Indoswe Engineers Pvt.Ltd., Pune V. ACIT, CIR-9, AKURDI PUNE, Pune

ITA 135/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72070 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K OJHA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 135/PN/2012 (ASSESSMENT YEAR 2007-08) INDOSWE ENGINEERS PVT. LTD., PLOT NO.4, MIDC, BHOSARI, PUNE 411 026 PAN NO.AAACI 3918C .. APPELLANT VS. ACIT, CIRCLE-9, PRATYAKSHAKAR BHAVAN, NEAR AKURDI RAILWAY STATION AKURDI, PUNE-35 .. RESPONDENT APPELLANT BY : SHRI KISHOR PHADKE RESPONDENT BY : SHRI K.K. OJHA DATE OF HEARING : 06-06-2013 DATE OF PRONOUNCEMENT : 05-08-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 16-11-2011 OF THE CIT(A)-V, PUNE RELATING TO ASSESS MENT YEAR 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF COPPER AND COPPER ALLOYS. IT FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSE SSMENT YEAR ON 31-10- 2007 DECLARING NIL INCOME. DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED FROM THE PR OFIT AND LOSS ACCOUNT ANNEXED TO THE RETURN OF INCOME THAT THE ASSESSEE C OMPANY HAS WORKED OUT BOOK PROFIT AT RS.1,01,41,261/- . HE OBSERVED THAT THE ASSESSEE IS HAVING BROUGHT FORWARD LOSS AS WELL AS DEPRECIATION FOR EARLIER YEARS AS 2 PER BOOKS. ON BEING ASKED BY THE ASSESSING OFFICER THE ASSESSEE FILED THE DETAILS OF SUCH BROUGHT FORWARD BUSINESS LOSS A ND DEPRECIATION LOSS WHICH ARE AS UNDER : A.Y. DEPRECIATION LOSS BUSINESS LOSS 01-02 27,15,693 1,54,53,149 02-03 24,22,593 2,01,13,470 03-04 14,322 4,69,87,632 04-05 45,59,065 -- 05-06 10,69,109 -- TOTAL 1,07,80,782 8,25,54,251 06-07 (PROFIT ADJUSTED) 49,34,271 -- BALANCE 58,46,511 8,25,54,251 2.1 FROM THE ABOVE THE ASSESSING OFFICER NOTED THAT THE SAID LOSSES ARE AVAILABLE AS PER BOOKS AND ELIGIBLE FOR SET OFF IN SUBSEQUENT YEARS AGAINST THE POSITIVE INCOME U/S.115JB, IF ANY. HOW EVER, ON GOING THROUGH THE RETURNS FILED BY THE ASSESSEE FOR EARLI ER YEARS, I.E. 2004-05 AND 2005-06 HE OBSERVED THAT THE ASSESSEE COMPANY H AS REDUCED PROVISIONS FOR RE-VALUATION RESERVES OF RS,33,55,46 3/- AND RS.33,52,454 AGGREGATING TO RS.66,07,917/- IN THE RESPECTIVE YEA RS WHILE COMPUTING THE TOTAL INCOME. ACCORDING TO THE ASSESSING OFFIC ER AFTER ADJUSTING THE SAID POSITIVE INCOME AGAINST THE BROUGHT FORWARD DE PRECIATION LOSSES THERE WILL BE NO DEPRECIATION LOSS TO BE CARRIED FO RWARD FOR THE YEAR AS ON 01-04-2006 SINCE THE BROUGHT FORWARD DEPRECIATION L OSS AS PER BOOKS WORKS OUT TO NIL AND THERE IS ONLY BUSINESS LOSS AV AILABLE. THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT IN VIEW O F PROVISIONS OF SECTION 115JB(III) BUSINESS LOSS OR DEPRECIATION LO SS WHICHEVER IS LESS IS TO BE SET OFF AGAINST THE CURRENT YEARS BOOK PROFI T. SINCE THE DEPRECIATION LOSS COMES TO NIL THE ASSESSING OFFICE R WORKED OUT THE INCOME U/S.115JB AT RS.1,36,37,715/-. 3 3. IN APPEAL THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS AS TO WHETHER THERE EXISTED ANY UN ABSORBED LOSS OR DEPRECIATION AS PER BOOKS PRIOR TO A.Y. 2001-02 AND IF THAT IS THE CASE, TO CONSIDER THE SAME ALSO FOR THE PURPOSE OF COMPUTATI ON U/S.115JB OF THE ACT. 3.1 SO FAR AS THE ISSUE RELATING TO REDUCING THE BR OUGHT FORWARD DEPRECIATION AS CALCULATED UNDER CLAUSE (III) OF EX PLANATION (1) TO SECTION 115JB THE ASSESSEE SUBMITTED THAT CLAUSE (IIA) AND (IIB) TO EXPLANATION 1 OF SECTION115JB WHICH WAS INSERTED W.E.F. 01-04-200 7 IS APPLICABLE FOR A.Y. 2007-08 AND THEREFORE IT SHOULD NOT BE APPLIED TO THE EARLIER YEARS, I.E. DEPRECIATION ON REVALUATION OF THE ASSETS IN A .Y. 2004-05 AND 2005- 06 NEEDS TO BE CONSIDERED FOR SET OFF OF THE BOOK P ROFIT. HOWEVER, THE LD.CIT(A) REJECTED THE ABOVE CONTENTION OF THE ASSE SSEE HOLDING THAT THE SAME IS NOT TENABLE IN LAW. ACCORDING TO HIM, THE AMENDMENT BY INSERTION OF CLAUSE (IIA) & (IIB) TO EXPLANATION 1 OF SECTION 115JB IS W.E.F. 01-04-2007 AND THEREFORE APPLICABLE FROM A.Y . 2007-08 ONWARDS. RELYING ON VARIOUS DECISIONS HE HELD THAT THE LAW T O BE APPLIED IS THAT IN FORCE IN THE ASSESSMENT YEAR UNLESS OTHERWISE PROVI DED EXPRESSLY OR BY NECESSARY IMPLICATION. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE JUTE INDUSTRIES VS.CI T REPORTED IN 120 ITR HE OBSERVED AS UNDER : JUDGMENT OF THE HONBLE APEX COURT IS SQUARELY APP LICABLE TO THE FACTS OF THE ASSESSEES CASE. SINCE AMENDMENT W.E.F. 01-04- 2007 RESULTING IN INSERTION OF CLAUSE (IIA) AND (II B) OF EXPLANATION 1 TO SECTION 115JB WAS APPLICABLE FOR THIS YEAR, TH E DEPRECIATION ON THE REVALUATION OF ASSETS CANNOT BE CONSIDERED A S PART OF UNABSORBED DEPRECIATION ELIGIBLE FOR SET OFF AGAINS T BOOK PROFIT OF THIS YEAR. ACCORDINGLY, SINCE THE PROVISIONS WHICH ARE APPLICABLE FOR A.Y. 2007-08 ONLY WOULD BE APPLICABLE FOR THIS YEAR AND 4 THEREFORE, THE ASSESSING OFFICER HAS CORRECTLY MAD E THE ADJUSTMENT AS PER CLAUSE (IIA) & (IIB) EXPLANATION 1 TO SECTION 115JB. THIS GROUND OF APPEAL IS THEREFORE, DISMISS ED. 4. AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. IN VIEW OF FACTS AND IN LAW THE LOWER AUTHORITI ES ERRED IN NOT ALLOWING SET OFF OF DEPRECIATION ON REVALUED PART O F ASSETS UPTO A.Y. 2006-07 AND CONSEQUENTLY ERRED IN CALCULATING UNABSORBED DEPRECIATION AS PER BOOKS AT THE TIME OF ASSESSING THE BOOK PROFITS UNDER PROVISIONS OF SECTION 115JB. 2. IN VIEW OF FACTS AND IN LAW THE LOWER AUTHORITIE S ERRED IN NOT ALLOWING FRINGE BENEFIT TAX AS EXPENDITURE WHILE AR RIVING AT THE BOOK PROFITS U/S.115JB. 3. WITHOUT PREJUDICE TO ABOVE THE VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER ERR ED IN NOT TREATING THE COMPANY A SICK COMPANY AND THEREBY EXE MPTING THE COMPANY FROM APPLICATION OF PROVISIONS OF SECTION 1 15JB. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE THE ABOVE GROUND OF APPEAL IF SO REQUIRED. 5. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUNDS OF APPEAL NO.2 AND 3 FOR WHICH THE LD. DEPARTMENTAL REPRESENT ATIVE HAS NO OBJECTION. ACCORDINGLY, THE ABOVE GROUNDS ARE DISM ISSED AS NOT PRESSED. GROUND OF APPEAL NO.4 BEING GENERAL IN N ATURE IS DISMISSED. 6. SO FAR AS GROUND OF APPEAL NO.1 IS CONCERNED IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE CIT(A) SHOULD HAVE ALLOWED SET-OFF OF DEPRECIATION ON REVALUATION OF PART OF T HE ASSETS UPTO A.Y. 2006-07 FOR CALCULATING THE BOOK PROFIT UNDER THE P ROVISIONS OF SECTION 115JB. HOWEVER, WE DO NOT FIND MUCH FORCE IN THE A BOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND CLAUSE ( IIA) AND (IIB) OF EXPLANATION 1 TO SECTION 115JB READ AS UNDER : 5 EXPLANATION [ 1 ].FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE REL EVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION (2), AS INCREASED BY ( A ) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND THE PROVISION THEREFORE; OR ( B ) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED [, OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC ]; OR ( C ) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MAD E FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR ( D ) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBS IDIARY COMPANIES; OR ( E ) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPOS ED ; OR ( F ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH [SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF) OR [***]SECTION 11 OR SECTION 12 APPLY; OR] ( G ) THE AMOUNT OF DEPRECIATION,] [( H ) THE AMOUNT OF DEFERRED TAX AND THE PROVISION THER EFORE, [( I ) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, [ ( J ) THE AMOUNT STANDING IN REVALUATION RESERVE RELATI NG TO REVALUED ASSET ON THE RETIREMENT OR DISPOSAL OF SUCH ASSET, IF ANY AMOUNT REFERRED TO IN CLAUSES ( A ) TO ( I ) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF ANY AMOUNT REFERRED TO IN CLAUSE ( J ) IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY, ]]] [( I ) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISIO N (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 O THERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [( IIA ) THE AMOUNT OF DEPRECIATION DEBITED TO THE PROFIT AND LOSS ACCOUNT (EXCLUDING THE DEPRECIATION ON ACCOUNT OF REVALUATI ON OF ASSETS); OR ( IIB ) THE AMOUNT WITHDRAWN FROM REVALUATION RESERVE AND CREDITED TO THE PROFIT AND LOSS ACCOUNT, TO THE EXTENT IT DOES NOT EXCEED THE AMOUNT OF DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS RE FERRED TO IN CLAUSE ( IIA ); OR] 6.1 THE ABOVE EXPLANATION WAS INSERTED BY THE FINAN CE ACT, 2006 W.E.F. 01-04-2007 AND THEREFORE IS APPLICABLE TO A. Y. 2007-08 AND ONWARDS. SINCE THE LD.CIT(A), BASED ON THE DECISIO N OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE JUTE INDUSTRIES (SUPRA) HAS UPHELD THE 6 ACTION OF THE ASSESSING OFFICER, THEREFORE, IN ABSE NCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE ORDER OF THE LD.CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE ASSESSEE IS DIS MISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 05 TH DAY OF AUGUST 2013 . SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA ) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 05 TH AUGUST 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V, PUNE 4 CIT-V, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE