The ACIT, Circle-4, Surat V. Shanta Sizewell Pvt.Ltd., Surat

ITA 347/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5690 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 31-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N VEPARI
• Assessee Lawyers: H P MEENA
• Section: 54; 154

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K.SHARMA, JM AND D.C.AGRAWAL, AM ASSTT. CIT, CIR-4, ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT. SHANTA SIZEWELL (P) LTD, 49/1542. OUTSIDE KAMEL DARWAJA, UMARWADA TEKRA, SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI H. P. MEENA, SR. DR REVENUE BY:- SHRI R. N. VEPARI, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUND:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON AC COUNT OF UNUTILIZED INVESTMENT ALLOWANCE OF RS.9,05,897/-. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT L D. CIT(A) HAS DELETED THE ADDITION MADE ON ACCOUNT OF UNUTILIZED INVESTME NT ALLOWANCE. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF MANUFACTURE AND SALE OF SIZED YARN AND TEXTURISED Y ARN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT AN AM OUNT OF RS.9,05,897/- REMAINED UNUTILIZED AS ON 31.3.2001 U NDER THE HEAD ITA NO.347/AHD/2008 ASST. YEAR :2001-02 2 INVESTMENT ALLOWANCE RESERVE A/C. ACCORDING TO TH E AO THIS AMOUNT WAS REQUIRED TO BE TRANSFERRED TO PROFIT AND LOSS ACCOU NT BECAUSE THE SUM WAS NOT UTILIZED FOR THE SPECIFIC PURPOSE WITHIN THE ST IPULATED TIME AS REQUIRED UNDER SECTION 32A OF THE ACT. THE LD. AO REFERRED T O THE PROVISIONS OF SECTION 32A AND SECTION 155(4A) AND HELD THAT THIS AMOUNT IS TAXABLE IN ASST. YEAR 2001-02 AS INCOME OF THE ASSESSEE. HOWEV ER, LD. CIT(A) DELETED THE ADDITION BY HOLDING THAT THIS WOULD BE TAXABLE IN THE YEAR IN WHICH RESERVE WAS CREATED I.E. 1998-99 BY INVOKING PROVISIONS OF SECTION 155(4A) READ WITH SECTION 154(7). IN THIS REGARD HE OBSERVED AS UNDER :- 2.5 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND OBSERVATION OF THE AO. IT IS SEEN THAT AS PER THE P ROVISIONS OF SECTION 155(4A) IF THE ASSESSEE FAILS TO UTILIZE THE INVEST MENT ALLOWANCE RESERVE THEN THE INVESTMENT ALLOWANCE ORIGINALLY ALLOWED WO ULD BE DEEMED TO HAVE BEEN WRONGLY ALLOWED THEN THE AO IS REQUIRED T O RECOMPUTED THE TOTAL INCOME OF THE ASSESSEE FOR THE RELEVANT PREVI OUS YEAR AND MAKE THE NECESSARY AMENDMENT AND THE PROVISIONS OF SECTION 1 54 SHALL SO FAR AS MAY WILL APPLY THERE TO AND THE PERIOD OF FOUR YEAR S SPECIFIED IN SECTION 154(7) SHALL BE RECKONED FROM THE END OF THE 10 YEA RS REFERRED TO IN THAT CLAUSE. THEREFORE THE AO SHOULD HAVE RECTIFIED THE ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR AS PER SECTION 155(4A) R.W .S. 154(7). THERE IS NO PROVISION FOR MAKING THE ADDITION TO THE ASSESSM ENT YEAR OTHER THAN THE ASSESSMENT YEAR IN WHICH THE INVESTMENT ALLOWAN CE WAS ALLOWED. HENCE THE ADDITION MADE IN ASST. YEAR 2001-02 IS WR ONG AS PER THE PROVISIONS OF THE ACT. SINCE NO ADDITION CAN BE MAD E FOR THE CURRENT YEAR THE MERIT OF THE ADDITION IS NOT DISCUSSED AND ON T ECHNICAL GROUND THE ADDITION MADE BY THE AO IS DELETED AS IT CANNOT BE MADE IN ASST. YEAR 2001-02. HENCE THIS GROUND OF APPEAL IS ALLOWED ON TECHNICAL GROUND. 4. WE HAVE HEARD THE PARTIES. THERE IS NO DISPUTE W ITH THE PROPOSITION THAT UNUTILIZED INVESTMENT RESERVE HAS TO BE TRANSF ERRED TO THE PROFIT AND LOSS ACCOUNT. THE QUESTION IS WHEN IT IS TAXABLE. W HETHER IN THE YEAR IT WAS TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT OR I N THE YEAR WHEN THE RESERVE WAS CREATED. WHILE INTRODUCING SUB-SECTION (4A) IN SECTION 155 IT WAS EXPLAINED THAT WHERE THE TAX PAYER DOES NOT UTI LIZE THE AMOUNT 3 CREDITED TO THE INVESTMENT ALLOWANCE RESERVE ACCOUN T WITHIN A PERIOD OF 10 YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH THE SHIP OR AIRCRAFT WAS ACQUIRED OR THE MACHINERY OR PLANT WAS INSTALLE D FOR THE PURPOSES OF ACQUIRING A NEW SHIP OR AIRCRAFT WAS ACQUIRED OR TH E MACHINERY OR PLANT WAS INSTALLED FOR THE PURPOSES OF ACQUIRING A NEW S HIP OR AIRCRAFT OR MACHINERY OR PLANT [OTHER THAN MACHINERY OR PLANT R EFERRED TO IN CLAUSES (A), (B) AND (D) OF THE PROVISO TO SECTION 32A(1)] THE RECTIFICATION OF THE ORIGINAL ASSESSMENT ORDER WILL BE PERMISSIBLE WITHI N A PERIOD OF 4 YEARS FROM THE END OF THE 10 YEARS AFORESAID. WHERE THE TAX PAYER UTILIZES, BEFORE THE EXPIRY OF THE AFORESAID PERIOD OF 10 YEARS, THE AMOUNT CREDITED TO THE INVESTMENT ALL OWANCE RESERVE ACCOUNT FOR DISTRIBUTION BY WAY OF DIVIDENDS OR PRO FITS OR FOR MAKING REMITTANCE OUTSIDE INDIA AS PROFITS OR FOR ANY PURP OSE OTHER THAN A PURPOSE OF THE BUSINESS OF THE UNDERTAKING, THE RECTIFICATI ON OF THE ORIGINAL ASSESSMENT ORDER WILL BE PERMISSIBLE WITHIN A PERIO D OF 4 YEARS FROM THE END OF THE PREVIOUS YEAR IN WHICH THE AMOUNT IS SO UTILIZED. 5. IN THIS REGARD WE MAY ALSO REFER TO SUB-SECTION (4A) WHICH PROVIDES THAT IF INVESTMENT ALLOWANCE RESERVE IS NOT UTILIZE D IN THE WAY IT IS PROVIDED IN SECTION 32A THEN IT SHALL BE DEEMED WRO NGLY ALLOWED AND THE AO MAY NOTWITHSTANDING ANYTHING CONTAINED IN THIS A CT, RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE FOR THE RELEVANT PREVI OUS YEAR AND MAKE NECESSARY AMENDMENT BY INVOKING PROVISIONS OF SUB-S ECTION (7) OF SECTION 154. SUCH RECTIFICATION COULD BE CARRIED OU T WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE 10 YEARS REFERRED TO IN S ECTION 32A OR WHERE ASSET ON WHICH INVESTMENT ALLOWANCE HAS BEEN ALLOWE D HAS BEEN TRANSFERRED THEN WITHIN 4 YEARS FROM THE END OF PRE VIOUS YEAR IN WHICH SALE OR TRANSFER HAS TAKEN PLACE. THUS IT IS THE RE LEVANT ASST. YEAR IN WHICH 4 INVESTMENT ALLOWANCE WAS ORIGINAL ALLOWED SHALL BE SUBJECT TO RECTIFICATION AND UNUTILIZED INVESTMENT ALLOWANCE W OULD BE TAXABLE IN THAT YEAR. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DE LETING THE ADDITION FROM THIS ASST. YEAR. IT HAS BEEN CLEARLY HELD BY HIM TH AT THIS RESERVE WAS CREATED IN 1998-99 AND, THEREFORE, WHEN NOT UTILIZE D IT WOULD BE TAXABLE IN THAT YEAR. THUS WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 02/07/2010 SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 02/07/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD