DCIT, CHENNAI V. AB Medical Centres Ltd., CHENNAI

ITA 1273/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68738 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1273/MDS/2013 ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(1), CHENNAI-34 (APPELLANT) VS M/S. AB MEDICAL CENTRES LTD., ALI TOWERS, 3 RD FLOOR, NO.55, GREAMS ROAD, CHENNAI 600 006. [PAN: AADCA 1051 F] (RESPONDENT) REVENUE BY : SHRI T.N. BETGERI, JCIT ASSESSEE BY : SHRI K. BALASUBRAMANIAN, ADVOCATE DATE OF HEARING : 25-09-2013 DATE OF PRONOUNCEMENT : 25-09-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, CHEN NAI DATED 27-12-2012 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 6-07. 2. THE ASSESSEE IS IN THE BUSINESS OF LEASING BUILD INGS AND HOSPITAL EQUIPMENTS. RENT FROM THE BUILDING IS OFF ERED AS INCOME I.T.A. NO. 1273/MDS/2013 2 FROM HOUSE PROPERTY AND LEASE INCOME FROM EQUIPMEN T IS OFFERED AS INCOME FROM BUSINESS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY. 2006-07 ON 21-06-2006 DECLARING ITS INC OME AS ` 15,02,778/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSE E ON 26-06-2007. DURING THE COURSE OF SCRUTINY ASSESSME NT, THE ASSESSING OFFICER DIS-ALLOWED SET-OFF OF UN-ABSORBE D DEPRECIATION RELATING TO THE AY. 1993-94 TO AY. 2002-03. THE CONTENTION OF THE ASSESSING OFFICER WAS THAT THE UN-ABSORBED DEPRECIA TION CANNOT BE CARRIED FORWARD FOR A PERIOD OF MORE THAN EIGHT YEARS IMMEDIATELY SUCCEEDING THE AY FOR WHICH SUCH ALLOWA NCE WAS FIRST COMPUTED AS PER THE PROVISIONS OF SECTION 32(2) AS IT EXISTED PRIOR TO 01-04-2002. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 29-08 -2008, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS). THE CIT(APPEALS) VIDE IMPUGNED ORDER HELD THAT THE FINA NCE ACT, 2000 AMENDED THE PROVISIONS OF SECTION 32(2) AND HAS UN- DONE THE AMENDMENT CARRIED OUT IN 1996 AND RESTORED THE STATUS-QUO ANTE, MEANING THEREBY THERE IS NO CAP OF EIGHT YEARS FOR CARRYING FORWARD THE UN-ABSORBED DEPRECIATION. THE CIT(APPEALS) ALL OWED THE APPEAL OF THE ASSESSEE. I.T.A. NO. 1273/MDS/2013 3 AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS), TH E REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI T.N. BETGERI, APPEARING ON BEHALF OF THE RE VENUE STRONGLY SUPPORTING THE ASSESSMENT ORDER PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT(APPEALS). 4. ON THE OTHER HAND, SHRI K. BALASUBRAMANIAN, ADVO CATE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE UN-ABSORBED DEPREC IATION EVEN BEYOND EIGHT YEARS IN VIEW OF THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2001. THE LD. AR OF THE ASSESSEE STRO NGLY SUPPORTED THE ORDER OF THE CIT(APPEALS) AND SUBMITTED THAT TH E CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD., VS. DCIT REPORTED AS 257 CTR (GUJ)123 . 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGMENT RELIE D ON BY THE LD. COUNSEL FOR THE ASSESSEE. THE ONLY ISSUE IN THE AP PEAL IS WHETHER THE ASSESSEE IS ENTITLED TO SET-OFF OF UN-ABSORBED DEPRECIATION FOR I.T.A. NO. 1273/MDS/2013 4 THE PERIOD BETWEEN AY. 1993-94 TO AY. 2002-03 THAT IS PRIOR TO THE AMENDMENT BROUGHT IN BY THE FINANCE ACT, 2001 WHICH HAD REMOVED THE CAP OF EIGHT YEARS FOR CARRY FORWARD OF UN-ABSORBED DEPRECIATION. 6. WE FIND THAT THE ISSUE IN HAND IS IDENTICAL TO T HE ONE ALREADY ADJUDICATED BY THE HONBLE GUJARAT HIGH COURT IN TH E CASE OF GENERAL MOTORS INDIA (P) LTD., VS. DCIT (SUPRA). THE HONBLE GUJARAT HIGH COURT AFTER EXAMINING THE PROVISIONS P RIOR TO THE AMENDMENT BROUGHT IN BY THE FINANCE ACT OF 2001AND AFTER THE AMENDMENT TO THE PROVISIONS OF SECTION 32(2) BROUGH T IN BY THE FINANCE ACT, 2001 AS WELL AS CLARIFICATION GIVEN BY THE CBDT IN CIRCULAR NO. 14/2001 CONCLUDED THAT THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF UN-ABSORBED DEPRECIAT ION HAD BEEN DISPENSED WITH. THE UN-ABSORBED DEPRECIATION FROM AY. 1997-98 UP TO THE AY. 2001-02 CAN BE CARRIED FORWARD TO THE AY. 2002-03. IT CAN BE GOVERNED BY THE PROVISIONS OF SECTION 32( 2) AS AMENDED BY THE FINANCE ACT, 2001 AND ARE AVAILABLE FOR CARR Y FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. THE RELEVANT EXTRACT OF THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IS REPRODUCED HEREIN BEL OW: I.T.A. NO. 1273/MDS/2013 5 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SU FFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2002-0 3 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANC E WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT ST OOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISL ATURE BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORK ED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT Y EARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY FINANC E ACT, 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HE NCE KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF ST RICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND R EASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEG ISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLE D FOR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEA R WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSE E CANNOT BE DENIED. HOWEVER, CIRCULAR NO.14 OF 2001 HAD CLARIFI ED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND G AINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUC TION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. T HEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINAN CE ACT, I.T.A. NO. 1273/MDS/2013 6 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWA NCE AVAILABLE IN THE A.Y. 1997-98, 1999-2000, 2000-01 A ND 2001- 02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, A ND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT B E SET OFF TILL THE A.Y. 2002-03 THEN IT WOULD BE CARRIED FORWARD T ILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQU ENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF TH E BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LA RGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH E XCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FRO M ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASS ESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUC TIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHE R HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL B ALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATIO N AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS C URRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION F OR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDIN G YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN AS SESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 O F 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED W ITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO THE I.T.A. NO. 1273/MDS/2013 7 A.Y.2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT Y EAR 2002- 03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AG AINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. THE LD. DR WAS UNABLE TO CONTROVERT THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD., VS. DCIT (SUPRA). 7. IN VIEW OF THE ABOVE, THE ASSESSEE CAN CARRY FOR WARD UNABSORBED DEPRECIATION FOR THE AYS. 1993-94 TO 200 2-03 TO BE SET OFF IN SUBSEQUENT AYS, WITHOUT ANY TIME LIMIT. WE DO NOT FIND ANY ERROR IN THE IMPUGNED ORDER, THE SAME IS UPHELD AND THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON WEDNESDAY, THE 25 TH SEPTEMBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VI KAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 25 TH SEPTEMBER, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR