M/s Narmada Transmission P.Ltd., Bhopal V. The ACIT, Bhopal

ITA 361/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2766 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 13-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32; 56

Judgement Text

PAGE 1 OF 5 -. I.T.A.NO. 361/IND/2009 NARMADA TRANSMISSION, BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AABCMN0638B I.T.A.NO. 361/IND/2009 A.Y. : 2006-07 M/S.NARMADA TRANSMISSION PVT.LTD., ACIT, 6/1, INDUSTRIAL ESTATE, VS 2(1), GOVINDPURA, BHOPAL. BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI S. S. DESHPANDE, C. A. RESPONDENT BY : SHRI P.K. MITRA, SR. DR DATE OF HEARING : 29.06.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-I, BHOPAL , DATED 18.05.2009, FOR THE ASSESS MENT YEAR 2006-07. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THE LD.CIT(A) HAS ERRED IN TREATING THE RENT AS PROPERTY INCOME INSTEAD OF BUSINESS INCOME. PAGE 2 OF 5 -. I.T.A.NO. 361/IND/2009 NARMADA TRANSMISSION, BHOPAL. 2. THE LD.CIT(A) OUGHT TO HAVE DIRECTED TO ALLOW CA RRY FORWARD OF DEPRECIATION AND SET IT OFF AGAINST THE OTHER INCOME. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE DISCLOSE D INCOME FROM BUSINESS AT RS. 10,79,716/- AND INCOME FROM HOUSE P ROPERTY AT RS. 2,24,070/- IN THE RETURN OF INCOME. HOWEVER, AFTER CLAIMING SET OFF OF CARRY FORWARD LOSS AT RS. 13,03,800/-, THE TOTAL IN COME WAS WORKED OUT AT NIL. THE AO, HOWEVER, ESTIMATED BUSINESS INCOME AT RS. 6,33,697/- BY REDUCING A SUM OF RS. 6,13,986/- COMPRISING OF INTE REST ON FDR AT RS.2,25,066/-, RENT IN RESPECT OF FLAT AT DELHI AT RS. 3,84,120/- AND RS. 4,800/- INCOME FROM HIRE OF MACHINERY. THE AO TREAT ED SUCH INCOMES AS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S. THEREAFTER, THE AO SET OFF THE BROUGHT FORWARD LOSS TO THE TUNE OF RS. 6,33,697/- AGAINST THE BUSINESS INCOME AND COMPUTED BUSINESS INCOME AT NIL. THE AO, HOWEVER, ASSESSED THE TOTAL INCOME AT RS. 6,13,986/ -. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A), WHO HELD THAT INTEREST ON FDRS IN THE FACTS OF THE CASE WAS TO BE CONSIDERED AS BUSINESS INCOME. AS REGARD TO MACHINERY HIRE CHARGES, THE LD .CIT(A) HELD THAT IT WAS TO BE CONSIDERED UNDER THE HEAD INCOME FROM OT HER SOURCES AS PER THE PROVISIONS OF SECTION 56(2)(III) OF THE ACT. AS REGARD TO RENTAL INCOME, THE LD.CIT(A) HELD THAT IT WAS TO BE TREATED AS INC OME FROM HOUSE PAGE 3 OF 5 -. I.T.A.NO. 361/IND/2009 NARMADA TRANSMISSION, BHOPAL. PROPERTY ONLY. THE LD.CIT(A) ALSO HELD THAT THE AO WAS ALSO CORRECT IN NOT ALLOWING ANY SET OFF AGAINST THIS INCOME. STILL AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF T HE RENT WAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY, THEN THE LD.CIT(A) SHOULD HAVE GIVEN DEDUCTIONS ADMISSIBLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PER THE PROVISIONS OF SECTION 24 OF TH E ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE AO HAD TREATED IT INCOME FROM OTHER SOURCES AS EVIDENT FROM THE ASSESSMENT ORDER, HENC E, THE OBSERVATIONS OF THE LD.CIT(A) THAT THE AO HAD TREATED DELHI FLATS R ENT AS INCOME FROM HOUSE PROPERTY WERE NOT CORRECT. HE FURTHER SUBMITT ED THAT APART FROM CARRIED FORWARD UNABSORBED BUSINESS LOSS, THE ASSES SEE WAS ALSO HAVING UNABSORBED DEPRECIATION FOR FINANCIAL YEAR 2000-01 TO 2003-04 AND, HOWEVER, THE UNABSORBED DEPRECIATION OF FINANCIAL Y EAR 2000-01 WAS TO THE TUNE OF RS. 9,74,953/- AND IF THE SAME WAS SET OFF AGAINST THE INCOME FROM OTHER SOURCES OR INCOME FROM HOUSE PROPERTY, T HEN, THE TOTAL INCOME WOULD BECOME NIL. IN THIS REGARD, HE REFERRED TO TH E PROVISIONS OF SECTION 32(2) AND THE PROVISIONS OF SECTION 72 OF THE ACT. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ESCORTS ELECTRONICS LIMITED VS. CIT, AS REPORTED IN 258 ITR 23, AND ON THE ORDER OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF BARODA SPINNING VS. CIT, AS PAGE 4 OF 5 -. I.T.A.NO. 361/IND/2009 NARMADA TRANSMISSION, BHOPAL. REPORTED IN 238 ITR 221. THE LD. COUNSEL ALSO SUBMI TTED THAT HON'BLE DELHI HIGH COURT HAD FOLLOWED THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF BIRMANI INDUSTRIES PRIVATE LIM ITED AS REPORTED IN 216 ITR 607. ACCORDINGLY, HE ONCE AGAIN REITERATED THAT THE UNABSORBED DEPRECIATION CARRIED FORWARD FROM EARLIER YEARS WOU LD BE SET OFF AGAINST THE INCOME ASSESSED U/S 56 AS INCOME FROM OTHER SOU RCES AND INCOME FROM HOUSE PROPERTY. HE ALSO SUBMITTED THAT THERE W AS NO PROHIBITION IN ANY PROVISION OF LAW IN RESPECT OF SUCH SET OFF. 6. THE LD. SENIOR D.R. ,ON THE OTHER HAND, PREFERRED T O RELY ON THE ORDER OF THE LD.CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IN SUM AND SUBSTANCE, THE ASSESSEE IS CONCERNED THA T THE QUANTUM OF TOTAL INCOME ASSESSED BY THE REVENUE AUT HORITIES AND CARRY FORWARD OF BUSINESS LOSS/UNABSORBED DEPRECIATION TH EREAFTER. IN THIS REGARD, WE ARE OF THE VIEW THAT IF THE INCOME FROM HOUSE PROPERTY SHOULD BE REWORKED OUT AFTER GIVING DUE DEDUCTION TO THE A SSESSEE U/S 24 OF THE ACT. WE ARE FURTHER OF THE VIEW THAT UNABSORBED DEP RECIATION CARRIED FORWARD FROM EARLIER YEARS IS LIABLE TO BE SET OFF AGAINST THE OTHER INCOMES OF A PARTICULAR ASSESSMENT YEAR AS PER THE PROVISIO NS OF LAW I.E. SECTION 32 AND SECTION 72 PREVAILING AT THE RELEVANT POINT OF TIME AS JUDICIALLY PAGE 5 OF 5 -. I.T.A.NO. 361/IND/2009 NARMADA TRANSMISSION, BHOPAL. NOTICED IN THE DECISIONS CITED BY THE LD.COUNSEL F OR THE ASSESSEE AND, THEREAFTER, THE UNABSORBED DEPRECIATION CARRIED FOR WARD FROM EARLIER YEARS SHOULD BE SET OFF SUCH INCOME FROM HOUSE PROPERTY A ND THE INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND TOTAL INCOME AND QUANTUM OF UNABSORBED LOSSES AND UNABSORBED DEP RECATION TO BE CARRIED FORWARD SHOULD BE WORKED OUT ACCORDINGLY. T HUS, GROUND NO.1 OF THE ASSESSEE STANDS PARTLY ALLOWED AND GROUND NO.2 IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH JUNE, 2010. CPU* 296