M/s. Shree Benzophen Industries Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 1384/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1149 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Question of law; Unabsorbed depreciation
• Section: 32; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1384/AHD/2012 (ASSESSMENT YEAR: 2008-09) M/S. SHREE BENZOPHEN INDUSTREIS LTD., C/O. ORGANO METALLICS 47/1/22, G.I.D.C. NANDESARI, GIDC. BARODA V/S THE A.C.I.T. CIRCLE-4, BARODA (APPELLANT) (RESPONDENT) PAN: AACCS6072K APPELLANT BY : SHRI M.K. PATEL, AR RESPONDENT BY : SHRI K. MADHUSUDAN SR. D.R. ( )/ ORDER DATE OF HEARING : 08 -07-201 6 DATE OF PRONOUNCEMENT : 11-07-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-III, BARODA DATED 17.04.2012 PERTAINING TO A .Y. 2008-09. ITA NO1384/A HD/2012 . A.Y. 2008-09 2 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READS AS UNDER:- 1. THAT ON FACTS, AND IN LAW, THE LD. CIT(A) HAS GRIEV OUSLY ERRED IN NOT ALLOWING THE CARRY FORWARD OF BUSINESS LOSS OF RS. 74,44,271/-. 2. THAT, ON FACTS AND IN LAW, THE LD. CIT(A) HAS GRIEV OUSLY ERRED IN NOT ALLOWING EITHER SET-OFF OR CARRY FORWARD OF UNABSORBED DEPRE CIATION AMOUNTING TO RS. 3,17,82,254/-. 3. THAT THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 3,00,544/- OUT OF INTEREST PAYMENT. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E FAIRLY CONCEDED THAT THE GRIEVANCE RAISED VIDE GROUND NO. 1 IS MISP LACED INASMUCH AS THE CLAIM OF SET OFF OF BUSINESS LOSS IS FOR THE BU SINESS LOSSES WHICH PERTAIN TO ASSESSMENT YEARS OF MORE THAN 8 YEARS. 4. SINCE, THE ASSESSEE IS NOT ENTITLED TO CARRY FORWAR D ANY LOSS FOR MORE THAN 8 ASSESSMENT YEARS AND SINCE THE LD. COUNSEL H AS CONCEDED GROUND NO. 1 IS ACCORDINGLY DISMISSED. 5. IN SO FAR AS THE GRIEVANCE RELATING TO GROUND NO. 2 IS CONCERNED, THE REVENUE AUTHORITIES HAVE DENIED THE SET OFF OF UNAB SORBED DEPRECIATION IN THE LIGHT OF THE PROVISIONS OF SUB SECTION 2(III )(B) OF SECTION 32 AS AMENDED BY THE FINANCE (NO. 2) ACT, 1996 WITH EFFEC T FROM 1 ST APRIL, 1997. ACCORDING TO THE REVENUE AUTHORITIES, THE SAI D AMENDMENT IS APPLICABLE IN THE CASE OF ASSESSEE AND, THEREFORE, THE ASSESSEE IS NOT ALLOWED TO CARRY FORWARD UNABSORBED DEPRECIATION FO R MORE THAN 8 ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSM ENT YEARS FOR WHICH THE AFORESAID ALLOWANCE WAS FIRST COMPUTED. 6. THIS ISSUE IS NO MORE RES INTEGRA AND HAS BEEN SETT LED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE ITA NO1384/A HD/2012 . A.Y. 2008-09 3 JURISDICTIONAL HIGH COURT IN THE CASE OF GENERAL MO TORS INDIA (P.) LTD. 354 ITR 244 WHICH HAS BEEN FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GUJARAT THEMIS BIOSYN LTD . 228 TAXMAN.COM 359 WHEREIN THE HONBLE HIGH COURT WAS CEASED WITH THE FOLLOWING QUESTION OF LAW:- B. WHETHER IN LAW AND ON THE FACTS AND CIRCUMSTANC ES OF THE CASE, THE ITAT WAS RIGHT IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS.58,48,076/- FOR THE P ERIOD A.Y. 1997-98 TO 2000-01 I.E. MORE THAN EIGHT YEARS IN CONTRAVENTION TO THE PROVISIONS OF THE UNAMENDED PROVISIONS OF SECTION 32(2)(III)(B) AS ST OOD IN THE ASSESSMENT YEARS 1997-98 TO 2000-2001?' 7. THE HONBLE HIGH COURT OBSERVED AS UNDER:- 3.THIS VERY ISSUE HAS BEEN DECIDED BY THIS COURT IN THE CASE OF GENERAL MOTORS INDIA P. LTD. V. DY. CIT [2013] 354 ITR 244/[20121 25 TAXMANN.COM 364/210 TAXMAN 20 (GUJ.)FMAG.). WHILE DECIDING THE QUESTION OF REOPENING OF THE NOTICE, THIS COURT CHOSE TO CONSIDER WHETHER UNABSO RBED DEPRECIATION COULD BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS AND WOULD THAT BE GOVERNED BY SECTION 32 AS AMENDED BY THE FINANCE AC T 2 OF 1996. THIS COURT HAS CHOSEN TO ANSWER THE SAME IN THE FOLLOWING MANN ER: 'THE LAST QUESTION WHICH ARISES FOR CONSIDERATION I S THAT WHETHER THE UNABSORBED DEPRECIATION PERTAINING TO A.Y. 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY FINANCE ACT 20 01? THE REASON GIVEN BY THE ASSESSING OFFICER UNDER SECTION 147 IS THAT SECTION 32(2) OF THE ACT WAS AMENDED BY FINANCE ACT NO.2 OF 1996 W.E.F. A.Y. 199 7-98 AND THE UNABSORBED DEPRECIATION FOR THE A.Y. 1997-98 COULD BE CARRIED FORWARD UP TO THE MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIR ST COMPUTED. ACCORDING TO THE ASSESSING OFFICER, 8 YEARS EXPIRED IN THE A.Y. 2005-06 AND ONLY TILL THEN, THE ASSESSEE WAS ELIGIBLE TO CLAIM UNABSORBED DEPRE CIATION OF A.Y. 1997-98 FOR ITA NO1384/A HD/2012 . A.Y. 2008-09 4 BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOM E FOR THE A.Y. 2005-06. BUT THE ASSESSEE WAS NOT ENTITLED FOR UNABSORBED DEPREC IATION OF RS.43,60,22,1587- FOR A.Y. 1997-98, WHICH WAS NOT E LIGIBLE FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE A.Y. 2006-07. PRIOR TO THE FINANCE ACT NO.2 OF 1996 THE UNABSORBE D DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FORWARD INDEFINITELY A ND BY A DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR . THE FINANCE ACT NO.2 OF 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DEPRECIATION AND SET-OFF TO A LIMIT OF 8 YEARS, FROM THE A.Y.I997-98. CIRCULAR NO.762 DATED 18.2.1998 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THE FORM OF EXPLANATORY NOTES CATEGORICALLY PROVIDED, THAT THE UNABSORBED DEPRECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FULL EFFEC T CANNOT BE GIVEN IN THAT PREVIOUS YEAR SHALL BE CARRIED FORWARD AND ADDED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR AND BE DEEMED TO BE PART THEREOF. SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF A.Y. 1 996-97 WOULD BE ADDED TO THE ALLOWANCE OF A.Y. 1997-98 AND THE LIMITATION OF 8 YEARS FOR THE CARRY- FORWARD AND SET-OFF OF SUCH UNABSORBED DEPRECIATION WOULD START FROM A.Y. 1997-98. WE MAY NOW EXAMINE THE PROVISIONS OF SECTION 32(2) OF THE ACT BEFORE ITS AMENDMENT BY FINANCE ACT 2001. THE SECTION PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2001, READ AS UNDER: 'WHERE IN THE ASSESSMENT OF THE ASSESSEE FULL EFFEC T CANNOT BE GIVEN TO ANY ALLOWANCE UNDER CLAUSE (II) OF SUB-SECTION (1) IN A NY PREVIOUS YEAR OWNING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR OWING TO THE PROFITS OR GAINS BEING LESS THAN THE ALLOWANCE, THEN, THE ALLOWANCE OR THE PART OF ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVE N (HEREINAFTER REFERRED TO AS UNABSORBED DEPRECIATION ALLOWANCE), AS THE CASE MAY BE, (I) SHALL BE SET OFF AGAINST THE PROFITS AND GAINS , IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THA T ASSESSMENT YEAR; ITA NO1384/A HD/2012 . A.Y. 2008-09 5 (II) IF THE UNABSORBED DEPRECIATION ALLOWANCE CAN NOT BE WHOLLY SET OFF UNDER CLAUSE (I), THE AMOUNT NOT SO SET OFF SHALL BE SET OFF FROM THE INCOME UNDER ANY OTHER HEAD, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR; (III) IF THE UNABSORBED DEPRECIATION ALLOWANCE CA NNOT BE WHOLLY SET OFF UNDER CLAUSE (I) AND CLAUSE (II), THE AMOUNT OF ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AND (A) IT SHALL BE SET OFF AGAINST THE PROFITS AND GA INS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THAT ASSESSMENT YEAR; (B) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNO T BE WHOLLY SO SET OFF, THE AMOUNT OF UNABSORBED DEPRECIATION ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR NO T BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSM ENT YEAR FOR WHICH THE AFORESAID ALLOWANCE WAS FIRST COMPUTED: PROVIDED THAT THE TIME LIMIT OF EIGHT ASSESSMENT YE ARS SPECIFIED IN SUB- CLAUSE (B) SHALL NOT APPLY IN CASE OF A COMPANY FOR THE ASSESSMENT YEAR BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPA NY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANY (S PECIAL PROVISIONS) ACT, 1985 (1 OF 1986) AND ENDING WITH THE ASSESSMENT YEA R RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ENTIRE NET WORTH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA) OF SUB-SECTIO N (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985.' THE AFORESAID PROVISION WAS INTRODUCED BY FINANCE ( NO.2) ACT, 1996 AND FURTHER AMENDED BY THE FINANCE ACT, 2000. THE PROVI SION INTRODUCED BY FINANCE (NO.2) ACT WAS CLARIFIED BY THE FINANCE MIN ISTER TO BE APPLICABLE WITH PROSPECTIVE EFFECT. ITA NO1384/A HD/2012 . A.Y. 2008-09 6 SECTION 32 (2) OF THE ACT WAS AMENDED BY FINANCE AC T, 2001 AND THE PROVISION SO AMENDED READS AS UNDER: 'WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFF ECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUBSECTION (1) IN ANY PREVIOUS YEAR , OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YE AR OR OWING TO THE PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OWING T O THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUB JECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB-SECTION (3) O F SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFF ECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DE EMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THA T PREVIOUS YEAR, BE DEEMED TO BE ALLOWANCE OF THAT PREVIOUS YEAR, AND S O ON FOR THE SUCCEEDING PREVIOUS YEARS.' THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIED BY CENTRAL BOARD OF DIRECT TAXES IN THE CIRCULAR NO.14 OF 2001. THE REL EVANT PORTION OF THE SAID CIRCULAR READS AS UNDER :- 'MODIFICATION OF PROVISIONS RELATING TO DEPRECIATIO N 30.1 UNDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N IS ALLOWED FOR 8 ASSESSMENT YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WH ERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISPENSED WITH THE REST RICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N. THE ACT HAS ALSO CLARIFIED THAT IN COMPUTING THE PROFITS AND GAINS O F BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UN DER SECTION 32 SHALL BE MANDATORY. ITA NO1384/A HD/2012 . A.Y. 2008-09 7 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FO R DEPRECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESSEE'S BUSINESS OR PROFESSION IN ANOTHER COUNTR Y. 30.4 THE ACT HAS ALLOWED DEPRECIATION ALLOWANCE ON ALL IMPORTED MOTOR CARS ACQUIRED ON OR AFTER 1ST APRIL, 2001. 30.5 THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2002-03 AND SUBSEQUENT YEARS' THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMEND MENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES W ITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED D EPRECIATION. THE AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2002-0 3 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILAB LE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002-03) WILL BE DEALT WIT H IN ACCORDANCE 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 STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNAB SORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEV ER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE O F AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERP RETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT IN TERPRETATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANG UAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED F OR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ITA NO1384/A HD/2012 . A.Y. 2008-09 8 ACCRUING TO THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTIN G THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUC TION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVI SIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSO RBED 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 T ILL THE A.Y. 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OF F AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATIO N IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT R ELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GA INS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASS ESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT O F INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBE D DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDE D TO THE CURRENT DEPRECIATION 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 AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION T HAT 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 PROVISION S 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 A ND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBE D DEPRECIATION FROM A.Y.I997-98 UP TO THE A.Y.2001-02 GOT CARRIED FORWA RD TO THE ASSESSMENT YEAR ITA NO1384/A HD/2012 . A.Y. 2008-09 9 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVE RNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND W ERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS O F SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 8. AS, NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO THE NOTICE BY THE LD. D.R. IN FAVOUR OF THE REVENUE. RESPECTFULLY FOLLOWI NG THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE DIREC T THE A.O TO ALLOW SET OFF/CARRY FORWARD OF UNABSORBED DEPRECIATION AS CLAIMED BY THE ASSESSEE. GROUND NO. 2 IS ACCORDINGLY ALLOWED. 9. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS. 3, 00,544/- OUT OF INTEREST PAYMENT. 10. ON SCRUTINIZING THE FINANCIAL STATEMENTS OF THE ASS ESSEE, THE A.O FOUND THAT THE ASSESSEE HAS PAID INTEREST @ 15% TO THE PARTIES LISTED IN THE REGISTER MAINTAINED U/S. 301 OF THE COMPANIE S ACT. THE A.O. CALLED FOR THE DETAILS OF INTEREST PAID TO THE PART IES AND ALSO TO SHOW CAUSE WHY INTEREST PAID @ 15% SHOULD NOT BE TREATED AS EXCESSIVE AND WHY IT SHOULD NOT BE RESTRICTED TO 12.50%. ASSESSEE FILED A DETAILED REPLY TO SUBSTANTIATE ITS CLAIM. IT WAS BROUGHT TO THE NOTICE OF THE A.O. THAT SINCE IN PAST MANY YEARS, THE ASSESSEE WAS INC URRING HUGE LOSSES AND WAS, THEREFORE, NOT IN A POSITION TO PAY INTERE ST TO ITS DEPOSITORS AND AS THE ASSESSEE HAS MADE PROFITS DURING THE YEA R, IT HAS DECIDED TO PAY INTEREST @ 15%. THE ASSESSEE STRONGLY CONTEN DED THAT INTEREST @ 15% CANNOT BE CONSIDERED TO BE EXCESSIVE. ITA NO1384/A HD/2012 . A.Y. 2008-09 10 11. THIS EXPLANATION OF THE ASSESSEE DID NOT FIND ANY F AVOUR WITH THE A.O. WHO RESTRICTED THE CLAIM OF INTEREST @ 12.50% AND MADE A DISALLOWANCE OF RS. 3,00,544/-. 12. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 13. BEFORE US, THE LD. COUNSEL VEHEMENTLY STATED THAT I NTEREST RATE OF 15% PER ANNUM SHOULD NOT BE CONSIDERED AS EXCESSIVE . THE LD. COUNSEL FURTHER REITERATED WHAT HAS BEEN STATED BEF ORE THE LOWER AUTHORITIES. PER CONTRA, THE LD. D.R. STRONGLY SUPP ORTED THE FINDINGS OF THE A.O. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN OUR CONSIDERED OPINION, IF THE A.O. IS OF THE OPINION THAT ANY CLAIM OF EXP ENDITURE IS EXCESSIVE THEN IT IS INCUMBENT UPON HIM TO BRING ON RECORD TH E COMPARABLE CASES. THE ONLY REASON GIVEN BY THE A.O. IS THAT TH E NORMAL RATE OF BANK INTEREST IS 12.50% BUT THE A.O. HAS NOT REALIZ ED IS THAT THE PUBLIC MAKE DEPOSITS IN COMPANIES TO GET MORE INTEREST THA N FROM THE BANK. IF THE COMPANIES ARE PAYING THE SAME RATE OF INTERE ST AS THE BANK ARE PAYING THEN THE PUBLIC WOULD NOT SEE ANY BENEFIT IN MAKING DEPOSITS WITH THE COMPANY AND THEY WILL GO FOR BANK INTEREST . FURTHER, BY NO STRETCH OF IMAGINATION RATE OF INTEREST OF 15% CAN BE CONSIDERED AS EXCESSIVE. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 3,00, 544/-. ITA NO1384/A HD/2012 . A.Y. 2008-09 11 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 07 - 2 016. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD