DCIT, Coimbatore V. Shree Karthik Papers Ltd., Coimbatore

ITA 325/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9625 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 28-04-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2015
• Court: TRIBUNAL
• Assessee Lawyers: A V SREEKANTHJCIT
• Keywords: Unexplained cash credit; Depreciation; Salary income; Unabsorbed depreciation
• Section: 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.325 /MDS./2015 ( / ASSESSMENT YEAR :2006-07) DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1, 63-A,RACE COURSE ROAD, COIMBATORE. VS. M/S.SHREE KARTHIK PAPERS LTD., 25, 50 FEET ROAD, KRISHNASWAMY NAGAR, RAMANATHAPURAM, COIMBATORE 641 045. PAN AADCS 1863 K ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : MR.A.V.SREEKANTH,JCIT, D.R / DATE OF HEARING : 22.03.2016 /DATE OF PRONOUNCEMENT : 06.04.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-1, COI MBATORE DATED 25.11.2014 PERTAINING TO THE ASSESSMENT YEAR 2006- 07 . ITA NO.325/MDS/2014 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL. 01. THE ORDER OF THE LD.CIT(A) IS AGAINST THE LAW AND FACTS OF THE CASE. 02. THE LD.CIT(A) ERRED IN ALLOWING SET OFF OF BUS INESS LOSS FROM THE UNEXPLAINED CASH CREDITS U/S.68 OF THE ACT , IS IN VIOLATION OF THE JURISDICTIONAL HIGH COURTS DECISI ON IN THE CASE OF S.MUTHUKUMARS STANELY RAJAN VS. ITO CITED I N [2014] 42 TAXMANN.COM 439(MAD.), WHEREIN IT WAS HEL D THAT WHEN UNEXPLAINED CASH CREDIT HAD BEEN ADDED TO INCOME, CONTENTION OF ASSESSEE THAT NECESSARY EXPENDITURE SHOULD BE DEDUCTED AND PROFIT ALONE COU LD BE TAKEN AS INCOME COULD NOT BE ACCEPTED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE WANTS TO SET OFF OF INCOME OFFERED U/S.68 OF THE ACT AGAI NST THE LOSS INCURRED BY THE ASSESSEE. THE AO HAD NOT ALLOWED THE SET OF F OF THE INCOME OFFERED U/S.68 OF THE ACT AGAINST THE LOSS INCURRED IN ALL THE REGULAR HEADS OF INCOME SPECIFIED IN SECTION 14 OF THE ACT. THE AO ALLOWED ONLY SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIA TION TO THE EXTENT OF PROFIT AVAILABLE. AGAINST THIS, THE ASSESSEE WA S IN APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) PLACED REL IANCE ON THE JUDGEMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENSING ITA NO.325/MDS/2014 3 VENTURES REPORTED IN 291 ITR 258(MAD.) WHEREIN HELD THAT TH E INCOME TAX IS ONLY ONE TAX AND LEVIED ON THE SUM TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARIOUS HEADS. SECTION 14 HAS CLASSIFIED THE DIFFERENT HEADS OF INCOME AND INCOME UNDER EACH HEAD IS SEPARATELY COMPUTED. INCOME WHICH IS COMPUTED I N ACCORDANCE WITH LAW IS ONE INCOME AND IT IS NOT A COLLECTION O F DISTINCT TAX LEVIED SEPARATELY ON EACH HEAD OF INCOME AND IT IS NOT AN AGGREGATE OF VARIOUS TAXES COMPUTED WITH REFERENCE TO EACH OF TH E DIFFERENT SOURCES SEPARATELY AND ALSO THE DECISION OF GUJARA T HIGH COURT IN THE CASE OF RADHE DEVELOPERS INDIA LTD., WHEREIN HELD THAT THE DECISIONS OF THIS COURT IN THE CASE OF FAKIR MOHAMED HAJI HASAN AND KRISHNA TEXTILES ARE NEITHER RELEVANT NOR GERMANE TO THE IS SUE CONSIDERING THE FACT THA IN