Deputy Commissioner of Income-tax, V. Fresenius Kabi India Pvt. Ltd., Pune

ITA 2095/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4839 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHAI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , ! , ' # BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO. 2095/PUN/2016 '% & '& / ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 1(2), PUNE. ....... / APPELLANT (% / V/S. FRESENIUS KABI INDIA PVT. LTD. HERITAGE HOUSE, 6E RAMABAI AMBEDKAR ROAD, PUNE-411 001 PAN : AAACF2614E / RESPONDENT REVENUE BY : SHRI SANJEEV GHAI ASSESSEE BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 18.10.2018 / DATE OF PRONOUNCEMENT : 24.10.2018 ) / ORDER PER D. KARUNAKARA RAO, AM: THIS IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDE R OF THE CIT(A), PUNE-1 DATED 02.06.2016 FOR THE ASSESSMENT YEAR 2006-07. 2. GROUNDS RAISED BY THE REVENUE IN APPEAL READS AS UNDER: 2 ITA NO. 2095/PUN/2016 A.Y.2006-07 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRO SSLY ERRED IN ALLOWING SET OFF OF UNABSORBED DEPRECIATION OF A.YS 1997-98 AND 1998- 99. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GR OSSLY ERRED IN HOLDING THAT AMENDED PROVISIONS OF SECTION 32(1) OF THE I.T. ACT, 1961 ARE APPLICABLE IGNORING THE DECISION OF ITAT, MUMBA I SPECIAL BENCH IN THE CASE OF TIMES GUARANTEE LTD. VS. DCIT (ITA NO.4917/4918/MUM/2008 IN WHICH IT WAS HELD THAT BRO UGHT FORWARD UNABSORBED DEPRECIATION AND CARRY FORWARD OF LOSS C ANNOT BE SET OFF AGAINST INCOME UNDER THE HEAD BUSINESS AND PROFESSI ON FOR MORE THAN EIGHT A.YS. IMMEDIATELY SUCCEEDING THE A.Y. FOR WHI CH LOSS WAS FIRST COMPUTED. 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGE D AT THE TIME OF HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RES TORED. 5. THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR DEL ETE ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PR OCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 3. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSE E-COMPANY IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING VIDE RANGE OF INTRAVENORS (IV), FLUID (SALINE) AND G OODS (IV FLUIDS). THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2006 DE CLARING TOTAL LOSS OF RS.17,93,84,790/-. DURING SCRUTINY ASSESSMENT PROCE EDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), THE ASSESSING OFFICER DETERMINED TOTAL LOSS OF RS.17,90,14,127 /-. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED BAD DE BTS OF RS.67.98 LACS BUT THERE WAS NO DEBIT ENTRY IN THE P & L ACCOUN T OF THAT ACCOUNT. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE HAD CA RRIED FORWARD UNABSORBED DEPRECIATION OF A.Y.1997-98 AND 1998-99 FOR MO RE THAN EIGHT ASSESSMENT YEARS AND ACCORDINGLY, A NOTICE U/S.154 OF TH E ACT WAS ISSUED ON 23.08.2012 TO THE ASSESSEE. IN THE PROCEEDINGS U/S.15 4 OF THE ACT, THE ASSESSING OFFICER HELD THAT THE UNABSORBED DEPRECIATION O F A.Y.1997-98 AND 1998-99 CANNOT BE CARRIED FORWARD TO A.Y. 2006-07 AND A CCORDINGLY, DISALLOWED THE BAD DEBT CLAIM OF RS.67,98,436/- AS THE SAME WAS NOT 3 ITA NO. 2095/PUN/2016 A.Y.2006-07 DEBITED TO P & L ACCOUNT. IN THE PROCESS, THE ASSESSIN G OFFICER MISSED THE FAVOURABLE RATIO VIDE THE JUDGMENT IN THE CASE OF GENERAL MOTORS INDIA LTD. VS. DCIT IN SPL. CIVIL APPLICATION NO.1773 OF 2012 REPORTED IN 354 ITR 244. 4. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE FILED AP PEAL BEFORE THE CIT(A). THE CIT(A) GRANTED RELIEF TO THE ASSESSEE AFTER RELY ING ON THE DECISION OF ITAT, MUMBAI SPECIAL BENCH IN THE CASE OF TIMES GUARANTE E LTD. VS. DCIT, ITA NOS. 4917 & 4918/MUM./2008. 5. NOW, AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BY RAISING GROUNDS AS EXTRACTED ABOVE. 6. THE LD. DR FOR THE REVENUE HEAVILY PLACED RELIANCE ON THE ORDER OF CIT(A). LD. DR ALSO SUBMITTED THAT BROUGHT FORWARD UNABSOR BED DEPRECIATION AND CARRY FORWARD OF LOSS CANNOT BE SET OFF A GAINST INCOME UNDER THE HEAD BUSINESS AND PROCESSION FOR MORE THAN E IGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE A.Y. FOR WHICH LOSS WAS FIRS T COMPUTED AND ACCORDINGLY, HE PRAYED FOR UPHOLDING THE ORDER OF CIT(A). 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS AND SUBMITTED THAT THIS IS A CASE WHERE REV ENUE AGGRIEVED WITH THE DECISION OF CIT(A) WHO GRANTED SET OFF OF UNABSORBED DE PRECIATION ON EARLIER YEARS AGAINST THE INCOME OF THE CURRENT YEAR ON THE GROUND THAT THE SAID UNABSORBED DEPRECIATION EXCEEDED THE LIMITATION OF PER IOD OF 8 YEARS. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE CIT (A) GRANTED RELIEF TO THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF ITAT, M UMBAI SPECIAL BENCH (SUPRA.) WHICH IS JUSTIFIED IN THE EYE OF LAW. 4 ITA NO. 2095/PUN/2016 A.Y.2006-07 8. AFTER HEARING BOTH THE PARTIES ON THIS ASPECT, WE PER USED THE ORDER OF CIT(A) IN GENERAL AND CONTENTS OF PARA 4 TO 6 IN PARTICULAR AND FIND THAT THE CIT(A) FAIRLY GRANTED RELIEF TO THE ASSESSEE RELYING ON THE DECISION OF ITAT MUMBAI SPECIAL BENCH (SUPRA.) AND ALSO THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA LTD. VS. DC IT IN SPL. CIVIL APPLICATION NO. 1773 OF 2012 REPORTED IN 354 ITR 244 WHE REIN IT HAS BEEN HELD THAT THE BENEFIT OF AMENDED PROVISION WILL APPLY TO EAR LIER YEARS TOO. FOR THE SAKE OF COMPLETENESS, RELEVANT PARAS ARE EXTRACTED HEREIN BELO W: 4. IN GROUND NO. 1 AND ITS SUB GROUNDS, THE APPELLA NT IS AGGRIEVED ON ACCOUNT OF ACTION OF THE AO IN NOT ALLOWING UNABSOR BED DEPRECIATION OF A.Y.1997-98 AND 1998-99 BEYOND PERIOD OF EIGHT YEAR S DISREGARDING THE DECISION OF HON. GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. THE APPELLANT ALSO CLAIMS THAT THE ISSUE IS DEBATABLE AND CANNOT BE RECTIFIED U/S.154 OF THE I.T. ACT, 19 61. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED FOLLOWING SUBMISSIONS IN THIS REGARD. ALL THE ABOVE GROUNDS RELATE TO THE ISSUE WHETHER THE APPELLANT COMPANY WAS ENTITLED TO CARRY FORWARD THE UNABSORBE D DEPRECIATION OF RS.3,52,93,686/- AND RS.6,03,96,592 PERTAINING TO A .Y. 1997-98 AND A.Y.1998-99 ON THE GROUND THAT THE UNABSORBED DEPRE CIATION FOR THE ABOVE TWO ASS. YEARS COULD BE CARRIED FORWARD ONLY FOR 8 YEARS. AT THE OUTSET, IN THIS MATTER WE WOULD LIKE TO SUBM IT THAT THE SAID ISSUE HAS ALREADY BEEN SETTLED BY THE DECISION OF H ON. GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, IN SPECIAL CIVIL APPLIC ATION NO. 1773 OF 2012 AND ALSO 354 ITR 0244. COPY OF THE SAID DEC ISION IS ENCLOSED FOR THE READY REFERENCE OF YOUR HONOUR. WE STRONGLY RELY ON THE SAID DECISION AND REQUEST YOUR HONOUR TO FOL LOW THE SAME. IN THIS CASE THE HON. HIGH COURT HAS CLEARLY HELD T HAT TILE PROVISIONS OF SECTION 32 (2) AS AMENDED BY FINANCE ACT, 2001 WOUL D ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN A.Y. 1997-98, 1999- 2000, 2000-01 & 2001-02 TO BE CARRIED FORWARD TO TH E SUCCEEDING YEARS AND IF ANY UNABSORBED DEPRECIATION OR PART TH EREOF COULD NOT BE SET OFF TILL THE A.Y. 2002-03, THEN IT WOULD BE CAR RIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS & GAINS OF S UBSEQUENT YEARS. IT IS THEREFORE REQUESTED TO ALLOW THE SET OFF OF U NABSORBED DEPRECIATION PERTAINING TO A.Y.1997-98 AND 1998-99 BEYOND THE PE RIOD OF 8 YEARS. FOR THE READY REFERENCE OF YOUR HONOUR, WE ARE ALSO ENCLOSING OUR SUBMISSION MADE BEFORE THE LEARNED DCIT DURING THE ASSESSMENT PROCEEDINGS U/S.154 OF THE INCOME TAX ACT. 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E AS WELL AS REPLY OF THE APPELLANT. THE AO'S DECISION IS BASED ON LAW EX ISTING FOR A.Y.1997- 98 AND 1998-99 AS PER WHICH UNABSORBED DEPRECIATION CANNOT BE CARRIED FORWARD FOR MORE THAN EIGHT YEARS. HOWEVER, FINANCE ACT 2001 5 ITA NO. 2095/PUN/2016 A.Y.2006-07 HAS REMOVED THE CAP OF EIGHT YEARS FOR CARRY FORWAR D OF UNABSORBED DEPRECIATION. HON. GUJARAT HIGH COURT IN THE CASE O F GENERAL MOTORS INDIA PVT. LTD. VS. DCIT IN SPL. CIVIL APPLICATION NO.1773 OF 2012 REPORTED IN 354 ITR 0244 HAS HELD THAT THE BENEFIT OF AMENDED PROVISION WILL APPLY TO EARLIER YEARS TOO. THIS BEI NG SO, THE STAND OF THE AO IN RESTRICTING THE UNABSORBED DEPRECIATION OF A. Y. 1997-98 AND 1998-99 FOR 8 YEARS CANNOT BE ACCEPTED AND HE IS DI RECTED TO ALLOW THE SAME AS PER AMENDED PROVISIONS VIDE FINANCE ACT 200 1 EVEN BEYOND PERIOD OF EIGHT YEARS AS PER LAW. ACCORDINGLY, GROU ND NO.1 IS ALLOWED. 9. WE ALSO PERUSE THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA.) AN D HELD PORTION OF THE SAID JUDGMENT READS AS UNDER: EVEN ON THE MERITS THE PROVISIONS OF SECTION 32(2), AS AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE UNABSORBED DEPRE CIATION ALLOWANCE AVAILABLE IN THE ASSESSMENT YEARS 1997-98, 1999-200 0, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEA RS AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT B E SET OFF TILL THE ASSESSMENT YEAR 2002-03 THEN IT WOULD BE CARRIED FO RWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBS EQUENT YEARS. THE ORDER OF REASSESSMENT WAS NOT VALID AND WAS LIABLE TO BE QUASHED. 10. CONSIDERING THE ABOVE SETTLED POSITION OF LAW ON THIS IS SUE, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY TH E REVENUE ARE DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 24 TH DAY OF OCTOBER, 2018. SD/- SD/- ( ! /VIKAS AWASTHY) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; !' / DATED : 24 TH OCTOBER, 2018. SB 6 ITA NO. 2095/PUN/2016 A.Y.2006-07 ) * +',- . ', / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEAL), PUNE-1. 4. THE PR. CIT-1, PUNE. 5. %&' () , * () , +,- , / DR, ITAT, A BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.