M/s Raja Ram Corn Products (Pb.) P. Ltd., Chandigarh V. DCIT, Chandigarh

ITA 1092/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8351 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A.K.JINDAL
• Keywords: Depreciation; Opportunity of being heard; Unabsorbed depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 43D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1092/CHD/2016 ASSESSMENT YEAR: 2013-14 M/S RAJA RAM CORN PRODUCTS VS THE DCIT, (PB) PVT. LTD., CIRCLE 1(1), HOUSE NO. 17, SECTOR 4, CHANDIGARH. CHANDIGARH. PAN: AABCR1679L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K.JINDAL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 01.02.2017 DATE OF PRONOUNCEMENT : 02.02.2017 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-1 CHANDIGARH DATED 02.09.2016 FOR ASSESSMENT YEAR 2013-14 ON THE FOLLO WING GROUND : THAT THE LD.. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN UPHOLDING THE ACTION OF AO IN NOT ALLOWING THE SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS AMOUNTING TO RS. 65,40,217/- AGAINST THE CURRENT YEAR'S INCOME WHICH IS HIGHLY UNJUSTIFIED AND UNCALLED FOR. 2. BRIEFLY THE FACTS ON THIS ISSUE AS NOTED BY THE AUTHORITIES BELOW ARE THAT ASSESSEE WAS ENGAGED IN THE 2 BUSINESS OF MANUFACTURING OF CORN PRODUCTS BUT AFTE R 20.06.2002, THE ASSESSEE HAS CLOSED HIS BUSINESS. THE ONLY INCOME BEING RETURNED IS 'INCOME FROM OTHER SOURCES'. THE ASSESSING OFFICER NOTED THAT THE ASSE SSEE COMPANY HAS NOT BEEN DOING ANY BUSINESS IN THE LAST MANY YEARS. THE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM PREVIOUS YEAR OR PERTAINING TO THIS YE AR WAS NOT ALLOWED TO BE SET OFF AGAINST THE INCOME OF RS. 31,23,691/-. FURTHER, NO BUSINESS LOSS OF PREVIOUS YEAR IS ALLOWED TO BE CARRIED FORWARD IN VIEW OF THE ORD ER OF THE LD. CIT(APPEALS) DATED 19.12.2013 FOR ASSESSMENT YE AR 2008-09. THE ASSESSEE ARGUED BEFORE LD. CIT(APPEALS ) THAT DEPRECIATION IS ALLOWABLE UNDER SECTION 32(2) OF TH E ACT IRRESPECTIVE OF THE FACT THAT BUSINESS IS CLOSED AN D THAT THE PROVISIONS OF SECTION 32(2) OF THE ACT WOULD AP PLY. THE LD. CIT(APPEALS), HOWEVER, DID NOT AGREE WITH T HE ARGUMENT OF THE ASSESSEE BECAUSE COMPUTATION OF INC OME FROM PROFIT AND GAINS OF BUSINESS AND PROFESSION A RE COVERED FROM SECTIONS 28 TO 43D. SECTION 28 IS CHA RGING SECTION AND SECTION 29 GIVES THE METHOD OF COMPUTA TION. ALL THE SECTIONS 30 TO 43D INCLUDING SECTION 32 ARE IN A WAY ARE APPLICABLE TO SECTION 28 OF THE INCOME TAX ACT. THE LD. CIT(APPEALS), THEREFORE, NOTED THAT SINCE B USINESS OF THE ASSESSEE IS CLOSED THEREFORE, THERE CANNOT B E ANY PROFIT/LOSS UNDER THAT HEAD AND UNABSORBED LOSS AND UNABSORBED DEPRECIATION CANNOT BE ALLOWED TO BE SET OFF AND CARRY FORWARD. THE UNABSORBED DEPRECIATION IS TO BE TREATED AT PAR WITH THE UNABSORBED BUSINESS LOSS WH ICH 3 WERE DISALLOWED BY LD. CIT(APPEALS) BY ORDER DATED 19.12.2013. THE LD. CIT(APPEALS), THEREFORE, HELD THAT ASSESSING OFFICER WAS RIGHT IN REJECTING THE CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION OF THE EARLI ER YEAR. THIS GROUND WAS, ACCORDINGLY, DISMISSED. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(APPEALS) AND SUBMIT TED THAT SECTION 32(2) OF THE ACT RELATES TO CARRY FORW ARD OF UNABSORBED DEPRECIATION AND THIS SECTION HAS UNDERG ONED VARIOUS CHANGES. THEREFORE, THE UNABSORBED DEPRECI ATION COULD BE SET OFF FROM INCOME DERIVED DURING THE YEA R UNDER THE HEAD 'INCOME FROM OTHER SOURCES' DESPITE CLOSURE OF THE BUSINESS BY THE ASSESSEE. IN SUPPOR T OF HIS CONTENTION, HE HAS RELIED UPON FOLLOWING DECISIONS : I) JUDGEMENT OF GUJRAT HIGH COURT IN THE CASE OF BARODA SPINNING & WEAVING MILLS CO. LTD. VS CIT 238 ITR 221 (GUJ), IN WHICH IT WAS HELD AS UNDER : SET OFF OF UNABSORBED DEPRECIATION CARRIED FORWARD FROM EARLIER YEARS COULD BE ALLOWED AGAINST THE INCOM E FROM OTHER SOURCES EVEN IF THE-ASSESSES-HAD NO INCOME FALLING UNDER S. 28. II) DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS G.T.M. SYNTHETICS LTD. 347 ITR 458, IN WHICH IT WAS HELD AS UNDER : UNABSORBED DEPRECIATION COULD BE SET-OFF FROM INCOME DERIVED DURING THE YEAR UNDER HEAD 'INCOME 4 FROM, OTHER SOURCES' DESPITE CLOSURE OF BUSINESS BY ASSESSEE. III) DECISION OF HON'BLE DELHI HIGH COURT IN THE CA SE OF ESCORTS ELECTRONICS LTD. VS CIT 258 ITR 23, IN WHICH IT WAS HELD AS UNDER : UNABSORBED DEPRECIATION CARRIED FORWARD FROM EARLIER YEARS COULD BE ALLOWED AGAINST THE INCOME ASSESSED UNDER S. 56 OF THE ACT UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 4. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL OF TH E ASSESSING OFFICER. THE POINTS RAISED BY THE LD. COU NSEL FOR THE ASSESSEE HAVE NOT BEEN DEALT BY THE AUTHORI TIES BELOW. THE DECISIONS NOW CITED ARE CITED FOR THE FI RST TIME AND EVEN AMENDMENT IN SECTION 32 HAVE NOT BEEN BROUGHT TO THE NOTICE OF THE AUTHORITIES BELOW. THE AUTHORITIES BELOW HAVE ALSO CONFIRMED THE ADDITION AND DID NOT ALLOW CLAIM OF THE ASSESSEE OF SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS AGAINST TH E CURRENT INCOME BECAUSE OF THE ORDER OF THE LD. CIT(APPEALS) FOR ASSESSMENT YEAR 2008-09 DATED 19.12.2013 IN WHICH NO APPEAL HAVE BEEN FILED BY TH E ASSESSEE BEFORE THE TRIBUNAL. HOWEVER, IT APPEARS THAT THE JUDGEMENTS NOW RELIED UPON BY LD. COUNSEL FOR T HE 5 ASSESSEE HAVE BEARING ON THE MATTER IN ISSUE AND HA VE TO BE DEALT IN ACCORDANCE WITH AMENDED PROVISIONS OF L AW AS IS CONTENDED BY LD. COUNSEL FOR THE ASSESSEE. THER EFORE, MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL OF TH E ASSESSING OFFICER. I, ACCORDINGLY, SET ASIDE THE O RDERS OF AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FIL E OF ASSESSING OFFICER WITH DIRECTION TO RE-DECIDE THE I SSUE IN ACCORDANCE WITH LAW IN THE LIGHT OF THE JUDGEMENTS REFERRED TO ABOVE IN THIS ORDER BY GIVING REASONABL E SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 2 ND FEBRUARY,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH