The DCIT, Circle-1(1), Baroda V. Baroda Extrusion Ltd., Baroda

ITA 2725/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8133 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: SAKET BAKSHI
• Keywords: Depreciation; Business expenditure; Difference of opinion; Unabsorbed depreciation; Change of opinion
• Section: 147

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] YS [KK LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] YS [KK LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] YS [KK LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] YS [KK LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ) ./ I.T.A. NO.2725/AHD/2014 ( / ASSESSMENT YEAR : 2007-08) THE DCIT, CIRCLE -1(1), BARODA. / VS. BARODA EXTRUSION LTD. AT & PO. GARADYA, TAL-SAVLI, BARODA-391 770 ./ ./ PAN/GIR NO. : AAACB 7733 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI V. K. SINGH, SR. DR / RESPONDENT BY : SHRI SAKET BAKSHI, AR / DATE OF HEARING 01/11/2017 !'# / DATE OF PRONOUNCEMENT 23/11/2017 $% / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA, DATE D 17.07.2014 FOR THE ASSESSMENT YEAR (AY) 2007-08, ON THE FOLLOWING GROUNDS: I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF CARRIED F ORWARD UNABSORBED DEPRECIATION TO THE ASSESSES FOR A.Y. 19 96-97 & A.Y.1997-98 BEING RS.36,16,083/- AND RS.51,45,427/- RESPECTIVELY, HOLDING THAT THE AMENDMENT BROUGHT IN SECTION 32(2) OF THE INCOME TAX ACT W.E.F. 01.04.2002 (A.Y. 2002-03) IS APPLICABLE TO THE PRESENT CASE. ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 2 - II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN NOT APPRECIATING THAT IN THE ASS ESSEES CASE, THE UNABSORBED DEPRECIATION PERTAINED TO A.YS 1996- 97 & 1997- 98 WHICH ARE GOVERNED BY THE PROVISIONS OF SECTION 32(2) OF THE INCOME-TAX ACT AS AMENDED BY THE FINANCE (NO.2) ACT , 1996 W.E.F. 01.04.1997 AND THEREFORE, THE SAME ARE NOT L IABLE TO BE CARRIED FORWARD FOR SET-OFF BEYOND EIGHT ASSESSMENT YEARS. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, ASSESSMENT U/S.143(3) WAS COMPLETED ON 10.12.2009 DETERMINING TOTAL LOSS AT RS.5,47,24,794/-. IT WAS NOTICED THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THEREFORE , AFTER RECORDING REASONS FOR REOPENING THE ASSESSMENT U/S.147 OF THE I.T. ACT, A NOTICE U/S.148 WAS ISSUED ON 29.03.2012 AND WAS SERVED UPO N THE ASSESSEE. THE ASSESSEE COMPANY SUBMITTED ITS REPLY ON 24.01.2013 OBJECTING THE REOPENING U/S.147 OF THE I.T. ACT, STATING THAT VAR IOUS JUDICIAL AUTHORITIES HAVE BEEN HELD THAT EVEN AFTER THE AMENDMENT TO SEC TION 147 W.E.F. 1 ST APRIL, 1989 R-OPENING SIMPLY BASED ON A CHANGE OF O PINION WAS NOT VALID. 3. IT IS FOUND THAT THE ASSESSEE COMPANY HAD SHOWN THE WAIVER AS A PART OF ONE TIME SETTLEMENT SCHEME (OTS) FROM DENA BANK AND THE SOUTH INDIAN BANK TOTAL AMOUNTING TO RS.3,97,30,813/- AFT ER CLAIMING DEDUCTION AMOUNTING TO RS.72,23,626/- ON THE GROUNDS THAT IT IS RELATED TO INTEREST PAYABLE AND UNPAID, WHICH HAD ALREADY BEEN DISALLOW ED IN EARLIER YEARS AND MARGIN MONEY INTEREST OF RS.20,837/- TOTALING R S.3,97,51,651/- WAS CONSIDERED AS INCOME COVERED BY THE HEAD 'PROFITS A ND GAINS OF BUSINESS', HOWEVER, THE AMOUNT OF RS.3,97,51,650/- WAS CORRECTLY ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 3 - COVERED BY THE HEAD 'INCOME FROM OTHER SOURCES'. TH US AO STATED THAT COMPANY WAS NOT ENTITLED TO SET OFF EARLIER BUSINES S LOSS AGAINST 'INCOME FROM OTHER SOURCES' AND SENT NOTICE TO EXPLAIN AS T O WHY IT CONSIDERED AS INCOME FROM OTHER SOURCES. 4. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE COM PANY SUBMITTED ITS REPLY, WHICH IS REPRODUCED AS FOLLOWS: THE BENCH OF BOARD FOR INDUSTRIAL AND FINANCIAL RE CONSTRUCTION (BIFR) HAVING SATISFIED ITSELF ABOUT THE VIABILITY OF BARODA EXTRUSION LTD (BEL) SANCTIONED THE REHABILITATION SCHEME ON 1 9.09.2001 AS THE COMPANY BECAME 'SICK' WITHIN THE MEANING OF SECTION 3(1)(O) OF SICA. BIFR ALLOWED CERTAIN RELIEF AND CONCESSION IN THE F ORM OF RESCHEDULING OF OUTSTANDING TERM LOAN AND CONVERSION OF INTEREST CHARGED BY BANKS FROM DATE OF SANCTION LIMIT TILL DATE OF SANCTION O F SCHEME BY IT IN TO FUNDED INTEREST TERM LOAN (FITL) AND WORKING CAPITA L TERM LOAN (WCTL). INTEREST CHARGED BY EACH OF THE BANKS WAS D EBITED TO PROFIT AND LOSS ACCOUNT AND CLAIMED AS EXPENDITURE IN THE YEAR IN WHICH IT WAS ACCRUED. THE ABOVE REFERRED SCHEME SANCTIONED BY BIFR DELAYE D BY BANKERS AND THEY WERE NOT READY FURTHER REHABILITAT ION AND REQUESTED BEL TO SETTLE ITS DUES UNDER OTS SCHEME. ACCORDINGL Y DENA BANK AND THE SOUTH INDIAN BANK LTD AGREED TO SETTLE THEIR OU TSTANDING DUES AS UNDER: NAME OF THE BANK BALANCE AS PER BOOK AMOUNT AGREED UNDER OTS DIFFERENCE DENA BANK 303.76 113.71 190.05 THE SOUTH INDIAN BANK LTD. 384.24 108.00 276.24 TOTAL 466.29 LESS : INTEREST DISALLOWED IN EARLIER YEARS U/S.43B 72.23 NET BALANCE REPRESENTING INTEREST CLAIMED 394.06 ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 4 - AND ALLOWED AS EXPENDITURE IN EARLIER YEARS AMOUNT NOT PAYABLE TO CREDITORS WRITTEN BAK 3.25 TOTAL REMISSION 397.31 2.2 AS THE REMISSION OF ABOVE LIABILITIES TO BANKS REPRESENTS THE REVERSAL OF EXPENDITURE WHICH HAS ALREADY BEEN ALLO WED ALLOWABLE BUSINESS EXPENDITURE IN PREVIOUS YEARS THE REMISSIO N OF SUCH LIABILITIES BY BANKS IN THE YEAR 2006-07 AMOUNTS TO DEEMED BUSI NESS PROFIT AND HENCE THE SAME SHOULD BE ALLOWED TO BE SET OFF AGAI NST BROUGHT FORWARD BUSINESS LOSSES OR UNABSORBED DEPRECIATION. 2.3 THE EXTRACT OF SEC 41(I)(A) OF THE INCOME T AX ACT IS REPRODUCED BELOW FOR YOUR INFORMATION. 'WE AN ALLOWANCE OF DEDUCTION HAS BEEN MADE IN THE ASSESSMENT YEAR FOR ANY YEAR IN RESPECT IF LOSS, EXPENDITURE O R TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREIN AFTER REFERRED TO AS FIRST MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR; A. THE FIRST MENTIONED PERSON HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF S UCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CONCESSION THEREOF THE AMOUNT OBTAI NED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHAL L BE DEEMED TO BE PROFIT AND GAINS OF BUSINESS OR PROFESSION AND ACCO RDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLO WANCE OR THE DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEA R OR NOT' IN VIEW OF THE LEGAL POSITION AS EXPLAINED ABOVE TH E REMISSION OF INTEREST LIABILITY BE BANKS WHICH WAS ALLOWED AS AN EXPENDIT URE AGAINST THE INCOME OF EARLIER YEARS WOULD ALWAYS CONSIDERED AS DEEMED BUSINESS PROFIT. IT MAY KINDLY BE NOTED THAT INTEREST ON BAN K LOANS IS BUSINESS EXPENDITURE AS THE LOANS RELATED TO THE BUSINESS AN D IN ANY CASE HAVE IN THE PAST ALWAYS BEEN CLAIMED AS BUSINESS EXPENDITUR E. AND HENCE ANY REMISSION IN THE LIABILITY OF SUCH INTEREST WOULD A LWAYS BE CONSIDERED AS A BUSINESS PROFIT UNDER SECTION 41 UNDER THE HEAD ' PROFIT OR GAINS FROM BUSINESS OR PROFESSION'. ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 5 - 2.4 IN ANY CASE, ANY INCOME UNDER SECTION 41 WO ULD ALWAYS BE A PART OF THE HEAD PROFIT OR GAINS FROM BUSINESS OR PROFE SSION AND HENCE CAN BY NO STRETCH OF IMAGINATION BE TREATED AS INC OME FROM OTHER SOURCES. SINCE THE REMISSION OF LIABILITY IS A BUSINESS INCO ME, THE SAME WAS VALIDLY SET-OFF BY THE COMPANY AGAINST ITS CARRIED FORWARD BUSINESS LOSSES. 5. SUBMISSION OF THE ASSESSEE COMPANY HAD BEEN CONS IDERED BUT NOT FOUND TENABLE IN THE EYES OF THE AO AND LD. AO ASSE SSED TOTAL INCOME OF RS.2,14,50,123/-. THE AO HAS STATED IN HIS ORDER TH AT INCOME FROM OTHER SOURCES CAN BE SET OFF AGAINST UNABSORBED DEPRECIAT ION OF EARLIER YEAR AS PER THE PROVISION OF SECTION U/S.32 OF I.T. ACT. FU RTHER, THE UNABSORBED DEPRECIATION PERTAINING TO A.Y.1996-97 & A.Y.1997-9 8 CANNOT BE ALLOWED TO BE SET OF AGAINST THE INCOME OF A.Y.2007 -08. THEREFORE, THE REMAINING AVAILABLE UNABSORBED DEPRECIATION IS ALLO WED TO BE SET OFF AGAINST THE INCOME OF A.Y. 2007-08 6. AGAINST THE SAID ORDER, ASSESSEE PREFERRED APPEA L BEFORE LD. CIT(A), WHO ALLOWED THE APPEAL OF THE APPELLANT. 7. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LD. AR STATED THAT THIS CASE IS SQUARELY COVERED BY THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DEPUTY COMMISSIONER OF I NCOME TAX (2012) 25 TAXMANN.COM 365 (GUJ.). HE STATED THAT AO HAD DE NIED THE BENEFIT OF SET-OFF OF UNABSORBED DEPRECIATION BROUGHT FORWARD FROM A.Y.1996-97 AND A.Y.1997-98, WITHOUT ASSIGNING ANY REASON. IT I S SUBMITTED BY THE ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 6 - ASSESSEE THAT THE SAID BENEFIT MAY HAVE BEEN DENIED ON ACCOUNT OF POSITION OF LAW PREVAILING DURING THE SAID ASSESSME NT YEARS. AS PER LD.AR THE SAID DENIED IS WITHOUT CONSIDERING THE SUBSEQUE NT AMENDMENT IN THE LAW AND THE JUDICIAL DECISION RENDERED IN THIS RESP ECT. AS PER LD.AR THE UNABSORBED DEPRECIATION FOR A.Y.1996-97 AND A.Y.199 7-98 BEING RS.36,16,083/- AND RS.51,45,427/- RESPECTIVELY, HAD BEEN CORRECTLY BROUGHT FORWARD BY IT AS THE SAME WAS ALLOWABLE UND ER SECTION 32(2) AS THE SAID SECTION WAS AGAIN AMENDED BY THE FINANCE A CT, 2001, WHICH ENTITLED THE COMPANY TO TREAT THE SAID DEPRECIATION AS CURRENT DEPRECIATION WITHOUT ANY LIMIT OF TIME. THE LD.AR H AS DRAWN OUR ATTENTION TO THE DECISION OF THE JURISDICTIONAL GUJ ARAT HIGH COURT IN THE MATTER OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, IN WHICH IT IS HELD: SECTION-32 OF THE INCOME-TAX ACT, 1961 - DEPRECIAT ION - UNABSORBED DEPRECIATION ASSESSMENT YEAR 2006-07 - WHETHER UNAB SORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1997-98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EI GHT YEARS WITHOUT ANY LIMIT WHATSOEVER IN ACCORDANCE WITH SECTION 32(2) A S AMENDED BY FINANCE ACT 2001 - HELD, YES [IN FAVOUR OF ASSESSEE ] SECTION- 147, READ WITH SECTION 32, OF THE INC OME-TAX ACT, 1961 - INCOME ESCAPING ASSESSMENT - NON-DISCLOSURE OF PR IMARY FACTS - ASSESSMENT YEAR 2006-07 - DURING ASSESSMENT PROCEE DINGS ASSESSING OFFICER CONSIDERED MATERIAL ON RECORD AND TOOK A CO NSCIOUS DECISION IN SCRUTINY ASSESSMENT AND THEREAFTER, AL LOWED UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1997-98 TO BE SET OFF AGAINST INCOME OF ASSESSMENT YEAR 2006-07 - SUBSEQUENTLY AS SESSMENT WAS REOPENED ON GROUND THAT UNABSORBED DEPRECIATION WAS ALLOWED TO BE SET OFF IN VIOLATION OF PROVISIONS OF AMENDED SECTION 3 2(2) - WHETHER ORIGINAL ASSESSMENT ORDER COULD NOT BE REOPENED AS IT AMOUNTED TO CHANGE OF OPINION BY ASSESSING OFFICER - HELD, YES [IN FAVOUR OF ASSESSEE] ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 7 - 8. WE HAVE CONSIDERED THE SUBMISSION OF THE ASSESS EE. WE OBSERVED THAT THIS CASE IS SQUARELY COVERED BY THE GUJARAT M OTORS INDIA PVT. LTD. (SUPRA) WHEREIN IT IS HELD THAT ANY UNABSORBED DEPR ECIATION AVAILABLE TO AN ASSESSEE ON FIRST DAY OF APRIL, 2002 (AY 2002-03 ) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION-32(2) AS AMENDED BY FINANCE ACT 2001. AS PER THE HONBLE HIGH COURT OF GUJARAT THUS, ONCE THIS CIRCULAR NO. 14 OF 2001 OF CBDT CLARIFIED THAT THE RESTRICTION OF ATS FOR CARRY FORWARD AND SET-OFF OF UNABSORBED DEPRECIATIO N HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO A.Y.2001-02 GOT CARRIED FORWARD TO A.Y.2002-03 AND BECAME PART. 9. IN OUR CONSIDERED OPINION, LD.CIT(A) HAS PASSED THE DETAILED AND REASONED ORDER AND THEREFORE, WE DO NOT FIND ANY RE ASON TO INTERFERE IN THE ORDER PASSED BY THE LD CIT(A). 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/11/2017 SD/- SD/- VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG &' $ ( $ ) ()* $ ) ( AMARJIT SINGH ) ( MAHAVIR PR ASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/11/2017 PRITI YADAV, SR.PS ITA NO.2725/AHD /2014 THE DCIT VS. BARODA EXTRUSION LTD. ASST.YEAR 2007-08 - 8 - !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , -. / / CONCERNED CIT 4. / () / THE CIT(A)-I, BARODA. 5. 012 **-. , -.# , '&$,$ / DR, ITAT, AHMEDABAD 6. 245 6 / GUARD FILE. & ' / BY ORDER, 0 * //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 03/11/2017 (DICTATION-PAD 4 PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15/11/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER