESE SPECIFIC PROVISIONS, THE HONBLE SUPREME COURT HELD THAT THE RIGHT VESTED IN THE ASS ESSEE AS PER 1922 ACT HAD BEEN SAVED. HE HAS CONTENDED THAT IN THE SITUATION AS OBTAINED IN THE CASE OF GOVIND DAS, THE RIGHTS WERE ACCRUED UNDER 1922 ACT AND THEY WERE HELD TO HAVE B EEN SAVED BECAUSE OF REPEAL OF OLD LEGISLATURE KEEPING IN VIEW THE SPECIFIC PROVISIONS CONTAINED IN SEC.297(2)(D)(II). 39. AFTER HAVING PERUSED CAREFULLY THE ENTIRE TEXT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GOVINDDAS & ORS. (SUPRA), WE ARE UNA BLE TO AGREE WITH THIS CONTENTION OF LD. DR. IT IS OBSERVED THAT THE ENTIRE DISCUSSION IN THE CA SE OF GOVINDDAS & ORS. WAS MADE BY THE HONBLE SUPREME COURT WITHOUT REFERRING TO THE PROV ISIONS OF SEC.297(2)(D) AND EVEN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE WITHOUT ANY R EFERENCE TO THE SAID PROVISION AS IS EVIDENT FROM PAGE NO.133 OF THE REPORT. IT WAS ONLY AFTER D ECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THEIR LORDSHIPS OF SUPREME COURT PROCEEDED TO DEAL WITH AND DISCUSS THE CONTENTION RAISED BY THE REVENUE RELYING ON THE PROVISIONS OF SEC.297 (2)(D) OF 1961 ACT. THE CONTENTION OF THE LD. DR THAT THE DECISION IN THE CASE OF GOVINDDAS & ORS . (SUPRA) WAS DECIDED BY THE HONBLE SUPREME COURT ON INTERPRETATION OF PROVISIONS OF SE C.297(2)(D) OF 1967 ACT THUS IS DEVOID OF ANY MERIT AND THE SAME CANNOT BE ACCEPTED. AS A MAT TER OF FACT, THE ISSUE WAS DECIDED BY THE HONBLE SUPREME COURT ON THE BASIS OF A WELL SETTLE D RULE OF INTERPRETATION HALLOWED BY TIME AND SANCTIFIED BY JUDICIAL DECISIONS THAT, UNLESS T HE TERMS OF A STATUTE EXPRESSLY SO PROVIDE OR NECESSARILY REQUIRE IT, RETROSPECTIVE OPERATION SHO ULD NOT BE GIVEN TO A STATUTE SO AS TO TAKE AWAY OR IMPAIR AN EXISTING RIGHT OTHERWISE THAN AS REGARDS THE MATTERS OF PROCEDURE. AFTER REFERRING THIS WELL SETTLED RULE ON PAGE NO.132 OF THE REPORT, THE HONBLE SUPREME COURT ALSO MADE A REFERENCE TO A GENERAL RULE AS STATED BY HAL SBURY IN VOL. 36 OF THE LAWS OF ENGLAND (3RD ED.) AND REITERATED IN SEVERAL DECISIONS OF TH E SUPREME COURT AS WELL AS ENGLISH COURTS THAT 'ALL STATUTES OTHER THAN THOSE WHICH ARE MEREL Y DECLARATORY OR WHICH RELATE ONLY TO THE MATTERS OF PROCEDURE OR OF EVIDENCE ARE PRIMA FACIE PROSPECTIVE' AND RETROSPECTIVE OPERATION SHOULD NOT BE GIVEN TO A STATUTE SO AS TO AFFECT, A LTER OR DESTROY AN EXISTING RIGHT OR CREATE A NEW LIABILITY OR OBLIGATION UNLESS THAT EFFECT CANNOT B E AVOIDED WITHOUT DOING VIOLENCE TO THE LANGUAGE OF THE ENACTMENT. IF THE ENACTMENT IS EXPR ESSED IN LANGUAGE WHICH IS FAIRLY CAPABLE OF EITHER