M/s RB Polymers Ltd., Kolkata V. DCIT, CIR-4, KOLKATA, Kolkata

ITA 202/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0647 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Depreciation; Rectification of order; Retrospective amendment; Unabsorbed depreciation
• Section: 143(3); 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENCH KOLKATA BEFORE SHRI A.T. VARKEY, JM &DR. A.L.SAINI, AM ./ ITA NO.202/KOL/2016 ( / ASSESSMENT YEAR: 2009-10) RB POLYMERS LTD. 25, R.N. MUKHERJEE ROAD, 4 TH FLOOR, SUITE-F, KOLKATA 1. VS. CIT(A)-2, KOLKATA AAYAKARBHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69. ./ ./PAN/GIR NO. : AABCR 3117 R ( /ASSESSEE ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SUBASH AGARWAL, ADVOCATE. /RESPONDENT BY : SHRI SAURABH KUMAR, ADDL. CIT(DR) / DATE OF HEARING : 16/11/2017 /DATE OF PRONOUNCEMENT : 15/12/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2009-10, IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, KOLKATA, IN APPEAL NO.1386/CIT(A)-2/CIR-4/2014- 15, DATED 22.12.2015, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 28.12.2011. 2.THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.THAT THE IMPUGNED ORDER DATED 22 ND DECEMBER 2015 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX,(APPEALS) - 2 IS LIABLE TO BE QUASHED SINCE IT HAS BEEN PASSED IN HASTE WITHOUT APPLICATION OF MIND AND WITHOUT CONSIDERING THE EVIDENCES FURNISHED & SUBMISSIONS MADE BY THE APPELLANT IN COURSE OF HEARING OF THE APPEAL. RB POLYMERS LTD. ITA NO.202/KOL/2016 ASSESSMENT YEAR: 2009-10 PAGE | 2 2.THAT ON THE FACTS & CIRCUMSTANCES AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-2 OUGHT TO HAVE HELD THAT RECTIFICATION ORDER PASSED IN THE INSTANT CASE WAS OUTSIDE THE PURVIEW OF POWER VESTED WITH THE ASSESSING OFFICER U/S154 OF THE INCOME TAX ACT. 1961 IN AS MUCH AS THE ISSUES INVOLVED WERE DEBATABLE CONTENTIOUS AND REQUIRED DEEP INVESTIGATION INTO FACTS AND AS SUCH THE RECTIFICATION ORDER DATED 7 TH JULY 2014 PASSED BY THE LD DCIT (CIRCLE)-4 WAS LIABLE TO BE QUASHED. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX,(APPEALS)-2 FAILED TO APPRECIATE THAT THE CONDITIONS PRECEDENT FOR INITIATION OF IMPUGNED PROCEEDINGS U/S154 OF THE ACT INSTANT CASE THROUGH THE IMPUGNED NOTICE DATED NIL WERE NEITHER PRESENT NOR SATISFIED IN THE INSTANT CASE AND IN THIS VIEW OF MATTER THE IMPUGNED EX-PARTE ORDER DATED 07.07.2014 PASSED BY THE DCIT CIRCLE -4 U/S 154/143(3) OF THE ACT IS BAD IN LAW AND NOT MAINTAINABLE. 4. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX,(APPEALS) -2 ERRED IN CONFIRMING THE DISALLOWANCE OF RS.50,04,177/- BEING CLAIMED FOR SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION RELATING TO ASST YEARS 1995-96 TO 2000-01,AGAINST THE INCOME OF ASSESSMENT YEAR 2009-10. 5.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX,(APPEALS) -2 ERRED IN HOLDING THAT THE APPELLANT WAS NOT ENTITLED AND/OR ELIGIBLE FOR UNABSORBED DEPRECIATION OF RS.50,04,177/- FOR ASSESSMENT YEARS 1995-96 TO 2000-01 FOR BEINGCARRIED FORWARD AND SET OFFAGAINST THE INCOME FOR THE ASSESSMENT YEAR 2009-10. 6.THAT IN VIEW OF CBDT CIRCULAR CLARIFYING THE INTENT OF AMENDMENT & ALSO IN VIEW OF THE DECIDED CASE LAWS OF THE HON'BLE GUJARAT HIGH COURT RELIED UPON BY THE APPELLANT THE LEARNED COMMISSIONEROF INCOME TAX,(APPEALS) -2OUGHT TO HAVE HELD THAT UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD AND SET OFF IN SUBSEQUENT YEARS WITHOUT ANY TIME LIMIT. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND MODIFY ANY OF THE GROUNDS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. ALTHOUGH, IN THIS APPEAL, THE ASSESSEE HAS RAISED A MULTIPLE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING, THE MAIN GRIEVANCE OF THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE THAT AO DISALLOWED THE CLAIM OF ASSESSEE FOR SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION RELATING TO A.Y 1995-96 TO 2000-01 AGAINST THE INCOME OF A.Y 2009-10. 4.THE BRIEF FACTS QUA THE ISSUE ARE THAT ON SCRUTINY OF THE ASSESSMENT ORDER PASSED U/S 143(3) ON 28.12.2011, THE ASSESSING OFFICER FOUND THAT BROUGHT FORWARD UNABSORBED DEPRECIATION FOR ASSESSMENT YEARS 1995-96, 1997-98, 1998-99, 1999-2000, 2000-01 COMBINING TO A TOTAL OF RS.50,03,977/- WAS ALLOWED SET OFF WITH THE ASSESSED INCOME IN CONTRAVENTION TO THE PROVISION OF SECTION 32 OF THE I.T ACT. THEREFORE, A NOTICE U/S 154/155 OF THE ACT WAS SERVED ON TO THE ASSESSEE ON 18.10.2012 NOTIFYING THE MISTAKE. THE RB POLYMERS LTD. ITA NO.202/KOL/2016 ASSESSMENT YEAR: 2009-10 PAGE | 3 MISTAKE, AS PER AO, WAS BEING APPARENT FROM RECORD AND PRO-JUDICIAL TO THE INTEREST OF THE REVENUE, THEREFORE THE ORDER PASSED U/S143(3) WAS RECTIFIED BY ASSESSING OFFICER U/S 154 OF THE ACT AS UNDER:- TOTAL INCOME AS ASSESSED IN ORDER U/S 143(3) -NIL- ADD: BROUGHT FORWARD UNABSORBED DEPRECIATION A.Y 1995-96 12,24,394/- A.Y 1997-98 23,43,144/- A.Y 1998-99 6,07,491/- A.Y 1999-00 3,69,781/- A.Y 2000-01 4,59,367/- 50,03,977/- REVISED TOTAL INCOME 50,03,977/- 5.AGGRIEVED BY THE RECTIFICATION ORDER U/S 154 OF THE ACT, PASSED BY THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ORDER PASSED BY THE AO U/S 154 OF THE ACT. THE LD. CIT(A) OBSERVED THAT THE ISSUE IS TO BE DECIDED AS TO WHAT SHOULD BE THE TREATMENT OF UNABSORBEDDEPRECIATION BEFORE AMENDMENT OF SECTION 32(2) W.E.F. 1 ST APRIL, 2002, AS THE AMENDMENT WASNOT RETROSPECTIVE BUT PROSPECTIVE. BEFORE AMENDMENT, THE TREATMENT OF BROUGHT FORWARDUNABSORBED DEPRECIATION WAS GOVERNED BY SECTION 32(2)(III)(B) OF THE ACT WHICH READS ASFOLLOWS: IF THE UNABSORBED DEPRECATION ALLOWANCE CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OFUNABSORBED DEPRECIATION ALLOWANCE NOT SO SET OFF SHALL BE CARRIED FORWARD TO THEFOLLOWING ASSESSMENT YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELYSUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE AFORESAID ALLOWANCE WAS FIRSTCOMPUTED. THEREFORE, GOING BY THE PROVISIONS OF SECTION 32(2) AS IT WAS BEFORE AMENDMENT ANDSINCE THE AMENDMENT IN FINANCE ACT, 2001 WAS NOT RETROSPECTIVE, UNABSORBED DEPRECIATION FORTHE ASSESSMENT YEARS 1995-96 TO 2000-01 COULD NOT BE SET OFF BEYOND EIGHT YEARS. FOR EXAMPLE, UNABSORBEDDEPRECIATION FOR THE A.Y. 1995-96 COULD BE SET OFFAGAINST PROFIT & GAINS UPTO A.Y 2003-04 AND UNABSORBED DEPRECIATION FOR THE A.Y. 2000-01 COULD BE SET OFF AGAINST PROFIT & GAINS UPTO A.Y. 2008-09. NOWHERE IN THE AMENDED SECTION 32(2), ITWAS STATED THATACCUMULATIVE UNABSORBED DEPRECIATION AS ON 1 ST APRIL, 2002 COULD BE CARRIED FORWARD INDEFINITELY. HAD IT RB POLYMERS LTD. ITA NO.202/KOL/2016 ASSESSMENT YEAR: 2009-10 PAGE | 4 BEEN THE INTENTION OF THE LEGISLATURE, THE AMENDMENT WOULD HAVE BEEN BROUGHT IN WITH RETROSPECTIVE EFFECT. THE THEN AO, IN HIS ORDER U/S.143(3), DATED 28/12/2001, HAD MADE AN APPARENT AND PATENT MISTAKE BY ALLOWING TO SET OFF THESE BROUGHT FORWARD DEPRECIATION AGAINST THE INCOME OF A.Y 2009- 10 AND THEREFORE, THE CIT(A) HELD THAT,THE ASSESSINGOFFICER WAS WITHIN HIS JURISDICTION IN RECTIFYING THE APPARENT MISTAKE IN TERMS OF PROVISION OF SECTION 154 OF THE ACT. THEREFORE, THE LD CIT(A) CONFIRMED THE RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT. 6.NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE HAS STATED BEFORE US THAT CBDT HAS ISSUED CIRCULAR NO.14 OF 2001, WHEREIN IT HAS BEEN CLARIFIED THAT AFTER AMENDMENT OF SECTION 32(2) IN THE FINANCE ACT, 2001,W.E.F. 1 ST APRIL, 2002, ANY UNABSORBED DEPRECIATION AVAILABLE TO THE ASSESSEE AS ON 1 ST APRIL, 2002 WOULD BE CARRIED FORWARD INDEFINITELY TILL THE TIME IT IS SET OFF AGAINST THE PROFITS & GAINS OF SUBSEQUENT YEARS. THE LD. COUNSEL PLACED RELIANCEHIGH COURT AT AHMEDABAD IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT IN THE 354 ITR 244 WHEREIN IT WAS HELD THAT THE UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD AND SET OFF IN THE SUBSEQUENT YEARS WITHOUT ANY TIME LIMIT. 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 RB POLYMERS LTD. ITA NO.202/KOL/2016 ASSESSMENT YEAR: 2009-10 PAGE | 5 DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST 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 I 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. THE LD COUNSEL ALSO RELIED ON THE JUDGMENT OF HON`BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. GUJARAT THEMIS BIOSYN LTD. [2014] 44 TAXMAN.COM 204 (GUJARAT)WHEREIN IT WAS HELD THAT THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1 ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. 7.ON THE OTHER HAND, LD DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT 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 DISPENSED 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 1 ST 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 NOT BY THE PROVISIONS OF SECTION32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO RB POLYMERS LTD. ITA NO.202/KOL/2016 ASSESSMENT YEAR: 2009-10 PAGE | 6 ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y.1995-96TO 2000-01, 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. 1995-96 TO 2001-01, 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.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 RB POLYMERS LTD. ITA NO.202/KOL/2016 ASSESSMENT YEAR: 2009-10 PAGE | 7 FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR.THEREFORE, CONSIDERING THE FACTUAL POSITION DISCUSSED ABOVE, WE ALLOW THE APPEAL OF THE ASSESSEE AND WE DIRECT THE AO TO ALLOW SET OFF, OF DEPRECIATION PERTAINING TO A.Y 1995-96 TO 2000-01, AGAINST INCOME OF ASSESSMENT YEAR 2009-10. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15/12/2017. SD/- (A.T. VARKEY) SD/- (DR. A.L.SAINI) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /KOLKATA; DATED 15/12/2017 RS, SPS / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. / THE ASSESSEE- RB POLYMERS LTD. 2. / THE RESPONDENT.-CIT(A)-2, KOLKATA 3. ( ) / THE CIT(A), :KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE.