PARAMOUNT ART PRINTS (P) LTD, MUMBAI V. DCIT 10(2), MUMBAI

ITA 1093/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5765 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: P R RAIYANI
• Keywords: Depreciation; Period of limitation; Speculation loss; Unabsorbed depreciation
• Section: 143(3); 32; 139

Judgement Text

, LH LH LH LH INCOME TAX APPELLATE TRIBUNAL MUMBAI - C BENCH MUMBAI , , / , BEFORE S/SH. VIJAY PAL RAO, JUDICIAL MEMB ER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1093/M/2011, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2008-09 PARAMOUNT ART PRINTS (P) LTD. 501, KARMA VIHAR, YASHWANT JADHAV MARG, GHATKOPAR (E), MUMBAI- 400077 VS. D.C.I.T. 10(2) AAYAKAR BHAVAN, M.K.ROAD, MUMBAI. PAN: AAEC P1205B ( #$ / ASSESSEE ) ( %&#$ / RESPONDENT) #$ #$ #$ #$ ' ' ' ' / ASSESSEE BY : SHRI P.R.RAIYANI %&#$ ( ' / RESPONDENT BY : SMT. PARMINDER ! ! ! ! ( (( ( )* )* )* )* / DATE OF HEARING : 08-01-2014 +,' ( )* / DATE OF PRONOUNCEMENT : 17 - 01 - 2014 ! ! ! ! , 1961 ( (( ( 254 )1( )-) )-) )-) )-) . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M: CHALLENGING THE ORDER DATED 14.12.2010 OF THE CIT(A )-22,MUMBAI,ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) 22, MUMBAI (HEREINAFTER CIT (A)) ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE IN NOT DIRECTING THE ASSESSING OFFICER TO ADD THE UNABSORBED DEPRECIATIO N FOR THE CURRENT PREVIOUS YEAR TO THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIO US YEAR. 2.THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THA T SEC 80 OF THE INCOME TAX ACT,1961, OVER RULES ANYTHING CONTAINED IN CHAPTER VI AND NOT ANYTHING C ONTAINED IN CHAPTER IV AND THAT SEC 32 OF THE ACT IS PART OF CHAPTER IV AND NOT PART OF CHAPTER V I. 3.THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THA T GROUND NO. 1 OF THE APPEAL BEFORE CIT (A) RELATED TO UNABSORBED DEPRECIATION AND NOT TO CAR RY FORWARD OF BUSINESS LOSS AND CIT (A) ERRED IN DEALING WITH THE SAID GROUND AS IF IT WAS IN RESPECT OF BUSINESS LOSS. 4.THE LEARNED CIT (A) ERRED IN PASSING A NON SPEA KING ORDER AND ALSO ERRED IN NOT CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT ON ALLOWABILI TY AND TREATMENT OF UNABSORBED DEPRECIATION AND IN NOT CONSIDERING SEVERAL JUDICIAL DECISIONS C ITED BY THE APPELLANT. 2 ITA NO. 1093/MUM/2011 PARAMOUNT ART PRINTS (P) LTD. 5.THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THA T THE DECISIONS RELIED UPON BY CIT (A) WERE IN RESPECT OF CARRY FORWARD OF BUSINESS LOSS AND NOT I N RESPECT OF ALLOWABILITY OF UNABSORBED DEPRECIATION. 6.THE APPELLANT PRAYS THAT (I)UNABSORBED DEPRECIATION FOR THE CURRENT PREVIOUS YEAR BE DIRECTED TO BE ADDED TO DEPRECIATION CLAIM OF THE APPELLANT FOR THE FOLLOWING PREVIOUS Y EAR; AND (II)STATEMENT OF FACTS ATTACHED TO THE APPEAL BE TA KEN INTO CONSIDERATION AT THE TIME OF DECIDING THE APPEAL. 7.APPELLANT CRAVES LEAVE TO ADD TO, AME ND, ALTER, VARY OR WITHDRAW ALL OR ANY OF THE ABOVE GROUNDS. 2 . ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF PRIN TING, FILED ITS RETURN OF INCOME ON 01.10.2008 DECLARING TOTAL LOSS OF RS. 67.12 LACS. AO FINALISED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 08.10.2010 ACCEPTING LOSS OF RS. 67,12,131/- . WHILE FINALIZING THE ASSESSMENT, ASSESSING OFFICER (AO) HELD THAT LOSS DETERMINED BY IT WAS NO T ELIGIBLE TO BE CARRIED FORWARD IN THE SUBSEQUENT ASSESSMENT YEARS, THAT THE ASSESSEE HAD FAILED TO FURNISH THE RETURN AS PER THE PROVISIONS OF SECTION 80 OF THE ACT, THAT THE ASSES SEE HAD FURNISHED THE LOSS RETURN BEYOND THE DUE DATE, THAT CLAIM MADE BY THE ASSESSEE FOR CARRYING FORWARD THE BUSINESS LOSS FOR THE YEAR UNDER CONSIDERATION WAS TO BE REJECTED. 3 . ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY (FAA). DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT RETURN WAS DELAY ED BY ONE DAY ONLY, THAT DELAY WAS DUE TO TECHNICAL PROBLEMS, THAT AO HAD NOT GIVEN SUFFICIEN T OPPORTUNITY TO EXPLAIN THAT THE CARRYING FORWARD ON DEPRECIATION AS PER THE SECTION 32(2) WA S NOT GOVERNED BY THE PROVISIONS OF SECTION 80 OF THE ACT. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE, FAA HELD THAT SECTION 80 STARTED WITH NON-OBSTANTE CLAUSE, T HAT THE SAID SECTION HAD OVERRIDING EFFECT ON ALL OTHER SECTIONS. RELYING UPON THE DECISIONS OF GUNAV ANTY DHARMSSE 241 ITR 168, ARDEE MECHANICAL INDUSTRIALS PVT. LTD. 247 ITR 47 AND RAJ ESH KUMAR 259 ITR 629 (KERALA) DELIVERED BY THE HONBLE HIGH COURTS OF KERALA AND DELHI, HE HELD THAT AO WAS JUSTIFYING IN DISALLOWING THE LOSS SINCE THE RETURN WAS FILED LATE. 4 . BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITT ED THAT PROVISIONS OF SECTION 80 AND 139 APPLIED TO BUSINESS LOSS ONLY, THAT OUT OF TOTAL LO SS OF RS. 67.21 LACS UNABSORBED DEPRECIATION AMOUNTED TO RS. 30.28 LACS, THAT THE PROVISIONS OF DEPRECIATION WERE GOVERNED BY SECTION 32(2) OF THE ACT, THAT BUSINESS LOSS SUFFERED BY THE ASSESSE E WAS OF RS. 36.92 LACS ONLY, THAT SECTION 32(2) PROVIDED CARRY FORWARD UNABSORBED DEPRECIATION IN T HE SUBSEQUENT AYS TILL IT GOT ABSORVED, THAT CARRY FORWARD OF DEPRECIATION WAS SUBJECT TO PROVIS ION OF SECTION 72(2) AND 73(3), THAT THE SAID SECTIONS PROVIDED FOR PRIORITY ON ADJUSTMENT OF BUS INESS/SPECULATION LOSS BROUGHT FORWARD VIS--VIS 3 ITA NO. 1093/MUM/2011 PARAMOUNT ART PRINTS (P) LTD. UNABSORBED DEPRECIATION ALLOWANCE BROUGHT FORWARD, THAT THE ABOVE REFERRED SECTIONS DID NOT GOVERN DETERMINING OF DEPRECIATION ALLOWANCE OR CAR RY FORWARD THEREOF IN ANY MANNER, SECTION 80 ALSO DID NOT GOVERN THE CARRY FORWARD/SETTING OFF O F DEPRECIATION ALLOWANCE. HE REFERRED TO THE DECISIONS OF GOVIND NAGAR SUGAR LTD. (334 ITR 13 AN D R.S.BAJWA & CO. (301 ITR 333) DELIVERED BY THE HONBLE HIGH COURT OF DELHI AND JHARKHAND RE SPECTIVELY. HE ALSO REFERRED TO THE DECISIONS OF MEHSANA DISTRICT CO-OPERATIVE MILK PRODUCERS UNI ON LTD. (12 TAXMANN.COM.), SURESH INDUSTRIES (P) LTD. (54 SOT 450) DELIVERED BY THE A HMEDABAD AND MUMBAI BENCHES OF THE TRIBUNAL. HE FURTHER SUBMITTED THAT APPEAL WAS PREF ERRED ONLY AGAINST THE DENIAL OF CARRIED FORWARD ON UNABSORBED DEPRECIATION AND NOT AGAINST THE DENI AL TO CARRY FORWARD OF BUSINESS LOSS, THAT ASSESSEE HAD TAKEN UP THE MATTER OF DENIAL OF CARRY ING FORWARD OF BUSINESS LOSS WITH THE CENTRAL BOARD OF DIRECT TAXES (CBDT) BY MAKING AN APPLICATI ON U/S. 119(2)(B) OF THE ACT, THAT THE MATTER WAS PENDING BEFORE THE CBDT. 5 . DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORD ER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US. WE F IND THAT WHILE FINILISING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, AO HAD PRESUMED THAT LOSS CLAIMED BY THE ASSESSEE, AMOUNTING TO RS. 67.12 LACS, PERTAINED TO BUSINESS ACTIVITIES OF THE ASSESSEE. BEFORE FAA, ASSESSEE MADE A CATEGORICAL SUBMISSION THAT OUT OF RS. 67.12 LACS A N AMOUNT OF RS. 30.28 LACS PERTAIN TO UNABSORBED DEPRECIATION. SECTION 32(2) OF THE ACT D EALS WITH DEPRECIATION ALLOWANCE TO BE ALLOWED TO AN ASSESSEE. HERE, WE WOULD LIKE TO REPRODUCE THE PROVISIONS OF SECTION 32(2): WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFE CT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEA R, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUB JECT TO THE PROVISIONS OF SUB- SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SE CTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN , AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATI ON FOR THE FOLLOWING PREVIOUS 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 F OR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS.' FROM THE ABOVE, IT IS CLEAR THAT FOR CARRY FORWARD OF UNABSORBED DEPRECIATION THE ONLY REQUIREMENT STIPULATED BY THE ACT IS INSUFFICIENCY OF PROFITS I N A PARTICULAR AY OR IN THE SUBSEQUENT AYS. 6 . WE ARE OF THE OPINION, THAT PROVISIONS OF SECTION 80/139 DO NOT DEAL WITH CARRY FORWARD OF UNABSORBED DEPRECIATION ALLOWANCE. IN THE CASE OF G OVIND NAGAR SUGAR LTD. AN ISSUE BEFORE THE 4 ITA NO. 1093/MUM/2011 PARAMOUNT ART PRINTS (P) LTD. HONBLE DELHI HIGH COURT WAS OF CARRYING FORWARD UN ABSORBED DEPRECIATION U/S. 32(2) OF THE ACT. IN THAT MATTER ASSESSEE HAD FIELD A RETURN OF LOSS ON 31.03.2003 THOUGH THE DUE DATE OF FILING THE RETURN OF LOSS IN THE TERMS OF SECTION 139(3) OF TH E ACT WAS 31.10.2001. THE AO FINALISED THE ASSESSMENT U/S. 143(3) AT A LOSS OF RS. 6.03 CRORES , BUT DID NOT ALLOW THE ASSESSEE TO CARRY FORWARD THE UNABSORBED LOSS AND DEPRECIATION. IN THE APPELL ATE PROCEEDINGS, FAA HELD THAT ASSESSEE WAS NOT ALLOWED TO CARRY FORWARD THE LOSS BY VIRTUE OF SECTION 80 OF THE ACT AS IT HAD NOT FILED THE LOSS RETURN WITHIN THE TIME PRESCRIBED U/S. 139(3) OF TH E ACT. ASSESSEE CHALLENGED THE ORDER OF THE FAA BEFORE THE TRIBUNAL AND TRIBUNAL HELD THAT UNABSORB ED DEPRECIATION WAS TO BE ALLOWED. DISMISSING THE APPEAL FILED BY THE DEPARTMENT, HONBLE HIGH CO URT HELD THAT SECTION 180 AND 139(3) OF THE ACT APPLIED TO BUSINESS LOSS AND NOT TO UNABSORBED DEPRECIATION, THAT UNABSORBED DEPRECIATION WAS EXCLUSIVELY GOVERNED BY THE PROVISIONS OF SECTION 3 2(2) OF THE ACT, THAT THE PERIOD OF LIMITATION FOR FILING LOSS RETURN AS PROVIDED BY SECTION 139(1) WO ULD NOT BE APPLICABLE FOR CARRYING FORWARD OF UNABSORBED DEPRECIATION AND INVESTMENT ALLOWANCE, T HAT U/S. 32(2) OF THE ACT UNABSORBED DEPRECIATION OF A YEAR WOULD BECOME PART OF DEPRECI ATION OF THE SUBSEQUENT YEAR BY THE LEGAL FICTION, THAT WHEN IT WOULD BECOME PART OF THE CURR ENT YEARS DEPRECIATION IT WAS ALLOWED TO SET OFF OF AGAINST ANY OTHER INCOME IRRESPECTIVE OF THE FAC T THAT THE RETURN FOR THE EARLIER YEAR WAS NOT FILE D IN TIME. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE HIGH COURT OF JHARKHAND IN THE CASE OF R.S.BAJWA & CO. (SUPRA). RESPECTFULLY FOLLOWING THE ORDERS OF THE HONBLE HIGH COURTS, WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE ASSESSEE S TANDS ALLOWED. / 0 / 0 / 0 / 0 !/) !/) !/) !/) 1 1 1 1 2 2 2 2 ( (( ( - -- - 34 34 34 34 ( (( ( ) ) ) ) 56 5656 56 . ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2014 . . . . ( (( ( +,' +,' +,' +,' 7 77 7 8! 8! 8! 8! 17 TUOJH TUOJH TUOJH TUOJH 2014 , ,, , ( (( ( - -- - 9 99 9 SD/- SD/- ( / VIJAY PAL RAO ) ( / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8! /DATE: 17 TH JANUARY,2014 SK . . . . ( (( ( %) %) %) %) :') :') :') :') / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / ; < , 4. THE CONCERNED CIT / ; < 5. DR C BENCH, ITAT, MUMBAI / =- %)! LH LHLH LH , . . . 5 ITA NO. 1093/MUM/2011 PARAMOUNT ART PRINTS (P) LTD. 6. GUARD FILE/ - > &) &) &) &) %) %)%) %) //TRUE COPY// .! / BY ORDER, ? / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI