DCIT, Cuddalore V. M/s. Tamil Nadu State Transport Corporation (Villupuram) Limited, Villupuram

ITA 1713/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57882 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: V JAGADISAN F
• Keywords: Depreciation; Period of limitation; Unabsorbed depreciation
• Section: 143(3); 32; 148

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1713/MDS/2011 ASSESSMENT YEAR: 2003-04 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I, CUDDALORE 607 002. VS. M/S. TAMIL NADU STATE TRANSPORT CORPORATION (VILLUPURAM) LIMITED, NO. 3/137, SALA MEDU, VALUDAREDDY, VILLUPURAM 605 062. [PAN: AAACT1107E] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.P. GO PAKUMAR, JCIT ASSESSEE BY : SHRI V. JAGADISAN, F.C.A. DATE OF HEARING : 1 8 . 0 1.201 2 DATE OF PRONOUNCEMENT : 18.01.2012 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) XII, CHENNAI DATED 27.07.2011 PASSED IN ITA NO. 110/2008-09 FOR THE ASSESSMENT YEAR 2003-04. SHRI K.P. GOPAKUMAR, J CIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI V. JAGADISAN, F.C.A. REPRESENTED ON BEHALF OF THE ASSESSEE. 2. IN THIS APPEAL, THE REVENUE HAS TAKEN 5 GROUNDS OF APPEAL. THE ONLY ISSUE, WHICH WAS ARGUED BY THE LD. DR WAS THAT THE LD. CIT(A) HAS ERRED IN I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1713 1713 1713 1713/ // /M/ M/M/ M/11 1111 11 2 ALLOWING THE CLAIM OF BROUGHT FORWARD DEPRECIATION LOSSES FROM THE ASSESSMENT YEARS 1983-84 TO 1995-96 AND THEIR SET O FF AGAINST THE BUSINESS PROFITS OF THE CURRENT ASSESSMENT YEAR 2003-04 WHEN THE WORD USED IN THE INCOME TAX ACT WAS FIRST COMPUTED AND NOT ANY OTH ER TERM. HENCE, THE TIME LIMIT FOR CARRY FORWARD AND SET OFF FOR UNABSORBED DEPRECIATION LOSSES EXPIRED IN THE ASSESSMENT YEAR 2001-02. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 4. THE LD. CIT(A) HAS DECIDED THE ISSUE BY OBSERVI NG AS UNDER: BRIEF FACTS OF THE CASE: THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.20 03-04 ON 30-10-2003 ADMITTING AN INCOME OF `.NIL. ORIGINAL A SSESSMENT U/S.143(3) WAS COMPLETED ON 31.03.2006. SUBSEQUENTLY, THE ASSESSING OFFICER OBSERVED THAT T HE BROUGHT FORWARD DEPRECIATION LOSSES FROM A.YS. 1983-84 TO 1995-96 H AVE BEEN ALLOWED TO BE SET OFF AGAINST THE CURRENT YEAR'S INCOME. HENCE, THE ASSES SING OFFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 ON 27.03.2008. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT U/S. 143(3) R.W.S. 147 DISALLOWED THE ASSESSEES CLAIM OF BROUGHT FORW ARD DEPRECIATION LOSSES FROM A.YS. 1983-84 TO 1995-96 AND THEIR SET OFF AGAINST THE BUSINESS PROFITS OF CURRENT ASSESSMENT YEAR 2003-04. AGGRIEVED BY THE ABOVE ACTION OF THE ASSESSING OFFI CER, THE ASSESSEE INSTITUTED THE PRESENT APPEAL. GROUNDS OF APPEAL: THE ASSESSEE IN ITS GROUNDS OF APPEAL OBJECTED TO THE ASSESSING OFFICER'S ACTION OF DISALLOWING THE CLAIM OF BROUGHT FORWARD DEPRECIATION LOSSES FROM A.YS 1983-84 TO 1995-96 AND THEIR SET O FF AGAINST THE BUSINESS PROFITS OF CURRENT ASSESSMENT YEAR 2003-04. THE ASSESSEE ALSO RELIED ON THE CBDT'S