ITO WD 9(3)(4), MUMBAI V. YASHRAJ CONTAINERS LTD, MUMBAI

ITA 2462/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3193 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 27-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: SANJAY KAPADIA
• Keywords: Depreciation; Wrong claim; Tax effect; Unabsorbed depreciation
• Section: 43B; 143(3); 147; 148; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH G ,MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2462/MUM/2014 (ASSESSMENT YEAR : 2007-08) ITO WARD-9(3)(4), ROOM NO. 216B, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. VS. M/S YASHRAJ CONTAINERS LTD. PLOT NO. 757/758, JWALA ESTATE, SONIWADI, NEAR KORA KENDRA, S.V.ROAD, BORIVALI WEST, MUMBAI-400092. PAN: AAACV4846J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI VIVEK PERAMPURNA (DR) ASSESSEE BY : SHRI SANJAY KAPAD IA (AR) DATE OF HEARING : 25.07.2016 DATE OF PRONOUNCEMENT : 24.08.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-20, MUMBAI, DATED 09.01.2014 FOR ASSESSMENT YEAR (AY)-2 007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN ALLOWING WRONG CLAIM OF T HE ASSESSEE OF INTEREST ACCCURED ON ACCOUNT OF EXTINGUISHMENT OF LIABILITY ON ONE TIME SETTLEMENT WITH IDBI AMOUNTING TO RS. 1,25,82,571/- AS DEDUCTI ON FROM TAXABLE INCOME? 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY FILED ITS RETURN OF INCOME ON 30.10.2007 DECLARING NIL. IN THE RETURN O F INCOME ASSESSEE 2 ITA NO. 2462/M/2014- M/S YASHRAJ CONTAINERS LTD. CLAIM SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AN D UNABSORBED DEPRECIATION AMOUNTING TO RS. 5,15,48,492/-. THE AS SESSMENT WAS COMPLETED ON 30.11.2009 U/S 143(3) OF THE INCOME-TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ACCEPTING TH E RETURN OF INCOME. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED U/S 147 OF THE ACT. A NOTICE U/S 148 WAS ISSUED ON 31.01.2012 AFTER RECORDING TH E REASONS THEREOF. IN RESPONSE TO THE NOTICE THE ASSESSEE SUBMITTED THAT THE RETURN ALREADY FILED BY THEM BE TREATED AS RETURN IN RESPONSE TO THE NOT ICE U/S 148. THE ASSESSEE REQUESTED FOR THE REASONS OF RE-OPENING. THE FOLLOW ING REASONS OF REOPENING WERE SUPPLIED TO THE ASSESSEE ARE AS UND ER: 'THE ASSESSEE COMPANY FILED ITS RETURN OF INCOM E FOR A.Y-2007-08 ON 30.10.2007 DECLARING NIL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSS OF RS. 5,15,48,492.THE ASSESSMENT WAS COMPLETE D UNDER SCRUTINY VIDE ORDER PASSED U/S. 143(3) ON 30.11.2009. IT WAS OBSERVED FROM THE STATEMENT OF COMPUTAT ION OF INCOME THAT THE ASSESSEE COMPANY CLAIMED RS. 1,25,82,571 AS INT EREST DISALLOWED IN EARLIER YEARS ALLOWED IN CURRENT YEAR ON EXTINGUISH MENT OF LIABILITY (I.E. WAIVER OF INTEREST ACCOUNTED IN THE BOOKS AS EXTRAO RDINARY ITEM), WHICH IS NOT ALLOWABLE AS THE LIABILITY HAS NOT BEEN ACTU ALLY PAID. FURTHER DEPRECIATION ALLOWABLE U./S.32 PERTAINI NG TO THE A.Y. 2007-08 AMOUNTING TO RS. 44,72,809 HAS BEEN CLAIMED TWICE ONCE UNDER THE STATEMENT OF COMPUTATION OF INCOME AND AGAIN AS SET OFF OF BROUGHT FORWARD DEPRECIATION U/S.32(2). THIS HAS RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 1,70,55,320 (RS. 1,25,82,511 + RS. 44,72,809) LEADI NG TO EXCESS ALLOWANCE OF LOSS ALLOWED TO BE CARRY FORWARD OF A LIKE AMOUNT INVOLVING NOTIONAL TAX EFFECT OF RS. 57,40,820 (33. 66% OF RS. 1,70,55,320).' 3. THE ASSESSEE VIDE NOTICE DATED 19.07.2012 WAS ASKED TO EXPLAIN ABOUT THE COMPUTATION OF INCOME WHEREIN ASSESSEE-COMPANY CLAI MED RS. 1,25,82,571/- AS INTEREST DISALLOWED IN EARLIER YEA RS AND FURTHER DEPRECIATION ALLOWABLE U/S 32 OF RS. 44,72,809/- CL AIMED TWICE. ONE UNDER THE STATEMENT OF COMPUTATION OF INCOME AND AGAIN SE T OFF OF BROUGHT FORWARD DEPRECIATION. THE ASSESSEE SUBMITTED THAT THE ASSESSEE-COMPANY HAS CARRIED FORWARD UNABSORBED BUSINESS LOSSES OF R S. 33,39,93,454/- , CARRIED FORWARD UNABSORBED DEPRECIATION OF RS. 9,92 ,60,351/- AND LONG TERM CAPITAL LOSS (LTCL) OF RS. 44,48,090/- BROUGHT FORWARD FROM 3 ITA NO. 2462/M/2014- M/S YASHRAJ CONTAINERS LTD. PRECEDING AY WITHOUT SET OFF AND CARRIED FORWARD TO TAL UNABSORBED LOSSES AND DEPRECATION AGGREGATING TO RS. 53,77,01,895/-. IN THE CURRENT YEAR, THE ASSESSEE EARNED NET PROFIT OF RS. 52,68,117/- AND A FTER DISALLOWANCE/ADDITION AGGREGATING TO RS. 3,03,95,42 4/- AND CLAIMED THE PERMISSIBLE DEDUCTION AGGREGATING TO RS. 3,09,15,04 9/- WORKED OUT PROFIT & GAIN OF BUSINESS AT RS. 5,15,48,492/-. THE SAID A MOUNT OF RS. 5,15,48,492/- TAXABLE UNDER THE HEAD PROFIT & GAIN OF BUSINESS AND ASSESSEE CLAIMED SET OFF OF THE AMOUNT OF RS. 5,15, 48,492/- OUT OF BROUGHT FORWARD BUSINESS LOSSES OF RS. 38,55,41,946/- AND D ETERMINED GROSS TOTAL INCOME AT RS. NIL. BUSINESS LOSS TO BE CARRIED FORW ARD AFTER SET OFF OF BROUGHT FORWARD LOSSES. THE ASSESSEE ALSO CONTENDED THAT THE SET OFF CLAIM OF RS. 44,72,809/- ON ACCOUNT OF UNABSORBED DEPRECI ATION U/S 32 IS ALSO AMOUNT OF DEPRECIATION ALLOWABLE AS PER THE ACT. TH IS WAS AN INADVERTENT MISTAKE AS THERE WAS NO NEED TO PARTIALLY CLAIMED S ET OFF OUT OF BROUGHT FORWARD BUSINESS LOSSES AND PARTIALLY OUT OF BROUGH T FORWARD UNABSORBED DEPRECIATION. ASSESSEE FURTHER CONTENDED THAT THEY HAVE NOT CLAIMED DOUBLE DEDUCTION. THE CONTENTION OF ASSESSEE WAS NO T ACCEPTED BY AO HOLDING THAT THE CLAIM OF INTEREST, DISALLOWANCE OF RS. 1,25,82,571/- IN EARLIER YEARS ALLOWED IN CURRENT YEAR ON EXTINGUISH MENT OF LIABILITY. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED AP PEAL BEFORE THE CIT(A) WHEREIN THE CIT(A) ALLOWED THE APPEAL OF THE ASSESS EE IN THE IMPUGNED ORDER DATED 09.01.2014. AGGRIEVED BY THE ORDER OF A O, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE LD DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE. DR FOR REVENUE ARGUED THAT CIT(A) WRONGLY DELETED T HE ADDITION ON ACCOUNT OF INTEREST DISALLOWANCE AMOUNTING TO RS. 1 ,25,82,571/-. DR FOR REVENUE FURTHER ARGUED THAT THE ASSESSEE WRONGLY CL AIMED THE INTEREST DISALLOWANCE DISALLOWED IN EARLIER YEARS AND ALLOWE D IN THE CURRENT YEAR ON EXTINGUISHMENT OF LIABILITY. AUTHORIZED REPRESENTAT IVE (AR) OF THE 4 ITA NO. 2462/M/2014- M/S YASHRAJ CONTAINERS LTD. ASSESSEE SUBMITTED THAT HE WILL FILE WRITTEN SUBMIS SION, HOWEVER MORE THAN MONTH HAVE PASSED BUT NO SUCH WRITTEN SUBMISSION AR E FILED. 5. WE HAVE CONSIDERED THE CONTENTIONS OF THE LD DR FOR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE SEEN THAT THE ASSESSEE WAS MAKING PAYMENT OF INTEREST FROM THE YEAR 2001-02, W HICH IS EVIDENT FROM THE DETAILS SUBMITTED BY ASSESSEE. IT IS FURTHER E VIDENT THAT BECAUSE OF NON- PAYMENT OF INTEREST, SUBSTANTIAL AMOUNT HAS BEEN DI SALLOWED FOR PRECEDING YEARS. THE ASSESSEE ENTERED INTO ONE TIME SETTLEMEN T OF OUTSTANDING DUES OF IDBI. AS PER CONDITION OF ONE TIME SETTLEMENT, THE ASSESSEE WAS REQUIRED TO MAKE PAYMENT OF RS. 12.36 CRORE TO IDBI AS FULL AND FINAL AMOUNT AND THE ASSESSEE HAS PAID THE AMOUNT OF RS. 1,04,00,000 /- AND CREATED CORRESPONDING REMISSION OF INTEREST OF RS. 1,25,82, 571/- WHICH AMOUNT HAS BEEN CLAIMED WHILE WORKING OUT THE TAXABLE INCOME A S SUCH AMOUNT WAS ALREADY DISALLOWED U/43B AS SHOWN IN THE DETAILS SU BMITTED BEFORE THE CIT(A). IN THE EARLIER YEARS, THE INTEREST EXPENDIT URE WAS DISALLOWED BECAUSE OF NON-PAYMENT. PAID INTEREST TO IDBI OUT OF WHICH THE AO HAS DISALLOWED RS. 19,99,46,578/- U/S 43B OF THE ACT. DETAILS OF WHICH WERE CALLED AND FURNISHED BY ASSESSEE DURING THE FIRST A PPELLATE PROCEEDING (FAA). HOWEVER, WHEN THE ASSESSEE MADE SETTLEMENT BY WAY OF ONE TIME SETTLEMENT, THE AMOUNT OF SETTLEMENT INCLUDES THE E LEMENT OF INTEREST TO BE ALLOWED AS CLAIMED BY THE ASSESSEE. AND THE SAME WA S CONSIDERED BY CIT(A) IN CORRECT PERSPECTIVE AND DELETED THE DISAL LOWANCE OF RS. 1,24,82,571/-. WITH THESE OBSERVATION, WE DO NOT FI ND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF CIT(A). 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON T HIS 24 TH AUGUST, 2016. SD/- SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 24/08/2016 S.K.PS 5 ITA NO. 2462/M/2014- M/S YASHRAJ CONTAINERS LTD. COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/