DCIT, CHENNAI V. Coromandel Sugars Limited, CHENNAI

ITA 1430/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81126 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA; GURU BHASHYAM
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Tangible material; Reason to believe; Unabsorbed depreciation
• Section: 148

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , . !' !' !' !' , # # # # $% $% $% $% $& $& $& $& BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI V. DURGA RAO, JUDICIAL MEMBER $ . / I.T.A.NO.1430/MDS/2014 # ' '' / ASSESSMENT YEAR :2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI 600 034. VS. M/S. COROMANDEL SUGARS LIMITED, NO. 93, SANTHOME HIGH ROAD, R.A. PURAM, CHENNAI 600 028. [PAN :AAACI2702G] ( () () () () / APPELLANT ) ( *+() *+() *+() *+() / RESPONDENT ) () , $ / APPELLANT BY : SMT.V.S.SREELEKHA, CIT-DR & SHRI GURU BHASHYAM, JCIT *+() , $ / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE $ , -. / DATE OF HEARING : 31.07.2014 /0' , -. /DATE OF PRONOUNCEMENT : 18.08.2014 1 1 1 1 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, CHENNAI DATED 29.01.2014 RELEVANT TO THE ASSESSMENT YEAR 2010-11. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 143 143143 1430 00 0/M/ /M/ /M/ /M/14 1414 14 2 2. THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER TH E ASSESSEE IS ENTITLED FOR SET OFF OF UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02. IN THE ASSESSMENT ORDER, THE A SSESSING OFFICER HAS OBSERVED THAT THE DEPRECIATION LOSS OF .5,46,91,009/- FOR THE ASSESSMENT YEAR 2000-01 AND .22,05,94,091/- PERTAINING TO THE ASSESSMENT YEAR 2001-02 CANNOT BE ALLOWED TO CARRY FORWARD FOR MORE THAN 8 YEARS AS PER SECTION 32(2) OF THE ACT AS AME NDED WITH EFFECT FROM 01.04.1998 AND AGAIN AMENDED WITH EFFECT FROM 01.04.2002. THE BROUGHT FORWARD DEPRECIATION LOSSES PERTAINING TO T HE YEARS FALLING BEFORE 2003 CANNOT BE CARRIED FORWARD AND SET OFF B EYOND 8 YEARS. HENCE, THE ASSESSING OFFICER HAS DENIED THE DEPRECI ATION LOSSES PERTAINING TO THE ASSESSMENT YEARS 2000-01 AND 2001 -02 AND CANNOT BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR 2 010-11. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT(APPEALS) AND SUBMITTED AS UNDER: CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATI ON POSITION OF LAW PROVISIONS RELATING TO CARRY-FORWARD OF UNABSORBED DEPRECIATION REMAINED UNCHANGED RIGHT FROM 1922 TO 1996. UNABSOR BED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRIED FORWARD INDEFINITELY, AND BY VIRTUE OF A DEEMING FICTION BE CAME THE ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 143 143143 1430 00 0/M/ /M/ /M/ /M/14 1414 14 3 POST AMENDMENT BY THE FINANCE ACT (NO.2) ACT 1996, WITH EFFECT FROM AY 97-98 SECTION 32(2) OF THE INCOME TAX ACT,1961 (IT ACT) W AS AMENDED TO PROVIDE FOR, INTER ALIA, AN EIGHT YEAR TIME LIMIT F OR THE CARRY FORWARD OF UNABSORBED DEPRECIATION. CENTRAL BOARD OF DIRECT TA XES (CBDT) CIRCULAR NO.762 DATED FEBRUARY 18, 1998, WHILE EXPL AINING THE PROVISIONS OF THE FINANCE (NO.2) ACT, 1996 CLARIFIE D THAT SECTION 32(2) AS IT EXISTED UP TO AY 96-97, PROVIDED THAT UNABSOR BED DEPRECIATION OF A YEAR WOULD BE DEEMED TO BE PART OF THE ALLOWANCE OF DEPRECIATION FOR THE FOLLOWING YEAR. SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF AY 96- 97 WOULD BE ADDED TO THE ALLOWANCE OF AY 97-98 AND THE LIMITATI ON OF 8 YEARS FOR THE CARRY FORWARD AND SET OFF OF SUCH UNABSORBED DEPREC IATION WOULD START FROM AY 97-98. AMENDMENT BY THE FINANCE ACT, 2001 THE FINANCE ACT, 2001, HAS ONCE AGAIN AMENDED THE P ROVISIONS RELATING TO CARRY FORWARD AND SET-OFF OF UNABSORBED DEPRECIA TION. CBDT CIRCULAR NO.14/2001 STATES THAT THE REASONS FOR DIS PENSING WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OF F OF UNABSORBED DEPRECIATION IS TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, ESPECIALLY IN AN ERA W HERE OBSOLESCENCE TAKES PLACE SO OFTEN'. THE FINANCE ACT, 2001 HAS RESTORED SECTION 32(2) TO ITS ORIGINAL POSITION AS IT STOOD PRIOR TO THE AMENDMENT BY THE FINANCE (NO.2) ACT, 1996. THUS, THE PROVISION DEEMING UNABSORBED DEPREC IATION TO BE A PART OF THE ALLOWANCE OF THE FOLLOWING YEAR WAS RES TORED WITH EFFECT FROM AY 02-03. NOW, THE ISSUE IS WHAT WOULD BE THE TREATMENT OF UN ABSORBED DEPRECIATION FOR AY 97-98 TO 2000-01. WILL THE SAME BE CARRIED FORWARD INDEFINITELY OR WILL ITS CARRY FORWARD BE R ESTRICTED TO A LIMITED PERIOD OF 8 YEARS? ANSWER TO THIS QUESTION IS AVAILABLE IN CBDT'S CIRC ULAR NO. 762 ITSELF - WHEN THE 8 YEAR LIMIT WAS IMPOSED FOR THE CARRY FOR WARD OF UNABSORBED DEPRECIATION, THE CIRCULAR CLARIFIED THAT UNABSORBE D DEPRECIATION FOR AY 96-07 WOULD BE ADDED TO THE DEPRECIATION ALLOWANCE FOR AY 97-98. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 143 143143 1430 00 0/M/ /M/ /M/ /M/14 1414 14 4 SIMILARLY, DEPRECIATION THAT REMAINS UNABSORBED AS ON 31 MARCH 2002 WILL FORM PART OF THE ALLOWANCE FOR AY 03-04 AND WI LL THUS CONTINUE TO BE CARRIED FORWARD INDEFINITELY. THEREFORE THE BENEFIT OF INDEFINITE CARRY FORWARD O F UNABSORBED DEPRECIATION BE ALLOWED TO THE TAX PAYER AND THE IN TENTION OF THE LEGISLATURE MAY ADMITTEDLY BE TO ALLOW INDEFINITE C ARRY FORWARD OF UNABSORBED DEPRECIATION TO TAX PAYERS. 1. GENERAL MOTORS INDIA P. LTD VS. DCIT (2013) (354 ITR 244) (GUJ) 2. HINDUSTAN LEVER LTD V. ADDL. CIT (2013) (22 ITR 737 (MUMBAI) 4. THE LD. CIT(APPEALS), AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE, ALLOWED THE CLAIM OF THE ASSESSEE BY FOLL OWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERA L MOTORS INDIA P. LTD. V. DCIT 354 ITR 244. 5. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVER ED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENER AL MOTORS INDIA P. LTD. V. DCIT (SUPRA). 7. ON THE OTHER HAND, THE LD. DR SIMPLY RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 8. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FI ND THAT THE VERY I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 143 143143 1430 00 0/M/ /M/ /M/ /M/14 1414 14 5 SAME ISSUE HAS BEEN CONSIDERED BY THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P. LTD. V. DCIT (S UPRA), WHEREIN, THE HONBLE COURT HAS HELD AS UNDER: HELD, THAT IF WAS NOT OPEN TO THE ASSESSING OFFICE R TO DECIDE THE OBJECTION TO NOTICE UNDER SECTION 148 BY A COMPOSIT E ASSESSMENT ORDER. THE ASSESSING OFFICER WAS REQUIRED TO FIRST DECIDE THE OBJECTION OF THE ASSESSEE FILED UNDER SECTION 148 AND SERVE A COPY O F THE ORDER ON THE ASSESSEE. AND AFTER GIVING SOME REASONABLE TIME TO THE ASSESSEE FOR CHALLENGING HIS ORDER, IT WAS OPEN TO HIM TO PASS A N ASSESSMENT ORDER. THIS WAS NOT DONE, BY THE ASSESSING OFFICER, THEREF ORE, THE ORDER ON THE OBJECTION TO THE NOTICE UNDER SECTION 148 AND THE A SSESSMENT ORDER PASSED UNDER THE ACT DESERVED TO BE QUASHED. MOREOV ER, FROM THE FACTS ON RECORD, IT WAS CLEAR THAT THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139. THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR HIS ASSESSMENT FOR THE YEAR. NOR SUBSEQUENTLY, DID THE ASSESSING O FFICER HAVE ANY TANGIBLE MATERIAL ON RECORD, ON THE BASIS OF WHICH HE COULD HAVE FORMED HIS OPINION OR COULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. EVEN ON T HE MERITS THE PROVISIONS OF SECTION 32(2), AS AMENDED BY THE FINA NCE ACT, 2001, WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE A VAILABLE IN THE ASSESSMENT YEARS 1997-98, 1999-2000, 2000-01 AND 20 01-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF T ILL THE ASSESSMENT YEAR 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE T IME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. THE ORDER OF REASSESSMENT WAS NOT VALID AND WAS LIABLE TO BE QUA SHED. 9. THE LD. DR COULD NOT CONTROVERT THE ABOVE DECIS ION OF THE HONBLE GUJARAT HIGH COURT. MOREOVER, THE HONBLE SUPREME C OURT HAS DISMISSED THE DEPARTMENTS SPECIAL LEAVE PETITION A GAINST THE ABOVE JUDGMENT. RESPECTFULLY FOLLOWING THE ABOVE DECISION , WE DISMISS THE APPEAL FILED BY THE REVENUE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO. 143 143143 1430 00 0/M/ /M/ /M/ /M/14 1414 14 6 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 18 TH OF AUGUST, 2014 AT CHENNAI. SD/ - SD/ - ( . . . ) (DR. O.K. NARAYANAN) / VICE-PRESIDENT ( . !' !' !' !' ) (V. DURGA RAO) # # # # $% $% $% $% / JUDICIAL MEMBER CHENNAI, DATED, THE 18.08.2014 VM/- 1 , *#-23 43'- /COPY TO: 1. () / APPELLANT, 2. *+() / RESPONDENT, 3. 5 ( ) /CIT(A), 4. 5 /CIT, 5. 36! *#-# /DR & 6. !' 7 /GF.