INTERPRETATION, IT OUGHT TO BE CONSTRUED AS PROSPECTIVE ONLY. APPLYING THIS PRINCIPLE OF INTERPRETATION, HONBLE SUPREME COURT HELD THAT IT IS CLEAR THAT SUBSECTION (6) OF SECTION 171 APPLIED ONLY TO A SITUATION WHERE THE ASSESSMENT OF A HINDU UNDIVIDED FAMILY IS COMPLETED UNDER SECTION 143 OR SECTION 144 OF THE NEW ACT AND IT COULD NOT HAVE ANY APPLICATION WHERE THE ASSESSMENT OF A HUF WAS COMPLETED UNDER THE COR RESPONDING PROVISIONS OF THE OLD ACT. IT WAS HELD THAT SUCH A CASE WOULD BE GOVERNED BY SEC. 25 OF THE OLD ACT WHICH DID NOT IMPOSE ANY PERSONAL LIABILITY ON THE MEMBERS IN CASE OF PARTIA L PARTITION AND TO CONSTRUE SEC.171(6) AS APPLICABLE IN SUCH CASE WITH CONSEQUENTIAL EFFECT O F CASTING ON THE MEMBERS PERSONAL LIABILITY WHICH DID NOT EXIST UNDER SEC.25A, WOULD BE TO GIVE RETROSPECTIVE OPERATION TO THE SAID PROVISION WHICH IS NOT WARRANTED EITHER BY THE EXPR ESS LANGUAGE OF THAT PROVISION OR BY NECESSARY IMPLICATION. 40. IN THE PRESENT CASE, THE PROVISIONS OF SEC.74(1 ) AS AMENDED W.E.F. 1.4.2003 HAVE BEEN RELIED UPON BY THE REVENUE AUTHORITIES TO DISALLOW THE ASS ESSEES CLAIM FOR SET OFF OF LONG-TERM CAPITAL LOSS RELATING TO AY 2001-02 AGAINST SHORT-TERM CAPI TAL GAIN OF THE YEAR UNDER CONSIDERATION AND AS ALREADY NOTED BY US, THE PLAIN GRAMMATICAL CONST RUCTION OF THE LANGUAGE OF SEC.74(1) AS AMENDED W.E.F. 1.4.2003 MAKES IT CLEAR THAT THE SAM E ARE APPLICABLE AND DEAL WITH CARRY FORWARD AND SET OFF OF LOSS UNDER THE HEAD CAPITAL GAIN INCURRED IN AY 2003-04 AND SUBSEQUENT YEARS. THE RIGHT ACCRUED TO THE ASSESSEE BY VIRTUE OF SEC.74(1) AS IT STOOD PRIOR TO 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 7 THE AMENDMENT MADE W.E.F.1.4.2003 THUS HAS NOT BEEN TAKEN AWAY EITHER EXPRESSLY BY THE PROVISIONS OF SEC. 74(1) AS AMENDED W.E.F. 1.4.2003 OR EVEN BY IMPLICATION. 41. THE GOLDEN RULE OF CONSTRUCTION IS THAT, IN TH E ABSENCE OF ANYTHING IN THE ENACTMENT TO SHOW THAT IT IS TO HAVE RETROSPECTIVE OPERATION, IT CANN OT BE SO CONSTRUED AS TO HAVE THE EFFECT OF ALTERING THE LAW APPLICABLE TO A CLAIM IN LITIGATIO N AT THE TIME WHEN THE ACT WAS PASSED. AFTER REFERRING TO THIS GOLDEN RULE IN ITS JUDGMENT IN TH E CASE OF MAHARAJA CHINTAMANI SARAN NATH VS. STATE OF BIHAR & ORS. AIR 1999 SC 3609, THE HONBLE SUPREME COURT ALSO REFERRED TO FRANCIS BENION'S STATUTORY INTERPRETATION, 2ND EDN. WHEREIN THE LEARNED AUTHOR COMMENTED THAT THE ESSENTIAL IDEA OF A LEGAL SYSTEM IS THAT CURRENT LA W SHOULD GOVERN CURRENT ACTIVITIES. IF WE DO SOMETHING TODAY, WE FEEL THAT THE LAW APPLYING TO I T SHOULD BE THE LAW IN FORCE TODAY, NOT TOMORROWS BACKWARD ADJUSTMENT OF IT. SUCH IS THE N ATURE OF LAW AND THE TRUE PRINCIPLE IS THAT LEX PROSPICIT NON RESPICIT WHICH MEANS LAW LOOKS FO RWARD AND NOT BACK. AS WILLES, J. SAID, RETROSPECTIVE LEGISLATION IS CONTRARY TO THE GENER AL PRINCIPLE THAT LEGISLATION BY WHICH THE CONDUCT OF MANKIND IS TO BE REGULATED OUGHT, WHEN I NTRODUCED FOR THE FIRST TIME, TO DEAL WITH FUTURE ACTS, AND OUGHT NOT TO CHANGE THE CHARACTER OF PAST TRANSACTIONS CARRIED ON UPON THE FAITH OF THE THEN EXISTING LAW. 42 IN THE CASE OF CIT VS. SHAH SADIQ AND SONS (SUPR A), A SIMILAR ISSUE AGAIN AROSE FOR THE CONSIDERATION OF HONBLE SUPREME COURT. IN THE SAID CASE, THE ASSESSEE, A PARTNERSHIP FIRM, HAD CLAIMED THE SET OFF OF THE SPECULATION LOSSES SUFFE RED IN THE ASSESSMENT YEARS 1960-61 AND 1961- 62 AGAINST THE SPECULATION PROFIT OF THE PREVIOUS Y EAR 1962- 63 BY VIRTUE OF SEC.24(1) OF THE 1922 ACT WHICH GAVE A RIGHT TO THE ASSESSEE TO CARR Y FORWARD THE UNABSORBED SPECULATION LOSSES TO BE SET OFF AGAINST SPECULATION PROFITS OF THE FU TURE YEARS. THE CLAIM OF THE ASSESSEE FOR SUCH SET OFF WAS DISALLOWED BY THE ITO RELYING ON THE PR OVISIONS OF SEC.75 OF THE 1961 ACT WHICH PROVIDED AN ENTIRELY NEW SCHEME AS FOLLOWS; SEC.75 - LOSSES OF REGISTERED FIRMS (I) WHERE THE ASSESSEE IS A REGISTERED FIRM, ANY LOSS W HICH IT CANNOT BE SET OFF AGAINST ANY OTHER INCOME OF THE FIRM SHALL BE APPOR TIONED BETWEEN THE PARTNERS OF THE FIRM AND THE ALONE SHALL BE ENTITLED TO HAVE THE AMOUNT OF T HE LOSS SET OFF AND CARRY FORWARD FOR SET OFF U/S.70,71, 72,73, 74 & 74A. (II) NOTHING CONTAINED IN SUB-SECTION (1) OF SEC.72 , SUB-SEC.(2) OF SEC.73, SUB-SEC.(1) OF SEC.74 AND SUB-SEC.(3) OF SEC.74A SHALL ENTITLED ANY ASSES SEE, BEING A REGISTERED FIRM, TO HAVE ITS LOSS CARRIED FORWARD AND SET OFF UNDER THE PROVISIONS OF THE AFORESAID SECTIONS. THE MATTER WAS CARRIED BY THE ASSESSEE IN AN APPEAL BEFORE THE TRIBUNAL WHICH HELD THAT THE ASSESSEE WAS ENTITLED TO SET OFF THE SPECULATION LO SSES SUFFERED IN THE ASSESSMENT YEARS 1960-61 AND 1961-62 AGAINST THE SPECULATION PROFITS OF THE PREVIOUS YEAR 1962-63. THE HONBLE ALLAHABAD HIGH COURT UPHELD THE DECISION OF THE TRI BUNAL AND WHILE DISPOSING OFF THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE HONB LE ALLAHABAD HIGH COURT, THE HONBLE SUPREME COURT HELD THAT UNDER THE INCOME-TAX ACT, 1 922, THE ASSESSEE WAS ENTITLED TO CARRY FORWARD THE LOSSES OF THE SPECULATION BUSINESS AND SET OFF SUCH LOSSES AGAINST THE PROFIT MADE FROM THAT BUSINESS IN FUTURE YEARS. IT WAS HELD THA T THE FACT THAT RIGHT CREATED BY OPERATION OF SEC.24(2) WAS A VESTED RIGHT COULD NOT BE DISPUTED AND SUCH A RIGHT WHICH HAD ACCRUED AND HAD BECOME VESTED CONTINUED TO BE CAPABLE OF BEING ENFO RCED NOTWITHSTANDING THE REPEAL OF THE STATUTE UNDER WHICH THAT RIGHT ACCRUED UNLESS THE R EPEALING STATUTE TOOK AWAY SUCH RIGHT EXPRESSLY. IT IS WORTHWHILE TO NOTE HERE THAT IN TH E CASE OF SHAH SADIQ AND SONS (SUPRA), RELIANCE WAS PLACED ON BEHALF OF THE REVENUE IN SUP PORT OF ITS CASE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RELIANCE JUTE MILLS CO. LTD. VS. CIT 86 ITR 570 (WHICH WAS AFFIRMED BY THE HONBLE SUPREME COURT IN 120 ITR 921) AND IT WAS OPINED BY THE HONBLE SUPREME COURT THAT THE PRINCIPLES ENUNCIATE D THEREIN WILL HAVE NO APPLICATION TO THE CONTROVERSY INVOLVED IN THE CASE OF SHAH SADIQ AND SONS (SUPRA). 43. IT IS NO DOUBT TRUE THAT THE DECISION IN THE CA SE OF SHAH SADIQ AND SONS (SUPRA) WAS RENDERED BY THE HONBLE SUPREME COURT ON THE BASIS OF SECTION 6 OF THE GENERAL CLAUSES ACT OF 1897 AS WELL AS SEC.297(2) OF THE INCOME-TAX ACT, 1 961 AS SUBMITTED BY THE LD. DR. HOWEVER, AS ALREADY NOTED BY US, THE DECISION IN THE CASE OF GOVINDDAS AND OTHERS (SUPRA) WHICH IS A DECISION OF THE BENCH OF THREE JUDGES OF HONBLE SU PREME COURT WAS RENDERED ON THIS ISSUE ON 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 8 THE BASIS OF WELL SETTLED RULE OF INTERPRETATION HA LLOWED BY TIME AND SANCTIFIED BY JUDICIAL DECISIONS THAT UNLESS THE TERMS OF A STATUTE EXPRES SLY SO PROVIDE OR NECESSARILY REQUIRE IT, RETROSPECTIVE OPERATION SHOULD NOT BE GIVEN TO A ST ATUTE SO AS TO TAKE AWAY OR IMPAIR AN EXISTING RIGHT OR CREATE A NEW OBLIGATION OR TO IMPOSE A NEW LIABILITY OTHERWISE THAN AS REGARDS MATTERS OF PROCEDURE. 44. IT IS OBSERVED THAT THE DECISION OF HONBLE MAD RAS HIGH COURT IN THE CASE OF CIT VS. SSC SHOES LTD. 259 ITR 674 CITED BY THE LD. COUNSEL FOR THE ASSESSEE FURTHER CLINCHES THIS ISSUE. IN THAT CASE, THE ASSESSEE HAD CLAIMED SET OFF OF DEPR ECIATION CARRIED FORWARD FROM AY 1987-88 AND 1988-89 IN THE ASSESSMENT YEAR 1989-90 BY VIRTU E OF THE PROVISIONS OF SEC.80VVA. THE SAID PROVISIONS HAD IMPOSED CERTAIN RESTRICTIONS ON THE ALLOWABILITY OF CERTAIN DEDUCTIONS SPECIFIED IN SUBSEC.(2) AND THE DEDUCTIONS WERE RESTRICTED IN THE SENSE THAT THE SAME WERE GRANTED TO THE EXTENT OF 70% OF THE AMOUNT OF PROFITS AS COMPUTED U/S.80VVA(2). SUB-SEC.(4) OF SEC.80VVA PROVIDED THAT WHERE THE DEDUCTION WAS NOT GRANTED I N RESPECT OF ANY PROVISION SPECIFIED IN SUB- SEC.(2) BY VIRTUE OF THE RESTRICTIONS, THE AMOUNT R EMAINING UNALLOWED SHALL BE ADDED TO THE AMOUNT TO BE ALLOWED IN THE NEXT FINANCIAL YEAR AND SHALL BE DEEMED TO BE A PART OF THE DEDUCTION ADMISSIBLE TO THE ASSESSEE UNDER THE SAID PROVISION FOR THAT YEAR. SEC.80VV(A) FURTHER PROVIDED THAT THE DEDUCTION NOT BE ALLOWED SHALL BE ADDED TO THE DEDUCTION FOR THE SUCCEEDING ASSESSMENT YEARS. SEC.80VVA WAS DELETED BY THE FINA NCE ACT, 1987 W.E.F. APRIL 1, 1988 AND AS A RESULT OF THE SAID DELETION, THE AO HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CARRY FORWARD AND SET OFF THE DEDUCTION U/S.80HHC RELATING TO AY 1987 -88 AND 1988-89 IN THE ASSESSMENT YEAR 1989-90. THE LD. CIT (A) CONFIRMED THE VIEW TAKEN B Y THE AO. THE TRIBUNAL HOWEVER TOOK A DIFFERENT VIEW THAT A VESTED RIGHT HAD ACCRUED TO T HE ASSESSEE TO CARRY FORWARD AND SET OFF THE UNABSORBED DEDUCTION U/S.80HHC TO WHICH IT WAS ENTI TLED TO DURING THE SUBSEQUENT YEARS. THE HONBLE MADRAS HIGH COURT UPHELD THE DECISION OF TH E TRIBUNAL HOLDING THAT A VESTED RIGHT U/S.80VVA(4) OF THE ACT HAD ACCRUED IN FAVOUR OF TH E ASSESSEE AND THAT RIGHT WAS NOT TAKEN AWAY EITHER EXPRESSLY OR BY NECESSARY IMPLICATION B Y DELETION OF SEC.80VVA OF THE ACT. FOR THIS CONCLUSION, THE HONBLE MADRAS HIGH COURT RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHAH SADIQ AND SONS (SUPRA). IT WAS NOTED BY THE HONBLE MADRAS HIGH COURT THAT THE DECISION IN THE CASE OF SHAH SADIQ A ND SONS (SUPRA) WAS RENDERED BY THE HONBLE SUPREME COURT WITH REFERENCE TO SEC.6 OF GE NERAL CLAUSES ACT AND IT WAS HELD BY HONBLE MADRAS HIGH COURT THAT THOUGH THE SUPREME C OURT WAS DEALING WITH A CASE OF REPEAL OF ENACTMENT, THE PRINCIPLES LAID DOWN IN THE CASE OF SHAH SADIQ AND SONS (SUPRA) WOULD APPLY TO CARRY FORWARD OF DEDUCTION PROVIDED U/S.80VVA(4) OF THE ACT. IT WAS HELD THAT THERE WAS NO NECESSITY TO CONSIDER THE LARGER QUESTION THAT SEC. 6 OF GENERAL CLAUSES ACT DOES NOT APPLY TO THE OMISSION OF A PROVISION AND THE OMISSION OF A PROVI SION IS DIFFERENT FROM REPEAL AS THE ASSESSEE HAD ACQUIRED A RIGHT TO CARRY FORWARD THE UNABSORBED DEPRECIATION DEEMING THE SAME AS DEDUCTION OF THE NEXT FOLLOWING ASSESSMENT YEAR WHEN SEC.80VVA WAS IN EXISTENCE AND IN FULL FORCE, WHICH WAS NOT TAKEN AWAY BY OMISSION OF THE PROVISION FROM STATUTE BOOK. 45. IN OUR OPINION, THE POSITION IN THE PRESENT CA SE IS SIMILAR TO THE ONE INVOLVED IN THE CASE OF S.S.C. SHOES LTD. (SUPRA) INASMUCH AS PROVISIONS OF SEC.74(1) AS AMENDED W.E.F. 1.4.2003, GOING BY THE LANGUAGE USED THEREIN, EXPRESSLY PROVI DE FOR AND DEAL WITH CARRY FORWARD AND SET OFF OF LOSS UNDER THE HEAD CAPITAL GAINS FOR ASSE SSMENT YEAR 2003-04 AND SUBSEQUENT YEARS AND THE RIGHT ACCRUED TO THE ASSESSEE BY VIRTUE OF SEC.74(1) AS IT STOOD PRIOR TO THE AMENDMENT MADE W.E.F. 1.4.2003 TO SET OFF BROUGHT FORWARD LON G-TERM CAPITAL LOSS RELATING TO THE PERIOD PRIOR TO AY 2003-04 AGAINST SHORTTERM CAPITAL GAIN OF SUBSEQUENT YEAR/S HAS NOT BEEN TAKEN AWAY BY THE PROVISIONS OF SEC.74(1) SUBSTITUTED W.E .F. 1.4.2003. 46. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SEC.74 WHICH DEAL WITH CARRY FORWARD AND SET OFF OF LOSSES UNDER THE HEAD CAPITAL GAINS AS AMENDED BY FINANCE ACT, 2002, WILL APPLY ONLY TO THE UNABSORBED CAPITA L LOSS FOR THE ASSESSMENT YEAR 2003-04 AND ONWARDS AND WILL NOT APPLY TO THE UNABSORBED CAPITA L LOSSES RELATING TO THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 2003-04. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO THIS SPECIAL BENCH IN FAVOUR OF THE ASSESSEE HOLDING THA T THE ASSESSEE IS ENTITLED TO SET OFF THE LONG- TERM CAPITAL LOSS INCURRED IN AY 2001-02 AGAINST TH E SHORT-TERM CAPITAL GAIN MADE BY IT IN AY 2003-04. GROUND NO.2 OF THE ASSESSEES APPEAL IS AC CORDINGLY ALLOWED. 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 9 RESPECTFULLY FOLLOWING ABOVE MENTIONED DECISIONS OF THE SPECIAL BENCH,GROUND NO.2 IS DECIDED IN FAVOUR OF THE ASSESSEE. 5. NEXT GROUND OF APPEAL DEALS WITH DEPRECIATION ON A SSETS GIVEN ON LEASE.BEFORE US,THE AR STATED THAT IT WAS CONSEQUENTIAL IN NATURE, THAT IT SHOULD BE RESTORED BACK TO THE FILE OF THE AO TO FOLLOW THE DIRECTIONS OF THE TRIBUNAL GIVEN IN T HE EARLIER YEARSORDERS. DR STATED THAT MATTER COULD BE DECIDED ON MERITS.AFTER CONSIDERING THE RI VAL SUBMISSIONS,WE DIRECT THE AO TO FOLLOW THE DIRECTIONS OF THE TRIBUNAL GIVEN WHILE A DJUDICATING THE ISSUE UNDER CONSIDERATION IN THE EARLIER YEARS. ITA3506/M/08 (04-05): 6. THE FIRST GROUND OF APPEAL IS ABOUT ADMINISTRATIVE EXPENSES DISALLOWED U/S. 14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.5.57 CRORES AND HAD CLAIMED IT EXEMPT U/S.10(33) OF THE ACT. HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY SOME EXPENSES SHOULD NOT BE ATTRIBUTED TO EARNING OF THE EXEMPT INCOME INVOKING THE PROVISIONS OF SECTION 14A OF TH E ACT.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE MADE VIDE ITS LETTER DT 21.12.2006 THE AO MADE A DISALLOWANCE OF 10% OF THE DIVIDEND INCOME I.E.RS.55,75,565/-.AS THE ASSESSEE HAD ALREADY DISALLOWED 1% OF THE DIVIDEND INCOME THEREFORE, HE DISALLOWED RS.50.18 L AKHS, (RS.55.75 LAKHS-5.57 LAKHS).DURING THE APPELLATE PROCEEDINGS THE FAA, FOLLOWING THE OR DERS OF HIS PREDECESSORS FOR THE AY.S 2002-03 AND 2004-05 RESTRICTED THE DISALLOWANCE TO 1% OF THE DIVIDEND INCOME. 6.1. BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO. TH E AR REFERRED TO THE CASES OF TATA CONSULTING ENGINEERS LTD. ( ITA/265/MUM/11 & ITA/ 2460/MUM/12-AY.S 2006-07AND 07- 08 DATED4.3.2015, HDFC BANK LTD. ITA 4529/MUM/2005 AND OTHER AY 2001-02 AND OTHER AY.S DATED 29.6.2011, GODREJ AGROVET LTD.(ITA1613/M /11-AY.06-07,DT.22.08.2014). 6.2. AFTER CONSIDERING THE SUBMISSIONS OF THE AR AND DR AND THE ORDERS RELIED BY THE AR AND DR WE ARE OF THE OPINION THAT THERE IS NO NEED TO I NTERFERE WITH THE ORDER OF THE FAA. WE FIND THAT A LUMPSUM DISALLOWANCE OF 1%/2% OF THE DIVIDEN D INCOME HAS BEEN UPHELD BY THE TRIBUNAL/HON'BLE HIGH COURT.THEREFORE,UPHOLDING THE ORDER OF THE FAA,WE DECIDE FIRST GROUND OF APPEAL AGAINST THE AO. 7 .SECOND GROUND OF APPEAL IS ABOUT DISALLOWANCE OF C LUB ENTRANCE AND SUBSCRIPTION FEE. DURING THE COURSE OF HEARING BEFORE US,REPRESENTATI VES OF BOTH THE SIDES AGREED THAT IDENTICAL ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER DT.30.1.2009 (ITA/3808/MUM/2007 AY.03-04),THAT THE HONBLE BOMBAY HIGH COURT HAD C ONFIRMED THE SAID ORDER OF THE TRIBUNAL VIDE ITS JUDGMENT DT. 25.07.2009.CONSIDERI NG THESE FACTS GROUND NO.2 IS DECIDED AGAINST THE AO. ITA NO.3115/MUM/08 (A.Y. 05-06): 8. FIRST GROUND OF APPEAL DEALS WITH DEPRECIATION ON P REMISES GIVEN ON LEASE. THE AR DID NOT PRESS THE SAID GROUND,HENCE, SAME STANDS DISMISSED AS NOT PRESSED. 9 .SECOND GROUND IS ABOUT DEPRECIATION ON LEASE ASSET S.FOLLOWING OUR ORDER ON THE ISSUE FOR THE EARLIER YEARS,WE DIRECT THE AO TO CONSIDER THE DIRE CTIONS OF THE BENCH GIVEN FOR THE EARLIER YEARS. 10. THE ASSESSEE HAD FILED AN APPLICATION FOR ADMITTING ADDITIONAL GROUND AND THE GROUND DEALS WITH DENIAL OF SET OFF OF BROUGHT FORWARD CAPITAL LOSS AGAINST STCG.WE FIND THAT ADDITIONAL GROUND IS ARISING OUT OF THE APPEAL AND DOES NOT RE QUIRE ANY ADDITIONAL MATERIAL TO DECIDE THE PURE LEGAL ISSUE. WE HAVE DECIDED THE ISSUE WHILE A DJUDICATING THE APPEAL FOR THE EARLIER YEAR. FOLLOWING THE SAME, ADDITIONAL GROUND, RAISED BY T HE ASSESSEE IS DECIDED IN ITS FAVOUR. 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 10 ITA NO.3507/MUM/2008(05-06): 11. FIRST TWO GROUNDS,RAISED BY AO,ARE ABOUT ADMINISTRA TIVE EXPENSES DISALLOWED U/S.14A AND DISALLOWANCE OF CLUB ENTRANCE AND SUBSCRIPTION FEE RESPECTIVELY.FOLLOWING OUR ORDER FOR THE EARLIER YEAR,BOTH THE GROUNDS ARE DECIDED AGAINST T HE AO. 12. LAST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF BAD DEBTS.WHILE DECIDING THE APPEAL FOR AY.2003-04,WE HAVE UPHELD THE ORDER OF THE FAA.FOLL OWING THE SAME, GROUND NO.3 IS DECIDED AGAINST THE AO. ITA NO.3116/MUM/2008-AY.06-07: 13. THE ASSESSEE DID NOT PRESS FIRST GROUND OF APPEAL, HENCE SAME STANDS DISMISSED. GROUND NO.2 IS RESTORED BACK TO THE FILE OF AO TO F OLLOW THE DIRECTIONS OF THE TRIBUNAL GIVEN FOR THE EARLIER YEARS. THE ASSESSEE HAS FILED AN ADDITIONAL GROUND FOR THE YEAR UNDER CONSIDERATION ALSO AND IT DEALS WITH THE SET OFF OF BROUGHT FORWARD LOSSES.FOLLOWIN G OUR ORDERS FOR THE EARLIER YEARS, ADDITIONAL GROUND RAISED BY THE ASSESSEE,IS ADMITTE D AND IS DECIDED IN ITS FAVOUR. ITA NO.3508/MUM/2008 -AY.07-08: 14. GROUND NO.1, 2 AND 3,FILED BY THE AO,ARE ABOUT ADMI NISTRATIVE EXPENSES TO BE DISALLOWED U/S. 14A OF THE ACT,CLUB ENTRANCE AND SUBSCRIPTION FEE AND DISALLOWANCE OF BAD DEBTS U/S. 36 (1)(VII)(A).WE HAVE DECIDE THESE GROUNDS AGAINST T HE AO WHILE ADJUDICATING THE APPEALS FILED FOR THE EARLIER YEARS.FOLLOWING THOSE ORDERS ALL TH E THREE GROUNDS STAND DISMISSED. 15. LAST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF EXEM PTION CLAIMED U/S.54EC OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS,THE AO HELD THAT CAPITAL GAIN UNDER CONSIDERATION WAS TAXABLE AS SHORT TERM CAPITAL GAIN AS PER THE PROV ISIONS OF SECTION 50C OF THE ACT. 15.1. DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE REFE RRED TO THE CASE OF ACE BUILDERS (P) LTD.OF HON'BLE BOMBAY HIGH COURT(281 ITR210).FOLLOW ING THE SAID JUDGMENT,THE FAA ALLOWED THE CLAIM MADE BY THE ASSESSEE. 15.2. BEFORE US,THE DR LEFT THE ISSUE TO THE DISCRETION O F THE BENCH. AR SUPPORTED THE ORDER OF THE FAA. WE FIND THAT IN THE CASE OF ACE BUILDERS(SUPRA),THE HONBLE HIGH COURT HAS HELD THAT SECTION 50 TREATS CAPITAL GAIN ARISING ON TRANSFER OF CAPIT AL ASSET AS STCG, THAT CAPITAL ASSETS U/S.50 ARE ALL LONG TERM CAPITAL ASSETS,THAT THEY DO NOT LOOSE THEIR CHARACTER OF BEING LONG TERM CAPITAL ASSETS MERELY ON THE GROUND THAT CAPITAL GAINS WAS BEING TAXED U/S.50 OF THE ACT, THAT THE PROVISIONS OF SEC.54EC WOULD CONTINUE TO REMAIN APP LICABLE TO THE CAPITAL ASSETS EVENTHOUGH THE CAPITAL GAIN IS CHAREGEABLE U/S.50.RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT WE HOLD THAT ASSESSEE I S ENTITLED TO DEDUCTION U/S. 50EC.LAST GROUND OF APPEAL IS DECIDED AGAINST THE AO. IN THE RESULT APPEALS FILED BY THE ASSESSEE ARE P ARTLY ALLOWED AND APPEALS FILED BY THE AO.S STAND DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. ( 16 , 2016 SD/- SD/- ( / AMIT SHUKLA ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16.03.2016. JV.SR.PS. 8523/M/11 & ORS.--KOTAK MAHINDRA(7) 11 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.