TaxTMI 
TaxTMI 
2014 (1) TMI 1908
X X X X Extracts X X X X
X X X X Extracts X X X X
....- against short term capital gains of even amount. In support of the arguments, the assessee submits two paper books. One of them contains the following documents: (i) Declaration from authorized representative. (ii) Copy of return of income and computation of income for the assessment year 2007-08. (iii) Copy of annual report for the financial year 2006-07. (iv) Copy of the assessment order u/s 143(3) for the assessment year 2007-08. (v) Copy of show cause notice u/s 263 dated 9.3.2012 for the assessment year 2007-08. (vi) Copy of the order of the BIFR. The other paper book comprises of catena of case law as under: (i) General Motors India (P) Ltd vs DCIT [2013] 257 CTR(Guj) 123. (ii) Devesh Metcast Ltd vs JCIT [2011] 338 ITR 130 (Guj). (iii) A. Amboiram vs DCIT in I.T.A.No. 1952/Mds/2012 dated 5.8.2013. (iv) Confidence Petroleum India Ltd vs DCIT in I.T.A.No. 1937/Mum/2012 dated 24.7.2013. (v) DCIT vs Andhra Petrochemicals Ltd [2010] 123 ITD 89(Visakha). (vi) Reliance Jute & Industries Ltd vs CIT [1979] 120 ITR 921 (SC). (vii) Jai Ushin Ltd vs DCIT [2009] ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be seen from the case file that on 9.3.2012, the CIT issued section 263 notice to the assessee proposing to revise the assessment on the ground that the same was 'erroneous causing prejudice to the interest of the Revenue'. The reasons stated in the notice read as under: "2. So far as the adjustment of unabsorbed depreciation of A.Y 1996-97 against short term capital gains of Rs. 8,21,94,859 is concerned, the such unabsorbed depreciation gets merged with the value of unabsorbed depreciation as at 1/04/1997 and the same is allowed to be adjusted against business income and available for set off for the next eight years. Therefore, the adjustment of unabsorbed depreciation of A.Y 1996-97 against short term capital gains of Rs. 8,21,94,859/- is incorrect for the reason that the time limit of eight years has elapsed. Further such an unabsorbed depreciation of A.Y 1996-97 could not be set off against any head of income other than "Profits and gains of Business." In reply, the assessee quoted section 32(2) amended vide Finance Act, 1997, removing the deeming fiction of unabsorbed depreciation pertaining to preceding assessment years as that of current years depreciation and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee to set off the impugned unabsorbed depreciation against short term capital gains. Undisputedly, at that time, apart from the relevant provision in the Statute, there was no decision either of the 'tribunal' or that of any hon'ble high court or apex court. After finalization of 'regular' assessment on 23.12.2009, the Special Bench of the 'tribunal' in Times Guaranty Ltd.'s case (supra) trisected the application of the relevant provision i.e section 32(2) as under: "38. The legal position of current and brought forward unadjusted/ unabsorbed depreciation allowance in the three periods, is summarised as under: (A) In the first period (i.e upto the assessment year 1996-97) (i) Current depreciation, that is the amount of allowance for the year under section 32(1), can be set off against income under any head within the same year. (ii) Amount of such current depreciation which cannot be so set off within the same year as per (i) above shall be deemed as depreciation under section 32(1), that is depreciation for the current year in the following year(s) to be set off against income under any head, like current depreciation. (B) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Gujarat high court on 11.4.2011 took a contrary view in the case of Devesh Metcast Ltd (supra) and held that in such circumstances, unabsorbed depreciation could be allowed to be set off. Similar view has been reiterated in the case of General Motors (supra) on 23.8.2012 observing as under: "30. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to A.Y. 1997- 98 could be allowed to be carried forward and set off after a period of eight years or it would be governed by Section 32 as amended by Finance Act 2001? The reason given by the Assessing Officer under section 147 is that Section 32(2) of the Act was amended by Finance Act No.2 of 1996 w.e.f. A.Y. 1997- 98 and the unabsorbed depreciation for the A.Y. 1997-98 could be carried forward up to the maximum period of 8 years from the year in which it was first computed. According to the Assessing Officer, 8 years expired in the A. Y., 2005-06 and only till then, the assessee was eligible to claim unabsorbed depreciation of A.Y. 1997-98 for being carried forward and set off against the income for the A.Y. 2005-06. But the assessee was not entitled for unabsorbed depr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(a) It 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; (b) If the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed: Provided that the time limit of eight assessment years specified in sub-clause(b) shall not apply in case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Company (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous eyar in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation - For the purposes of this clause, "net worth" shall have the meaning assigned to it in clause (ga) of sub-section(1) of section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee's business or profession in another country. 30.4 The Act has allowed depreciation allowance on all imported motor cars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." 37. The CBDT 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 dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A. Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by 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 A.Y. 1997-98 only for eight subsequent assessment years even after the am....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03)will be dealt with in accordance with the provisions of section 32(2) as amended by Finance, Act, 2001. And once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.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 Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever." In view of the decision of the hon'ble Gujarat high court, the decision of the Special Bench of the 'tribunal' no more holds a good law. Confronted with this, the Revenue submits that since the case law of hon'ble high court was not there when the Assessing Officer had framed the assessment, the Special Bench decision stood violated. In our view, the same is not liable to be accepted. We make it clear that we are dealing with a case ....