TUNI TEXTILE MILLS LTD, MUMBAI V. ITO WD 4(3)(2), MUMBAI

ITA 1565/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83862 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 24-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 23-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEVIDAS DADIA
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIVEK VARMA, JM ./ I.T.A. NOS. 1563 & 1565/MUM/2011 ( / ASSESSMENT YEARS: 2006-07 & 2007-08) TUNI TEXTILE MILLS LTD. 63/71, ROOM NO. 53-54, 3 RD FLOOR, DADISETH AGIARY LANE, MUMBAI-400 002 / VS. INCOME TAX OFFICER, WARD 4(3)(2), AYAKAR BHAWAN, M. K. ROAD, MUMBAI-400 020 ./! ./PAN/GIR NO. AABCT 4244 J ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ' % & / APPELLANT BY : SHRI DEVIDAS DADIA #$ ' % & / RESPONDENT BY : SHRI PITAMBAR DAS ' ( ) % * + / DATE OF HEARING : 24.06.2014 ,-. % * + / DATE OF PRONOUNCEMENT : 22.09.2014 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE DIRECT ED AGAINST THE COMBINED ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMB AI (CIT(A) FOR SHORT) DATED 09.12.2010 FOR THE ASSESSMENT YEARS (A.Y.) 2006-07 & 2007-08, DISALLOWING THE ASSESSEES APPEALS CONTESTING ITS ASSESSMENTS U/S.1 43(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE RELEVANT YEARS. 2. THE SHORT QUESTION ARISING IN THE INSTANT APPEAL S IS THE ADMISSIBILITY OF THE ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD UNA BSORBED DEPRECIATION ALLOWANCE U/S.32(2) OF THE ACT AGAINST INCOME FROM HOUSE PROP ERTY, ASSESSABLE U/S.22 OF THE ACT AT 2 ITA NOS. 1563 & 1565/MUM/2011 (A.Y. 2006-07 & 07-08 ) TUNI TEXTILE MILLS LTD. VS. ITO RS.2,13,548/- AND RS.2,19,834/- FOR THE TWO CONSECU TIVE YEARS RESPECTIVELY. CLEARLY, THE SET OFF, IF ALLOWED, WOULD ABSORB THE ENTIRE INCOME BROUGHT TO TAX, ON THE QUANTUM OF WHICH INCOME WE OBSERVE NO DISPUTE (REFER: DETAIL O F THE BROUGHT FORWARD LOSS/ DEPRECIATION ALLOWANCE/PB PG.6). ALSO, THE UNABSORB ED DEPRECIATION BEING CLAIMED SET OFF, AS IT APPEARS TO US, IS FOR A.YS. 1999-2000 AN D 2000-01, OR IN ANY CASE OF THE MATTER, PRIOR TO A.Y. 2002-03, SO THAT IT IS IN TERMS OF TH E DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN DY. CIT VS. TIMES GUARANTY LIMITED [2010] 4 ITR (TRIB) 210 (MUM)(SB), ELIGIBLE FOR BEING CARRY FORWARD UP TO A PERIOD OF EIGHT ASSESSMENT YEARS SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE DEPRECIATION WAS FIRS T COMPUTED AND, THUS, IS FOR THE YEARS UNDER REFERENCE WITHIN THE TIME LIMITATION FOR WHIC H THE SAME COULD BE CARRY FORWARD FOR SET OFF. THE ONLY DISPUTE THEREFORE IS WITH REGARD TO THE ELIGIBILITY OF ITS SET OFF AGAINST INCOME FROM HOUSE PROPERTY FOR THE RELEVANT YEARS. 3. THE DECISION BY THE TRIBUNAL IN TIMES GUARANTY LIMITED (SUPRA), RELIED UPON BY THE ASSESSEE, IS CLEARLY ON THE POINT. THE ISSUE IS DIS CUSSED THREAD BARE, FOR WHICH PURPOSE THE CLAIM OF UNABSORBED DEPRECIATION IS, IN VIEW OF THE CHANGED POSITION OF LAW DURING THE INTERIM PERIOD, BROKEN INTO THREE PERIODS, WHICH AR E CHRISTENED AS THE FIRST, SECOND AND THE THIRD PERIODS, AS UNDER, EVEN AS NOTED BY THE ASSES SEE ITSELF PER ITS WRITTEN SUBMISSION TO THE LD. CIT(A) DATED 16.01.2003 (PB PGS. 1-3): A) UP TO A.Y. 1996-97 : FIRST PERIOD B) A.Y. 1997-98 TO 2001-02 : SECOND PERIOD C) A.Y. 2002-03 ONWARDS : THIRD PERIOD THE UNABSORBED DEPRECIATION FOR THE FIRST AND THE T HIRD PERIODS WOULD BE ALLOWED SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME AND , FURTHER, WITHOUT ANY RESTRICTION AS TO THE TIME PERIOD, I.E., IN PERPETUITY. THAT PERTA INING TO THE SECOND PERIOD WOULD, IN CONTRADISTINCTION, STAND TO BE CARRY FORWARD FOR A PERIOD OF EIGHT YEARS AND, FURTHER, ALLOWED SET OFF ONLY AGAINST INCOME ASSESSABLE UNDE R CHAPTER IV-D, I.E., UNDER THE HEAD OF INCOME PROFITS AND GAINS OF BUSINESS OR PROFESS ION. THIS IS IN VIEW OF THE CLEAR PROVISION OF LAW, I.E., SECTION 32(2), AS IT OBTAIN S ON SUBSTITUTION BY FINANCE (NO.2) ACT, 3 ITA NOS. 1563 & 1565/MUM/2011 (A.Y. 2006-07 & 07-08 ) TUNI TEXTILE MILLS LTD. VS. ITO 1996 W.E.F. 01.04.1997 AND PRIOR TO ITS AMENDMENT B Y SUBSTITUTION BY FINANCE ACT, 2001 W.E.F. 01.04.2002, RESTORING THE PROVISION TO AS IT STOOD PRIOR TO 01.04.1997. REFERENCE IN THIS REGARD MAY BE MADE TO PARA 38 (PGS. 242-244) O F THE ORDER BY THE TRIBUNAL IN TIMES GUARANTY LIMITED (SUPRA), BESIDES THE CATCH NOTES AT PGS. 210 TO 215 OF THE REPORTS, THE GIST OF THE ORDER BEING IN FACT ALSO ENCLOSED (IN P ART) BY THE ASSESSEE AS A PART OF ITS PAPER- BOOK (AT PGS. 4-5). CLEARLY, THEREFORE, THE ASSESSE ES CLAIM IS INADMISSIBLE ACCORDING TO THE VERY DECISION BY THE LARGER BENCH OF THE TRIBUN AL IT RELIES UPON. AS SUCH, RESPECTFULLY FOLLOWING THE SAID DECISION AND, THUS, FOR THE SAME REASONS AS STATED THERE-IN, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO SET OFF DEPRECIATIO N FOR THE ASSESSMENT YEARS 1999-2000 TO 2001-02 AGAINST INCOME FROM HOUSE PROPERTY, I.E., A S CLAIMED BY IT. SO, HOWEVER, WE OBSERVE THAT THE ASSESSEE HAS BROUG HT FORWARD UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 2002-03 AND TH E FOLLOWING YEARS AS WELL, I.E., FALLING UNDER THE THIRD PERIOD AFORE-SAID. AS SUCH, WE WOND ER WHY COULD THE SAME BE NOT ALLOWED SET OFF OF AGAINST THE INCOME ASSESSABLE U/S.22 FOR THE CURRENT YEAR/S. THERE IS NO LAW THAT THE UNABSORBED DEPRECATION FOR A PRIOR YEAR IS TO B E EXHAUSTED PRIOR TO THE SET OFF OF THE ALLOWANCE PERTAINING TO A SUBSEQUENT YEAR. THE PRAC TICE OF ADJUSTING PRIOR YEARS CLAIM IN PRECEDENCE TO THAT FOR THE LATTER YEAR IS NOT GUIDE D BY ANY STRICT RULE OF LAW BUT BY PRUDENCE IN-AS-MUCH AS CLAIMS ARE GENERALLY SUBJECT TO TIME LIMITATION. BOTH THE ASSESSEE, WHICH CONTINUES TO INSIST ON A CLAIM INCONSISTENT W ITH THE VIEW EXPRESSED BY THE LARGER BENCH OF THE TRIBUNAL, AND THE REVENUE HAVE DEFAULT ED IN APPLYING THE LAW. 4. WE HAVE THEREFORE NO HESITATION IN CONFIRMING TH E SET OFF, AT THE ASSESSEES OPTION, OF THE UNABSORBED DEPRECIATION FOR ANY YEAR, A.Y. 2 002-03 ONWARDS, AGAINST INCOME U/S.22 FOR THE RELEVANT YEARS. THE MATTER IS ACCORD INGLY RESTORED TO THE FILE OF THE ASSESSING OFFICER (A.O.). THE ASSESSEE SHALL, AT IT S OPTION, SPECIFY THE ASSESSMENT YEAR/S UNABSORBED DEPRECIATION FOR WHICH BE ALLOWED SET OF F OF AGAINST THE INCOME FROM HOUSE PROPERTY. THE A.O. SHALL GIVE EFFECT THERETO AFTER CAUSING THE NECESSARY VERIFICATION AT HIS END. HE SHALL ALSO, AS A RESULT, SPECIFY THE UNABSO RBED BUSINESS LOSS AND DEPRECIATION FOR 4 ITA NOS. 1563 & 1565/MUM/2011 (A.Y. 2006-07 & 07-08 ) TUNI TEXTILE MILLS LTD. VS. ITO EACH YEAR OUTSTANDING AFTER ALLOWING SET OFF AGAINS T THE CURRENT YEARS(S) INCOME AGAINST INCOME ASSESSABLE UNDER ANY HEAD. WE DECIDE ACCORDI NGLY. 5. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWE D ON THE AFORE-SAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 22, 2014 SD/- SD/- (VIVEK VARMA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' 0) MUMBAI; 1( DATED : 22.09.2014 .(../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' 2* ( ) / THE CIT(A) 4. ' 2* / CIT - CONCERNED 5. 5 6 #*(78 , + 78. , ' 0) / DR, ITAT, MUMBAI 6. 6 9 : ) / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ' 0) / ITAT, MUMBAI