Commissioner Of Income Taxtamil Nadu-Iii, Madras v. M/S.pioneer Asia Packing (P) Limited109

In the High Court of Judicature at Madras Dated : 21.11.2007 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mrs.Justice CHITRA VENKATARAMAN Tax Case (Appeal) No.1423 of 2007 Commissioner of Income TaxTamil Nadu-III, Madras. .. Appellant Vs. M/s.Pioneer Asia Packing (P) Limited109/2, G.N.T.Road, KaranodaiChennai – 600 067... Respondent TAX CASE (APPEAL) under Section 260A of the Income Tax Actagainst the order of the Income Tax Appellate Tribunal Madras 'B'Bench dated 7.3.2007 made in I.T.A.No.896/Mds/2003 for theassessment year 2000-01 against the order of the Commissioner ofIncome Tax (A) V Chennai-34 for the Assessment year 2000-2001 inITA.No.181/2002-2003 dated 24.2.2003 against the assessment order ofthe Assistant Commissioner of Income Tax Company Circle V (2)Chennai in PAN.GIR.NO.52356 P for the assessment year 2000-2001. For Appellant : Mrs.Pushya Sitaraman Sr. Standing Counsel for Revenue JUDGMENT OF THE COURT WAS DELIVERED BY K.RAVIRAJA PANDIAN, J The appeal is filed against the order of the Income TaxAppellate Tribunal Madras 'B' Bench dated 7.3.2007 made inI.T.A.No.896/Mds/2003 for the assessment year 2000-01. 2. The brief facts of the case as culled out from the statementof facts stated in the memorandum of appeal are as follows:The assessee company is engaged in the business of packing andprinting. For assessment year 2000-01, the assessee filed itsreturn of income on 30.11.2000 declaring nil income. A notice under https://hcservices.ecourts.gov.in/hcservices/ Section 148 of the Income-tax Act was issued on 13.9.2002. Thereturn filed on 30.11.2000 was considered as the return filed inresponse to notice under section 148 of the Act. In the said returnthe assessee claimed set off of capital gains amounting to Rs.10.57lakhs against the brought forward unabsorbed depreciation. Theassessee's explanation that prior to 1996 unabsorbed depreciationcould be set off against any other head of income and could becarried forward individually. But as per the amendment underFinance Act, 1996 w.e.f. 01.04.1997 the cumulated unabsorbeddepreciation brought forward as on 01.04.1997 could be set offagainst the taxable business profit or income under any other headfor the assessment year 1997-98 and seven subsequent years wasrejected and the assessing officer brought the capital gains ofRs.10,51,894/- and assessed to tax and completed the assessment.Against that order, the assessee preferred an appeal before theCommissioner of Income-tax (Appeals) and the Commissioner of Income-tax (Appeals) upheld the order of the assessing officer anddismissed the appeal filed by the assessee on the ground that theunambiguous amended provision did not support the case of theassessee. Against that order, the assessee preferred an appealbefore the Income-tax Appellate Tribunal. The Income-tax AppellateTribunal accepted the view of the assessee and remitted the case tothe assessing officer for verification as to how much depreciationwas available upto 1.4.1997, that could be allowed against theincome of the assessee. The correctness of the said order iscanvassed by the revenue by filing the present appeal byformulating the following question of law. "Whether on the facts and in the circumstances of thecase the Income-tax Appellate tribunal was right in law inremitting back the matter to the file of the assessingofficer for verification, even though the law laid down byclear and unambiguous words in section 32(2), isapplicable to the assessment year 2000-01?" 3. We heard the argument of the learned counsel for the revenueand perused the materials on record. 3. We heard the argument of the learned counsel for the revenueand perused the materials on record. 4. We are not able to see any illegality or irregularity in theorder of the Tribunal, as contended by the learned Senior StandingCounsel for the Revenue. As per the amended provisions of section 32(2) of the Act, with effect from 01.04.1997, if the income frombusiness for the assessment year is insufficient to absorb thedepreciation allowance of that assessment year, the amendedprovision permits absorption of depreciation allowance of abusiness against profits and gains of any other business of the sameassessment year. When the depreciation allowance of a business ofthe assessment year is not absorbed by any other business of thesame assessment year, then the remaining unabsorbed depreciationallowance could be set off against the income under any other head, that is assessable for the same assessment year. In the event ofdepreciation allowance of the year is unable to be absorbed by anyother business income or from income under any other head in thesame assessment year, the remaining unabsorbed depreciationallowance shall be carried forward to the following year and (a)unabsorbed allowance shall be set off against the profits and gainsof any business carried by a person. (b) If the unabsorbeddepreciation allowance cannot be wholly set off so, it shall beallowed to be carried forward for the following eight assessmentyears immediately succeeding the assessment year in which it wasfirst computed. The proviso provides that the business to whichdepreciation allowance is related to must be carried on in thesucceeding year so as to allow such set off. Thus, by theamendment, the deeming fiction of treating the earlier years'unabsorbed depreciation as current year depreciation was removed.The period available for absorbing the unabsorbed depreciationagainst the profit of the succeeding years was limited to eightyears. The clarification of the Finance Minister in the Parliamentis also to the effect that inasmuch as the cumulated unabsorbeddepreciation brought forward as on 01.04.1997 could still be set offagainst the taxable business profit or income under any other headfor the assessment year 1997-98 and seven subsequent years vide 222ITR (stat) 36. Circular of the Central Board of Direct Taxes No.762dated 18.02.1998 (230 ITR (stat) 12) also clarifies the issue to thefollowing effect : “Sub-section (2) of section 32, as it existed uptoassessment year 1996-97, provided that the unabsorbeddepreciation of a year shall be added to the amount of theallowance for depreciation of the following previous yearand deemed to be part of that allowance. Therefore, theunabsorbed depreciation allowance, if any, of theassessment year 1996-97 shall be added to the amount of theallowance for depreciation of assessment year 1997-98 anddeemed to be part of the allowance for this year. In otherwords, the unabsorbed depreciation allowance of assessmentyear 1996-97 shall be added to the allowance of 1997-98 andwill be deemed to be the allowance of that year. Thelimitation of eight years shall start from the assessmentyear 1997-98.” 5. In view of the above position of law, we are of the viewthat the Tribunal has rightly come to the conclusion that theassessee is entitled to the unabsorbed depreciation brought forwardas on 01.04.1997 and could be set off against the business profitsand in order to give effect to that finding, the case was remittedto the file of the assessing officer for verification as to how muchdepreciation was available upto 01.04.1997 that could be included inthe income of the assessee. 6. For the fore-going reasons, the appeal is dismissed as noquestion of law, much less a substantial question of law isinvolved. 5. In view of the above position of law, we are of the viewthat the Tribunal has rightly come to the conclusion that theassessee is entitled to the unabsorbed depreciation brought forwardas on 01.04.1997 and could be set off against the business profitsand in order to give effect to that finding, the case was remittedto the file of the assessing officer for verification as to how muchdepreciation was available upto 01.04.1997 that could be included inthe income of the assessee. 6. For the fore-going reasons, the appeal is dismissed as noquestion of law, much less a substantial question of law isinvolved. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.uskTo1. The Asst.Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, III Floor, Besant Nagar, Chennai2. The Commissioner of Income-tax (Appeals) – V Chennai3. The Asst.Commissioner of Income-tax Company Circle V(2), Chennai- 34.4. The Commissioner of Income Tax,Tamilnadu IIIChennai.1 cc to M/s. Pushya Sitaraman, SC for IT Department SR.69530 Tax Case (Appeal) No.1423 of 2007RS (CO)kk 7/12