ARCH FINE CHEMICALS P.LTD, HYDERABAD v. ACIT CEN CIR 32, MUMBAI

ITA 2414/MUM/2012 | 2005-2006
Pronouncement Date: 09-10-2013 | Result: Allowed

Appeal Details

RSA Number 241419914 RSA 2012
Assessee PAN AAACW1817C
Bench Mumbai
Appeal Number ITA 2414/MUM/2012
Duration Of Justice 1 year(s) 5 month(s) 28 day(s)
Appellant ARCH FINE CHEMICALS P.LTD, HYDERABAD
Respondent ACIT CEN CIR 32, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 09-10-2013
Date Of Final Hearing 26-09-2013
Next Hearing Date 26-09-2013
Assessment Year 2005-2006
Appeal Filed On 11-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI BEFORE S/SHRI B.R.MITTAL (JM) AND SANJAY ARORA (AM) . . & ./I.T.A. NO.2414 AND 2415/MUM/2012 ( / ASSESSMENT YEARS:2005-06 & 2006-07) M/S ARCH FINE CHEMICALS PVT.LTD. 3/1 3/2 4 TH FLOOR SAI SRI NILAYAM STREET NO.4 HABSRIGNDA HYDERABAD-73 / VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-32 MUMBAI. ./ ./PAN/GIR NO. : AAACW1817C ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : SHRI SATISH CHANDAK /RESPONDENT BY : SHRI RAJESH RANJAN PRASAD ' / DATE OF HEARING : 26.9.2013 ' /DATE OF PRONOUNCEMENT : 09.10.2013 / O R D E R PER B.R.MITTAL JM: THE ASSESSEE HAS FILED THESE TWO APPEALS AGAINST CO MMON ORDER OF LD. CIT(A)-37 DATED 13.2.2012 ON COMMON GROUNDS FOR ASSESSMENT YE ARS 2005-06 AND 2006-07. 2. GROUNDS TAKEN BY ASSESSEE IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE AS TO WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN CONFIRMING ACTION OF ASSESSING OFFICER OF NOT ALLO WING THE SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF EARLIER YEAR. 3. SINCE FACTS AND THE ISSUE INVOLVED IN BOTH THE A SSESSMENT YEARS UNDER CONSIDERATION ARE IDENTICAL AND APPEALS ARE ALSO A RISING OUT OF COMMON ORDER PASSED BY LD. CIT(A) WE HAVE HEARD THESE APPEALS TOGETHER A ND DISPOSE OFF THEM BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 4. RELEVANT FACTS GIVING RISE TO THESE APPEALS AR E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ORGANO PHOSPHOROU S CHEMICALS AND OFFERED INCOME UNDER THE HEAD BUSINESS INCOME. FOR THE ASSESSME NT YEAR 2005-06 ASSESSEE FILED I.T.A. NO.2414 AND 2415/MUM/2012 2 ORIGINAL RETURN OF INCOME ON 24.10.2005 DECLARING T OTAL INCOME AT NIL COMPUTED UNDER NORMAL PROVISIONS OF INCOME TAX ACT 1961 (T HE ACT) AND BOOK PROFIT AT RS.37 40 800/- COMPUTED UNDER SECTION 115JB OF THE ACT. HOWEVER FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSEE FILED ORIGINAL RETURN O F INCOME ON 24.11.2006 DECLARING TOTAL INCOME AT NIL COMPUTED UNDER NORMAL PROVISIONS O F INCOME TAX ACT 1961 (THE ACT) AND BOOK PROFIT AT RS.56 30 430/- COMPUTED UNDER SE CTION 115JB OF THE ACT. 5. THE ASSESSEE CLAIMED UNABSORBED DEPRECIATION LOS S OF EARLIER YEARS. AS PER ORDER OF ASSESSMENT YEAR 2004-05 THERE WAS A CARRI ED FORWARD DEPRECIATION LOSS PERTAINING TO ASSESSMENT YEAR 1997-98 AMOUNTING T O RS.2 18 62 113/-. DURING THE ASSESSMENT YEAR 2005-06 THE ASSESSEE CLAIMED SET OFF OF SUCH LOSS AMOUNTING TO RS.44 85 842/-. THE AO HAS STATED THAT AS PER LEG AL POSITION REMAINING LOSS OF RS.1 73 76 271/- PERTAINING TO ASSESSMENT YEAR 19 97-98 WAS NOT ELIGIBLE FOR CARRY FORWARD AND TO CLAIM SET OFF AGAINST BUSINESS INCO ME IN SUBSEQUENT YEAR. 6. SIMILARLY FOR THE ASSESSMENT YEAR 2006-07 THE AO STATED THAT UNABSORBED DEPRECIATION RELATING TO THE ASSESSMENT YEAR 1998- 99 AMOUNTING TO RS.52 48 058/- IS NOT TO BE CARRIED FORWARD FOR SET OFF IN THE 8 SU CCEEDING ASSESSMENT YEARS. 7. TO APPRECIATE THE POSITION OF ASSESSMENT YEAR-W ISE UNABSORBED DEPRECIATION WE STATE AS UNDER : ASSESSMENT YEAR UNABSORBED DEPRECIATION 1997 - 98 1 73 73 271 1998 - 99 85 78 211 199 9 - 2000 29 93 980 2000 - 01 43 57 500 2001 - 02 53 09 730 THE ASSESSING OFFICER WHILE NOT ALLOWING CARRIE D FORWARD FOR SET OFF THE LOSSES IN THE SUCCEEDING ASSESSMENT YEARS STATED THE RELEVANT PRO VISIONS OF SECTION 32(2) OF THE ACT BY STATING THE SAID PROVISIONS OF SECTION 32(2) OF THE ACT CAN BE DEALT INTO THREE PERIODS IN RESPECT OF VARIOUS AMENDMENTS MADE IN TH IS SECTION. I.E. (A) FIRST PERIOD UP TO AY 1996-97; (B) SECOND PERIOD FROM AY 1997-98 TO AY 2001-02; AND (C ) THIRD PERIOD FROM AY 2002-03 ONWARDS. AO STATED THE PR OVISIONS OF SECTION 32(2) AS SUBSTITUTED BY FINANCE (NO.2) ACT 1996 WITH EFFEC T FROM 1.4.1997 AND STATED THAT ON PERUSAL OF THE SAID PROVISION WHERE THE AMOUNT OF DEPRECIATION ALLOWANCE U/S 32(1) FOR THE CURRENT YEAR OF A BUSINESS CANNOT BE ABSORBED F ULLY OR PARTLY DUE TO INADEQUACY OF PROFIT OR GAINS FROM SUCH BUSINESS THEN SUCH ALLO WANCE OR PART OF IT WHICH REMAINED UNABSORBED IS TO BE REFERRED TO AS UNABSORBED DEP RECIATION ALLOWANCE. SUCH I.T.A. NO.2414 AND 2415/MUM/2012 3 UNABSORBED DEPRECIATION ALLOWANCE IS TO BE SET OFF FIRSTLY AGAINST THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION FROM ANY OTHER BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE IN THAT ASSESSMENT YEAR . IF SUCH BUSINESS PROFIT IS ALSO INSUFFICIENT TO ABSORB UNABSORBED DEPRECIATION ALLO WANCE THEN REMAINING AMOUNT SHALL BE SET OFF AGAINST THE INCOME UNDER OTHER HEADS AS MENTIONED IN SECTION 14 OF THE ACT ASSESSABLE FOR THAT ASSESSMENT YEAR. THIS EXERCIS E 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 U/S 32 (1) OF THE ACT. IF HOWEVER INCOME OF THE ASSESSEE UNDER ALL HEADS IS INSUFFICIENT TO ABSORB THE UNABSORBED DEPRECIATION ALLOWANCE THEN SUCH AMOUNT IT TO BE CARRIED FORWAR D TO THE FOLLOWING ASSESSMENT YEAR TO BE SET OFF AGAINST THE INCOME ARISING UNDER TH E HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. NOT ONLY THAT THE BUSINESS OR PR OFESSION FOR WHICH THE ALLOWANCE WAS COMPUTED SHOULD CONTINUE TO BE CARRIED ON BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR IN WHICH THE SET OFF I S CLAIMED. THE EXERCISE OF CARRYING FORWARD SUCH UNABSORBED DEPRECIATION ALLOWANCE IS TO BE CONTINUED UPTO 8 ASSESSMENT YEARS IMMEDIATELY SUCCEEDING ASSESSMENT YEAR FOR WHICH THE AFORESAID DEPRECIATION ALLOWANCE WAS FIRST COMPUTED. THUS T HE AMOUNT OF UNABSORBED DEPRECIATION ALLOWANCE WHICH COULD NOT BE SET OFF AGAINST THE INCOME UNDER ANY HEAD IN THE YEAR IN WHICH THE ALLOWANCE WAS FIRST COMPUTED SHALL BE ELIGIBLE TO BE CARRIED FORWARD FOR SET OFF ONLY AGAINST INCOME UNDER THE H EAD PROFIT AND GAINS OF BUSINESS OR PROFESSION TO THE FOLLOWING ASSESSMENT YEARS(S) N OT MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHIC H IT WAS FIRST COMPUTED. 8. AO HAS STATED THAT THE POSITION AS STATED IN SEC TION 32(2) OF THE ACT THAT FOR THE SECOND PERIOD WAS DILUTED AS THE PROVISION OF SECTI ON 32 (2) AS AMENDED BY FINANCE (NO.2) ACT 1996 WITH EFFECT FROM 1.4.1997 HAD BEEN SUBSTITUTED BY FINANCE (NO.1) ACT 2001 WITH EFFECT FROM 1.4.2002. THE EFFECT OF THE S AID AMENDMENT BY THE FINANCE (NO.1) ACT 2001 IS IN FACT REINFORCEMENT OF THE PROVIS ION AS EXISTING IN THE FIRST PERIOD I.E. UP TO ASSESSMENT YEAR 1996-97. THUS LAW AS EXISTING I N THE SECOND PERIOD WAS COMPLETELY TAKEN BACK AND AS A RESULT OF THAT THE PROVISION AS PREVAILING IN THE FIRST PERIOD WAS RESTORED. AO HAS STATED THAT THE AMENDMENT SO MADE BY THE FINANCE (NO.1) ACT 2001 IS SUBSTITUTING PROVISION WITH EFFECT FROM 1.4.2002 AND IS APPLICABLE PROSPECTIVELY TO ASSESSMENT YEAR 2002-03 AND ONWARDS. AO AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE AND PLACING RELIANCE ON THE DECISION OF HO NBLE APEX COURT IN THE CASE OF CIT V/S SCINDIA STEAM NAVIGATION CO.LTD.(1961) 42 ITR 5 89(SC) AND THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF OM SINDHOORI CAPITAL INVESTMENTS LTD V/S I.T.A. NO.2414 AND 2415/MUM/2012 4 JCIT (2005) 274 ITR 427 (MAD) STATED THAT UNLESS T HE AMENDMENT IS EXPRESSLY OR BY NECESSARY IMPLICATION RETROSPECTIVE IT WOULD BE PR EVAILING FROM THE FIRST DAY OF THE RELEVANT ASSESSMENT YEAR. AO HAS SUMMARIZED THE L EGAL POSITION OF CURRENT AND BROUGHT FORWARD UNADJUSTED/UNABSORBED DEPRECIATION ALLOWANCE IN THE THREE PERIODS AS UNDER : A. IN THE FIRST PERIOD (I.E. UP TO AY 1996-97) (I) CURRENT DEPRECIATION THAT IS THE AMOUNT OF ALLOWA NCE FOR THE YEAR U/ S 32(1) CAN BE SET OFF AGAINST INCOM E 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 U/S 32(1) THAT IS DEPRECIATION FOR THE CURRENT YEAR IN THE FOLLOWING YEARS TO BE SET OFF AGAINST INCOME UN DER ANY HEAD LIKE CURRENT DEPRECIATION. B. IN THE SECOND PERIOD (I.E. AY 1997-98 T O 2001-02) (I) BROUGHT FORWARD UNADJUSTED DEPRECIATION ALLOWANCE FOR AND UPTO AY 1996-97 (HEREINAFTER CALLED THE FIRST UNADJUS TED DEPRECIATION ALLOWANCE) WHICH COULD NOT SET OFF UP TO AY 1996 -97 SHALL BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT AYS STARTING FROM AY 1997-98. (II) CURRENT DEPRECIATION FOR THE YEAR U/S 32(1) (FOR EA CH YEAR SEPARATELY STARTING FROM A.Y.1997-98 UPTO 2001-02) CAN BE SET OFF FIRSTLY AGAINST BUSINESS INCOME AND THEN AGAINST INCOME UND ER ANY OTHER HEAD. (III) AMOUNT OF CURRENT DEPRECIATION FOR A.YS. 1997-98 TO 2001-02 WHICH CANNOT BE SO SET OFF AS PER (II) ABOVE HERE INAFTER CALLED THE 'SECOND UNABSORBED DEPRECIATION ALLOWANCE' SHALL BE CARRIED FORWARD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS FROM THE A .Y. IMMEDIATELY SUCCEEDING THE AY FOR WHICH IT WAS COMPUTED TO BE SET OFF ONLY AGAINST THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSI NESS OR PROFESSION. C. IN THE THIRD PERIOD (I.E. A.Y. 2002-03 ONW ARDS). (I) FIRST UNADJUSTED DEPRECIATION ALLOWANCE' CAN BE SE T OFF UPTO A.Y. 2004-05 THAT IS THE REMAINING PERIOD OUT OF MAXIM UM PERIOD OF EIGHT A.Y.S [AS PER B(I) ABOVE) AGAINST INCOME UNDER ANY HEAD. (II) SECOND UNABSORBED DEPRECIATION ALLOWANCE' CAN BE S ET OFF ONLY AGAINST THE INCOME UNDER THE HEAD 'PROFITS AND GAIN S OF BUSINESS OR PROFESSION' WITHIN A PERIOD OF EIGHT A.YS. SUCCEEDI NG THE A.Y. FOR WHICH IT WAS FIRST COMPUTED (III) CURRENT DEPRECIATION FOR THE YEAR U/S 32(1) FOR EA CH YEAR SEPARATELY STARTING FROM A.Y. 2002-03 CAN BE SET O FF AGAINST INCOME UNDER ANY HEAD. AMOUNT OF DEPRECIATION ALLOWANCE NO T SO SET OFF I.T.A. NO.2414 AND 2415/MUM/2012 5 (HEREINAFTER CALLED THE 'THIRD UNADJUSTED DEPRECIAT ION ALLOWANCE) SHALL BE CARRIED FORWARD TO THE FOLLOWING YEAR. (IV) THE 'THIRD UNADJUSTED DEPRECIATION ALLOW ANCE' SHALL BE DEEMED AS DEPRECIATION U/S 32(1) THAT IS DEPRECIATION FOR THE CURRENT YEAR IN THE FOLLOWING YEAR(S) TO BE SET OFF AGAINST INCOME UNDE R ANY HEAD LIKE CURRENT DEPRECIATION IN PERPETUITY 9. IN VIEW OF ABOVE THE AO STATED THAT CARRIED FOR WARD DEPRECIATION LOSS PERTAINING TO ASSESSMENT YEAR 1997-98 AMOUNTING TO RS.1 73 76 271/- IS DENIE D. SIMILARLY FOR THE ASSESSMENT YEAR 2006-07 THE A O STATED THAT THE CARRIED FORWARD OF DEPRECIATION LOSS PERTAINING TO ASSESSMENT YEAR 19 98-99 AMOUNTING TO RS.52 48 058/- IS DENIED. BEING AGGRIEVED ASSESSEE FILED APPEAL S BEFORE THE FIRST APPELLATE AUTHORITY 10. ON BEHALF OF THE ASSESSEE LEGAL POSITION FOR S AID THREE PERIODS AS DISCUSSED BY AO WAS STATED BEFORE THE LD. CIT(A) AND SUBMITTED THAT ITAT IN THE CASE OF ITO V/S GRAHAM FIRTH STEEL PRODUCTS (I) LTD (24 SOT 106) (M UM) CONSIDERED THE SIMILAR ISSUE. THAT UNABSORBED DEPRECIATION FOR THE AY 1997-98 TO 2001-02 SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE OF DEPRECIATION FOR THE AS SESSMENT YEAR 2002-03 AND BE DEEMED TO BE PART OF THE ALLOWANCE OR IF THERE I S NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR I.E. ASSESSMENT YEAR 2002-03 BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIOUS YEAR AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS WHICH MEANS UNABSORBED DEPRECIATION UPTO AY 2001-02 CAN BE CARRIED FORWARD FOR SET OFF FOR INDEFINITE PERIOD. WE CONSIDER IT RELEVANT TO STATE THE RELEVANT PARA S OF THE SAID ORDER OF ITAT (SUPRA) WHICH IS ALSO STATED BY LD. CIT(A) IN PARA 9 OF THE IMPUGNED ORDER WHICH READS AS UNDER: 'ON READING THE PROVISIONS OF S. 32(2) AS IT STOOD PRIOR TO THE AMENDMENT MADE BY THE FINANCE (NO.2) ACT 1996 I.E. OPERATIVE UPT O AND INCLUDING ASST. YR. 1996- 97 IT IS SEEN THAT WHERE IN THE ASSESSMENT OF ASS ESSEE FULL EFFECT CANNOT BE GIVEN TO THE DEPRECIATION ALLOWANCE OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR WOOING TO TH E PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE THEN SUBJECT TO THE PROVISIONS OF SUB-S.(2) OF S. 72 AND SUB-S.(3) OF S. 73 THE ALLOWANCE OR THE PART O F THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN AS THE CASE MAY BE SHALL BE AD DED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIO US YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIOUS YEAR AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. THE EFFECT OF THESE PROVISIONS IS T HAT THE UNABSORBED DEPRECIATION FOR A PARTICULAR YEAR BECOMES BY LEGA L FICTION PART OF THE DEPRECIATION ALLOWANCE FOR THE SUCCEEDING YEAR AND SO ON WITHOUT ANY TIME-LIMIT. WHAT S.32(2) AS OPERATIVE UPTO AND INCLUDING ASST.Y R.1996-97 CONTEMPLATES IS THAT CURRENT DEPRECIATION IS DEDUCTIBLE IN THE FIR ST PLACE FROM THE INCOME AT THE BUSINESS TO WHICH IT RELATES; IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS THEN SUCH E XCESS IS DEDUCTIBLE FROM THE PROFITS OR GAINS OF ANY OTHER BUSINESS/ES IF ANY CARRIED ON BY THE ASSESSEE AND IF A BALANCE IS LEFT EVEN THEREAFTER THAT COMES FO R ABSORPTION FROM THE INCOME I.T.A. NO.2414 AND 2415/MUM/2012 6 FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF IN COME DURING THAT YEAR; AND IN CASE THERE IS STILL A BALANCE LEFT OVER IT IS T O BE TREATED AS UNABSORBED DEPRECIATION AND IT SHALL BE CARRIED FORWARD TO THE NEXT SUCCEEDING YEAR AND WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEE DING YEAR THE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEAR IS A DDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEME D BY LEGAL FICTION A PART THEREOF. IF HOWEVER THERE IS NO CURRENT DEPRECIAT ION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATIO N ALLOWANCE FOR SUCCEEDING YEAR. IN THIS VIEW OF THE MATTER S.32(2) CONTAINED AN INDEPENDENT PROVISION FOR SETTING OFF UNABSORBED DEPRECIATION CARRIED FORWARD FROM A PRECEDING YEAR. THE UNABSORBED DEPRECIATION CAN BE ALLOWED TO BE CARRIE D FORWARD AND SET OFF AGAINST INCOME FROM OTHER SOURCES IN A SUBSEQUENT YEAR NOTW ITHSTANDING THE FACT THAT THE BUSINESS IN RESPECT OF WHICH IT AROSE CEASED TO EXIST IN THE YEAR OF SUCH SET OFF. HOWEVER CERTAIN RESTRICTIONS HAVE BEEN PUT F OR AND FROM ASST. YR 1997-98 BY AN AMENDMENT MADE BY THE FINANCE (NO.2) ACT 199 6 ON ALLOWANCE OF UNABSORBED DEPRECIATION AS THE OLD S.32(2) OPERATIV E UPTO ASST. YR. 1996-97 HAS BEEN SUBSTITUTED. ACCORDING TO S.32(2) AS SUBSTIT UTED BY THE FINANCE (NO.2) ACT 1996 W.E.F 1ST APRIL 1997 THE UNABSORBED DEPRECI ATION OF EARLIER YEARS CAN BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AN D CAN ONLY BE SET OFF AGAINST THE PROFIT AND GAINS IF ANY OF ANY BUSINESS OR PR OFESSION CARRIED ON BY THE ASSESSEE AND ASSESSABLE FOR THAT ASSESSMENT YEAR S UCCEEDING THE ASSESSMENT YEAR FOR WHICH THE AFORESAID ALLOWANCE WAS FIRST CO MPUTED. HOWEVER FOR AVAILING THE BENEFIT OF CARRIED FORWARD OF UNABSORBED DEPREC IATION IT IS ESSENTIAL THAT THE BUSINESS OR PROFESSION FOR WHICH THE ALLOWANCE WAS ORIGINALLY COMPUTED CONTINUED TO BE CARRIED ON BY THE ASSESSEE IN THE P REVIOUS YEAR RELEVANT FOR THAT ASSESSMENT YEAR AS STIPULATED IN THE 1ST PROVISO TO S.32(2)(III) AS SUBSTITUTED W.E.F. 1ST' APRIL 1997. IN THIS CONTEXT IT MAY BE OBSERVED THAT AMENDED S.32(2) AS SUBSTITUTED BY THE FINANCE ACT 2001 W.E.F. 1ST ' APRIL 2002 AND STATUS QUO ANTE HAS BEEN RESTORED W. E. F. ASST. YR. 2002-03. THE NEW SUB-S (2) OF S.32 AS SUBSTITUTED BY THE FINANCE ACT 2001 W.E.F. 1ST' AP RIL 2002 HAS RESTORED THE SUB- S.(2) OF S.32 AS IT STOOD IN THE ASST. YR 1996-97. IN OTHER WORDS THE RESTRICTIONS IMPOSED BY THE FINANCE (NO.2) ACT 1996 WITH W.E.F. 1ST' APRIL 1997 IN THE MATTER OF SET OFF OF UNABSORBED DEPRECIATION HAS BE EN DISPENSED BY SUBSTITUTING THE S.32(2) BY THE FINANCE ACT 2001 W.E.F 1ST' APR IL 2002AND STATUS QUO ANTE I.E. STATUS QUO OF S.32(2) AS EXISTED PRIOR TO THE AMENDMENT MADE BY FINANCE (NO.2) ACT 1996 W.E.F. 1ST' APRIL 1997 HAS BEEN R ESTORED.' 11. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT THE UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 1997-98 TO 2001-02 AGGREG ATING TO RS.3 86 12 692/- BE SET OF AGAINST ANY INCOME OF THE SUCCEEDING ASSESSMENT YE ARS AND THERE IS NO RESTRICTION OF 8 YEARS AS STIPULATED IN THE AMENDED PROVISION OF SEC TION 32(2) AS AMENDED BY FINANCE (NO.2) ACT 1996 W.E.F.1.4.1997 AS THE SAID AMENDED PROVISION HAD BEEN SUBSTITUTED BY FINANCE (NO.1) ACT 2001 W.E.F. 1.4.2002. IT WAS S UBMITTED BEFORE THE LD. CIT(A) THAT UNABSORBED DEPRECIATION FOR AY 1997-98 AMOUNTING TO RS. 1 73 76 271/- AND UNABSORBED DEPRECIATION FOR ASSESSMENT YEAR 1998-9 9 AMOUNTING TO RS.52 48 058/- BE ALLOWED TO BE SET OFF AGAINST THE PROFIT OF BUSINES S FOR ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. I.T.A. NO.2414 AND 2415/MUM/2012 7 12. HOWEVER LD. CIT(A) DID NOT ACCEPT THE SAI D CONTENTION OF THE ASSESSEE AND BY FOLLOWING HIS ORDER FOR THE ASSESSMENT YEARS 2008-0 9 AND 2009-10 DATED 16.9.2011 (CORRECT DATE IS 15.9.2011) CONFIRMED THE ACTION OF AO. COPY IS PLACED ON RECORD. HENCE THESE APPEALS BEFORE THE TRIBUNAL. 13. DURING THE COURSE OF HEARING LD. AR MADE H IS SUBMISSIONS ON THE LINES OF THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW. HE HAS FURTHER SUBMITTED THAT THE SIMILAR ISSUE IS COVERED BY THE ORDER OF THE HONBL E GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. V/S DCIT DATED 23.8.2 012 IN SPECIAL CIVIL APPLICATION NO.1773 OF 2012. HE FURNISHED A COPY OF THE SAID O RDER TO SUBSTANTIATE HIS SUBMISSIONS. HE FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 THE LD. CIT(A) HAS ALSO NOT GIVEN ANY REASONING TO TAKE DI FFERENT VIEW IN SPITE OF THE FACT THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT. HE ALSO FURNISHED A COPY OF ORDER OF LD. CIT(A) DATED 15.9.2011 FOR ASSESSMENT YEAR 2008 -09 AND 2009-10 TO SUBSTANTIATE HIS SUBMISSIONS. 14. ON THE OTHER HAND LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. 15. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIO NS OF THE LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW. WE HA VE ALSO GONE THROUGH THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GE NERAL MOTORS INDIA PVT.(SUPRA) WHEREIN THEIR LORDSHIPS HAVE STATED THAT THE AMENDM ENT MADE BY FINANCE (NO.1) ACT WAS CLARIFIED BY CBDT VIDE CIRCULAR NO.14 OF 2001. THE SAID AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THAT UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON FIRST DAY OF APRIL 200 2 (ASSESSMENT YEAR 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SE CTION 32(2) OF THE ACT AS AMENDED BY FINANCE (NO.01) ACT 2001 AND NOT BY PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. THEIR LORDSHIPS HAVE STATED HAD T HE INTENTION OF THE LEGISLATURE BEING TO ALLOW UNABSORBED DEPRECIATION ALLOWANCE WORKED O UT IN ASSESSMENT YEAR 1997-98 ONLY FOR 8 SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT TO SECTION 32(2) BY FINANCE (NO.1) ACT 2001 IT WOULD HAVE INCORPORAT ED A PROVISION TO THAT EFFECT. HOWEVER IT DOES NOT CONTAIN ANY SUCH PROVISION. THEIR LORDSHIPS HAVE HELD THAT THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE (NO.1) 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 SET OFF TILL THE ASSESSMENT YEAR 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL TH E TIME IT IS SET OFF AGAINST THE PROFITS I.T.A. NO.2414 AND 2415/MUM/2012 8 AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHA TSOEVER. IN VIEW OF ABOVE DECISION OF THE HONBLE GUJARAT HIGH COURT AND ALSO CONSIDE RING THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF GRAHAM FIRTH STEEL PRODUCTS (I) LTD (SUPRA) WE HOL D THAT LD. CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING SET OFF OF UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99 AGAINST THE PR OFIT FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. HENCE WE VACATE THE ORDER S OF AUTHORITIES BELOW AND DIRECT THE AO TO ALLOW UNABSORBED DEPRECIATION FOR THE ASS ESSMENT YEARS 1997-98 AND 1998-99 AGAINST THE PROFIT FOR THE ASSESSMENT YEARS UNDER C ONSIDERATION AND IF ANY AMOUNT IS LEFT UNABSORBED THE SAME SHOULD BE ALLOWED TO BE CARRI ED FORWARD AND BE SET OFF AGAINST THE PROFIT AND GAINS OF SUBSEQUENT YEARS TILL THE ENTIRE AMOUNT OF UNABSORBED DEPRECIATION IS SET OFF. HENCE GROUNDS OF APPEAL TAKEN BY ASSESSEE ARE ALLOWED FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION BY RE VERSING THE ORDERS OF AUTHORITIES BELOW. 16. IN THE RESULT APPEALS OF THE ASSESSEE FOR BOTH ASSESSMENT YEARS VIZ 2005-06 AND 2006-07 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 09 TH OCTOBER 2013 ( * + 09 TH OCTOBER 2013 SD SD ( /SANJAY ARORA) ( . . 1 /B.R.MITTAL) / ACCOUNTANT MEMBER ( / JUDICIAL MEMBER MUMBAI; ON THIS 9TH DAY OF OCTOBER 2013 . . ./ SRL SR. PS * + - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3 . 2 ( ) / THE CIT(A)- 4. 2 / CIT 5. 3 5 ' 5 / DR ITAT MUMBAI 6. / GUARD FILE. / BY ORDER TRUE COPY (ASSTT. REGISTRAR) / ITAT MUMBAI