Visakha Industries Ltd., Secunderabad V. DCIT, Hyderabad

ITA 1224/HYD/2007

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5835 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 24-12-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: M V ANIL KUMAR; SADASIVA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 80HHC; 32; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1224/HYD/2007 ASST. YEAR : 2001-2002 M/S VISAKHA INDUSTRIES LTD., SECUNDERABAD (AAACV 7263 K) VS THE DCIT, CIRCLE 3 (3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI SADASIVA & M.V. ANIL KU MAR RESPONDENT BY: SMT. VASUNDHARA SINHA, D R O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS D IRECTED AGAINST THE ORDER PASSED BY THE CIT(A) IV, HYDERABAD DATED 28/9/2 007 AND PERTAINS TO THE ASSESSMENT YEARS 2001-02. 2. IN THIS CASE THE ASSESSEES GRIEVANCE IS WITH REFE RENCE TO PASSING ORDER U/S 154 BY THE CIT(A) THEREBY RE-DETERMI NING THE SEC.80HHC DEDUCTION AFTER SETTING OFF OF THE UNABSORBED D EPRECIATION OF EARLIER YEARS. THE BRIEF FACTS OF THE CASE ARE THAT THE CIT(A) PASSED THE ORDER U/S 250 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSME NT YEAR 2001-02 ON 21/10/2004. SUBSEQUENTLY THE DCIT, CIRCLE 3(3), HYDERABAD VIDE AN APPLICATION DATED 5.3.2007 HAS MOVED A PETITION U/S 154 OF THE IT ACT SEEKING RECTIFICATION OF AN APPARENT MISTAKE IN RESPECT OF COMPUTATION OF PROFIT UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION FOR THE PURPOSE OF DEDUCTION U/S 80HHC. 2 2 3. IT IS SEEN FROM THE RECORDS THAT WHILE COMP LETING THE ASSESSMENT U/S 143(3), THE ASSESSING OFFICER HAD CALCULATED THE DEDUCTION U/S. 80HHC BY TAKING THE BUSINESS INCOME OF THE A PPELLANT AT RS.5,13, 85,303/- WHICH WAS ARRIVED AT AFTER SET OFF TH E UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEAR (ASST. YEAR 2000-01) AMOUNTING TO RS.4,16, 88, 833/- FROM THE CURRENT YEAR S BUSINESS INCOME OF RS.9,30,74,136/-. AFTER MAKING VARIOUS ADJUST MENTS AS PRESCRIBED IN SEC.80HHC THE ADJUSTED BUSINESS PROFIT WAS WORK ED OUT AT A FIGURE OF RS.1,46, 78,992/- ON WHICH DEDUCTION U/S 80 HHC WAS COMPUTED AT RS.43, 69,352/-. 4. WHILE PASSING THE APPELLATE ORDER THAT TH E CIT(A) IN ITS ORDER DATED 21.10.2004, HE HAS OPINED THAT CARRY FORWARD L OSSES ARE NOT REQUIRED TO BE SET OFF FOR THE PURPOSE OF COMPUTING DE DUCTION U./S. 80HHC. ACCORDINGLY THE CIT(APPEALS) DIRECTED THE FIGURE O F RS.9,30,74,136/- AS PROFITS OF THE BUSINESS. 5. RELYING ON THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF IPCA LABORATORIES LTD VS. DCIT IN ( 266 ITR 521), THE ASSESSING OFFICER IN HIS PETITION HAS SOUGHT SET OFF OF UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS FROM THE CURRENT Y EARS PROFITS AND SUBMITTED THAT ONLY THE NET AMOUNT AFTER SUCH ADJUSTMEN T HAS TO BE TAKEN AS INCOME UNDER THE HEAD PROFITS AND GAINS OF TH E BUSINESS OR PROFESSION. THE ASSESSING OFFICER HAS FURTHER SUBMITTED TH AT THE AMOUNT OF RS.4,61,88,833 WAS REFERRED TO IN THE ASSESSMENT ORDER AS CARRY FORWARD LOSSES, SAME WAS ACTUALLY IN THE FORM OF UNABSORBE D DEPRECIATION BROUGHT FORWARD FROM THE ASSESSMENT YEAR 2 000-01. HE HAS CONTENDED THAT EVEN WITHOUT THE BENEFIT OF RATIO OF DECISION OF HONBLE SC IN THE CASE OF IPCA LABORATORIES LTD., THE L EGAL POSITION IS THAT UNABSORBED DEPRECIATION OF EARLIER YEARS IS TREATE D AS PART OF 3 3 CURRENT YEARS DEPRECIATION U/S 32(2) OF THE IT ACT AND ADJUSTED AGAINST THE BUSINESS PROFITS OF THE CURRENT YEAR. 6. THE CIT(A) AFTER CONSIDERING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES VS. DCIT (SC) (266 ITR 521) AND IN THE CASE OF CIT VS. SHIRKE CONSTRUCTION EQUI PMENTS LTD. (SC) (291 ITR 380), DIRECTED THE ASSESSING OFFICER TO SET OFF OF THE UNABSORBED DEPRECIATION OF EARLIER YEARS OUT OF PROFIT AND GAINS OF CURRENT ASSESSMENT YEAR AND THEREAFTER DETERMINE THE DED UCTION U/S 80HHC. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE AUTHORISED REPRESENTATIVE SUBMITTED THAT THE IMPUGNED RECTIFICATION IS NOT POSSIBLE U/S 154 OF THE ACT. HE SUBMIT TED THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. NAMEEL L EATHERS & UPPERS (MADRAS HC) (273 ITR 350) CONSIDERED SIMILAR ISSUE A ND WHEREIN IT WAS HELD THAT: 'THAT EVEN THOUGH LOSSES SHOULD BE DEDUCTED FROM TH E PROFIT AVAILABLE FOR THE PURPOSE OF COMPUTATION OF RELIEF U/S 80HHC OF THE INCOME TAX ACT, 1961 SINCE THE QUESTION OF RELIEF U/S 80HHC OF THE ACT IS A DEBATABLE ISSUE WHICH DOES NOT FALL WITHIN THE PURVIEW OF PRIMA FAC IE ADJUSTMENT U/S 143(1) (A) OF THE ACT AND COULD BE TAKEN UP IN REGULAR ASS ESSMENT U/S 143(3) OF THE ACT, THE ACTION OF REVENUE INVOKING SECTION 154 OF THE ACT TO RECTIFY THE INTIMATION U/S 143 (1) (A) OF THE ACT WAS NOT VALID .' FURTHER, HE SUBMITTED THAT THE ISSUE IN DISPUTE IS NOT A T ALL THE SUBJECT MATTER OF JUDGMENT IN THE CASE OF 266 ITR 521 CITED SUP RA AND ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE RECTI FICATION U/S 154 OF THE IT ACT, IS NOT POSSIBLE ON THIS ISSUE. 8. ON THE OTHER HAND THE DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THERE IS AN APPARENT MISTAKE IN THE ORDER OF THE CIT(A) ORIGINALLY PASSED ON 21.10.2004 THAT AN AMOUNT OF RS.4,61,88,833 /- WAS REFERRED BY THE CIT(A) IN ITS ORIGINAL ORDER AS CARRIED FORWAR D LOSSES INSTEAD OF 4 4 UNABSORBED DEPRECIATION BROUGHT FORWARD FROM ASSESSMENT Y EAR 2000- 01. SHE SUBMITTED THAT UNABSORBED DEPRECIATION OF EAR LIER YEARS TO BE TREATED AS PART OF CURRENT YEARS DEPRECIATION U/S 32 (2 ) OF THE ACT AND TO BE ADJUSTED AGAINST THE BUSINESS PROFIT OF THE CURRENT YEAR. THIS MATERIAL FACT WAS NOT PROPERLY CONSIDERED BY THE CIT(A) IN ITS ORDER DATED 21.10.2004 BEARING NO.0040/AC-3(4)/CIT(A)/04- 05, AS SUCH THE RECTIFICATION REQUIRED TO BE PASSED. SHE RELIED ON THE FOLLOWING JUDGMENTS: 1. CIT VS. SHIRKE CONSTRUCTION EQUIPMENT LTD. ) ( SC) (291 ITR 380) 2. CIT VS. SUBHOCHANDRA S. PATEL (GUJ. HC) (265 I TR 445) 3. SHRI B. V. K. SESHAVATARAM & OTHERS VS. CIT (2 10 ITR 633) (A.P. HC) 4. ORDER OF THE TRIBUNAL , HYDERABAD B BENCH IN THE CASE OF M/S GMR TECHNOLOGIES AND INDUSTRIES (P) LTD. (FORMERLY GMR VASAVI INDUSTRIES LTD.) IN ITA NO.1229/HYD/2003 FOR THE ASSESSMENT YEARS 1997- 98 DATED 24.8.2006. 5. ORDER OF THE TRIBUNAL , BENCH A (SMC) IN THE CASE OF M/S SUDEX, HYDERABAD IN ITA NO.565/HYD/98 FOR THE ASSESSMENT Y EARS 1993-94 DATED 29.3.2004. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. IN THIS CASE, THE CIT (A) IN ITS ORDER DATED 21 .10.2004 WHILE PASSING THE ORDER CONSIDERED THE LOSS AT RS.4,61,88,833 AS CARRY FORWARD LOSSES THOUGH IT WAS ACTUALLY UNABSORBED DEPRECIAT ION BROUGHT FORWARD FROM THE ASSESSMENT YEARS 2000-01. THE CIT(A) O BSERVED THAT CARRY FORWARD LOSSES ARE NOT REQUIRED TO BE SET OFF FROM BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80HHC. IN VIEW OF THE JUDGMENT IN THE CASE OF CIT VS. SHIRKE CONSTRUCTION EQUI PMENT LTD. (SC) (291 ITR 380), THE UNABSORBED DEPRECIATION HAS TO BE SET OFF OF AGAINST THE BUSINESS PROFIT OF THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC. IN THE CASE OF GUJARA T HIGH COURT IN THE CASE OF CIT VS. SUBO CHANDRA PATEL (265 ITR 44 5), IT WAS HELD THAT, NON CONSIDERATION OF JUDGMENT OF JURISDICTIONAL HIGH COURT OR APEX COURT WOULD ALWAYS CONSTITUTE MISTAKE APPARENT FROM THE RECORDS 5 5 REGARDLESS WHETHER THE JUDGMENT WAS RENDERED PRIOR TO OR SUBSEQUENT TO THE YEAR PROPOSED TO BE RECTIFIED. FURTHER, THE J URISDICTIONAL HIGH COURT IN THE CASE OF (210 ITR 633) CITED (SUPRA) WHEREI N IT WAS HELD THAT A SUBSEQUENT DECISION CAN VALIDLY FORM THE BASIS FOR RECTIF YING AN ORDER OF ASSESSMENT YEAR U/S 154 OF THE ACT. 10. IN VIEW OF THE ABOVE JUDGMENTS OF THE HONBLE SUPREME COURT AND JURISDICTIONAL HIGH COURT, WE ARE OF THE OPINION T HAT THE CIT(A) HAS JUSTIFIED IN PASSING THE ORDER U/S 154 OF THE ACT ON THE IMPUGNED ISSUED. SINCE WE HAVE FOLLOWED JUDGMENT OF APEX COURT AND JU RISDICTIONAL HIGH COURT, WE ARE DECLINED TO COMMENT ON THE JUDGMENT REL IED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 26TH MARCH, 201 0 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 26TH MARCH , 2010 COPY FORWARDED TO: 1 C/O SHRI M. ANANDAM & CO., CA, 7 A SURYA TOWERS, S P ROAD, SECUNDERABAD 2 DCIT, CIRCLE 3 (3), HYDERABAD 3. CIT(A)-. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP