The ITO, Ward-8(1), Ahmedabad V. The Ahmedabad Advance Mills Ltd., Ahmedabad

ITA 1335/AHD/2011

• Counselvise Citation: 133520514 RSA 2011
• Duration Of Justice: 4 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGRAWAL
• Assessee Lawyers: DHIREN SHAH
• Keywords: Business income; Depreciation; Period of limitation; Time period of passing order; Unabsorbed depreciation
• Section: 143(3); 115JB

Judgement Text

I.T.A. NO. 1 335 /AHD/ 201 1 & C.O. NO.135/AH D/2011 ASSESSMENT YEAR: 200 7 - 08 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. 1 335 /AHD/201 1 A SSESSMENT Y EAR : 20 0 7 - 08 INCOME TAX OFFICER , .APPELLANT WARD - 8(1), AHMEDABAD. VS. THE AHMEDAB AD ADVANCE MILLS LIMITED, . RESPONDENT F.P. NO.105, O/S. DELHI GATE, SHAHIBAUG ROAD, AHMEDABAD. [P AN: AA BCT 6856 F ] C.O. NO.135/AHD/2011 (IN I.T.A. NO. 1335/AHD/2011 ) ASSESSMENT Y EAR: 20 07 - 08 THE AHMEDABAD ADVANCE MILLS LIMITED, ..... . APPELLANT F.P. NO.105, O/S. DELHI GATE, SHAHIBAUG ROAD, AHMEDABAD. [P AN: AA BCT 6856 F ] VS. INCOME TAX OFFICER, RESPONDENT WARD - 8(1), AHMEDABAD. APPEARANCES BY: RAJEEV AGRAWAL , FOR THE REVENUE DHIREN S HAH , FOR THE ASSESSEE D ATE OF CONCLUDING THE HEARING: SEPTEMBER 10 , 201 5 DATE OF PRONOUNCING THE ORDER : DECEMBER 8 TH , 2015 O R D E R PER PRAMOD KUMAR , AM : I.T.A. NO. 1 335 /AHD/ 201 1 & C.O. NO.135/AH D/2011 ASSESSMENT YEAR: 200 7 - 08 PAGE 2 OF 6 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS O F THE ORDER DATED 14 TH MARCH, 2011 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER), FOR THE ASSESSMENT YEAR 2007 - 08, ON THE FOLLOWING GROUND: - THE LD. CIT(A) - VI, AHMEDABAD ERRED IN LAW AND ON FACTS IN DIRECTING T O ALLOW SET OFF OF ACCUMULATED LOSSES AGAINST LONG TERM CAPITAL GAIN (LTCG) OF RS.12,34,98,829/ - AND SHORT TERM CAPITAL GAIN (ST C G) OF RS.44,20,752/ - EVEN BEYOND 8 YEARS. 2. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS A SICK UNIT UNDER THE SICK INDUSTRIES (COMPANIES) ACT AND THE BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) HAS DECLARED IT TO BE SO. VIDE ORDER DATED 21 ST AUGUST, 2006, THE BIFR HAS GRANTED IT CERTAIN CONCE SSION WHICH INCLUDE, INTER ALIA, THE FOLLOWING: - .. THE BOARD, KEEPING IN VIEW THE LONG TERM VIABILITY OF THE COMPANY, ALSO ISSUES FOLLOWING FURTHER DIRECTIONS FOR COMPLIANCES BY THE CONCERNED AGENCIES : - .......... .. ........ ........ (IV) T HE INCOME T A X DEPTT . , BESIDES CONSIDERING GRANT OF OTHER RELIEFS AS ENVISAGED IN T ERMS OF THE SS - 04, WOULD ALSO EXEMPT THE COMPANY FROM PAYMENT OF CAPITAL GAINS TAX AND PERMIT THE COMPANY TO SET - OFF THE CAPITAL GAINS, IF ANY, AGAINST THE ACCUMULATED LOSSES OF THE COMPANY IN TERMS OF PROVISION VIDE PARA 7.6(II) OF THE SS - 04. [7.6(II) OF SS4 STATES EXEMPTION OF CAPITAL GAINS FROM CAPITAL GAINS TAX, IF ANY, THE COMPANY MAY BE ALLOWED TO SET OFF CAPITAL GAINS AGAINST ACCUMULATED LOSSES] * P ARA 7.6 OF SS - 0 4 OF BIFR , WHICH IS ALSO RELEVANT FOR PRESENT PURPOSES , IS AS FOLLOWS: - 7.6 INCOME TAX THE CHAIRMAN, CENTRAL B OARD OF DIRECT TAXES , NEW DELHI I.T.A. NO. 1 335 /AHD/ 201 1 & C.O. NO.135/AH D/2011 ASSESSMENT YEAR: 200 7 - 08 PAGE 3 OF 6 TO CONSIDER I) THE COMPANY HAS TOTAL ACCUMULATED LOSSES OF RS.3432.22 LACS AS PER ASSESSMENT R ECORDS. THE COMPA NY WANTS THAT UNABSORBED BUSINESS A ND UNABSORBED DEPRECIATION M AY BE ALLOWED TO SET OFF AGAINST THE INCOME OF THE COMPANY ON SALE OF ASSETS AND FUTURE INCOME, TILL SUCH UNABSORBED L OSS/ DEPRECIATION IS REDUCED T O NIL. II) EXEMPTION OF CAPITAL GAINS FROM CA PITAL GAIN TAX, IF ANY. THE COMPANY M A Y BE ALLOWED TO SET OFF CAPITAL GAINS AGAINST ACCUMULATED LOSSES. III) EXEMPTION FROM APPLICABILITY OF SECTION 41(1) OF THE INCOME TAX ACT . IV) FOR THE PURPOSE OF 8 YEARS LIMITATION PERIOD FOR CARRY FORWARD OF LO SSES, 8 YEARS PERIOD WOULD BE COUNTED FROM THE FINANCIAL YEAR 2002 - 20 03 . VI) TO EXEMPT THE COMPANY FROM THE APPLICABILITY OF PROVISIONS OF SECTIONS 115JB OF THE INCOME T AX ACT, 1961. VII) TO ALLOW THE CARRY FORWARD OF BUSINESS LOSS AND DEPRECIATION OF TH E YEAR FOR WHICH RETURN OF INCOME IS FILED LATE. ] 3. THE ABOVE ORDER WAS CHALLENGED, IN APPEAL BEFORE THE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION BY THE DIRECTOR GENERAL OF INCOME TAX BUT, VIDE ORDER DATED 10.06.2008, THE SAID AP PEAL WAS REJECTED AND IT WAS , INTER ALIA , OBSERVED AS FOLLOWS: - 12. IT IS NOT THE CASE OF DGIT THAT AAML HAS NOT REQUESTED OR APPROACHED DGIT WITHIN REASONABLE TIME AND/OR AAML IS NOT ENTITLED TO RECEIVE THE RELIEFS AND C ONCESSIONS. DGIT IN A NUMBER OF OTHER CASES HAVE GRANTED SUCH RELIEFS TO SICK INDUSTRIAL COMPANY; HOWEVER IN THE INSTANT CASE DGIT CHOSE NOT TO TAKE ANY ACTION AND KEEP THE MATTER PENDING INDEFINITELY. IN REJOINDER FILED BY DGIT, WE HAVE NOTED T HE STAND TAKEN BY DGIT, INTER - ALIA, STATIN G THAT SINCE THE NET WORTH OF AAML HAS TURNED POSITIVE, NO RELIEF AND CONCESSION CAN BE GRANTED. THIS STAND OF DGIT IN OUR OPINION, IS NOT TENABLE . THE REVIVAL SCHEME WAS SANCTIONED BY BIFR AFTER HEARING THE PARTIES. THEREFORE, DGIT I S BOUND TO IMPLEMEN T THE PROVISIONS/ CLAUSES OF THE REVIVAL SCHEME. 13. THE AI M AND OBJECT OF SICA IS EXPEDITIOUS REVIVAL OF SICK INDUSTRIAL COMPANIES ; WHEREAS IN THE INSTANT CASE DGIT H A S NO T GIVEN EFFECT TO ITS PAR T OF OBLIGATION. DGIT BEING AN INSTRUMENTALITY OF A STATE IS EXPECTED TO ACT WITHIN A REASONABLE TIME PERIOD. I.T.A. NO. 1 335 /AHD/ 201 1 & C.O. NO.135/AH D/2011 ASSESSMENT YEAR: 200 7 - 08 PAGE 4 OF 6 14. IN OUR VIEW BIFR IS JUSTIFIED IN DIRECTING DGIT TO EXEMPT A AML FROM PAYMENT OF C APITAL GAIN TAXES AND PERMIT THE COMPANY TO SET - OFF THE CAPITAL GAINS AGAINST ACC UMULATED LOSSES. 15. IN THE HEARING H ELD ON 19.06.2003, THE SUBMISSION OF THE DGIT ON THE DRS WAS THAT THE APPELLANT HAD FILED THEIR RETURNS A LONG WITH THE JUSTIFICATION FOR RELIEFS AND CONCESSIONS. ON 23.01.2004 , BIFR SANCTIONED THE REVIVAL SCHEME DIRECTING THE CONSIDERATION OF GRANT OF EXE MPTION FROM CAPITAL GAINS TAX. THEREAFTER, THE APPELLANT COMPANY FILED AN APPLICATION ON 19.09.2005 FOR GRANT OF RELIEFS AND CONCESSIONS AS PER THE SANCTIONED SCHEME. THE APPELLANT BROUGHT TO THE NOTICE OF BIFR THAT THE R E LIEFS AND CONCESSIONS AS PROVIDE D IN THE SANCTIONED SCHEME WERE NOT IMPLEMENTED BY DGIT ON 05.08.2006 AND BIF R PASSED THE IMPUGNED ORD E R ON 21.08.06 DIRECTING TH E DGIT TO COMPLY WITH THE PROVISIONS OF THE SANCTIONED SCHEME. 16. IN VIEW OF THE FACT THAT THE APPELLANT COMPANY HA S FILED T HE RETURNS WITH JUSTIFICATIONS OF RELIEFS AND CONCESSIONS ON 19.06.2003 ITSELF AND HAVING REGARD TO THE INORDINATE DELAY IN GRANTING EXEMPTION FROM CAPITAL GIN TAX, THE DIRECTION WAS GIVEN AT PARA 8(IV) OF THE IMPUGNED ORDER DATED 21.08.2006. WE FIND NO I NFIRMITY IN THE ORDER PASSED BY BIFR. THE APPEAL , IS, THEREFORE, REJECTED. 4. HOWEVER, IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DECLINED TO GIVE EFFECT TO THE ABOVE ORDERS. THE COMPANY HAD CLAIMED SET OFF OF SHORT TERM CAPITA L GAINS OF RS.44,20,752/ - AND LONG TERM CAPITAL GAINS OF RS.12,35,64,620/ - AGAINST UNABSORBED BUSINESS LOSSES OF EARLIER YEARS. HOWEVER, THE ASSESSING OFFICER DECLINED THE SAME ON THE GROUND THAT THE LOSSES COULD NOT BE ALLOWED TO BE SET OFF BEYOND 8 YEAR S. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO DELETED THE DISALLOWANCE BY OBSERVING AS FOLLOWS : - NOW ISSUE HERE IS WHETHER 8 YEAR S LIMITATION WILL APPLY IN THIS CASE O R NOT . AS PER THE SECTION 72, BUSINESS LOSS CANN OT BE SET OFF AGAINST BUSINESS INCOME BEYOND EIGHT YEARS. HOWEVER CAPITAL GAIN CAN NEVER BE ALLOWED TO BE SET OFF AGAINST BUSINESS LOSS BROUGHT FORWARD. THEREFORE INCOME TAX ACT NEVER ALLOWS SET OFF OF CAPITAL GAIN AGAINST BUSINESS LOSS BROUGHT FORWARD. HOWEVER THE BIFR UNDER SICA HAS POWER TO ALLOW ANY CONCESSION IT CONSIDERED APPROPRIATE FOR THE REVIVAL OF THE COMPANY. AS DISCUSSED EARLIER , BIFR HAS CLEARLY ALLOWED SET OFF OF CAPITAL G A IN AGAINST ACCUMULATED LOSSES . I.T.A. NO. 1 335 /AHD/ 201 1 & C.O. NO.135/AH D/2011 ASSESSMENT YEAR: 200 7 - 08 PAGE 5 OF 6 THE ORDER NOWHERE TALKS OF BROUGHT FORWARD BUSINESS LOSSES. THE LIMITATION OF 8 YEARS APPLIES TO BROUGHT FORWARD BUSINESS LOSSES. HOWEVER ACCUMULATED LOSSES HAVE NO SUCH LIMIT. THE SET OFF IS OF THE ACCUMULATED LOSSES AGAINST CAPITAL GAIN WHICH ARE OTHERWISE NOT PERMISSIBLE UNDER IT ACT . SINCE SI CA HAS OVERRIDING POWER A S DISCUSSED EARLIER , THE SET OFF OF CAPITAL GAIN IS PERMITTED BY BIFR AGAINST ACCUMULATED LOSSES . THEREFORE WHILE IMPLEMENTING THE ORDER OF BIF R , ASSESSING OFFICER HAS TO APPLY THE ORDER EVEN IF IT IS NOT CONSISTENT WIT H THE PROVISIONS OF IT ACT. SINCE THE ORDER OF BIFR IS INCONSIS TENT WITH THE PROVISIONS OF IT ACT AS F A R AS SETTING OFF OF ACCUMULATED LOSSES BEYOND EIGHT YEAR S AGAINST CAPITAL GIN ARE CONCERNED. BUT STILL BIFR ORDER WILL PREVAIL OVER THE INCONSISTENT PR OVISIONS OF IT ACT. ACCORDINGLY APPELLANT WILL BE ELIGIBLE TO SE T OFF CAPITAL GAINS AGAINST ACCUMULATED LOSSES EVEN BEYOND 8 YEARS. AS MENTIONED BY THE APPELLANT, IN THE IMMEDIATELY PRECEDING YEAR, ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED ON 13.1 0.2008 ALLOWED SET OFF OF ACCUMULATED LOSSES BEYOND 8 YEARS AGAINST LONG - TERM CAPITAL GAINS OF RS.15,87,02,36 8 AND SHORT - TERM CAPI TAL GAIN OF RS.1634615. SINCE SAME ASSESSING OFFICER HIMSELF ALLOWED SET OFF OF ACCUMULATED LOSSES AGAINST CAPITAL GAINS IN T HE IMMEDIATE PRECEDING YEAR, I DO NOT UNDERSTAND THE CHANGE IN HIS STAND THIS YEAR. IN VIEW OF THE CLEAR ORDER OF BIFR WHICH HAS BECOME FINAL, APPELLANT IS ENTITLED TO SET OFF CAPITAL GAINS AGAINST ACCUMULATED LOSSES EVEN BEYOND 8 YEARS. ASSESSING OFFICE R IS THEREFORE DIRECTED T O ALLOW SUCH SET OFF. 5. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US . 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE L EGAL POSITION. 7. WE HAVE NOTED THAT, IN THE BIFR ORDER, THERE IS A SPECIFIC REFERENCE TO SS - 04 (I.E. SANCTIONED SCHEME DATED 23.01.2004) WHICH IN TURN REFERS TO, AT ITEM IV, THAT FOR THE PURPOSE OF 8 YEARS LIMITATION PERIOD FOR CARRY FORWARD OF LOSSES, 8 YEARS PERIOD WOULD BE CONSIDERED FROM THE FINANCIAL YEAR 2002 - 03 . THIS BIFR ORDER HAS ATTAINED FINALITY AND IT IS AN ADMITTED POSITION THAT THE MATTER HAS NOT BEEN CARRIED AGAINST THE APPELLATE ORDER, BEFORE HON BLE HIGH COURT. ON THESE FACTS, IN OUR CONSIDERED VIEW, THE STAND OF THE LEARNED I.T.A. NO. 1 335 /AHD/ 201 1 & C.O. NO.135/AH D/2011 ASSESSMENT YEAR: 200 7 - 08 PAGE 6 OF 6 CIT(A) CANNOT BE FAULTED. IN ANY CASE, AS NOTED BY HON BLE DELHI HIGH COURT IN THE CASE OF DGIT VS. BIFR [2011) 57 DTR 53 (DEL)], THE BIFR DIRECTION BIND THE REVENUE AUTHORITIES . 8. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 9. IN THE RESULT, APPEAL OF THE ASSESSING OFFICER IS DISMISSED. 10. COMING TO THE CROSS OBJECTION FILED BY T HE ASSESSEE, LEARNED COUNSEL FOR THE ASSESS E E FAIRLY ACCEPTS THAT IT SUPPORTS THE RELIEF GRANTED BY THE LEANED CIT(A) AND DOES NOT RAISE ANY SPECIFIC GROUNDS FOR ADJUDICATION. ACCORDINGLY, IT IS DISMISSED AS INFRUCTUOUS. 11. IN THE RESULT, THE APPEAL AND THE C ROSS OBJECTION ARE DISMISSED. P RONOUNCED IN THE OPEN COURT TODAY ON 8 TH DECEMBER, 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 8 TH DAY OF DECEMBER , 201 5 . PBN/ * COPIES TO : (1) THE APPE LLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPE LLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD