The DCIT, Central Circle-1, Baroda V. Shri Kiritbhai Dalsukhbhai Patel, Baroda

ITA 327/AHD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2178 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RD LALCHANDANI
• Assessee Lawyers: AVINASH KUMAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT. BEFORE S/SHRI SHAILENDRA KUMAR YADAV, JM & N. S. SAINI, AM ITA NO.327/RJT/2013 ASST. YEAR 2009-10 SHRI KARTIKBHAI J. DOSHI, ILLA VILL ASHAPURA ROAD, RAJKOT -360001. VS THE DY. CIT, CEN. PROCE CENTRE, BANGLORE, INCOME-TAX OFFICE, WARD -2 (1), RAJKOT. (APPELLANT) (RESPONDENT) PA NO. APPELLANT BY SHRI R. D. LALCHANDANI, AR RESPONDENT BY SHRI AVINASH KUMAR, DR DATE OF HEARING: 27/5/2015 DATE OF PRONOUNCEMENT: 05/6/2015 O R D E R PER N. S. SAINI, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) III, RAJKOT, DATED 25.7.2013 BY RAISING THE FOLLOWING GROUNDS OF APPEAL:- 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN U PHOLDING THE RECTIFICATION IN THE ORDER U/S 143(1). THE ORDE R U/S 143(1) IS WITHOUT JURISDICTION AND INVALID AS THERE WAS NEITH ER ARITHMETICAL ERROR NOR INCORRECT CLAIM APPARENT FROM FACTS OF RE CORDS. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN C ONFIRMING THE REJECTION OF CLAIM OF SET OFF OF CARRY FORWARD DEPRECIATION TO THE EXTENT OF RS.3,66,837/-. ITA NO.327/RJT/2013 ASST. YEAR 2009-10 2 1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE O N RECORD. IN THE INSTANT CASE THE ASSESSEE HAS DISCLOSED INCOME FROM HOUSE PROPERTY AT RS. 1, 73, 607/-, INCOME FROM BUSINESS AND PROFESSI ON AT (-) RS.4, 17, 469/-, AND INCOME FROM OTHER SOURCES RS. 7,87,048/- . AGAINST THE AFORESAID INCOME OF RS.5,43,186/- THE ASSESSEE CLAI MED SET-OFF OF UNABSORBED BROUGHT FORWARD DEPRECIATION OF RS 3, 66 ,837/- RELATING TO THE ASSESSMENT YEAR 2004-05, 2005-06, 2007-08 AND 2 008-09. THE ABOVE SET-OFF WAS NOT ALLOWED TO THE ASSESSEE IN TH E INTIMATION PASSED UNDER SECTION 143(1) ON 18-09-2010. 2. AGAINST THIS THE ASSESSEE PREFERRED AN APPEAL BE FORE THE COMMISSIONER OF INCOME TAX APPEALS. THE COMMISSIONE R OF INCOME TAX APPEALS REJECTED APPEAL OF THE ASSESSEE BY OBSERVIN G UNDER: 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE APPELLANT AND THE REPORT OF THE ASSESSING OFFICER. IT IS SEEN THAT THE ASSESSING OFFICER IS RIGHT IN SAYING THAT THE LOSS OF RS.3,66,837/- B/F LOSS FROM EARLIER YEARS ON ACCOUNT OF UNABSORBED DE PRECIATION CANNOT BE SET OFF AGAINST INCOME FROM OTHER SOURCES. SINCE THE DEPRECIATION IS A PART OF BUSINESS LOSS, ONLY THE CARRIED FORWARDED PURPOSES FOR LONGER PERIOD IT IS SEPARATED FROM BUSINESS LOSS. IN INCOM E-TAX ACT, THERE IS NO SEPARATE NCOME HEADFOR DEPRECIATION. SINCE THE UNABSORBED DEPRECIATION OF EARLIER YEAR IS A PART OF THE BUSIN ESS LOSS OF EARLIER YEARS, THE SAME IS NOT ALLOWABLE U/S 72 OF I.T. ACT , 1961 TO SET OFF AGAINST INCOME OF INCOME FROM OTHER SOURCES IN THE SUBSEQUENT YEARS. IN THIS CASE, IN THE YEAR UNDER CONSIDERATIO N THE APPELLANT HAS SHOWN INCOME OF INTEREST ON FD AND BANK INTEREST OF RS.7,87,048 UNDER THE HEAD INCOME FROM OTHER SOURCES WHERE FROM THE APPELLANT WANT TO SET OFF BROUGHT FORWARD BUSINESS LOSS (UNAB SORBED DEPRECIATION IS A PART OF BUSINESS LOSS), WHICH IS NOT ALLOWABLE UNDER SECTION 72 OF THE I.T. ACT. KEEPING IN VIEW THE ABOVE FACT AND PR OVISION OF THE I.T. ACT U/S 72 THE ASSESSING OFFICER HAS (CPC) RIGHTLY DISALLOWED SET OFF OF UNABSORBED DEPRECIATION AGAINST INCOME FROM OTHE R SOURCES. THIS GROUND OF APPEAL IS DISMISSED. ITA NO.327/RJT/2013 ASST. YEAR 2009-10 3 3. WE FIND THAT IT IS NOT IN DISPUTE THAT RS.3,66,8 37/-RELATED TO UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR S 2004 05, 2005 06, 2007 08, AND 2008 09. 4. AS PER PROVISIONS OF SECTION 32 (2) OF THE INCOM E TAX ACT UNABSORBED APPRECIATION OF EARLIER YEARS ARE DEEMED AS CURRENT YEARS DEPRECIATION. THUS IN VIEW OF THE ABOVE DEEMING PRO VISION RS.3,66,837/- IS TO BE DEEMED AS DEPRECIATION OF TH E CURRENT YEAR. ON SUCH DEEMING THE ASSESSEES BUSINESS INCOME OF CURR ENT YEAR COMES TO A LOSS OF RS. 7, 84, 306/-. THE CURRENT YEARS BUSI NESS LOSS SO ARRIVED AT IS ALLOWABLE AS SET-OFF AGAINST INCOME FROM OTHE R SOURCES OF RS.7,87,048/-AS PER PROVISIONS OF SECTION 71 OF THE ACT. 5. THUS IN OUR CONSIDERED VIEW THE LOWER AUTHORITIE S WERE NOT JUSTIFIED IN NOT ALLOWING SET-OFF OF BROUGHT FORWAR D UNABSORBED APPRECIATION TO THE ASSESSEE. 6. THE COMMISSIONER OF INCOME TAX APPEALS ERRED IN OBSERVING THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION IS PART OF BUSINESS LOSS GOVERNED BY SECTION 72 OF THE ACT. UNDER THE SCHEME OF THE INCOME TAX ACT UNABSORBED DEPRECIATION AND BUSINESS LOSS A RE TREATED SEPARATELY OR DIFFERENTLY, THOUGH BROUGHT FORWARD B USINESS LOSS IS GOVERNED BY SECTION 72 OF THE ACT BUT UNABSORBED BR OUGHT FORWARD DEPRECIATION IS GOVERNED BY SECTION 32(2) OF THE AC T. OUR ABOVE VIEW IS SUPPORTED BY THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF CIT V VIRMANI INDUSTRIES PVT. LTD AND OTHER S (1999) 216 ITR 607(SC) WHEREIN IT HAS BEEN HELD THAT IF AFTER SETT ING OFF THE UNABSORBED DEPRECIATION ALLOWANCE RELATING TO ASSES SMENT YEAR 1956- ITA NO.327/RJT/2013 ASST. YEAR 2009-10 4 57 AGAINST THE INCOME OF THE FOLLOWING ASSESSMENT Y EARS, ANY DEPRECIATION ALLOWANCE STILL REMAINED UNABSORBED IT COULD BE SET OFF AGAINST THE INCOME FOR THE ACCOUNTING PERIOD RELEVA NT TO THE ASSESSMENT YEAR 1965-66. 7. THEREFORE WE DIRECT THE ASSESSING OFFICER TO ALL OW SET OFF OF UNABSORBED DEPRECIATION OF RS.3,66,837/- IN COMPUTI NG THE TOTAL INCOME OF THE YEAR UNDER CONSIDERATION AND ALLOW TH IS GROUND OF APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONO UNCED IN THE OPEN COURT ON 05/06/2015 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER ( N. S. SAINI ) ACCOUNTANT MEMBER DATED : 5/6/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.327/RJT/2013 ASST. YEAR 2009-10 5 1. DATE OF DICTATION: 4/6/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 4/6/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 05/06/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: