DCIT, New Delhi V. M/s. Messe Dusseldorf India (P) Ltd., New Delhi

ITA 2642/DEL/2013

• Counselvise Citation: 264220114 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P DAM KANUNJHA
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2642 /DEL/2013 ASSESSMENT YEAR : 2009-10 DCIT, CIRCLE 6(1), VS. MESSE DUSSELDORF INDIA (P) LTD. NEW DELHI 1, COMMERCIAL COMPLEX, POCKET H & J, SARITA VIHAR, NEW DELHI GIR / PAN: AABCC4880E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PIYUSH KAUSHIK, ADV. RESPONDENT BY : SHRI P DAM KANUNJHA, SR. DR DATE OF HEARING : 16.03.2015 DATE OF PRONOUNCEMENT : 25.03.2015 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF LD. CIT(A) DATED 21.12.2011. THE ONLY GRIEVANCE RAISED BY REV ENUE WAS AGAINST ACTION BY LD. CIT(A) BY WHICH HE HAS ALLOWED CLAIM OF BROU GHT FORWARD OF UNABSORBED DEPRECIATION. 2. AT THE OUTSET, THE LD. D.R. INVITED OUR ATTENTIO N TO ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HAD ALREADY EXHAUST ED THE CARRY FORWARD LOSSES AND MOREOVER, THERE WAS CHANGE IN SHAREHOLDI NG AND THEREFORE, THE CLAIM OF BROUGHT FORWARD LOSS WAS NOT ALLOWED U/S 7 9 OF THE I. T. ACT, 1961. 3. LD. A.R. ON THE OTHER HAND INVITED OUR ATTENTION TO THE RELEVANT FINDING OF LD. CIT(A) AND SUBMITTED THAT BROUGHT FORWARD LO SSES WERE DUE TO ITA NO.2642/DEL/2013 2 UNABSORBED DEPRECIATION AND WERE NOT CARRY FORWARD LOSSES AND, THEREFORE, SECTION 79 WAS NOT APPLICABLE. IT WAS SUBMITTED TH AT HON'BLE SUPREME COURT IN THE CASE OF CIT VS SHUBH LAXMI MILLS LTD. 249 IT R 795 S.C. HAS CLEARLY HELD THAT SECTION 79 APPLIES ONLY TO CARRY FORWARD OF SET OFF OF LOSSES AND DOES NOT INCLUDE CARRY FORWARD OF DEPRECIATION AND UNABSORBED DEPRECIATION. LD. A.R. SUBMITTED THAT VARIOUS HIGH COURTS INCLUDI NG KERALA AND MADRAS HIGH COURTS HAVE FOLLOWED HON'BLE SUPREME COURTS O RDER AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAG ES 3-17. 4. WE HAVE HARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT LD. CIT(A) HAD CALLED FOR REPORT FOR ASSESSMENT YEAR 2009-10 AND FROM THE RECORDS HE FOUND THAT ASS ESSEE HAD CLAIMED SET OFF OF DEPRECIATION FOR THE INCOME AND ITS BROUGHT FORWARD CLAIMED WERE NOT ON ACCOUNT OF BUSINESS LOSSES. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUBHLAXMI MILLS LTD. (SUPRA) HAS HELD AS UND ER: SO FAR AS QUESTION NO.2 IS CONCERNED, THE QUESTION IS WHETHER IN APPLYING SECTION 79 OF THE ACT, ONLY THE BUSINESS L OSS SHOULD BE TAKEN INTO ACCOUNT AND NOT THE UNABSORBED DEPRECIATION OR UNABSORBED DEVELOPMENT REBATE. THE HIGH COURT HAS ANSWERED TH E QUESTION SAYING THAT WHEN SECTION 79 SPEAKS OF LOSS, IT DOES NOT INCLUDE UNABSORBED DEPRECIATION OR UNABSORBED DEVELOPMENT R EBATE. WE AGREE WITH THE HIGH COURT. 5. LD. CIT(A) HAS ALREADY LOOKED INTO THE CASE LAW RELIED BY ASSESSEE AND FOR THE SAKE OF CONVENIENCE, FINDINGS OF LD. CI T(A) ARE REPRODUCED BELOW: 4. BEFORE THE UNDERSIGNED THE APPELLANT HAS SUBMI TTED: 'THE ASSESSEE HAS THUS CLAIMED SET OFF FROM BROUGHT FORWARD 'UNABSORBED DEPRECIATION' ONLY AS NOTED BY THE AO I TSELF IN ITS ORDER. THE YEAR WISE DETAILS OF 'UNABSORBED DEPRECIATION' OF RS.6,236,736/- WERE DULY STATED IN THE RETURN OF INCOME BEING IN R ECORD OF THE AO. ITA NO.2642/DEL/2013 3 COMPUTATION FORMING PART OF RETURN OF INCOME FOR A. Y. 2009-10 ENCLOSED. FROM THE SAID COMPUTATION FORMING PART OF RETURN OF INCOME IT IS THUS ABUNDANTLY CLEAR THAT THE ASSESSEE HAS C LAIMED SET OFF IN RESPECT OF 'UNABSORBED DEPRECIATION' ONLY WITHOUT C LAIMING ANY SET OFF IN RESPECT OF LOSSES'. FROM THE EXTRACT OF TAX AUDIT REPORT FILED BEFORE THE AO BEING ANNEXURE 4 OF THE LETTER DATED 24.10.11 BEFORE THE AD IT IS CLEAR THAT EVEN THOUGH THE ASSES E - W S HAVING BROUGHT FORWARD BALANCE OF 'BUSINESS LOSSES' ALSO, HOWEVER THE ASSESSEE HAS CLAIMED SET OFF IN RESPECT OF 'UNABSORBED DEPRECIAT ION' ONLY WHICH IS ABUNDANTLY CLEAR FROM THE RETURN OF INCOME (SUPRA) AND THIS FACT HAS ITSELF BEEN ADMITTED BY THE AO IN THE FIRST LINE OF ITS ORDER. THE ASSESSEE HAS THUS NOT CLAIMED ANY SET OFF ON ACCOUN T OF 'BUSINESS LOSSES' AS A MATTER OF FACT AND RECORD. IN THE PROC ESS OF DISALLOWANCE (AS AFORESAID) BY THE AO, THE AO FAILS TO TAKE A NO TE OF THE LEGAL POSITION AS TO WHETHER 'UNABSORBED DEPRECIATION' BE ING A ITEM DISTINCT FROM LOSSES CAN AT ALL FALL UNDER THE CLUT CHES OF SECTION 79. IN THE PRESENT CASE THE ASSESSEE HAS CLAIMED SET OF F IN RESPECT OF 'UNABSORBED DEPRECIATION' ONLY AS A MATTER OF FACT AS ADMITTED BY THE AO ITSELF IN THE FIRST LINE OF ITS ORDER. NO SET OF F WAS CLAIMED IN RESPECT OF 'BUSINESS LOSSES'. IT IS A SETTLED LEGAL POSITIO N THAT EVEN IN THOSE CASES WHERE THE PROVISIONS OF SECTION 79 ARE HELD T O BE APPLICABLE THE DISALLOWANCE WILL BE CONFINED TO 'BUSINESS LOSSES' ONLY AND WILL NOT EXTEND TO 'UNABSORBED DEPRECIATION'. THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUBHULAXMI MILL S LTD. 249 ITR 795 SC (PAGES 17-18 PAPER BOOK): THE HON'BLE SUPREM E COURT IN THIS CASE VERY CLEARLY HELD AS UNDER: 'SO FAR AS QUESTION NO. 2 IS CONCERNED, THE QUESTIO N IS WHETHER IN APPLYING SECTION 79 OF THE ACT, ONLY THE BUSINESS L OSS SHOULD BE TAKEN INTO ACCOUNT AND NOT THE UNABSORBED DEPRECIATION OR UNABSORBED DEVELOPMENT REBATE. THE HIGH COURT HAS ANSWERED THE QUESTION SAYING THAT WHEN SECTION 79 SPEAKS OF LOSS, IT DOES NOT INCLUDE UNABSORBED DEPRECIATION OR UNABSORBED DEVELOPMENT R EBATE. WE AGREE WITH THE HIGH COURT'. 5. THE RECORDS OF THE APPELLANT FOR A.Y. 2009-10 WE RE CALLED FOR. FROM THE RECORD, IT IS SEEN THAT IN THE COMPUTATION OF T OTAL INCOME FILED BY THE APPELLANT IT HAS CLAIMED BROUGHT FORWARD AND SE T OFF OF DEPRECIATION OF RS.62,36,736/- FROM THE INCOME OF R S.93,25,494/- AS SHOWN IN THE P&L ACCOUNT. IT HAS RETURNED THE GROSS TOTAL INCOME OF RS.30,88,758/-. THE ITR 6 ON THE FILE SHOWS IN THE SCHEDULE BFLA, ITA NO.2642/DEL/2013 4 (GIVING DETAILS OF INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS) THAT THE APPELLANT HAD NOT CLAIMED B ROUGHT FORWARD LOSS SET OFF, IN FACT IT HAD CLAIMED BROUGHT FORWARD DEP RECIATION SET OFF OF RS.62,36,736/-. IN REPLY TO NOTICE U/S 143(2)/142(1 ) OF THE ACT DATED 21.07.2011 THE ASSESSEE HAD REPLIED TO THE AO ON 24 .08.2011 STATING CLEARLY AT POINT 4 'CLAUSE 18 OF YOUR NOTICE: THERE IN NO LOSS CARRIED FORWARD FOR THE A.Y. 2009-10.' 6. THE LEGAL PROPOSITION IN THE CASE OF CIT VS SUBH ULAXMI MILLS LTD. 249 ITR 795 (SC) STATES THAT SECTION 79 APPLIES ONL Y TO CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF CERTAIN COMPAN IES AND DOES NOT APPLY TO THE CASE OF CARRY FORWARD / UNABSORBED DEP RECIATION. IN THE PRESENT CASE, THE ASSESSEE IS NOT CARRYING FORWARD AND SETTING OFF ANY LOSS BUT HAS UNABSORBED DEPRECIATION, WHICH IS GUID ED BY THE PROVISIONS OF SECTION 32(2) AND NOT SECTION 79. IN VIEW OF THE FACTUAL POSITION ON RECORD OF THE AO, THE SUBMISSIONS MADE BEFORE THE UNDERSIGNED AND IN VIEW OF THE RATIO LAID DOWN IN T HE CASE OF SUBHULAXMI MILLS LTD. BY THE HON'BLE SUPREME COURT THE GROUNDS OF APPEAL ARE ALLOWED. THE AO IS DIRECTED TO ALLOW THE APPELLANT THE CLAIM OF SET OFF OF CARRIED FORWARD 'UNABSORBED DEP RECIATION' OF RS.62,36,736/-. 6. WE FIND THAT LD. CIT(A) HAS DULY VERIFIED THE FA CTS AND HAD ARRIVED AT THE CONCLUSION THAT THE CARRY FORWARD LOSS WAS ON A CCOUNT OF UNABSORBED DEPRECIATION ONLY AND THEREFORE, AS DECIDED BY HON' BLE SUPREME COURT IN THE CASE OF CIT VS. SHUBHLAXMI MILLS LTD., SECTION 79 W AS NOT APPLICABLE AND IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A), THEREFORE, APPEAL FILED BY REVENUE IS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2015. SD./- SD./- ( G. C. GUPTA) (T.S. KAPOO R) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 25 TH MARCH, 2015 SP ITA NO.2642/DEL/2013 5 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18/3 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 19,23,24 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 25/3 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 25/3 SR. PS/PS 7 FILE SENT TO BENCH CLERK 25/3 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER