Hindustan Copper Limited, Kolkata V. D.C.I.T Cir - 5,kolkata, Kolkata

ITA 2528/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1657 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTEN HANSHING
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 2528 / KOL / 2013 ASSESSMENT YEAR :2007-08 HINDUSTAN COPPER LTD., TAMRA BHAWAN, 1, ASHUTHOSH CHOUHURY AVENUE, KOLKATA-19 [ PAN NO.AAACH 7409 R ] V/S . DCIT, CIRCLE-5, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANJAY BHATTACHARYA, ADVOCATE /BY RESPONDENT SHRI GOUTEN HANSHING, CIT-DR /DATE OF HEARING 18-04-2017 /DATE OF PRONOUNCEMENT 02-06-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, KOLKATA DA TED 23.08.2013. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-5, KOLKATA U/ S 143(3) & 115WE(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) VIDE HIS ORDER DATED 31.12.2009 FOR ASSESSMENT YEAR 2007-08. SHRI SANJAY BHATTACHARYA, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE AND SHRI GOUTEN HANGSHING, LD. DEPARTMENTAL REPRESENTAT IVE REPRESENTED ON BEHALF OF REVENUE. ITA NO.2528/KOL/2013 A.Y. 2007-08 HINDUSTAN COPPER LTD. VS. DCIT, CIR-5 KOL. PAGE 2 2. AT THE TIME OF HEARING LD. AR FOR THE ASSESSEE S TATED THAT HE HAS BEEN INSTRUCTED NOT TO PRESS GROUND NO.1, HENCE, SAME IS DISMISSED AS NOT PRESSED. 3. SOLITARY INTERCONNECTED ISSUE RAISED BY ASSESSEE IN GROUND NO. 2 & 3 ARE THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY ADDING BACK 106,91,00,000/- AS EXCESS DEDUCTION UNDER THE PROVI SION OF SEC. 115JB(2) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A GOVT . OF INDIA ENTERPRISE AND ENGAGED IN THE BUSINESS OF MINING AND SALE OF COPPE R AND OTHER BY-PRODUCTS. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SH OWN BROUGHT FORWARD LOSSES OF 637.58 CRORES AND UNABSORBED DEPRECIATION OF 144.62 CRORES IN ITS BOOKS OF ACCOUNT. THE AO DURING THE COURSE OF ASSES SMENT PROCEEDINGS OBSERVED THAT IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR THE BOOK PROFIT WAS DETERMINED U/S. 115JB OF THE ACT BY ADJUSTING T HE UNABSORBED DEPRECIATION OF 107.47 CRORES OUT OF THE TOTAL UNABSORBED DEPRECIAT ION OF 144.62 CRORES BEING LOWER OF UNABSORBED DEPRECIATIO N. THEREFORE, THE AO IN THE YEAR UNDER CONSIDERATION WHILE DETERMINING THE BOOK PROFIT U/S. 115JB OF THE ACT WAS OF THE VIEW THAT UNABSORBED DEPRECIATIO N AVAILABLE IS OF 37.15 CRORES ONLY (144.62 107.47). HOWEVER, ASSESSEE HA S CLAIMED DEDUCTION OF 144.62 CRORES WHILE DETERMINING THE BOOK PROFIT IN THE CURRENT YEAR U/S. 115JB OF THE ACT. THEREFORE, THE AO WAS OF THE VIEW THAT ASSESSEE HAS CLAIMED EXCESS DEDUCTION OF UNABSORBED DEPRECIATION BY 106.91 CRORES AND ACCORDINGLY DISALLOWED THE SAME WHILE DETERMINING T HE BOOK PROFIT U/S. 115JB OF THE ACT. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT AS PER TH E PROVISION OF ACT THE LOWER OF BUSINESS LOSS OR UNABSORBED DEPRECIATION S HOULD BE ALLOWED TO BE REDUCED FROM THE AMOUNT OF BOOK PROFIT. THIS EXERCI SE HAS TO BE CARRIED OUT EACH YEAR IRRESPECTIVE OF THE FACT WHETHER ANY DEDU CTION ON ACCOUNT OF BUSINESS LOSS OR UNABSORBED DEPRECIATION HAS BEEN C LAIMED BY ASSESSEE IN ITA NO.2528/KOL/2013 A.Y. 2007-08 HINDUSTAN COPPER LTD. VS. DCIT, CIR-5 KOL. PAGE 3 THE EARLIER YEARS OR NOT. HOWEVER, LD. CIT(A) DISRE GARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 7.3. IT WAS ALSO MENTIONED OUT BY THE APPELLANT, TH AT THE ASSESSMENT ORDER FOR A.Y 2006-07 PASSED U/S. 143(3) ON 31.12.2011, THAT THE TAX LIABILITY IN THAT YEAR HAD BEEN DETERMINED UNDER THE NORMAL PROVISION S AND NOT UNDER MAT AND VIEWED FROM THAT ANGLE, THERE IS NO JUSTIFICATI ON IN STATING, THAT ANY UNABSORBED BOOK DEPRECIATION HAD BEEN ACTUALLY SET OFF IN THAT YEAR REDUCING THE AMOUNT AVAILABLE FOR SUBSEQUENT YEAR. WHILE IT IS TRUE THAT TAX IN AY 2006- 07 HAD BEEN CHARGED UNDER NORMAL PROVISIONS, IT IS ALSO SEEN THAT COMPUTATION U/S. 115JB HAD BEEN MADE IN THE ORDER. IT IS WELL SETTLED THAT COMPUTATION UNDER NORMAL PROVISIONS AND MATD PROVIS IONS GO PARALLEL TO AND INDEPENDENT OF EACH OTHER. THEREFORE, THE COMPUTATI ON U/S. 115JB MADE DURING AY 2006-07 HAS TO BE TAKEN INTO CONSIDERATIO N. FURTHER, AS PER THE RATIO OF THE RULING IN THE CASE OF RASHTRIYA ISPAT NIGAM LTD. IN RE (SUPRA), WHICH, IT MAY BE ADDED, HAS BEEN FOLLOWED BY HON'BLE KERALA H IGH COURT IN THE CASE OF CIT VS. CARBON & CHEMICALS INDIA LTD 196 TAXMAN 302(KER.) AND BY ITAT, CHENNAI IN THE CASE OF LAXMI MACHINE WORKS VS ACIT 1 ITR (TRIB.) 92, AS WELL AS THE ILLUSTRATION GIVEN IN CIRCULAR NO. 495 DATED 22.9.1987, FIGURES OF BOOK LOSS AND UNABSORBED BOOK DEPRECIATION IN THE SAME H AVE TO BE TAKEN AS THE STARTING POINT FOR THE COMPUTATION FOR THE YEAR UND ER APPEAL. I, THEREFORE, DO NOT FIND ANY FAULT IN THE WORKING MADE BY THE ASSES SING OFFICER. THE ADJUSTMENT MADE TO THE BOOK PROFIT IS, ACCORDINGLY, CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2. THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) WA S WRONG IN CONFIRMING THE ASSESSING OFFICERS ACTION WHILE COMPUTING THE BOOK PROFIT U/S 115JB(2), IN ADDING BACK RS.106,91,00,000 AS ALLEGED EXCESS S ET OFF OF DEPRECIATION. 3. THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO. 2 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPR ECIATE THAT FOR COMPUTING BOOK PROFIT U/S. 115JB(2) FOR ANY YEAR, COMPUTATION MADE FOR ANY EARLIER YEAR HAD NOT BEEN RELEVANT AND THUS HE ERRED IN CONFIRMI NG THE ADDITION OF RS.106,91,00,000. 6. LD. AR FOR THE ASSESSEE SUBMITTED THAT THE CIRCU LAR NO. 495 OF 1987 DATED 22.09.1987 RELIED BY THE LD. CIT(A) WAS ISSUE D UNDER THE PROVISION OF SEC. 115J OF THE ACT AND THEREFORE THE SAME CANNOT BE RELIED UPON AS BOOK PROFIT WAS DETERMINED UNDER THE PROVISION OF SEC. 1 15JB OF THE ACT, WHEREAS LD. DR FOR THE REVENUE SUBMITTED THAT THERE IS NO I NFORMATION WHETHER THE UNABSORBED DEPRECIATION HAS ACTUALLY BEEN WRITTEN O FF IN THE BOOKS OF ACCOUNT OR NOT OF THE ASSESSEE AND HE VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. ITA NO.2528/KOL/2013 A.Y. 2007-08 HINDUSTAN COPPER LTD. VS. DCIT, CIR-5 KOL. PAGE 4 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND THE ORDER OF AUTH ORITIES BELOW. THE ASSESSEE WHILE DETERMINING THE BOOK PROFIT UNDER SE CTION 115JB OF THE ACT HAS REDUCED 144.06 CRORES BEING LOWER OF THE UNABSORBED DEPRECIATION. HOWEVER THE AO FOUND THAT THE ASSESSEE IN THE IMMEDIATE PRE CEDING YEAR 2007-08 HAS ADJUSTED THE AMOUNT OF UNABSORBED DEPRECIATION TO T HE EXTENT OF RS. 107.47 CRORES WHILE DETERMINING THE BOOK PROFIT UNDER SECT ION 115JB OF THE ACT. THEREFORE THE AO WAS OF THE VIEW THAT THE BALANCE A MOUNT OF UNABSORBED DEPRECIATION OF RS. 37.15 CRORES (144.06-107.47) SH OULD BE AVAILABLE FOR THE ADJUSTMENT WHILE DETERMINING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE VIEW OF THE AO WAS ALSO CONFIRMED BY THE LD. CI T(A). NOW THE ISSUE BEFORE US ARISES FOR ADJUDICATION SO TO WHETHER THE ACTION OF LOWER AUTHORITIES IS CORRECT IN THE AFORESAID FACTS & CIRCUMSTANCES. IN THIS CONNECTION, WE FIND THAT NEITHER THE BROUGHT FORWARD LOSS NOR THE UNABS ORBED DEPRECIATION HAS BEEN WRITTEN OFF IN THE BOOKS OF THE ACCOUNTS. BOTH ARE APPEARING IN THE BOOKS OF ACCOUNTS IN-SPITE OF THE FACTS THAT THE UNABSORB ED DEPRECIATION WAS ADJUSTED IN THE IMMEDIATE PRECEDING YEAR TO THE EXT ENT OF RS. 107.47 WHILE DETERMINING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. IT IS BECAUSE THE AFORESAID ADJUSTMENT WAS NOT MADE IN THE BOOKS OF A CCOUNTS BUT IN THE COMPUTATION OF INCOME WHILE DETERMINING THE BOOK PR OFIT AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. THUS, LAW ON THIS ISSU E IS FAIRLY CLEAR THAT THE EFFECT HAS TO GIVEN FOR THE BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION AS PER THE BOOKS AND AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT. IN THIS REGARD, WE ALSO RELY IN THE ORDER OF HONBLE TRIBUN AL IN THE CASE OF DCIT VS. BINANI INDUSTRIES LIMITED IN ITA 144/KOL/2013 FOR THE AY 2009-10 DATED 2.3.2016 WHEREIN IT WAS HELD AS UNDER:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE ARE IN AGREEMENT WITH THE ARGUMENTS OF T HE LEARNED AR THAT THE LOSSES ( BOTH CASH LOSS AND DEPRECIATION LOSS) WOUL D CONTINUE TO REMAIN IN THE BOOKS OF ITA NO.144/KOL/2013-A-AM M/S. BINANI INDUS TRIES LTD 13 ACCOUNTS TILL IT IS WIPED OFF BY EARNING PROFITS BY THE ASSESSEE COMPANY AND ACCORDINGLY THE SAME WOULD BE AVAILABLE FOR REDUCTION FROM BOOK PRO FITS U/S 115JB OF THE ACT. WE HOLD THAT THE LEAST OF THE CASH LOSS OR DEPRECIA TION LOSS ONCE ADJUSTED / REDUCED FROM BOOK PROFITS IN EARLIER ASSESSMENT YEA RS, DO NOT VANISH OUT OF ITA NO.2528/KOL/2013 A.Y. 2007-08 HINDUSTAN COPPER LTD. VS. DCIT, CIR-5 KOL. PAGE 5 THE BOOKS UNTIL IT IS WIPED OUT BY PROFITS IN SUBSE QUENT YEARS. TILL SUCH TIME, THE LOSSES WOULD ONLY CONTINUE TO REMAIN IN THE BOO KS. WE HOLD THAT FOR THE PURPOSE OF COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT, EVERY YEAR THE SITUATION OF LEAST OF CASH LOSS AND DEPRECIATION LO SS NEEDS TO BE WORKED OUT AND REVIEWED AND ACCORDINGLY THE UNDERSTANDING OF T HE LEARNED AO THAT SUCH LOSS ONCE ADJUSTED IN EARLIER YEAR IS NO LONGER AVA ILABLE FOR SET OFF IS MISCONCEIVED. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN THIS REGARD. THE GROUND NO.2 RAISED BY TH E REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE ORDER OF THIS CO-ORDIN ATE BENCH IN THE CASE OF BINANI INDUSTRIES LTD. (SUPRA) WE REVERSE THE ORDER OF LD. CIT(A) IN THIS REGARD AND DIRECT THE AO TO DELETE THE ADDITION. HENCE, TH IS GROUND OF ASSESSEES APPEAL IS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT 02 /06/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 02 / 06 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-HINDUSTAN COPPER LTD., TAMRA BHAWAN, 1, ASHUTHOSH CHOUDHURY AVENUE, KOLKATA- 19 2. /RESPONDENT-DCIT, CIRCLE-5, AAYAKAR BHAWAN, P-7, CH OWRINGHEE SQ., KOLKATA-69 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 1 /0 ,