ACIT, UDAIPUR V. M/s. Historic Resorts Hotels Pvt. Ltd., UDAIPUR

ITA 210/JODH/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54387 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-12-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 06-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N M RANKA
• Keywords: Depreciation; Retrospective amendment; Cost of acquisition; Tax effect; Revised return; Unabsorbed depreciation
• Section: 143(3); 32; 37; 28; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR (BEFORE SHRI R.K. GUPTA AND SHRI .N.L. KALR A ) ITA NO.210/JU/2010 ASSESSMENT YEAR : 2000-01 PAN: AAACH 4069 B THE ACIT VS. M/S. HISTORIC RESORTS HOTELS (P) L TD. CIRCLE- 1, UDIAPUR CITY PALACE, UDAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI SUNIL MATHUR ASSESSEE BY : SHRI N.M. RANKA DATE OF HEARING: 01-12-2011 DATE OF PRONOUNCEMENT: 09-12-2011 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD.CIT(A), JODHPUR DATED 21-07-2009 FOR THE ASSESSMENT YEAR 2006-07. 2.1 THE GROUND OF APPEAL RAISED BY THE REVENUE IS A S UNDER:- ON THE FACTS AND IN HE PRESENT CIRCUMSTANCES OF T HE CASE, THE LD.CIT(A) HAS ERRED IN CANCELLING THE REC TIFICATION ORDER U/S 154/ 143(3) OF THE ACT PASSED BY THE ACIT , CIRCLE- 2, JAIPUR WITHOUT APPRECIATING THE FACTS OF THE CAS E. 2.2 THE LD.CIT(A) IN HIS ORDER HAS CONSIDERED THE C ASE OF THE AO IN THE APPELLATE ORDER, CONTENTION OF THE ASSESSEE AND THE REAFTER HE HAS GIVEN HIS DECISION. IT WILL BE USEFUL TO REPRODUCE THE FOLLOWING PARAS FROM THE ORDER OF THE LD.CIT(A) 2 2.1 A.O.S CASE THE FACTS IN BRIEF RELATING TO THE ISSUE, AS AVAILA BLE IN ORDER UNDER APPEAL ARE THAT THE ASSESSMENT WAS ORIGINALLY COMPL ETED UNDER SECTION 143(3) DETERMINING THE TOTAL INCOME AT NIL DUE TO S ET OFF UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION. HOWEVER, LATER ON, IT WAS NOTICED THAT THE APPELLANT HAS FILED EVERY DETAIL F OR CLAIM OF DEPRECIATION FOR THE CURRENT YEAR AND QUANTIFIED THE CLAIM OF DE PRECIATION FOR RS. 2,37,04,835 BUT THE SAME WAS NOT CLAIMED IN THE COM PUTATION AGAINST THE TOTAL ASSESSED INCOME OF RS. 1,00,32,848 WHEREAS TH E APPELLANT HAS SET OFF THE UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECI ATION OF EARLIER YEARS. HOWEVER, AS PER THE PROVISIONS OF SECTION 32(2), FR OM THE TOTAL INCOME, IT IS THE CURRENT YEARS DEPRECIATION WHICH IS SET OFF FIRST BEFORE SET OFF OF UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATIO N OF EARLIER YEARS. IN SUPPORT OF THIS, THE A.O. HAS PLACED RELIANCE ON TH E RATIO OF DECISION OF THE HONBLE SUPREME IN CASE OF JAIPURIA CHINACLAY MINES (1966) 59 ITR 555 WHERE IN IT WAS HELD THAT MAKE IT CLEAR THAT THE TAXABLE PROFITS OR GAINS FROM A PARTICULAR BUSINESS CANNOT BE ASCERTAINED WI THOUT DEBITING THE CURRENT YEARS DEPRECIATION TO THE PROFIT AND GAINS IN THE INSTANCES DEPRECIATION HAS NOT BEEN CLAIMED AND ALLOWED BY THE A.O. AMOUNTING TO RS. 2,37,04,835. THE INTEREST OF THE APPELLANT IS TO SET OFF UNABSORBED BUSINESS LOSS, WHICH WAS FOR RS. 19,55,399 AND RS. 21,74,205 OTHERWISE, IT WOULD HAVE LAPSED IN ASST. YEAR 2001-02 & ASST. YEAR 2002-03 BECAUSE IN ASSTT. YEAR 2001-02 THERE I S BUSINESS LOSS FOR RS. 67,75,77- AND RECORDS OF ASSTT. YEAR 2002-03 WERE N OT MADE AVAILABLE. THE OMISSION RESULTED IN NON ALLOWANCE OF CURRENT YEAR S DEPRECIATION FOR RS. 2,37,04,835 INVOLVING NOTIONAL TAX EFFECT FOR RS. 9 1,26,361/-. ACCORDING TO THE A.O. THE ABOVE MISTAKE BEING APPARENT FROM THE RECORDS, HE ISSUED NOTICE UNDER SECTION 154 REQUIRING THE APPELLANT TO FILE ITS EXPLANATION/OBJECTION IF ANY FOR THE PROPOSED RECTI FICATION. IN RESPONSE TO THE ABOVE THE APPELLANT HAS FILED ITS EXPLANATION/O BJECTION AS UNDER: PLEASE REFER TO YOUR NOTICE U/S. 154 OF THE ACT IN RESPECT OF ASSTT. YEAR 2000-2001 ENCLOSING THEREWITH AUDIT OBSERVATIO NS AS [PER ANNEXURE WHEREIN IT HAS BEEN STATED THAT THE ASSESSEE HAS NO T CLAIMED THE DEPRECIATION OF RS. 2,37,04,835 AND CURRENT YEAR PR OFIT OF RS. 1,00,32,848 HAS BEEN ALLOWED TO BE SET OFF AGAINST UNABSORBED B USINESS LOSS AND DEPRECIATION OF ASSTT. YEAR 1993-94 AND 1994-95. AS PER AUDIT PARA THIS HAS RESULTED IN IRREGULAR SET OFF OF BROUGHT FORWAR D LOSSES. 3 IN THIS RESPECT, WE WOULD LIKE TO SUBMIT THAT SECTI ON 32 ALLOW DEPRECIATION AS DEDUCTION SUBJECT TO PROVISIONS OF SECTION 34. THE POSITION OF LAW HAS BEEN MADE ABSOLUTELY CLEAR BY THE HONBL E SUPREME COURT IN THE CASE OF CIT VS. / MAHENDRAMILLS LTD. (ITR VOL.2 43 PAGE 56) COPY ENCLOSED, WHICH CLEAR SAY THAT THE ASSESSING OFFICE R CANNOT GRANT DEPRECIATION ALLOWANCE WHEN THE SAME IS NOT CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS NOT CLAIMED THE DEPRECIATION ALLOWANCE AND A SUITABLE NOTE WAS ALSO GIVEN IN THE COMPUTATION OF INCOME THAT DE PRECIATION AS PER INCOME TAX ACT HAS NOT BEEN CLAIMED DURING THE YEAR . THE SYNOPSIS OF ORDER OF CIT VS. MAHENDRA MILLS LTD. IS REPRODUCED HERE BELOW FOR YOUR READY REFERENCE. THE LANGUAGE OF THE PROVISIONS OF SECTION 32 AND 3 4 OF THE I.T.ACT 1961 IS SPECIFIC AND ADMITS OF NO AMBIGUITY . SECTION 32 ALLOWS DEPRECIATION AS DEDUCTION SUBJECT TO PROVISI ONS OF SECTION 34. SECTION 34 PROVIDES THAT DEDUCTION UNDER SECTIO N 32 SHALL BE ALLOWED ONLY IF THE PRESCRIBED PARTICULARS HAVE BEE N FURNISHED. RULE 5AA OF THE I.T.RULES, 1962, SINCE DELETED, PRO VIDED FOR THE PARTICULARS REQUIRED FOR THE PURPOSE OF DEDUCTION U NDER SECTION 32. EVEN IN THE ABSENCE OF RULE 5AA, THE RETURN OF INCO ME IN THE FORM PRESCRIBED ITSELF REQUIRED PARTICULARS TO BE FURNIS HED IF THE ASSESSEE CLAIMS DEPRECIATION. THESE PARTICULARS ARE REQUIRED TO BE FURNISHED IN GRANT DETAIL. THERE IS A CIRCULAR OF THE BOARD D ATED 31.08.1965 WHICH PROVIDES THAT DEPRECIATION COULD NOT BE ALLOW ED WHERE THE REQUIRED PARTICULARS HAVE NOT BEEN FURNISHED BY THE ASSESSEE AND NO CLAIM FOR THE DEPRECIATION HAS BEEN MADE IN THE RET URN, THE A.O. IN SUCH CASE IS REQUIRED TO COMPUTE THE INCOME WITHOUT ALLOWING DEPRECIATION ALLOWANCE. THE