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TMI Blog2008 (6) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18-2-1998 be as much as the said circular is silent on this issue. (4)The appellant prays that the order of learned CIT(A) on the grounds be set aside and that of the ITO/AC/DC be restored. 3. The assessee in this case is a company engaged in the business of manufacture of Cold Rolled Steel Strips. For assessment year 2000-01, it filed a return of income declaring Nil income. During the previous year, the assessee sold some depreciable assets and in view of the provisions of section 50 of the Act, there resulted a short-term capital gain of Rs. 11,89,100 on transfer of depreciable asset. The assessee had carried forward unabsorbed depreciation relatable to assessment year 1996-97 more than the short-term capital gain on sale of depreciable asset. The assessee set off the carried forward unabsorbed depreciation against short-term capital gain and filed a nil return of income. The Assessing Officer disallowed the claim of set off by relying on the provisions of section 32(2) as applicable from assessment year 1997-98 to assessment year 2000-01. The CIT(A) directed the Assessing Officer to allow the claim of the assessee giving raise to the present appeal by the revenue befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year, (b)if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed : (Provided that the business or profession for which the allowance was originally computed continued to be carried on by him in the previous year relevant for that assessment year) : Provided [further] that the time limit of eight assessment years specified in sub-clause (b) shall not apply in the case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative up to and including assessment year 1996-97 contemplates is that current depreciation is deductible, in the first place, from the income of the business to which it relates; if such depreciation amount is larger than the amount of the profits of that business, then such process is deductible from the profits or gains of any other business/es, if any, carried on by the assessee, and if a balance is left even thereafter, that comes for absorption from the income from any source under any of the other heads of income during that year; and in case there is still a balance left over, it is to be treated as unabsorbed depreciation and it shall be carried forward to the next succeeding year, and where there is current depreciation for such succeeding year, the unabsorbed depreciation brought forward from earlier year is added to the current depreciation for such, succeeding year and is deemed, by legal fiction, a part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for succeeding year. In this view of the matter, section 32(2) contained an independent provision for setting off unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. 762, dated 18-2-1998 while explaining the amended provisions of section 32(2) as applicable with effect from 1-4-1997, the explained provisions as follows : "23.5 Sub-section (2) of section 32, as, it existed up to assessment year 1996-97, provided that the unabsorbed depreciation of a year shall be added to the amount of the allowance for depreciation of the following previous year and deemed to be part of that allowance. Therefore, the unabsorbed depreciation allowance, if any, of assessment year 1996-97 shall be added to the amount of the allowance for depreciation of assessment year 1997-98 and deemed to be apart of the allowance for this year. In other words, the unabsorbed depreciation allowance of assessment year 1996-97 shall be added to the allowance of 1997-98 and will be deemed to be the allowance of that year. The limitation eight years shall start from the assessment year 1997-98." On the basis of the aforesaid circular, the Commissioner was of the view that the claim of the assessee has to be allowed. In the following deci- sions :- u Southern Travels v. Asstt. CIT [2003] 103 ITD 198 (Chennai) (SB). u CIT v. Pioneer Asia Packing (P.) Ltd. [2008] 170 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and inclusive assessment year which remained unabsorbed and brought forward to the assessment year 1997-98 continue to set off as per the pre-amended provisions of section 32(2) as stood prior 1-4-1997 and it is only the current depreciation allowance for the assessment year 1997-98 onwards which remains unabsorbed will be governed by the amended provisions of section 32(2) as substituted by the Finance (No. 2) Act, 1996 with effect from 1-4-1997. 15. To resolve the said controversy and to find out the true intent of the Legislature in substituting the section 32(2) with effect from 1-4-1997, a useful inferences may be taken from the Speech of the Finance Minister while moving the Finance (No. 2) Bill. 1996 for consideration in Lok Sabha on 11-9-1996 as reported in (1996) 222 ITR 36 (St.). The following is the relevant extract of the Speech of the Finance Minister :- '4. Clause 11 of the Bill seeks to amend section 32 of the Income-tax Act, 1961, relating to depreciation. During the course of discussion on the General Budget, a number of Hon'ble Members have expressed their apprehension that the proposed amendment limiting carry forward of unabsorbed depreciation to 8 years will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount can be carried forward to the next 7 assessment years for being set off against the profits and gains of a business or profession or income under any other head. (ii )If full effect cannot be given to the current depreciation allowance of the assessment year 1997-98, and subsequent assessment years, it can be carried forward for being set-off only as per amended provisions of section 32(2) substituted with effect from 1-4-1997 by the Finance (No. 2) Act, 1996. 18. To remove the ambiguity in interpretating the amended provisions of section 32(2) (with effect from 1-4-1997) and to ascertain the object and purpose in amending section 32(2), the Speech made by the Finance Minister can certainly be referred to, inasmuch as, this is in accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. The Hon'ble Supreme Court in the case of Kerala State Industrial Development Corporation v. CIT [2003] 259 ITR 51 has held as under :- 'That the Finance Minister's speech can be relied upon to throw light on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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