Dy.CIT, Circle-1(1), Hyderabad V. Arunachala Logistics Private Limited, Hyderabad

CO 4/HYD/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8930 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNIL BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Rectification of order; Assessment record; Unabsorbed depreciation
• Section: 115JB; 6; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1722/HYD/2012 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME-TAX, APPELLAN T CIRCLE 1(1), HYDERABAD. VS. M/S ARUNACHALA LOGISTICS PVT. LTD., RE SPONDENT HYDERABAD. (PAN AAGCS1855C) C.O. NO. 04/HYD/13 (IN ITA NO. 1722/HYD/2012 ASSESSMENT YEAR : 2005-06 M/S ARUNACHALA LOGISTICS PVT. LTD., CROSS OBJECTOR HYDERABAD. (PAN AAGCS1855C) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDE NT CIRCLE 1(1), HYDERABAD. REVENUE BY : SHRI SUNIL BABU ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 28/08/2013 DATE OF PRONOUNCEMENT : 28/08/2013 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-II, HYDERABA D ON 2 ITA NO. 1722/HYD/12 AND C.O. NO. 04/H/13 M/S ARUNACHANA LOGISTICS PVT. LTD. 18/09/2012, FOR ASSESSMENT YEARS 2005-06. THE ASSES SEE ALSO FILED C.O. WHICH IS IN SUPPORT OF THE SAID ORDER OF THE CIT(A). 2. BRIEFLY THE FACTS OF THE CASE ARE THAT IN C ASE OF THE ASSESSEE AN ASSESSMENT U/S 143(2) WAS COMPLETED ON 14 11.2007 DETERMINING THE BOOK PROFIT U/S. 115JB AT RS.6,48,29,629/- AND NIL UNDER NORMAL PROVISIONS OF THE ACT FOR THE ASST. YEAR 2005-06. THE BOOK PROFIT U/S 115 JB WAS COMPUTED AFTER ALLOWING THE DEDUCTION OF RS.1,71,88 ,763/- WHICH INCLUDED THE LOSS OF RS.1,51,06,838/- RELATIN G TO A FIRM. SINCE THE LOSS OF RS. L, 71,88,763/- INCLUDED THE LOSS OF RS.1,51,06,838/- RELATING TO THE FIRM WHICH COULD N OT BE ALLOWED IN THE HANDS OF THE COMPANY U/S 115JB, THE ASSESSING OFFICER ISSUED NOTICE U/S 154 OF THE ACT. 3. FURTHER, THE ASSESSING OFFICER NOTED THAT EARLI ER THE BUSINESS WAS CARRIED ON BY FIRM VIZ., M/S SHIV KESHAV TRANSPORT WHICH LATER WAS CONVERTED INTO A COMPANY VIZ., SHIV KESHAV TRANSPORT PVT. LTD. W.E.F. 21.11.2000. LATER THE NAME OF THE COMPANY WAS CHANGED INTO M/S ARUNACHALA LOGISTICS P VT. LTD. FOR THE AY 2001-02 THE FIRM FILED ITS RETURN O F INCOME ADMITTING THE INCOME/LOSS UPTO DATE CONVERSION AND FOR THE BALANCE PERIOD THE COMPANY FILED ITS RETURN. THUS, THERE ARE TWO RETURNS FOR THE AY 2001-02. THE DETAILS OF BUSI NESS LOSS AND DEPRECIATION LOSS WHICHEVER IS LESS WAS CLAIMED FOR SET OFF U/S 115JB AS SHOWN BELOW: AY BOOK PROFIT DEPRECIATION LOSS (RS.) BUSINESS LOSS (RS.) 1999-00 (FIRM) 1,01,30,025 - 2000-01 (FIRM) 2,92,11,051 - 2001-02 (FIRM) 3,42,04,601 1,51,06,839 2001-02 (CO.) 1,91,50,340 1,08,32,865 3 ITA NO. 1722/HYD/12 AND C.O. NO. 04/H/13 M/S ARUNACHANA LOGISTICS PVT. LTD. 2002-03 (CO.) 87,50,941 - 2003-04 (CO.) 1,25,85,851 - 2004-05 (CO.) 12,25,660 - 2004-05 (CO.) 10,68,07,528 2,59,39,704 BUSINESS LOSS AS PER ABOVE CALCULATION RS. 2,59,3 9,704/- LESS: PROFIT OF AY 2002-03 RS. 87,50,941/- BOOK PROFIT AS PER P&L ACCOUNT RS. 8,20,18,392/- LESS: DEDUCTION U/S 205(2) LOWER OF DEPRECIATION LOSS OR BUSINESS LOSS RS. 1,71,88,763/- BOOK PROFIT U/S 115 JB RS. 6,48,29,629/- ============ 4. IN RESPONSE TO THE NOTICE U/S 154, THE ASSESSEE FILED LETTER DATED 25.10.2010 ENCLOSING THEREWITH A COPY OF LETTER DATED 25.5.2009 IN WHICH IT WAS CONTENDED THAT AS P ER PROVISIONS OF SEC. 72A(6) OF THE ACT, THE LOSSES ERSTWHILE FIRM WHICH WAS CONVERTED INTO A COMPANY IN ACCORDANCE WI TH PROVISIONS OF SECTION 47(XIII) OF THE ACT CAN BE CL AIMED SET OFF WHILE COMPUTING THE INCOME OF THE SUCCESSOR COMPANY . 5. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANA TION OF THE ASSESSEE AND HELD THAT THERE WAS A MISTAKE APPA RENT FROM RECORD, AND RECTIFICATION ORDER WAS PASSED BY ADDIN G LOSSES RELATING TO FIRM WHICH WAS GIVEN SET OFF IN THE C OMPUTATION FOR BOOK PROFIT U/S 115 JB. 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A) AND CONTENDED BEFORE HIM THAT THE ISSUE INVOLVED IN THE CASE WHETHER THE PROVISIONS OF SECT ION 72A(6) OF THE INCOME-TAX ACT, 1961 ARE APPLICABLE FOR COMP UTATION OF BOOK PROFIT U/S 115JB, WHETHER THE ASSESSEE CAN CLA IM SET OFF OF LOSSES RELATING TO A FIRM WHETHER THE PROVISIONS OF COMPANY 4 ITA NO. 1722/HYD/12 AND C.O. NO. 04/H/13 M/S ARUNACHANA LOGISTICS PVT. LTD. ACT CONTEMPLATES TO SET OFF LOSSES OF A FIRM IS DEB ATABLE POINT OF LAW. THE AR SUBMITTED THAT ONLY WHEN A GLARING M ISTAKE IS APPARENT FROM THE RECORD, THE SAME CAN BE RECTIFIED U/S 154 OF THE IT ACT, 1961 AND A DEBATABLE POINT OF LAW IS NO T A MISTAKE APPARENT FROM THE RECORD AND THE ORDER PASSED BY TH E ASSESSING OFFICER U/S 154 OF THE IT ACT IS NOT IN A CCORDANCE WITH LAW. 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND RECTIFICATION ORDER OF THE ASSESSING OFFICER, THE C IT(A) HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 154 IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 154 OF TH E IT ACT AND ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE BY OBS ERVING AS UNDER: THE RECTIFICATION ORDER, THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT RECORDS HAVE BEEN CAREFULLY CONSIDERED. FOR CONVENIENCE SAKE I WILL T AKE UP THE GROUND ON THE ISSUE OF RECTIFICATION U/S 154 AN D THE LEGALITY OF THE ORDER UNDER THE SAID SECTION. IT MA Y BE NOTED THAT THE APPELLANT HAS CARRIED ON BUSINESS AS A FIRM TILL 2000-01 AND UPTO 21.11.2000 AND FOR THE P ART PERIOD, THE APPELLANT HAS FILED A RETURN IN THE STA TUS OF A 'FIRM'. THE PARTNERSHIP FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY AS M/S SHIV KESHAV TRANSPOR T PVT. LTD. W.E.F. 21.11.2000. AS PER THE SUBMISSIONS OF THE APPELLANT BEFORE THE AO, DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAS CLEARLY STATED THAT AS PER THE PROVISIONS OF SEC.72A(6), THE ACCUMULATED LOSS AND UNABSORBED DEPRECIATION SHALL BE DEEMED TO BE THE LOSS/ALLOWANCE OF THE SUCCESSOR COMPANY, AND THE APPELLANT HAS CALCULATED THE BOOK PROFIT AS PER SEC TION 115JB AND EXPLANATION 1 AND 2 OF SECTION 115JB AND AS PER PARTS OF II AND III OF SCHEDULE VI OF COMPANIES ACT, 1956, THE ACCUMULATED LOSS AND UNABSORBED DEPRECIATION WERE TAKEN INTO ACCOUNT AS APPEARED IN THE BALANCE SHEET OF THE COMPANY I.E M/S SHIV KESHAV TRANSPORT PVT. LTD. AS ON 31.3.2004 AND THERE IS NO BUSINESS LOSS OF RS.1,51,06,839/- AS TAKEN BY THE A O IN THE FIRMS BOOKS AND THE ENTIRE LOSS OF RS.1,71,88,7 63/- 5 ITA NO. 1722/HYD/12 AND C.O. NO. 04/H/13 M/S ARUNACHANA LOGISTICS PVT. LTD. WAS APPEARING IN THE BOOKS OF THE COMPANY AS ON 31.3.2004. FROM ALL THIS, IT IS EVIDENT THAT THE AC TION PROPOSED TO BE TAKEN BY THE ASSESSING OFFICER WAS N OT IN RESPECT OF A MISTAKE APPARENT FROM RECORD, RATHE R IS A DEBATABLE ISSUE AND A DEBATABLE ISSUE CANNOT BE RECTIFIED U/S 154 OF THE IT ACT. RELIANCE IS PLACED ON THE FOLLOWING CASES. 1. CIT VS. SOORA SUBRAMANIAN (2011) 330 ITR 591, WHERE IT HAS BEEN HELD THAT DEBATABLE ISSUE IS NOT A MISTAKE APPARENT FROM RECORD. 2. GRASIM INDUSTRIES LTD. VS: CIT (2009) 317 ITR 241, WHERE IT HAS BEEN HELD THAT ONLY OBVIOUS MISTAKE CAN BE RECTIFIED. 3. MEPCO INDUSTRIES LIMITED VS. CIT (2009) 319 ITR 208 (SC); HELD A RECTIFIABLE MISTAKE IS A MISTAKE WHICH WAS OBVIOUS AND NOT SOMETHING WHICH HAD TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING OR WHERE TWO OPINIONS WERE POSSIBLE. A DECISION ON DEBATABLE POINT OF LAW COULD NOT BE TRE ATED AS A MISTAKE APPARENT FROM RECORD. 8. EVEN ON MERITS ALSO THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT AS PER THE PROVISION S OF SECTION 72A(VI) R.W.S. 47(XIII), THE ASSESSEES CON TENTION APPEARS TO BE CORRECT AND THEREFORE THE UNABSORBED DEPRECIATION AND THE BUSINESS LOSS OF THE FIRM WHIC H HAS BECOME PART OF THE ACCOUNTS OF THE COMPANY HAS BEEN TAKEN RIGHTLY FOR THE PURPOSE OF BOOK PROFIT AS PER THE P ROVISIONS OF SECTION 115JB OF THE ACT. 9. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AN D THE SUBSTANTIVE GROUNDS RAISED BY THE REVENUE ARE AS UN DER: 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT ACTION U/S 154 IS NOT IN ACCORDANCE WITH LAW. 3. THE LEARNED CIT(A) ALSO ERRED IN ALLOWING THE AP PEAL ON MERITS HOLDING THAT IN VIEW OF PROVISIONS OF SEC TION 6 ITA NO. 1722/HYD/12 AND C.O. NO. 04/H/13 M/S ARUNACHANA LOGISTICS PVT. LTD. 72A(VI) R.W.S. 47(XIII), THE LOSS OF THE FIRM HAS T O BE TAKEN FOR THE PURPOSE OF BOOK PROFITS COMPUTED U/S 115JB OF THE IT ACT. 4. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE DISALLOWANCE OF SET OFF OF LOSS OF THE FIRM AS THE PROVISIONS U/S 115JB ARE SEPARATE IN NATURE AND NOR MAL PROVISIONS ARE NOT APPLICABLE. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AS THE ISSUE DEALT IN THE PROCEEDINGS U/S 154 IS A DEB ATABLE ISSUE, WHICH BY ITSELF CANNOT BE DEALT U/S 154 OF THE ACT . ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) A ND DISMISS THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD. 11. THE ASSESSEE HAS FILED THE C.O. WITH A TWO DAYS DELAY BEFORE US AND THE ASSESSEE HAS EXPLAINED THE REASONS FOR F ILING THE C.O WITH TWO DAYS DELAY. AFTER CONSIDERING THE EXPLANAT ION OFFERED BY THE ASSESSEE, WE ADMIT THE CO FOR ADJUDICATION. 12. AS WE HAVE UPHELD THE ORDER OF THE CIT(A) WHILE DECIDING THE REVENUE APPEAL AND THE C.O. FILED THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE CIT(A), THE C.O. BECOMES INFRUC TUOUS AND, HENCE, THE SAME IS DISMISSED AS INFRUCTUOUS. 7 ITA NO. 1722/HYD/12 AND C.O. NO. 04/H/13 M/S ARUNACHANA LOGISTICS PVT. LTD. 13. IN THE RESULT, THE APPEAL OF THE REVENUE AS WE LL AS THE C.O. FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/08/2013. SD/- SD/- (SAKTIJIT DEY) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH AUGUST, 2013 KV COPY TO:- 1) DCIT, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) M/S ARUNACHALA LOGISTICS PVT. LTD., H.NO. 8-2-1/ 1/3, AVTAR NIVAS, SRINAGAR COLONY, MAIN ROAD, PUNJAGUTTA, HYDE RABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT-III, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.