Deputy Commissioner of Income TAx Circle-4(1)(1), Bangalore V. M/s Karnataka Silk Industries Corporation Ltd , Bangalore

ITA 2463/BANG/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3898 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 21-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIDDAPPAJI R N CIT HEARD ON PR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 2

Judgement Text

ITA.2463/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.2463/BANG/2017 (ASSESSMENT YEAR : 2011-12) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 4(1)(1), BENGALURU .. APPELLANT V. M/S. KARNATAKA SILK INDUSTRIES CORPORATION LTD, 3 RD & 4 TH FLOOR, PUBLIC UTILITY BUILDING, M. G. ROAD, BENGALURU 560 001 .. RESPONDEN T PAN : AAACK6554A ASSESSEE BY : SHRI. SACHIN MEHTA, CA REVENUE BY : SHRI. SIDDAPPAJI R. N. ADDL. CIT HEARD ON : 25.09.2018 PRONOUNCED ON : 28.09.2017 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A) -4, BENGALURU, DT.30.08.2017, FOR TH E ASSESSMENT YEAR 2011-12, ON THE FOLLOWING EFFECTIVE GROUNDS OF APPE AL : 2. ON FACTS OF THE CASE, WHETHER THE LD CIT (A) IS JUSTIFIED IN LAW AS WELL AS ON FACTS IN HOLDING THA T UNABSORBED DEPRECIATION IS COVERED BY THE PROVISION S OF ITA.2463/BANG/2017 PAGE - 2 SECTION 32(2) OF THE ACT, AS AMENDED BY THE FINANCE ACT, 2001 AND THEREFORE, THE ASSESSEE IS ENTITLED TO CAR RY FORWARD AND SET OFF AGAINST PROFIT AND GAINS OF SUB SEQUENT YEAR? 3. ON FACTS OF THE CASE, THE DECISION OF THE LD CIT (A) IS RIGHT IN ALLOWING THE APPEAL OF THE ASSESSEE IGN ORING THE AMENDMENTS TO THE FINANCE ACT AMENDED AS ON 01/04.1997, WHEREIN IT WAS MENTIONED THAT THE DEPRECIATION OUGHT TO BE ALLOWED UPTO 8 ASST. YEARS ONLY? 02. FROM A PERUSAL OF THE GROUNDS OF APPEAL, IT IS CLEAR THAT THE CIT (A) HAD ALLOWED THE CARRY FORWARD OF DEPRECIATI ON BEYOND A PERIOD OF EIGHT YEARS, RELYING ON THE AMENDMENT BRO UGHT INTO THE FINANCE ACT, 2001 AND THEREFORE FEELING AGGRIEVED B Y THE ORDER OF THE CIT (A), THE REVENUE IS IN APPEAL. 03. THE LD. DR HAS DRAWN OUR ATTENTION TO PARA 6 OF THE ORDER OF THE CIT (A), WHEREIN IT WAS HELD AS UNDER : I HAVE CONSIDERED THE AC'S OBSERVATIONS I FINDINGS AND SUBMISSION MADE /THE CASE LAWS RELIED UPON BY THE ASSESSEE COMPANY. THE CASE LAWS CITED BY THE APPELL ANT PERTAIN TO SIMILAR SITUATION AS ARISING IN THE PRES ENT CASE. IT IS SEEN THAT, THE JURISDICTIONAL KARNATAKA HIGH COURT (IN CASE OF KARNATAKA COOPERATIVE MILK PRODUCERS) HAS H ELD THAT UNABSORBED DEPRECIATION U/S. 32(2) CAN BE CARR IED- FORWARD FOR OVER THE RELEVANT PERIOD. THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GE NERAL MOTORS INDIA (P) LTD. (50 ITCL 255), WHEREIN IT HAS BEEN HELD THAT, UNABSORBED DEPRECIATION PERTAINING TO AS SESSMENT YEAR 1997-98 TO 2001-02, CAN BE CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND THE SAME BECAME PART TH EREOF. THE HON'BLE COURT OBSERVED THAT, THE QUESTION OF CA RRY- FORWARD LOSS CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2), AS AMENDED BY FINANCE ACT, 2001 AND THE SAME WERE AVAILABLE FOR CARRY FORWARD AND SET OFF, AGAIN ST THE PROFITS ITA.2463/BANG/2017 PAGE - 3 AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY BAR. THE JURISDICTIONAL HONBLE KARNATAKA HIGH COURT IN THE CASE OF KA RNATAKA CO- OPERATIVE MILK PRODUCERS' FEDERATION LTD. VS. DCIT 53 DTR (KAR) 81, IN RESPECT OF THE SIMILAR ISS UE OF ADJUSTMENT OF UNABSORBED DEPRECATION FOR AY: 199 3- 94 (AGAINST AY:2006-07), DECIDED THE ISSUE IN FAVOU R OF THE ASSESSE. THE APPELLANT IN ITS WRITTEN SUBMISSI ON HAS ALSO POINTED OUT THAT THE DECISION OF THE SPECIAL BENCH OF ITAT (MUMBAI) IN DCIT V. TIMES GUARANTY LTD. (RELIED ON BY THE A O) HAS SINCE BEEN REVERSED BY THE AFORESAID HON'BLE GUJARA T HIGH COURT IN GENERAL MOTORS INDIA PVT LTD. IN BACKGROUND OF THE ABOVE DETAILED DISCUSSION, FACTS & CIRCUMSTANCES OF THE CASE AND BINDING J UDICIAL PRECEDENTS ON THE SUBJECT, THE ASSESSEE'S GROUNDS O F A P PEAL ARE ALLOWED. THE AO IS THEREFORE DIRECTED TO G IVE NECESSARY APPEAL-EFFECT, AND THE GROUNDS OF APPEAL ON THIS ACCOUNT ARE THEREFORE ALLOWED. THE LD. DR RELIED ON THE ORDER PASSED BY THE AO AND HAS SUBMITTED THAT THE PROVISION INSERTED BY THE FINANCE ACT, 200 1 CANNOT BE MADE APPLICABLE RETROSPECTIVELY. 05. PER CONTRA THE LD. AR HAS SUBMITTED THAT THE OR DER PASSED BY THE CIT (A) IS BASED ON THE JUDGMENTS OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE MATTER OF KA RNATAKA CO-OPERATIVE MILK PRODUCERS' FEDERATION LTD. VS. DCIT 53 DTR (KAR) 81, AND ALSO ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE MATTER OF GENERAL MOTORS INDIA P. LTD [354 ITR 244] AND HAS SUBMITTED THAT SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENTS OF THE HONBLE JURISDICTIONAL AND GUJARAT ITA.2463/BANG/2017 PAGE - 4 HIGH COURTS, THEREFORE THE APPEAL OF THE REVENUE IS REQUIRED TO BE DISMISSED. 06. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD AS ALSO THE CITATIONS QUOTED BEFORE US. THE HONBLE JURISDICTIONAL HIGH COURT IN KARNATAKA MILK PRODUCERS FEDERATION LTD (SUPRA), IN PARA 7, HAS HE LD AS UNDER : 7. THE ORDER PASSED AT ANNEX. Q BY THE CIT THAT THE UNABSORBED DEPRECIATION INCURRED FOR THE ASST. YR. 1993-94 GET S LAPSED ON 31ST MARCH, 2002. THE SAID ORDER HAS AFFECTED THE P ETITIONER, SINCE ACCORDING TO THE PETITIONER, PRIOR TO THE AME NDMENT INTRODUCED DURING 1996-97, IT WAS PERMISSIBLE TO CA RRY FORWARD THE UNABSORBED DEPRECIATION AND FROM 1993-94 TO 199 6-97, THE UNABSORBED DEPRECIATION HAS BEEN CARRIED FORWARD. T HE AMENDMENT INTRODUCED LIMITING THE TIME FOR CARRYING FORWARD FOR A PERIOD OF EIGHT YEARS HAS TO BE RECKONED NOT FROM 1993-94 BUT FROM 1996-97 AND THE SAME WAS CARRIED FORWARD A ND BY THE YEAR 2006-07 SINCE AGAIN THERE IS AN AMENDMENT INTR ODUCED DURING 2002 MAKING THIS PERIOD OF EIGHT YEARS AS UN LIMITED, FROM 2002 ONWARDS EVEN TILL 2006-07, IT IS PERMISSI BLE TO CARRY FORWARD THE UNABSORBED DEPRECIATION IN VIEW OF THE CHANGE IN POSITION OF LAW. THIS ASPECT HAS NOT BEEN CONSIDERE D BY THE REVISIONAL AUTHORITY AS SUCH, THE IMPUGNED ORDER PA SSED AT ANNEX. Q IS WITHOUT TAKING INTO CONSIDERATION THE P ROVISIONS UNDER S. 32(2) OF THE ACT WHICH CAME TO BE INTRODUC ED LIMITING/EXTENDING THE PERIOD FROM EIGHT YEARS FOR AN UNLIMITED PERIOD. FURTHER, CARRYING FORWARD OF UNABSORBED DEP RECIATION FOR EVERY YEAR HAS TO BE CALCULATED INDIVIDUALLY BA SED ON THE AUDIT REPORT AND TO ARRIVE AT THE EXACT AMOUNT TO B E CARRIED FORWARD. SIMILARLY THE HONBLE GUJARAT HIGH COURT IN PARA 40 , HAS HELD AS UNDER : 40. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF TH E BUSINESS TO ITA.2463/BANG/2017 PAGE - 5 WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LA RGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH E XCESS 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 EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT O F INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME D URING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, I T 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 UNABSORBED DEPRECIATION IS ADDED TO THE CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIAT ION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOME S THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2002 (THE A SSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001. AND ONCE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICT ION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED D EPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATIO N FROM THE ASSESSMENT YEAR 1997-98 UP TO THE ASSESSMENT YEAR 2 001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS O F SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001, AND WERE AVAIL ABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND G AINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. IN BOTH THESE JUDGMENTS CITED BEFORE US, IT IS CRYS TAL CLEAR THAT UNABSORBED DEPRECIATION AFTER LIFTING OF THE EIGHT YEARS PERIOD CEILING , IS NOW AVAILABLE TO BE CARRIED FORWARD BE YOND THE PERIOD OF EIGHT YEARS AND THEREFORE THE GROUND RAISED BEFORE US BY THE REVENUE ARE NOT SUSTAINABLE IN LAW. THEREFORE RESP ECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT, WE DISMISS THE APPEAL OF THE REVENUE. ITA.2463/BANG/2017 PAGE - 6 07. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF SEPTEMBER, 2018. SD/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 28.09.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.