ACIT, Coimbatore V. Sri Ramakrishna Mills (Coimbatore) Ltd., Coimbatore

ITA 2468/CHNY/2014

• Counselvise Citation: 246821714 RSA 2014
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 06-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2014
• Court: TRIBUNAL
• Department Lawyers: B NISCHAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2468 /MDS./2014 ( !' #' / ASSESSMENT YEAR :2010-11) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV(2), NO.63,RACE COURSE ROAD, COIMBATORE 641 018. VS. M/S.SRI RAMAKRISHNA MILLS (COIMBATORE) LTD., 1493,SATHYAMANGALAM ROAD, GANAPATHY, COIMBATORE 641 006. PAN AACCS 9188 A ( / APPELLANT ) ( / RESPONDENT ) $% & ' / APPELLANT BY : MR.B.NISCHAL, JCIT, D.R ()$% & ' / RESPONDENT BY : MR.R.VIJAYARAGHAVAN,ADVOCATE * + & ,- / DATE OF HEARING : 06. 07.2015 .# & ,- /DATE OF PRONOUNCEMENT : 10.07.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-I, COIMBA TORE DATED 04.07.2014 IN ITA NO.140/13-14 PASSED UNDER SEC.14 3(3) READ WITH SECTION 250 OF THE ACT. ITA NO.2468 /MDS/2014 2 2. THE REVENUE HAS RAISED FOUR ELABORATE GROUNDS I N ITS APPEAL; HOWEVER, THE CRUX OF THE ISSUE IS THAT THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT (A), WHO HAD ALLOWED UNABSORBE D DEPRECIATION PERTAINING TO A.Y 1999-2000 TO BE ADJUSTED AGAINST LONG TERM CAPITAL GAIN OF THIS RELEVANT ASSESSMENT YEAR. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF COTTON YA RNS, FILED ITS RETURN OF INCOME ON 26.09.2010 ADMITTING ITS INCOME AS ` 3,60,71,261/-. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT WHEREIN THE LD. A.O DID NOT ALLOW TO CARRY FORWARD THE UNABSORBED D EPRECIATION OF THE ASSESSMENT YEARS 1999-00 TO 2000-01 IN THE RELEVANT ASSESSMENT YEAR ON THE GROUND THAT THE AMENDMENTS MADE IN SEC. 32(2) OF THE ACT WITH EFFECT FROM 2002-03 IS SUBSTANTIVE AND PROSPEC TIVE IN OPERATION AND AS PER THE EARLIER PROVISIONS OF THE SECTION-32 (2) OF THE ACT THE ALLOWABLE PERIOD OF EIGHT YEARS HAS LAPSED. HOWEVE R, ON APPEAL, THE LD. CIT (A) ALLOWED THE ISSUE IN FAVOUR OF THE ASSE SSEE BY OBSERVING AS UNDER:- ITA NO.2468 /MDS/2014 3 THE ISSUE RELATING TO SETTING OFF OF UNABSORBED DE PRECIATION AGAINST THE INCOME FOR ASSESSMENT YEAR 2010-11 IS REQUIRED TO B E CONSIDERED AND DECIDED IN ACCORDANCE WITH THE PROVISIONS OF SECTIO N 32(2) AS AMENDED W.E.F.1 ST APRIL, 2002 BY THE FINANCE ACT,2001 WHICH ARE APPL ICABLE TO THE RELEVANT ASSESSMENT YEAR. IT IS A WELL SETTLED PRIN CIPLE THAT THE LAW APPLICABLE TO ANY ASSESSMENT YEAR IS THE LAW THAT P REVAILS ON THE 1 ST DAY OF APRIL OF THE RELEVANT ASSESSMENT YEAR AS PER THE PR OVISIONS OF SECTION 32(2) PREVAILING AS ON THE 1 ST DAY OF THE ASSESSMENT YEAR UNDER APPEAL WHEREIN THE ASSESSMENT OF THE ASSESSEE, FULL EFFEC T CANNOT BE GIVEN TO THE PROVISIONS OF SECTION 32(2). AS SEEN FROM THE PRO VISIONS, IT IS VERY CLEAR THAT THE CARRY FORWARD ALLOWANCE SHALL BE ADDED TO THE AMOUNT OF ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIO US YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO ALLOWA NCE FOR THAT PREVIOUS YEAR BUT DEEMED TO BE ALLOWANCE FOR THAT PREVIOUS YEAR, AND TO ON FOR THE SUCCEEDING PREVIOUS YEARS. IT IS VERY CLEAR THAT T HERE IS NO RESTRICTION FOR CARRYING FORWARD THE UNABSORBED DEPRECIATION AND SE TTING IT OFF AGAINST TOTAL INCOME INCLUDING LTCG AS CLAIMED BY THE ASSES SEE. AS SUBMITTED BY THE APPELLANT THE JUDICIAL DECISIONS ALSO SUPPORT T HE ASSESSEES VIEW. HENCE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW T HE SETTING OFF OF THE CARRY FORWARD OF DEPRECIATION AGAINST THE LTCG. THE GROUN DS OF APPEAL ARE ALLOWED. 4. LD. A.R. ARGUED IN SUPPORT OF THE ORDER OF THE LD. CIT (A) AND ALSO PLACED RELIANCE IN THE DECISION RENDERED BY TH E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PIONEER ASIA PACK ING P. LTD., REPORTED IN [2009] 310 ITR 198 (MAD.) AND HONBLE G UJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P. LTD. V S. DCIT REPORTED IN ITA NO.2468 /MDS/2014 4 [2013] 354 ITR 244(GUJ.). LD. D.R COULD NOT CONTROV ERT TO THE SUBMISSIONS OF THE LD. A.R. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. THE CASE RELIED BY THE LD. A.R. IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THE RELEVANT GIST/PORTION OF THE RESPECTIVE ORDERS IS STATED HEREIN BELOW FOR REFERENCE:- (A) CIT VS.PIONEER ASIA PACKING P. LTD . 5. WE ARE NOT ABLE TO SEE ANY ILLEGALITY OR IRREGULARI TY IN THE ORDER OF THE TRIBUNAL, AS CONTENDED BY LEARNED SENI OR STANDING COUNSEL FOR THE REVENUE. AS PER THE AMENDED PROVISI ONS OF SECTION 32(2) OF THE ACT, WITH EFFECT FROM APRIL 1, 1997, IF THE INCOME FROM BUSINESS FOR THE ASSESSMENT YEAR IS INS UFFICIENT TO ABSORB THE DEPRECIATION ALLOWANCE OF THAT ASSESSMEN T YEAR, THE AMENDED PROVISION PERMITS ABSORPTION OF DEPRECI ATION ALLOWANCE OF A BUSINESS AGAINST PROFITS AND GAINS O F ANY OTHER BUSINESS OF THE SAME ASSESSMENT YEAR. WHEN THE DEPRECIATION ALLOWANCE OF A BUSINESS OF THE ASSESSM ENT YEAR ITA NO.2468 /MDS/2014 5 IS NOT ABSORBED BY ANY OTHER BUSINESS OF THE SAME ASSESSMENT YEAR, THEN THE REMAINING UNABSORBED DEPR ECIATION ALLOWANCE COULD BE SET OFF AGAINST THE INCOME UNDER ANY OTHER HEAD THAT IS ASSESSABLE FOR THE SAME ASSESSMENT YEA R. IN THE EVENT OF DEPRECIATION ALLOWANCE OF THE YEAR IS UNAB LE TO BE ABSORBED BY ANY OTHER BUSINESS INCOME OR FROM INCOM E UNDER ANY OTHER HEAD IN THE SAME ASSESSMENT YEAR, THE REM AINING UNABSORBED DEPRECIATION ALLOWANCE SHALL BE CARRIED FORWARD TO THE FOLLOWING YEAR AND (A) UNABSORBED ALLOWANCE SHA LL BE SET OFF AGAINST THE PROFITS AND GAINS OF ANY BUSINESS C ARRIED BY A PERSON, (B) IF THE UNABSORBED DEPRECIATION ALLOWANC E CANNOT BE WHOLLY SET OFF SO, IT SHALL BE ALLOWED TO BE CAR RIED FORWARD FOR THE FOLLOWING EIGHT ASSESSMENT YEARS IMMEDIATEL Y SUCCEEDING THE ASSESSMENT YEAR IN WHICH IT WAS FIRS T COMPUTED. THE PROVISO PROVIDES THAT THE BUSINESS TO WHICH DEPRECIATION ALLOWANCE IS RELATED TO MUST BE CARRIE D ON IN THE SUCCEEDING YEAR SO AS TO ALLOW SUCH SET OFF. THUS, BY THE AMENDMENT, THE DEEMING FICTION OF TREATING THE EARL IER YEARS' UNABSORBED DEPRECIATION AS THE CURRENT YEAR DEPRECI ATION WAS ITA NO.2468 /MDS/2014 6 REMOVED. THE PERIOD AVAILABLE FOR ABSORBING THE UNA BSORBED DEPRECIATION AGAINST THE PROFIT OF THE SUCCEEDING Y EARS WAS LIMITED TO EIGHT YEARS. THE CLARIFICATION OF THE FI NANCE MINISTER IN PARLIAMENT IS ALSO TO THE EFFECT THAT INASMUCH A S THE CUMULATED UNABSORBED DEPRECIATION BROUGHT FORWARD A S ON APRIL 1, 1997, COULD STILL BE SET OFF AGAINST THE T AXABLE BUSINESS PROFIT OR INCOME UNDER ANY OTHER HEAD FOR THE ASSES SMENT YEAR 1997-98 AND SEVEN SUBSEQUENT YEARS VIDE [1996] 222 ITR (ST.) 36. CIRCULAR OF THE CENTRAL BOARD OF DIRECT T AXES NO. 762, DATED FEBRUARY 18, 1998 ([1998] 230 ITR (ST.) 12 ) ALSO CLARIFIES THE ISSUE TO THE FOLLOWING EFFECT (PAGE 2 7): ' SUB-SECTION (2) OF SECTION 32 , AS IT EXISTED UP TO THE ASSESSMENT YEAR 1996-97, PROVIDED THAT THE UNABSORBED DEPRECIATION OF A YEAR SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATI ON OF THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWAN CE. THEREFORE, THE UNABSORBED DEPRECIATION ALLOWANCE, IF ANY, OF THE A SSESSMENT YEAR 1996-97 SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR D EPRECIATION OF THE ASSESSMENT YEAR 1997-98 AND DEEMED TO BE PART OF TH E ALLOWANCE FOR THIS YEAR. IN OTHER WORDS, THE UNABSORBED DEPRECIATION A LLOWANCE OF THE ASSESSMENT YEAR 1996-97 SHALL BE ADDED TO THE ALLOW ANCE OF 1997-98 AND WILL BE DEEMED TO BE THE ALLOWANCE OF THAT YEAR. TH E LIMITATION OF EIGHT YEARS SHALL START FROM THE ASSESSMENT YEAR 1997-98.' ITA NO.2468 /MDS/2014 7 6. IN VIEW OF THE ABOVE POSITION OF LAW, WE ARE OF THE VIEW THAT THE TRIBUNAL HAS RIGHTLY COME TO THE CONCLUSION THA T THE ASSESSEE IS ENTITLED TO THE UNABSORBED DEPRECIATION BROUGHT FORWARD AS ON APRIL 1, 1997, AND COULD BE SET OFF A GAINST THE BUSINESS PROFITS AND IN ORDER TO GIVE EFFECT TO THA T FINDING, THE CASE WAS REMITTED TO THE FILE OF THE ASSESSING OFFI CER FOR VERIFICATION AS TO HOW MUCH DEPRECIATION WAS AVAILA BLE UP TO APRIL 1, 1997, THAT COULD BE INCLUDED IN THE INCOME OF THE ASSESSEE. (B) GENERAL MOTORS INDIA P. LTD. VS. DCIT EVEN ON THE MERITS THE PROVISIONS OF SECTION 32(2) , AS AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE ASSESSMENT YEARS 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEA RS AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COUL D NOT BE SET OFF TILL THE ASSESSMENT YEAR 2002-03 THEN IT WO ULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINS T THE PROFITS AND GAINS OF SUBSEQUENT YEARS. SINCE IN THE GIVE CASE BEFORE US, THE ISSUE IS WITH RESPECT TO CARRY FORWARD OF UNABSORBED DEPRECIATION OF THE ASSESSMEN T YEARS 1999- 2000 TO 2000-2001 IN THE RELEVANT ASSESSMENT YEAR 2 010-11, THE ITA NO.2468 /MDS/2014 8 FACTS OF THE CASE IS IDENTICAL TO THE ISSUE DECIDED BY THE HONBLE HIGH COURTS SUPRA, THEREFORE WE HEREBY CONFIRM THE ORDER OF THE LD. CIT (A) WHICH IS IN FAVOUR OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 10 TH JULY, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH JULY, 2015. K S SUNDARAM. & (,/0 1 0#, /COPY TO: 1. $% /APPELLANT 2. ()$% /RESPONDENT 3. * 2, ( ) /CIT(A) 4. * 2, /CIT 5. 05 (,6! /DR 6. 7' 8+ /GF