LAVINO KAPUR COTTONS P.LTD, MUMBAI V. ITO 3(2)(1), MUMBAI

ITA 3619/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8394 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2016
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Business income; Depreciation; Carry forward of business losses; Unabsorbed depreciation
• Section: 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 3619 / MUM/20 1 6 ( ASSESSMENT YEAR : 2008 - 09 ) M/S. LAVINO KAPUR COTTONS PVT. LTD., 121/122, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI 400 021 VS. ITO 3(2)(1), MUMBAI PAN/GIR NO. AAACL0824C APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI SURINDER MEHTA REVENUE BY SHRI A. RAMACHANDRAN DATE OF HEARING 07/11 /2016 DATE OF PRONOUNCEME NT 17 / 02 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2008 - 09 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 254. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE. 1 A) THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN NOT ALLOWI NG DEDUCTION FOR LOSS OF RS. 1,1 0,14,646 OF 100% EXPORT ORIENTED UNIT ELIGIBLE FOR U /S 10 B OF THE ACT AGAINST THE BUSINESS INCOME OF INELIGIBLE UNIT OF THE APPELLANT COMPANY AND INCOME OF THE APPELLANT COMPANY FROM CAPITAL GAINS. B) THAT THE CIT(A) HAS ERRED IS NOT FOLLOWING THE FOLLOWING DECISIONS OF THE BOMBAY HIGH COURT IN THE FOLLOWING CASE BROUGHT TO HIS NOTICE: - (I) C.I.T V/S GALAXY SURFACTANTS LTD. 343 ITR 108. ITA NO. 3619/MUM/2016 M/S. LAVINO KAPUR COTTONS PVT. LTD., 2 (II) HINDUST AN UNILEVER LTD. V/S D.C.I.T 325 ITR 103. (III) C.L.T V/S SHANTIVIJAY JEWELS LTD. 374 ITR 520. C) THAT THE C.LT.(A) HAS ERRED IN RELYING UPON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF C.I.T V/ S BLACK & VEATCH CONSULTING PVT. LTD. 348 ITR 72 (BOR N) TO DENY THE CLAIM OF THE APPELLANT COMPANY. D) THAT THE ISSUE INVOLVED IN BLACK & VEATCH'S CASE WAS ENTIRELY DIFFERENT AND THE C.LT (A) HAS CLEARLY MISDIRECTED HIMSELF. E) THAT THE ONLY ISSUE INVOLVED IN BLACK & VEATCH'S CASE WAS WHETHER DEDUCTION U / S 10 A OF THE ACT IS ALLOWABLE IN RESPECT OF INCOME OF ALLOWABLE UNIT UNDER SECTION 10 A BEFORE SETTING OFF BROUGHT FORWARD LOSSES OF A NON - SECTION 10 A UNIT. IN THE SAID CASE THE BOMBAY HIGH COURT HAS NO WHERE HELD THAT THE LOSSES OF ELIGIBLE UNIT ARE NOT TO BE SETOFF AGAINST PROFITS OF INELIGIBLE UNITS AND VISE VERSA. F) THAT THE C.I.T (A) HAS ERRED IN STATING THAT IN THE CASE BEFORE THE BOMBAY HIGH COURT RELIED UP ON THE APPELLANT'S COMPANY THE ISSUE WAS REGARDING SET OFF OF LOSS OF ELIGIBLE UNITS U/ S 1 0 B OF THE ACT AGAINST THE INCOME FROM OTHER UNITS UNDER THE SAME HEAD OF INCOME, WHILE IN THE CASE OF THE APPELLANT COMPANY THE DEDUCTION HAS BEEN CLAIMED AGAINST INCOME FROM OTHER HEADS. G) THAT AS IS APPARENT FROM THE FACTS RECORDED AT SEVERAL PLACES I N THE APPELLATE ORDER, THE APPELLANT COMPANY HAS CLAIMED SETOFF OF LOSS OF ELIGIBLE UNIT U/S 10 B AGAINST THE BUSINESS INCOME OF INELIGIBLE UNIT AND INCOME FROM CAPITAL GAINS AND AS SUCH THE DECISIONS OF THE BOMBAY HIGH COURT RELIED UPON BY THE APPELLANT AR E FULLY APPLICABLE. 2.A) THAT THE C I T ( A) HAS ERRED 111 NOT FOLLOWING THE FOLLOWING BOARD CIRCULARS PLACED BEFORE HIM : - (I) CIRCULAR NO.7 OF2003 DATED 05.09.2003 WHICH CLARIFIED THAT WITH A VIEW TO RATIONALIZE THE EXI STING INCENTIVES IN RESPECT OF 10 A & 10 B UNITS THE PROVISIONS OF THE ACT HAVE BEEN AMENDED TO DO AWAY WITH RESTRICTION ON THE CARRY FORWARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION. IN THE SAID CIRCULAR IT IS FURTHER CLARIFIED THE AMENDMENT HAS BEEN BROUGHT INTO EFFECT RETROSPECTIVEL Y FROM 01.04.200I AND IS MADE APPLICABLE TO BUSINESS LOSS OR UNABSORBED DEPRECIATION ARISING IN ASSESSMENT YEAR 2001 - 2002 AND SUBSEQUENT YEAR. ITA NO. 3619/MUM/2016 M/S. LAVINO KAPUR COTTONS PVT. LTD., 3 (II) CIRCULAR/INSTRUCTION NO.7 (D Y) OF 2013 DATED 16TH JULY 2013 WHEREIN THE COMPLETE HISTORY OF SECTION 10 A, 1 0 B ETC WAS GIVEN AND THE RELEVANT PORTION OF CIRCULAR NO.7 OF 2003 WAS REPRODUCED AN IT WAS CLARIFIED THAT IRRESPECTIVE OF THEIR CONTINUED PLA CEMENT IN CHAPTER ILL, SECTION 10 A & 10 B AS SUBSTITUTED BY THE FINANCE ACT 2000 PROVIDED FOR DEDUCTION OF THE PROF IT AND GAINS DERIVED FROM EXPORTS. IN THE SAID CIRCULAR IT IS EXPRESSLY STATED THAT FIRSTLY THE INCOME / IOSS FROM VARIOUS SOURCES I.E ELIGIBLE AND INELIGIBLE UNITS, UNDER THE SAME HEAD ARE TO BE AGGREGATED IN ACCORDANCE WITH PROVISION OF SECTION 70 OF THE ACT. IN THE SAID CIRCULAR IT IS FURTHER EXPLAINED THAT THEREAFTER THE INCOME OR LOSS OF ONE HEAD IS TO AGGREGATED WITH INCOME OF OTHER HEAD IN ACCORDANCE WITH PROVISIONS OF SECTION 71. B) THAT BOTH THE CIRCULARS BEING CLARIFICATORY IN NATURE ARE APPLICAB LE FROM 01.04.200 1 AND IN THE APPELLATE ORDER PASSED IT HAS BEEN WRONGLY STATED THAT CIRCULAR RELIED UPON BY THE APPELLANT IS OF 2013 WHICH IS NOT APPLICABLE TO THE APPELLATE CASE. C) THAT NOT FOLLOWING THE APPLICABLE BOARD CIRCULARS WHICH ARE 100% APPLIC ABLE TO THE APPELLANT'S CASE HAS RESULTED IN GRAVE 'ERROR' IN THE ORDER PASSED. D) THAT THE APPELLANT COMPANY MAY BE ALLOWED THE BENEFIT OF BOARD CIRCULAR WHICH ARE 100% APPLICABLE TO THE FACTS OF THE PRESENT CASE 3.A) THAT THE COMMISSIONER OF INCOME - T AX (APPEALS) HAS ERRED IN NOT ADJUDICATING ON GROUND NO.2 OF GROUNDS OF APPEAL FILED BEFORE HIM. B) THAT THE SAID GROUND OF APPEAL RELATE TO CARRY FORWARD OF BALANCE UNABSORBED LOSS OF RS.54,98,861. THE APPELLANT COMPANY IS ENTITLED TO CARRY FORWARD OF B ALANCE UNABSORBED LOSS AND THE NECESSARY RELIEF MAY BE ALLOWED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN MANUFACTURING OF ABSORBENT COTTON AND FINISHED PRODUCTS. DURING THE COURSE OF SCRUTI NY ASSESSMENT, AO DECLINED ASSESSEES CLAIM OF DEDUCTION U/S.10B. THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF AO FOR DECIDING AFRESH AFTER VERIFYING THE FACTS. ITA NO. 3619/MUM/2016 M/S. LAVINO KAPUR COTTONS PVT. LTD., 4 5. IN THE SECOND RO UND, AO DID NOT ALLOW SET OFF LOS S IN 10B UNIT ARISING OUT OF CURRE NT YEARS DEPRECIATION AGAINST THE INCOME OF OTHER INELIGIBLE UNITS. 6. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF AO BY RELYING ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF KEI INDUSTRIES LTD., 57 TAXMAN 412. AGAINST THIS ORDER OF CIT( A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT ASSESSEE S CLAIM OF SET OFF LOS S IN RESPECT OF ITS 10B UNIT ARISING IN THE FORM OF CURREN T YEAR DEPRECIATION WAS DECLINED BY THE AO TO BE SET OFF AGAINST THE PROFIT OF OTHER UNITS. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF GALAXY SURFACTANTS LTD., 343 ITR 108 WHEREIN HIGH COURT HELD AS UNDER: - HELD THAT THE FACT THAT UNABSORBED DEPRECIATION COULD BE CARRIED FORWARD TO A SUBSEQUENT YEAR DID NOT MILITATE AGAINST THE ENTITLEMENT OF THE ASSESSEE TO SET OFF THE LOSS WHICH WAS SUSTAINED BY AN ELIGIBLE UNIT AGAINST THE INCOME ARISING FROM OTHER UNITS UNDER THE SAME HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE LEGISLATURE NOT HAVING INTRODUCED A STATUTORY PROHIBITION, THERE WAS NO REASON TO DEPRIVE THE ASSESSEE OF THE NORMAL ENTITLEMENT WHICH WOULD FLOW OUT OF THE PROVISIONS OF SECTION 70. 8. WE FOUND THAT ISSUE IS ALSO COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN UNILEVER LIMITED., 325 ITR 103 AND BY THE DECISION IN CASE OF SHANTIVIJAY JEWELS LTD., 374 ITR 520. ITA NO. 3619/MUM/2016 M/S. LAVINO KAPUR COTTONS PVT. LTD., 5 9. RESPECTFULLY FOLLOWING THESE JUDIC IAL PRONOUNCEMENTS, WE DO NOT FIND ANY JUSTIFICATION FOR DECLINING SETTING OF SUCH LOSS AGAINST INCOME OF OTHER UNITS. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 17 / 02 /2017 SD/ - ( RAVISH SOOD ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 17 / 02 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//