Shri A.Amboiram, CHENNAI V. DCIT, CHENNAI

ITA 1952/CHNY/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68634 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 05-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.1952/MDS/2012 ASSESSMENT YEAR : 2008-09 SHRI A. AMBOIRAM C/O SHRI PHILIP GEORGE, ADVOCATE NEW # 6, OLD # 10, SEETHA NAGAR, 1 ST STREET, NUNGAMBAKKAM CHENNAI 600 034 VS THE DY. CIT BUSINESS CIRCLE III CHENNAI [PAN AAAPA 6617R ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PHILIP GEORGE, ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 24 -07-2013 DATE OF PRONOUNCEMENT : 05-08-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE AS SESSEE AGAINST THE ORDER OF THE LD. CIT(A)-VIII, CHENNAI, DATED 27.8.2012. 2. THE LD. A.R OF THE ASSESSEE SUBMITTED THAT GROUND NOS.1,5 & 6 OF THE APPEAL ARE GENERAL IN NATURE. HENCE, TH EY DID NOT REQUIRE ANY ADJUDICATION BY US. I.T.A.NO.1952/12 :- 2 -: 3. THE LD. A.R OF THE ASSESSEE SUBMITTED THAT GROUND N O.2 OF THE APPEAL OF THE ASSESSEE, THE GRIEVANCE IS THAT THE LD. CIT(A) HAS MENTIOND THAT ` 16,10,568/- WAS THE CARRIED FORWARD BUSINESS LOSS. HE SUBMITTED THAT THE AMOUNT OF ` 16,10,865/- REPRESENTS THE TOTAL OF THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEADS I NCOME FROM HOUSE PROPERTY AND PROFITS AND GAINS OF BUSINESS OR PRO FESSION. HENCE, HE SUBMITTED THAT THE ASSESSING OFFICER MAY BE DIRECTE D TO MAKE NECESSARY CORRECTIONS AND TO TREAT THE AMOUNT OF ` 19,19,810/- AS SHOWN BY THE ASSESSEE AS THE CARRIED FORWARD BUSIN ESS LOSS. 4. THE LD. DR SUBMITTED THAT HE HAD NO OBJECTION ON TH IS ISSUE BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND THEREAFTER DEDUCTING THE CORRECT FIGURE OF CARRIED FORWARD BUSINESS LOSS IN THE CASE OF THE ASSESSEE. 5. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO VERI FY THE AMOUNT OF CARRIED FORWARD BUSINESS LOSS FROM ITS AS SESSMENT RECORDS AND ADOPT THE CORRECT FIGURE OF CARRIED FORWARD BUS INESS LOSS IN THE CASE OF THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO.1952/12 :- 3 -: 6. THE LD. A.R OF THE ASSESSEE SUBMITTED THAT GROUND N O.3 OF THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING SET OFF OF CARRIED FORWARD UNABSORBED DEPRECIATION AGAINST THE INCOME FROM HOUSE PROPERTY DECLARED BY THE ASSESSEE. HE SUBMITTED T HAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE SET OFF THE INCOM E FROM HOUSE PROPERTY OF ` 9,66,528/- OF THE CURRENT YEAR AGAINST UNABSORBED DEPRECIATION OF ` 37,69,708/- AND THE BALANCE UNABSORBED DEPRECIATIO N WAS CARRIED FORWARD TO SUBSEQUENT ASSESSMENT YEARS. THE ASSESSEE CLAIMED DEPRECIATION IN RESPECT OF PROPERTY LET OUT , BUT ALSO CLAIMED DEPRECIATION AGAINST THE SAME PROPERTY IN PROFIT & LOSS ACCOUNT OF THE BUSINESS AMOUNTING TO ` 1,81,174/-. AS THE INCOME FROM RENT IS CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPE RTY ASSESSEE CANNOT CLAIM DEPRECIATION AGAINST THE SAME PROPERTY . THE LD. A.R OF THE ASSESSEE SUBMITTED THAT THE ISSUE WAS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF CIT VS VIRMANI INDUSTRIES PVT. LTD [1995] 216 ITR 6 07(S.C) WHEREIN IT HAS BEEN HELD THAT THE WORDS NO PROFITS OR GAINS CHARGEABLE FOR THAT YEAR IN SECTION 32(2) OF THE INCOME-TAX ACT, 1961 ARE NOT CONFINED TO PROFITS AND GAINS DERIVED FROM BUSINESS. THEY REFE R TO THE TOTALITY OF THE PROFITS OR GAINS COMPUTED UNDER THE VARIOUS HEA DS AND CHARGEABLE I.T.A.NO.1952/12 :- 4 -: TO TAX. IT IS, THEREFORE, CLEAR THAT EFFECT MUST B E GIVEN TO DEPRECIATION ALLOWANCE FIRST AGAINST THE PROFITS AND GAINS OF TH E PARTICULAR BUSINESS WHOSE INCOME IS BEING COMPUTED UNDER SECTION 28 AND IF THE PROFITS OF THAT BUSINESS ARE NOT SUFFICIENT TO ABSORB THE DEPR ECIATION ALLOWANCE, THE ALLOWANCE TO THE EXTENT TO WHICH IT IS NOT ABSO RBED WOULD BE SET OFF AGAINST THE PROFITS OF ANY OTHER BUSINESS AND I F A PART OF THE DEPRECIATION ALLOWANCE STILL REMAINS UNABSORBED, IT WOULD BE LIABLE TO BE SET OFF AGAINST THE PROFITS AND GAINS CHARGEABLE UNDER ANY OTHER HEAD AND IT IS ONLY IF SOME PART OF THE DEPRECIATIO N ALLOWANCE STILL REMAINS THAT IT CAN BE CARRIED FORWARD TO THE NEXT ASSESSMENT YEAR. HE SUBMITTED THAT ACCORDING TO SECTION 32(2) OF THE ACT, WHERE ANY PART OF THE DEPRECIATION IS CARRIED FORWARD TO THE SUBSEQUENT YEAR FOR DEDUCTION THE SAME SHALL BE ADDED TO THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PA RT OF THAT ALLOWANCE. THUS, THE UNABSORBED DEPRECIATION OF TH E PREVIOUS YEAR BECOMES THE CURRENT YEAR DEPRECIATION IN THE FOLLOW ING YEAR, THEREFORE, THE SAME IS ALLOWABLE AS DEDUCTION FROM INCOME UNDE R ANY OTHER HEAD IN THE COMPUTATION OF TOTAL INCOME. 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT HE AGR EED TO THE SUBMISSIONS OF THE LD. A.R AS ABOVE, BUT HE SU BMITTED THAT FOR I.T.A.NO.1952/12 :- 5 -: ASSESSMENT YEAR 2000-01 BROUGHT FORWARD DEPRECIATIO N OF ` 6,09,898/- CANNOT BE CARRIED FORWARD AND ADJUSTED AGAINST OTHE R HEADS OF INCOME AND THE SAME CAN ONLY BE ADJUSTED AGAINST THE BUSIN ESS INCOME OF THE ASSESSEE. FOR THIS, HE PLACED RELIANCE ON THE DECI SION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S TIMES GUARANTY LTD [2010] 4 ITR (TRIB) 210 WHEREIN IT HAS BEEN HEL D THAT THE UNABSORBED DEPRECIATION ALLOWANCE WHICH AROSE IN AS SESSMENT YEARS 1997-98 TO 1999-2000 COULD NOT BE SET OFF AGAINST I NCOME UNDER ANY HEAD OTHER THAN PROFITS AND GAINS OF BUSINESS OR PR OFESSION. 8. IN THE REJOINDER, THE LD. A.R PLACED RELIANCE ON TH E DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GE NERAL MOTORS INDIA (P) LTD VS DCIT ,[2013] 257 CTR (GUJ) 123, AND SUBM ITTED THAT IN PARA 30 OF THE ORDER, THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT AMENDMENT TO SECTION 32(2) BY THE FINANCE ACT, 2001 IS APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN A SSESSEE ON 1.4.2002 (ASSESSMENT YEAR 2002-03) WILL BE DEALT WI TH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. THEREFORE, UNABSORBED DEPRECIATION FROM I.T.A.NO.1952/12 :- 6 -: ASSESSMENT YEAR 1997-98 UPTO 2001-02 GOT CARRIED FO RWARD TO THE ASSESSMENT YEAR 2002-03 BECAME PART THEREOF WHICH C AME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMEN DED BY THE FINANCE ACT, 2001 AND WAS AVAILABLE FOR CARRY FORWA RD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS W ITHOUT ANY LIMIT WHATSOEVER IN THE ASSESSMENT YEAR 2006-07. HE, TH EREFORE, SUBMITTED THAT IN VIEW OF THE DECISION OF THE DECIS ION OF THE HON'BLE GUJARAT HIGH COURT, THE ASSESSEE WAS ENTITLED FOR SET OFF OF CARRIED FORWARD UNABSORBED DEPRECIATION AGAINST THE INCOME UNDER ANY OTHER HEAD SHOWN IN THE RETURN OF INCOME BY THE ASSESSEE . 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF UNABSORBED DEPRECIATION AGAINST INCOME FROM HOUSE P ROPERTY OF ` 9,66,528/- WHICH WAS DENIED TO THE ASSESSEE BY TH E ASSESSING OFFICER ON THE GROUND THAT THE UNABSORBED DEPRECIATION CANN OT BE CLAIMED AS DEDUCTION AGAINST INCOME FROM HOUSE PROPERTY. THE SAME WAS CONFIRMED IN APPEAL BY THE LD. CIT(A). 10. WE FIND THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE GUJARAT HIG H COURT IN THE CASE I.T.A.NO.1952/12 :- 7 -: OF GENERAL MOTORS INDIA (P) LTD VS DCIT (SUPRA) WHE REIN IT WAS HELD AS UNDER: 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMEN DMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICI ENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AME NDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS AP PLICABLE 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) W ILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 2(2) AS AMENDED BY FINANCE ACT, 2001 AND NOT BY THE PROVISI ONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT . HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNAB SORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 O NLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMEN T OF SECTION 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE IN CORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONT AIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AME NDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOU S INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TA XING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GI VING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECT ION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESS EE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECT ION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO.14 OF 2001 H AD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUC TION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. T HEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE A VAILABLE IN THE A.Y. 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSOR BED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF T ILL THE A.Y. 2002- 03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME I T IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATI ON IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF TH E BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LA RGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH E XCESS COMES I.T.A.NO.1952/12 :- 8 -: 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 INC OME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OV ER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATIO N FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDE D TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND I S DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPR ECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOME S 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 3 2(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 DISPENS ED 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 W ERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSO EVER. 11. RESPECTFULLY FOLLOWING THE ABOVE CITED ORDER OF TH E HON'BLE GUJARAT HIGH COURT , WE REJECT THE SUBMISSION OF TH E LD. DR AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 12. THE LD. A.R OF THE ASSESSEE SUBMITTED THAT GROUND N O.4 OF THE APPEAL RELATES TO DISALLOWANCE OF CLAIM FOR DEP RECIATION OF ` 1,81,174/-. HE SUBMITTED THAT THE ASSESSING OFFIC ER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AGAINST THE PROPERTY WHICH IS LET OUT. ACCORDING TO THE ASSESSING OFFICER, THE INCOME FROM RENT IS C HARGEABLE UNDER THE I.T.A.NO.1952/12 :- 9 -: HEAD INCOME FROM HOUSE PROPERTY THEREFORE, THE ASSESSEE CANNOT CLAIM DEPRECIATION AGAINST THE SAME PROPERTY. 13. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF T HE ASSESSING OFFICER. 14. AT THE TIME OF HEARING, THE LD. A.R OF THE ASSESSEE SUBMITTED THAT AS THE ASSESSEE HAS SHOWN RENTAL INCOME THROU GHOUT THE YEAR FROM HOUSE PROPERTY, THEREFORE, THE ORDER OF THE AS SESSING OFFICER IN DENYING THE CLAIM OF DEDUCTION OF DEPRECIATION AGAI NST SUCH INCOME TO THE ASSESSEE WAS IN ORDER. WE, THEREFORE, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 05 TH OF AUGUST, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED:05 TH AUGUST, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR