DEEPI ARORA, MUMBAI V. ITO 19(1)3, MUMBAI

ITA 1899/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88421 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 18-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income; Depreciation; Source of fund; Unabsorbed depreciation
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI .. , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 1899/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) DEEPI ARORA 16, GOLF LINK, ARORA HOUSE, UNION PARK, KHAR (W), MUMBAI-400 018 / VS. ITO-19(1)(3), MUMBAI ./ ./PAN/GIR NO. AAIPA 1690 A ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI PRAKASH JOTWANI !' # $ / RESPONDENT BY : SHRI LOVE KUMAR % &'( # )* / DATE OF HEARING : 18.12.2014 +,- # )* / DATE OF PRONOUNCEMENT : 18.02.2015 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-30, MUMBAI (CIT(A) FOR SH ORT) DATED 31.01.2011, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2007-08 VIDE ORDER DATED 29.12.2009. 2 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO 2. THE ONLY ISSUE ARISING IN THIS APPEAL, RAISED PE R GROUNDS # 1 AND 2, IS THE QUANTUM OF DEDUCTION U/S.80-IA IN RESPECT OF THE PROFIT OF THE ASSESSEES ELIGIBLE UNDERTAKING/S. WHILE THE ASSESSEE CLAIMS IT AT RS.37,80,034/- , THE SAME STANDS RESTRICTED BY THE REVENUE TO RS.2,83,720/- . IT WOULD BE RELEVANT, IN ORDER TO HIGHLIGHT THE C ONTROVERSY INVOLVED IN THE INSTANT CASE AS WELL AS ITS ELEMENTS, TO REPROD UCE THE ASSESSEES COMPUTATION OF INCOME, FORMING PART OF HER RETURN OF INCOME FOR TH E RELEVANT YEAR (PB 1): TABLE 1 (AMOUNT IN RS.) STATEMENT OF TOTAL INCOME FOR THE YEAR ENDED 31.03. 2007 INCOME FROM BUSINESS PROFIT FROM TEX INTERNATIONAL 3,903,043 PROFIT FROM ROYAL ENERGY COMPANY UNIT-1 36,333 PROFIT FROM ROYAL ENERGY COMPANY UNIT-2 3,151,954 PROFIT FROM ROYAL ENERGY COMPANY UNIT-3 699,551 7,790,882 INCOME FROM PROPERTY (PERSONAL A/C.) (A) RENT FROM TATA A/G 2,334,420 LESS: 30% REPAIRS 700,326 1,634,094 (B) RENT FROM RAP MEDIA 600,000 LESS: 30% REPAIRS 180,000 2,054,094 420,000 INCOME FROM OTHER SOURCES (PERSONAL A/C.) INTEREST RECEIVED FROM RAP MEDIA LTD. 3,879,654 INTEREST PAID TO THE BANK ON LOAN TAKEN (2,437,434) 1,442,220 GROSS TOTAL INCOME 11,287,196 LESS SET OFF AGAINST CARRY FORWARD DEPRECIATION 7,507,162 NET TAXABLE INCOME 3,780,034 LESS: DEDUCTION UNDER CHAPTER VI-A SECTION TYPE AMOUNT MAX ALLOWED 80-IA TEX INTERNATIONAL 3,903,043 3,780,034 80-IA ROYAL UNIT 1 36,333 0 3,780,034 NET INCOME NIL 3 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO THE ASSESSEES CASE 3. THE ASSESSEE CLAIMS THAT NO PART OF THE BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS.75.07 LACS PERTAINS TO THE ANY OF THE TWO ELI GIBLE UNDERTAKINGS, I.E., TEX INTERNATIONAL (TI) AND ROYAL ENERGY COMPANY UNIT-1, THE PROFIT FROM WHICH IS ADMITTEDLY AT RS.39.03 LACS AND RS. 0.36 LACS RESPECTIVELY. TH E SAME EXCEEDING ITS GROSS TOTAL INCOME (GTI) FOR THE YEAR, I.E., RS.37.80 LACS, THE DEDUCTION U/S.80-IA WOULD STAND RESTRICTED THERETO. NO OTHER CONSIDERATION WOULD AP PLY. RELIANCE STANDS PLACED ON THE DECISION IN THE CASE OF HERCULES HOISTS LTD. VS. ASST. CIT (IN ITA NOS. 7943, 7944,7946 AND 2255/MUM/2011 DATED 13.02.2013/COPY ON RECORD SINCE REPORTED AT [2013] 22 ITR (TRIB) 527 (MUM)), UPHOLDING THE STAND ALONE PRINC IPLE, ENSHRINED IN SECTION 80-IA(5), WHICH WOULD GOVERN THE QUANTUM OF DEDUCTION U/S.80- IA(1). RELIANCE STOOD ALSO PLACED BEFORE US ON THE ORDER BY THE TRIBUNAL IN THE CASE OF NETSCRIBES (INDIA) PVT. LTD. V. ITO (IN ITA NO . 424/MUM/2011 DATED 14.11.2014/COPY ON RECORD), UPHO LDING THE SET OFF OF UNABSORBED DEPRECATION AGAINST THE INCOME ASSESSABL E UNDER ANY HEAD OF INCOME OTHER THAN THE HEAD PROFITS AND GAINS OF BUSINESS OR PRO FESSION, I.E., ASSESSABLE U/S.28. ON BEING INQUIRED DURING HEARING THAT THERE WAS NOT HING ON RECORD TO SUGGEST THAT THE ENTIRE BROUGHT FORWARD UNABSORBED DEPRECIATION U/S. 32(2) PERTAINS TO THE NON-ELIGIBLE UNDERTAKINGS, BEING THE ROYAL ENERGY UNITS 2 & 3, T HE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, WOULD CONCEDE TO IT B EING SO, BEING NEITHER APPARENT FROM THE ASSESSEES RETURN OF INCOME NOR THE ORDERS OF T HE REVENUE AUTHORITIES, THOUGH WOULD STATE THAT THIS ASPECT OF THE MATTER CAN BE VERIFIE D BY THE ASSESSING OFFICER (A.O.) WHILE GIVING EFFECT TO OUR APPELLATE ORDER. HE WOULD FURT HER CONCEDE TO THE NET TAXABLE INCOME (NTI) IN THE ASSESSEES COMPUTATION OF INCOME (TABL E 1) BEING THE GTI (DEFINED U/S. 80B(5)) AND, FURTHER, OF THE NET INCOME AS PER THE SAID COMPUTATION BEING THE NET TAXABLE OR THE TOTAL INCOME UNDER THE ACT. ON BEING FURTHER ENQUIRED ABOUT ANY DECISION BY ANY HONBLE HIGH COURT OR SUPREME COURT THAT WOULD COVE R THE ASSESSEES CASE, HE ANSWERED THAT THE AFORE-CITED DECISIONS ARE THE ONLY TWO DEC ISIONS TO HIS NOTICE, AND ON WHICH THEREFORE HE PLACES RELIANCE. 4 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO THE REVENUES CASE 4. IN THE VIEW OF THE REVENUE, THE INCOME OF THE EL IGIBLE UNDERTAKINGS, BEING THE TI UNIT AND ROYAL ENERGY UNIT NO.1, AS INCLUDED IN THE GTI, CANNOT EXCEED RS.2,83,720/-, I.E., THE AMOUNT ASSESSABLE U/S.28 (RS.77,90,882 - RS.75,07,162). FURTHER, THIS WOULD BE IRRESPECTIVE OF WHETHER THE BROUGHT FORWARD UNABSOR BED DEPRECIATION OF RS. 75.07 LACS IS IN RESPECT OF THE ELIGIBLE OR THE NON-ELIGIBLE UNDE RTAKINGS. THE ASSESSEE, BY CLAIMING THE DEDUCTION AT RS.37.80 LACS, IS IN FACT CLAIMING DED UCTION U/S.80-IA ON THE INCOME FROM HOUSE PROPERTY (RS. 20.54 LACS) AND INCOME FROM O THER SOURCES (RS. 14.42 LACS), AND WHICH SURELY CANNOT BE. THIS SUMS UP THE REVENUES CASE. DISCUSSION AND FINDINGS 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5.1 WE SHALL BEGIN BY DELINEATING THE PRECISE ISSUE AT HAND. THE REVENUE DOES NOT DISPUTE THE STAND ALONE PRINCIPLE, SOUGHT TO BE C ANVASSED BEFORE US BY THE LD. AR WITH REFERENCE TO THE DECISION BY THE TRIBUNAL IN THE CA SE OF HERCULES HOISTS LTD. (SUPRA). THE SAID PRINCIPLE, LEGISLATIVELY MANDATED PER SECTION 80-IA(5), AND FURTHER DISCUSSED AT LENGTH BY THE TRIBUNAL IN THE SAID CASE, IS NOT IN DISPUTE. THE SECOND PRINCIPLE, I.E., THE SET OFF OF THE BROUGHT FORWARD UNABSORBED DEPRECIATION U/S. 32(2), IN-AS-MUCH AS IT FORMS PART OF THE CURRENT YEARS DEPRECIATION, AGAINST THE INC OME ASSESSABLE UNDER OTHER HEADS OF INCOME, I.E., IN THE ABSENCE OF INCOME U/S.28, CANV ASSED WITH REFERENCE TO THE DECISION BY THE TRIBUNAL IN NETSCRIBES (INDIA) PVT. LTD . (SUPRA), IS AGAIN WELL SETTLED (REFER: CIT VS. VIRMANI INDUSTRIES PVT. LTD. [1995] 216 ITR 607 (SC); CIT VS. JAIPURIA CHINA CLAY MINES (P.) LTD. [1966] 59 ITR 555 (SC); AND RAJAPALAYAM MILLS LTD. VS. CIT [1978] 115 ITR 777 (SC)). IN FACT, THE TRIBUNAL IN THE LATTER CASE ITSELF FOLLOWS THE DECISION IN THE CASE OF CIT VS. SPEL SEMI CONDUCTOR LTD. [2013] 212 TAXMAN 506 (MAD). AGAIN, NEITHER DO WE OBSERVE ANY DISPUTE IN PRINCIPLE NOR HAS THE REV ENUE RAISED ANY BEFORE US. THE GTI OF RS.37.80 LACS STANDS WORKED OUT ONLY AFTER REDUCING THE BROUGHT FORWARD UNABSORBED DEPRECATION. THE SOLE AND THE ONLY ISSUE, THEREFORE, AS WE DISCE RN, IS AS TO HOW THE EXTENT OF ANY INCOME INCLUDED IN THE GTI IS TO BE COMPUTED OR ARRIVED AT ? SIMPLY PUT, HOW IS 5 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO THE GTI TO BE BROKEN INTO ITS CONSTITUENTS. THE RE ASON IS SIMPLE. THE DEDUCTION U/S.80- IA, IS ONLY ON THE PROFITS OF THE ELIGIBLE UNDERTAK ING AS INCLUDED IN THE GTI. REFERENCE FOR THE PURPOSE IS MADE TO SECTION 80-IA(1), WHICH READ S AS UNDER: DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IND USTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT, ETC. 80-IA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS. [EMPHASIS, O URS] FURTHER, AS EXPLAINED IN SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER [2002] 254 ITR 608 (BOM), FOLLOWED IN AND APPLIED BY THE TRIBU NAL IN HERCULES HOISTS LTD. (SUPRA), SECTION 80-IA(3) & (4) (I.E., THE CORRESPONDING PRO VISIONS OF S. 80I) ONLY DESCRIBES THE QUALIFYING CONDITIONS TO BE FULFILLED FOR THE APPLI CABILITY OF THE PROVISION AND, THUS, DEDUCTION U/S. 80-IA(1), UNDER WHICH ONLY THE DEDUC TION IS TO BE ALLOWED. THIS LEADS US TO GTI, DEFINED IN S. 80-B(5), READING AS UNDER: CHAPTER VIA DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME A- GENERAL DEFINITIONS. 80B. IN THIS CHAPTER ( 1 ) ( 5 ) GROSS TOTAL INCOME MEANS THE TOTAL INCOME COMPU TED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER; 5.2 TO COMPUTE GTI, INCOME IS THEREFORE TO BE WOR KED OUT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. FIRSTLY, INCOME FROM ANY SOU RCE IS TO BE COMPUTED FOLLOWING AND APPLYING THE COMPUTATIONAL PROVISIONS OF THE RELEVA NT HEAD OF INCOME. IT IS THEN 6 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO AGGREGATED FOR THE DIFFERENT SOURCES FALLING UNDER THE RELEVANT HEAD OF INCOME, WHICH ARE AGAIN AGGREGATED, I.E., ACROSS DIFFERENT HEADS OF I NCOME. THE AGGREGATION IS TO BE IN TERMS OF CHAPTER VI. THIS SEQUENCE IS INTEGRAL AND HAS TO BE OBSERVED. THE SAME, IN THE FACTS OF THE PRESENT CASE, ADOPTING THE FIGURES SPECIFIED IN THE COMPUTATION OF THE INCOME, WHICH WE FIND TO BE IN AGREEMENT WITH THAT ASSESSED, IS A S UNDER: (AMOUNT IN RS.) TABLE 2 STATEMENT OF TOTAL INCOME FOR THE YEAR ENDED 31.03. 2007 REMARKS INCOME FROM HOUSE PROPERTY (A) (A) RENT FROM TATA A/G 23,34,420 LESS: 30% REPAIRS 7,00,326 16,34,094 (B) RENT FROM RAP MEDIA 6,00,000 LESS: 30% REPAIRS 1,80,000 20,54,094 4,20,000 PROFITS OR GAINS OF BUSINESS (B) PROFIT FROM TEX INTERNATIONAL (UNIT A) (*) 39,03,04 3 PROFIT FROM ROYAL ENERGY COMPANY UNIT-1 (UNIT B-1) (*) 36,333 PROFIT FROM ROYAL ENERGY COMPANY UNIT-2 (UNIT B-2) 31,51,954 PROFIT FROM ROYAL ENERGY COMPANY UNIT-3 (UNIT B-3) 6,99,551 LESS: SET OFF AGAINST CARRY FORWARD DEPRECIATION 7, 507,162 2,83,720 INCOME FROM OTHER SOURCES (C) INTEREST RECEIVED FROM RAP MEDIA LTD. 38,79,654 INTEREST PAID TO THE BANK ON LOAN TAKEN (24,37,434) 14,42,220 GROSS TOTAL INCOME 37,80,034 NET TAXABLE INCOME 3,780,034 THE ASSESSEES MANNER OF COMPUTING GTI (TABLE 1), T HOUGH MATHEMATICALLY LEADING TO THE SAME RESULT, I.E., IN TERMS OF NET T AXABLE INCOME, IS INCORRECT AND NOT IN CONFORMITY WITH EITHER THE TERMS OF THE PROVISIONS OR THE SCHEME OF THE ACT. THERE IS, IN FACT, NO SCOPE FOR ANY VACILLATION; THE SAME BEING BASIC TO THE SCHEME OF THE ACT, WITH THE APEX COURT IN SYNCO INDUSTRIES LTD. (REPORTED AT [2008] 299 ITR 444 (SC)), IN FACT AFFIRMING THE DECISION BY THE HONBLE JURISDICTIONA L HIGH COURT EXPLAINING THE MANNER IN 7 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO WHICH THE GTI IS TO BE COMPUTED, SO THAT INDEPENDEN T OF THE PROVISION OF S. 80-I(6) (OR S. 80-IA(5)), ALL OTHER APPLICABLE PROVISIONS, INCLUD ING SS. 32(2) & S. 72, WOULD APPLY IN COMPUTING SUCH INCOME. RATHER, WE OBSERVE A COMPLET E UNANIMITY OF JUDICIAL VIEW, AND TOWARD WHICH WE MAY REFER TO SOME OF THE DECISIONS BY THE APEX COURT REFERRED TO IN HERCULES HOISTS LTD. (SUPRA), VIZ. SYNCO INDUSTRIES LTD. (SUPRA); CIT VS. KOTAGIRI INDUSTRIAL CO-OPERATIVE TEA FACTORY LTD. [1997] 224 ITR 604 (SC); H.H. SIR RAMA VARMA VS. CIT [1994] 205 ITR 433 (SC); DISTRIBUTORS BARODA (P.) LTD. VS. UNION OF INDIA [1985] 155 ITR 120 (SC). ALSO, WITHOUT DOUBT, THE I NCOME FROM UNIT A, REPRESENTING A SEPARATE SOURCE OF INCOME, IS RS.39.03 LACS (ASSUMI NG NO PART OF UNABSORBED DEPRECIATION AS RELATING TO THAT UNIT). THE QUESTION IS HOW MUCH OF THIS INCOME IS TO BE CO NSIDERED AS INCLUDED IN GTI OF RS.37.80 LACS . WHILE THE ASSESSEE CLAIMS THE ENTIRE GTI (RS.37.8 0 LACS) TO BE COMPROMISED OF THE PROFIT OF UNIT-A, AN ELIGIBLE UNDERTAKING U/S.80-IA AND, THUS, DEDUCTIBLE U/S. 80-IA(1), THE REVENUE CLAIMS IT TO BE AT RS.2.84 LACS ONLY, LIMITING THE DEDUCTION THERE-UNDER TO THAT AMOUNT. THE ASSES SEES CONTENTION IN THIS REGARD ONLY NEEDS TO BE STATED TO BE REJECTED. THE GTI HAS TO B E COMPUTED FOLLOWING THE PROVISIONS (SS. 66 TO 80) OF CHAPTER VI, WHICH PROVIDES FOR TH E RULES OF THE AGGREGATION. INCOME FALLING UNDER EACH HEAD OF INCOME, I.E., CHAPTER IV -A TO IV-F, WOULD THUS STAND TO BE DETERMINED PRIOR TO BEING AGGREGATED U/C. VI. SECTI ON 70 PROVIDES FOR AN ADJUSTMENT OF INCOME FROM ONE SOURCE OF INCOME AGAINST ANOTHER FA LLING UNDER THE SAME HEAD OF INCOME. SECTION 71 PROVIDES FOR SET OFF A LOSS UNDE R ONE HEAD AGAINST INCOME FROM ANOTHER, I.E., FOR THE SAME YEAR. SECTIONS 71B TO 8 0 RELATE TO THE CARRY FORWARD AND SET OFF OF LOSS UNDER DIFFERENT HEADS OF INCOME. IN-AS-MUCH AS THEREFORE THE ASSESSEES INCOME UNDER EACH OF THE THREE HEADS OF INCOME WHERE-UNDER HER INCOME FOR THE YEAR IS ASSESSABLE, IS POSITIVE, SECTION 71 TO 80 HAVE NO A PPLICATION IN THE INSTANT CASE, AS DO SECTIONS 67 TO 69D, WHILE S.66 ONLY SPEAKS OF THE E LEMENTS OF TOTAL INCOME. THE CONSTITUENTS OF GTI CAN BE DETERMINED, WORKING BACK WARDS, FOLLOWING THE SAME COURSE AS ADOPTED IN COMPUTING THE SAME. THE BUSINESS INCOME U/S.28 FALLING UNDER CHAPTER IV-E COMPRISED IN GTI IS RS.2,83,720/-. THE ENTIRE OF IT CAN BE ASCRIBED TO UNIT-A, OR SAVE RS.36,333/- TO UNIT B-1 (THE SECOND ELIGIBLE UNIT), WHICH THOUGH WOULD BE OF NO 8 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO CONSEQUENCE, I.E., ASSUMING, AS CONTENDED BY THE A SSESSEE, THAT NO PART OF THE BROUGHT FORWARD UNABSORBED DEPRECIATION OF RS. 75.07 LACS R ELATES TO THESE UNITS. IN-AS-MUCH AS THE INCOME UNDER THE SAID HEAD, INCLUDED IN GTI, IS RS.2.84 LACS, THE INCOME OF THE ASSESSEES ELIGIBLE UNDERTAKINGS/BUSINESS CANNOT EX CEED THE SAID SUM. THE BALANCE GTI CONSISTS OF INCOME FROM HOUSE PROPERTY AND INCOM E FROM OTHER SOURCES, AT RS.20.54 LACS AND RS.14.42 LACS RESPECTIVELY. WE ARE UNABLE TO SEE AS TO HOW COULD THERE AT ALL BE ANY DIFFERENT VIEW IN THE MATTER. EVEN THOUGH OTHER WISE APPARENT FROM THE VARIOUS COMPUTING AND AGGREGATING PROVISIONS OF THE ACT, SE CTION 80AB SPECIFICALLY PROVIDES FOR THE SAME, CAUSING TO REMOVE ANY AMBIGUITY OR DOUBT IN THE MATTER. IT UNEQUIVOCALLY PROVIDES THAT ONLY THE INCOME OF A PARTICULAR NATUR E AS SPECIFIED IN A PARTICULAR DEDUCTION PROVISION, COMPUTED IN ACCORDANCE WITH THE PROVISIO NS OF THE ACT, I.E., PRIOR TO ALLOWING ANY DEDUCTION UNDER CHAPTER VI-A, SHALL ALONE BE DE EMED TO BE THE INCOME OF THAT NATURE DERIVED OR RECEIVED BY THE ASSESSEE WHICH IS INCLUD ED IN THE GTI. IN FACT, THE APEX COURT HAS TIME AND AGAIN, AS IN IPCA LABORATORY LTD. V. CIT [2004] 266 ITR 521 (SC), EMPHASIZED THE PRIMACY OF SECTIONS 80A, 80AB AND 80 B(5) IN COMPUTING THE DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT. 5.3 GOING BY THE ASSESSEES CLAIM, THE GTI WOULD CO NSIST OF THE FOLLOWING: TABLE 3 HEAD A: INCOME FROM HOUSE PROPERTY RS. NIL HEAD B: BUSINESS INCOME (UNIT A) RS.37,80,034/- HEAD C: INCOME FROM OTHER SOURCES RS. NIL ____________ RS.37,80,034/- WHAT IS THE BASIS THERE-FOR? IF NOT RIDICULOUS OR A TRAVESTY OF THE CLEAR PROVISIONS OF LAW, WHAT IS IT? TRUE, IF THE UNABSORBED DEPRECIATI ON EXCEEDS THE BUSINESS INCOME OF RS.77.91 LACS, THE SAME WOULD STAND TO BE SET OFF A GAINST THE INCOME ASSESSABLE U/S.22 AND/OR SECTION 56 IN-AS-MUCH AS THE SAME, PER THE D EEMING OF SECTION 32(2), FORMS PART OF THE CURRENT YEARS DEPRECIATION, AND IS TO BE GIVEN EFFECT TO, SAVE FOR A PRECEDENCE TO THE 9 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO PROVISION OF SECTIONS 72(2) & 73(3), WHICH ARE INAP PLICABLE IN THE PRESENT CASE IN-AS- MUCH AS THERE IS NO BROUGHT FORWARD BUSINESS LOSS. THERE IS NO OCCASION OR NEED FOR THE SET OFF OF UNABSORBED DEPRECATION AGAINST INCOME AS SESSABLE UNDER OTHER HEADS OF INCOME, I.E., UNDER CHAPTERS IV-C AND IV-F, AS THE ASSESSEE CLAIMS OR DOES. HOW, FOR INSTANCE, S. 70 COME INTO PLAY WITHOUT FIRST DETERMINING THE INC OME ASSESSABLE U/S. 28, AND WHICH WOULD ONLY BE AFTER GIVING EFFECT TO THE PROVISION OF S. 32. THE CHARGE OF DEPRECIATION U/S.32, IT MUST BE APPRECIATED, IS ONE, SINGLE CHAR GE, I.E., IRRESPECTIVE OF THE DIFFERENT SOURCES OF INCOME WHERE-UNDER IT MAY ARISE AND, ACC ORDINGLY, WOULD, IN TERMS OF SECTION 32(1) R/W S. 32(2), ALLOWABLE UNDER THE INCOME ASSE SSABLE U/S.28, WHICH PER SECTION 29 IS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CO NTAINED IN SECTIONS 30 TO 43D. THE OTHER MANNER IN WHICH THE ASSESSEES CLAIM CAN BE INTERPRETED OR UNDERSTOOD IS TO RETAIN THE FIGURE OF INCOME FOR EACH SOURCE OF I NCOME FALLING UNDER ANY HEAD OF INCOME AT THE SAME FIGURE AT WHICH IT STANDS COMPUTED FOLL OWING THE COMPUTATION PROVISION OF FOR THAT HEAD OF INCOME, VIZ. CHAPTERS IV-A TO IV-F. TH E SAME WOULD BE GRAPHICALLY REPRESENTED AS: TABLE 4 INCOME FROM HOUSE PROPERTY (HEAD A) PROPERTY 1 RS.16,34,094/- PROPERTY 2 RS.4,20,000/- RS.20,54,094/- PROFITS AND GAINS OF BUSINESS (HEAD B (*) UNIT A RS.39,03,043/- UNIT B-1 RS.36,333/- UNIT B-2 (#) (RS.28,81,548/-) UNIT B-3 (#) (RS.7,74,110/-) RS.2,83,720/- INCOME FROM OTHER SOURCES (HEAD C) SOURCE 1 RS.14,42,220/- RS.14,42,220/- GTI RS.37,80,034/- (*) AS PER THE BREAK-UP OF THE BROUGHT FORWARD DEPR ECIATION U/S.32(2) OF RS.75,07,162/-, SUPPLIED BY THE ASSESSEE, SUBJECT T O THE A.O.S VERIFICATION. (#) FIGURES IN BRACKET REPRESENTS NEGATIVE FIGURES. 10 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO IN THIS MANNER, IT WOULD BE POSSIBLE TO CONTEND TH AT THE INCOME OF UNIT-A, AS INCLUDED IN THE GTI, IS RS.39.03 LACS, WHICH BEING HIGHER THAN THE GTI (RS.37.80 LACS), THE DEDUCTION QUA THE PROFIT OF THAT UNIT BE LIMITED TO THE LATTER SU M. THE SAME HAS NO BASIS IN LAW. THE PROVISION OF SECTION 32(2) ITSELF DOES NOT ADMIT OF SUCH A COURSE IN-AS-MUCH AS THE BROUGHT FORWARD DEPRECIATION CLAIM MERGES WITH THE CURRENT YEARS DEPRECIATION, SO THAT IT IS A SINGLE CHARGE, TO BE ALLOWED TO THE EXTENT OF THE AVAILABLE PROFIT. THE PROFIT OF UNITS B-2 AND B-3, THEREFORE, CANNOT BE, ON ACCOUNT OF UN ABSORBED DEPRECIATION, NEGATIVE, BUT AT BEST AT NIL. THE SAID DEPRECIATION, IN VIEW OF T HE AVAILABLE INCOME FROM THE OTHER UNITS (BEING UNITS A & B1), AND IN-AS-MUCH AS IT FORMS PA RT OF THE CURRENT YEARS DEPRECIATION ALLOWANCE, HAS TO BE SET OFF THERE-AGAINST. THE REP RESENTATION AT TABLE 2 IS THE ONLY CORRECT REPRESENTATION OF THE INCOME ARISING TO THE ASSESSE E UNDER DIFFERENT HEADS OF INCOME, STATED SOURCE-WISE. THE ONLY DIFFERENCE, THOUGH TO NO EFFECT, WOULD BE THAT ADJUSTING DEPRECIATION AMONGST THE INCOME FROM DIFFERENT UNIT S, WOULD YIELD THE INCOME FROM UNITS B-1, B-2 AND B-3, AT NIL, SO THAT THE ENTIRE INCOME ASSESSABLE U/S.28, AS AFORE-STATED, ARISES FROM UNIT A. THE GTI U/S.80-B(5) IS TO BE COMPUTED ONLY AS PER THE PROVISIONS OF THE ACT, SO THAT EFFECT HAS TO BE GIVEN TO ALL THE PROV ISIONS, EXCLUDING CHAPTER VI-A, I.E., UP TO CHAPTER VI. TWO, THE SAID REPRESENTATION (TABLE 4) IS IN CONTRADICTION OF SECTION 80- AB. DEDUCTION CAN ONLY BE OUT OF A POSITIVE SUM. A POSITIVE GTI CAN, THEREFORE, ONLY BE COMPRISED OF POSITIVE ELEMENTS, SIGNIFYING AGAIN TO THE VALIDITY OF TABLE 2 . 5.4 FINALLY, AND IF ONLY FOR THE SAKE OF COMPLETENE SS OF OUR ORDER, BESIDES BEING OF NO LESS SIGNIFICANCE, IS THAT THE APART FROM THE STAN D ALONE PRINCIPLE, THE SECOND PRINCIPLE ON WHICH THE DECISION IN THE CASE OF HERCULES HOISTS LTD. (SUPRA) WHEREAT THE TRIBUNAL WAS CALLED UPON TO INTERPRET THE PROVISION OF SECTION 8 0-IA(5), RESTED IS THAT THE TAX SHELTER IS TO EXTEND ONLY TO THE ELIGIBLE PROFIT. THE MANNER I N WHICH THE ASSESSEE DRAWS THE BREAK-UP OF ITS INCOME, HOWEVER, APART FROM BEING IN CLEAR C ONTRAVENTION OF THE PROVISIONS AND SCHEME OF THE ACT, ALSO VIOLATES THIS PRINCIPLE INA SMUCH AS DEDUCTION U/S. 80-IA(1) STANDS CLAIMED AGAINST INCOME ASSESSABLE U/SS. 22 AND 56. 11 ITA NO. 1899/MUM/2011 (A.Y. 2007-08) DEEPI ARORA VS. ITO DECISION 6. FOR THE VARIOUS REASONS DISCUSSED HEREINABOVE, W E FIND THE ASSESSEES CASE AS WHOLLY WITHOUT MERIT; RATHER, AGAINST THE WELL SETT LED LAW ON THE COMPUTATION OF INCOME UNDER THE ACT, FOR WHICH REFERENCE MAY BE MADE TO T HE VARIOUS DECISIONS BY THE APEX COURT REFERRED TO IN THIS ORDER. THE DECISION IN TH E CASE OF HERCULES HOISTS LTD . (SUPRA), EXTENSIVELY RELIED UPON BY THE ASSESSEE, HOLISTICAL LY READ, IS CONCLUSIVELY AGAINST THE ASSESSEES CASE, FOR WHICH REFERENCE MAY BE MADE TO PARAS 5.3 & 5.4 OF THE SAID ORDER. WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. /-)0 &12/) # / # ) 34 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 18, 2015 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 5& DATED : 18.02.2015 '.&../ ROSHANI , SR. PS !' # $%&' ('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 6) ( ) / THE CIT(A) 4. % 6) / CIT - CONCERNED 5. 9':; !)&<1 , * <1- , % ( / DR, ITAT, MUMBAI 6. ;=2 >( / GUARD FILE !' ) / BY ORDER, */)+ (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI