Dehradun Dugdh Utpadak Sehkari Sangh Ltd, Uttrakhand V. ACIT, Dehradun

ITA 1324/DEL/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61613 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Assessee Lawyers: B R GARG; ATUL VISHNOI S
• Keywords: Capital asset; Depreciation; Assessment record; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.1324/DEL/2009 ASSESSMENT YEAR : 2004-05 DEHRADUN DUGDH UTPADAK SEHKARI SANGH LTD., RAJPUR ROAD, DEHRADUN, UTTARAKHAND. PAN : AAAAD0468Q VS. ACIT, CIRCLE-2, DEHRADUN. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI B.R. GARG & ATUL VISHNOI, ADVOCATES REVENUE BY : MS NANDITA KANCHAN, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT (A) DATED 13 TH FEBRUARY, 2009 FOR ASSESSMENT YEAR 2004-05. THE LEARNED AR ONLY REFERRED TO GROU ND NOS.1 TO 6 AND OTHER GROUNDS WERE NOT PRESSED BY HIM. GROUNDS NOS. 1 TO 6 READ AS UNDER:- 1. THAT O N THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN DISA LLOWING THE APPELLANTS CLAIM FOR DEPRECIATION ALLOWANCE IN PART TO THE EXTENT OF RS.10,00,000/- ON AN AD HOC BASIS AND THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN ENHANCING THE DISALLOWANCE ON THIS ACCOUNT TO THE FULL EXTENT OF THE APP ELLANTS CLAIM. ITA NO.1324/DEL/2009 2 2. THAT O N THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE FINDING OF THE LEARNED COMMISSIONER (APPEALS) ABO UT THE APPELLANT NOT AT ALL BEING ENTITLED TO ANY DEPRECIATION AL LOWANCE IN RESPECT OF THE CAPITAL ASSETS USED IN HIS BUSINESS I S WITHOUT ANY COGENT MATERIAL ON RECORD TO SUPPORT SUCH A FINDING . 3. THAT O N THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE DIRECTION OF THE LEARNED COMMISSIONER (APPEAL S) TO THE LEARNED ASSESSING OFFICER TO REQUISITION FROM THE APPE LLANT THE BREAK-UP OF ADDITIONS IN THE PAST YEARS AND CLAIM OF DEPRECIATION IN EACH YEAR AND THAT TOO NOT FOR DEDUCTIO N OF DEPRECIATION IN THE COMPUTATION OF INCOME BUT FOR ACCO UNTING PURPOSES ONLY IS BEYOND HIS LAWFUL JURISDICTION AND CONTRARY TO THE STATUTE. 4. THAT O N THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE LD. ASSESSING OFFICER AND THE LEARNED COMMISSIONE R (APPEALS) HAVE ERRED IN REJECTING THE APPELLANTS CLAI M FOR SET-OFF OF HIS BUSINESS LOSSES AND UN-ABSORBED DEPRECIATION OF EARLIER YEARS, DULY SUPPORTED BY ACKNOWLEDGEMENTS OF HIS RETUR N FOR THE RELEVANT EARLIER YEARS, AGAINST HIS AGGREGATE INCOME O F THE YEAR UNDER ASSESSMENT. 5. THAT O N THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE LEARNED COMMISSIONER (APPEALS) HAS EXCEEDED HIS JURISDICTION TO CAST ASPERSIONS ON THE CORRECTNESS OF THE QUANTUM OF LOSSES ASSESSED IN APPELLANTS CASE FOR EARLIER Y EARS THE ASSESSMENTS FOR WHICH STAND AS HAVING BECOME FINAL. 6. THAT O N THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE THE LEARNED COMMISSIONER (APPEALS) HAS EXCEEDED HIS JURISDICTION TO PROHIBIT A SET OFF OF UNABSORBED DEPRE CIATION OF EARLIER YEARS THE ASSESSMENT FOR WHICH STAND AS HAVING BECOME FINAL. 2. GROUND NOS.1 TO 3 RAISES AN ISSUE REGARDING DISALLOWAN CE OF ` 10 LAC ON ACCOUNT OF DEPRECIATION AND GROUND NOS.4 TO 6 RELATES TO SETTING OFF OF UNABSORBED DEPRECIATION ALLOWANCE BROUGHT FOR WARD FROM EARLIER YEARS. 3. SO FAR AS IT RELATES TO THE ISSUE RELATING TO GROUND NOS.1 TO 3, THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 4 OF THE ASSE SSMENT ORDER AND IT WILL BE RELEVANT TO REPRODUCE THE SAID PARA:- ITA NO.1324/DEL/2009 3 4. VIDE SUBMISSION DATED 29.11.2006, THE ASSESSEE HAS STATED THAT DURING THE YEAR UNDER CONSIDERATION NO NEW DEPRECIABLE ASSET WAS CREATED AS IS CLEAR FROM THE STATE MENT OF DEPRECIATION ALREADY FILED, AS FAR AS DEPRECIATION OF SUCH ASSETS WHICH HAS BEEN ACQUIRED FROM THE GRANTS ETC. IS CONCE RNED, THE ASSESSEE HAS NOT KEPT A RECORD LIKE THAT AND NO SUCH B IFURCATION CAN BE GIVEN. IN VIEW OF THE UNVERIFIABILITY OF THE SOURCE OF MONEY USED I.E., REVENUE GRANT OR CAPITAL GRANT FROM W HICH ASSETS HAVE BEEN CREATED THE CLAIM OF DEPRECIATION AT RS.14,13,986/- IS REDUCED BY AN AMOUNT OF RS.10,00,0 00/- TO BE TAKEN AT RS.4,13,986/-. (ADDITION : RS.10,00,000) 4. LEARNED CIT (A) HAS DECIDED THIS ISSUE VIDE PARA 5 O F THE IMPUGNED ORDER. LEARNED CIT (A) HAS OBSERVED THAT DE PRECIATION IS ALLOWABLE ONLY TO RECOUP THE COST INCURRED AND IN TH E PRESENT CASE THE ASSESSEE SHOULD NOT HAVE CLAIMED THE DEPRECIATION AS IT H AS NOT UTILIZED ITS OWN PROFIT OR INCOME IN THE PURCHASE OF CAPITAL ASSET. ACCORDING TO LEARNED CIT (A) THESE ASSETS HAVE BEEN PUR CHASED OUT OF GRANTS RECEIVED AND NOT OUT OF ANY INCOME EARNED BY THE APPELLANT AND, THEREFORE, ADMISSIBILITY OF DEPRECIATION CLAIMED DOES NOT ARISE. HE DISTINGUISHED THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF SASISRI EXTRATION LTD. VS. ACIT 307 ITR (AT) 127. HE ALSO REJECTED THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE DISALLOW ANCE MAY BE RESTRICTED ONLY TO THE EXTENT OF THE ADDITIONS MADE D URING THE YEAR WHICH ARE ONLY TO THE TUNE OF ` 6,94,649/- AND NO D ISALLOWANCE OF DEPRECIATION SHOULD BE ALLOWED ON THE ADDITIONS AND D EPRECIATION CLAIMED ON OLD ASSETS COMING FROM PAST YEARS. HE NOTED THAT THE ASSESSEE HAS NEVER GIVEN A PROPER BREAK UP OF THESE ASSETS P URCHASED IN EACH YEAR. THE ASSESSING OFFICER WILL GIVE APPEAL E FFECT ON THIS PARTICULAR ISSUE ONLY IF THE ASSESSEE IS ABLE TO FURNISH TH E BREAK UP OF ADDITIONS IN THE PAST YEARS AND CLAIM OF DEPRECIATION IN EACH YEAR FOR ACCOUNTING PURPOSES AND NOT FOR DEDUCTION OF DEPRECIA TION IN THE COMPUTATION OF INCOME. IF THE ASSESSEE COMPLIES AND MAK ES SUCH BREAK UP AVAILABLE TOGETHER WITH EVIDENCE OF PURCHA SE OF ASSETS, THEN, DEPRECIATION SHOULD BE CALCULATED FOR RESPECTIVE YEAR S, BUT, SHALL NOT ITA NO.1324/DEL/2009 4 BE ALLOWED IN COMPUTING INCOME AS THE ASSETS ARE NOT PU RCHASED FROM THE INCOME EARNED. IF NO BREAK UP IS GIVEN, THEN, ASSE SSING OFFICER WOULD NATURALLY BE IN A HELPLESS SITUATION AND ACCOUNT ING RELATING TO PURCHASE OF ASSETS SHALL CONTINUE TO REMAIN INCOMPLETE. IN THIS MANNER, LEARNED CIT (A) HAS DEALT WITH THE GRIEVANCE OF THE ASSESSEE ON ACCOUNT OF DISALLOWANCE OF ` 10 LAC. 5. REFERRING TO THE GROUNDS OF APPEAL AND FACTS MENTI ONED IN THE ASSESSMENT ORDER AS WELL AS IN THE ORDER OF THE CIT (A), IT IS THE CASE OF THE LEARNED AR THAT CIT (A) HAS TRAVELED BEYOND HIS J URISDICTION TO GIVE THE DIRECTIONS TO THE ASSESSING OFFICER IN RESPECT OF EAR LIER YEARS. HE SUBMITTED THAT WHATEVER WDV HAS BEEN BROUGHT FORWARD FROM EARLIER YEARS SHOULD BE CONSIDERED FOR THE PURPOSE OF DEPRECIAT ION AS DURING THE YEAR UNDER CONSIDERATION THE ASSETS ONLY TO THE EXT ENT OF ` 6,94,649/- WERE ADDED. IN THE ALTERNATIVE, HE PLEA DED THAT THE DISALLOWANCE OF ` 10 LAC IS HIGHLY EXCESSIVE AND SHOULD BE REDUCED. 6. ON THE OTHER HAND, RELYING UPON THE ORDER OF ASSESSI NG OFFICER AS WELL AS THE CIT (A), IT IS THE CASE OF THE LEARNED DR THAT THE DISALLOWANCE HAS RIGHTLY BEEN MADE BY THE ASSESSING OFFIC ER AND IT HAS RIGHTLY BEEN UPHELD BY THE CIT (A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. IT IS THE CASE OF THE LEARNED AR THAT PRIOR TO IMPUGNED ASSESSMENT YEAR NO DISALLOWANCE WHATSOE VER HAS BEEN MADE ON ACCOUNT OF DEPRECIATION. DEPRECIATION HAS TO BE CALCULATED ON WDV OF AN ASSET. IF THE DEPARTMENT IS TO RESTRICT THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE VALUE OF THE ASSETS ON WHICH THE DEPRECIATION HAS BEEN CLAIMED C OMPRISES OF THE AMOUNT RECEIVED BY THE ASSESSEE DIRECTLY OR INDIREC TLY FROM CENTRAL GOVERNMENT OR STATE GOVERNMENT OR ANY AUTHORITY ESTA BLISHED UNDER ANY LAW IN THE FORM OF SUBSIDY OR GRANT OR RE-IMBURSEM ENT, THEN, THOSE ITA NO.1324/DEL/2009 5 FACTS HAVE TO BE BROUGHT ON RECORD TO NEGATE THE CLA IM OF THE ASSESSEE TO THAT EXTENT. IT HAS BEEN SHOWN BY THE ASSESSEE THAT D URING THE YEAR UNDER CONSIDERATION THE ADDITION TO THE ASSET, IF ANY, IS MADE ONLY TO THE EXTENT OF ` 6,94,649/-. UNLESS THE DEPARTMENT RE -COMPUTE THE DEPRECIATION IN RESPECT OF EARLIER YEARS, DISALLOWANCE CANNOT BE MADE ON THE BASIS OF ESTIMATE AS IT HAS TO BE CORRECTLY WORKE D OUT THAT WHICH PORTION OF THE COST COMPRISES OF THE GRANT OR SUBSIDY ISSU ED BY THE GOVERNMENT TO THE ASSESSEE. MAKING OF DISALLOWANCE WITH REGARD TO DEPRECIATION SIMPLY ON ESTIMATE BASIS CANNOT BE SUSTAINED IN THE EYES OF LAW AS THE DEPRECIATION IS A STATUTORY ALLOWANCE GI VEN TO THE ASSESSEE AND IT HAS TO BE WORKED OUT WITH REFERENCE TO W DV OF THE ASSETS DETERMINED AND BROUGHT FORWARD FROM EARLIER YEA R. THEREFORE, WE SEE FORCE IN THE CLAIM OF THE ASSESSEE THAT UNLESS WDV IS COMPUTED DIFFERENTLY IN RESPECT OF EARLIER YEARS, THE COGNIZAN CE OF THE SAME CANNOT BE TAKEN IN THE YEAR UNDER CONSIDERATION. AT BEST THE ASSET ACQUIRED BY THE ASSESSEE DURING THE YEAR CAN BE LINKED WITH THE DIRECT OR INDIRECT COST INCURRED BY THE ASSESSEE ON THESE ASSETS FO R THE PURPOSE OF CLAIMING DEPRECIATION. IT MAY BE MENTION ED HERE THAT THE DISALLOWANCE WHICH THE ASSESSING OFFICER AND CIT (A) REF ERS TO BE MADE WILL FALL UNDER THE PURVIEW OF EXPLANATION 10 TO SE CTION 43 (1) WHICH DEFINE THE ACTUAL COST ON WHICH THE DEPRECIATION IS A VAILABLE. ACCORDING TO EXPLANATION 10, ACTUAL COST IN THE HAND S OF THE ASSESSEE WILL BE REDUCED BY AN AMOUNT WHICH HAS BEEN MET DIRE CTLY OR INDIRECTLY BY CENTRAL GOVERNMENT/STATE GOVERNMENT OR ANY AUTHO RITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON IN THE FORM OF A SUBSIDY OR AMOUNT OR REIMBURSEMENT. THEREFORE, THERE IS A LACK OF MATERIAL ON RECORD TO SUGGEST THAT THE COST OF ANY ASSET HAS BEEN REST RICTED BY THE DEPARTMENT IN EARLIER YEARS W.R.T. EXPLANATION 10 TO SECTION 43 (1). THE DISALLOWANCE BEING MADE WITHOUT BRINGING ANY MATERIA L ON RECORD, MERELY ON THE BASIS OF ESTIMATE IS NOT SUSTAINABLE IN THE EYES OF LAW AND THE SAME IS DELETED. ITA NO.1324/DEL/2009 6 8. THEREFORE, GROUND NOS.1 TO 3 OF THE ASSESSEE ARE ALLO WED. 9. SO AS IT RELATES TO THE GRIEVANCE OF THE ASSESSEE RAISE D IN GROUND NOS.4 TO 6, WE HAVE PERUSED THE ASSESSMENT ORDER. THE ASSE SSING OFFICER HAS SIMPLY COMPUTED THE INCOME OF THE ASSESSEE WI THOUT REFERRING TO THE CLAIM OF THE ASSESSEE REGARDING UNABSOR BED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS. TH IS ISSUE WAS RAISED BY THE ASSESSEE BEFORE CIT (A) BY WAY OF GROUND NO.11 W HICH READ AS UNDER:- 11. THAT IT IS ON THE RECORD MAINTAINED IN THE OFFICE O F THE LD. A.O. THAT THE APPELLANT HAS BEEN FILING ITS RETURN OF INC OME IN HEAVY LOSSES ALMOST EVERY YEAR AND ALL THE RETURNS WER E SUBMITTED IN THE TIME PROVIDED UNDER THE ACT. IT WAS BROU GHT TO THE NOTICE OF THE LD. A.O. ABOUT THE LOSSES RETURN IN REP LY TO HER NOTICE AS WELL, ALSO IT WAS STATED DURING THE ARGUMENT WH AT WHATEVER ADDITION SHE PROPOSE IS SUBJECT MATTER OF SET OF F OF LOSSES, BUTS HE HAS GONE WRONG IN NOT SETTING OFF THE IN COME ASSESSED THIS YEAR FROM THE LOSSES OF THE EARLIER YEAR S. 10. THIS GROUND HAS BEEN DEALT WITH BY THE LEARNED CI T (A) AS PER PARA 8 OF THE IMPUGNED ORDER WHICH IS REPRODUCED BEL OW:- 8. GROUND NO.11 AGITATES NON SET OFF OF LOSSES AND UNABSORBED DEPRECIATION. IT GOES WITHOUT SAYING THAT ON TH E BASIS OF EVIDENCES TO BE ADDUCED BY THE APPELLANT, THE A.O. SHALL ALLOW SET OFF OF LOSSES ONLY IF THE LOSSES ARE CORREC TLY ASSESSED IN THE PRECEDING YEARS. SINCE DEPRECIATION IS NOT ADMISS IBLE IN THE CASE OF THE APPELLANT THERE IS NO QUESTION OF SETTING OFF OF UNABSORBED DEPRECIATION. 11. IT IS THE CASE OF THE LEARNED AR THAT DETERMINATI ON OF UNABSORBED DEPRECIATION RELATES TO EARLIER YEARS AND UNLESS THAT D ETERMINATION IS DISTURBED, THE SAME CANNOT BE A MATTER OF ISSUE FOR THE YEAR UNDER CONSIDERATION, THEREFORE, IT IS THE CASE OF THE LEARNE D AR THAT THE ASSESSEE SHOULD BE GRANTED THE RELIEF ON THIS ACCOUNT. ITA NO.1324/DEL/2009 7 12. ON THE OTHER HAND, RELYING UPON THE ORDER OF ASSE SSING OFFICER AND CIT (A), IT IS THE CASE OF THE LEARNED DR THAT TH E RELIEF HAS RIGHTLY BEEN DENIED TO THE ASSESSEE. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS I N THE LIGHT OF THE MATERIAL PLACED BEFORE US. THERE IS A FORCE IN T HE CLAIM OF THE LEARNED AR THAT DETERMINATION OF UNABSORBED DEPRECIA TION IN THE EARLIER YEARS IS NOT AN ISSUE WHICH CAN BE DECIDED IN T HE YEAR UNDER CONSIDERATION. THE UNABSORBED DEPRECIATION HAS TO BE DETERMINED WITH RESPECT TO EACH OF THE ASSESSMENT YEAR. UNLESS THAT DETER MINATION IS DISTURBED, THE RELIEF THEREOF CANNOT BE HELD TO BE I NADMISSIBLE TO THE ASSESSEE IN THE PRESENT YEAR. THEREFORE, WE HOLD THAT TH E ASSESSEE IS ENTITLED TO RELIEF WITH REGARD TO SET OFF OF UNABSORB ED DEPRECIATION AS DETERMINED WITH REFERENCE TO ASSESSMENT RECORD OF THE A SSESSEE. THE ASSESSING OFFICER WILL VERIFY THE PAST RECORD OF THE ASSESSE E AND WILL ALLOW THE CLAIM REGARDING UNABSORBED DEPRECIATION AS PER THE PROVISIONS OF LAW. WE DIRECT ACCORDINGLY. THESE GROU NDS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID. 14. IT HAS ALREADY BEEN MENTIONED THAT OTHER GROUNDS WERE NOT ARGUED BY THE LEARNED AR AND THEY WERE NOT PRESSED. THEREFORE, THEY ARE NOT REQUIRED TO BE ADJUDICATED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. SD/- SD/- [G.D. AGRAWAL] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 13.04.2012. DK ITA NO.1324/DEL/2009 8 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR, ITAT, DELHI BENCHES