THE ACIT, AHMEDABAD Circle-1, Ahmedabad V. ASMAN INVESTMENT PVT.LTD., Ahmedabad

ITA 3987/AHD/2003

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57163 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-01-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 31-10-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Keywords: Depreciation; Earning of tax free income; Fair market value; Scheme of amalgamation; Unabsorbed depreciation
• Section: 14A

Judgement Text

ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AH MEDABAD (BEFORE SHRI D.K. TYAGI, J.M. AND SHRI A.L. GEHLOT A.M.) I.T.A. NO. 39 87/AHD/2003 (ASSESSMENT YEAR: 2000-01) ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE-1, KENDRITA PRATIKSHA BHAVAN, OPP. OLD SACHVALAYA, AMBAWADI, AHMEDABAD. (APPELLANT) VS. ASMAN INVESTMENT PVT. LTD., ADITYA 1 ST FLOOR, ELLISBRIDGE, AHMEDABAD. (RESPONDENT) PAN: AABCA 5968R APPELLANT BY : SHRI KARTAR SINGH. RESPONDENT BY : MR. S.N.SOPARKAR,SR.ADV WITH MR. P.M. MEHTA. ( )/ ORDER DATE OF HEARING : 31-1-2012 DATE OF PRONOUNCEMENT : 9-2-2012 PER: SHRI A.L. GEHLOT, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT (A)-V, AHMEDABADS ORDER DATED 29-8-2003 FOR THE ASSESSMEN T YEAR 2000-01. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. THE LD. CIT (A) HAS ERRED IN LAW ABND ON FACTS IN DIRECTING TO ALLOW SET OFF OF UNABSORBED DEPRECIATION OF RS.1,28,14,57 8/- IN COMPUTING THE BOOK PROFIT U/S. 115JA. ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 2 2. THE LD. CIT (A) HAS FURTHER ERRED IN DELETING TH E ADDITION MADE BY THE AO IN RESPECT OF SALE CONSIDERATION ADOPTED AT RS.1 6,16,940/- AGAINST RS.1 LAKH SHOWN BY THE ASSESSEE. (IT IS TYPING MISTAKE F IGURE SHOULD BE RS.12 LAKH). 3. THE LD. CIT (A) HAS FURTHER ERRED IN DELETING THE D ISALLOWANCE OF INTEREST OF RS.55,85,616/- MADE BY THE AO INVOKING THE PROVISIONS OF SECTION 14A OF THE I.T ACT. 3. THE BRIEF FACTS OF FIRST GROUND OF APPEAL ARE TH AT THE ASSESSEE-COMPANY CLAIMED SET OFF OF UNABSORBED DEPRECIATION. THE UNA BSORBED DEPRECIATION IS ON ACCOUNT OF 15 COMPANIES WHICH AMALGAMATED WITH THE ASSESSEE-COMPANY W.E.F. 1- 4-1998 AS PER THE JUDGMENT OF GUJARAT HIGH COURT DA TED 23-12-1999 AND 28-12- 1999.THE AO DISALLOWED CLAIM OF ASSESSEE FOR SET OF F OF UNABSORBED DEPRECIATION AS UNDER:- 8.3. THE SUBMISSION MADE BY THE ASSESSEE-COMPANY R EGARDING THE SET OFF OF UNABSORBED DEPRECIATION AND BUSINESS LOSS OF AMA LGAMATING COMPANY WHICH THEY HAD SUFFERED BEFORE THE ORDER WAS RECEIV ED IS NOT ACCEPTABLE. THE THE ASSESSEE-COMPANY HAS FAILED TO APPRECIATE THAT THERE IS NO PROVISION UNDER THE COMPANIES ACT TO AMEND/RECONCILE ACCOUNTS PREPARED IN ACCORDANCE WITH PART II AND III OF SCHEDULE VI. IN VIEW OF THIS THE QUESTION OF ALLOWING SET-OFF OF LOSS OR UNABSORBED DEPRECIAT ION WHICH DO NOT FORMED PART OF ACCOUNT OF THE AMALGAMATED COMPANY DOES NOT ARISE. ACCORDINGLY THE BOOK PROFIT UNDER SECTION 115JA OF THE ACT IS RESTR ICTED AT RS.1,28,14,578/- BEING THE AMOUNT BEFORE SETTING OFF UNABSORBED DEPR ECIATION OF F.Y. 1998- 99. THOUGH THE TOTAL AMOUNT OF UNABSORBED DEPRECIAT ION AS PER THE CERTIFICATE OF CHARTERED ACCOUNTANT AND ALSO SHOWN IN THE RETUR N OF INCOME IS RS.1,62,17,756/-, THE ASSESSEE COMPANY HAS ACTUALLY SET-OFF AN AMOUNT OF RS.1,28,14,578/- AND THEREFORE THE REJECTION OF SET -OFF IS RESTRICTED TO RS. 1,18,14,578/-. 4. THE CIT (A) ALLOWED THE CLAIM OF ASSESSEE AS UND ER :- ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 3 3.2. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND THE ABOVE SUBMISSIONS. ON PERUSAL OF THE SUBMISSIONS IT IS FO UND THAT THE SCHEME OF AMALGAMATION OF THE VARIOUS COMPANIES WITH ASSESSEE COMPANY WAS SANCTIONED BY THE HIGH COURT IN DECEMBER, 1999. HOW EVER, AS PER CLAUSE 7 OF THE SCHEME OF AMALGAMATION SANCTIONED BY THE HIG H COURT WITH EFFECT FROM THE APPOINTED DATE I.E. 1-4-1998 THE AMALGAMAT ING COMPANIES WERE TO CARRY ON THEIR ACTIVITIES AND BUSINESSES ION ACCOUN T OF AND IN TRUST FOR THE ASSESSEE COMPANY. ACCORDINGLY ALL THE PROFITS OR IN COME OR LOSSES ARISING TO THE AMALGAMATING COMPANIES ARE FOR ALL THE PURPOSES TO BE CONSIDERED AS PROFITS OR INCOME OR LOSSES OF THE AMALGAMATED COMP ANY I.E. THE ASSESSEE COMPANY. THIS CLAUSE HAS NOT BEEN MODIFIED BY THE H IGH COURT WHILE APPROVING THE SCHEME OF AMALGAMATION. IN THE CIRCUM STANCES AS HELD BY THE SUPREME COURT IN THE CASE OF MARSHALL & SONS (INDIA ) LTD., 223 ITR 809 THE DATE OF AMALGAMATION IS EFFECTIVE FROM THE APPOINTE D DATE AND ACCORDINGLY THE INCOME/LOSSES ARISING TO THE AMALGAMATING COMPA NIES AFTER THAT APPOINTED DATE ARE DEEMED TO BE INCOME AND LOSSES O F THE AMALGAMATED COMPANY I.E. THE ASSESSEE COMPANY. THERE IS NO QUES TION OF RECONSTRUCTION OF ACCOUNTS HAVING REGARD TO THE ABOVE POSITION BUT THE FACTS REMAINS THAT FROM THE APPOINTED DATE THE LOSSES ARE TO BE CONSID ERED AS LOSSES OF THE ASSESSEE COMPANY. ACCORDINGLY THE CARRIED FORWARD LOSSES/DEPRECIATION OF THE AMALGAMATING COMPANIES HAVE TO BE CONSIDERED FO R ADJUSTMENT IN THE BOOK PROFIT IN TERMS OF THE PROVISIONS OF SECTION 2 05 OF THE COMPANIES ACT, 1956. ACCORDINGLY THE ASSESSING OFFICER MUST CONSIDER THO SE LOSSES/DEPRECIATION IN THE COMPUTATION OF BOOK PROFIT U/S.115JA OF THE I.T. ACT. HE IS, THEREFORE, NOT JUSTIFIED IN NOT ALLOWING SUCH ADJUSTMENT IN TH E COMPUTATION OF INCOME U/S. 115JA. THE ASSESSING OFFICER IS, THEREFORE, DI RECTED TO ALLOW SUCH SET OFF. THIS GROUND OF APPEAL IS ALLOWED. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF PARTIES , RECORDS PERUSED AND GONE THROUGH DECISIONS CITED. THE CASE OF AO IS THAT THE RE IS NO PROVISION UNDER THE COMPANIES ACT TO AMEND/CONSOLIDATED ACCOUNTS PREPAR ED IN ACCORDANCE WITH PART II & III OF SCHEDULE VI, AS UNABSORBED DEPRECIATION PE RTAINING TO OTHER 15 COMPANIES FOR EARLIER YEARS NOT FOR THE YEAR UNDER CONSIDERAT ION. IT IS ADMITTED FACT THAT THE TRANSACTION WAS SUBJUDICE BEFORE GUJARAT HIGH COURT AND HAS BEEN DECIDED ON 23/28-12-1999 WHICH PERTAIN TO F.Y. 1999-2000 RELAT ED TO A.Y. 2000-01. IT IS ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 4 SETTLED POSITION OF LAW THAT IN CASE OF MATTER IS S UBJUDICE, THE ACCRUAL IS ON DECIDING BY THE COURT. IN THE CASE UNDER CONSIDERATION THE I SSUE HAS BEEN DECIDED BY THE COURT IN THE FINANCIAL YEAR UNDER CONSIDERATION, TH EREFORE, ACCRUAL OF THE TRANSACTION IS IN THE YEAR UNDER CONSIDERATION. FUR THER THE COURT DIRECTED THAT ITS JUDGMENT IS WITH EFFECT FROM 1-4-1999 AND ALL THE P ROFITS OR INCOME OR LOSSES TO BE CONSIDERED AS PROFIT OR INCOME OR LOSSES OF THE AMA LGAMATED COMPANY I.E. ASSESSEES COMPANY. THE EFFECT OF THE JUDGMENT OF H IGH COURT IS REQUIRED TO BE GIVEN EFFECT FROM A.Y. 2000-01 I.E. IN THE YEAR UND ER CONSIDERATION. PART II AND III OF SCHEDULE VI IS REQUIRED TO BE PREPARED IN ACCORD ANCE WITH METHOD OF ACCOUNTING AND ACCOUNTING STANDARDS. TO THIS EXTENT THE ORDER OF CIT (A) IS CORRECT. HOWEVER, AS REGARDS DIRECTION WE MODIFY THE ORDER OF CIT (A) AND DIRECT AO TO RECALCULATE BOOK PROFIT IN ACCORDANCE WITH SECTION 115J INCLUDI NG PROVISIONS OF SECTION 115J(1)(IV) OF THE ACT. THE AO SHALL PROVIDE OPPORT UNITY OF HEARING TO THE ASSESSEE BEFORE CALCULATING BOOK PROFIT. THE ORDER OF CIT (A ) IS CONFIRMED WITH ABOVE MODIFICATION. 6. THE BRIEF FACTS OF THE SECOND GROUND ARE THAT DU RING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE DECLAR E RS.12 LAKH AGAINST SALE OF SWAGAT BUILDING AS AGAINST COST PRICE OF RS.24,13,6 92/-. THE AO REFERRED THE MATTER TO DISTRICT VALUATION OFFICER. THE DVO WORKE D OUT MARKET PRICE OF SAID PROPERTY BASED ON COMPARABLE CASES AT RS.16,16,940/ -. THE DVO RECALCULATED LONG TERM CAPITAL LOSS TAKING VALUE OF RS.16,16,940/- DE TAILED AS UNDER:- FAIR MARKET VALUE AS GIVEN BY THE VALUATION OFFICER RS.16,16,940 LESS: TOTAL INDEX COST (2413692 X 389/281) RS.33,41,374 LONG TERM CAPITAL LOSS RS.17,24,434 7. THE CIT (A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE AS UNDER:- ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 5 4.2. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISS IONS AND THE FACTS OF THE APPELLANTS CASE. I FIND THAT THERE IS NO EVIDENCE AVAILABLE WITH THE ASSESSING OFFICER TO SHOW THAT THE APPELLANT HAS RECEIVED ANY CONSIDERATION OTHER THAN WHAT IS SHOWN IN THE DOCUMENTED PRICE. THEREFORE, T HERE IS NO JUSTIFICATION FOR HIS HOLDING THAT THE SALE CONSIDERATION OF THE PROPERTY IS HIGHER THAT THE AMOUNT DECLARED AT RS.12 LAKH. FURTHER, IT IS NOTIC ED THAT THE APPELLANT HAS SHOWN SALE INSTANCES OF THE PROPERTIES IN THE SAME BUILDING AND ALSO IN THE NEARBY BUILDINGS TO SHOW THAT THE SALE CONSIDERATIO N WAS AROUND THE SAME FIGURE AT WHICH THE SALE CONSIDERATION IN THE OTHER PREMISES WAS REGISTERED. ON THE OTHER HAND THE DEPARTMENT HAS NOT SHOWN THE COMPARABLE SALE INSTANCES FROM THE SAME PREMISES SO AS TO PROVE THE IR ESTIMATE OF CONSIDERATION. CONSIDERING ALL THESE ASPECTS I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ADOPTING SALE CONSIDERATION OF THE PREMISES AT RS.16 LAKH AS AGAINST THE ACTUAL SALE CONSIDERATION OF RS.12 L AKH. THE ADDITION ON THIS ACCOUNT IS, THEREFORE, DELETED. 8. THE LD. AR AT THE OUTSET SUBMITTED THAT THE ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE BY A JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GIRISH DAMJIBHAI PATEL, TAX APPEAL NO.1016 OF 2009 JUDGMEN T DATED 28-3-2011 WHEREIN IT HAS BEEN HELD THAT FULL VALUE OF CONSIDERATION U /S. 48 OF THE ACT DOES NOT HAVE REFERENCE TO MARKET PRICE. SINCE THE ORDER OF CIT ( A) IS IN CONSONANCE OF THE ORDER OF JURISDICTIONAL HIGH COURT THEREFORE, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF CIT (A). THE ORDER OF CIT (A) IS CONFIRMED ON THE I SSUE. 9. THE BRIEF FACTS OF THIRD GROUND ARE THAT THE AO DISALLOWED INTEREST CLAIM OF ASSESSEE INVOKING SECTION14A OF THE ACT AS DIVIDEND INCOME HAS BEEN CLAIMED AS EXEMPT INCOME UNDER SECTION10(33) OF THE ACT. THE C IT (A) FOLLOWED AN ITAT ORDER MUMBAI BENCH AND DELETED THE ADDITION. 10. THE LD. REPRESENTATIVES OF PARTIERS SUBMITTED T HAT THE MATTER MAY BE SENT BACK TO THE FILE OF AO, AS AFTER THE ORDER OF CIT (A) THERE IS DEVELOPMENT IN LAW BY ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 6 VARIOUS DECISIONS OF ITAT AND HIGH COURT. THEREFORE , THE FACT OF THE CASE REQUIRED TO BE EXAMINED IN THE LIGHT OF PRESENT INTERPRETATI ON BY LATEST JUDGMENTS. WE THEREFORE, SEND THE ISSUE TO THE FILE OF THE AO WIT H A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING PROPE R OPPORTUNITY OF HEARING TO THE ASSESSEE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY DISMISSED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 9 - 2 - 201 2. SD/- SD/- (D.K. TYAGI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-V, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.3987/AHD/2003 ASSESSMENT YEAR 2000-01 7 1.DATE OF DICTATION 1 - 2 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 1 /2 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 8 - 2 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 9 - 2 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 9 - 2 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 0 - 2 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..