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TMI Blog2014 (4) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... rbed depreciation. The Assessing Officer on 18/08/2010 passed order u/s 154 of the Act rectifying the mistake in calculation of interest u/s 234B of the Act. The Assessing Officer also allowed carry forward and set off of unabsorbed depreciation of Rs. 57,48,933.- pertaining to assessment years 1995-96 to 2005-06. In the meanwhile, the CIT(A) had also disposed off assessee's appeal against the assessment order passed u/s 143(3) of the Act by allowing the appeal in favour of the assessee. Pursuant to the order passed by the CIT(A) on 05/11/2010, the Assessing Officer passed a consequential order on 31/01/2011 giving effect to the order of the CIT(A). In the consequential order so passed, the Assessing Officer allowed carry forward and set off of unabsorbed depreciation of Rs. 3,18,176/- and Rs. 14,42,694/- for the assessment years 1995- 96 and 1997-98 respectively. 3. The CIT while examining the assessment record of the assessee for the AY under consideration, was of the view that the rectification order dated 18/08/2010 passed by the Assessing Officer u/s 154 of the Act allowing carry forward and set off of unabsorbed depreciation for the assessment year 1997-98 is erroneous and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the clear statutory provision prevailing in the relevant AY i.e. 1997-98, the Assessing Officer could not have passed the order u/s 154 of the Act allowing carry forward and set off of unabsorbed depreciation pertaining to AY 1997-98 in the AY 2006-07. In support of such contention, the learned DR relied upon the decision of the ITAT, Hyderabad Bench in case of M/s Fenoplast Ltd. Vs. ACIT in ITA No. 807 to 809/Hyd/2011 dated 30/04/2013. 6. We have heard the parties and perused the orders of the revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions relied upon by both the parties. At the outset, we would like to observe that the revision order passed by the CIT u/s 263 of the Act is not only confusing but reveals non application of mind. Though the CIT has sought to revise the rectification order dated 18/08/2010 passed u/s 154 of the Act by the Assessing Officer, but, actually the CIT has ended up revising the consequential order dated 31/01/2011 passed by the Assessing Officer in pursuance to direction of CIT(A). We hold this opinion because the CIT in the revision order has directed the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited period. The Hon'ble Gujarat High Court while considering the issue of carry forward and set off of unabsorbed depreciation for AY 1997-98 in AY 2006-07 after taking into consideration, the import of the amendment made by the Finance Act, 2001 to section 32(2) and clarification issued by the Board allowed the claim of the assessee by holding as under: "30. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to A.Y. 1997-98 could be allowed to be carried forward and set off after a period of eight years or it would be governed by Section 32 as amended by Finance Act 2001? The reason given by the Assessing Officer under section 147 is that Section 32(2) of the Act was amended by Finance Act No.2 of 1996 w.e.f. A.Y. 1997-98 and the unabsorbed depreciation for the A.Y. 1997-98 could be carried forward up to the maximum period of 8 years from the year in which it was first computed. According to the Assessing Officer, 8 years expired in the A.Y. 2005-06 and only till then, the assessee was eligible to claim unabsorbed depreciation of A.Y. 1997-98 for being carried forward and set off against the income for the A.Y. 2005- 06. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst 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 time limit of eight assessment years specified in sub-clause (b) shall not apply in 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 subsection (1) of section 17 of the Sick Industrial Company (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 the accumulated losses. Explanation.- For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." 37. The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry 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 the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out 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. Hence keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 32(2) as amended by Finance Act, 2001. And once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed 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 governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever." 6.1 The ratio laid down by the Hon'ble Gujarat High Court squarely applies to the facts of the assessee's case. The learned DR has not brought to our notice decision of any other High Court holding a contrary view. Therefore, respectfully following the same, we are inclined to hold that the assessee will be eligible to carry forward and set off of unabsorbed depreciation pertaining to the AY 1997-98 in the impugned assessment year. Therefore, the order passed by the Assessing Officer u/s 154 of the Act cannot be said to be erroneous and prejudicial to the interests of the revenue so as to empower the CIT to revise i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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