ITO 10(3)(1), MUMBAI V. GANESH POLYCHEM LTD, MUMBAI

ITA 22/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8998 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 11-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 02-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 7001/MUM/2008. ASSESS MENT YEAR :2005-06. GANESH POLYCHEM LTD., THE INCOME-TAX OFFICER, 2 ND FLOOR UDYOG KSHETRA, VS . RANGE-10(3), MULUND, GOREGAON LINK ROAD, MUMBAI. MUMBAI 400 080. PAN AABCG6160B APPELLANT RESPONDENT. I.T.A. NO.22/MUM/2009 AS SESSMENT YEAR : 2005-06. THE INCOME-TAX OFFICER, M/S GANESH PCHEM LTD., 10(3)(1), MUMBAI. VS. MUMBAI. APPELLANT. RESPONDENT ASSESSEE BY : SHRI VIJAY MEHTA. DEPARTMENT BY : SHRI PAVAN VED. DATE OF HEARING : 11-09-2012. DATE OF PRONOUNCEMENT : 14 -09-2012. O R D E R PER P.M. JAGTAP, A.M. BOTH THESE APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 7001/MUM/2008 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO. 22/MUM/2009, ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE OR DER OF LEARNED CIT(APPEALS)-X, MUMBAI DATED 16-10-2008. 2 ITA NO.7001/MUM/2008, ITA NO. 22/MUM/2009 2. GROUND NO. 1 OF THE ASSESSEES APPEAL AND THE SO LITARY GROUND RAISED IN THE REVENUES APPEAL INVOLVE A COMMON ISSUE RELATING TO COMPUTATION OF DEDUCTION U/S 10B ALLOWABLE TO THE ASSESSEE AND THE SAME READ AS UNDER : GROUND IN ASSESSEES APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THAT THE EXEMP TION U/S 10B SHOULD BE ALLOWED AFTER SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION. GROUND IN REVENUES APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFIC ER TO ALLOW DEDUCTION U/S 10B FROM THE TOTAL INCOME BEFORE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31-10-2005 DECLARI NG TOTAL INCOME AT NIL AFTER CLAIMING EXEMPTION OF RS.1,28,23,383/- U/S 10B. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSE SSEE COMPANY HAS NOT SET OFF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION AG AINST BUSINESS INCOME AND DEDUCTION U/S 10B HAS BEEN CLAIMED ON THE BUSINESS INCOME WITHOUT SETTING OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION. A CCORDING TO HIM, THE ASSESSEE OUGHT TO HAVE FIRST SET OFF BROUGHT FORWARD BUSINE SS LOSS AND UNABSORBED DEPRECIATION AGAINST BUSINESS INCOME AND THEN CLAIM ED DEDUCTION U/S 10B ON THE BALANCE AMOUNT. HE, THEREFORE, SET OFF THE UNABSORB ED DEPRECIATION OF RS.81,57,884/- AND BROUGHT FORWARD BUSINESS LOSS OF RS.6,88,532/- AGGREGATING TO RS.88,46,416/- AGAINST THE BUSINESS INCOME OF RS.1, 28,23,383/- AND ALLOWED THE DEDUCTION U/S 10B TO THE EXTENT OF THE BALANCE AMOU NT OF RS.39,76,967/-. 3 ITA NO.7001/MUM/2008, ITA NO. 22/MUM/2009 ACCORDINGLY, THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N U/S 10B OF RS.1,28,23,383/- WAS RESTRICTED BY HIM TO RS.39,76,967/- IN THE ASSE SSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 31-01-2007. AGAINST THE ORDER P ASSED BY THE AO U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEA RNED CIT(APPEALS) CHALLENGING THEREIN THE ACTION OF THE AO IN RESTRICTING ITS CLA IM FOR DEDUCTION U/S 10B. AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(APPEALS) HELD THAT UNABSORBED DEPRECIATION WOULD BECOME THE CURRENT YEARS DEPRECIATION BY VIR TUE OF SECTION 32(2) AND THE SAME, THEREFORE, SHOULD BE SET OFF AGAINST THE CURR ENT YEARS PROFIT BEFORE COMPUTING THE PROFIT ELIGIBLE FOR DEDUCTION U/S 10B AS RIGHTLY HELD BY THE AO. AS REGARDS THE BROUGHT FORWARD BUSINESS LOSS, HE, HOWE VER, DIRECTED THE AO TO COMPUTE THE DEDUCTION U/S 10B WITHOUT SET OFF OF TH E BROUGHT FORWARD BUSINESS LOSSES RELYING ON THE DECISION OF MUMBAI BENCH OF I TAT IN THE CASE OF ENERCON WIND FARMS (KRISHNA) LTD. 21 SOT 29 WHEREIN IT WAS HELD THAT PROFITS ELIGIBLE FOR DEDUCTION U/S 10B WOULD MEAN THE CURRENT YEARS PRO FIT AND GAINS BEFORE ADJUSTING BROUGHT FORWARD LOSSES. AGGRIEVED BY THE ORDER OF T HE LEARNED CIT(APPEALS) ON THIS ISSUE, THE ASSESSEE AND REVENUE BOTH HAVE RAIS ED THEIR GRIEVANCE IN THE PRESENT APPEALS FILED BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LEARNED COU NSEL FOR THE ASSESSEE, SIMILAR ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE FOR AS SESSMENT YEAR 2006-07 AND THE TRIBUNAL VIDE ITS ORDER DATED 10-08-2012 PASSED IN ITA NO. 8515/MUM/2010 DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. A COPY OF THE SAID ORDER IS PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT SIMILAR ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 FOLLOWING THE DECISION OF H ONBLE BOMBAY HIGH COURT IN 4 ITA NO.7001/MUM/2008, ITA NO. 22/MUM/2009 THE CASE OF CIT VS. BLACK & VEATCH CONSULTING (P) L TD. (2012) 20 TAXMANN.COM 727 (ITA NO. 1237 OF 2011 DATED 09-04-2012) WHEREIN IT WAS HELD THAT UNABSORBED DEPRECIATION AND BROUGHT FORWARD LOSSES OF THE UNIT , INCOME OF WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S 10A, CANNOT BE SET OFF AGAINST CU RRENT PROFIT OF ELIGIBLE UNIT FOR COMPUTING DEDUCTION U/S 10A. THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CONSULTING (P) LTD. (SUPRA) THUS IS SQUARELY COVERS THE ISSUE UNDER CONSIDERATION IN FAVOUR OF THE ASSE SSEE. THE LEARNED DR HAS CONTENDED THAT THE LATEST DECISION OF HONBLE DELHI HIGH COURT ON THE ISSUE OF SET OFF OF UNABSORBED DEPRECIATION, HOWEVER, IS IN FAVO UR OF THE REVENUE AND THE SAME HAS BEEN RENDERED AFTER TAKING INTO CONSIDERATION T HE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CO NSULTING (P) LTD. (SUPRA). THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CONSULTING (P) LTD., HOWEVER, IS THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT AND THE SAME BEING DIRECTLY APPLICABLE TO THE ISSUES UNDER CONSIDERATION, WE ARE BOUND TO FOLLOW THE SAME. ACCORDINGLY, FOLLOWIN G RESPECTFULLY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS. BLACK & VEATCH CONSULTING (P) LTD. (SUPRA), WE DIRECT THE AO TO AL LOW DEDUCTION U/S 10B ON THE PROFITS OF THE CURRENT YEAR WITHOUT SETTING OFF THE UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSSES AS CLAIMED BY THE A SSESSEE. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED WHEREAS T HE SOLITARY GROUND RAISED IN THE REVENUES APPEAL IS DISMISSED. 5. AS REGARDS THE REMAINING GROUND NO.2 RAISED IN T HE APPEAL OF THE ASSESSEE RELATING TO ASSESSEES CLAIM FOR CREDIT OF TDS OF R S.19,603/-, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SOUGHT A LIMITED RELIEF BY WAY OF DIRECTION TO THE AO TO ALLOW SUCH CREDIT AFTER VERIFYING THE RELEVANT RECORD. AC CORDINGLY, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR CREDIT OF TDS O F RS.19,603/- IN ACCORDANCE WITH 5 ITA NO.7001/MUM/2008, ITA NO. 22/MUM/2009 LAW AFTER VERIFYING THE RELEVANT RECORD. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON 14 TH DAY OF SEPT., 2012. SD/- (VIVEK VARMA) JUDICIAL MEMBER SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED : 14 TH SEPT., 2012 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI WAKODE