ONE OF THE DECISIONS THE LEGISLATIVE SC HEME EMANATING FROM CONJOINT READING OF PROVISIONS OF THE SECTION 14 & 56 OF THE ACT HAVE BEEN CONSIDERED. THE APEX COURT IN THE CASE O F D.P.SANDU BROS, CHEMBUR P. LTD HAS DEALT WITH THIS VERY ISSU E WHILE DECIDING THE TREATMENT TO BE GIVEN TO A TRANSACTIONS OF SURR ENDER OF TENANCY RIGHT. THE EARLIER DECISIONS OF THE APEX COURT COM MENCING FROM THE CASE OF UNITED COMMERCIAL BANK LTD. VS. CIT (1957) 32 ITR 688 (SC) ITA NO.325/MDS/2014 4 HAVE BEEN CONSIDERED BY THE APEX COURT AND HENCE, I T IS NOT NECESSARY TO REPEAT THE SAME. SUFFICE IT TO STATE T HAT THE ACT DOES NOT ENVISAGE TAXING ANY INCOME UNDER ANY HEAD NOT SPECI FIED IN SECTION 14 OF THE ACT. IN THE CIRCUMSTANCES, THERE IS NO QU ESTION OF TYING TO READ ANY CONFLICT IN THE TWO JUDGEMENTS OF THIS COU RT AS SUBMITTED BY THE LEARNED COUNSEL FOR THE REVENUE. HENCE, THE L D.CIT(A) DIRECTED THE AO TO ALLOW SET OFF OF CARRIED FORWARD DEPRECI ATION LOSS IN ACCORDANCE WITH SECTION 72 & SECTION 32 OF THE ACT FOR ASSESSMENT YEAR 2006-07. AGAINST THIS THE REVENUE IS IN APPEA L BEFORE US. 4. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD T HE ARGUMENT OF THE LD.D.R AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE SIMILAR ISSUE WAS CAME FOR CONSIDERATION BEFORE THI S TRIBUNAL IN THE CASE OF M/S.ERODE ANNAI SPINNING MILLS PVT LTD.,IN ITA NO.1389/MDS./2015 FOR ASSESSMENT YEAR 2008-09 DATED 30.09.2015 HELD AS FOLLOWS:- 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. PLACING RELIANCE BY THE ASSES SEES COUNSEL ON THE JUDGMENT OF THE TRIBUNAL IN THE CAS E OF SHRI P. SUBRAMANIAN V. ITO IN TA NO.1363/MDS/10 IS TOTA LLY ITA NO.325/MDS/2014 5 MISPLACED. IN THAT CASE, THE ISSUE BEFORE THE TRIB UNAL WAS THAT WHETHER THE BUSINESS LOSS COMPUTED UNDER THE H EAD PROFIT AND LOSS ACCOUNT OF BUSINESS COULD BE SET OF F AGAINST THE INCOME ASSESSED AS UNEXPLAINED U/S.69 OF THE ACT. THE TRIBUNAL CONSIDERED THE FACTS OF THE CASE AND O BSERVED AS BUSINESS LOSS OF THE ASSESSMENT YEAR UNDER CONSI DERATION COULD BE SET OFF AGAINST THE INCOME ASSESSED U/S.68 UNDER THE HEAD OTHER SOURCES. HOWEVER, THE ISSUE ON HA ND BEFORE US IN THIS APPEAL IS WHETHER UNABSORBED DEPRECIATIO N OF EARLIER YEARS COULD BE SET OFF AGAINST DEEMED INCOM E U/S.69 OF THE ACT OR NOT, WHICH IS TOTALLY DIFFERENT ISSU E. SECTION 72 OF THE ACT DOES NOT PERMIT SET OFF OF ACCUMULATED L OSSES AND UNABSORBED DEPRECIATION AGAINST ANY OTHER HEAD OF I NCOME OTHER THAN THE INCOME FROM PROFITS AND GAINS OF BU SINESS OR PROFESSION. BEING SO, THE ABOVE ORDER OF THE TRIB UNAL HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 5. FURTHER, WE PLACE RELIANCE IN THE CASE OF CHAN DRAKUMAR VS. ACIT REPORTED IN [2010] 129 TTJ 0489(CHENNAI TRIB.) WHEREIN HELD THAT:- 7. A READING OF THE SECTIONS 71, 72 AND 32(2) WOULD SHOW THAT S. 71 DEALS WITH INTER-HEAD ADJUSTMENTS WITHIN A GIVEN YEAR. SEC. 72 PROVIDES FOR CARRY FORWARD AND SET OFF OF LOSS, WHEREAS S. 32(2) DEALS WITH CARRY FORWARD OF UNABSORBED DEPREC IATION. THE LAST OF THESE ABOVE REFERRED SECTIONS CLEARLY MENTI ONS THAT UNABSORBED DEPRECIATION HAS TO BE ADDED TO THE DEPR ECIATION ITA NO.325/MDS/2014 6 ALLOWANCE OF THE SUBSEQUENT YEAR AND TO BE CONSIDER ED AS PART OF THE CURRENT DEPRECIATION. THIS POSITION IS CLEAR FROM THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF V IRMANI INDUSTRIES (SUPRA). OF COURSE, THE ORDER OF THE HON 'BLE APEX COURT DOES BRING OUT THE DIFFERENCE BETWEEN UNABSOR BED LOSS AND UNABSORBED DEPRECIATION. NEVERTHELESS UNABSORBE D DEPRECIATION WAS NEVER CONSIDERED AS SOMETHING THAT WAS NOT FALLING UNDER THE HEAD 'PROFITS AND GAINS OF BUSINE SS OR PROFESSION'. SEC. 72 STIPULATES CONDITIONS REGARDIN G CARRY FORWARD AND SET OFF OF BUSINESS LOSS YEAR TO YEAR, BUT THIS WOULD NOT IN ANY WAY HAMPER THE WORKING OF S. 71 WHICH DE ALS WITH INTER-HEAD SET OFF. SUB-S. (2) OF S. 32 HAS STIPULA TED A SPECIAL TREATMENT TO BE GIVEN TO UNABSORBED DEPRECIATION WH ERE IT IS NOT ABSORBED IN ANY GIVEN YEAR. SUCH A SPECIAL TREATMEN T, IN OUR OPINION, WOULD NEVER TAKE IT OUT OF THE HEAD 'PROFI TS AND GAINS OF BUSINESS OR PROFESSION'. EACH OF THE ABOVE SECTIONS DEALS WITH DIFFERENT ASPECTS REGARDING SET OFF AND CARRIED FOR WARD, AND HAVE TO BE HARMONIOUSLY INTERPRETED, SO THAT APPLIC ATION OF ONE OF SUCH SECTIONS WOULD NOT NEGATE THE OTHER. IF WE LOOK AT SUB-S. (2) OF S. 71 OF THE ACT AGAIN, IT CLEARLY SPECIFIES THAT IF THE NET RESULT OF COMPUTATION OF THE INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IS A LOSS, THEN A SET OFF OF SUCH LOSS CANNOT BE MADE AGAINST INCOME ASSESSABLE UNDER THE HEAD SALARIES. SO WHAT IS TO BE SEEN IS THE NET RES ULT OF COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION'. ONCE UNABSORBED DEPRECIATION IS CONSID ERED AS PART OF CURRENT DEPRECIATION, NO DOUBT, THE NET RES ULT OF COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION' FOR ANY GIVEN YEAR WOULD BE INCLUSIVE O F SUCH UNABSORBED DEPRECIATION. NEEDLESS TO SAY THAT ANY L OSS AS A RESULT OF SUCH COMPUTATION WHETHER ON ACCOUNT OF UN ABSORBED DEPRECIATION OR NOT WOULD NOT BE SUSCEPTIBLE TO A S ET OFF AGAINST INCOME UNDER THE HEAD SALARIES ON ACCOUNT OF SPECIF IC BAR CONTAINED IN SUB-S. (2A) OF S. 71 OF THE ACT. NEITH ER S. 72 NOR S. 32(2) OF THE ACT WOULD IN ANY WAY AFFECT THE INTER- HEAD ADJUSTMENTS SPECIFIED UNDER S. 71 OF THE ACT NOR TH E APPLICATION OF SPECIFIC BAR CONTAINED IN SUB-S. (2A) THEREOF. T HIS BEING THE CASE, WE ARE OF THE OPINION THAT THE AO AS WELL AS THE LEARNED ITA NO.325/MDS/2014 7 CIT(A) WAS WELL JUSTIFIED IN NOT ALLOWING THE CLAIM OF THE ASSESSEE FOR HAVING ITS UNABSORBED DEPRECIATION FRO M EARLIER YEARS TO BE SET OFF AGAINST SALARY INCOME. ACCORDINGLY, WE ARE OF THE OPINION THAT THE CIT(A) IS JUSTIFIED IN DISALLOWING SET OFF OF UNABSORBED DEPRECIATION FROM EARLIER YEARS AGAINST INCOME FROM OTHER SOURCES . HENCE, THE APPEAL OF REVENUE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 6 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) ( ( () * + ) ) ! CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 6 TH APRIL,2016 . K S SUNDARAM. -.,, /0,10 /COPY TO: , 1. /APPELLANT 2. /RESPONDENT 3. , 2,!' /CIT(A) 4. , 2 /CIT 5. 034, 5 /DR 6. 4&,6 /GF