Swabs India Private Ltd., CHENNAI V. ACIT, CHENNAI

ITA 155/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3942 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS JCITD R
• Keywords: Business income; Depreciation; Scheme of amalgamation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.155/MDS./2016 / ASSESSMENT YEAR :2006-07 M/S.SWABS INDIAPVT LTD., FORMERLY KNOWN AS KRISH POLYMERS PVT LTD., 279 SYDENHAMS ROAD, CHENNAI 600 112. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -4(2), CHENNAI 600 034. [PAN AACCK 2365 F ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : NONE /RESPONDENT BY : MR.SHIVA SRINIVAS,JCIT,D.R / DATE OF HEARING : 04 - 1 0 - 201 6 !' / DATE OF PRONOUNCEMENT : 23 - 11 - 2016 ' / O R D E R PER BENCH THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-8,CHENNAI DATED 02.11.2015 PERTAINING TO ASSESSMENT YEAR 2006-07. ITA NO. 155/MDS./2016 :- 2 -: 2. THE ASSESSEE IS IN APPEAL BEFORE US WITH REGARD TO TREATING THE INCOME BY LEASING OUT ITS BUSINESS ASSETS AS AS SESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 3. HOWEVER, THE LD.A.R FILED AN ADJOURNMENT PETITI ON, STATING THAT HE WAS PRE-OCCUPIED WITH TAX AUDIT WORK AND HE IS NOT IN A POSITION TO ARGUE THE CASE BEFORE THIS TRIBUNAL ON THIS DATE. IN OUR OPINION, THE PROFESSIONAL PRE-OCCUPATION CANNOT BE THE REASON FOR ADJOURNMENT. ACCORDINGLY, WE FIND NO REASON TO ADJ OURN THE CASE. HENCE, WE PROCEED TO DISPOSE THE CASE AFTER THE HEA RING THE LD.D.R. 4. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE HA S SHOWN INCOME FROM LETTING OUT OF THE PROPERTY AS BUSINESS INCOME. ACCORDING TO AO, ASSESSEE HAS DERIVED INCOME UNDER THE HEAD I NCOME FROM HOUSE PROPERTY RATHER THAN INCOME FROM BUSINESS AND THE SAME WAS BROUGHT INTO TAX UNDER THE HEAD INCOME FROM BUSINES S AND GRANTED DEDUCTION U/S.23 & 24 OF THE ACT. ON APPEAL, THE L D.CIT(A) OBSERVED THAT THE ASSESSEE COMPANY HAS AMALGAMATED WITH ITS SISTER CONCERN M/S.SWABS INDIA PVT LTD., WITH EFFECT FROM 01.04.20 10 AND A SCHEME OF AMALGAMATION WAS SANCTIONED BY THE MADRAS HIGH C OURT VIDE ORDER DATED 11.01.2012. IN VIEW OF AMALGAMATION WHICH CA ME INTO EFFECT FROM 01.04.2010, THE DISCONTINUATION OF THE BUSINES S OF ASSESSEE FROM THE YEAR 2005 HAS BECOME PERMANENT IN NATURE. AS S UCH, INCOME DERIVED FROM LEASING OUT OF PROPERTY TO BE CONSIDER ED AS INCOME FROM ITA NO. 155/MDS./2016 :- 3 -: HOUSE PROPERTY ONLY. ACCORDINGLY, THE ORDER OF THE AO IS CONFIRMED BY THE LD.CIT(A). AGAINST THIS, THE ASSESSEE IS IN APP EAL BEFORE US. 5. ACCORDING TO THE ASSESSEE AS PER THE GROUNDS OF THE APPEAL, IT WAS ONLY TEMPORARY SUSPENSION OF THE BUSINESS AN D TO OVERCOME BUSINESS CRISIS WITHOUT ANY INTENTION TO CLOSE THE BUSINESS OF ASSESSEE FOR TEMPORARY PERIOD, THE BUSINESS ASSETS WAS LET O UT AND THE RENTAL INCOME HAS CONSIDERED AS INCOME FROM BUSINESS ONLY. ACCORDING TO THE ASSESSEE, THE ASSESSEE SHALL BE ALLOWED TO SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEAR AGAINST THE INCOME ASS ESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HOWEVER, THE ASS ESSEE STATED IN ITS GROUNDS THAT AS PER THE PROVISIONS OF THE SECTI ON 32(2), SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SEC.72 AND SUB -SECTION (3) OF SEC.73, THE ALLOWANCE OR PART OF THE ALLOWANCE TO W HICH EFFECT HAS NOT BEEN GIVEN, SHALL BE ADDED TO THE ALLOWANCE FOR DEP RECIATION FOR THE FOLLOWING YEARS. FURTHER, THE ASSESSEE STATED THAT IT IS SETTLED LAW THAT UNABSORBED DEPRECIATION SHALL BE TREATED AS CURRENT YEAR DEPRECIATION AND IS ELIGIBLE TO BE SET OF AGAINST INCOME UNDER A NY OTHER HEAD. 6. ACCORDING TO LD.D.R, THE ASSESSEE HAS PERMANENT LY CLOSED THE BUSINESS AND THERE IS NO INTENTION TO RE-START THE BUSINESS OF ASSESSEE, AS SUCH IT IS NOT A TEMPORARY LETTING OUT OF THE PROPERTY, BUT LETTING OUT OF PROPERTY IS PERMANENT NATURE AND INC OME OF ASSESSEE IS ASSESSED AS INCOME FROM HOUSE PROPERTY. CONSEQUENTL Y, THE ASSESSEE ITA NO. 155/MDS./2016 :- 4 -: CANNOT BE ALLOWED TO SET OFF OF UNABSORBED DEPRECIA TION OF EARLIER YEARS WITH INCOME FROM HOUSE PROPERTY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS SEEN FROM THE FACTS OF THE CASE, THE AS SESSEE AS PER THE ORDER OF THE JURISDICTIONAL HIGH COURT, IT HAS AMAL GAMATED WITH ITS SISTER CONCERN, M/S.SWABS INDIA (P) LTD., WITH EFFE CT FROM 01.04.2010 AND A SCHEME OF AMALGAMATION WAS APPROVED BY THE MA DRAS HIGH COURT VIDE ITS ORDER DATED 11.01.2012 AND THEREAFTE R THE ASSESSEE DISCONTINUED THE BUSINESS WITH EFFECT FROM 01.04.20 10 AND THEREAFTER THE ASSESSEE HAS LET OUT THE PROPERTY AND EARNED TH E RENTAL INCOME WHICH IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY ONLY. SINCE THERE WAS A PERMANENT CLOSURE OF THE AS SESSEE BUSINESS, THERE WAS NO IOTA OF EVIDENCE TO SHOW THAT THE ASSE SSEE HAS ANY INTENTION TO RE-START ITS BUSINESS, WHEN THE BUSINE SS WAS CEASED TO EXIST AND THERE IS NO INTENTION TO RE-START IT BUSI NESS, AS HELD BY THE SUPREME COURT IN THE CASE OF M/S.UNIVERSAL PLAST LT D. VS. CIT (237 ITR 454(SC) ) THAT: IF THE BUSINESS NEVER STARTED OR HAS STARTED BUT C EASED WITH NO INTENTION TO BE RESUMED, THE ASSETS ALSO WI LL CEASE TO BE BUSINESS ASSETS AND THE TRANSACTION WILL ONLY BE EXPLOITATION OF PROPERTY BY AN OWNER THEREOF, BUT N OT EXPLOITATION OF BUSINESS ASSETS. ITA NO. 155/MDS./2016 :- 5 -: THUS, THE QUESTION OF SETTING OFF OF CARRIED FORWAR DED LOSSES DOES NOT ARISE IN VIEW OF THE ABOVE CITED JUDGEMENT OF SUP REME COURT. CONSEQUENTLY THE ASSESSEE CANNOT BE ALLOWED TO SET OFF UNABSORBED DEPRECIATION OF EARLIER YEARS OUT OF THE INCOME FROM HOUSE PROPERTY. AS SUCH WE DO NOT FIND ANY INFIRMITY IN THE ORDER L D.CIT(A) AND THE SAME IS CONFIRMED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON 23 RD NOVEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 23 RD NOVEMBER, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF