The ACIT, Circle-2, RAJKOT-GUJARAT V. M/s. Ambica Recycling Industries, JAMNAGAR

ITA 365/RJT/2013

• Counselvise Citation: 36524914 RSA 2013
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI
• Assessee Lawyers: VIMAL DESAI CA
• Keywords: Depreciation; Carry forward of business losses; Unabsorbed depreciation
• Section: 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA JM AND SHRI B. R. JAIN AM ITA NO. 365/RJT/2013 / ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, JAMNAGAR. ( / APPELLANT V/S M/S AMBICA RECYCLING IND., PLOT NO. 621/622, GIDC, PHASE-II, DARED, JAMNAGAR. PAN- AAJFA7019E / RESPONDENT ! '# / REVENUE BY DR. J.B. JHAVERI, D.R. $% ! '# / ASSESSEE BY SHRI VIMAL DESAI, C.A. ' & ' %( / DATE OF HEARING 06-01-2014 ) %( / DATE OF PRONOUNCEMENT 09-01-2014 / ORDER PER B. R. JAIN, A. M. : THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 24/07/2013 OF SHRI R.R. PATHAK, THE LEARNED CIT(A), JAMNAGAR RAIS ES THE FOLLOWING GROUNDS:- 1. THE CIT(A) ERRED IN LAW AND IN FACTS IN TREATIN G THE EXEMPTION U/S 10B OF THE ACT AS PER FORM 56G I.E. RS. 97,96,3 19/- AS AGAINST THE AMOUNT OF EXEMPTION RESTRICTED BY THE A .O. TO THE TUNE OF RS. 50,52,266/-. 2. THE CIT(A) ERRED IN LAW AND IN FACTS BY FOLLOWIN G THE METHODOLOGY OF FIRST ALLOWING THE EXEMPTION U/S 10B AND THEN TO SET OFF THE BUSINESS LOSS AND DEPRECIATION ALLOW ANCE THEREAFTER AS AGAINST THE METHODOLOGY ADOPTED BY TH E A.O. I.E. TO FIRST ALLOW SET OFF BROUGHT FORWARD BUSINESS LOS SES AND DEPRECIATION ALLOWANCE AND THEN ALLOW EXEMPTION U/S 10B. 3. THE CIT(A) ERRED IN LAW AND IN FACTS BY MAKING E XCLUSION OF FREIGHT AND INSURANCE IN THE VALUE OF TOTAL TURNOV ER FOR WORKING THE EXEMPTION U/S 10B. ITA365/RJT/2013 2 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 6. THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, ALT ER OR WITHDRAW ANY GROUNDS OF APPEAL. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE, A PARTN ERSHIP FIRM IS REGISTERED AS100% EXPORT ORIENTED UNIT. THE ASSESSE E FIRSTLY CLAIMED EXEMPTION OF RS. 97,96,319/- U/S 10B OF THE I.T. AC T, 1961 (HEREINAFTER REFERRED AS THE ACT) AND THEN SET OFF RESULTANT NET BUSINESS PROFIT OF RS. 67,46,090 AGAINST THE BROUGHT FORWARD BUSINESS LOSS AMOUNTING TO RS. 42,97,187/- AS WELL AS UNABSORBED DEPRECIATION OF RS. 4,30,917/- AND THUS DECLARED INCOME OF RS. 20,17,990/-. THE ASSESSING O FFICER AFTER CONSIDERING THE ENTIRE MATERIAL AND LAW, WAS OF THE OPINION THAT THE PROFITS OF THE ASSESSEE HAVE TO BE COMPUTED AS PER THE PROV ISIONS OF SECTIONS 29 TO 43A OF THE ACT. IN THIS VIEW OF THE MATTER, DEPR ECIATION U/S 32(2) OF THE ACT HAS TO BE DEDUCTED FOR COMPUTING INCOME OF THE ASSESSEE. HE ALSO DID NOT TAKE INTO ACCOUNT THE AMOUNT OF FREIGHT AND INS URANCE AS PART OF TURNOVER IN COMPUTING DEDUCTION U/S 10B OF THE ACT. THE ASSESSING OFFICER ALSO SET OFF THE BROUGHT FORWARD LOSSES BEFORE ALLO WING DEDUCTION U/S 10B OF THE ACT AND ACCORDINGLY RESTRICTED THE DEDUCTION OF RS. 50,52,266/- AGAINST THE CLAIM OF RS. 97,96,319/- MADE BY THE AS SESSEE. 3. THE LD. CIT(A) TAKING THE COMPUTATION OF THE INC OME SUBMITTED BY THE ASSESSEE TO BE CORRECT, DIRECTED THE ASSESSING OFFICER TO COMPUTE THE EXEMPTION U/S 10B OF THE ACT FIRST WITHOUT DEDUCTIN G BUSINESS LOSS AND DEPRECIATION ALLOWANCE AND THEN IF ANY INCOME REMA INS THEN GIVE SET OFF FOR CARRY FORWARD OF BUSINESS LOSSES AND DEPRECIATI ON ALLOWANCE. 4. THE LD. D.R. CONTENDS THAT THE LD. CIT(A) DID NO T ASSIGN ANY REASON FOR ACCEPTING COMPUTATION GIVEN BY THE ASSESSEE. BR OUGHT FORWARD ITA365/RJT/2013 3 DEPRECIATION BECOMES DEPRECIATION OF THE CURRENT YE AR. HE, THEREFORE, IS NOT JUSTIFIED IN NOT DEDUCTING AMOUNT OF DEPRECIATI ON ALLOWANCE FOR DETERMINING BUSINESS PROFITS FOR ALLOWING DEDUCTION U/S 10B OF THE ACT. THERE ALSO IS NO JUSTIFICATION IN NOT SETTING OFF T HE LOSSES BROUGHT FORWARD BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING INCOME EL IGIBLE FOR DEDUCTION U/S 10B OF THE ACT. 5. ON THE OTHER HAND, THE ASSESSEES COUNSEL CONTEN DS THAT THE LD. CIT(A) COMMITTED NO ERROR IN DECIDING THE ISSUES BY FOLLOWING THE JUDGMENT BY THE HONBLE KARNATKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANR. VS. YOKOGAWA INDIA LTD. & ORS. (2 012) 341 ITR 385, IS REPRODUCED AS UNDER:- AS THE INCOME OF 10A UNIT HAS TO BE EXCLUDED AT SO URCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF NON -S.10A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF 10A UNIT UNDER S. 72. THE LOSS INCURRED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION HAS TO BE SET OFF AGAINST TH E PROFITS AND GAINS IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SUCH ASSESSEE. THEREFORE, AS THE PROFITS AND GAINS UNDER S. 10A AR E NOT TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE OF ANY PROFITS AND GAI NS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING W OULD NOT ARISE. SIMILARLY, AS PER S. 72(2), UNABSORBED BUSINESS LOS S IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEARS DEPRECIATION UNDER S. 32(2) IS TO BE SET OFF. AS DE DUCTION UNDER S. 10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARIS E. HE IS ALSO PLACED RELIANCE ON THE JUDGMENT PASSED B Y THE ITAT MUMBAI BENCH IN THE CASE OF VALUEPROCESS TECHNOLOGIES (I) (P) LTD. VS. INCOME TAX OFFICER, WARD 10(3)(1), MUMBAI REPORTED IN (20 13) 141 ITD 447 (MUM). 6. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE ORDER OF THE LD. CIT(A) IS NOT FOUND TO BE A SPEAKING ORDER ON T HE ACCEPTANCE OF THE ASSESSEES COMPUTATION TO BE CORRECT. THE REVENUE A LSO HAS GOT AN ARGUABLE CASE BUT BEFORE DECIDING THE APPEAL, ADEQU ATE OPPORTUNITY TO ITA365/RJT/2013 4 ASSESSING OFFICER HAS NOT BEEN GIVEN. WE, THEREFORE , SET ASIDE THE ORDER AND REMIT THE MATTER BACK TO THE LD. CIT(A) FOR PAS SING A SPEAKING ORDER. HE SHALL ALSO HAVE REGARD TO THE JUDGMENT BY THE HO NBLE KARNATKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX & A NR. VS. YOKOGAWA INDIA LTD. & ORS. (SUPRA) AND JUDGMENT OF THE ITAT MUMBAI BENCH IN THE CASE OF VALUEPROCESS TECHNOLOGIES (I) (P) LTD. VS. INCOME TAX OFFICER, WARD 10(3)(1), MUMBAI (SUPRA), AND TAKE DECISION I N ACCORDANCE WITH LAW AFTER PROVIDING EFFECTIVE OPPORTUNITY OF BEING HEAR D TO BOTH THE PARTIES. 7. IN THE RESULT, REVENUES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2014. SD/- SD/- ( T. K. SHARMA ) ( B. R. JAIN ) '* /JUDICIAL MEMBER #( '* / ACCOUNTANT MEMBER *#+ ,*-/ ORDER DATE 09/01/2014 /RAJKOT *RANJAN / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-, JAMNAGAR. 2. /RESPONDENT- M/S AMBICA RECYCLING IND., JAMNAGAR. 3. '-2- % & 3% / CIT-I, RAJKOT. 4. & 3%- / CIT (A)-, JAMNAGAR. 5. 789 % , , / DR, ITAT, RAJKOT 6. 9; <= / GUARD FILE. *#+ '# / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.