TaxTMI 
TaxTMI 
2014 (1) TMI 802
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.... under consideration." 2. At the outset it was contended by the ld. AR that the issue is squarely covered by the decision of the Co-ordinate Bench in the case of Milton's Pvt. Limited vs. CIT in ITA No.2019/Mum/2012, order dated 22.05.2013. The ld. AR has also placed reliance on the decision of Hon'ble Gujarat High Court in the case of General Motors India P. Ltd. vs. Dy. CIT [2013] 354 ITR 244 (Guj), wherein similar issue was decided in favour of the assessee and it was held that the unabsorbed depreciation or part thereof not set off till the A.Y. 2002-03 is eligible to be carry forward and set off till the final set off. Further, reliance placed on the following decisions: 1. Hindustan Unilever Ltd. vs. Addl. CIT - [2013] 22 ITR (Trib) 737 (Guj); 2. Dy. CIT vs. M/s. Bisleri Sales Ltd. -151 TTJ 285 (Mum-Trib.); 3. Asst. CIT vs. ECIL Ltd. - [2013] 56 SOT 237 (Hyderabad); 4. Dy. CIT vs. Times Guaranty Ltd. - [2010] 40 SOT 14 (Mum.) (SB). 3. On the other hand, the ld. DR relied on the orders of the authorities below. 4. We have considered the rival contentions carefully and gone through the orders of the authorities below and found from the record that the lower authorities ....
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....d to as 'unabsorbed depreciation allowance'. Such unabsorbed depreciation allowance is to be set off firstly against the income under the head 'Profits and gains of business or profession' from any other business or profession carried on by the assessee for that assessment year. If such business profit is also insufficient to absorb the unabsorbed depreciation allowance, then the remaining amount shall be set off against income under other heads, as mentioned in section 14 assessable for that assessment year. This exercise of setting off the unabsorbed depreciation allowance against any head of income is restricted to the year in which the claim for depreciation has arisen under section 32(1). If, however, income of the assessee under all heads is insufficient to absorb the unabsorbed depreciation allowance, then such amount is to be carried forward to the following assessment year to be set off against the income arising under the head 'Profits and gains of business or profession'. Not only that, the business or profession for which the allowance was computed should continue to be carried on by the assessee during the previous year relevant to the assessment year in which the set ....
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....ub-section (2) of section 72, which is relevant for present purpose, states that where any allowance under section 32(2) or section 35(4) is to be carried forward, the effect shall first be given to the brought forward loss. In other words, if there is a brought forward business loss as well as brought forward unadjusted depreciation of the earlier years, then brought forward business loss shall have preference over the unadjusted depreciation for the purposes of set-off against the business income of the succeeding year. It is so for the reason that a time-limit has been enshrined for carry forward of brought forward business loss up to a period not more than eight assessment years. As against that the amount of brought forward unadjusted depreciation under section 32(2) can go on for indefinite period for set off against the business income in the following years. Section 73 deals with losses in speculation business and provides that the unabsorbed speculation loss shall be carried forward to the succeeding years for not more than four assessment years immediately succeeding the assessment year for which the loss was first computed. The prescription of sub- section (3) of section....
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....ad 'Profits and gains of business or profession', yet for the purposes of clause (i) of substituted section 32(2), it refers to income under the head 'Profits and gains of business or profession'. Clause (ii ) of sub-section (2) makes the position clear by providing that if the unabsorbed depreciation allowance cannot be wholly set off under clause (i ), then the amount not so set off shall be set off from the 'income under any other head', if any, assessable for that assessment year. If the interpretation given in Virmani Industries (P.) Ltd.'s case (supra) had been intended to be retained, then there was no need to have two alike looking expressions in the language of sub-section (2), viz, firstly, 'profits or gains' in the main part of sub-section (2) and then, 'profits and gains' in clause (i ). The doubt, if any, gets further dispelled when one turns to clause (iii) of sub- section (2) which provides that the unabsorbed depreciation allowance not so set off under clauses (i) and (ii ) shall be carried forward to the following assessment year and then set off against the 'profits and gains' of any business or profession carried on by the assessee in the following assessment yea....
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.... the fact that the unadjusted brought forward depreciation arose in the assessment year 1984-85 or 1994-95. [Para 19] The above provision has been substituted by the Finance Act, 2001 with effect from 1-4-2002. In fact, it is reinforcement of the provision as existing in the first period. Thus, the law as existing in the second period was completely taken back and as a result of that the provision as prevailing in the first period was restored. From the language of the sub-section (2) of section 32 it is manifest that it is a substantive provision and not a procedural one. It is settled legal position that the amendment to substantive provision is normally prospective unless expressly stated otherwise or it appears so by necessary implication. It is nowhere coming up either from the notes on clauses or memorandum explaining the provision of the Finance Bill 2001, that substitution of sub-section (2) of section 32 is retrospective. It is, therefore, patent that the substantive provision contained in section 32(2) as substituted by the Finance Act, 2001 with effect from 1-4-2002, is prospectively applicable to the assessment year 2002-03 onwards. [Para 21] It is obvious that sectio....
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.... under section 32(2) shall apply. The mention of the words 'cannot be' and 'has not been' indicates that it speaks of the depreciation allowance under section 32(1) for the current year. The point becomes more lucid when one mulls over the language of section 71B, dealing with the carry forward and set off of losses from house property within the same year. It provides that where for any assessment year the net result of computation under the head 'Income from house property' is a loss to the assessee and such loss 'cannot be' or is not wholly set off against income from any other head of income in accordance with the provisions of section 71, so much of the loss as 'has not been so set off' shall be carried forward to the following assessment years. Section 72(1) deals with carry forward and set off of business losses (other than speculation business). It provides that where for any assessment year the net result of the computation under the head 'Profits and gains of business or profession' is a loss to the assessee, not being loss sustained in speculation business and such loss 'cannot be' or is not wholly set off against the income under any head of income in accordance with th....
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....ff and carried forward for set off under sections 70, 71, 72, 73, 74 and 74A. On a conjoint reading of section 75, before and after substitution, it is discernible that prior to 1-4-1993, when the reference was made to the unabsorbed loss of a firm for the current year getting apportioned between the partners of firm, the words used were 'cannot be' set off. However, with effect from 1-4-1993, due to change in the scheme of taxation of firms, unabsorbed losses of the registered firms for the earlier years, which were apportioned between the partners but could not be set off against their separate income, have come back to the coffers of the firm. In order to make reference to such losses of the earlier years, the words used have been 'could not be' set off. Thus, it is manifest that the words 'cannot be' as used in section 32(2) in the third period, refer only to the current year's depreciation, which is parallel to section 75 before substitution. The brought forward unabsorbed depreciation of the earlier years cannot be included within the scope of section 32(2). If the intention of the Legislature had been to allow such brought forward unabsorbed depreciation respecting the secon....