CIRCULAR OF THE BOARD DATED APRIL,11,1955, IMPO SES MERELY A DUTY OF THE OFFICERS OF THE DEPARTMENT TO ASSIST TH E TAX PAYERS IN EVERY REASONABLE WAY PARTICULARLY IN THE MATTER OF CLAIMI NG AND SECURING RELIEF. THE OFFICER IS REQUIRED TO DO NO MORE THAN THE ADVI SE THE ASSESSEE. IT DOES NOT PLACE ANY MANDATORY DUTY ON THE OFFICER TO ALLO W DEPRECIATION IF THE ASSESSEE DOES NOT WANT TO CLAIM THAT. THE PROVISION FOR CLAIM OF DEPRECIATION IS CERTAINLY FOR THE BENEFIT OF THE AS SESSEE. IF HE DOES NOT WISH TO AVAIL OF THE THAT BENEFIT FOR SOME REASONS, THE BENEFIT CANNOT BE FORCED UPON HIM. IT IS FOR THE ASSESSEE TO SEE IF THE CLAI M OF DEPRECIATION IS TO HIS ADVANTAGE. INCOME UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION IS CHARGEABLE TO INCOME-TAX UNDER SECTI ON 28 AND INCOME UNDER SECTION 29 IS TO BE COMPUTED IN ACCORDANCE WI TH THE PROVISION OF CONTAINED IN SECTION 30 TO 43A. THE ARGUMENT THAT S INCE SECTION 32 PROVIDES FOR DEPRECIATION IT HAS TO BE ALLOWED IN C OMPUTING THE INCOME OF THE ASSESSEE CANNOT IN ALL CIRCUMSTANCES BE ACCEPTE D IN VIEW OF THE BAR CONTAINED IN SECTION 34. IF SECTION 34 IS NOT SATIS FIED AND THE PARTICULARS ARE NOT FURNISHED BY THE ASSESSEE HIS CLAIM FOR DEPRECI ATION UNDER SECTION 32 4 CANNOT BE ALLOWED SECTION 29 IS THUS TO BE READ WIT H REFERENCE TO OTHER PROVISIONS OF THE ACT. IT IS NOT ITSELF A COMPLETE CODE. IF THE REVISED RETURN IS A VALID RETURN AND THE ASSESSEE HAS WITHDRAWN TH E CLAIM OF DEPRECIATION IT CANNOT BE GRANTED RELYING ON THE ORIGINAL RETURN WHEN THE ASSESSMENT IS BASED ON THE REVISED RETURN. ALLOWANCE OF DEPRECIAT ION IS CALCULATED ON THE WRITTEN DOWN VALUE OF THE ASSETS, WHICH WRITTEN DOW N VALUE WOULD BE THE ACTUAL COST OF ACQUISITION LESS THE AGGREGATE OF AL L DEDUCTIONS ACTUALLY ALLOWED TO THE ASSESSEE FOR THE PART YEAR. ACTUAL LY ALLOWED DOES NOT MEAN NOTIONALLY ALLOWED. IF THE ASSESSEE HAS NOT CLAIMED DEDUCTION OF DEPRECIATION IN ANY PAST YEAR IT CANNOT SAID THAT I T WAS NOTIONALLY ALLOWED TO HIM. A THING IS ALLOWED WHEN IT IS CLAIMED. A SU ITABLE DISTINCTION IS THERE WHEN WE EXAMINE THE LANGUAGE USED IN SECTION 16 AND SECTION 34 AND 37 OF THE ACT. IT IS RIGHTLY SAID THAT A PRIVILEGE CANNOT BE TO A DISADVANTAGE AND AN OPTION CANNOT BECOME AN OBLIGATION. THE ASSE SSING OFFICER CANNOT GRANT DEPRECIATION ALLOWANCE WHEN THE SAME IS NOT C LAIMED BY THE ASSESSEE. FURTHER, IT WAS ALSO SUBMITTED THAT AMENDMENT IN SE CTION 32 OF THE INCOME TAX ACT WAS MADE FROM THE ASST. YEAR 2002-03 , WHEREIN EFFECT OF ABOVE JUDGMENT WAS NULLIFIED AND IT WAS MADE MANDAT ORY FROM ASST. YEAR 2002-03 THAT DEPRECIATION MUST BE ALLOWED EVEN THOU GH NOT CLAIMED. THE AMENDMENTS WERE MADE FROM THE ASST YEAR 2002-03 BUT IN THIS CASE ASSET YEAR IS 2000-01 WHERE THE ASSESEE RIGHTLY NOT CLAIM ED THE DEPRECIATION ALLOWANCE. IN VIEW OF ABOVE IT WAS REQUESTED BY THE APPELLANT TO DROP THE PROCEEDINGS INITIATED U/S 154 OF THE ACT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE C ONTENTIONS / SUBMISSIONS OF THE APPELLANT AND HE ALLOWED THE DEP RECIATION FOR THE CURRENT YEAR TO THE EXTENT OF PROFIT / INCOME AVAIL ABLE FOR THE AY UNDER CONSIDERATION. HENCE THE PRESENT APPEAL. 2.2 APPELLANTS CASE BEFORE ME, THE SUBMISSIONS OF THE LEARNED AR ARE MO STLY THE SAME AS SUBMITTED IN DETAIL BEFORE THE A.O. IN RESPONSE TO NOTICE ISSUED BY HIM FOR THE PROPOSED RECTIFICATION. APART FROM IT HAS B EEN SUBMITTED THAT THOUGH THE DEPRECIATION WAS DEBITED TO PROFIT AND L OSS ACCOUNT AS PER PROVISIONS UNDER THE COMPANYS ACT, BUT THE SAME WA S NOT CLAIMED IN THE COMPUTATION OF THE INCOME AND ALSO NOT ALLOWED IN T HE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE AO DID NOT CONSIDER THE DETAILS SUBMISSIONS MADE BY THE APPELLANT IN RESPON SE TO HIS NOTICE ISSUED U/S 154. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAHENDRA MILLS LTD. IS SQUARELY APPLICABLE IN THE C ASE OF APPELLANT WHERE 5 IT HAS BEEN HELD THAT THE DEPRECIATION CANNOT BE GR ANTED UNLESS THE SAME IS CLAIMED BY THE ASSESSEE. IN VIEW OF ABOVE FACTS AS WELL AS THE DETAILED SUBMISSIONS MADE BEFORE THE AO WHICH WERE NOT AT AL L CONSIDERED BY THE AO WHILE ALLOWING THE DEPRECIATION WHICH WERE NOT C LAIMED, IT IS URGED THAT THE ORDER U/S 154 MAY BE CANCELED. 2.3 DECISION I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AR VIS A VIS THE FINDING OF THE AO GIVEN THE ORDER UNDER APPEAL. ON GOING THROUGH THE ORDER, IT IS SEEN THAT EXCEPT THE FINDINGS THAT THE CONTENTION OF THE ASSESSEE IS NOT TENABLE, THE AO HAS NOT GIVEN ANY FINDINGS A S TO WHY THE SUBMISSIONS OF THE APPELLANTS WERE NOT ACCEPTABLE. IT IS A FACT ADMITTED BY THE AO IN THE ORDER THAT THE APPELLANT HAS NOT CLAI MED ANY DEPRECIATION IN THE COMPUTATION OF THE TOTAL INCOME. SINCE THE APPE LLANT HAS NOT CLAIMED ANY DEPRECIATION, IT IS NOT KNOWN HOW IT CAN BE SAI D THAT IT IS MISTAKE APPARENT FROM THE RECORD AND IS RECTIFIABLE U/S 154 OF THE ACT. FURTHER, ON GOING THROUGH THE DECISION OF THE HONBLE SUPREME C OURT RELIED UPON BY THE LEARNED AR, IT IS SEEN THAT THE SAID DECISION I S SQUARELY APPLICABLE IN THE CASE OF APPELLANT. FURTHER, THE AMENDMENT IN SE CTION 32 OF THE ACT TO THE EFFECT THAT IT WAS MANDATORY FROM THE AY 2002-0 3 THAT DEPRECIATION MUST BE ALLOWED EVEN THOUGH NOT CLAIMED, CANNOT BE MADE APPLICABLE IN THE CASE OF THE APPELLANT AS THE ASSESSMENT UNDER C ONSIDERATION IS 2000-01. AFTER HAVING CONSIDERED ALL THE FACTS AND CIRCUMSTA NCES OF THE CASE OF THE APPELLANT AS DISCUSSED ABOVE, THE ORDER PASS ED BY THE AO U/S 154 ALLOWING THE CURRENT YEARS DEPRECIATION DESERVES TO BE CANCELLED AND I ORDER ACCORDINGLY. 3. IN THE RESULT THE APPEAL IS ALLOWED. 2.3 BEFORE US, THE LD. DR DREW OUR ATTENTION TO EXP LANATION 5 OF SECTION 32(1) OF THE ACT. VIDE THIS EXPLANATION, IT WAS SUBMITTED THAT FOR REMOVAL OF DOUBTS, IT WAS DECLARED THAT PROVISIONS OF SUB-SECTION (1) SEC TION 32 SHALL APPLY WHETHER OR NOT, THE DEDUCTION IS CLAIMED IN RESPECT OF DEPREC IATION IN COMPUTING ITS TOTAL INCOME. THE STRESS WAS LAID ON THE WORD FOR REMOV AL OF DOUBTS AND THE WORD DECLARED. FROM THESE WORDS, IT WAS SUBMITTED BY THE LD. DR THAT THE LEGISLATURE CLARIFIED THAT THE DEPRECIATION IS TO BE ALLOWED I RRESPECTIVE OF THE FACT WHETHER 6 DEPRECIATION HAS BEEN CLAIMED OR NOT. HENCE, THIS E XPLANATION SHOULD HAVE BEEN CONSIDERED AS RETROSPECTIVE. 2.4 ON THE OTHER HAND, THE LD. SENIOR COUNSEL OF TH E ASSESSEE RELIED UPON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS MAHENDRA MILLS LTD. 243, ITR 56 IN SUPPORT OF THE PROPOSITION THAT THE DEPRECIATION CANNOT BE ALLOWED UNLESS THE ASSESSEE HAS CLAIMED IT. EXPLANATION 5 TO SECTI ON 32(1) CANNOT BE CONSIDERED AS RETROSPECTIVE. THE LD. SENIOR COUNSEL OF THE ASSESS EE FURTHER SUBMITTED THAT RESORT CANNOT BE MADE TO THE PROVISIONS OF SECTION 154 FOR RECTIFYING THE MISTAKE WHICH IS DEBATABLE EITHER ON FACTS OR ON LAW. IT WAS THER EFORE, SUBMITTED THAT ORDER U/S 154 HAS RIGHTLY BEEN CANCELLED BY THE LD.CIT(A). 2.5 WE HAVE HEARD BOTH THE PARTIES. IT IS A SETTLED LAW THAT DISPUTABLE QUESTION OF FACTS AND LAW ARE NOT COVERED UNDER THE PROVISIO NS OF SECTION 154 OF THE ACT. THE MISTAKE APPARENT FROM RECORD CANNOT BE RECTIFIE D U/S 154 OF THE ACT. THE HON'BLE MADRAS HIGH COURT IN CIT VS SREE SENHAVALL I TEXTILE MILLS (P) LTD. , 259 ITR 77 HELD THAT THE INTERPRETATION OF RELEVANT PRO VISIONS OF THE ACT BY THE HON'BLE SUPREME COURT SETTLES THE LAW AND UNLESS THE SUBSEQ UENT AMENDMENT IS EXPRESSLY GIVEN RETROSPECTIVE EFFECT THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT WILL REMAIN BINDING FOR THE PERIOD PRIOR TO THE AMENDMEN T. THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS KERALA ELECTRIC LAMP WO RKS LTD., 261 ITR 721 HELD THAT EXPLANATION 5 OF SECTION 32(1) IS APPLICABLE O NLY FROM 01-04-2002. IT WAS OBSERVED THAT IF THE LEGISLATURE ACTUALLY INTENDED TO NULLIFY THE EFFECT OF THE DECISION OF THE HON'BLE APEX COURT RENDERED IN THE MAHENDRA MILL DECISION, THE 7 EXPLANATION ADDED COULD HAVE BEEN GIVEN RETROSPECTI VE EFFECT IN EXPRESS TERMS. ON THE OTHER HAND, THE LEGISLATURE ITSELF THOUGHT THAT THE EXPLANATION SHOULD WORK ONLY PROSPECTIVELY AND DID NOT INTEND TO RENDER THE DECI SION, RENDERED PRIOR TO THE AMENDMENT RELATING TO ASSESSMENT YEAR IN QUESTION, NULLIFIED. IN THE INSTANT CASE, THE ASSESSMENT YEAR INVOLVED IS 2000-01 AND THEREFO RE, THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS MAHENDRA MILLS, 2 43 ITR 56 WILL BE SQUARELY APPLICABLE. MOREOVER, THE ISSUE IS DEBATABLE AND WE THEREFORE, HOLD THAT THE LD.CIT(A) WAS JUSTIFIED IN CANCELING THE ORDER U/S 154 OF THE ACT 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 09 -12-2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JODHPUR DATED: 09 /12/2012 MISHRA COPY TO: 1. THE ACIT , CIRCLE- 1, UDAIPUR 2. M/S. HISTORIC RESORTS HOTELS (P) LTD. , UDAIPUR 3.THE LD. CIT (A) BY ORDER 4.THE CIT 5.THE D/R 6.THE GUARD FILE (ITA NO. 210/JU/10) A.R.. ITAT: JODHPUR 8