CIRCULAR NO.762 DT.18.02.1998. DECISION: THE GROUNDS OF APPEAL AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE UNDERSIGNED ARE PERUSED CAREFULLY. THE CLAIM OF CARRY FORWARD OF UNABSORBED DEPRECIATION LOSSES AND THEIR SET OFF IS GOVERNED B Y PROVISIONS OF SEC.32(2) OF THE I T ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1713 1713 1713 1713/ // /M/ M/M/ M/11 1111 11 3 AS PER THE AMENDED PROVISIONS OF SEC.32(2) OF THE A CT, W.E.F. 01.04.1997 THE UNABSORBED DEPRECIATION LOSSES CAN BE CARRIED FORWA RD FOR A MAXIMUM OF 8 ASSESSMENT YEARS FROM THE END OF THE ASSESSMENT YEA R IN WHICH SUCH LOSSES WERE FIRST COMPUTED. THE RELEVANT PROVISIONS ARE AS UNDE R: SECTION 32 2) WHERE IN THE ASSESSMENT OF THE ASSESSEE FULL EFF ECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER CLAUSE (II) OF SUB-SECTION (J) IN A NY PREVIOUS YEAR OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVI OUS YEAR OR OWING TO THE PROFITS OR GAINS BEING LESS THAN THE ALLOWANCE, THEN. THE A LLOWANCE OR THE PART OF ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN (HEREINAFTER REF ERRED TO AS UNABSORBED DEPRECIATION ALLOWANCE). AS THE CASE MAY BE.- (I) SHALL BE SET OFF AGAINST THE PROFITS AND GAINS , IF ANY. OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THA T ASSESSMENT YEAR; (II) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANN OT BE WHOLLY SET OFF UNDER CLAUSE (I), THE AMOUNT NOT SO SET OFF SHALL BE SET OFF FROM THE INCOME UNDER ANY OTHER HEAD, IF ANY. ASSESSABLE FOR THAT ASSESSM ENT YEAR; (III) IF THE UNABSORBED DEPRECIATION ALLOWANCE CAN NOT' BE WHOLLY SET OFF UNDER CLAUSE (I) AND CLAUSE (II), THE AMOUNT OF ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AN D.- (A) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI NS, IF ANY. OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM ARID ASSESSABLE FOR TH AT ASSESSMENT YEAR; (B) IF THE UNABSORBED DEPRECIATION ALLOWANCE CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OF UNABSORBED DEPRECIATION ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSM ENT YEAR FOR WHICH THE AFORESAID ALLOWANCE WAS FIRST COMPUTED: THUS, THE ASSESSING OFFICER OPINED THAT THE UNABSOR BED DEPRECIATION LOSSES COMPUTED FOR ASSESSMENT YEARS UP TO 1993-94 GET LAP SED BY THE ASSESSMENT YEAR 2001-02 AND CANNOT BE ALLOWED TO BE BROUGHT FORWARD AND SET OFF DURING THE A.Y.2003-04 BECAUSE OF THE TIME LIMITATION. THE ABOVE VIEW OF THE ASSESSING OFFICER IS NOT TRUE . AS PER THE OLD PROVISIONS OF SEC.32(2) EXISTING OUGHT 31.3.97 ,ALL THE BROUGHT FORWARD DEPRECIATION ALLOWANCES GETS MERGED WITH THE CURRENT YEARS DEPRE CIATION ALLOWANCE. HENCE, WITH THE CHANGE IN THE LAW W.E.F. 01.04.1997, THE ENTIRE UNABSORBED DEPRECIATION ALLOWANCE (INCLUDING THOSE BROUGHT FORWARD FROM EAR LIER YEARS) IS DEEMED TO BE UNABSORBED DEPRECIATION ALLOWANCE OF A.Y .1997 -98 AND THE PERIOD OF LIMITATION OF 8 YEARS IS TO BE RECKONED FROM THE A.Y.1997-98 ONL Y. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1713 1713 1713 1713/ // /M/ M/M/ M/11 1111 11 4 FURTHER AS PER THE CIRCULAR NO.762 DT. 18.02.1998 I SSUED BY THE CBDT, THE CONSEQUENCES OF THE AMENDED PROVISIONS OF SEC.32(2) ARE EXPLAINED THAT THE UNABSORBED DEPRECIATION OF A. Y. 1996-97 WILL BE AD DED TO THE DEPRECIATION ALLOWANCE OF A.Y. 1997-98 AND DEEMED TO BE PART OF THE DEPRECIATION ALLOWANCE OF A.Y.1997-98. IN OTHER WORDS, THE UNABSORBED DEPRECI ATION ALLOWANCE OF A.Y.1996- 97 SHALL BE ADDED TO THE ALLOWANCE OF A. Y. 1997-98 AND WILL BE DEEMED TO BE ALLOWANCE OF THAT YEAR. THE LIMITATION OF 8 YEARS S HALL START FROM THE A.Y. 1997-98. THE CONTENTS OF THE CIRCULAR ARE AS UNDER: FINANCE (NO. 2), ACT, 1996 23.3 SUB-SECTION (2) OF SECTION 32 PROVIDES FOR CARRY FORWARD OF UNABSORBED DEPRECIATION ALLOWANCE. UNDER THIS SUB-SECTION, WHE RE FULL EFFECT CANNOT BE GIVEN TO THE DEPRECIATION ALLOWANCE IN ANY PREVIOUS YEAR, OW ING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT YEAR, OR OWING TO THE PRO FITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THE ALLOWANCE OR PART THEREOF T O WHICH EFFECT HAS NOT BEEN GIVEN SHALL BE ADDED TO THE AMOUNT OF ALLOWANCE FOR DEPRECIATION F OR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWAN CE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. THE NET EFFEC T IS THAT UNABSORBED DEPRECIATION ALLOWANCE OF ONE YEAR IS ADDED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR. THUS, THE UNABSORBED DEPRECIATION ALLOWA NCE, IN A CASE WHERE PROFITS ARE INSUFFICIENT IN THE SUBSEQUENT YEARS, IS CARRIED INDEFINITELY. ON THE OTHER HAND, THE BUSINESS LOSSES ARE ALLOWED TO BE CARRIED FORWARD FOR A PERIOD OF EIGHT YEARS ONLY. BY AN AMENDMENT THE BUSINESS LOSS AND THE UNABSORBED 'DEPRECIATION HAVE BEEN BROUGHT AT PAR FOR THE PURPOSES OF SET OFF AND CARR Y FORWARD NOTWITHSTANDING THE FACT THAT SUB-SECTION (2) OF SECTION 72 MAINTAINS A DISTINCTION BETWEEN THEM REGARDING THE PRIORITIES. FINANCE (NO.2), ACT, 1996 23.4 IN ORDER TO HELP THE REVIVAL OF SICK COMPANIES, AN AMENDMENT HA S BEEN MADE WHICH PROVIDES THAT THE PERIOD OF REHABILITATI ON OF SUCH A COMPANY, AS ORDERED BY THE BIFR, SHALL BE EXCLUDED IN RECKONING THE PERIOD OF EIGHT YEARS NOW PRESCRIBED FOR THE PURPOSES OF CARRY FORWARD AN D SET OFF OF THE UNABSORBED DEPRECIATION. FINANCE (NO.2), ACT, 1996 23.5 SUB-SECTION (2) OF SECTION 32, AS IT EXISTED UPTO ASSESSMENT YEAR 1996-97, PROVIDED THAT THE UNABSORBED DEPRECIATION OF A YEAR SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION OF THE FOL LOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE. THEREFORE, THE UNABSORBE D DEPRECIATION ALLOWANCE, IF ANY, OF ASSESSMENT YEAR 1996-97 SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION OF ASSESSMENT YEAR 1997-98 AND DEEMED TO BE PART OF THE ALLOWANCE FOR THIS YEAR. IN OTHER WORDS , THE UNABSORBED DEPRECIATION ALLOWANCE OF ASSESSMENT YEAR 1996-97 SHALL BE ADDED TO THE ALLOWANCE OF.1997- I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1713 1713 1713 1713/ // /M/ M/M/ M/11 1111 11 5 98 AND WILL BE DEEMED TO BE THE ALLOWANCE OF THAT YEAR. THE LIMITATION OF EI GHT YEARS SHALL START FROM THE ASSESSMENT