THE DCIT, CIRCLE - 2(1), Vijayawada V. The Krishna District Mutually Aided Co-Op. Union Ltd., Vijayawada

ITA 115/VIZ/2014

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9650 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SHANKAR NARAYAN
• Keywords: Depreciation; Retrospective amendment; Unabsorbed depreciation
• Section: 143(3); 32; 154

Judgement Text

ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.115/VIZAG/2014 ( / ASSESSMENT YEAR:2009-10) DCIT, CIRCLE - 2(1), VIJAYAWADA VS. THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA [PAN: AAAAT2578D ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI RAVI SHANKAR NARAYAN, DR / RESPONDENT BY : SHRI C. SUBRAHMANYAM, AR / DATE OF HEARING : 20.12.2016 / DATE OF PRONOUNCEMENT : 30.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A), VIJAYAWADA DATED 15.1.2014 AND IT PERTAINS TO THE ASSESSMENT YEAR 2008-09. ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., IS ENGAGED IN THE BUSINESS OF PROCUREMENT AND SALE OF MILK AND ALSO M ANUFACTURING AND SALE OF MILK PRODUCTS. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.9.2008 DECLARING NIL TOTAL INCOME AFTER SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION AT ` 1,00,91,204/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') ON 23.12.2010 ACC EPTING THE INCOME RETURNED BY THE ASSESSEE. SUBSEQUENTLY, THE A.O. F OUND THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE O F ` 1,00,91,204/- (OUT OF ` 1,74,14,850/-) RELATING TO ASSESSMENT YEAR 1997-98 , WHICH WAS WRONGLY ALLOWED WHILE COMPLETING ASSESSMENT U/S 143 (3) OF THE ACT AND HENCE, AN ORDER U/S 154 OF THE ACT, WAS PASSED ON 1 5.3.2012 WITHHOLDING THE UNABSORBED DEPRECIATION LOSS PERTAI NING TO THE ASSESSMENT YEAR 1997-98 AND THE TOTAL INCOME WAS DE TERMINED AT ` 58,82,403/-. WHILE DOING SO, THE A.O. HELD THAT THE UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR PRIOR TO A SSESSMENT YEAR 2002- 03 CAN BE CARRIED FORWARD AND SET OFF AGAINST INCOM E UP TO 8 YEARS ONLY AS PER SUB SECTION 2 OF SECTION 32 OF THE ACT AND H ENCE HELD THAT UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1997-98 CANNOT BE SET OFF AGAINST INCOME OF ASSESSMENT YEAR 2008-09. ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 3 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS FILED WRITTEN SUBMISSIONS AND CONTENDED THAT THERE IS NO RESTRICTION AS TO CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N RELATING TO ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 2002-03 A ND IT CAN BE CARRIED FORWARD WITHOUT ANY RESTRICTIONS IN VIEW OF THE AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT, BY THE FINA NCE ACT, 2001 W.E.F. ASSESSMENT YEAR 2002-03. THE ASSESSEE FURTHER SUBM ITTED THAT WHILE AMENDING THE ACT, THE LEGISLATURE HAS WITH ITS WISD OM TO CLEAR THE HARDSHIP CAUSED TO THE ASSESSEE HAS DISPENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED D EPRECIATION. THEREFORE, THE A.O. WAS INCORRECT IN DISALLOWING UN ABSORBED DEPRECIATION PERTAINING TO THE ASSESSMENT YEARS PRIOR TO ASSESSM ENT YEAR 2002-03. IN SUPPORT OF HIS ARGUMENTS RELIED UPON THE DECISIO N OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF GENERAL MOTORS INDI A PVT. LTD. VS. DCIT REPORTED IN (2012) 210 TAXMAN 20. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF HONBLE HIGH COURT OF GUJARAT, IN THE CASE OF GENER AL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA), HELD THAT THE ASSESSEE IS EL IGIBLE FOR SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YE AR 1997-98, SINCE THE LIMIT OF 8 YEARS OF CARRY FORWARD AND SET OFF O F UNABSORBED ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 4 DEPRECIATION IS NOT APPLICABLE TO THE CASE OF THE A SSESSEE. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE U S. 4. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) FAILE D TO TAKE THE COGNIZANCE OF THE FACT THAT AS PER THE PROVISIONS O F SUB SECTION 2 OF SECTION 32 OF THE ACT, UNABSORBED DEPRECIATION ALLO WANCES PERTAINING TO ASSESSMENT YEAR 1997-98 CANNOT BE ALLOWED TO SET OF F BEYOND ASSESSMENT YEAR 2005-06 AS THERE WAS A RESTRICTION FOR CARRY FORWARD OF UNABSORBED DEPRECIATION BEYOND 8 YEARS. AMENDMENT BROUGHT INTO THE SECTION 32(2) BY THE FINANCE ACT, 2001 W.E.F. 1.4.2 002 IS APPLICABLE FOR THE ASSESSMENT YEAR 2002-03 ONWARDS AND HENCE ANY U NABSORBED DEPRECIATION PERTAINS TO PERIOD PRIOR TO ASSESSMENT YEAR 2002-03 CAN BE CARRIED FORWARD ONLY UP TO 8 ASSESSMENT YEARS. THE LD. D.R. REFERRING TO THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF GEM GRANITES VS. CIT 271 ITR 322 SUBMITTED THAT UNLESS EXPRESSLY STA TED OR CLEARLY IMPLIED, NO RETROSPECTIVE EFFECT OF AMENDED PROVISI ONS. THE PROVISIONS ARE VERY CLEAR. AS PER THE PRE-AMENDED PROVISIONS, UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD UP TO 8 ASSESSM ENT YEARS AND THUS THE UNABSORBED DEPRECIATION LOSS PERTAINING TO ASSE SSMENT YEAR 1997-98 CANNOT BE ALLOWED TO CARRY FORWARD BEYOND THE ASSES SMENT YEAR 2005- 06. THE A.O. RIGHTLY DISALLOWED UNABSORBED DEPRECI ATION AND HIS ORDER SHOULD BE UPHELD. ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 5 5. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTING THE ORDER OF THE CIT(A), SUBMITTED THAT THE PROVISIONS OF SUB SECTION 2 OF SECTION 32 OF THE ACT HAS BEEN AMENDED BY THE FINANCE ACT, 2001 W.E.F. 1.4.2002 AS PER WHICH, THERE IS NO SUCH LIMITATION FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION BEYO ND 8 YEARS. THE A.R. FURTHER SUBMITTED THAT THE LAW STOOD AS ON THE DATE OF FILING OF THE RETURN IS APPLICABLE, AS PER WHICH THE AMENDED PROV ISIONS CAME INTO EFFECT FROM THE ASSESSMENT YEAR 2002-03 ONWARDS AND HENCE THE ASSESSEE CAN CARRY FORWARD UNABSORBED DEPRECIATION OF ANY PERIOD PRIOR TO ASSESSMENT YEARS 2002-03. THE ABOVE SUBMISSIONS ARE SUPPORTED BY THE CIRCULAR ISSUED BY THE BOARD VIDE CIRCULAR NO.1 4 OF 2001, WHICH HAS BEEN CONSIDERED BY THE HONBLE GUJARAT HIGH COURT, IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA), WH EREIN IT WAS CLEARLY HELD THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON FIRST DAY OF APRIL, 2002 (ASSESSMENT YEAR 2002-03) WILL B E DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT, AS AMENDED BY FINANCE ACT, 2001. THEREFORE, THERE IS NO RESTR ICTION AS TO CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION OF A NY PERIOD PRIOR TO ASSESSMENT YEAR 2002-03. THE CIT(A) AFTER CONSIDER ING THE RELEVANT PROVISIONS AND ALSO BY FOLLOWING THE DECISION OF HO NBLE HIGH COURT OF ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 6 GUJARAT HAS RIGHTLY DELETED ADDITIONS MADE BY THE A .O. AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE LIMITED ISSUE CAME UP FOR OUR CONSIDERATION IS WHET HER UNABSORBED DEPRECIATION OF ASSESSMENT YEARS PRIOR TO ASSESSMEN T YEAR 2002-03 CAN BE CARRIED FORWARD AND SET OFF BEYOND 8 YEARS. THE CARRY FORWARD OF UNABSORBED DEPRECIATION IS REGULATED BY PROVISIONS OF SECTION 32(2) OF THE ACT. PRIOR TO AMENDMENT BY THE FINANCE ACT, 20 01 W.E.F. ASSESSMENT YEAR 2002-03, THE PROVISIONS OF SECTION 32(2) OF THE ACT, RESTRICTS CARRY FORWARD AND SET OFF OF UNABSORBED D EPRECIATION BEYOND 8 ASSESSMENT YEARS. THE AMENDED PROVISIONS OF SECTIO N 32(2) OF THE FINANCE ACT, 2001 W.E.F. ASSESSMENT YEAR 2002-03 HA S DISPENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SE T OFF OF UNABSORBED DEPRECIATION. ACCORDINGLY, UNABSORBED DEPRECIATION OF ANY PERIOD CAN BE SET OFF FOR UNLIMITED PERIOD WITHOUT ANY RESTRIC TIONS. THE BOARD HAS ISSUED A CIRCULAR NO.14 OF 2001, WHEREIN IT WAS CLA RIFIED THAT WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY SPECIALLY IN AN ERA WHERE OBSOLESCENCE TA KES PLACE SO OFTEN, THE ACT HAS DISPENSED WITH THE RESTRICTION OF 8 YEA RS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE ACT HA S ALSO CLARIFIED THAT IN ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 7 COMPUTING THE PROFITS & GAINS OF BUSINESS OR PROFES SION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION U/S 32 OF THE ACT S HALL BE MANDATORY. 