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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SH. N. K. SAINI & SMT. BEENA A. PILLAI
ORDER
PER BEENA A. PILLAI, JM:
The present appeal has been filed by revenue against order dated 18.11.2013 passed by Ld. CIT (A) 11 on following grounds of appeal:
1. "On the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.33,79 407/- made by the AO on account of Set off and carry forward depreciation." 2. "The appellant craves to amend modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal."
Brief facts as submitted by assessee before Ld. CIT(A) in the statement of fact are as under:
For the year under consideration the assessee had filed its return of income on 30.11.2006, declaring total taxable income of rupees ‘Nil’ after adjusting the brought forward loss of Rs.81,811,190/-. The accumulated brought forward loss and unabsorbed depreciation available for set off as on 01.04.2005 is as under:
Assessment year Business Loss (Rs) Depreciation loss (Rs) Total {Rs} 1997-98 19,062,677 -- 19,062,677 675,505 3.7,122,517 1998-99 36,447,012 36,974,432 1999-00 29,293,124 66,267,556 24,415,545 54,272,744 2000-01 29,857,199 5,239,435 23,492,424 2001-02 18,252,989 Total 65,065,263 135,152,655 200,217,918
The case of the assessee was selected for scrutiny and assessing officer passed assessment order on 23.12.2008. Aggrieved by the order of Ld. AO, assessee preferred appeal before Ld. CIT(A), wherein partial relief was allowed. Thereafter, assessee as well as the revenue came into appeal before this Tribunal. This Tribunal granted relief to assessee vide order dated 16.12.2011 in ITA No. 434/Del/2011. Consequent to the order giving effect to Hon’ble Tribunal’s order, the income of assessee was computed at ‘Nil’ and therefore, income declared by assessee under section 115JB was considered to be taxable income in the hands of assessee for the year under consideration.
Thereafter, Ld. AO issued notice dated 14.12.2011 under section 154 of the Act. Ld. AO observed that while computing the taxable income under normal provisions of the Act, assessee had adjusted unobserved depreciation of Rs. 19,062,677/- pertaining to assessment year 1997-08 which could have been carried forwarded and adjusted up to 8 years only, and this benefit ended in the case of assessee in assessment year 2005-06. As assessee had adjusted the unobserved depreciation in the assessment year 2006-07 (year under consideration) which is 9th assessment year, from original year of loss and the same was added back to income of assessee.
Aggrieved by order of Ld. AO passed under section 154 of the Act, assessee preferred appeal before Ld. CIT(A), who allowed assessee is claim. Ld. CIT(A) relied upon decision of Hon’ble Gujarat High Court in the case of General Motors India Pvt. Ltd. vs DCIT reported in 354 ITR 224 and the circular issued by CBDT being Circular No. 14 of 2001, dated 09.11.2001.
Aggrieved by the order of Ld. CIT(A), the revenue is in appeal before us now.
Ld. DR has placed reliance upon the order of assessing officer.
Ld. AR submitted law that in respect of unobserved depreciation was amended by Finance Act 2001 w.e.f. 01.04.2002, and the amendment applies to assessment year under consideration. Ld. AR further submitted that the restriction of 8 years for carry forward and set off of unobserved depreciation is no more applicable and it would be allowed to be carry forward till the time it is set off against the profits and gains of subsequent assessment years.
We have perused the submissions advanced by both the sides and the light of the records placed before us.
Before us Ld. AR has placed his reliance upon the decision of Hon’ble Gujarat High Court in the case of General Motors India Pvt. Ltd. vs DCIT (supra). It is also been pointed out that the decision of General Motors India Pvt. Ltd., (supra) has been followed by various High Court’s and coordinate benches of this Tribunal. A reference of the same has been placed in the paper book filed before us. The judicial precedent on the issue by Hon’ble Gujarat High Court, is held as under:
“The Central Board of Direct Taxes 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
(AY 2006-07) dispenses with the restriction of eight years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from the assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (the assessment year 2002- 03), will be dealt with in .accordance with the pro- visions of section 32(2) as amended by the 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 the assessment year 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by the Finance Act, 2001, it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence, keeping in view the purpose of the amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While statutes, construing the taxing rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of the assessee or the Revenue. But if the Legislature fails to express dearly 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. Therefore, it can be said that, current depreciation is deductible in the 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 comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for' such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (the assessment year 2002-03), will be dealt with in accordance-' with the provisions of section 32(2) as amended by the Finance Act, 2001. And once Circular No. 14 of 2001 clarified that the restriction of eight years . for carry forward and set off of unabsorbed depreciation had been dispensed with,. the unabsorbed depreciation from the assessment year 1997-98 up to the assessment year 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 the Finance Act, 2001, and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever.”
Respectfully following the same, we do not find any infirmity in the findings of Ld. CIT(A). Accordingly, the grounds raised by the revenue stands dismissed.
In the result appeal filed by the revenue stands dismissed.
Order pronounced in the open court on 17th February, 2017.