Active Knitwears Pvt. Ltd., Ludhiana V. ITO, Ludhiana

ITA 148/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6634 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 18-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ZEENIA HANDADR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA NO. 148/CHD/2017 ASSESSMENT YEAR : 2010-11 M/S ACTIVE KNITWEARS P.LTD. VS. THE ITO, (AT PRESENT AGAIN LIFESTYLE P.LTD., WARD VI(1), UGF-2, KUNAL TOWER, MALL ROAD, LUDHIANA. LUDHIANA. PAN NO. ADLPT0392A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : MS. ZEENIA HANDA,DR DATE OF HEARING : 03.10.2017 DATE OF PRONOUNCEMENT : 21.11.2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSA ILING THE CORRECTNESS OF THE ORDER DATED 14.10.2016 OF LD. CIT (APPE ALS)-4 LUDHIANA PERTAINING TO 2010-11 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. THAT THE ORDER OF THE LD. CIT(A) IN UPHOLDING RED UCED AMOUNT OF DEPRECIATION AGAINST CURRENT YEAR'S INCOME AS PROVIDED UNDER SEC TION 115JB OF THE INCOME TAX ACT 196LAS AGAINST DEPRECIATION AS ASSESSED AND B ROUGHT FORWARD FROM THE PRECEDING YEAR. 2. THAT THE ORDER OF THE LD. CIT(A) IN NOT ALLOWING TH E CORRECT SET OFF OF DEPRECIATION AS HAD BEEN BROUGHT FORWARD FROM THE PRECEDING YEAR BEING LESSER OF BROUGHT FORWARD LOSSES/DEPRECIATION AS ORDAINED IN CLAUSE(I II) OF EXPLANATION TO SECTION 115JB IS BOTH AGAINST LAW AND FACTS OF THE CASE. 3. THAT WHILE SUSTAINING THE ORDER OF THE ASSESSING OF FICER THE LD. CIT(A) DID NOT APPRECIATE THAT DEPRECIATION AS COMPUTED ,ALLOWED A ND CARRIED FORWARD WAS AS PER PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT. 4. THAT WHILE SUSTAINING THE ORDER OF THE ASSESSING OF FICER THE LD. CIT(A) IN NOT ALLOWING DEPRECIATION AS BROUGHT FORWARD FROM THE P RECEDING YEAR 2009-10 DID NOT APPRECIATE THAT THE JUDGMENT OF THE HON'BLE IT AT, CHENNAI 'C' BENCH CHENNAI IN ITA NO. 993/MDS/2011 DATED 15-10-11 WAS NOT REMOTEL Y APPLICABLE . 2. BOTH THE LD. AR AND THE LD. SR.DR HAVE BEEN HEARD IN SUPPORT OF THE GRIEVANCE OF THE ASSESSEE. THE FACTS ON RECORD ARE THAT THE ASSESSEE WAS RUNNING A BUSINESS OF MANUFACTURING AND TRADING OF HOSIERY GOODS. THE ASSESSEE DECLARED NIL RETURN BY ADJUSTING BROUGHT FORW ARD LOSSES OF RS. 33,05,861/-. IT WAS CLAIMED THAT THE ASSESSEE HAD BROUGH T FORWARD LOSSES OF EARLIER YEARS TO THE EXTENT OF RS. 42,64,245/- OUT OF WHIC H RS. 33,55,861/- HAD BEEN ADJUSTED AGAINST THE AVAILABLE PROFITS. THE ASSE SSEE WAS REQUIRED TO ITA/148/CHD/2017 A.Y 2010-11 PAGE 2 OF 2 FILE COMPUTATION OF PROFIT U/S 115JB OF THE ACT. CONSIDERING THE REPLY OF THE ASSESSEE, THE AO REQUIRED THE ASSESSEE TO ADDRESS VIDE ORDER-SHEET ENTRY DATED 04.12.2012 AS TO WHY BOOK VALUE OF DEPRECIATION (WIT H RESPECT TO CLAUSE (III) OF EXPLANATION (1) TO SECTION 115JB OF PREVIOUS YEAR MAY NOT BE TREATED AS UNABSORBED DEPRECIATION FOR THE PURPOSE OF SECTI ON 115JB. IN RESPONSE THERETO, THE ASSESSEE'S COUNSEL SUBMITTED THAT DEPRECIATION AS PER INCOME CHART IS TO BE TREATED AS UNABSORBED DEP RECIATION FOR THE PURPOSE OF SECTION 115JB. CONSIDERING THE FACTS AN D THE POSITION OF LAW THEREON, AO MADE AN ADDITION BY WAY OF A DISALLOWAN CE AND CONCLUDED THE ASSESSMENT AS OPPOSED TO NIL RETURN U/S 115JB AT AN INCOME OF RS. 15,76,852/- HOLDING AS UNDER : O N GOING THROUGH THE JUDGEMENTS CITED BY THE COUNSEL IT HAS BEEN OBSERVED THAT THE HON'BLE COURTS HAS BEEN DECIDED THE ISSUE II FAVOUR OF THE DEPARTMENT AS FAR AS SECTION 11533 IS CONCERNED. THE HON'BLE KARNATAKA HIGH COURT IN I TS ORDER DATED 29.09.1999 REPORTED IN 242 ITR 678 HELD THAT: 'IN THESE CIRCUMSTANCES, WE. ARE OF THE VIEW THAT' THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE AMOUNTS OF BROUGHT FORWARD LOSS ES/ALLOWANCES WERE REQUIRED TO BE ADJUSTED TO THE EXTENT TO WHICH SUCH ADJUSTMENTS WO ULD BE NECESSARY BY WAY OF SET-OFF OF SUCH LOSSES/ALLOWANCES AGAINST CURRENT YEAR'S NET PROFIT , COMPUTED IN ACCORDANCE WITH THE REGULAR METHOD OF DETERMINATION OF INCOME OF THE AS SESSEE FOR THIS YEAR IN ACCORDANCE WITH THE ORDINARY PROVISIONS OF THE INCOME-TAX ACT (FROM SEC TIONS 28 TO 43), FOR THE PURPOSE OF CARRYING FORWARD SUCH, LOSSES/ALLOWANCES TO THE NEX T YEAR, WITHOUT PAYING ANY ATTENTION TO THE FACT THAT ACTUALLY THE ASSESSEE WAS CHARGED TO TAX IN THIS YEAR IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115J ONLY.' SIMILARLY THE HON'BLE APEX COURT IN ITS JUDGEMENT D ATED 03.12.2002 REPORTED IN 258 ITR 770 HELD THAT 'ADJUSTMENT OF B/F LOSSES OR LOSS ES TO BE CARRIED FORWARD, UNABSORBED DEPRECIATION/IN VEST MERIT ALLOWANCE ARE TO BE ALLO WED WHILE COMPUTING TOTAL INCOME OF THE COMPANY AS PER SECTIONS 28 TO 43. FROM THE ABOVE DISCUSSIONS IN THE LIGHT OF ABOVE JU DGEMENTS, THE B/F LOSSES AND UNABSORBED DEPRECIATION OF EARLIER YEARS IS ADJUSTABLE TO COMP UTE TINE INCOME AS PER REGULAR PROVISIONS OF SECTIONS 28 TO 43 AND REMAINING UNABSORBED AMOUNT I S ALLOWED TO BE CARRIED FORWARD. AS SUCH, PROFITS ARE REDUCED TO NIL AFTER ADJUSTING TH E B/F LOSSES/ UNABSORBED DEPRECIATION U/S 28 TO 43 IN THIS CASE. HOWEVER, AS THE RETURN FILED BY THE ASSESSEE IS ATE BY 3 MONTHS THE BENEFIT OF CARRIED FORWARD OF LESSEE I S NOT ALLOWED IN THIS CASE. HOWEVER, WHILE CALCULATING THE PROFITS U/S 11536, THE CALCUL ATIONS ARE STRICTLY ACCORDING TO THE PROVISIONS OF SECTION 115JB. AS SUCH, VERSION OF TH E ASSESSEE IS NOT ACCEPTED AND TOTAL INCOME IS COMPUTED UNDER SECTION 115JB AS UNDER : NET PROFIT AS PER P&L A/C RS. 32,15,529/- ADD:DEPRECIATION AS PER CLAUSE (G) RS. 25,41,971 /- TO EXPLANATION (1) TOTAL RS. 57,57,500/- LESS: DEPRECIATION AS PER CLAUSE (IIA) RS. 25,41 ,971/- B/F LOSS OR UNABSORBED DEPN. WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT BUSINESS LOSS RS. 42,40,993/- UNABSORBED DEPRECIATION AS PER BOOKS OF ACCOUNT RS. 16,38,677/- TOTAL LOSS 58,79,670/- BALANCE PROFITS U/S 115JB RS. 15,76,852/- TOTAL ASSESSED INCOME RS. 15,76,850/- ITA/148/CHD/2017 A.Y 2010-11 PAGE 3 OF 2 3. THE ISSUE TRAVELED IN APPEAL BEFORE THE CIT(A) WHEREIN T HE ASSESSEE FILED WRITTEN SUBMISSIONS DATED 12.10.2016 WHICH HAVE BEEN EXTR ACTED IN THE ORDER. FOR READY REFERENCE, THE SAME IS REPRODUCED HEREUNDER : 5.1 'HOWEVER, AS THE RETURN FILED BY THE ASSESSEE IS LA TE BY 3 MONTHS THE BENEFIT OF CARRIED FORWARD OF LOSSES IS NOT ALLOWED IN THIS CASE. HOWEVER, WHILE CALCULATING THE PROFIT U/S 115JB, THE CALCULATIONS ARE STRICTLY ACCORDING TO THE PROVISIO NS OF SECTION 115JB. AS SUCH VERSION OF THE ASSESSEE NOT ACCEPTED AND INCOME IS COMPUTED UNDER 115JB AS UNDER.' 3.1 NOT CONVINCED WITH THE EXPLANATION OFFERED, THE CIT(A) PR OCEEDED TO DISMISS THE ASSESSEE'S APPEAL HOLDING AS UNDER : 5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSES SING OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER WHILE COMPUTING TAXABLE PROFITS UNDER SECTION 115JB OF THE ACT AT RS. 15,76,852/-. I HAVE ALSO CONSIDERED WRITTEN SUBMISSIONS FILED BY THE AS SESSEE COMPANY THROUGH ITS LD. AR VIDE LETTER DATED 12.10.2016 ON THE ISSUE UNDER REFERENCE. I HA VE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE COMPANY AS WELL AS THE OTHER MATERIAL PLACED BY THE ASSESSEE COMPANY ON RECORD. I HAVE AGAIN CONSIDERED THE PROVISIONS OF SECTION 115JB OF THE ACT. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, I DO NOT FIND ANY FORCE IN THE ARGUMENT OF THE LD. AR OF THE ASSESSEE COMPANY WITH REGARD TO SET OFF O F BROUGHT FORWARD UNABSORBED DEPRECIATION. AS THE COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT IS TO BE MADE AS PER COMPANIES ACT, I AM ALSO OF THE OPINION THAT THE LE SSER AMOUNT OF BROUGHT FORWARD UNABSORBED DEPRECIATION OR BROUGHT FORWARD BUSINESS LOSS AS CO MPUTED UNDER THE COMPANIES ACT (WHICHEVER IS LESS) IS TO BE REDUCED/ADJUSTED FROM/ AGAINST CURRENT YEAR'S INCOME TO ARRIVE AT TAXABLE PROFITS UNDER SECTION 115JB OF THE ACT. MY VIEW IS ALSO SUPPORTED BY THE DECISION OF HONORABLE ITAT, CHENNAI 'C' BENCH, CHANNAI DATED 15 .10.2011 IN ITA NO.993/MDS/2011 IN THE CASE OF ACIT, COMPANY CIRCLE-V(2), CHENNAI VS. M/S PIONEER ASIA PACKAGING LIMITED. I, THEREFORE, DO NOT FIND ANY FAULT WITH THE ACTION OF THE ASSESSING OFFICER. UNDER SUCH CIRCUMSTANCES, THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE TAXABLE PROFITS OF THE ASSESSEE COMPANY UNDER SECTION 115JB OF THE ACT AT RS. 15,76,852/- AS AGAINST COMPUTED BY THE ASSESSEE COMPANY AT RS. NIL CANNOT BE SAID TO BE UN JUSTIFIED. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE COMPANY INFACT SUPPORT THE CAS E OF THE REVENUE AND NOT THE ASSESSEE COMPANY . 5.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CI RCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OFFICER IS FULLY JUSTIFIED IN COMPUTI NG THE TAXABLE PROFITS OF THE ASSESSEE COMPANY UNDE R SECTION 115JB OF THE ACT AT RS. 15,76,852/- AS AGAI NST COMPUTED BY THE ASSESSEE COMPANY AT RS. NIL. THE ADDITION MADE BY THE ASSESSING OFFICER IS ACCORDINGLY UPHELD. IN THE RESULT, GROUNDS NO. 1, 2, 3, 4 AND 5 OF APPEAL TAKEN BY THE DISMISSED . 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. THE LD. AR VEHEMENTLY RELYING UPON THE SUBMISSIONS ADVANCED BEFOR E THE CIT(A) ON 12.10.2016 REITERATED THE SAME AT LENGTH SO AS TO CONTE ND THAT RELIEF WAS ALLOWABLE. THE LD. SR.DR, ON THE OTHER HAND, SUBMITTED THAT THE POSITION OF LAW ON THE ISSUE IS WELL SETTLED AND HAS BEEN ADDRESSED B Y THE AO AS WELL AS THE CIT(A). 5. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. ON A CONSIDERATION THEREOF, I AM OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES AS FAR AS THE ISSUE OF SET OFF OF BROUGH T FORWARD AND UNABSORBED DEPRECIATION IS CONCERNED, LAW IS VERY CLEAR TH AT THE COMPUTATION ITA/148/CHD/2017 A.Y 2010-11 PAGE 4 OF 2 OF BOOK PROFITS HAS TO BE MADE AS PER THE COMPANIES ACT AND ON THIS ASPECT, THERE IS NO DEBATE THAT THE LESSER AMOUNT OF BROUGHT FO RWARD UNABSORBED DEPRECIATION FROM BROUGHT FORWARD BUSINESS LOSS AS COMPUT ED UNDER THE COMPANIES ACT, WHICHEVER IS LESS, IS TO BE REDUCED/ADJUSTE D FROM CURRENT YEARS INCOME TO ARRIVE AT TAXABLE PROFITS U/S 115JB. IN THE CIRCUMSTANCES, THE TAX AUTHORITY I.E. AO IN COMPUTATION AND THE CIT(A) IN U PHOLDING THAT THE TAXABLE PROFITS OF THE ASSESSEE COMPANY U/S 115JB WERE TO BE ASSESSED AT RS. 15.76.852/- AS AGAINST NIL COMPUTED BY THE ASSESSEE CA NNOT BE FAULTED. BEING SATISFIED WITH THE REASONING AND FINDING, THE IMPUGNED O RDER IS UPHELD AND THE APPEAL OF THE ASSESSEE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.11. 2017. SD/- (DIVA SINGH) JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.