SABOO SODIUM CHLORO LTD., Jaipur V. ITO, Jaipur

ITA 21/JPR/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6313 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DHK
• Assessee Lawyers: NIKHILESH KATARIA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 21/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09. M/S. SABOO SODIUM CHLORO LTD., L-5, B-II, SURYA HOUSE, KRISHNA MARG, C-SCHEME, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 6(4), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCS 2613 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI NIKHILESH KATARIA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28.06.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 02/07/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 28 TH OCTOBER, 2014 OF LD. CIT (A)-II, JAIPUR FOR THE ASSESSMENT Y EAR 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1.1. THE ASSESSMENT ORDER PASSED BY THE LD. AO AN D CONFIRMED BY THE LD. CIT (A) IS BAD IN LAW AS WELL AS ON THE FAC TS OF THE PRESENT CASE AND HENCE, THE SAME MAY PLEASE BE QUAS HED. 1.2. THE VERY INITIATION OF REASSESSMENT PROCEEDING IS BAD IN LAW AND ON THE FACTS OF THE PRESENT CASE AND THE LD. CIT (A ) ERRED IN CONFIRMING THE SAME. 2. THE LD. CIT (A) ERRED IN LAW AS WELL AS ON THE F ACTS OF THE PRESENT CASE IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING 2 ITA NO. 21/JP/2015 M/S. SABOO SODIUM CHLORO LTD., JAIPUR. THE CLAIM FOR SET OFF OF UNABSORBED DEPRECIATION FO R THE A.Y. 1998-99 AND 1999-2000. 3. THE APPELLANT PRAYS YOUR HONOURS INDULGENCE TO ADD, AMEND, MODIFY OR DELETE ALL OR ANY GROUND OF APPEAL. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS CLAIMED SET OFF OF UNABSORBED DEPRECIATION OF R S. 33,69,815/- AND RS. 1,34,43,021/- PERTAINS TO THE ASSESSMENT YEARS 1998 -99 AND 1999-2000 RESPECTIVELY. THE AO DISALLOWED THE CLAIM OF SET OFF ON THE GROUN D THAT AS PER THE EXISTING PROVISIONS OF SECTION 32(2) OF THE IT ACT APPLICABL E FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 THE UNABSORBED DEPRECIATION CAN BE CA RRIED FORWARD AND SET OFF ONLY UPTO 8 YEARS. SINCE THE ASSESSMENT YEAR 2008-09 IS BEYOND THE PERIOD OF 8 YEARS, THEREFORE, THE AO HELD THAT THE CLAIM OF THE ASSESS EE IS NOT ALLOWABLE. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A), HOWEVER, COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ISSUE IS PURELY LEGAL IN NATURE AND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, 354 ITR 244 (GUJ.) HAS CO NSIDERED THIS ISSUE AND DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE UNABSORB ED DEPRECIATION AVAILABLE TO THE ASSESSEE ON 1 ST DAY OF APRIL, 2002 WILL BE DEALT WITH IN ACCORDANC E WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED B Y THE FINANCE ACT, 2001. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. BRITISH MOTOR CO. LTD. 300 ITR 337 (DEL.) AS WE LL AS THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN UNILEVER LTD., 394 ITR 73 (BOM.). 3 ITA NO. 21/JP/2015 M/S. SABOO SODIUM CHLORO LTD., JAIPUR. 3.1. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AS PER THE EXISTING PROVIS IONS OF SECTION 32(2) APPLICABLE FOR THE ASSESSMENT YEARS 1998-99 AND 1999-2000 THE UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD AND SET OFF UPTO 8 YEARS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE IS NO LONGER RES INTEGRA AND HONBLE GUJARAT HIGH COURT IN CASE OF GENERAL MOTOR INDIA P VT. LTD. VS. DCIT (SUPRA) HAS CONSIDERED AND DEALT WITH THE ISSUE IN PARA 37 AND 38 AS UNDER :- 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE A MENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLAC E PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRI CTION 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 1ST DAY OF APRIL, 2002 (A.Y. 2002- 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2 ) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEE N TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 O NLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTIO N 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 O F AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRE TATION 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 LEGISLA TURE 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 4 ITA NO. 21/JP/2015 M/S. SABOO SODIUM CHLORO LTD., JAIPUR. DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. T HEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997-9 8, 1999-2000, 2000-01 AND 2001- 02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, A ND IF ANY UNABSORBED 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 IT IS SET OFF AGAI NST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION 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 BUSIN ESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHE R BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EV EN 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 B ALANCE 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 U NABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEA R AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR S UCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNA BSORBED 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 32(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 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 P ART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMEN DED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINS T THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. THE SAME VIEW HAS BEEN REITERATED BY THE HONBLE DE LHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. BRITISH MOTOR CO. LTD. (SUPRA) AS WELL AS BY THE HONBLE BOMBAY 5 ITA NO. 21/JP/2015 M/S. SABOO SODIUM CHLORO LTD., JAIPUR. HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN UNILEVE R LTD. (SUPRA). ACCORDINGLY, IN THE ABSENCE OF ANY CONTRARY BINDING PRECEDENT, WE F OLLOW THE DECISIONS RELIED UPON BY THE LD. A/R OF THE ASSESSEE AND HOLD THAT WHEN T HE UNABSORBED DEPRECIATION WAS AVAILABLE TO THE ASSESSEE FOR SETTING OFF AS ON 1 ST APRIL, 2002, THEN AS PER THE AMENDED PROVISIONS OF SECTION 32(2) BY FINANCE ACT, 2001 THE SAID UNABSORBED DEPRECIATION WILL PARTAKE THE CHARACTER OF CURRENT DEPRECIATION AND CONSEQUENTLY THERE IS NO LIMITATION OF TIME PERIOD FOR CLAIMING SET OFF OF THE SAME. HENCE, WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT AND ALLOW THE CLAIM OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 02/07/2018 . SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 02/07/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. SABOO SODIUM CHLORO LTD., JAIPUR . 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 6(4), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 21/JP/2015} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 6 ITA NO. 21/JP/2015 M/S. SABOO SODIUM CHLORO LTD., JAIPUR.