YEAR 1997-98. IN VIEW OF THE ABOVE CIRCULAR, ARID ALSO IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT VS S & S POWER SWITCHGEAR LTD., (218 CTR 701)(MAD) THE ENTIRE DEPRECIATION THAT WAS BROU GHT FORWARD TO THE A.Y. 1996- 97 AND THE NET UNABSORBED DEPRECIATION COMPUTED FOR THE A.Y. 1996-97 AND CARRIED FORWARD TO THE A.Y.1997-98 BECOMES THE DEPREDATION ALLOWANCE OF A.Y. 1997-98. THE UNABSORBED' DEPRECIATION ALLOWANCE AFTER SET OF F AGAINST THE INCOME OF THE CURRENT YEAR, WILL BECOME THE UNABSORBED DEPRECIATI ON ALLOWANCE OF A.Y. 1997-98 AND THE LIMITATION OF 8 YEARS, AS PER THE AMENDED P ROVISIONS OF SEC.32(2), STARTS FROM THE A.Y.1997-98. THEREFORE, ALL THE DEPRECIATION AL LOWANCES THAT ARE BROUGHT FORWARD FROM THE EARLIER YEARS AND WERE AVAILABLE D URING THE A.Y. 1997-98 CAN BE CARRIED FORWARD FOR ANOTHER PERIOD OF 8 YEARS I.E., UP TO A.Y.2005-06. IN ANY CASE, WITH THE CHANGE IN THE PROVISIONS OF SEC.32(2) W.E. F. 01.04.2002 THE UNABSORBED DEPRECIATION ONCE AGAIN WAS MADE AVAILABLE TO THE A SSESSEE INDEFINITELY BY CLUBBING WITH THE CURRENT DEPRECIATION ALLOWANCE. THEREFORE, THE ASSESSEE IS ENTITLED FOR CARRY FORWA RD OF UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE DURING THE A.Y.199 7-98 TO THE A.Y. 2003-04 AND CLAIM THE SAME AS SET OFF AGAINST THE INCOME OF A.Y .2003-04. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE ASSESSEE 'S CLAIM OF BROUGHT FORWARD OF UNABSORBED DEPRECIATION LOSSES FROM A.YS. 1983-84 T O 1993-94 AND ALLOW THE SAME AS SET OFF AGAINST THE INCOME OF A.Y.2003-04. IN VIEW OF THE ABOVE, THE ASSESSEES APPEAL IS ALLO WED. 5. AT THE TIME OF HEARING, THE LD. DR VERY FAIRLY CONCEDED THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISI ON OF THE HONBLE MADRAS HIGH COURT IN CASE OF CIT V. PIONEER ASIA PA CKING (P) LTD. REPORTED IN [2009] 310 ITR 198 (MAD). 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UPPORTED THE ORDER OF THE LD. CIT(A). 7. WE FIND THAT NO ERROR COULD BE POINTED OUT BY T HE LD. DR IN THE ABOVE QUOTED ORDER OF THE LD. CIT(A). WE FIND THAT THE LD . CIT(A) HAS HELD THAT THE ASSESSEE IS ENTITLED FOR CARRY FORWARD OF UNABSORBE D DEPRECIATION ALLOWANCE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1713 1713 1713 1713/ // /M/ M/M/ M/11 1111 11 6 AVAILABLE DURING THE ASSESSMENT YEAR 1997-98 TO THE ASSESSMENT YEAR 2003- 04 AND CLAIMED THE SAME AS SET OFF AGAINST THE INCO ME OF THE ASSESSMENT YEAR 2003-04 BY FOLLOWING THE DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S & S POWER SWITCHGEAR LTD. (218 CTR 701)(MAD). HENCE, WE DO NOT FIND ANY GOOD AND JUSTI FIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). IT IS C ONFIRMED. THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 8. NO OTHER POINT HAS BEEN URGED BY THE REVENUE EX CEPT THE ABOVE POINT. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED AT THE CLOSE OF THE HEARING IN TH E PRESENCE OF THE PARTIES ON 18.01.2012. SD/ - SD/ - (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 18.01.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.