DCIT, CHENNAI V. Sterling Holiday Financial Services Ltd., CHENNAI

ITA 1128/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5917 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Business income; Depreciation; Question of law; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , , $ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1128/MDS/2016 % % /ASSESSMENT YEAR: 2007-08 THE DY. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-6(2), AAYAKAR BHAVAN, NEW BLOCK, 7 TH FLOOR, 121, M.G.ROAD, CHENNAI-600 034. VS. M/S.STERLING HOLIDAY FINANCIAL SERVICES LTD., III FLOOR, PADMA COMPLEX, 320 ANNA SALAI, NANDANAM, CHENNAI-600 035. [PAN: AAACS 4955 K] ( ( /APPELLANT) ( )*( /RESPONDENT) ( + / APPELLANT BY : MR.V.SREENIVASAN, JCIT )*( + /RESPONDENT BY : MR.G.BASKAR, ADV. + /DATE OF HEARING : 28.08.2017 + /DATE OF PRONOUNCEMENT : 31.10.2017 / O R D E R PER S. JAYARAMAN , ACCOUNTANT MEMBER : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-15 CHENNAI, IN ITA NO.469/CIT( A)-15/13-14 DATED 12.01.2016 FOR THE AY 2007-08. ITA NO.1128/MDS/2016 :- 2 -: 2. M/S. STERLING HOLIDAY FINANCIAL SERVICES LTD., I S ENGAGED IN THE FINANCIAL SERVICES SECTOR. WHILE MAKING THE ASSESS MENT FOR THE A Y 2007- 08 U/S.143(3) R.W.S.147, THE AO FOUND THAT THE AS SESSEE HAS SET OFF THE LONG TERM CAPITAL GAIN OF RS.97,22,163/- AGAINST TH E UNABSORBED DEPRECIATION LOSS OF AY 1998-99 . BASED ON THE ON T HE ITAT SPECIAL BENCH, MUMBAI DECISION IN THE CASE OF TIMES GUARANTY LTD. IN ITA NO.4917/M/2008 (TIOL 340 ITAT MUM SB) DATED 30.06.2 010, THE AO HELD THAT THE UNABSORBED DEPRECIATION ALLOWANCE CAN ONLY BE SET OFF AGAINST PROFIT & GAINS OF BUSINESS AND ALSO FOR NOT BEING MORE THAN EIGHT YEARS. SINCE, THE ASSESSEE HAS CLAIMED SET OFF UNABSORBED DEPRECIATION LOSS PERTAINING TO A Y 1998-99 AGAINST THE LONG TERM CAP ITAL GAINS FOR THE AY 2007-08, THE CLAIM IS NOT ALLOWED. AGGRIEVED, THE A SSESSEE FILED AN APPEAL BEFORE THE CIT (A). THE CIT(A) BY FOLLOWING THE JU DGMENTS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS IN DIA PVT. LTD. VS. DCIT (2013) 354 ITR 244 (GUJ) AND OTHERS REPORTED IN 3 70 ITR 107 (GUJ) & 370 ITR 119 (GUJ) ALLOWED THE APPEAL. AGGRIEVED AGA INST THAT ORDER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROU NDS OF APPEAL: 1. THE ORDER OF THE LD CIT(A) IS CONTRARY TO LAW AND F ACTS OF THE CASE. 2. THE LD CIT(A) DIRECT THE AO TO ALLOW SET OFF OF UNA BSORBED DEPRECIATION AGAINST CAPITAL GAINS. 2.1 THE LD CIT(A) FAILED TO APPRECIATE, EVEN THOUGH THE UNABSORBED DEPRECIATION ALLOWANCE CAN ONLY BE SET OFF AGAINST THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ALSO FOR NOT BEING MO RE THAN EIGHT ASSESSMENT YEARS. 2.2 THE LD CIT(A) FAILED TO APPRECIATE, EVEN THOUGH UNA BSORBED DEPRECIATION FOR THE ASST YEARS 1997-98 TO 2001-02 ONLY NOT EL IGIBLE FOR RELIEF GRANTED BY AMENDED SECTION 32(2) IN ASST YEAR 2002- 03. 2.3 THE LD CIT(A) FAILED TO APPRECIATE , EVENTHOUGH THE SUBSTITUTION OF SECTION 32(1) W.E.F. 2002-03 IS A LIMITED RESPECT OF THE OL D SECTION 32(2) AND ITS ITA NO.1128/MDS/2016 :- 3 -: EFFECT IS THAT UNABSORBED DEPRECIATION OF THE EARL IER PERIOD IS ALLOWABLE UNDER THE NEW PROVISION BUT HAS TO BE DEALT WITH IN ACCORDANCE WITH THE OLD DEPRECIATION AND IS SUBJECT TO THE LIMITATION O F BEING ELIGIBLE FOR SET OFF ONLY AGAINST BUSINESS INCOME FOR EIGHT YEARS 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING. IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE D R PRESENTED THE CASE ON THE LINES OF G ROUNDS OF APPEAL, SUPRA. THE AR RELIED ON THE DECISIONS OF THE HONBLE HIGH COURT OF GUJARAT, BASED ON WHICH THE CIT (A) ALLOWED THE APP EAL. FURTHER, HE RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CAS E OF ACIT VS. M/S. TAMIL NADU CEMENTS CORPORATION LTD., FOR THE A Y 2008-09 IN ITA NO.420/MDS/2017 DATED 29.06.2017. THE RELEVANT POR TION IS EXTRACTED AS UNDER: THE LD.DR PLACED HIS RELIANCE ON THE JUDGME NT OF THE APEX COURT IN PEERLESS GENERAL FINANCE AND INVESTMENT CO . LTD. VS. COMMISSIONER OF INCOME TAX, (2016) 380 ITR 165. 3. ON THE CONTRARY, MS. S.SRINIRANJANI, THE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 32(2) WAS AMENDED W.E.F. 01. 04.2002 BY FINANCE ACT, 2001. AFTER THE AMENDMENT, THE CARRY FORWARD DEPRE CIATION HAS TO BE TREATED AS DEPRECIATION FOR THE CURRENT YEAR AND IT HAS TO BE SET OFF FOR THE SUCCEEDING PREVIOUS YEARS. THE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. EXAMINED THIS ISSUE AND FOUND THAT AFTER THE AMENDM ENT IT CAN BE CARRY FORWARD EVEN AFTER 8 ASSESSMENT YEARS. THIS JUDGMENT OF TH E GUJARAT HIGH COURT WAS FOLLOWED BY THIS TRIBUNAL IN ACIT VS. M/S. SRI RAMA KRISHNA MILLS (COIMBATORE) LTD., ITA 2468/MDS/2014 VIDE ORDER DATED 10.07.2015. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTION 32(2) WAS AME NDED W.E.F. 01.04.2002. THE AMENDED SECTION 32(2) READS AS FOLLOWS: WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFF ECT 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 SEC TION 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 D EPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWAN CE, OR IF THERE IS NO SUCH ITA NO.1128/MDS/2016 :- 4 -: ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. IN VIEW OF THE LATEST PROVISIONS OF SEC. 32(2), TH E DEPRECIATION WHICH CANNOT BE ALLOWED SHALL BE ADDED TO THE AMOUNT OF D EPRECIATION FOR THE FOLLOWING YEAR AND THE SAME SHALL BE TREATED AS INCOME OF THE PREVIOUS YEAR AND DEEMED TO BE ALLOWANCE FOR THAT YEAR. ACCORDINGLY, IT CAN B E CARRY FORWARD EVEN FOR THE SUCCEEDING PREVIOUS YEARS WITHOUT ANY RESTRICTION. SINCE THE PARLIAMENT HAS REMOVED THE RESTRICTION OF 8 SUCCEEDING YEARS W.E.F . 01.04.2002, THE LD.CIT(APPEALS) HAS RIGHTLY PLACING HIS RELIANCE ON THE JUDGMENT OF THE GUJARAT HIGH COURT AND THIS TRIBUNAL DECISION, ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 3.1 FURTHER, THE AR RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S&S POWER SWITCHG EAR LTD. REPORTED IN 218 CTR 0701 AND THE HEAD NOTE OF THE JURISDICTIONA L HIGH COURT DECISION IS EXTRACTED BELOW: DEPRECIATION (UNABSORBED)CARRY FORWARD AND SET OFF EFFECT OF AMENDMENT OF S. 32(2) W.E.F. 1ST APRIL, 1997AS PER CLARIFICATION O F FINANCE MINISTER AS ALSO BY CBDT CIRCULAR NO. 762 DT. 18TH FEB., 1998, UNABSORB ED DEPRECIATION BROUGHT FORWARD AS ON 1ST APRIL, 1997, COULD BE SET OFF AGA INST BUSINESS INCOME OR INCOME UNDER ANY OTHER HEAD FOR ASST. YR. 1997-98 AND SEVE N SUBSEQUENT YEARSTRIBUNAL WAS THEREFORE JUSTIFIED IN ALLOWING SET OFF OF PRIO R YEARS BUSINESS LOSS AND UNABSORBED DEPRECIATION AGAINST SHORT-TERM CAPITAL GAINSNO SUBSTANTIAL QUESTION OF LAW ARISES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE MATERIAL. SINCE THE FACTS AND POSITION OF LAW REM AIN SAME, FOLLOWING THE ABOVE DECISIONS, WE HOLD THAT DECISION OF THE CIT (A) DOES NOT REQUIRE ANY INTERFERENCE AND HENCE DISMISS THE REVENUES APPEAL. ITA NO.1128/MDS/2016 :- 5 -: 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( S. JAYARAMAN ) /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: OCTOBER 31, 2017. TLN + )23 43 /COPY TO: 1. ( /APPELLANT 4. 5 /CIT 2. )*( /RESPONDENT 5. 3 ) /DR 3. 5 ( ) /CIT(A) 6. % /GF