The DCIT(OSD) Circle-8, Ahmedabad V. Shree Yogi Steel Pvt. Ltd., Ahmedabad

ITA 2059/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6873 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V R CHOKSHI
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI N.S.SAINI, A.M . ) I.T.A. NO. 2059/AHD./2009 : ASSESSMENT YEAR 2005-06 D.C.I.T. (OSD), CIRCLE-8, AHMEDABAD -VS- SHR EE YOGI STEEL PVT. LTD., ABAD (PAN: AADCS 8778H) (APPELLANT) (RESPONDENT) C.O.NO.173/AHD./2009 : ASSESSMENT YEAR 2005-06 (ARISING OUT OF I.T.A.NO.2059/AHD./2009) SHREE YOGI STEEL PVT. LTD., ABAD -VS- D.C .I.T. (OSD), CIRCLE-8, AHMEDABAD DEPARTMENT BY : SHRI K. MADHUSUDAN, SR .D.R ASSESSEE BY : SHRI V.R.CHOKSHI, A .R. O R D E R PER BENCH : THIS APPEAL FILED BY THE REVENUE AND THE CROSS OB JECTION FILED BY THE ASSESSEE ARE AGAINST THE ORDER DATED 21.04.2009 PASSED BY THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD FOR THE ASSESSMENT YEAR 2005-2006. 2. THE ONLY GROUND RAISED BY THE REVENUE IN THIS AP PEAL IS RELATING TO ALLOWING SET-OFF OF UNABSORBED DEPRECIATION OF RS.1,82,62,722/- AGAINST SHORT TERM CAPITAL GAIN OF CURRENT YEAR BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 2.1 VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS C ROSS-OBJECTION ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) ERRED IN NOT UPHOLDING THE ASSESSEE'S CONTENTION THAT THE REASS ESSMENT ORDER WAS BAD IN LAW, MORE PARTICULARLY BECAUSE THE STEPS LAID DOWN IN THE SU PREME COURT DECISION IN GKN DRIVESHAFTS (INDIA) LTD. VS. ITO 259ITR19(SC) WERE ALMOST BLATANTLY FLOUTED. 2. WITHOUT PREJUDICE, EVEN ON MERITS THE CIT(A) S HOULD HAVE FURTHER HELD THAT THE WHOLE OF SHORT TERM CAPITAL GAINS OF RS.1,14,80.00 0 ARISING IN THIS CASE WAS DUE TO 2 ITA NO. 2059/AHD/2009 & C.O. 173/A/2009 APPLICATION OF SECTION 50 OF THE INCOME-TAX ACT AN D FURTHER THAT ON THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE IN REALITY IT WAS W ITHDRAWAL OF DEDUCTION FOR DEPRECIATION ALLOWANCE WHICH WAS GRANTED IN AN EAR LIER YEAR AND HENCE IN SPITE OF SECTION 50 OF THE I.T, ACT THE REAL NATURE OF THE AFORESAID SUM OF RS.1,14,80,000 WAS THAT OF BUSINESS INCOME. 3. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE FURTHER HELD THAT THE AFORESAID SUM OF RS. 1,14,80,000 WAS PART AND PARCEL OF THE BROUGHT FORWARD UNABSORBED DEPRECIAT ION IN A SUM OF RS.1,82,62,722. THIS IS SO BECAUSE IN THE RELEVANT EARLIER YEAR (V IZ. 2002-03) DEPRECIATION ALLOWANCE IN THE AFORESAID SUM OF RS,1,14,80,000 WAS COMPUTE D BUT ANY BENEFIT FROM THAT DEPRECIATION ALLOWANCE WAS NOT MADE AVAILABLE TO T HE ASSESSEE IN ANY OF THE PRECEDING YEARS. THIS IS SO BECAUSE THE AFORESAID DEPRECIATION ALLOWANCE OF RS.1,14,80,000 RELATABLE TO A.Y. 2002-03 WAS CARRI ED FORWARD ALONGWITH OTHER ITEMS FOR THE INTERVENING YEARS TO A.Y. 2005-06 WHICH IS RELEVANT TO THIS APPEAL. THE POINT IS THAT THE AFORESAID SUM OF RS 1,14,80,000 EVEN AS S HORT TERM CAPITAL GAINS CANNOT BE BROUGHT TO TAX WHEN FOR THE CORRESPONDING DEDUCTIO N NO BENEFIT HAD ACCRUED TO THE ASSESSEE IN ANY EARLIER YEAR. 3. AT THE OUTSET, SHRI V.R.CHOKSHI, A.R., APPEARING ON BEHALF OF THE ASSESSEE, POINTED OUT THAT THE ONLY CONTROVERSY INVOLVED IN THE APPEA L OF THE REVENUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION DATED 31.08.2007 OF IT AT, D BENCH, AHMEDABAD IN THE CASE OF ITO-VS- THE SERENDIPITY APPARELS PVT. LTD. FOR T HE ASSESSMENT YEAR 2002-03 IN ITA NO.1952/AHD/2005. HE POINTED OUT THAT IN THE SAID D ECISION, THE TRIBUNAL HAS FOLLOWED THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F ITO-VS- RAJARATNA NARANBHAI MILLS CO. LTD. (1994) 208 ITR 597 (GUJ.). IN THIS JUDGEMENT, THE HON'BLE GUJARAT HIGH COURT HELD THAT UNABSORBED DEPRECIATION COULD BE SET OFF IN THE SUB SEQUENT YEARS AGAINST THE INCOME UNDER THE HEAD OTHER SOURCES, NOTWITHSTANDING THE FACT THAT BUSINESS IN RESPECT OF WHICH IT AROSE CEASED TO EXIST IN THE YEAR OF SUCH SET OFF. 3.1 THE LD. COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT IN THE JUDGEMENT, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF RAJARATNA NARANBH AI MILLS CO. LTD. ( SUPRA ) HAS CONSIDERED THE DECISION OF HON'BLEBLE SUPREME COURT IN THE CA SE OF CIT-VS- JAIPURIA CHINA CLAY MINES (P) LTD. (1966) [59 ITR 555] (SC) AND RAJAPALAYAM M ILLS LTD. VS- CIT (1978) [115 ITR 777] (SC). THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 3 ITA NO. 2059/AHD/2009 & C.O. 173/A/2009 4. ON THE OTHER HAND, SHRI K. MADHUSUDAN, SR.D.R., APPEARING ON BEHALF OF THE REVENUE, COULD NOT CONTROVERT THE AFORESAID SUBMISSIONS MADE BY THE LD. COUNSEL OF THE ASSESSEE. 5. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS FOLLOWED TH E DECISION DATED 21.08.2007 OF ITAT, D BENCH, AHMEDABAD IN THE CASE OF RAJARATNA NARAN BHAI MILLS CO. LTD. ( SUPRA ) AND HELD THAT EXISTENCE OF SOME BUSINESS OR ANY BUSINESS IS NOT AT ALL NECESSARY FOR ALLOWING SET OFF OF CARRY FORWARD UNABSORBED DEPRECIATION. THIS CAN BE SET OFF AGAINST INCOME UNDER THE HEAD OTHER SOURCES. IN VIEW OF THIS WE DECLINE TO INTE RFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). RESULTANTLY, T HE APPEAL OF THE REVENUE IS DISMISSED. 6. AT THE TIME OF HEARING, THE CROSS-OBJECTION FILE D BY THE ASSESSEE HAS NOT BEEN PRESSED. THEREFORE, THE SAME IS BEING DISMISSED AS NOT BEING PRESSED FOR. RESULTANTLY THE CROSS OBJECTION IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED AS NOT BEING PRESSED. THE ORDER PRONOUNCED IN THE COURT ON 08.04.2011. SD/- SD/- (N.S.SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08/04/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, A HMEDABAD TALUKDAR/SR.P.S. 4 ITA NO. 2059/AHD/2009 & C.O. 173/A/2009