ITO 10(1)(3), MUMBAI V. BHARAT RADIATORS INDUSTRIES P.LTD, MUMBAI

ITA 1356/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0740 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 154

Judgement Text

M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBERITA ITA NO. : 13 5 6 /MUM/20 1 3 ( ASSESSMENT YEAR: 200 7 - 0 8 ) DCIT - 10(1), 455, AAYAKAR BHAVAN, 4 TH FLOOR, M K MARG, MUMBAI - 400 020 VS M/S BHARAT RADIATORS INDUSTRIES PVT LTD , 2 ND FLOOR, UNIQUE HOUSE, S.A. BRELVI MARG, FORT, MUMBAI - 400 001 .: PAN : AA ACR 2895 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH KAMAT RESPONDENT BY : SHRI SANJIV M SHAH /DATE OF HEARING : 11 - 05 - 2015 / D ATE OF PRONOUNCEMENT : 10 - 07 - 2015 ORDER PER AMIT SHUKLA , J.M. : TH IS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 16.11.2012 PASSED BY CIT(A) - 21, MUMBAI IN RELATION TO THE PROCEEDINGS U/S 154 FOR THE ASSESSMENT YEAR 2007 - 08, ON T HE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)S ERRED IN HOLDING THAT THE SET - OFF OF UN - ABSORBED B/F DEPRECIATION PERTAINING TO AY 1999 - 2000 BE ALLOWED AGAINST THE INCOME FROM HOUSE PROPERTY FOR AY 2007 - 08 WHICH OTHERWISE WAS NOT ALLOWED BY THE AO ESPECIALLY IN VIEW OF THE HONBLE ITAT SPECIAL BENCH, MUMBAI, DECISION IN CASE OF DCIT VS. TIMES GUARANTY LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)S ERRED IN DECIDING THAT THE ASSESSEE IS ENTITLED TO C/F SHORT TERM CAPITAL LOSS OF RS. 14,48,840/ - PERTAINING TO AY 2005 - 06 WHEREAS ACTUALLY AS PER RECORDS THERE IS A SHORT TERM CAPITAL GAIN OF R S .12,32,400/ - FOR THAT YEAR I.E. AY 2005 - 06 M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 2 3. ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)S ERRED IN ALLOWING THE B/F BUSINESS LOSS PERTAINING TO AY 2004 - 05 TO BE SET - OFF AGAINST INCOME FROM HOUSE PROPERTY OF THE ASSESSEE OF AY 2007 - 08 WHICH IS IN CONTRAVENTION TO PROVISION OF SEC. 72 OF T HE ACT. 2. AS REGARDS THE ISSUE RAISED IN GROUND NO. 1, IT HAS BEEN SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THIS ISSUE STANDS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P LTD. VS DCIT, REPORTED IN [2013] 254 ITR 554 (GUJ). 3. BRIEF FACTS ARE THAT THE AO IN THE ORDER U/S 154 HAS DISALLOWED THE BROUGHT FORWARD OF UNABSORBED DEPRECIATION ALLOWANCE AFTER OBSERVING AND HOLDING AS UNDER: AS PER SECTION 72 OF THE INCOME TAX ACT, 1961, UNABSORBED LOSS C AN BE CARRIED FORWARD AND SET OFF AGAINST ANY OTHER HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD BUSINESS OR PROFESSION FOR MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED. FURTHER, AS PER S ECTION 32 OF THE INCOME TAX ACT, 1961, UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD FOR INDEFINITE PERIOD AND IT CAN BE SET OFF AGAINST ANY HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD SALARIES. HOWEVER, NO UNABSORBED DEPRECIATION RELEVANT TO ASSESSMENT YEAR 1997 - 98 TO 2000 - 02 CAN BE CARRIED FORWARD AND SET OFF AGAINST ANY OTHER HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD BUSINESS OR PROFESSION FOR MORE THAN EIGHT (8) ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRS T COMPUTED . SIMILARLY BROUGHT FORWARD UNABSORBED DEPRECIATION ALLOWANCE