The Deputy Commissioner of Income Tax, Circle-1(2), Vadodara V. The Liquidator, M/s. Petrofils Co. Operative Ltd., Vadodara

ITA 1465/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4384 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-11-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 15-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Capital asset; Business income; Depreciation; Salary income; Unabsorbed depreciation; Co-operative Credit Society; Liquidation; Capital Gains
• Section: 143(3); 43D; 32; 56; 28; 15

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER . / I.T..A. NOS. 1465, 1466, 1475 & 1245/AHD/2017 ( ASSESSMENT YEARS : 2009-10, 2011-12, 2004-05 & 2012-13) ERSTWHILE ASSESSING OFFICER DY. COMMISSIONER OF INCOME-TAX, CIR. 1(2), BARODA PRESENT ASSESSING OFFICER THE DEPUTY COMMISSIONER OF INCOEM TAX , CIRCLE-1(2), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, VADODARA / VS. THE LIQUIDATOR M/S PETROFILES CO- OPERATIVE LTD. D-5, PETROFILS NAGAR, P.O. PETROCHEMICAL TOWNSHIP, DIST. BARODA, ./ ./ PAN/GIR NO. : AAAAP0443P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ALOK SINGH, CIT.DR / RESPONDENT BY: SHRI MEHUL K. PATEL, A.R. DATE OF HEARING 25/11/2019 !'# / DATE OF PRONOUNCEMENT 27/11/2019 / O R D E R ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS DIRECTED AT THE INSTANCE OF R EVENUE ARISE FROM THE RESPECTIVE ORDERS OF THE COMMISSIONER OF I NCOME TAX (APPEALS) (CIT(A)) AGAINST DIFFERENT ASSESSMENT Y EARS AS TABULATED BELOW: ITA NOS. NAME OF ASSESSEE AY CIT(A)S ORDER DATED AOS ORDER DATED AOS ORDER UNDER SECTION 1465/AHD/2017 THE LIQUIDATOR 2009-10 28.03.17 23.11.11 143(3) OF THE INCOME TAX ACT (IN SHORT THE ACT) 1466/AHD/2017 -DO- 2011-12 -DO- 25.03.14 -DO- 1475/AHD/2017 -DO- 2004-05 28.03.17 20.11.06 -DO- 1245/AHD/2017 -DO- 2012-13 14.02.17 11.03.15 -DO- 2. THE GRIEVANCES RAISED BEING COMMON, ALL THE CASE S WERE HEARD TOGETHER AND DISPOSED OF BY THE COMMON ORDER. 3. ITA NO.1245/AHD/2017 RELEVANT TO AY 2012-13 IS TAKEN AS A LEAD CASE FOR THE PURPOSES OF ADJUDICATION. ITA NO.1245/AHD/2017 AY 2012-13 4. IN THE CAPTIONED APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ADJUDICATION: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING TO SET-OFF OF UNABSORBED DEPRECIATION ALLOWANCE CARRIED FORWARD FROM EARLIER YEARS AGAINS T THE INCOME FROM OTHER SOURCES AS WELL AS CAPITAL GAINS WITHOUT APPR ECIATING THE FACT THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA S NOT CARRIED ANY BUSINESS ACTIVITY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DIRECTING TO SET-OFF OF UNABSORBED DEPRECIATION ALLOWANCE, WITHOUT APPRECIATING THE FACT THAT CARRY ING ON OF A BUSINESS WAS AN ESSENTIAL PREREQUISITE FOR ALLOWING SET OFF OF SUCH UNABSORBED DEPRECIATION, AS MENTIONED IN THE CASE OF RAJARATNA NARANBHAI MILLS LTD. HELD BY ITAT AHMD. BENCH C (SPECIAL BENCH) [ 1982] 1 ITD 1044 (AHD.) (SB), AND IN THE CASE OF DHARTI DREDGING & I NFRASTRUCTURE LTD. ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 3 - VS. ADDITIONAL COMMISSIONER OF INCOME-TAX, [2013] 3 5 TAXMANN.COM 563 (HYDERABAD-TRIB.). 5. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED DR FOR THE REVENUE POINTED OUT THAT THE SOLITARY ISSUE IN THE REVENUES APPEAL IS WHETHER THE ASSESSEE IS ENTITLED TO CLAIM ADJUSTMEN T OF BROUGHT FORWARD OF UNABSORBED DEPRECIATION OF EARLIER YEARS WITHOUT ANY FETTERS AND ALSO SET OFF OF SUCH BROUGHT FORWARD UNABSORBED DEPRECIATION UNDER S.32(2) OF THE ACT AGAINST THE INCOME ASSESSE D UNDER VARIOUS HEADS OF INCOME OTHER THAN BUSINESS INCOME. THE LEARNED DR MADE TWO FOLD SUBMISSIONS; (I) THE RESTRICTION OF 8 YEAR S OF CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION SHOULD BE AP PLIED FOR THE UNABSORBED DEPRECIATION IN RELATION TO PERIOD PRIOR TO AMENDMENT BROUGHT FORWARD BY FINANCE ACT, 2001 AND (II) THE A SSESSEE SHOULD NOT BE ALLOWED TO CLAIM SET OFF OF UNABSORBED DEPRECIAT ION AGAINST INCOME ARISING UNDER DIFFERENT HEADS OTHER THAN BUSINESS INCOME. THE LEARNED DR ACCORDINGLY SUBMITTED THAT ACTION OF THE AO SHOULD BE UPHELD. 6. THE LEARNED AR, ON THE OTHER HAND, POINTED OUT T HAT CIT(A) HAS RIGHTLY APPRECIATED THE LAW CONCERNING THE ISSUES R AISED ON BEHALF OF THE REVENUE AND NO INTERFERENCE THEREOF IS CALLED F OR. THE LEARNED AR FURTHER POINTED OUT THAT IDENTICAL ISSUE CAME UP FO R ADJUDICATION BEFORE THE TRIBUNAL IN AYS. 2006-07 TO 2009-10 WHERE THE C O-ORDINATE BENCH OF ITAT HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT. LTD. (1995) 215 ITR 60 (SC) AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF GENERAL MOTORS INDIA P. LTD. VS. DCIT 354 ITR 244 (GUJ) WHEREBY FIRSTLY THE RESTRICTION OF 8 YEARS FOR CARRY FORWAR D AND SET OFF AND UNABSORBED DEPRECIATION HAS BEEN DISPENSED WITH BY THE SUBSEQUENT AMENDMENT AND ACCORDINGLY THE UNABSORBED DEPRECIATI ON ARISING IN THE ASSESSMENT ORDER PRIOR TO THE AMENDMENTS ARE ALSO G OVERNED BY THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED B Y THE FINANCE ACT, ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 4 - 2001. SIMILARLY, IN VIEW OF THE DECISION OF THE CO -ORDINATE BENCH IN RELATION TO AY 2006-07 IN ASSESSEES OWN CASE THE A SSESSEE IS ENTITLED FOR CLAIM OF SET OFF OF UNABSORBED DEPRECIATION UND ER S.32(2) OF THE ACT AGAINST INCOME FROM OTHER SOURCES FOR THE REA SONINGS PROVIDED BY THE CO-ORDINATE BENCH IN THIS REGARD. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE C ORE ISSUE INVOLVES MAINTAINABILITY OF SET OFF OF UNABSORBED D EPRECIATION. THE CIT(A) HAS DEALT WITH THE ISSUE AS UNDER: 2.2 REJECTION OF CLAIM OF SET-OFF OF BROUGHT FORWARD UN ABSORBED DEPRECIATION AGAINST INCOME FROM CAPITAL GAINS. THE ASSESSEE HAS EARNED LONG TERM AND SHORT TERM CA PITAL GAINS DURING THE YEAR UNDER CONSIDERATION AND ACCOR DINGLY, IT HAS CLAIMED SET OFF OF BROUGHT FORWARD UNABSORBED DEPRE CIATION AGAINST THE CAPITAL GAINS INCOME. THE AO PROPOSED TO REJECT THE CLAIM OF ASSESSEE ON THE GROUND THAT BUSINESS ACTIVITIES WER E NOT BEING CARRIED OUT DURING THE YEAR UNDER CONSIDERATION AND HENCE SET OFF OF DEPRECIATION WAS NOT PERMISSIBLE. THE ASSESSEE OBJE CTED TO THE AO'S PROPOSITION AND FILED A DETAILED REPLY WHICH HAS BE EN REPRODUCED BY THE AO IN PARA 6.2 OF THE ASSESSMENT ORDER, THE ASS ESSEE MAINLY SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 32( 2), THE BROUGHT FORWARD DEPRECIATION IS DEEMED TO BE THE DEPRECIATI ON OF YEAR UNDER CONSIDERATION EVEN IF NO PROFIT UNDER THE HEAD BUSI NESS / PROFESSION WAS CHARGEABLE TO TAX. TO SUPPORT THE CONTENTION, T HE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE ITAT, AHMEDABAD IN THE ASSEEE'S OWN CASE FOR A.Y. 2006-07 TO 2009-10 (ORDER DATED 2 7.06.2014), WHERE IT HAS BEEN HELD THAT EXISTENCE OF BUSINESS I S NOT REQUIRED FOR SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION U/S 32(2) AGAINST THE INCOME UNDER VARIOUS HEADS OF INCOME. 2.2.1 AFTER CONSIDERING THE SUBMISSION OF THE ASSES SEE, AO REJECTED THE CLAIM OF SET OFF OF BROUGHT FORWARD DEPRECIATIO N AGAINST THE INCOME FROM CAPITAL GAINS AFTER RECORDING HIS FINDI NGS IN PARA 6.3 TO 6.8 OF THE ASSESSMENT ORDER, WHICH ARE REPRODUCED A S UNDER; 6.3 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED, BUT THE SAME IS NOT ACCEPTABLE. IN THE CASE UNDER CONSIDERATION, TH E ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY, A JOINT VENTURE OF GOV ERNMENT OF INDIA AND CO-OPERATIVE SOCIETIES ENGAGED IN MANUFACTURING OF POLYESTER FILAMENT YARN. THE COOPERATIVE SOCIETY WAS MAKING H EAVY LOSSES AND THE CENTRAL REGISTRAR OF COOPERATIVE SOCIETIES HAD APPOINTED THE LIQUIDATOR TO WIND UP THE ASSESSEE SOCIETY VIDE ORD ER DATED 11.4.2001. THUS, DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE HAS NOT CARRIED ANY BUSINESS ACTIVITY IN THE RETURN OF INCOME FILED THE ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 5 - ASSESSES HAS SET OFF THE INCOME FROM LONG TERM CAPI TAL GAIN AND SHORT TERM CAPITAL GAIN AGAINST UNABSORBED DEPRECIATION H OWEVER THE BROUGHT FORWARD UNABSORBED DEPRECATION WAS ALREADY DISALLOWED IN EARLY YEAR ASSESSMENT ORDER AND THE SAME VIEW WAS U PHELD BY THE CIT(A) FURTHERMORE THE ADJUSTMENT FOR UNABSORBED DE PRECATION CANNOT BE ALLOWED. IN THE RETURN OF INCOME FILED, T HE ASSESSES ASS SET OFF THE INCOME FROM LONG TERM CAPITAL GAINS AND SHO RT TERM CAPITAL GAINS AGAINST BROUGHT FORWARD UNABSORBED DEPRECIATI ON. HOWEVER, THIS CANNOT BE ALLOWED FOR THE REASONS STATED AS BE LOW:- 6.4 THE INCOME TAX ACT, 1961 HAS LAID DOWN THE MANN ER IN WHICH TOTAL INCOME OF AN ASSESSES IS TO BE COMPUTED. CHAP TER TV DEALS WITH THE COMPUTATION OF TOTAL INCOME. SECTION 14 STATES THAT 'SAVE AS OTHERWISE PROVIDED BY THIS ACT, ALL INCOME SHALL, FOR THE PURPOSES OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME, BE CLASSIFIED UNDER THE FOLLOWING HEADS OF INCOME : A. SALARIES. B. 35[ ***] C.INCOME FROM HOUSE PROPERTY. D, PROFITS AND GAINS OF BUSINESS OR PROFESSION. E. CAPITAL GAINS. F. INCOME FROM OTHER SOURCES.' U/S 14, INCOME FOR THE PURPOSES OF CHARGE OF INCOME TAX HAS TO BE CLASSIFIED IN 5 HEADS OF INCOME. ONCE THE INCOME IS CLASSIFIED UNDER ANY OF THE HEAD OF INCOME, THE DEDUCTIONS SHALL BE AVAILABLE TO THE ASSESSEE AS PER THE SECTION DEALING WITH THE RESPEC TIVE HEADS OF INCOME. EG. INCOME FROM SALARY HAS TO BE CALCULATED AS PER THE PROVISIONS OF SECTION 15 TO SECTION 17, INCOME FROM HOUSE PROPERTY HAS TO BE CALCULATED AS PER THE PROVISIONS OF SECTI ON 22 TO SECTION 27, PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE CALCULATED AS PER THE PROVISIONS OF SECTION 28 TO SECTION 44, CAPITAL GAINS AS PER SECTION 45 TO SECTION 55 AND INCOME FROM OTHER SOURCES AS PER SECTION 56 TO SECTION 59. THEN, CHAPTER V DEALS WIT H INCOME OF OTHER PERSON INCLUDED IN ASSESSEE'S TOTAL INCOME. C HAPTER VI DEALS WITH SET OFF AND CARRY FORWARD OF LOSSES. SECTION 7 1(2) STATES 'WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET R ESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS', IS A LOSS AND THE ASSESSES HAS INCOME ASSES SABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD 'CAPITAL GAINS' (WHETHER RELATING TO SHORT - TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS).' THUS, THE BASIC CONDITION FOR SET OFF OF BUSINESS L OSS IS THAT THERE SHOULD BE COMPUTATION UNDER ANY HEAD OF INCOM E. IN THE PRESENT CASE, THE HEAD OF INCOME IS 'PROFITS AND GA INS OF BUSINESS OR PROFESSION'. SECTION 28 LISTS OUT THE I NCOME WHICH ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 6 - ARE TO BE CONSIDERED IN COMPUTING THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. SECT ION 28 LISTS OUT CERTAIN RECEIPTS RELATABLE TO THE BUSINESS ACTI VITY. THUS, SECTION 28 STATES THAT THE RECEIPTS SHOULD BE RELAT ABLE TO SOME SORT OF BUSINESS ACTIVITY. THE EXISTENCE OF A BUSIN ESS ACTIVITY OR EARNING OF RECEIPTS FROM A BUSINESS ACTIVITY IS A PRECONDITION TO COMPUTE INCOME UNDER THE HEAD 'PROF ITS AND GAINS OF BUSINESS OR PROFESSION'. SECTION 28 NECESS ITATES THE EXISTENCE OF A BUSINESS ACTIVITY/PROFESSION. 6.3 THE ASSESSEE WENT INTO LIQUIDATION IN THE YEAR 2001 AND THEREFORE, IT CAN BE CONCLUDED THAT NO BUSINESS ACT IVITY WAS CARRIED OUT BY THE ASSESSEE SINCE 2001. WHATEVER RECEIPTS W ERE RECEIVED BY THE ASSESSEE SHALL BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE ASSESSEE TOO HAS ACCEPTED THAT ALL IT S INCOME SHALL BE TAXED UNDER THE HEAD 'INCOME FROM OTHER SOURCES', V IDE LETTER DATED NIL, SUBMITTED TO THIS OFFICE. SINCE THE ASSESSES H AS NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDE RATION, THERE SHALL BE NO COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', THE ASSESSEE HAS CLAIMED BENEFIT OF UNABSORBED DEPR ECIATION U/S 32(2) OF THE INCOME TAX ACT, 1961, SECTION 32(2 ) STATES THAT WHEN THERE IS NO DEPRECIATION ALLOWANCE FOR A PARTICULAR YEAR, THE BROUGHT FORWARD UNABSORBED DEPRECIATION SHALL BE TREATED AS DEPREDATION ALLOWANCE FOR THAT YEAR. THUS, SECTION 32(2) DEEMS THE BROUGHT FORWARD DEPRECIATION OF PREVIOUS ASSESSMENT YEAR AS THE DEPREDATION ALLOWANCE OF THE CURRENT ASSESSMENT YEAR. THE DEPRE CIATION ALLOWANCE U/S 32 SHALL TIE GIVEN EFFECT AS PER THE PROVISIONS OF SECTION 29 WHICH PRESCRIBE THE MANNER IN WHICH INCO ME FROM BUSINESS OR PROFESSION SHALL BE COMPUTED. SECTION 2 9 STATES THAT 'THE INCOME REFERRED TO IN SECTION 28 SHALL BE COMP UTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 30 TO 34[43D].' SECTION 29 IS WITH REFERENCE TO INCOME REFERRED IN SECTION 28. SINCE, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSES H AS NOT EARNED ANY INCOME REFERRED TO IN SECTION 28 AND NO BUSINESS AC TIVITY EXISTED FOR THE YEAR UNDER CONSIDERATION, THE PROVISIONS OF SEC TION 29 CANNOT BE APPLIED IN THIS CASE. THUS, THERE SHALL BE NO COMPU TATION OF INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION '. ACCORDINGLY, THE DEDUCTIONS AVAILABLE AS PER PROVIS IONS U/S 38 TO 43D ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND WHEN, THERE IS NO COMPUTATION OF INCOME UNDER THE HEAD BUSINESS AS PROFESSION, THEN QUESTION OF MERGER OF BROUGHT FORWARD DEPREDAT ION WITH CURRENT YEAR DEPREDATION OR TREATING THE BROUGHT FORWARD UNABSORBED DEPREDATION AS CURRENT YEAR DEPRECIATION DOESN'T ARISE. THE DEPRECIATION, WHETHER UNABSORBED OR CURRENT COULD O NLY COME INTO PICTURE WHEN THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IS COMPUTED. THEREFORE, EVE N IF THE UNABSORBED DEPREDATION BY VIRTUE OF FICTION ENACTED IN SECTION 32(2) ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 7 - IS TREATED AS DEPREDATION FOR THE CURRENT YEAR, THE RE MUST BE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' OR EXISTENCE OF SOME BUSINESS ACTIVITY, SO THAT THE AL LOWANCE FOR DEPRECIATION COULD OPERATE. THE FICTION ENACTED IN SECTION 32(2) ONLY TREATS UNABSORBED DEPRECATION ON PAR WITH CURR ENT DEPREDATION AND SUBJECT TO THE CARRY FORWARD OF LOSSES, WHICH H AS PRECEDENCE BY OPERATION OF SECTION 72, THE SAID UNABSORBED DEPREC IATION ASSUMES THE CHARACTER AND COLOUR OF CURRENT DEPRECIATION. S ECTION 32(2) THROUGH WHICH THE ASSESSEE CLAIMED SET OFF OF THE U NABSORBED DEPRECIATION IS PART OF CHAPTER IV-D OF THE ACT WHI CH IS CONNECTED WITH THE COMPUTATION OF BUSINESS INCOME. IN THE ABSENCE OF ANY COMPUTATION UNDER THE HEAD 'P ROFITS AND GAINS OF BUSINESS OR PROFESSION', THE PROVISIONS OF SECTION 32 (2) AND CONSEQUENTLY, THE PROVISIONS OF SECTION 71(2) S HALL NOT BE APPLICABLE AND THUS, THE CLAIM OF THE ASSESSEE TO S ET -OFF INCOME FROM CAPITAL GAINS AGAINST UNABSORBED DEPREDATION OF THE PERIOD PRIOR TO 2001 IS REJECTED. 6.6 FURTHER, RELIANCE IS PLACED ON THE CASE LAWS ST ATED BELOW:- 1) [1998] 229 JTK $48 (KK.) HIGH COURT OF KERALA MALABAR AGRICULTURAL CO. LTD. V. COMMISSIONER OF INCOME TAX WHETHER WHERE ASSESSEE WHO WAS ENGAGED IN BUSINESS OF GROWING TEA FOR MANUFACTURE AND SALE, HAD ACTUALLY SOLD PART OF TEA GARDEN ALONG WITH WHOLE OF FACTORY AND WAS NOT ENGAGED IN ANY MANUFACTURING OR PROCESSING DURI NG RELEVANT PREVIOUS YEAR, ASSESSEE WAS NOT ENTITLED T O SET OFF UNABSORBED DEPRECIATION OF EARLIER YEARS AGAINS T INCOME OF CURRENT YEAR - HELD, YES 2) INCOME-TAX OFFICER VS RAJARATNA NARANBHAI MILLS LTD. [1982] 1 ITD 1044 (AHD) (SB):- WHETHER BENEFIT OF SET OFF OF CARRY FORWARD DEPREDA TION ALLOWANCE IS ADMISSIBLE IF ASSESSEE HAD NOT CARRIED ON ANY BUSINESS OR HAD NO NOTIONAL INCOME ASSESSABLE UNDER SECTION 41 DURING RELEVANT ACCOUNTING YEAR HELD, NO THE CONCLUDING PARAGRAPH OF THE JUDGMENT I.E. PARA NO. 15 IS AS FOLLOWS:- TO SUM UP, WE RECAPITULATE THE QUESTION WHICH IS R EFERRED TO US AS FOLLOWS: 'WHETHER THE ASSESSEE IS ENTITLED TO SET OFF OF UNA BSORBED DEPRECIATION OF THE EARLIER YEAR AND BROUGHT FORWAR D AGAINST THE INCOME FROM OTHER SOURCES?' OUR DECISION IS THAT TH E ASSESSEE IS NOT ENTITLED TO SUCH A SET OFF BECAUSE THE BUSINESS IN RESPECT OF WHICH THE DEPRECIATION IS CLAIMED HAD CEASED TO EXIST AND THE ASSESSEE IS NOT ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 8 - HAVING ANY INCOME FROM BUSINESS AT ALL EITHER ACTUA L OR NOTIONAL. THE ASSESSEE WILL BE ENTITLED TO CARRY FORWARD UNABSORB ED DEPRECIATION IF, FIRSTLY, THERE IS INCOME FROM SAME BUSINESS, SE CONDLY, IF THERE IS INCOME FROM SOME BUSINESS AND, LASTLY, IF THERE IS INCOME FROM BUSINESS WHICH IS SAID TO HAVE BEEN NOTIONALLY CARR IED ON BY VIRTUE OF FICTION ENACTED IN SECTION 41. IF, HOWEVER, THERE I S NO SUCH INCOME AND THE SOURCE OF INCOME FROM BUSINESS OR PROFESSIO N IS EXTINCT, THEN THE UNABSORBED DEPRECIATION CANNOT BE ALLOWED TO BE CARRIED FORWARD AND, CONSEQUENTLY, COULD NOT BE SET OFF AGAINST INC OME FROM ANY OTHER SOURCES. 16. IN THE RESULT, THE APPEALS ARE A LLOWED.' 6.7 ANOTHER IMPORTANT FACT IN THIS CASE IS THAT THE CARRY FORWARD OF UNABSORBED DEPRECIATION HAS BEEN DISALLOWED IN PARA 25 OF ASSESSMENT ORDER FOR AY 2004-05 DATED 20/11/2006, A GAINST WHICH THE ASSESSEE HAS NOT PREFERRED ANY APPEAL TILT DATE . THIS MEANS THAT THE ASSESSEE HAS ACCEPTED THE DECISION ON THIS ISSU E AND THE ISSUE HAS ATTAINED FINALITY. THE ASSESSMENT ORDER FOR A.Y. 20 04-05 IS FINAL AND IN THAT ASSESSMENT ORDER, CARRY FORWARD OF UNABSORB ED DEPRECIATION WAS EXPRESSLY DENIED. SINCE THE ASSESSMENT OF EARLI ER YEAR I.E. A.Y. 2004-05 IS FINALIZED WITHOUT ALLOWING CARRY FORWARD OF UNABSORBED DEPRECIATION AND THE ASSESSEE IS NOT IN APPEAL, THE RE EXISTS NO UNABSORBED DEPRECIATION TO BE BROUGHT FORWARD AND T HE QUESTION OF SETTING OFF SUCH BOUGHT FORWARD DEPRECIATION AGAINS T CURRENT YEAR'S INCOME DOESN'T ARISE. SIMILARLY, FOR A.Y. 2007-08, A.Y. 2008-09, A.Y. 200 9-10, A.Y. 2010-11 & A.Y. 2011-12 THE CARRY FORWARD OF UNABSOR BED DEPRECIATION HAS BEEN DISALLOWED IN THE ASSESSMENT ORDER. FOR ALL THESE YEARS, THE ASSESSEE WENT INTO APPEAL AGAINST THE ASSESSMENT ORDER AND THE HON'BLE CTT (APPEALS) DISMISSED THIS GROUND OF APPEALS FOR A.Y. 2007-08, A.Y. 2008-09, A.Y, 2008- 10, A.Y.2010-11 & A.Y. 2011-12, THIS PROVES THAT THE ASSESSES WAS N OT ALLOWED TO CARRY FORWARD UNABSORBED DEPRECATION OF EARLIER YEA RS AND THEREFORE, THE QUESTION OF ADJUSTING THE SAME WITH CURRENT YEAR'S INCOME DOESN'T ARISE. 6.8 BASED ON THE ABOVE DISCUSSION, THE CLAIM OF THE ASSESSEE TO SET OFF BROUGHT FORWARD UNABSORBED DEPREDATION AGAINST CAPITAL GAINS INCOME IS REJECTED.' WE FIND THAT THE ORDER OF THE CIT(A) IS INCONSONANC E WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. VIRMANI INDUSTRIES PVT. LTD. (1995) 215 ITR 60 (SC) AND THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF GENERAL MOTORS INDIA P. LTD. VS. DCIT 354 ITR 244 (GUJ) . THE HONBLE GUJARAT HIGH COURT IN CIT VS. GUJARAT THEMIS BIOSYN LTD. TAX APPEAL NO. 3 OF 2014 HAS ALSO EXPRESSED THE VIEW THAT CLAIM OF THE ASSESSEE FOR C ARRY FORWARD OF ITA NOS. 1465, 1466, 1475 & 1245/AHD/17 (DCIT VS. THE LIQUIDATOR) - 9 - UNABSORBED DEPRECIATION WAS TO BE ALLOWED TO BE CAR RIED FORWARD TO THE SUCCEEDING ASSESSMENT YEARS WITHOUT ANY FETTERS OF LIMITATION OF 8 YEARS PLACED AS PER ERSTWHILE PROVISIONS OF SECTION 32(2) OF THE ACT. THE CIT(A) IN OUR VIEW HAS RIGHTLY REVERSED THE ACT ION OF THE AO AND DIRECTED HIM TO ALLOW THE SET OFF OF UNABSORBED DEP RECIATION ALLOWANCE CARRIED FORWARD FROM EARLIER YEARS AGAINST INCOME FROM OTHER SOURCES AFTER NECESSARY VERIFICATIONS OF QUANTUM OF BROUGHT FORWARD UNABSORBED DEPRECIATION. WE SEE NO ERROR IN THE OR DER OF THE CIT(A). WE THUS DECLINE TO INTERFERE. 8. IN THE RESULT, ALL THE FOUR CAPTIONED APPEALS FI LED BY THE REVENUE ARE DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD: DATED 27/11/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 27/11/2019