2004 (4) TMI 273 - AT - Income Tax

Set off unabsorbed Depreciation for earlier years against income from house property - Binding nature of the Board Circulars - HELD THAT - In the present case, the relief allowed by the learned CIT(A) to the assessee in terms of adjustment of unabsorbed depreciation of the earlier years against the income from house property for the year under consideration i.e. assessment year 1997-98 was based on the assurance given by the Finance Minister in his Speech at the time of the relevant Finance Bill and since the same was further fortified by the aforesaid Board's Circular incorporating such assurance given by the Finance Minister, we are of the view that it was not open to the Revenue to challenge the relief so allowed by the learned CIT(A) on the plea that the same is not in consonance with the relevant provisions of law. In that view of the matter, we find no merits in this appeal filed by the Revenue and upholding the impugned order of the learned CIT(A) allowing the claim of the assessee to set off the unabsorbed depreciation of earlier years against the income from house property for the year under consideration, we dismiss the same. As discussed, the Hon'ble Supreme Court in the case of Commissioner of Customs v. Indian Oil Corpn. 2004 (2) TMI 66 - SUPREME COURT has reiterated the well established position regarding binding nature of the Board Circulars while holding that it is not open to the Revenue to file an appeal against order passed in conformity with the Board Circular.In the present appeal the Revenue, however, has challenged the order of learned CIT(A) which is in conformity with the Board Circular as referred to hereinabove and since the assessee has been dragged into these appellate proceedings before the Tribunal despite a direct and explicit Circular on the point issued by the Board, we are of the view that it is a fit case to award cost to the assessee by exercising the discretion under section 254(2B) which we quantify in a sum of Rs. 1,000. In the result, the appeal filed by the Revenue is dismissed.

Summary

Issues involved:
The appeal by Revenue against the order of CIT(A) allowing set off of unabsorbed depreciation for earlier years against income from house property for assessment year 1997-98.

Summary:
The appeal was filed by Revenue against the order of CIT(A) allowing the assessee to set off unabsorbed depreciation for earlier years against income from house property for assessment year 1997-98. The Assessing Officer disallowed this claim based on Section 32(2) as amended by Finance (No.2) Act, 1996. However, CIT(A) allowed the claim based on the Finance Minister's speech and Circular No. 762 issued by CBDT. The dispute centered around the interpretation of the provisions of Section 32(2) pre and post the 1996 amendment.

A comparative analysis of the pre-amended and post-amended provisions of Section 32(2) revealed that the benefits available to the assessee under the pre-amended section were curtailed by the 1996 amendment. The Finance Minister, in his Budget Speech, assured that the unabsorbed depreciation as of 1-4-1997 could still be set off against taxable profits for assessment year 1997-98 and subsequent years. This assurance was further clarified in Circular No. 762 issued by CBDT, emphasizing the treatment of unabsorbed depreciation for assessment year 1996-97 in the subsequent year.

The CBDT's power under Section 119 to issue Circulars for fair enforcement of tax laws was highlighted. The Supreme Court's rulings in UCO Bank v. CIT and Commissioner of Customs v. Indian Oil Corpn. Ltd. affirmed the binding nature of CBDT Circulars on departmental authorities. In this case, the relief granted by CIT(A) based on the Finance Minister's assurance and CBDT Circular was upheld, dismissing the Revenue's appeal.

The Tribunal emphasized the binding nature of CBDT Circulars and awarded costs to the assessee due to the Revenue challenging an order in line with the Circular. The appeal by Revenue was ultimately dismissed, affirming the allowance of the claim to set off unabsorbed depreciation against income from house property for assessment year 1997-98.