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TMI Blog2013 (10) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... limit whatsoever – Decided in favor of Assessee. - I.T.A. No.2414 and 2415/Mum/2012 - - - Dated:- 9-10-2013 - Shri B. R. Mittal,(JM) And Sanjay Arora (AM),JJ. For the Appellant : Shri Satish Chandak For the Respondent : Shri Rajesh Ranjan Prasad ORDER Per B. R. Mittal, JM:- The assessee has filed these two appeals against common order of ld. CIT(A)-37 dated 13.2.2012 on common grounds for assessment years 2005-06 and 2006-07. 2. Grounds taken by assessee in both the assessment years under consideration are as to whether on the facts and in the circumstances of the case, ld. CIT(A) has erred in confirming action of Assessing Officer of not allowing the set off of brought forward unabsorbed depreciation of earlier year. 3. Since facts and the issue involved in both the assessment years under consideration are identical and appeals are also arising out of common order passed by ld. CIT(A), we have heard these appeals together and dispose off them by a common order, for the sake of convenience. 4. Relevant facts giving rise to these appeals are that the assessee is engaged in the business of manufacturing of Organo Phosphorous Chemicals and offered income und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business cannot be absorbed fully or partly due to inadequacy of profit or gains from such business, then such allowance or part of it which remained unabsorbed, is to be referred to as "unabsorbed depreciation allowance". Such unabsorbed depreciation allowance is to be set off firstly against the income under the head "Profit and Gains of Business or Profession" from any other business or profession carried on by the assessee in that assessment year. If such business profit is also insufficient to absorb unabsorbed depreciation allowance, then remaining amount shall be set off against the income under other heads as mentioned in section 14 of the Act assessable for that assessment year. This exercise of setting off the unabsorbed depreciation allowance against any head of income is restricted to the year in which the claim for depreciation has arisen u/s 32 (1) of the Act. If, however, income of the assessee under all heads is insufficient to absorb the unabsorbed depreciation allowance, then such amount it to be carried forward to the following assessment year to be set off against the income arising under the head " Profit and gains of business or profession". Not only that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is the amount of allowance for the year u/ s 32(1), can be set off against income under any head within the same year. (ii) Amount of such current depreciation which cannot be so set off within the same year as per (i) above shall be deemed as depreciation u/s 32(1) that is depreciation for the current year in the following years to be set off against income under any head, like current depreciation. B. In the second period (i.e. AY 1997-98 to 2001-02) (i) Brought forward unadjusted depreciation allowance for and upto AY 1996-97 (hereinafter called the 'First unadjusted depreciation allowance') which could not set off up to AY 1996-97, shall be carried forward for set off against income under any head for a maximum period of eight AYs starting from AY 1997-98. (ii) Current depreciation for the year u/s 32(1) (for each year separately starting from A.Y.1997-98 upto 2001-02) can be set off firstly against business income and then against income under any other head. (iii) Amount of current depreciation for A.Ys. 1997-98 to 2001-02 which cannot be so set off, as per (ii) above, hereinafter called the 'Second unabsorbed depreciation allowance' shall be carried forward for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for indefinite period. We consider it relevant to state the relevant paras of the said order of ITAT (supra) which is also stated by ld. CIT(A) in para 9 of the impugned order which reads as under: "On reading the provisions of s. 32(2) as it stood prior to the amendment made by the Finance (No.2) Act, 1996, i.e. operative upto and including asst. yr. 1996- 97, it is seen that where, in the assessment of assessee, full effect cannot be given to the depreciation allowance owing to there being no profits or gains chargeable for that previous year, or wooing to the profits or gains chargeable being less than the allowance, then subject to the provisions of sub-s.(2) of s. 72 and sub-s.(3) of s. 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years. The effect of these provisions is that the unabsorbed depreciation for a particular year becomes, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness or profession for which the allowance was originally computed continued to be carried on by the assessee in the previous year relevant for that assessment year as stipulated in the 1st proviso to s.32(2)(iii) as substituted w.e.f. 1st" April, 1997. In this context, it may be observed that amended s.32(2) as substituted by the Finance Act, 2001, w.e.f. 1st" April, 2002 and status quo ante has been restored w. e. f. asst. yr. 2002-03. The new sub-s (2) of s.32 as substituted by the Finance Act, 2001 w.e.f. 1st" April, 2002 has restored the sub- s.(2) of s.32 as it stood in the asst. yr 1996-97. In other words, the restrictions imposed by the Finance (No.2) Act, 1996 with w.e.f. 1st" April, 1997 in the matter of set off of unabsorbed depreciation has been dispensed by substituting the s.32(2) by the Finance Act, 2001 w.e.f 1st" April, 2002and status quo ante, i.e. status quo of s.32(2) as existed prior to the amendment made by Finance (No.2) Act, 1996 w.e.f. 1st" April, 1997 has been restored." 11. On behalf of the assessee it was contended that the unabsorbed depreciation for the assessment years 1997-98 to 2001-02 aggregating to Rs.3,86,12,692/- be set of against any incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Finance (No.01) Act, 2001 and not by provisions of section 32(2) as it stood before the said amendment. Their Lordships have stated had the intention of the legislature being to allow unabsorbed depreciation allowance worked out in assessment year 1997-98 only for 8 subsequent assessment years even after the amendment to section 32(2) by Finance (No.1) Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Their Lordships have held that the provisions of section 32(2) as amended by Finance (No.1) Act, 2001 would allow the unabsorbed depreciation allowance available in the assessment years 1997-98, 1999- 2000, 2000-01 and 2001-02 to be carried forward to the succeeding years and if any unabsorbed depreciation or part thereof could not set off till the assessment year 2002-03, then it would be carried forward till the time it is set off against the profits and gains of subsequent years without any limit whatsoever. In view of above decision of the Hon'ble Gujarat High Court and also considering the decision of ITAT, Mumbai Bench in the case of Graham Firth Steel Products (I) Ltd (supra), we hold that ld. CIT(A) is not ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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