ITO 18(1)(1), MUMBAI V. VIRANG P. SHAH, MUMBAI

ITA 2410/MUM/2014

• Counselvise Citation: 241019914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Capital asset; Depreciation; Cost of acquisition; Unabsorbed depreciation
• Section: 54F; 32; 54; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.2410/MUM/2014 ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER-18(1)(1), ROOM NO.103, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. SHRI VIRANG P SHAH, 71, FLAT NO.5, SAVARKAR SADAN, DR. M.B. RAUT ROAD, SHIVAJI PARK, DADAR (EAST), MUMBAI-400028 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO. ACUPS1813P CROSS OBJECTION NO.136/MUM/2015 (ARISING OUT OF ITA NO.2410/MUM/2014) ASSESSMENT YEAR: 2010-11 SHRI VIRANG P SHAH, 71, FLAT NO.5, SAVARKAR SADAN, DR. M.B. RAUT ROAD, SHIVAJI PARK, DADAR (EAST), MUMBAI-400028 / VS. INCOME TAX OFFICER-18(1)(1), ROOM NO.103, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 ( !' # /ASSESSEE) ( / REVENUE) PAN. NO.ACUPS1813P / REVENUE BY SHRI CHANDIP SINGH -DR !' # / ASSESSEE BY SHRI VIJAY C KOTHARI $ % & # ' / DATE OF HEARING : 06/10/2015 & # ' / DATE OF ORDER: 13/11/2015 VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS IN APPEAL AGAINST THE IMPUGNED ORDE R DATED 20/01/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, WHEREAS, THE ASSESSEE HAS PREFERRED CROSS OBJECTIONS. 2. FIRST, WE SHALL TAKE THE APPEAL OF THE REVENUE, WHEREIN, THE ONLY GROUND PERTAINS TO HOLDING THAT D EDUCTION U/S 54F OF THE INCOME TAX ACT, 1961 (HEREINAFTER T HE ACT) IS ALLOWABLE ON CAPITAL GAIN ARISING ON TRANSFER OF DE PRECIABLE ASSETS I.E. WINDMILL, WITHOUT APPRECIATING THE FACT THAT THE SAME IS TAXABLE AS SHORT TERM CAPITAL GAIN U/S 50 O F THE ACT AND THUS ALLOWING SUCH DEDUCTION AMOUNTS TO DOUBLE DEDUCTION ONCE HAS DEPRECIATION AND SUBSEQUENTLY U/ S 54F OF THE ACT WHICH IS CONTRARY TO LEGISLATIVE INTENTI ON. 2.1. DURING HEARING OF THIS APPEAL, THE LD. DR, SH RI CHANDIP SINGH, ADVANCED HIS ARGUMENTS, WHICH ARE ID ENTICAL TO THE GROUND RAISED BY PLACING RELIANCE UPON THE A SSESSMENT ORDER. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SHRI VIJAY C KOTHARI, INVITED OUR ATTENTION TO THE WRITTEN SUBMISSIONS, FILED BY THE ASSESSEE, BY PLACING RELI ANCE UPON THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN CIT VS ACE BUILDER PVT. LTD. (2006) 281 ITR 210 (BOM.) 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 3 ARE THAT THE ASSESSEE DECLARED NIL INCOME IN HIS RE TURN FILED ON 30/09/2010 WHICH WAS PROCEEDED U/S 143(1) OF THE INCOME TAX ACT, 1961, (HEREINAFTER THE ACT). THE C ASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS, THER EFORE, REQUISITE NOTICES ALONG WITH QUESTIONNAIRE WERE ISS UED AND SERVED UPON THE ASSESSEE. THE ASSESSEE ATTENDED THE PROCEEDINGS AND FURNISHED THE DETAILS. THE ASSESSE E OWNED A WINDMILL WHICH WAS PURCHASED BY THE ASSESSEE FOR RS.5,83,48,520/-, AS PER VARIOUS INVOICES, FILED BY THE ASSESSEE, FROM M/S SUZULON ENERGY LTD. AND PUT TO U SE ON 22/08/2006. THE ASSESSEE SOLD THE SAID WINDMILL TO M/S NAIK FROSEN FOODS PVT. LTD. FOR A CONSIDERATION OF RS.4,50,00,000/- ON 29/09/2009. THE ASSESSEE VIDE LETTER DATED 26/11/2012 PREFERRED FOLLOWING WORKING OF THE CAPITAL GAINS ON THE SALE OF THE WINDMILLS (INCLUDING LAND) WHICH IS REPRODUCED HEREUNDER:- SALES CONSIDERATION RS. 4,49,55,000 LESS DEPOSIT WITH MSSEB TAKEN OVER RS. 37,56,000 NET SALES CONSIDERATION TOWARDS WIND MILL RS. 4,05,74,000 LESS: W.D.V. OF WIND MILL AS ON 01.04.2009 RS. 100 SHORT TERM CAPITAL GAIN RS. 4,05,73,900 LESS: DEDUCTION U/S 54F RS. 3,76,00,000 LESS: B/F SHORT TERM CAPITAL LOSS FOR EARLIER YEARS RS. 29,73,900 TAXABLE SHORT TERM CAPITAL GAIN RS. NIL WORKING FOR LOSS ON SALE OF WIND MILL LAND SALE CONSIDERATION RS. 45,000 VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 4 LESS INDEXED COST OF ACQUISITION (COST OF RS.14,50,000) RS.17, 65,703 LONG TERM CAPITAL LOSS (-)RS.17,20,703 2.3. THE LD. ASSESSING OFFICER DID NOT ACCEPT THE WORKING OF THE ASSESSEE AND DENIED THE CLAIMED DEDU CTION U/S 54F OF THE ACT. THE ASSESSEE FELT AGGRIEVED, PR EFERRED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (A PPEALS), WHEREIN, THE CONTENTION OF THE ASSESSEE GRANTING DE DUCTION U/S 54F OF THE ACT. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 2.4. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, BEFORE COMING TO ANY CO NCLUSION, WE ARE EXPECTED TO ANALYZE SECTION 54F AND SECTION 50(2) OF THE ACT, WHICH ARE REPRODUCED HEREUNDER FOR READY R EFERENCE AND ANALYSIS:- CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE: 1. SUBJECT TO THE PROVISIONS OF SUB-SECTION (4) , WHERE , IN THE CASE OF AN ASSESSEE BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY , THE CAPITAL GAIN ARISES FROM THE TRANSFER OF ANY LONG-TERM CAPITAL ASSET, NOT BEING A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE ORIGINAL ASSET) , AND THE ASSESSEE HAS , WITHIN A PERIOD OF ONE YEAR BEFORE OR TWO YEARS AFTER THE DATE ON WHICH THE TRANSFER TOOK PLA CE PURCHASED , OR HAS WITHIN A PERIOD OF THREE YEARS AFTER THAT DATE CONSTRUCTED , A RESIDENTIAL HOUSE (HEREAFTER IN THIS SECTION REFERRED TO AS THE NEW ASSET) , THE CAPITAL GAIN SHALL BE DEALT WITH IN ACCORDANCE WITH THE FOL LOWING PROVISIONS OF THIS SECTION , THAT IS TO SAY , - (A) IF THE COST OF THE NEW ASSET IS NOT LESS THAN THE NET VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 5 CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET. THE WHOLE OF SUCH CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45; (B) IF THE COST OF THE NEW ASSET IS LESS THAN THE NET CONSIDERATION IN RESPECT OF THE ORIGINAL ASSET , SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE O F THE CAPITAL GAIN THE SAME PROPORTION AS THE COST OF THE NEW ASSET BEARS TO THE NET CONSIDERATION SHAL L NOT BE CHARGED UNDER SECTION 45 ; . . . 2............... 3 . ............... 4. THE AMOUNT OF THE NET CONSIDERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASSET MADE WITHIN O NE YEAR BEFORE THE DATE ON WHICH THE TRANSFER OF THE ORIGINAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SECTION 139, SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH RE TURN SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF THE ASSESSEE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS MAY BE SPECIFIED IN, AND UTILISED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT ; AND , FOR THE PURPOSES OF SUB- SECTION (1) , THE AMOUNT , IF ANY , ALREADY UTILISED BY THE ASSESSEE FOR THE PURCHASE O R CONSTRUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHA LL BE DEEMED TO BE THE COST OF THE NEW ASSET : . . .. 2.5. A CAREFUL PERUSAL OF THE ABOVE WOULD MAKE IT C LEAR THAT SECTION 54F OF THE IT ACT LISTS DOWN FOLLOWING COND ITIONS IN ORDER TO AVAIL THE EXEMPTION UNDER THE SAID SECTION :- THERE SHOULD BE A TRANSFER OF CAPITAL ASSET THE SAID CAPITAL ASSET SHOULD BE A 'LONG TERM CAP ITAL ASSET' OTHER THAN A RESIDENTIAL HOUSE; THE 'NEW ASSET' CREATED SHOULD BE A RESIDENTIAL H OUSE; IN CASE AMOUNT OF SUCH CAPITAL GAIN OR PART THERE OF IS NOT INVESTED IN THE VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 6 'NEW ASSET' DURING THE SAME PREVIOUS YEAR, THEN AMO UNT OF SUCH CAPITAL GAIN OR PART THEREOF SHOULD BE DEPOSITED IN THE BAN K, IN THE MANNER TO BE NOTIFIED BY GOVERNMENT, BEFORE THE FILING OF RETURN OF INCOME FOR THE SAID PREVIOUS YEAR 2.6. IT IS PERTINENT TO NOTE THAT THE SAID WINDMIL L WAS PUT TO USE ON 22ND AUGUST 2006. THE PROOF OF COMMENCEMENT OF THE WINDMILL WAS DULY SUBMITTED TO THE LEARNED AO DURIN G THE COURSE OF SCRUTINY. THE LEARNED AO HAS ALSO CONFIRM ED THIS FACT IN PARA 4 OF THE ORDER. THE SAID WINDMILL WAS SOLD ON 29TH SEPTEMBER 2009 AND A COPY OF SUCH SALE AGREEME NT WAS DULY SUBMITTED WITH THE LEARNED AO. THUS, THE HOLDI NG PERIOD OF THE WINDMILL IS MORE THAN 36 MONTHS. 2.7. THE AO HAS RELIED ON THE PROVISIONS OF SECTIO N 50 OF THE IT ACT. THE RELEVANT EXTRACTS OF THE PROVISIONS OF SECTION 50 ARE REPRODUCED AS UNDER:- 'NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2, WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDE R THIS ACT OR UNDER THE INDIAN INCOME-TAX ACT, 1922 (11 OF 1922), THE PROVISIONS OF SECTIONS 48 AND 49 SHALL BE SUBJECT TO THE FOLLOWING MODIFIC ATIONS: 1............ 2. WHERE ANY BLOCK OF ASSETS CEASES TO EXIST AS SUC H, FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK ARE TRANSFERRED DURING THE PREVIOUS YEAR, THE COST OF ACQUISITION OF THE BLOCK OF ASSETS SHALL BE THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOU S YEAR, AS INCREASED BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BL OCK OF ASSETS, ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THE INCOME RECEIVED OR VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 7 ACCRUING AS A RESULT OF SUCH TRANSFER OR TRANSFERS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSETS. THE ASSESSEE PLACE RELIANCE UPON FOLLOWING DECISION S FROM HON'BLE HIGH COURTS' AND ORDERS OF THE TRIBUNALS:- I. CIT V/S ACE BUILDERS (P.) LTD. [2006281 ITR 210 (BOM ) II. CIT V/S ASSAM PETROLEUM INDUSTRIES (P.) LTD. [2003] 262 ITR 587 (GAU) III. DCIT V/S HIMALAYA MACHINERY (P.) LTD. - TAX APPEAL NO. 271OF 2012 (GUJ) IV. CIT V/S RAJIV SHUKLA [2011] 334 ITR 138 (DEL) V. DCIT V/S BHARAT ENTERPRISES [2011] 14 TAXMANN.COM 110 (MUM.). VI. GYAN CHAND BATRA V/S ITA (2010) 36 (II) ITCL 631 (MUM) VII. DR. (MRS.) SUDHA S. TRIVEDI V/S ITO [2009] 31 SOT 3 8 (MUM.) VIII. ACIT V MANALI INVESTMENTS PVT. LTD.-ITA NO. 6646/ MUM/2008 IX. ACIT V HATHWAY INVESTMENTS PVT. LTD. ITA 6256/MUM /2008 X. WEIKFIELD PRODUCTS CO. (I)(P.) LTD. V DCIT 71 TTJ 51 8 (PUNE) 2.8. SECTION 54F IS THAT PROVIDES DEDUCTION AGAINST CAPITAL GAIN ARISING FROM TRANSFER OF ANY LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOUSE. IN THE INSTANT CASE, THE ASSET TRANSFERRED BY THE ASSESSEE IS A WINDMILL WHICH WAS HELD FOR VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 8 MORE THAN 36 MONTHS, ACCORDINGLY, THE WINDMILL QUA LIFIES TO BE A LONG TERM CAPITAL ASSET. WE FIND THAT THE IMP UGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACE BUILDERS PVT. LTD (SUPRA), WHEREIN, IT WAS HELD THA T IN CASE OF DEPRECIABLE ASSET THE DEEMING FICTION CREATED UNDER SECTION 50(1) AND (2) IS RESTRICTED ONLY TO THE MODE OF COM PUTATION OF CAPITAL GAINS CONTAINED UNDER SECTION 48 AND 49, TH EREFORE, DO NOT APPLY TO ANY OTHER PROVISIONS, THEREFORE, TH E FICTION CREATED BY THE LEGISLATURE IS TO BE CONFINED FOR WH ICH IT IS CREATED. IT IS ALSO NOTED THAT SECTION 54E DOES NOT MAKE ANY DISTINCTION BETWEEN DEPRECIABLE AND NON DEPRECIABLE ASSET, CONSEQUENTLY, EXEMPTION AVAILABLE UNDER SECTION 54E CANNOT BE DENIED BY REFERRING TO FICTION CREATED U/S 50 OF THE ACT. BENEFIT OF SECTION 54E IS AVAILABLE TO THE ASSESSEE IRRESPECTIVE OF THE FACT THAT THE COMPUTATION OF CAPITAL GAINS I S DONE EITHER U/S 48 AND 49 OR U/S 50. THIS DECISION OF THE HONB LE HIGH COURT SQUARELY COVERS THE CASE OF THE ASSESSEE. RES PECTFULLY FOLLOWING THE AFORESAID DECISIONS AND THE CASES MEN TIONED AT PAGE 7 OF THIS ORDER, WE FIND NO INFIRMITY IN THE C ONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL S). SINCE THE ASSESSEE HAD THE CAPITAL ASSET I.E. WIND MILL FOR MORE THAN 36 MONTHS AND TRANSFERRED AS A LONG TERM CAPITAL ASSET, THEREFORE, THE GAIN ARISING THEREFROM OUT O F SUCH TRANSFER WILL BE CALCULATED IN THE MANNER PRESCRIBE D U/S 50. HOWEVER, THE CLAIMED DEDUCTION/EXEMPTION U/S 54 CAN NOT BE DENIED TO THE ASSESSEE BY APPLYING THE DEEMING PROV ISION OF VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 9 SECTION 50. WE AFFIRM THE CONCLUSION OF THE LD. COM MISSIONER OF INCOME TAX (APPEALS). 3. NOW, WE SHALL TAKE UP THE CROSS OBJECTIONS (C.O . NO.136/MUM/2015), FILED BY THE ASSESSEE. THE FIRST GROUND RAISED BY THE ASSESSEE PERTAINS TO DISALLOWING THE AMOUNT OF RS.6,25,000/-, BEING THE AMOUNT DEPOSITED WITH MEDA , WHILE COMPUTING THE INCOME UNDER THE HEAD LONG TERM CAPIT AL GAINS. 3.1. THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESS EE WAS THAT THE IMPUGNED AMOUNT WAS NON-REFUNDABLE, PAID T O MEDA ON 10/07/2006. THE ASSESSEE DID NOT CLAIM ANY DEPRECIATION ON THIS AMOUNT. THE ASSESSEE SOLD THE WINDMILL ALONGWITH ALL ASSET AND LIABILITIES, WHICH WERE TAK EN OVER BY THE PURCHASER. THE ASSESSEE DEDUCTED THE SAID AMOUN T FOR THE SALES CONSIDERATION. ON THE OTHER HAND, THE LD . DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDL Y, THE AMOUNT OF RS.6,25,000/- WAS PAID TO MEDA AS ADVANCE/DEPOSIT AND FURTHER THE PURCHASER OF THE AS SET TOOK OVER ALONG WITH ASSET AND LIABILITIES AND THE IMPUG NED AMOUNT IS PART OF THE BASIC STRUCTURE OF THE WINDMI LL. THE LD. ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN PARA 9 &10 OF THE ASSESSMENT ORDER DISALLOWING THE DEDUCTION CLAI MED BUT ACCEPTED THAT THE AMOUNT WAS PAID TO MEDA. THE LD. ASSESSING OFFICER DISALLOWED THE CLAIM BY STATING T HAT THERE WAS NO DOCUMENTARY EVIDENCE TO TREAT THE AMOUNT PAI D AS VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 10 DEPOSIT. HOWEVER, FACT REMAINS THAT THE ASSESSEE SO LD THE WINDMILL BUSINESS ALONG WITH ASSETS AND LIABILITIES . THEREFORE, THE DEPOSIT GIVEN BY THE ASSESSEE TO MEDA WAS ALSO TRANSFERRED. THE ASSESSEE ALSO LOST ALL ITS RIGHTS, TITLE AND INTEREST IN THE DEPOSIT, GIVEN TO MEDA, ON ACCOUNT OF TRANSFER OF WINDMILL. IT CAN BE CONCLUDED THAT THE AMOUNT, A S AND WHEN WILL BE REFUNDED BY MEDA WOULD ALSO GO TO THE PURCHASER OF THE WINDMILL. THUS, WE FIND MERIT IN T HE CLAIM OF THE ASSESSEE AND ALLOW THE GROUND SO RAISED. 4. THE LAST GROUND THROUGH CROSS OBJECTION IS THAT THE ASSESSEE VERY MUCH PRESSED THIS GROUND FOR NOT GRAN TING SET OFF OF UNABSORBED DEPRECIATION AGAINST THE INTEREST INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES . ADMITTEDLY, WE DONT HAVE ANY RECORD, WHETHER THIS GROUND WAS PRESSED OR NOT BUT FACT REMAINS THAT IDENTICAL GROUND WAS RAISED BY THE ASSESSEE, THEREFORE, WE TEND TO P ROCEED WITH THE GROUND RAISED BY THE ASSESSEE. A. THE FACTS IN BRIEF ARE THAT THE ASSESSING OFFICE R HAS DISALLOWED THE SET OFF OF CLAIM MADE BY THE ASSESSE E IN RESPECT OF UNABSORBED DEPRECIATION AGAINST THE INTE REST INCOME RECEIVED BY THE ASSESSEE UNDER THE HEAD 'INC OME FROM OTHER SOURCES' BY STATING THAT AS PER SECTION 72 OF THE IT ACT THE BENEFIT OF BROUGHT FORWARD 'UNABSORBED LOSSES / DEPRECIATION' CAN BE SET OFF ONLY AGAINST INCOME UN DER THE SAME HEAD. VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 11 B. THE ISSUE BEFORE US PERTAINS TO INTERPRETATION O F SECTION 32, SECTION 71 AND SECTION 72 OF THE IT ACT. LET US FIR ST EXAMINE THE PROVISIONS OF THE SECTION 32 OF THE IT ACT. THE RELEVANT EXTRACT OF THE SECTION 32 OF THE IT ACT IS REPRODUC ED HEREUNDER FOR READY REFERENCE:- '(1) IN RESPECT OF DEPRECIATION OF - (1). BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEIN G TANGIBLE ASSETS; 2. KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICEN SES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWI NG DEDUCTIONS SHALL BE ALLOWED (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESS EE AS MAY BE PRESCRIBED; (II).... (2) WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 12 GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THE N, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB- SECTION (3) OF SECTION 73, THE ALLOWANCE OR THE PAR T OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN. AS TH E CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE F OR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DE EMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLO WANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE F OR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOU S YEARS. ' C. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. A CAREFUL PERUSAL OF THE ABOVE WOULD MAKE IT CLEAR THAT IN CASE, DURING ANY PREVIO US YEAR, THE AMOUNT OF DEPRECIATION ALLOWANCE IN TERMS OF SE CTION 32(1) OF THE IT ACT IS MORE THAN THE ANY INCOME OF THE SAID PREVIOUS YEAR, SUCH EXCESS OF DEPRECIATION SHALL BE CARRIED FORWARD TO THE SUCCEEDING YEAR AND SO ON AND SHALL BE ADDED TO THE DEPRECIATION ALLOWANCE OF THE SUCH SUCCEEDED YEAR. SECTION 32(2) OF THE IT ACT FURTHER STATES THAT IN CASE THERE IS NO DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDED YEAR, THE CARRIED FORWARD DEPRECIATION ALLOWANCE SHALL BE TRE ATED AS THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDED YEAR. FU RTHER, IN CASE THERE IS NO INCOME FROM BUSINESS OR PROFESSION DURING SUCH SUCCEEDED YEAR, THE NET COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION WOULD RESULT INTO 'BUSINESS LOSS', ON ACCOUNT OF SUCH CARRIED FORWARD DEPRECIATION ALLOWA NCE, FOR SUCH SUCCEEDED YEAR. SUCH 'BUSINESS LOSS' IS ELIGIB LE TO BE SET VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 13 OFF AGAINST ANY OTHER INCOME (INCLUDING INCOME FROM CAPITAL GAINS, INCOME FROM OTHER SOURCES BUT EXCLUDING INCO ME FROM SALARY) OF SUCH SUCCEEDED YEAR IN TERMS OF SECTION 71 OF THE IT ACT. THE RELEVANT EXTRACT OF SECTION 71 OF THE IT A CT IS REPRODUCED HEREUNDER: '(1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'CAPITAL GAINS', IS A LOSS AND THE ASSES SEE HAS NO INCOME UNDER THE HEAD 'CAPITAL GAINS', HE SH ALL, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTIT LED TO HAVE THE AMOUNT SUCH LOSS SET OFF AGAINST HIS INCOM E, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THA N 'CAPITAL GAINS', IS A LOSS AND THE ASSESSEE HAS INC OME ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOS S MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET O FF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD 'CAPITAL GAIN S' (WHETHER RELATING TO SHORT-TERM CAPITAL ASSETS OR A NY OTHER CAPITAL ASSETS) .... ' THUS, AS STATED ABOVE UNABSORBED DEPRECIATION ALLOW ANCE OF THE PREVIOUS YEAR FORMS PART OF THE DEPRECIATION AL LOWANCE OF SUCH SUCCEEDED YEAR FOR THE PURPOSE OF COMPUTATION OF 'INCOME FROM BUSINESS OR PROFESSION' OF SUCH SUCCEE DED YEAR. VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 14 ALSO, IF THE NET RESULT OF COMPUTATION OF 'INCOME F ROM BUSINESS OR PROFESSION' OF SUCH SUCCEEDED YEAR IS ' BUSINESS LOSS', SUCH 'BUSINESS LOSS' IS ELIGIBLE TO BE SET O FF AGAINST ANY OTHER INCOME OF SUCH SUCCEEDED YEAR (EXCEPT INCOME FROM SALARIES) IN TERMS OF SECTION 71 OF THE IT ACT. FUR THER, THE PROVISIONS OF SECTION 72 OF THE IT ACT DO NOT APPLY IN CASE OF SUCH UNABSORBED DEPRECIATION BECAUSE BY VIRTUE OF S ECTION 32(2) OF THE IT ACT SUCH UNABSORBED DEPRECIATION AL LOWANCE IS DEEMED TO BE THE DEPRECIATION ALLOWANCE OF THE CURR ENT YEAR. OUR VIEW FINDS SUPPORT FROM THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- DECISION BY HON'BLE SUPREME COURT IN CASE OF JAIP URIA CHINA CLAY MINES (P) LTD. [59 ITR 555 (SC)] DECISION BY HON'BLE SUPREME COURT IN CASE OF CIT VS. VIRMANI INDUSTRIES PRIVATE LIMITED [216 ITR 607] DECISION BY HON'BLE HIGH COURT OF GUJARAT IN CASE OF CIT VS. DEEPAK TEXTILE INDUSTRIES LTD. [(1987) 168 ITR 7 73(GUJ)] DECISION BY HON'BLE HIGH COURT OF MADRAS IN CASE OF CIT VS. PIONEER ASIA PACKING PVT LTD. (2009) 310 ITR 198 (MAD.) DECISION BY HON'BLE HIGH COURT OF DELHI IN CASE O F ITO VS. SELCHEM ENGINEERS (P) LTD. [272 ITR 10 (DEL)] DECISION BY GUJARAT TRIBUNAL IN CASE OF GUJARAT D AIRY DEVELOPMENT CORPN.LTD. VS. ITO [I.T.A. NO.1193/A HD/2009] THE CRUX OF THE RATIO LAID DOWN IN MAJORITY OF THE CASES CITED HEREINABOVE IS THAT UNABSORBED DEPRECIATION OF PAST PERIOD VIRANG P SHAH ITA NO.2410/MUM/2014 & C.O. NO.136/MUM/2015 15 CAN BE SET OF AGAINST ANY OTHER INCOME (EXCEPT INCO ME FROM SALARIES) OF THE CURRENT YEAR. IN VIEW OF THE FACTS AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, WE F IND MERIT IN THE CLAIM OF THE ASSESSEE AND THE SAME IS LEGITIMATE AND IN CONCURRENCE WITH THE PROVISIONS OF SECTION 3 2(2) AND SECTION 71 OF THE ACT. THUS THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION RAISED BY THE ASSESSEE ARE ALLOWED. THIS ORDER WAS PRONOUNCED ON 13/11/2015. SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 13/11/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 $ 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2# / CIT(A)- , MUMBAI 5. 45 /# , 1 +,' + 6 , $ % / DR, ITAT, MUMBAI 6. 7! % / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI.