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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 ..... on observing that assessee has set off carry forward unabsorbed depreciation in this year against the income under head "Other than business income" and interpreting provisions relating to carry forward and set off of unabsorbed depreciation as enshrined in income-tax which were amended from time to time, rejected the such claim of the assessee of unabsorbed depreciation against other head. Assessing Officer's view was that law relating to carry forward and set off of unabsorbed depreciation up to assessment year 1996-97 was such that unabsorbed depreciation shall be carry forward to the next year and can be adjusted against any other income and if there remain again unabsorbed depreciation in the next year, the same can be carry forward and adjusted against any other income in the subsequent year and so on. However, this law, which was up to 1996-97, was substituted by another law with effect from assessment year 1997-98 which provided that set off of unabsorbed 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (129 Taxman 158), relied upon by the Assessing Officer, in fact supports appellant's contention rather than Assessing Officer's contention. In that case, assessee argued as under:- "As regards the set off of such depreciation against income from other sources, it was contended that since unabsorbed depreciation loses its character as unabsorbed depreciation of an earlier year and is to be treated as depreciation allowance for the assessment year in which its merges, namely, the assessment year 1997-98 in the instant case, any amount remaining unabsorbed therefrom could, after being set off from against business income for the assessment year 1997-98, if any, be set off against the income under other heads, namely 'Income from house property' and 'Income from other sources'. The arguments of the assessee was accepted by the Hon'ble Tribunal." (iii) The provisions of section 32(2) as amended by Finance (No. 2) Act, 1996, have been duly explained by Circular 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 bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act. In the process of; this amendment, the provisions of section 32(2) got obliterated. This amounted to "repeal" of the earlier provision of section 32(2), since there is no real distinction between repeal and amendment. As held by the Apex Court in various cases, the effect of repeal is to be completely wipe out the impact of the provision after the repeal. Unless there is a saving provision to the effect, the condition prescribed in the repealed law would have no effect in the subsequent period. In this connection, reference may be made to the decisions of the Apex Court in the following cases: (a) Ramkanall Colliery of BCCL v. Workmen [2001] 4 SCC 236, at page 241, where the Court has explained the effect of substitution of a legal provision as under:- "What we are concerned within the present case is the effect of the expression 'substituted' used in the context of deletion of sub-sections of section 14, as was originally enacted. In Bhagat Ram Sharma v Union of India 3 1998 Supp. 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a whole section or Act. The arbitrary distinction has been followed by the Courts, and they have developed separate rules of construction for each. However, they have recognised that frequently an Act purporting to be an amendment has the same qualitative effect as a repeal - the abrogation of an existing statutory provision - and have therefore applied the term 'implied repeal' and the rules of construction applicable to repeals to such amendments." Amendment is, in fact a wider term and it includes abrogation or deletion of as provision in an existing statute. If the amendment, of an existing law is small, the Act professes to amend; if it is extensive, it repeals a law and re-enacts it. An amendment of substantive law is not retrospective unless expressly laid down or by necessary implication inferred. (c) In Union of India v. C. Rama Swamy [1997] 4 SCC 647, the Supreme Court held that the effect of a rule being substituted by a new rule clearly is that the old rule, which stands substituted, can under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant assessment year, entitled the assessee for adjustment of unabsorbed depreciation against any other head of income. 5. After hearing the rival contentions, going through the orders of the authorities below, we find that issue to be decided is whether the law applicable to carry forward and set off of unabsorbed depreciation in the assessment years 1997-98 to 2001-02 would continue to govern such carry forward unabsorbed depreciation even after substituting of the provision in the assessment year 2002-03. It will be useful to reproduce the relevant provision, which were reinstated with effect from 2002-03. "Where, in the assessment of the assessee, full effect cannot be given to any allowances 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, the subject to the provision of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance on 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 years a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance for that previous year, and so on for the succeeding previous years. The net effect is that unabsorbed depreciation allowance of one year is added to the depreciation allowance of the next year. Thus, the unabsorbed depreciation allowance, in a case where profits are insufficient in the subsequent years, is carried forward indefinitely. On the other hand, the business losses are allowed to be carried forward for period of eight years only. By an amendment the business loss and the unabsorbed depreciation have been brought at par for the purposes of set off and carry forward notwithstanding the fact that sub-section (2) of section 72 maintains a distinction between them regarding the priorities." "In order to help the revival of sick companies, an amendment has been made which provides that the period of rehabilitation of such a company as, ordered by the BIFR, shall be executed in reckoning the period of eight years now prescribed for the purpose of carry forward and set off of the unabsorbed depreciation. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in a particular year can be carried forward to the next year and can be set off only against the business income but these provisions got substituted by new provisions with effect from assessment year 2002-03 and in the new reinstated provisions there is no express mention about treatment of the earlier years unabsorbed depreciation against any other head of income. Assessing Officer has treated the unabsorbed depreciation of 1996-97 as a current depreciation of 1997-98 and depriving the assessee benefit of set off against any other head of income where the earlier provisions have been again reinstated from assessment year 2002-03. 7. In our view assessee cannot be put to disadvantage of carry forward and set off of unabsorbed depreciation against other income which was available to him up to assessment year 1996-97. Moreover from the speech of the Finance Minister it had become amply clear that the intention of the Legislature was that depreciation prior to assessment year 1996-97 can still be set off against any other income for the eight assessment years. Therefore, issue has to be understood under the scheme of the Income-tax Act which was available up to assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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