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TMI Blog2015 (8) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner against the order of assessment which is not prejudicial to the interest of Revenue, even where the order passed by the Assessing Officer was erroneous, cannot be exercised, since the twin conditions have not been fulfilled in the case. In view thereof, we reverse the directions of the Commissioner in this regard and uphold the order of Assessing Officer in allowing the set off of unabsorbed depreciation claimed against the business income in computation of income. The directions of the Commissioner in this regard are thus, reversed and the order of Assessing Officer is restored We find that the issue in the present appeal is identical to the one already adjudicated by the Tribunal in the case of M/s. SAB Miller Breweries Pvt. Ltd. Vs. ACIT [2015 (8) TMI 307 - ITAT PUNE]. Accordingly, we hold that there is no infirmity in the order of Assessing Officer in allowing the assessee to carry forward unabsorbed depreciation for the assessment years 1996-97 and 1997-98 to be set off against the profit of the assessee from business or profession from assessment year 2006-07. - Decided in favour of assessee. - ITA No. 1203/PN/2013 - - - Dated:- 31-7-2015 - SHRI R.K. PANDA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r heads of income except under the Head business or profession and in view of Section 32 unabsorbed depreciation cannot be carried forward for indefinite period w.e. from 2002-03 and can he set off only against business income. Unabsorbed depreciation relevant to AY 1997-98 to 2001-02 cannot be carried forward and set off against any other heads of income except income wider the head business or profession for more than eight Assessment Years immediately succeeding the AY for which the loss was first computed. Similarly b/f unabsorbed depreciation allowance for and upto AY 1996-97, which could not be set off upto AY 1996-97 shall be carried forward for set off against income under any head for a maximum period of eight assessment years starting from AY 1997-98 to AY 2004-05. In the instant case, depreciation loss brought forwarded at ₹ 2,61,05,488/- and ₹ 5,99,11,218/- for the AY 96-97 and 97-98 respectively. This brought forward unabsorbed depreciation allowance pertaining to AY 96-97 and 97-98 totaling to amount of ₹ 8,60,16,666/- shall not be carried forward upto AY 2005-06. As the above issues has not been considered by the Assessing Officer while completin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax. The ld. DR submitted that the Commissioner of Income Tax rightly assumed the jurisdiction u/s. 263 of the Act. In the present case, the Assessing Officer had not made any verifications before accepting the claim of the assessee of carry forward of depreciation. The ld. DR prayed for dismissing the appeal of the assessee. 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. A perusal of the show cause notice u/s. 263 which has been reproduced in para 2 above would show that the Commissioner of Income Tax has assumed jurisdiction u/s. 263 only on the ground that the Assessing Officer has accepted the claim of the assessee to carry corward and set off unabsorbed depreciation of assessment years 1996-97 and 1997-98. According to the Commissioner of Income Tax unabsorbed depreciation relevant to assessment years 1996- 97 to 1997-98 cannot be carried forward and set off against any other heads of income except income under the head business or profession for more than 8 assessment years immediately succeeding the assessment years for which the depreciation was computed. 6. We do not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w had been admitted by the Hon ble High Court and where the matter was debatable, it was not subject to rectification. The Commissioner on the other hand, was of the view that the decision relied upon by the assessee in Jai Ushin Ltd. vs DCIT (supra) had been considered by the Special Bench of Mumbai Tribunal in DCIT Vs. Times Guaranty Limited (supra), vide order dated 30.06.2010, wherein it was held that the unabsorbed depreciation relating to assessment year 1997-98 to 1999-00 is to be dealt with the provisions of sec.32(2) as applicable for A.Y. 1997-98 to 1999-00. In view thereof, the Commissioner held that the case law relied upon by the assessee was not relevant and the decision of the Special Bench of Mumbai Tribunal in DCIT Vs. Times Guaranty Limited (supra) had to be applied. 27. The Hon ble Gujarat High Court in General Motors India Pvt. Ltd. Vs. DCIT (2013) 354 ITR 244 (Guj) vide judgment dated 23.08.2012 had elaborated upon the issue of claim of unabsorbed depreciation and the law applicable and also the effect of amendment to section 32(2) of the Act by the Finance Act, 2001 and it was held that the amendment made to section 32(2) of the Act by the Finance Act, 2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r No. 762, dated February 18, 1998 (see [1998] 230 ITR (St.) 12), issued by the Central Board of Direct Taxes (CBDT) in the form of Explanatory Notes categorically provided, that the unabsorbed depreciation allowance for any previous year to which full effect cannot be given in that previous year shall be carried forward and added to the depreciation allowance of the next year and be deemed to be part thereof. 32. So, the unabsorbed depreciation allowance of the assessment year 1996-97 would be added to the allowance of the assessment year 1997-98 and the limitation of eight years for the carry forward and set off of such unabsorbed depreciation would start from the assessment year 1997-98. 33. We may now examine the provisions of section 32(2) of the Act before its amendment by the Finance Act, 2001. The section, prior to its amendment by the Finance Act, 2001, read as under : Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) in any previous year owning to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and subsection (3) of section 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 of that previous year, and so on for the succeeding previous years. 36. The purpose of this amendment has been clarified by the Central Board of Direct Taxes in Circular No. 14 of 2001 (see [2001] 252 ITR (St.) 65, 90). The relevant portion of the said Circular reads as under : Modification of provisions relating to depreciation 30.1 Cinder the existing provisions of section 32 of the Income-tax Act, carry forward and set off of unabsorbed depreciation is allowed for eight assessment years. 30.2 With a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee or the Revenue. But if the Legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No. 14 of 2001 had clarified that under section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by the Finance 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 be 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. 38. Therefore, it can be said that, current depreciation is deductible in the 40 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 excess c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), held that the benefit of set off of unabsorbed depreciation of assessment years 1997-98 and 1998-99 could be allowed against the income relating to assessment year 2007-08. In applying the ratio laid down by the Hon ble Gujarat High Court, the Tribunal held that the reliance placed by the learned Departmental Representative for the Revenue on the decision of Hyderabad Bench of the Tribunal in Dharti Dredging Infrastructure Ltd. Vs. Addl.CIT (supra) Hon ble Madras High Court in CIT Vs. Pioneer Asia Packing (P.) Ltd., (supra) and CIT Vs. S S Power Switchgear Ltd. (supra) was not correct. The learned Departmental Representative for the Revenue before us had also placed reliance on the decisions of Dharti Dredging Infrastructure Ltd. Vs. Addl.CIT (supra) and further in Ninestar Enterprises (P.) Ltd. Vs. ACIT (2013) 30 taxmann.com 57 (Hyd.) and also Hon ble Madras High Court in CIT Vs. Pioneer Asia Packing (P.) Ltd., (supra) and CIT Vs. S S Power Switchgear Ltd. (supra). In view of the same being contrary to the only decision of Hon ble Gujarat High Court on the issue for allowance of set off of brought forward unabsorbed depreciation relating to assessment year 1999- 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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