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TMI Blog2008 (12) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 2002-03. Our view are also fortified by the judgment of the Hon'ble Supreme Court in the case of K.P. Varghese v. CIT [ 1981 (9) TMI 1 - SUPREME COURT] wherein it has been observed by the Supreme Court that clarification made before the Parliament has to be taken as correct interpretation of law. Finance Minister's speech could be noticed upon for throwing light on the objects and purposes of provisions. Even otherwise when Assessing Officer apply the provisions applicable for assessment year 1997-98 to assessee's case in the relevant assessment year even after its substitution, it will be fair also to apply the provisions, which existed up to assessment year 1996-97 since unabsorbed depreciation pertained to the assessment year 1996-97 and before in view of the intention of Legislature. Therefore, in our considered view as per the various provisions of law relating to carry forward depreciation and speech of the Finance Minister in the Parliament we have no hesitation in upholding the order of the CIT (A) to set off against other income but in view of the fact that by virtue of provisions effective from assessment year 1997-98, assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation can be made with other income in the original year in which such unabsorbed depreciation arose, however, such depreciation remaining unabsorbed if carried forward in the next year cannot set off against any other income. Assessing Officer also noted that the law, which was, substituted with effect from 1997-98 was again substituted by Finance Act 2001 with effect from assessment year 2002-03 and reinstated the original provisions which were available on the statutory book up to 1996-97. Assessing Officer taking cognizance of laws i.e., up to assessment year 1996-97 and law which was substituted with effect from 1997-98 and the law which was again reinstated with effect from assessment year 2002-03 had opinion that as the unabsorbed depreciation up to the assessment year 1996-97 became the current depreciation of assessment year 1997-98 and got merged with depreciation of assessment year 1997-98 and since there was no provision in the substituted provision with effect from assessment year 1997-98 for set off of unabsorbed depreciation against any other income, assessee was not entitled to adjust the unabsorbed depreciation with the other income in the relevant assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular No. 762, dated 18-2-1998. The amendment does not deal with the problem of setting off of unabsorbed depreciation up to 1997-98, it only says that unabsorbed depreciation up to 1996-97 and will become depreciation allowance for assessment year 1997-98. (iv) In fact the intent and purpose of the amendment made in 1996 has been clarified by the Finance Minister on the floor of the Parliament as under:- 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 adversely affect the growth of industry. Similar apprehensions have been raised in a large number of post-budget memoranda. I would like to allay these fears. The proposed amendment is only prospective inasmuch as the cumulative unobserved ex parte brought forward as on 1st April, 1997, can still be set off against taxable profits or income under any other head for the assessment year 1997-98 and seven subsequent assessment years. Therefore, the proposed change will h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. SCC 30: 1988 SCC (L S) 404: (1988) 6 ATC 783, this Court stated that it is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. If there is both repeal and introduction of another provision in placed thereof by a single exercise, the expression substituted is used. Such deletion has the effect to the repeal of the existing provision and also provides for introduction of new provisions. In our view there is thus no real distinction between repeal and amendment or substitution in such cases. If that aspect is borne in mind, we have to apply the usual principles of finding out the rights of the parties flowing from an amendment of substitution in such cases. If that aspect is borne in mind, we have to apply the usual principles of finding out the rights of the parties flowing from an amendment of a provision. (b) In Bhagat Ram Sharma v Union of India 1988 Supp. SCC 30, at page 40, the Supreme Court observed: It is a matter of legislative practice to provide while enacting an amending law that an existing provision shall be deleted and a new provision substituted. Such deletion has th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no circumstances have any application at least from the date when it ceased to exist. (d) In the State of Rajasthan v. Mangilal Pindwal [1996] 5 SCC 60, at 63. The Supreme Court held as under:- As pointed out by this Court, the process of a substitution of statutory provision consists of two steps, first the old rules made to cease to exist and, next the new rule is brought into existence in its place [See: Koteswar Vittal Kamath v. K. Rangappa Baliga Co. [1969] 1 SCC 255: [1969] 3 SCR 4]. In other words, the substitution of a provision result in repeal of the earlier provision and its replacement by the new provision. As regards repeal of statute the law is thus stated in Sutherland on Statutory Construction. The effect of the repeal of a statute where neither a saying clause nor a general clause nor a general statute existing to prescribe the governing rule of the effect of the repeal, is to destroy the effectiveness of the repealed act in futuro and to divest the right to proceed under the statute, which except as to proceedings past and closed, is considered as if it had never existed Similarly in Crawford's Interpretation of Laws it has been said: Effect of Repeal, Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous years and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be allowance for, that previous year and so on for the succeeding previous years . The provisions which were effected from 1997-98 is 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 owing to there being no profits or gains chargeable for that previous year owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to unabsorbed depreciation allowance), as the case may be- (iv) shall 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. (v) If the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other-head, if any assessable for that assessment year. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessment year 1996-97 shall be added to the amount of the allowance of 1997-98 and will be deemed to be the allowance for that year. The limitation of eight years shall start from the assessment year 1997-98. 6. From the above various provisions of law relating to unabsorbed depreciation, we find that law which was available up to 1996-97 has been reinstated from assessment year 2002-03 and in the intervening period law as mentioned above was in operation. When the law was amended with effect from assessment year 1997-98 in the intervening period, there was wide spread apprehension about the treatment of unabsorbed depreciation as on 1-4-1997 and limitation period of 8 years and to allay the fear, the then Finance Minister made a speech in the Parliament which were although already mentioned in the assessee submissions is repeated here at the cost of the repetition:- Clause 11 of the Bill seeks to amend se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue has to be understood under the scheme of the Income-tax Act which was available up to assessment year 1996-97 and provisions for 1997-98 and provisions for assessment year 2002-03. Our view are also fortified by the judgment of the Hon'ble Supreme Court in the case of K.P. Varghese v. CIT [1981] 131 ITR 597 wherein it has been observed by the Supreme Court that clarification made before the Parliament has to be taken as correct interpretation of law. Finance Minister's speech could be noticed upon for throwing light on the objects and purposes of provisions. Also reliance of the Assessing Officer on the Circular is also misplaced as on perusal of circular itself, we find that Circular does not deal with the controversy in this case. Circular only clarifies that unabsorbed depreciation shall be the current depreciation of assessment year 1997-98 and it does not deal with the issue of set off against any other head of income, which is the actual controversy in this case. Even otherwise when Assessing Officer apply the provisions applicable for assessment year 1997-98 to assessee's case in the relevant assessment year even after its substitution, it will be fair also t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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