7. THE SCOPE OF SAID CIRCULAR HAS BEEN EXAMINED BY THE HONBLE HIGH COURT OF GUJARAT, IN THE CASE OF GENERAL MOTORS IND IA PVT. LTD. VS. DCIT (SUPRA) AND AFTER CONSIDERING AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT AND SCOPE OF THE CIRCULAR ISSUED BY THE BOARD, OBSERVED THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON FIRST DAY OF APRIL, 2002 WILL BE DEALT WITH, IN ACCORDANCE WITH THE PRO VISIONS OF SECTION 32(2) OF THE ACT, AS AMENDED BY FINANCE ACT, 2001 A ND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 Y EARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DIS PENSED WITH, THE UNABSORBED DEPRECIATION FROM ASSESSMENT YEAR 1997-9 8 UP TO THE ASSESSMENT YEAR 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF AND IT CAME TO BE G OVERNED BY THE PROVISIONS OF SECTION 32(2) OF THE ACT, AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AG AINST THE PROFITS & GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSO EVER. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: THE ISSUE WAS CONSIDERED BY THE HONBLE GUJARAT HIG H COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA) AHMED ABAD WHEREIN IT WAS HELD THAT CURRENT DEPRECIATION IS DEDUCTIBLE IN TH E FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSIN ESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FRO M ANY OTHER BUSINESS ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 8 OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INC OME FROM ANY SOURCE UNDER ANY OF THE OTHER HEDS OF INCOME DURING THAT Y EAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS U NABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THE RE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UBABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDI NG YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT D EPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOME S THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SE T OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBE D DEPRECIATION FROM A.Y. 1997-98 UPTO THE A.Y. 2001-02 GOT CARRIED FORW ARD TO THE AY 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND W ERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND G AINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. SINCE THIS DECISION IS IN FAVOUR OF ASSESSEE AND F ROM HIGHER JUDICIAL AUTHORITY, THE ITAT IS BOUND BY THE DECISION OF THE GUJARAT HIGH COURT IN PREFERENCE TO THE SPECIAL BENCH DECISION OF THE ITA T. THERE IS NO CONTRARY JUDGEMENT TO THE ABOVE. THEREFORE, RESPEC TFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT ON THE ISSUE , AO WAS DIRECTED TO ALLOW THE SET OFF OF UNABSORBED DEPRECIATION PERTAI NING TO AY 1997-98 AS PER THE RECORDS. 8. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT OF GUJARAT, IN THE C ASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA), WE ARE OF THE VIE W THAT THERE IS NO RESTRICTION AS TO CARRY FORWARD AND SET OFF OF UNAB SORBED DEPRECIATION OF ANY PERIOD PRIOR TO ASSESSMENT YEAR 2002-03 FOR UNL IMITED PERIOD. THE AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT, BY THE FINANCE ACT, 2001 W.E.F. 2002-03 HAS BEEN AMENDED WITH A VIEW TO DISPENSE WITH THE RESTRICTION OF 8 YEARS TO ENABLE THE INDUSTRY TO CO NSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY. THEREFORE, WE ARE OF THE VIEW THAT THE ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 9 A.O. WAS ERRED IN RESTRICTING CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION OF ASSESSMENT YEAR 1997-98. THE CIT(A ) AFTER CONSIDERING THE RELEVANT PROVISIONS OF THE ACT, HAS RIGHTLY DIR ECTED THE A.O. TO ALLOW CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N OF ASSESSMENT YEAR 1997-98. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE CIT(A). HENCE, WE INCLINED TO UPHELD THE CIT(A) OR DER AND DISMISS APPEAL FILED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 30.12.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT THE KRISHNA DISTRICT MUTUALLY A IDED CO-OP. UNION LIMITED, MILK PROJECT FACTORY, LAMBADIPET, CHITTINA GAR, VIJAYAWADA-520 009. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA ITA NO.115/VIZAG/2014 THE KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OP. UNION LTD., VIJAYAWADA 10 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM