Assistant Commissioner of Income-tax, Ahmednagar Circle , Ahmednagar V. Karmaveer Shankarrao Kale Sahkari Sakhar Karkhana Ltd, (Formerly Kopergaon SSK Ltd), Ahmednagar

ITA 1779/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5877 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: MINIR BAPAT
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 73; 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.1779/PUN/2017 / ASSESSMENT YEAR : 2009-10 ACIT, AHMEDNAGAR CIRCLE, AHMEDNAGAR. ....... / APPELLANT / V/S. KARMAVEER SHANKARRAO KALE SAHKARI SAKHAR KARKHANA LTD. (FORMERLY KOPERGAON SSK LTD.), A/P GAUTAMNAGAR, POST.- KOLPEWADI, TAL.- KOPERGAON, DIST.- AHMEDNAGAR. PAN : AAATT3070H / RESPONDENT REVENUE BY : SHRI S. P. WALIMBE ASSESSEE BY : SHRI MINIR BAPAT / DATE OF HEARING : 14.09.2020 / DATE OF PRONOUNCEMENT : 16.09.2020 / ORDER PER P.M. JAGTAP, VP : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-2, PUNE DATED 16.03.2017 WHEREBY HE ALLOWED THE CLAIM OF THE ASSESSEE FOR SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1998-99, 1999- 2000 AND 2000-01 AGAINST THE PROFIT FOR THE YEAR UNDER CONSIDERATION. 2. THE ASSESSEE IN THE PRESENT CASE IS A CO-OPERATIVE SOCIETY WHICH IS ENGAGED IN THE BUSINESS OF RUNNING A SUGAR FACTORY. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 26 TH SEPTEMBER, 2009 DECLARING TOTAL INCOME AT NIL. IN THE ASSESSMENT ORIGINALLY COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 VIDE AN ORDER DATED 24.10.2011, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER AT RS.1,36,29,081/-. 2 ITA NO.1779/PUN/2017 SUBSEQUENTLY, IT WAS NOTICED BY THE ASSESSING OFFICER INTER-ALIA THAT THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF CARRY FORWARD LOSS REPRESENTING UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1998-99, 1999-2000 AND 2000-01 AGAINST THE PROFIT FOR THE YEAR UNDER CONSIDERATION WAS WRONGLY ALLOWED SINCE THE UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1998-99, 1999- 2000 AND 2000-01 COULD HAVE BEEN ALLOWED TO BE SET OFF ONLY UPTO 8 YEARS I.E. A.Y. 2006-07, 2007-08 AND 2008-09 RESPECTIVELY. HE ACCORDINGLY REOPENED THE ASSESSMENT AND ISSUED NOTICE U/S 148 OF THE ACT TO THE ASSESSEE ON 12.03.2014 AFTER RECORDING THE REASONS AND AFTER OBTAINING THE REQUIRED APPROVAL OF THE CONCERNED CIT. THEREAFTER, ASSESSMENT U/S 143(3) R.W.S. 147 WAS COMPLETED BY THE ASSESSING OFFICER VIDE AN ORDER DATED 18.03.2015 WHEREBY THE CLAIM OF THE ASSESSEE FOR SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1998-99, 1999-2000 AND 2000-01 AGAINST THE PROFIT FOR THE YEAR UNDER CONSIDERATION WAS DISALLOWED BY THE ASSESSING OFFICER. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 147 OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE FOR SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1998-99, 1999-2000 AND 2000-01 AGAINST THE PROFIT FOR THE YEAR UNDER CONSIDERATION FOR THE FOLLOWING REASONS GIVEN IN PARA 6.1 AND 6.2 OF HIS IMPUGNED ORDER :- 6.1. I HAVE CONSIDERED THE FACTS AND THE DECISIONS CITED. IT IS OBSERVED THAT SUBSEQUENT TO THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF TIMES GUARANTY LTD., HONBLE GUJARAT HIGH COURT HAS PASSED ORDER IN THE CASE OF GENERAL MOTORS VS. DCIT 354 ITR 244. HONBLE COURT WHILE DECIDING THE ISSUE HELD AS UNDER: 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002- 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE 3 ITA NO.1779/PUN/2017 ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO.14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE A.Y. 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO THE A.Y.2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 6.2. IT IS FURTHER SEEN THAT THIS DECISION OF HONBLE GUJARAT HIGH COURT HAS BEEN SUBSEQUENTLY FOLLOWED BY THE HONBLE ITAT MUMBAI HIGH COURT IN THE CASE OF HINDUSTAN UNILIVER LTD. VS. ADDL. CIT IN ITA NO.7868/MUM/2010 DATED 10.12.2012. IT IS ACCORDINGLY HELD THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO THE APPELLANT ON 1ST APRIL 2002 WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE INCOME TAX ACT AND RESTRICTIONS OF 8 YRS HAVE BEEN DISPENSED WITH VIDE CIRCULAR NO.14 OF 2001. THEREFORE UNABSORBED DEPRECIATION ARE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST PROFIT AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT. THE GROUNDS ARE ACCORDINGLY TREATED AS ALLOWED. 4 ITA NO.1779/PUN/2017 4. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THIS TRIBUNAL ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW THE SET OFF AND CARRY FORWARD OF BROUGHT FORWARD DEPRECIATION LOSSES PERTAINING TO ASSESSMENT YEARS 1998- 99, 1999-2000 AND 2000-01 I.E. PERTAINING TO PERIOD PRIOR TO AMENDMENT IN SUB SECTION (2) OF SECTION 32 OF THE ACT W.E.F. 01.04.2002. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AMENDMENT BROUGHT INTO SECTION 32[2] BY THE FINANCE ACT [NO.2] OF 1996 IN RESPECT OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1997-98 TO 2001-02 IS NO LONGER APPLICABLE. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE OF UNABSORBED DEPRECIATION WAS MADE ON THE GROUND THAT, AS PER PROVISIONS OF SECTION 32[2] OF THE ACT RELATING TO CARRY FORWARD AND SETOFF OF UNABSORBED DEPRECIATION AMENDED BY FINANCE [NO.2] ACT 1996 W.E.F. ASSESSMENT YEAR 1997-98, THE UNABSORBED DEPRECIATION PERTAINING TO AYRS 1998-99, 1999-2000 AND 2000-01 COULD NOT BE CARRIED FORWARD BEYOND EIGHT YEARS. 5. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH, THE LD. DR HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE REVENUES CASE ON THE ISSUE UNDER CONSIDERATION, IT IS OBSERVED THAT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS VS. DCIT (SUPRA) RELIED UPON BY THE LD. CIT(A) IN HIS IMPUGNED ORDER AS ALSO BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN UNILEVER LTD., 394 ITR 73 WHEREIN A SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH NO.6 WHICH READS AS UNDER :- (A) THE IMPUGNED ORDER OF THE TRIBUNAL HAS ALLOWED THE RESPONDENT - ASSESSEE'S APPEAL ON THE ISSUE OF ALLOWING UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1996-97 AND 1997-98 WHICH WAS CARRIED FORWARD TO BE SET OFF IN THE SUBJECT ASSESSMENT YEAR. (B) THE GRIEVANCE OF THE APPELLANT IS THAT IN VIEW OF THE FETTER (OF EIGHT YEARS) IN CARRYING FORWARD DEPRECIATION FOR ASSESSMENT YEAR 1997-98 UPTO ASSESSMENT YEAR 2002-03, THE SET OFF OF THE SAME CANNOT BE ALLOWED IN THIS ASSESSMENT YEAR. (C) WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL WHILE ALLOWING THE ASSESSEE - RESPONDENTS' CLAIM FOLLOWS THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT REPORTED IN 354 ITR 244 WHEREIN ON IDENTICAL FACTS IT WAS HELD THAT THE UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 1997-98 UPTO ASSESSMENT YEAR 2001-02 COULD BE ALLOWED TO BE SET OFF, IF IT WAS STILL UNABSORBED ON 1ST APRIL, 2001. THE ABOVE DECISION ALSO PLACED UPON THE CBDT CIRCULAR NO.14 OF 2001 DATED 22ND NOVEMBER, 2001 TO HOLD THAT ANY UNABSORBED DEPRECIATION WHICH IS AVAILABLE ON 1ST DAY OF APRIL, 2001 WOULD BE 5 ITA NO.1779/PUN/2017 DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED BY THE FINANCE ACT OF 2001. MOREOVER, THE CIRCULAR NO.14 OF 2001 ISSUED BY THE CBDT CLARIFIES THAT RESTRICTION OF EIGHT YEARS TO CARRY FORWARD AND SET OFF THE UNABSORBED DEPRECIATION HAS BEEN DISPENSED WITH. CONSEQUENTLY, UNABSORBED DEPRECIATION FOR THE INTERVENING PERIODS BETWEEN ASSESSMENT 1997- 98 UPTO 2001-02, IF AVAILABLE IN THE ASSESSMENT YEAR 2002-03 WOULD BE ALLOWABLE AS PART OF CARRIED FORWARD DEPRECIATION FROM ASSESSMENT YEAR 2002-03 ONWARDS. NO DECISION CONTRARY TO THE DECISION OF THE GUJARAT HIGH COURT HAS BEEN SHOWN TO US. IT IS CLARIFIED THAT ALTHOUGH THE DECISION OF THE GUJARAT HIGH COURT WAS RENDERED IN CONTEXT OF RE-OPENING NOTICE IT HAS ALSO EXAMINED THE ISSUE ON MERITS AND DREW SUPPORT FROM THE CBDT CIRCULAR WHICH IS BENEFICIAL TO THE ASSESSEE TO CONCLUDE AS AFORESAID. NOTHING HAS BEEN SHOWN TO US TO INDICATE WHY THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS (INDIA) LTD. SHOULD NOT BE FOLLOWED IN THE PRESENT FACTS. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE HINDUSTAN UNILEVER LTD. (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE FOR SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1998-99, 1999-2000 AND 2000-01 AGAINST THE PROFIT FOR THE YEAR UNDER CONSIDERATION AND DISMISS THIS APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 16 TH DAY OF SEPTEMBER, 2020. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) ( P.M. JAGTAP ) JUDICIAL MEMBER VICE PRESIDENT / PUNE; / DATED : 16 TH SEPTEMBER, 2020. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-2, PUNE. 4. THE PR. CIT-1, PUNE. 5 . , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.