FOR AND UPTO AY 1996 - 97, WHICH COULD NOT BE SET OFF UPTO AY 1996 - 97, SHALL BE CARRIED FORWARD AND SET OFF AGAINST INCOME UNDER THE HEAD FOR A MAXIMUM PERIOD OF EIGHT (8) ASSESSMENT YEA RS STARTING FROM AY 1997 - 98 I.E. UPTO 2004 - 05. M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 3 4. THE LD. CIT(A) RELYING UPON T HE DECIS I ON OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS, DIRECTED THE AO TO ALLOW THE ASSESSEES CLAIM OF ADJUSTING UNABSORBED DEPRECIATION FOR THE AY 1999 - 200 0 FROM THE HOUSE PROPERTY INCOME OF THIS YEAR AFTER OBSERVING AND HOLDING AS UNDER: REGARDING THE SECOND ISSUE OF DISALLOWING THE DEPRECIATION OF THE AY 1999 - 2000 FOR SETTING OFF HOUSE PROPERTY INCOME OF THIS YEAR, INCOME - TAX ACT WAS AMENDED W.E.F. FROM A.Y. 1997 - 98 TO 2001 - 02. FOR THESE YEARS UNABSORBED DEPRECIATION HAS TO BE ADJUSTED ONLY FROM THE BUSINESS INCOME OF THE APPELLANT AND ALSO IT HAS TO CARRY FORWARD ONLY EIGHT YEARS. LATER THIS WAS FURTHER AMENDED THAT UNABSORBED DEPRECIATION ADJUSTED BECOM ES CURRENT DEPRECIATION AND TO BE ADJUSTED ON THE INCOME OF ANY HEAD OF THE INCOME INSTEAD OF BUSINESS INCOME AS IN THE PRE - AMENDED ACT. IN THE ITAT SPECIAL BENCH DECISION IN THE CASE OF TIMES GUARANTY LTD., IT IS HELD THAT UNABSORBED DEPRECIATION OF AY 19 97 - 98 UPTO 2001 - 02 CAN ONLY BE ADJUSTED FROM THE BUSINESS INCOME OF THE APPELLANT . BUT THIS DECISION WAS OVERTURNED BY THE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P LTD VS DCIT 25 TAXMAN.COM 364 (GUJ) WHEREIN IT WAS HELD AS UNDER: WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (A Y 2002 - 03) WILL BE DEALT WITHIN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND O NCE THE CIRCULAR NO. 14 OF 2 001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM AY 1997 - 98 UPTO 2001 - 02 GOT CARRIED FORWARD TO THE A.Y. 2002 - 03 AND BECAME PART THEREOF, IT CAM E TO BE GOVERNED BY THE PROVISIONS OF SEC. 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE TO CARRY FORWARD M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 4 AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. IN VIEW OF THE ABOVE GUJARAT HIGH COURT DECIS ION, I COULD NOT FIND ANY CONTRADICTORY DECISION ON THIS ISSUE, THEREFORE, I DIRECT THE AO TO ALLOW THE APPELLANTS CLAIM OF ADJUSTING UNABSORBED DEPRECIATION OF AY 1999 - 2000 FORM THE HOUSE PROPERTY INCOME OF THIS YEAR. THESE GROUNDS OF APPEAL ARE ALLOWED . 5. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE ORDER, WE F IND THAT THE CONCLUSION OF THE CIT(A) IS BASED ON THE DECISION OF HONBLE GUJARAT HIGH COURT, WHEREIN, THE HONBLE HIGH COURT AFTER DISCUSSING THE ENTIRE PROVISION OF SECTION 32(2) AND A MENDMENT BROUGHT BY FINANCE ACT, 2001, HAD CONCLUDED AS UNDER: THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997 - 98, 1999 - 2000, 2000 - 01 AND 2001 - 02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE A.Y. 2002 - 03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. TH EREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSOR PTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YE AR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 5 DEPRECIATION IS ADDED TO THE CURRENT DEP RECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPIN ION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE 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 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997 - 98 UPTO THE A.Y.2001 - 02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002 - 03 AND BECAME PART THEREOF, IT CA ME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 6. THUS, THE FINDING OF THE LD. CIT(A) IS BASED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P. LTD ( SUPRA ), AND NO CONTRARY DECISION OF ANY OTHER HIGH COURT HAS BEEN BROUGHT TO OUR NOTICE, HENCE SUCH A FINDING OF THE CIT(A) IS UPHELD. FURTHER, AS HELD BY TH E HIGH COURT THE UNABSORBED DEPRECIATION BECOMES THE CURRENT YEAR DEPRECIATION, WHICH CAN VERY WELL BE SET OFF AGAINST ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. 7. REGARDING I SSUE RAISED IN GROUND NO. 2, THE LD. COUNSEL POINT ED O UT THAT SAME IS NOT ARISING FROM THE ORDER OF THE CIT(A) THEREFORE, SUCH A GROUND IS MIS CONCEIVED. 8. WE AGREE WITH SUCH A CONTENTION OF THE LD. COUNSEL AS THIS GROUND IS NOT BORNE OUT FROM THE ORDER OF THE CIT(A) AS HE HAS NOT M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 6 ADJUDICATED ANY SUCH ISSUE , ACCORDINGLY , THE SAME IS DISMISSED AS INFRUCTUOUS. 9. AS REGARDS GROUND NO. 3, WE FIND THAT LD. CIT(A) HAD NOTED THAT AO HAD DISALLOWED THE BUSINESS LOSS OF AY 2004 - 05 WITHOUT STATING ANY REASON S AND HE HAD MERELY DIRECTED THAT THE ASSESSEE CAN SET OFF BUSINESS LOSS WITHIN 8 YEARS AND SINCE THE ASSESSEES BUSINESS LOSS FALLS WITHIN THE PERIOD OF EIGHT YEARS , THEREFORE , THE ASSESSEE IS ELIGIBLE FOR SET OFF OF BUSINESS LOSS. THE RELEVANT OBSERVATION OF LD. CIT(A) IS AS UNDER: IN RECTIFICATION U/S 154, TH E AO HAD DISALLOWED THE BUSINESS LOSS OF AY 2004 - 05 OF THE APPELLANT WITHOUT STATING ANY REASON. AS THE PROVISIONS OF THE ACT THE ASSESSEE CAN SET OF BUSINESS LOSS WITHIN EIGHT YEARS. AS THIS BUSINESS LOSS IS WITHIN EIGHT YEARS, THE APPELLANT IS ELIGIBLE F OR THE SET OFF OF THE BUSINESS LOSS. ON THIS ISSUE A.OS CONTENTION IS UPHELD AND AO IS DIRECTED TO ALLOW THE SET OFF OF BUSINESS LOSS. 10. WE FIND NO INFIRMITY IN SUCH AN ORDER OF LD. CIT(A). EVEN FROM THE COMPUTATION OF INCOME IT IS SEEN THAT UNDER TH E HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, ASSESSEE HAS CLAIMED BROUGHT FORWARD BUSINESS LOSSES OF AY 2004 - 05. THE GROUND RAISED BY THE REVENUE THAT IT HAS BEEN CLAIMED AGAINST INCOME FROM HOUSE PROPERTY IS MISCONCEIVED. THUS, GROUND NO. 3 RAI SED BY THE REVENUE IS DISMISSED. 11. AFTER CONSIDERING THE FOLLOWING FINDING OF THE TRIBUNAL, WE HOLD THAT THER E IS NO SUBSTANCE IN THE GROUND RAISED BY THE REVENUE . ACCORDINGLY, THE GROUND NO. 3, RAISED BY THE REVENUE IS DISMISSED. M/S BHARAT RADIATORS INDUSTRIES PVT LTD ITA NO. 1356 /M/201 3 7 1 2 . IN THE RESU LT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JU LY , 2015. SD/ - S D / - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 10 TH JU LY , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 2 1 , MUMBAI 4) THE CIT 10 , MUMBAI . 5) , , / THE D.R. B BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY . / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS