ACIT, Muzaffarnagar V. M/s. Ashirwad Steel & Alloys (P) Ltd., Muzaffarnagar

ITA 346/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74152 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS KUMAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 142(1); 263

Judgement Text

ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `A NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER I.T.A.NO.346/DEL/2012 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, VS ASHIRWAD S TEEL & ALLOYS(P) LTD., CIRCLE 2, MUZAFFARNAGAR. MEERUT ROAD, MUZAFFARNAGAR. (PAN: AADC4543J) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI B. SRINIVAS KUMAR, SR.DR RESPONDENT BY : SHRI ANKIT GUPTA O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX(A), MUZAFFARNAGAR DATED 11.10.2011 IN APPEAL NO. 234/10-11/MZR FOR AY 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN LAW BY ALLOWING TO SET OFF UNABSORBED DEPRECIATION RELATING TO AY 2000-01 AND 2001-02 AGAINST THE INCOME FROM OTHER SOURCES BY IGNORING THE ORDER DATED 29.04.2011 OF THE HONBLE ITAT, DELHI BENCH C NEW DELHI IN ITA NO. 4983/DEL/2010 IN THE CASE OF ACIT, CIRCLE-I, MUZAFFARNAGAR VS M/S HRJ STEELS(P) LTD. MUZAFFARNAG AR WHERE IT WAS HELD THAT AMOUNT OF CURRENT DEPRECIATI ON FOR AY 1997-98 TO 2001-02 WHICH CANNOT BE SET OFF SHALL BE CARRIED FORWARD FOR A MAXIMUM PERIOD OF 8 ASSESSMEN T ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 2 YEARS AND TO BE SET OFF ONLY AGAINST THE INCOME UND ER THE HEAD PROFIT AND GAIN OF BUSINESS OR PROFESSION. 2. THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED . 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE CASE WAS SELECTED FOR SCRUTINY AND ORDER U/S 143(3) OF THE I NCOME TAX ACT WAS PASSED ON 26.12.2008 BY THE ITO (TECH) MUZAFFARNAGAR. SUB SEQUENTLY, THE ITO(TECH), MUZAFFARNAGAR MOVED A PROPOSAL U/S 263 O F THE ACT ON 31.03.2009 AND THE COMMISSIONER OF INCOME TAX, MUZA FFARNAGAR VIDE HIS ORDER DATED 29.03.2010 U/S 263 OF THE ACT DIRECTED THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT AFTER MAKING APPROPRIATE INQU IRY. DURING THE FRESH ASSESSMENT, NOTICE U/S 143(2) AND 142(1) ALONG WITH QUESTIONNAIRE WERE SERVED ON THE ASSESSEE. THE ASSESSING OFFICER OBSE RVED THAT THE ASSESSEE HAS SHOWN INCOME OF RS.2,05,20,000 IN THE FORM OF PENAL TY/DAMAGES FOR NOT EXECUTING SALE OF AGRICULTURE LAND MEASURING 19 BIG HAS SITUATED IN SANGANER, JAIPUR. THE ASSESSEE HAS SHOWN THIS INCOME AS ITS BUSINESS INCOME. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE H AS CLAIMED AND CARRIED FORWARD LOSSES AND ITS SET-OFF AGAINST THIS BUSINES S INCOME. THE ASSESSING OFFICER OBSERVED THAT LAND TRANSACTION OF THE COMPA NY WHICH RESULTED IN IMPUGNED INCOME IS NOT A BUSINESS ACTIVITY AND THE SAME CANNOT BE TREATED AS ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 3 BUSINESS INCOME AND THE ASSESSING OFFICER CONSIDERE D THE SAME AS INCOME FROM OTHER SOURCES. THE AO FURTHER OBSERVED THAT S INCE THE INCOME IS TREATED AS INCOME FROM OTHER SOURCES, HENCE, NO CAR RIED FORWARD LOSSES ARE ALLOWABLE FROM THIS INCOME. FINALLY, THE ASSESSING OFFICER MADE ADDITION OF RS.2,05,20,000 IN THIS REGARD. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX(A), MUZAFFARNAGAR WHICH WAS PARTLY AL LOWED. THE COMMISSIONER OF INCOME TAX(A) HELD THAT THE INCOME FROM TRANSACTION OF SALE OF LAND CANNOT BE TREATED AS BUSINESS INCOME B UT IT IS TO BE ASSESSED UNDER THE HEAD OF INCOME FROM OTHER SOURCES. ON TH E ISSUE OF SET OFF OF INCOME AGAINST BROUGHT FORWARD BUSINESS LOSS/UNABSO RBED DEPRECIATION, THE COMMISSIONER OF INCOME TAX(A) HELD THAT THE UNABSOR BED DEPRECIATION/BUSINESS LOSS IS TO BE ALLOWED FOR SET OFF AGAINST INCOME FROM OTHER SOURCES AND THE BALANCE UNABSORBED DEPRECIATI ON/BUSINESS LOSS IS TO BE ALLOWED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEA RS. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL IN THE SECOND APPEA L WITH THE GROUNDS AS REPRODUCED HEREINABOVE. 5. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD PLACED BEFORE US. AT THE OUTSET , WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX(A) HAS HELD THAT THE INC OME OF ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 4 RS.2,05,20,000/- RECEIVED IN THE FORM OF PENALTY/DA MAGES IS NOT AN INCOME FROM BUSINESS BUT THE SAME IS INCOME FROM OTHER SOU RCES. THIS FINDING OF COMMISSIONER OF INCOME TAX(A) HAS GONE AGAINST THE ASSESSEE AND THE ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTIO N AGAINST THIS FINDING OF COMMISSIONER OF INCOME TAX(A) AND THUS, FINDING OF COMMISSIONER OF INCOME TAX(A) IN THIS REGARD HAS ATTAINED FINALITY. 6. COMING TO THE ISSUE OF SET OFF OF CARRIED FORWAR D BUSINESS LOSS/UNABSORBED DEPRECIATION, WE OBSERVE THAT THE C IT(A) HAS ALLOWED SET OFF OF UNABSORBED DEPRECIATION/BUSINESS LOSS AGAINS T THE INCOME FROM OTHER SOURCES AND THE BALANCE UNABSORBED DEPRECIATION/BUS INESS LOSS HAVE ALSO TO BE ALLOWED TO BE CARRIED FORWARD. LD. DR SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE VERDICT OF THE COMMISSIONER OF INCOME TAX(A) THAT THE IMPUGNED INCOME WAS INCOME FROM OTHER SOURCES AND I NCOME UNDER THE HEAD OF OTHER SOURCES CANNOT BE ALLOWED TO BE SET O FF AGAINST BUSINESS LOSS/UNABSORBED DEPRECIATION. THE DR FURTHER CONTE NDED THAT THE COMMISSIONER OF INCOME TAX(A) MISINTERPRETED THE PR OVISIONS OF THE ACT AND THE SET OFF WAS WRONGLY ALLOWED FOR THE ASSESSE E. REPLYING TO THE ABOVE, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT AS PER O RDER OF ITAT, DELHI C BENCH IN ITA NO. 4983/DEL/2010 FOR AY 2004-05 DATED 29.4.2011, THE ASSESSEE CAN CLAIM SET OFF OF UNABSORBED DEPRECIATI ON AGAINST INCOME UNDER ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 5 ANY HEAD OTHER THAN PROFITS AND GAINS OF BUSINESS O R PROFESSION, PROVIDED THE SAME IS RELATED TO THE ASSESSMENT YEAR PRIOR TO 199 7-98 OR TO THE AY 2002-03 AND THEREAFTER. THE RELEVANT OPERATIVE PART OF ABO VE JUDGMENT OF ITAT C BENCH DELHI READS AS UNDER:- 14. ADVERTING TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASSESSEE HAS ALSO CLAIMED SET OFF OF UNABSORBED DEPRECIATION AROSE IN THE SECOND PERIOD I.E. AY 197-98 TO 2001-02, WHICH WAS NOT ADJUSTED AGAINS T THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION PRIOR TO THE AY 2004-05 UNDER CONSIDERATION. THEREFORE, NOW, THE ASSESSEE CANNOT CLAIM SET OFF OF UNABSORBED DEPRECIATION ALLOWANCE PERTAI NING TO THE AY 1997-98 TO 2001-02 AGAINST INCOME UNDER A NY HEAD OTHER THAN PROFITS AND GAINS OF BUSINESS OR PROFESSION IN THE PRESENT YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE CAN CLAIM SET OFF OF UNABSORB ED DEPRECIATION AGAINST INCOME UNDER ANY HEAD OTHER TH AN PROFITS AND GAINS OF BUSINESS OR PROFESSION PROVIDE D THE SAME IS RELATED TO THE ASSESSMENT YEAR PRIOR TO AY 1997- 98 OR TO THE AY 2002-03 AND THEREAFTER. IT IS ALSO TO BE NOTED THAT DEPRECIATION PERTAINING UPTO AY 1996-97 CAN ONLY BE ALLOWED TO BE SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS STARTING FROM AY 1997-98. WE, THEREFORE, HOLD THAT THE AO SHALL ALLOW ASSESSEES CLAIM OF SET OFF OF UNABS ORBED DEPRECIATION AROSE IN THE AY 1997-98 TO 2001-02 ONL Y AGAINST THE INCOME UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS OR PROFESSION. HOWEVER, THE AO SHALL BE ENTITLED TO ALLOW SET OFF OF UNABSORBED DEPRECIATIO N PERTAINING UPTO THE AY 1996-97 AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT YEARS STARTI NG FROM AY 1997-98. THE AO MAY ALLOW SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO THE AY 2002-0 3 ONWARDS AGAINST INCOME UNDER ANY HEAD. THE AO SHALL EXAMINE THE ASSESSEES CLAIM OF UNBSORBED DEPRECIAT ION ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 6 AND SHALL ASCERTAIN THE RELEVANT ASSESSMENT YEARS I N WHICH THE UNABSORBED DEPRECIATION HAD ARISEN, AND T HEN DECIDE THE MATTER IN THE LIGHT OF OUR OBSERVATION M ADE ABOVE AFTER FOLLOWING THE DECISION OF THE SPECIAL B ENCH IN THE CASE OF DCIT VS. TIMES GUARANTY LIMITED (SUPRA) . WE DIRECT ACCORDINGLY. 7. FROM THE IMPUGNED ORDER, WE OBSERVE THAT THE COM MISSIONER OF INCOME TAX(A) HAS RELIED ON ITS OWN JUDGMENT IN THE CASE OF M/S PARIJAT PAPER MILLS LTD., MUZAFFARNAGAR IN APPEAL NO. 33/09 -10/MZR DATED 12.08.2010 FOR AY 2007-08. ON SPECIFIC QUERY FROM THE BENCH, LD. DR AS WELL AS COUNSEL APPEARING FOR THE ASSESSEE SUBMITTE D THAT THE ABOVE ORDER OF ITAT DELHI C BENCH IN THE CASE OF ACIT VS M/S HRJ STEELS PVT. LTD. HAS NOT BEEN SET ASIDE OR MODIFIED BY ANY HIGHER FORUM. THUS, WE ARE OF THE CONSIDERED OPINION THAT THE JUDGMENT OF ITAT C BE NCH DELHI HOLDS THE FIELD AND THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THIS JUDGMENT. ACCORDINGLY, WE ARE INCLINED TO HOLD THA T THE COMMISSIONER OF INCOME TAX(A) WAS RIGHT IN HOLDING THAT THE INCOME SHOWN BY THE ASSESSEE AS DAMAGES/PENALTY FOR NON-EXECUTION OF SALE DEED O F LAND WAS INCOME ASSESSABLE UNDER THE HEAD OF INCOME FROM OTHER SOUR CES. AT THE SAME TIME, WE ALSO HOLD THAT THE CLAIM OF THE ASSESSEE FOR SET OFF AGAINST THIS INCOME FOR BUSINESS LOSS/UNABSORBED DEPRECIATION REQUIRES A TH OROUGH EXAMINATION AND VERIFICATION AT THE END OF ASSESSING OFFICER IN THE LIGHT OF ITAT C BENCH, DELHI IN THE CASE OF ACIT VS M/S HRJ STEEL PVT. LTD . (SUPRA). UNDER THESE ITA NO.346/DEL/2012 ASSTT.YEAR: 2006-07 7 CIRCUMSTANCES, THE IMPUGNED ORDER IS SET ASIDE AND THE ISSUE OF ALLOWABILITY OF SET OFF OF INCOME FROM OTHER SOURCES AGAINST BUS INESS LOSSES/UNABSORBED DEPRECIATION IS RESTORED TO THE FILE OF ASSESSING O FFICER WITH A DIRECTION THAT THE ASSESSING OFFICER SHALL EXAMINE AND VERIFY THE ISSUE AND CLAIM OF THE ASSESSEE IN THE LIGHT OF RATIO LAID DOWN BY ITAT C BENCH DELHI IN THE CASE OF ACIT VS M/S HRJ STEEL (SUPRA). NEEDLESS TO MENT ION THAT THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFTER AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND ASSESSEE IS ALSO DIRECTED TO COOPE RATE WITH THE ASSESSING OFFICER DURING THE RELEVANT PROCEEDINGS. 8. WITH THE ABOVE DIRECTIONS, THE APPEAL OF THE REV ENUE IS DISPOSED FOR AND DEEMED TO BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.1.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 31 ST JANUARY 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR