ACIT 1(1), MUMBAI V. BIFORA WATCH CO. LTD, MUMBAI

ITA 1205/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84058 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETAM SINGH
• Assessee Lawyers: N H GAHRIA
• Keywords: Reopening of assessment; Depreciation; Period of limitation; Time period of passing order; Unabsorbed depreciation
• Section: 32; 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI . . , !' , # $ BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 1205/MUM/2013 ( % % % % / ASSESSMENT YEAR : 2007-08 THE DCIT-1(1), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. BIFORA WATCH CO. PVT. LTD., MISTRY BHAVAN, DINSHAW WACHHA ROAD, CHURCHGATE, MUMBAI-400 001 & # ./ '( ./ PAN/GIR NO. : AAACB 4498C ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY: SHRI PREETAM SINGH *+&) - , / RESPONDENT BY: SHRI N.H. GAHRIA - ./# / DATE OF HEARING :05.11.2014 01% - ./# / DATE OF PRONOUNCEMENT :05.11.2014 2 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-1, MUMBAI DT.30.11.2012 PERTAINING TO A. Y.2007-08. 2. THE SOLE GRIEVANCE OF THE REVENUE READS AS UNDER : ITA NO. 1205/M/2013 2 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE IS SUES RELATING TO RE-OPENING OF ASSESSMENT U/S. 147 AND DISALLOWANCE OF SET-OFF OF BROUGHT FORWARD DEPRECIA TION RELYING ON THE JUDGEMENT OF GUJARAT HIGH COURTS DE CISION IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. REPOR TED IN 25 TAXMAN.COM.364. 3. THE ASSESSEE IS MANUFACTURING PRESS METAL COMPON ENTS ON LABOUR JOB BASIS. THE RETURN OF INCOME WAS FILED ON 31.10 .2007 DECLARING TOTAL INCOME OF RS. 2,85,86,837/-. THE RETURN WAS SELECT ED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS MADE VIDE ORDER D T. 16.12.2009. THE ASSESSMENT WAS REOPENED VIDCE NOTICE U/S. 148 DT. 3 1.3.2011. THE REASONS FOR REOPENING THE ASSESSEE READ AS UNDER: ON PERUSAL OF THE RECORDS, IT WAS OBSERVED THAT TH ERE HAS BEEN IRREGULAR SET OFF OF UNABSORBED DEPRECIATI ON OF RS.13,96,46,904/-. AS PER PROVISIONS OF SECTION 32 OF I.T. ACT, UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD FOR INDEFINITE PERIOD AND IT CAN BE SET OFF AGAINST ANY HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD SALARY BUT NO UNABSORBED DEPRECIATION RELEVANT TO A. Y. 1997-98 TO 2001- 02 CAN BE CARRIED FORWARD AND SET OFF AGAINST ANY O THER HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD BUSIN ESS OR PROFESSION FOR MORE THAN 8 YEARS IMMEDIATELY SUCCEE DING A. Y. FOR WHICH A LOSS WAS FIRST COMPUTED. SIMILARLY B ROUGHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE FOR AN U PTO A. Y. 1996-97, WHICH COULD NOT BE SET OFF UPTO A, Y. 1 996-97 SHALL BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF 8 ASSESSMENT YEARS STA RTING FROM A.Y 1997-98, I.E. UPTO A.Y. 2004-05. THE ABOVE VIEW HAS BEEN SUPPORTED BY THE SPECIAL BENCH OF ITAT, M UMBAI DATED 30.06.2010 IN THE CASE OF DCIT VS. TIMES GUAR ANTEE LTD. IN THIS CASE, UNADJUSTED UNABSORBED DEPRECIATION OF RS. 13,96,46,904/- INCLUDES UNABSORBED DEPRECIATIO N OF RS. 11,00,36,887/- PERTAINING TO A.Y. 1991-92 TO 1996-9 7 AND RS. 2,89,19,245/- PERTAINING TO A.Y. 1997-98 TO 200 1-02. AS ITA NO. 1205/M/2013 3 PER THE ABOVE CITED DECISION, UNABSORBED DEPRECIATI ON PERTAINING TO A.Y. 1991-92 TO 1996-97 WAS NOT ELIGI BLE FOR SET OFF AS THE 8 YEARSS LIMITATION PERIOD EXPIRED IN 2004-05. SIMILARLY, UNABSORBED DEPRECIATION PERTAINING TO A. Y. 1997- 98 TO 2001-02 WAS ELIGIBLE FOR SET OFF UPTO 8 SUCCE EDING ASSESSMENT YEARS AND THAT TOO ONLY AGAINST INCOME F ROM PROFITS AND GAINS OF ANY BUSINESS OR PROFESSION. T HUS, ADJUSTMENT OF UNABSORBED DEPRECIATION RELEVANT TO A .Y. 1991-92 AND 1996-97 AND 1997-98 TO 2001-02 AGAINST INCOME FROM CAPITAL GAINS IN THE CURRENT YEAR WAS I RREGULAR WHICH RESULTED IN UNDER ASSESSMENT AND EXCESS BENEF IT OF CARRY FORWARD OF MAT CREDIT TO THE EXTENT OF RS. 57 ,14,231. 4. CONSIDERING THE VARIOUS AMENDMENTS BROUGHT TO SE C. 32 OF THE ACT, THE ASSESSING OFFICER BIFURCATED THE UNADJUSTED DEP RECIATION AND AS PER THE BIFURCATION, FIRST UNADJUSTED DEPRECIATION ALLO WANCE OF RS. 11,00,36,887/- COULD BE SET OFF UPTO A.Y. 2004-05, THE SECOND UNADJUSTED DEPRECIATION ALLOWANCE OF RS. 2,89,19,245/- COULD B E SET OFF ONLY AGAINST INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION WITHIN A PERIOD OF 8 ASSESSMENT YEARS. ACCORDING TO THE A O, THE ASSESSEE CANNOT SET OFF THIS AGAINST CAPITAL GAINS IN A.Y. 2007-08 AND THE THIRD UNADJUSTED DEPRECIATION ALLOWANCE OF RS. 6,90,772/- COULD BE S ET OFF AGAINST INCOME UNDER ANY HEAD IN PERPETUITY. THE AO CONCLUDED THE ASSESSMENT BY DISALLOWANCE OF SET OFF OF UNABSORBED DEPRECIATION FOR A.YRS 1991-92 TO 1996-07 RS. 11,00,36,887/- AND FOR A.Y. 1997-98 TO 2001-02 RS. 2,89,19,245/-. 5. THE ASSESSEE CHALLENGED THE REOPENING OF THE ASS ESSMENT AS WELL AS DISALLOWANCES MADE BY THE AO BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED BEFORE THE LD. CIT(A) THAT THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS TIMES GUAR ANTY LTD IS NOW IMPLIEDLY OVERRULED BY THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF ITA NO. 1205/M/2013 4 GENERAL MOTORS INDIA PVT. LTD. 25 TAXMAN.COM.364. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE DECISIONS BRO UGHT TO THE NOTICE AND RELYING UPON THE CIRCULAR NO. 14 OF 2001 ISSUED BY THE CBDT, THE LD. CIT(A) FINALLY CONCLUDED BY HOLDING AS UNDER: IN MY CONSIDERED OPINION THE BIFURCATION OF DEPRE CIATION MADE BY THE AO AS PER THE RATIO OF THE DECISION IN THE CASE OF TIMES GUARANTY LTD. (SUPRA) DOES NOT HELD GOOD AFT ER THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA). SINCE HON BLE GUJARAT HIGH COURT HAS OPINED ON THE SAME ISSUES, R AISED IN APPEAL BEFORE ME REGARDING REOPENING OF ASSESSMENT , AS WELL AS ON DISALLOWANCE OF SET OFF OF BROUGHT FORWA RD DEPRECIATION OF RS. 13,89,56,132/-, THEREFORE, RES PECTFULLY FOLLOWING THE DECISION OF HONBLE HIGH COURT, THE A PPEAL IS ALLOWED ON BOTH THE ISSUES. GROUNDS OF APPEAL NOS . 1-3 REGARDING REOPENING OF ASSESSMENT U/S. 147 AND GRO UNDS OF APPEAL NOS. 4-7 REGARDING THE DISALLOWANCE OF SET OFF OF BROUGHT FORWARD DEPRECIATION, ARE ALLOWED. 6. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL M OTORS INDIA LTD. (SUPRA) HAS PRACTICALLY OVERRULED THE DECISION OF T HE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TIMES GUARANTY LTD. IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE HONBLE GUJARAT HIGH COURT, THEREFORE, NO INTERFERENCE IS CALLED F OR. 7.1. SINCE THE REOPENING WAS MADE TO DISALLOW THE C LAIM OF SET OFF OF DEPRECIATION WHICH THE ASSESSEE IS ELIGIBLE AS PER THE DECISION OF THE HONBLE GUJARAT HIGH COURT, THE ISSUE RELATING TO T HE REOPENING OF THE ASSESSMENT BECOMES OTIOSE. ITA NO. 1205/M/2013 5 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH NOVEMBER, 2014. SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER MUMBAI; 3 DATED : 05.11.2014 . . ./ RJ , SR. PS 2 2 2 2 - -- - *. *. *. *. 4%. 4%. 4%. 4%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 67 *. , , / DR, ITAT, MUMBAI 6. 78 9 / GUARD FILE. 2 2 2 2 / BY ORDER, +. *. //TRUE COPY// : :: : / ; ; ; ; ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI