DCIT 15(3)(2), MUMBAI V. SHELL INDIA MARKET P.LTD, MUMBAI

ITA 2693/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9843 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Question of law; Unabsorbed depreciation
• Section: 143(3); 32; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2693 /MUM/201 5 ASSESSMENT YEAR: 20 0 8 - 09 DCIT 15(3)(2) R. NO . 451, 4 TH FLOOR, AAYAKARBHAVAN , M.K. ROAD MUMBAI 400020 VS. SHELL INDIA MARKET P . LTD. SUCCESSOR TO BHARAT SHELL LTD 401 - 401 POWAI PLAZA , 4 TH FLOOR , HIRANADANI BUSINESS PARK , POWAI , MUMBAI 400076 PAN NO. AA ICS1404P (APPELLANT) (RESPONDENT) CROSS OBJECTION NO. 22/MUM/2017 ASSESSMENT YEAR: 2008 - 09 SHELL INDIA MARKETS P. LTD. SUCCESSOR TO BHARAT SHELL LTD. TENT HOUSE, IST FLOOR, G BLOCK PLOT NO. - C60 BKC BANDRA EAST MUMBAI - 400051 DCIT 15(3)(2) R. NO. 451, 4 TH FLOOR, AAYAKARBHAVAN, M.K. ROAD MUMBAI 400020 PAN NO. AAICS1404P (APPELLANT) (RESPONDENT) REVENUE BY: MR. RAHUL RAMAN , D R ASSESSEE BY: MR. FARROKH V. IRANI & MR. MADHU R AGRAWAL , A R DATE OF HEARING: 18 /0 4 /2017 DATE OF ORDER: 12/07/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 20 08 - 09 . THE APPEAL IS DIRECTED AGAINST THE ORDER COMMISSIONER ITA NO. 2693/MUM/2015 2 (APPEALS) 24 , MUMBAI AND ARISES OUT OF ORDER U/S 154 OF THE INCOME TAX ACT, 1961 (THE ACT). THE ASSESSEE HAS FILED A C ROSS O BJECTION. 2. WE BEGIN WITH THE GROUNDS OF APPEAL FILED BY THE REVENUE WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN STATING THAT THE RECTIFICATION U/S. 154 OF THE ACT IS WITHOUT AUTHORITY. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY STATED , THE FACTS OF CASE ARE THAT THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT OF THE ASSESSEE - COMPANY FOR THE AY 2008 - 09 ON 26.12.200 1 U/S 143(3) OF THE ACT. SUBSEQUENTLY, THE AO NOTICE D THAT THE UNABSORBED DEPRECIATION AMOUNTING TO RS.71,70,52,454/ - WAS ALLOWED DURING THE YEAR OF WHICH RS.44,81,61,141/ - PERTAIN ED TO AY 1995 - 96 TO 1999 - 2000. THE AO HAS OBSERVED THAT IN THE LIGHT OF THE ORDER OF THE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF TIMES GUARANTY , THE UNABSORBED DEPRECIATION PRIOR TO AY 2002 - 03 CAN BE ALLOWED TO BE SET OFF ONLY FOR 8 YEARS . THUS AS PER THE AO IN THE INSTANT CASE, THE BROUGHT FOR WARD UNABSORBED DEPRECIATION PERTAINING TO AY 1995 - 96 TO 1999 - 2000 CANNOT BE ALLOWED AS 8 YEARS HAVE ALREADY ELAPSED. THE AO WAS OF THE VIEW THAT IT WAS A MISTAKE APART FROM RECORD AND THEREFORE, HE PASSED AN ORDER U/S 154 DETERMINING THE TOTAL INCOME AS U NDER: 1. TOTAL INCOME AS PER THE ORDER U/S 143(3) (II) DATED 26.12.2001 ADD: UNABSORBED DEPRECIATION DISALLOWED PERTAINING TO A.Y. 1995 - 96 TO AY 1999 - 2000 RS.8,72,91,070 RS.44,81,61,141 RS.53,54,52,211 ITA NO. 2693/MUM/2015 3 4. AGGRIEVED BY THE ORDER PASSED BY THE AO U/S 154, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS HELD THAT THE ISSUE WHETHER UNABSORBED DEPRECIATION BEYOND 8 YEARS CAN BE ALLOWED TO BE SET OFF OR NOT IS CLEARLY A DEBATAB LE ISSUE AND THE SAME CANNOT BE RECTIFIED BY INITIATING PROCEEDING U/S 154 OF THE ACT. THEREFORE, THE LD. CIT(A) DELETED THE DISALLOWANCE OF LOSS OF RS.44,81,61,141/ - MADE BY THE AO U/S 154 OF THE ACT. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER U/S 154 PASSED BY THE AO. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIES INTER ALIA ON THE DECISION IN THE CASE OF GEN ERAL MOTORS INDIA (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME - TAX [2012] 25 TAXMANN.COM 364 (GUJARAT HIGH COURT), DEPUTY COMMISSIONER OF INCOME - TAX CIRCLE 3 (1) VS. BAJAJ HINDUSTAN LTD. [2014] 47 TAXMANN.COM 333 (MUMBAI - TRIBUNAL), SMITH & NEPHEW HEALTHCARE (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME - TAX [2014] 50 TAXMANN.COM 420 (MUMBAI - TRIBUNAL) AND T.S. BALRAM, INCOME TAX OFFICER VS. V OLKART BROTHERS [1971] 82 ITR 50 (SUPREME COURT), CIT VS. M/S HINDUSTAN UNILEVER LTD. (ITA NO. 1873 OF 2013) BY THE BOMBAY HIGH COURT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ISSUE RAISED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P.) LTD. (SUPRA) . THE QUESTION BEFORE THE HONBLE HIGH COURT WAS WHETHER THE UNABSORBED DEPRECIATION PERTAINING TO AY 1997 - 98 CO ULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY FINANCE ACT 2001? WE FIND THAT THE HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER: ITA NO. 2693/MUM/2015 4 HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARI FIED THAT UNDER SECTION 32 (2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION U/S 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE AY 1997 - 98, 1999 - 2000, 2000 - 01 AND 2001 - 02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE AY 2002 - 03 THEN IT WOULD BE CARRI ED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATION IS DEDUCTIBLE IN SUCH FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF, SUCH DEPRECIATION AMO UNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDU CTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURREN T DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIA TION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (AY 2002 - 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM AY 1997 - 98 UPTO THE A Y 2001 - 02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002 - 03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS O F SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. [EMPHASIS UNDERLINED] ITA NO. 2693/MUM/2015 5 6.1 NOW WE REFER TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S HINDUSTAN UNILEVER LTD. (SUPRA) . THE RELEVANT QUESTION OF LAW BEFORE THE HIGH COURT IS MENTIONED BELOW: 7. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN DIRECTING TO ALLOW THE SET OFF OF BROUGHT FORWARD DEPRECIATION LOSSES OF AMALGAMATING COMPANY FOR THE ASSESSMENT YEARS 1996 - 97 AND 1997 - 98 I.E. FOR THE PERIOD PRIOR TO AMENDMENT IN SUB - SECTION (2) OF SECTION 32 OF THE ACT W.E.F. 01/04/2002? THE HONBLE HIGH COURT HELD AS UNDER: 6. REGARDING QUESTION NO.7: (A) THE IMPUGNED ORDER OF THE TRIBUNAL HAS ALLOWED THE RESPONDENT - ASSESSEES APPEAL ON THE ISSUE OF A LLOWING UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1996 - 97 AND 1997 - 98 WHICH WAS CARRIED FORWARD TO BE SET OFF IN THE SUBJECT ASSESSMENT YEAR. (B) THE GRIEVANCE OF THE APPELLANT IS THAT IN VIEW OF THE FETTER (OF EIGHT YEARS) IN CARRYING FORWARD DEPRECIATION FOR ASSESSMENT YEAR 1997 - 98 UPTO ASSESSMENT YEAR 2002 - 03, THE SET OFF OF THE SAME CANNOT BE ALLOWED IN THIS ASSESSMENT YEAR. (C) WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL WHILE ALLOWING THE ASSESSEE - RESPONDENTS CLAIM FOLLOWS THE DECISIO N OF THE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT REPORTED IN 354 ITR 244 WHEREIN ON IDENTICAL FACTS IT WAS HELD THAT THE UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 1997 - 98 UPTO ASSESSMENT YEAR 2001 - 02 COULD BE ALLOWED TO BE SET O FF, IF IT WAS STILL UNABSORBED ON 1 ST APRIL, 2001. THE ABOVE DECISION ALSO PLACED UPON THE CBDT CIRCULAR NO. 14 OF 2001 DATED 22 ND NOVEMBER, 2001 TO HOLD THAT ANY UNABSORBED DEPRECIATION WHICH IS AVAILABLE ON 1 ST DAY OF APRIL, 2001 WOULD BE DEALT WITH IN A CCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED BY THE FINANCE ACT 2001. MOREOVER, THE CIRCULAR NO. 14 OF 2001 ISSUED BY THE CBDT CLARIFIES ITA NO. 2693/MUM/2015 6 THAT RESTRICTION OF THE EIGHT YEARS TO CARRY FORWARD AND SET OFF THE UNABSORBED DEPRECIATION HA S BEEN DISPENSED WITH. CONSEQUENTLY, UNABSORBED DEPRECIATION FOR THE INTERVENING PERIODS BETWEEN ASSESSMENT YEAR 1997 - 98 UPTO 2001 - 02, IF AVAILABLE IN THE ASSESSMENT YEAR 2002 - 03 WOULD BE ALLOWABLE AS PART OF CARRIED FORWARD DEPRECIATION FROM ASSESSMENT YE AR 2002 - 03 ONWARDS. NO DECISION CONTRARY TO THE DECISION OF THE GUJARAT HIGH COURT HAS BEEN SHOWN TO US. IT IS CLARIFIED THAT ALTHOUGH THE DECISION OF THE GUJARAT HIGH COURT WAS RENDERED IN CONTEXT OF RE - OPENING NOTICE IT HAS ALSO EXAMINED THE ISSUE ON MER ITS AND DREW SUPPORT FROM THE CBDT CIRCULAR WHICH IS BENEFICIAL TO THE ASSESSEE TO CONCLUDE AS AFORESAID. NOTHING HAS BEEN SHOWN TO US TO INDICATE WHY THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS (INDIA) LTD. SHOULD NOT BE FOLLOWED IN THE PRESE NT FACTS. 6.2 IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA (P.) LTD. (SUPRA) AND HONBLE BOMBAY HIGH COURT IN M/S HINDUSTAN UNILEVER LTD. (SUPRA) , WE UPHOLD THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. NOW WE TURN TO THE C ROSS O BJECTION FILED BY THE ASSESSEE WHICH READS AS UNDER: 1. RE: NON ADJUDICATION OF ALLOWABILITY TO SET OFF UNABSORBED DEPRECIATION OF RS.42,88,61,141 PERTAINING TO AYS 1995 - 96 TO 1999 - 200 0: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS), HAS ERRED IN NOT ADJUDICATING GROUND NO. 1 THAT UNABSORBED DEPRECIATION AMOUNTING TO RS.42,88,61,141/ - (PERTAINING TO AYS 1996 - 96 TO 1999 - 2000) I S ELIGIBLE TO BE CARRIED FORWARD AND ADJUSTED AGAINST THE TAXABLE INCOME IN THE IMPUGNED YEAR UNDER APPEAL. ITA NO. 2693/MUM/2015 7 9. AS MENTIONED HERE - IN - ABOVE , OUT OF SET OFF OF UNABSORBED DEPRECIATION OF RS.71,70,52,454/ - ALLOWED BY THE AO DURING THE AY 2008 - 09, AN AMOUNT OF UNABSORBED DEPRECIATION OF RS.44,88,61,141/ - PERTAINS TO AY 1995 - 96 TO 1999 - 2000. THE AO DISALLOWED THE ABOVE CLAIM OF UNABSORBED DEPRECIATION BY ORDER U/S 154 DATED 03.02.2014. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE RELEVANT GROUND OF APPEAL TAKEN BY THE ASSESSEE READS AS UNDER: GROUND 1: DISALLOWED OF UNABSORBED DEPRECIATION OF RS.44,81,61,141/ - PERTAINING TO AY 1995 - 96 TO AY 1999 - 2000. 1.1 THE LD. AO ERRED IN DISALLOW ING THE UNABSORBED DEPRECIATION OF RS.44,81,61,141 FOR THE PERIOD AY 1995 - 96 TO AY 1999 - 2000 ON THE GROUND THE SUCH DEPRECIATION CANNOT BE CARRIED FORWARD AND ADJUSTED IN THE IMPUGNED YEAR UNDER APPEAL. 1.2. THE LD. AO ERRED IN INVOKING POWERS UNDER SECTION 1 54 OF THE ACT IN DISALLOWING THE UNABSORBED DEPRECIATION OF RS.44,81,61,141/E FOR THE PERIOD OF AY 1995 - 96 TO AY 1999 - 2000 RELYING ON THE DECISION IN THE CASE OF DCIT VS. TIMES GUARANTY [41 DTR 193 (MUM.)]. 1.3. THE LD. AO ERRED IN HOLDING THAT THE ISSUE U NDER CONSIDERATION IS NOT A DEBATABLE ISSUE WHILE PLACING RELIANCE ON A JUDICIAL DECISION, TO DISALLOW THE UNABSORBED DEPRECIATION. 1.4. THE LD. AO FAILED TO APPRECIATE THAT THE POWER CONFERRED BY THE PROVISIONS OF SECTION 154 OF THE ACT IS A POWER TO CO RRECT APPARENT MISTAKE AND NOT A POWER OF REVIEW. 1.5. WITHOUT PREJUDICE TO THE ABOVE , THE LD. AO ERRED IN WRONGLY DISALLOWING UNABSORBED DEPRECIATION OF RS.44,81,61,141/ - AS AGAINST RS.42,88,61,141/ - PERTAINING TO AY 1995 - 96 TO AY 1999 - 2000. ITA NO. 2693/MUM/2015 8 10. AS MENT IONED HERE - IN - ABOVE , THE LD. CIT(A) HAS ALLOWED THE ABOVE GROUND OF APPEAL FILED BY THE ASSESSEE. THEREFORE, THE CROSS - OBJECTION RAISED BY THE ASSESSEE ON THE ABOVE GROUND IS DISMISSED. 11. TO SUM UP, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 12 /07/2017. SD/ - SD/ - (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 12/07/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI