The ACIT, Circle-4, Surat V. M/s. Shree Raghupati Fibres Pvt.Ltd., Surat

ITA 256/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80363 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 08-09-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2011
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Business income; Depreciation; Additional evidence; Unabsorbed depreciation; Reassessment proceedings
• Section: 32; 68; 6; 56

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 00 0 0 00 0 , , , , ! ! ! ! ' #$% ' #$% ' #$% ' #$% #& #&#& #&0 00 0# ## #0 00 0 '& '& '& '&, , , , () * () * () * () * ( ' ( ' ( ' ( ' BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI N.S. SAINI, ACCOUNTANT % % % %./ ././ ./ ITA NO. 256/AHD/2011 & - $.- & - $.- & - $.- & - $.-/ // / ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-4, SURAT. VS M/S. SHREE RAGHUPATI FIBRES PVT. LTD. 116, JEEVAN DEEP COMPLEX, OPP. J.K. TOWER, RING ROAD, SURAT. PAN: AABCR1184Q /0/ (APPELLANT) 12 /0/ (RESPONDENT) REVENUE BY : SMT. SONIA KUMAR, SR. D.R. ASSESSEE(S) BY : NONE &$3 4 )/ // / DATE OF HEARING : 08/09/2014 56. 4 ) / DATE OF PRONOUNCEMENT: 12/09/2014 (7 (7 (7 (7/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHM EDABAD DATED 25.10.2010. 2. THE SOLE GROUND TAKEN BY THE REVENUE IS THAT TH E COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING SET OFF OF ADDITION MADE U/S. 68 OF THE ACT OF RS 13,80,000/- AGAINST THE UNABSORBED DEPRECIATION LOSS. ITA NO. 256/AHD/2011 SHREE RAGHUPATI FIBERS PVT. LTD., SURAT. FOR A.Y. 2004-05 - 2 - 3. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DE CIDED THE ISSUE AS UNDER: 4. GROUND NO. (D) IS AGAINST THE ASSESSING OFFICER WITHDRAWING SET OFF OF ADDITION MADE U/S. 68 OF THE I.T. ACT AGAINST B/F. UNABSORBED DEPRECIATION. IN THE ORIGIN AL ASSESSMENT, AN ADDITION OF RS 32,87,109/- WAS MADE. OUT OF THIS, AN ADDITION OF RS 13,80,000/- WAS MADE U/S. 6 8 OF THE I.T. ACT. THE A.O. HAD, IN THE ORIGINAL ASSESSMENT , ALLOWED SET OFF OF B/F. DEPRECIATION AGAINST ALL THE ADDITIONS MADE. HOWEVER, HE WAS OF THE OPINION THAT SET OFF HAD BEE N WRONGLY ALLOWED AGAINST INCOME DETERMINED U/S. 68 AND THERE FORE INCOME HAD BEEN NOT ASSESSED TO THAT EXTENT. HE TH EREFORE REOPENED THE ASSESSMENT. 4.1. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, IN REPLY TO SHOW CAUSE, THE APPELLANT SUBMITTED THAT T HE ADDITION U/S. 68 WILL FORM PART OF CURRENT YEAR'S INCOME AND SET OFF OF B/F DEPRECIATION WAS PERMISSIBLE. THE A.O. WAS OF T HE OPINION THAT ADDITION U/S 68 OF THE ACT DOES NOT FORM PART OF ANY SPECIFIC HEAD OF INCOME AND IT IS DEFINITELY NOT BU SINESS INCOME. HE THEREFORE HELD THAT B/F. UNABSORBED DEPR ECIATION CANNOT BE ALLOWED SET OFF AGAINST INCOME U/S 68 OF THE I.T. ACT. HE WITHDREW THE SET OFF GRANTED EARLIER. 4.2 DURING THE COURSE OF APPEAL PROCEEDINGS, THE A.R SUBMITTED THAT THE ADDITIONS MADE IN THE ORIGINAL A SSESSMENT WERE NOT CORRECT AND INTRODUCED ADDITIONAL EVIDENCE S WHICH WERE FORWARDED TO THE A.O BY MY PREDECESSOR IN OFFI CE FOR REMAND. REMAND REPORT RECEIVED WAS FORWARDED TO THE APPELLANT FOR HIS COMMENTS BUT HAVE BEEN RECEIVED B ACK UNSERVED. I HAVE HELD IN MY DECISION FOR EARLIER GR OUND THAT THE ISSUES WHICH HAVE ATTAINED FINALLY IN ORIGINAL ASSESSMENT ARE NOT OPENED FOR ADJUDICATION NOW HAVING BEEN ACC EPTED IN THE ORIGINAL ASSESSMENT. IT IS HOLD NOW THAT THE AD DITION U/S 68 HAD BECOME FINAL AND WAS NOT OPEN IN REASSESSMENT PROCEEDINGS. 4.3 IT IS SEEN THAT NO SUBMISSIONS HAVE BEEN MADE AS TO WHY B./F DEPRECIATION LOSS WAS ALLOWABLE AGAINST AD DITION MADE U/S 68 OF THE I.T. ACT. THE MATTER IS THEREFORE BEI NG DECIDED ON MERITS. 4.4 THE ISSUE, IN MY OPINION, IS WHETHER B/F. DEPRECIA TION LOSS CAN BE SET OFF AGAINST INCOME UNDER ANY HEAD O THER THAN BUSINESS IN SUBSEQUENT YEARS. READING OF SECTON-32 SHOWS THAT B/F. DEPRECIATION LOSS MERGES WITH THE DEPRECI ATION OF THE CURRENT YEAR AND THEREFORE BECOMES CURRENT YEARS B USINESS LOSS WHICH IS PERMITTED TO BE SET OFF AGAINST ANY I NCOME OF THE CURRENT YEAR OTHER THAN SALARY. INCOME DETERMINED U /S 68 OF THE I.T. ACT IS INCOME UNDER OTHER SOURCES. B/F. DE PRECIATION LOSS WHICH MERGES WITH THE CURRENT YEAR'S DEPRECIAT ION WILL THEREFORE HAVE TO BE ALLOWED AS A SET OFF AGAINST T HE INCOME ITA NO. 256/AHD/2011 SHREE RAGHUPATI FIBERS PVT. LTD., SURAT. FOR A.Y. 2004-05 - 3 - DETERMINED U/S 68 OF THE I.T. ACT. RULES OF SET OFF TO BE FOLLOWED WILL BE THE ONE APPLICABLE IN THE YEAR IN WHICH SET OFF IS BEING CLAIMED. IT IS THEREFORE HELD THAT APPELL ANT WAS ENTITLED TO THE SET OFF TO B/F. DEPRECIATION LOSS A GAINST INCOME DETERMINED U/S. 68 OF THE I.T. ACT. THIS GROUND OF THE APPELLANT IS ALLOWED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT T HE ADDITION OF RS 13,80,000/- WAS MADE U/S. 68 OF THE INCOME TAX ACT WHICH DOES NOT FORM PART OF ANY SPECIFIC HEAD OF INCOME AND IS ALS O NOT BUSINESS INCOME, THEREFORE BROUGHT FORWARD UNABSORBED DEPREC IATION CANNOT BE ALLOWED SET OFF AGAINST THE SAME. 5. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) OBSERVED THAT BROUGHT FORWARD DEPRECIATION CAN BE S ET OFF AGAINST INCOME UNDER ANY OTHER HEAD OTHER THAN BUSINESS IN SUBSEQUENT YEARS AS SECTION 32 PROVIDES THAT BROUGHT FORWARD D EPRECIATION MERGES WITH THE DEPRECIATION OF THE CURRENT YEAR AN D BECOMES CURRENT YEARS DEPRECIATION WHICH IS PERMITTED TO B E SET OFF AGAINST ANY INCOME OF THE CURRENT YEAR OTHER THAN SALARY. INCOME DETERMINED U/S. 68 OF THE INCOME TAX ACT IS INCOME UNDER OTHER SOURCES AND THEREFORE THE BROUGHT FORWARD DEPRECIAT ION WILL HAVE TO BE ALLOWED AS A SET OFF AGAINST INCOME DETERMINED U /S. 68 OF THE INCOME TAX ACT. 6. BEING AGGRIEVED BY THE SAID ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFO RE US. 7. WE FIND THAT THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. D.P. SANDU BROS. CHEMBUR (P) LTD. (2005) 27 3 ITR 1 (SC) HAS HELD AS UNDER: ITA NO. 256/AHD/2011 SHREE RAGHUPATI FIBERS PVT. LTD., SURAT. FOR A.Y. 2004-05 - 4 - SECTION 14 OF THE INCOME-TAX ACT, 1961 AS IT STOOD AT THE RELEVANT TIME SIMILARLY PROVIDED THAT ALL INCOME S HALL FOR THE PURPOSES OF CHARGE OF INCOME-TAX AND COMPUTATION OF TOTAL INCOME BE CLASSIFIED UNDER SIX HEADS OF INCOME, NA MELY:- (A) SALARIES; (B) INTEREST ON SECURITIES; (C) INCOME FROM HOUSE PROPERTY; (D) PROFITS AND GAINS OF BUSINESS OR PROFESSION; (E) CAPITAL GAINS; (F) INCOME FROM OTHER SOURCES UNLESS OTHERWISE, PROVIDE D IN THE ACT. SECTION 56 PROVIDES FOR THE CHARGEABILITY OF INCOME OF EVERY KIND WHICH HAS NOT TO BE EXCLUDED FROM THE TOTAL IN COME UNDER THE ACT, ONLY IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. 8. THUS, IN VIEW OF THE ABOVE DECISION OF THE HON BLE SUPREME COURT, THE AMOUNT WHICH HAS BEEN DEEMED AS INCOME U/S. 68 IS ASSESSABLE AS INCOME FROM OTHER SOURCES AND B ECAUSE OF THE SAME, IT FORMS PART OF THE TOTAL INCOME OF THE ASSE SSEE. 9. IT IS NOT IN DISPUTE THAT BROUGHT FORWARD UNABS ORBED DEPRECIATION CAN BE SET OFF AGAINST THE INCOME WHIC H IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. WE, TH EREFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). IT IS CONFIRMED. THE GROUND OF APPEAL OF REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 12 TH OF SEPTEMBER, 2014 AT AHMEDABAD. SD/- SD/- (G.C. GUPTA) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 12/09/2014 GHANSHYAM MAURYA, SR. P.S.