M/s. Petrofils Co.Operative Ltd., Baroda V. The ACIT.,Circle-2(2), Baroda

ITA 411/AHD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6047 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P SHAH A R SHRI P L KUREEL
• Keywords: Business income; Depreciation; Reasonable cause; Condonation of delay; Unabsorbed depreciation

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 411/AHD/2012 2006-07 M/S.PETROFILS CO- OPERATIVE LTD. D-5, PETROFILS NAGAR PO PETROFILS TOWNSHIP, BARODA PAN: AAAAP 0443P ASST.CIT CIRCLE- 2(2) BARODA 2. 2661/AHD/2013 2007-08 -DO- -DO- 3. 2662/AHD/2013 2008-09 -DO- -DO- 4. 2088/AHD/2012 2009-10 -DO- -DO- ASSESSEE BY : SHRI J.P. SHAH, A.R. REVENUE BY : SHRI P.L. KUREEL, SR.DR ' % & $' / / / / DATE OF HEARING : 17/06/2014 )*+ & $' / DATE OF PRONOUNCEMENT : 27/06/2014 , / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THESE FOUR APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LD.COMMISSIONER OF INCOME TA X(APPEALS)-III/II, BARODA (CIT(A) FOR SHORT) DATED 24.11.2011, 08/02 /2012, 13/07/2012 PERTAINING TO ASSESSMENT YEARS (AYS) 2006-07 TO 200 9-10. SINCE THE GROUNDS AND THE FACTS ARE IDENTICAL, THESE APPEALS WERE HEARD TOGETHER AND ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 2 - ARE BEING DISPOSED OF BY WAY OF A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE ITA NO.411/AHD/2012 FO R AY 2006-07 AS A LEAD CASE. THE ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL. 1.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF YOU R APPELLANTS CASE AND IN LAW, THE LD.CIT(APPEALS) HAS ERRED UPHOLDING DIS ALLOWANCE OF DEDUCTION OF ADMINISTRATION AND INTEREST EXPENSES E TC., ON THE GROUND THAT APPELLANT IS NOT CARRYING ON ANY BUSINESS AND INCOME OF THE APPELLANT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. YOUR APPELLANT SUBMITS THAT THE EXPENSES AS CLAIMED BY YOUR APPELLANT ARE ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE PRAYS YOU R HONOUR TO KINDLY HOLD SO NOW AND DIRECT THE LD.A.O. TO ALLOW THE DEDUCTIONS OF EXPENSES AS CLAIMED BY YOUR APPELLANT. 2.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF YO UR APPELLANTS CASE AND IN LAW, THE LD.CIT(APPEALS) HAS ERRED UPHOLDING THE DECISION OF NOT ALLOWING SET OFF OF BROUGHT FORWARD UNABSORBED DEPR ECIATION U/S.32(2) OF THE ACT AGAINST INCOME FROM OTHER SOURCES ON T HE GROUND THAT APPELLANT IS CEASED TO BE IN BUSINESS. APPELLANT SUBMITS THAT AS PER THE PROVISIONS OF S.3 2(2) OF THE ACT, APPELLANT IS ENTITLED TO SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF PAST YEARS AGAINST ITS INCOME ASSES SED UNDER HEAD INCOME FROM OTHER SOURCES, SINCE AS PER THE SAID S.32(2), SUCH BROUGHT FORWARD UNABSORBED DEPRECIATION IS DEEMED D EPRECIATION OF THE YEAR UNDER APPEAL EVEN IN CASES WHERE THERE IS NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR THERE IS NO A LLOWANCE FOR THAT PREVIOUS YEAR. THEREFORE, APPELLANT PRAYS YOUR HO NOUR TO HOLD SO NOW AND DIRECT THE LD.A.O. TO ALLOW SET OFF OF THE BROU GHT FORWARD OF UNABSORBED DEPRECIATION AGAINST ASSESSED INCOME. ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 3 - 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL LOSS AT RS.169.20 LACS. THE CA SE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143(3) O F THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 26/11/2008, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE AMOUNTING TO RS.13,89,000/-. AGAINS T THIS, ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A) AND ASSESSEE HAD CHA LLENGED REJECTION OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENSES CL AIMED AGAINST THE INCOME FROM OTHER SOURCES. THE ASSESSEE HAD ALSO M ADE ADDITIONAL GROUNDS AGAINST IN NOT ALLOWING SET OFF OF BROUGHT FORWARD LOSSES AND ALSO NOT ALLOWING THE BROUGHT FORWARD UNABSORBED DEPRECI ATION U/S.32(2) OF THE ACT AGAINST ASSESSED TOTAL INCOME. THE LD.CIT (A) ALSO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISMISS THE APPE AL FOLLOWING THE ORDER IN THE AY 2004-05. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 3. FIRST GROUND IS AGAINST UPHOLDING THE DISALLOWAN CE OF DEDUCTION OF ADMINISTRATION AND INTEREST EXPENSES ETC. ON THE GR OUND THAT APPELLANT IS NTO CARRYING ON ANY BUSINESS AND INCOME OF THE APPE LLANT IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE L D.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) FOLLOWED THE ORDER PASSED BY THE CIT(II), BARODA IN APPELLANTS OWN CASE IN APPEAL N UMBER CAB/II/372/06-07 FOR THE AY 2004-05. HE SUBMITTED THAT THE APPEAL AGAINST THE ORDER OF LD.CIT(A)-II BARODA PASSED IN AY 2004-05 WAS FILED BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS DISPOSED O F THE APPEAL IN ITA ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 4 - NO.170/AHD/2008 VIDE ORDER DATED 13/01/2012. HE SU BMITTED THAT THE TRIBUNAL HAD RESTORED THE ISSUE BACK TO THE FILE OF AO FOR FRESH DECISION. 4. ON THE CONTRARY, THE LD.SR.DR SUPPORTED THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO IL LEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE COORDINATE BENCH (ITAT B BENCH AHMEDABAD) IN ITA NO.170/AHD/2008 (SUPRA) VIDE PARAGRAPH NO.8 OF ITS ORDER DATED 13/01/2012 HAS OBSERVED AS UNDER:- 8. IN THE LIGHT OF THESE TWO DECISIONS, WE HAVE AL SO EXAMINED THE ACCOUNTS MADE AVAILABLE BEFORE US AND NOTICED THAT IN SCHEDULE-19 UNDER THE HEAD LIQUIDATORS ACCOUNT AN EXPENDITUR E OF RS.34.80 LACS WAS TOWARDS INTEREST ON GOVERNMENT OF INDIA LOAN. HOWEVER, AS PER SCHEDUEL-6 UNDER THE HEAD UNSECURED LOANS, WE HA VE NOTICED THAT THERE WAS NO CHANGE IN THE AMOUNTS OUTSTANDING AS O N 31/03/2003 AND 31/03/2004 OF RS.13,283.78 LACS. WE HAVE ALSO NOTE D THAT THE AMOUNT OF INTEREST ACCRUED WAS ALSO IDENTICAL IN FIGURES, FOUND TO BE OUTSTANDING AS ON 31/03/2003 AND 31/03/2004 OF RS.1 ,906.54 LACS. MEANING THEREBY THAT THERE WAS NO ACCRUAL OF INTERE ST LIABILITY, THOUGH ADMITTEDLY THE LD.AR HAS STATED BEFORE US THAT MER CANTILE SYSTEM OF ACCOUNTING WAS ADOPTED BY THE ASSESSEE. IN THAT C ASE, THE ASSESSEE HAS TO PROVE THE BASIS ON WHICH THE INTEREST EXPENDITUR E OF RS.34.80 LACS WAS CLAIMED. A.O. IS HEREBY DIRECTED TO PROCEED ACC ORDINGLY AS PER LAW. 5.1. IN RESPECT OF THE INTEREST PORTION, SINCE THE FACTS ARE IDENTICAL IN THIS YEAR ALSO, WE RESTORE THIS ISSUE BACK TO THE FILE O F AO IN THE LIGHT OF THE DECISION PASSED BY THE TRIBUNAL IN ITA NO.170/AHD/2 008 (SUPRA). ANOTHER COMPONENT WITH REGARD TO THE RENTAL INCOME, THE COORDINATE ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 5 - BENCH IN ITA NO.170/AHD/2008(SUPRA) HAS DECIDED THE ISSUE BY OBSERVING AS UNDER:- 8.1. ANOTHER HEAD OF INCOME, IN ADDITION TO THE I NTEREST INCOME AS DISCUSSED ABOVE, IS UNDER THE HEAD RENT INCOME. THE QUESTION IS THAT WHETHER LEGAL EXPENSES, CAR RUNNING EXPENSES, TRAVE LING EXPENSES, DATA PROCESSING CHARGES, ELECTRICITY AND WATER CHARGES A ND ENTERTAINMENT EXPENSES, SALARY EXPENSES, PRINTING & STATIONERY EX PENSES, TELEPHONE EXPENSES, ETC. COULD BE ALLOWED AS DEDUCTION AGAINS T THE INCOME WHICH ACCORDING TO US IS UNDER THE HEAD PROPERTY INCOME . TO ASSESS PROPERTY INCOME, THE PROVISIONS APPLICABLE ARE EN UMERATED IN SECTIONS 23 AND 24 OF IT ACT. THERE WAS NO SUCH DI SCUSSION IN THE ASSESSMENT ORDER. FIRST OF ALL, ASSESSING OFFICER HAS TO VERIFY THE EXACT NATURE OF THE EARNING OF AN INCOME AND THEN IT IS S UGGESTED TO VERIFY THE NATURE OF EXPENDITURE HAVING ANY NEXUS WITH THE EAR NING OF RENTAL INCOME. ONLY THAT PORTION OF THE EXPENDITURE WHICH HAS CONNECTION WITH THE EARNING OF RENTAL INCOME IS THEREFORE AN ADMISS IBLE DEDUCTION SUBJECT TO THE CEILING OR LIMITATION PRESCRIBED U/ S. 23 & 24 OF THE I.T.ACT. WE HOLD ACCORDINGLY. WITH THE RESULT, IN THE LIGHT OF ABOVE DISCUSSION, WE HEREBY RESTORE THIS ISSUE BACK TO TH E STAGE OF THE ASSESSMENT TO BE DECIDED DE NOVO AFRESH AS PER THE DIRECTIONS. 5.2. SINCE THE FACTS ARE IDENTICAL IN THIS YEAR ALS O, THEREFORE THE ISSUE IS RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION. THUS, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 6. SECOND GROUND IS AGAINST THE DISALLOWANCE OF SET TING OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION U/S.32(2) OF THE AC T AGAINST INCOME FROM OTHER SOURCES. THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 32(2) OF THE ACT, APP ELLANT IS ENTITLED TO SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF P AST YEARS AGAINST ITS INCOME ASSESSED UNDER HEAD INCOME FROM OTHER SOURC ES, SINCE AS PER THE SAID S.32(2), SUCH BROUGHT FORWARD UNABSORBED D EPRECIATION IS DEEMED DEPRECIATION OF THE YEAR UNDER APPEAL EVEN I N CASES WHERE THERE ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 6 - IS NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOU S YEAR. HE PRAYED TO ALLOW SET OFF OF THE BROUGHT FORWARD OF UNABSORBED DEPRECIATION AGAINST ASSESSED INCOME. THE LD.COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT.LTD. REPORTED AT (1995) 216 ITR 0607(SC) AND THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. DEEPAK TEXTILE INDUSTRIES LTD. REPORTED AT (1987) 1 68 ITR 0773(GUJ.). 6.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE B Y OBSERVING AS UNDER:- 5.1. IT IS SEEN FROM THE RECORDS THAT THE SAME ISS UE HAS BEEN CONSIDERED AND DECIDED UPON BY CIT(II), BARODA IN A PPELLANTS OWN CASE IN APPEAL NUMBER CAB/II-372/06-07 FOR THE AY 2 004-05 IN WHICH HE HAS UPHELD THE ACTION OF THE AO OF NOT ALLOWING SET OFF OF UNABSORBED APPRECIATION AND CARRIED FORWARD BUSINESS LOSSES AG AINST THE INCOME OF THE APPELLANT FOR THIS YEAR, ON THE BASIS THAT SINC E APPELLANT HAVE NO BUSINESS ACTIVITY SINCE AY 1997-98, DEPRECIATION FO R EARLIER YEARS CANNOT BE SET OFF FROM INCOME FROM OTHER SOURCES. IN THE ABSENCE OF ANY BUSINESS, NO INCOME IS TAXABLE IN BUSINESS HEAD AND HENCE THE DEPRECIATION OF EARLIER YEARS CANNOT BE ALLOWED UND ER BUSINESS HEAD. HE HELD THAT EVEN DURING AY 1997-98 TO 200102; THE DEPRECIATION WAS GIVEN THE SAME TREATMENT AS IS GIVEN TO THE BUSINES S LOSSES. SINCE APPELLANTS UNABSORBED DEPRECIATION FALLS IN THIS C ATEGORY, THE SAME CANNOT BE SET OFF IN ASSESSMENT YEAR 2004-05 FROM I NCOME FROM OTHER SOURCES. FOLLOWING THE SAME, IT IS HELD THAT, IN T HE YEAR IN QUESTION ALSO UNABSORBED APPRECIATION AND CARRIED FORWARD BUSINES S LOSSES CANNOT BE SET OFF AGAINST THE INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE THE ADDITIONAL GROUNDS OF APPEAL AR E ALSO DISMISSED. ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 7 - 7.1. IT APPEARS THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER IN THE AY 2004-05, BUT THIS ISSUE WAS NOT RAISED BY THE ASSES SEE BEFORE THE TRIBUNAL IN ITA NO.170/AHD/2008(SUPRA). THE REASONING GIVEN BY THE LD.CIT(A) IS THAT SINCE THE APPELLANT HAD NO BUSINESS ACTIVIT Y SINCE AY 1997-98, DEPRECIATION FOR EARLIER YEARS CANNOT BE SET OFF FR OM INCOME FROM OTHER SOURCES. IN THE ABSENCE OF ANY BUSINESS, NO INCOM E IS TAXABLE IN BUSINESS HEAD AND, HENCE, THE DEPRECIATION OF EARLI ER YEARS CANNOT BE ALLOWED UNDER BUSINESS HEAD. THE CONTENTION OF T HE LD.COUNSEL FOR THE ASSESSEE IS THAT THIS REASON OF THE AUTHORITIES BEL OW IS ERRONEOUS IN THE LIGHT OF THE JUDGEMENT OF THE HONBLE APEX COURT RE NDERED IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT.LTD.(SUPRA). THE HO NBLE SUPREME COURT FOLLOWING THE EARLIER JUDGEMENT HELD THAT IF THE PR OFITS OF BUSINESS ARE NOT SUFFICIENT TO ABSORB THE DEPRECIATION ALLOWANCE, TH E ALLOWANCE TO THE EXTENT TO WHICH IT IS NOT ABSORBED WOULD BE SET OFF AGAINST THE PROFITS OF ANY OTHER BUSINESS AND IF A PART OF THE DEPRECIATIO N ALLOWANCE STILL REMAINS UNABSORBED, IT WOULD BE LIABLE TO BE SET O FF AGAINST THE PROFITS OR GAINS CHARGEABLE UNDER ANY OTHER HEAD AND IT IS ONL Y IF SOME PART OF THE DEPRECIATION ALLOWANCE STILL REMAINS UNABSORBED THA T IT CAN BE CARRIED FORWARD TO THE NEXT ASSESSMENT YEAR. THE HONBLE SUPREME COURT FURTHER HELD THAT YET ANOTHER QUESTION WHICH HAS TO BE ANSWERED BEFORE WE CAN ANSWER THE QUESTION CONCERNED IN THIS APPEAL IS WHETHER IT IS NECESSARY THAT IN THE FOLLOWING YEAR THE ASSESSEE MUST CARRY ON BUSINESS, I.E., SOME OR OTHER BUSINESS, TO AVAIL OF THE BENEF IT OF THE SAID SUB- SECTION? TWO VIEWS ARE POSSIBLE IN THIS BEHALF, VI Z., (1) SINCE THE SUB- ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 8 - SECTION SPEAKS OF UNABSORBED DEPRECIATION BEING CAR RIED FORWARD TO THE NEXT YEAR AND ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART O F THAT ALLOWANCE THE SUB-SECTION NECESSARILY CONTEMPLATES EXISTENCE OF A BUSINESS IN THE FOLLOWING YEAR, AND (2) INASMUCH AS THE SUB-SECTION NOT ONLY SPEAKS OF ADDING THE UNABSORBED DEPRECIATION TO THE DEPRECIAT ION ALLOWANCE ALLOWED IN THE FOLLOWING YEAR BUT ALSO SAYS THAT IN THE ABSENCE OF SUCH ALLOWANCE, THE CARRIED FORWARD DEPRECIATION ALLOWAN CE SHALL BE THE ALLOWANCE FOR THAT YEAR, IT MEANS THAT IN THE FOLLO WING YEAR THE ASSESSEE NEED NOT CARRY ON ANY BUSINESS OR PROFESSION FOR AV AILING OF THE BENEFIT OF SUB-SECTION (2) OF SECTION 32. WE ARE INCLINED TO ADOPT THE SECOND OF THE ABOVE TWO VIEWS HAVING REGARD TO THE DECISIONS OF T HIS COURT IN JAIPURIA CHINA CLAY MINES (P.) LTD.S CASE (1966) 59 ITR 555 AND RAJAPALAYAM MILLS LTD.S CASE (1978) 115 ITR 777. WE HAVE EX TRACTED THE RELEVANT OBSERVATIONS FROM BOTH THE JUDGEMENTS HEREINABOVE, WHICH SAY THAT THE UNABSORBED DEPRECIATION ALLOWANCE HAS NOT ONLY TO B E SET OFF AGAINST OTHER HEADS OF INCOME IN THE RELEVANT PREVIOUS YEAR BUT WHERE IT IS CARRIED FORWARD, IT STANDS ON EXACTLY THE SAME FOOTING AS THE CURRENT DEPRECIATION. IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE WAS DECLINED ON THE BASIS THAT THERE WAS NO BUSINESS AC TIVITY. HOWEVER, THE HONBLE APEX COURT IN THE CASE OF CIT VS.VIRMANI IN DUSTRIES PVT.LTD.(SUPRA) HAS HELD THAT SETTING OFF OF THE B ROUGHT FORWARD LOSS IS NOT RESTRICTED ONLY TO THE BUSINESS INCOME AND IT HAS A LSO BEEN HELD BY THE HONBLE APEX COURT THAT IT IS NOT NECESSARY THAT TH E ASSESSEE CARRY ON ANY BUSINESS OR PROFESSION FOR AVAILING OF BENEFIT OF SUB-SECTION(2) OF SECTION ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 9 - 32 OF THE ACT. IN THE PRESENT CASE, THE FACTS AR E DIFFERENT AS THOSE WERE BEFORE THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT.LTD.(SUPRA). IN THE CASE IN HAND, T HE ASSESSEE-COMPANY IS UNDER LIQUIDATION AND, THEREFORE, NO ACTIVITY IS BE ING CARRIED OUT BY THE ASSESSEE. HOWEVER, THE RATIO LAID DOWN BY THE HON BLE APEX COURT IN THE CASE OF CIT VS. VIRMANI INDUSTRIES PVT.LTD. WOULD B E APPLICABLE TO THE EXTENT FOR AVAILING THE BENEFIT U/S.32(2) OF THE AC T. THE ASSESSEE NEED NOT CARRY ON ANY BUSINESS OR PROFESSION. IT IS NOT COM ING OUT OF THE RECORDS THAT FROM WHICH YEAR THE DEPRECIATION WAS BEING CAR RIED FORWARD BY THE ASSESSEE AND WHY THE ASSESSEE HAS ACCEPTED THE DECI SION OF THE LD.CIT(A) IN THE ASST.YEAR 2004-05 SINCE NO GROUND AGAINST TH E REJECTION OF CLAIM WAS RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IN I TA NO.170/AHD/2008 FOR AY 2004-05(SUPRA). IN THE PRESENT YEAR, THE CI T(A) HAS FOLLOWED THE DECISION RENDERED IN THE AY 2004-05. UNDER THESE F ACTS, WE ARE UNABLE TO ACCEPT THE CLAIM OF THE ASSESSEE AND, THEREFORE, THIS GROUND IS REJECTED. 8. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.411/A HD/2012 FOR AY 2006-07 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. NOW, WE TAKE UP THE ASSESSEES APPEALS, I.E. ITA NO.2661/AHD/2013 FOR AY 2007-08 & ITA NO.2662/AHD/ 2013 FOR AY 2008-09. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THESE APPEALS:- (A) ITA NO.2661/AHD/2013 AY 2007-08 1.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF APP ELLANTS CASE, AND IN LAW AND IN TOTAL DISREGARD OF THE ORDER DTD. 13-1-2 012 OF THE HONBLE ITAT, AHMEDABAD FOR THE ASST.YEAR 2004-05, THE LD.C IT(APPEALS) HAS ERRED UPHOLDING DISALLOWANCE OF DEDUCTION OF ADMINI STRATION AND ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 10 - INTEREST EXPENSES ETC., ON THE GROUND THAT IT HAS N OT BEEN ESTABLISHED THAT EXPENSES CLAIMED MEET THE REQUIREMENTS OF THE PROVISIONS OF SECTION 57(III) OF THE ACT WHILE COMPUTING THE INCOME UNDE R THE HEAD INCOME FROM OTHER SOURCES. YOUR APPELLANT SUBMITS THAT THE EXPENSES AS CLAIMED BY YOUR APPELLANT ARE ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE PRAYS YOU R HONOUR TO KINDLY HOLD SO NOW AND DIRECT THE LD.A.O. TO ALLOW THE DEDUCTIONS OF EXPENSES AS CLAIMED BY YOUR APPELLANT. 2.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF YO UR APPELLANTS CASE AND IN LAW, THE LD.CIT(APPEALS) HAS ERRED UPHOLDING THE DECISION OF NOT ALLOWING SET OFF OF BROUGHT FORWARD UNABSORBED DEPR ECIATION U/S.32(2) OF THE ACT AGAINST INCOME FROM OTHER SOURCES ON T HE GROUND THAT APPELLANT IS CEASED TO BE IN BUSINESS. APPELLANT SUBMITS THAT AS PER THE SECTION 32(2) OF THE ACT, APPELLANT IS ENTITLED TO SET OFF OF BROUGHT FORWARD UNABSORBED D EPRECIATION OF PAST YEARS AGAINST ITS INCOME ASSESSED UNDER HEAD INCOM E FROM OTHER SOURCES:, SINCE AS PER THE SAID S.32(2), SUCH BROUG HT FORWARD UNABSORBED DEPRECIATION IS DEEMED DEPRECIATION OF T HE YEAR UNDER APPEAL EVEN IN CASES WHERE THERE IS NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR THERE IS NO ALLOWANCE FOR TH AT PREVIOUS YEAR. THEREFORE, APPELLANT PRAYS YOUR HONOUR TO HOLD SO N OW AND DIRECT THE LD.A.O. TO ALLOW SET OFF OF THE BROUGHT FORWARD OF UNABSORBED DEPRECIATION AGAINST ASSESSED INCOME. (A) ITA NO.2662/AHD/2013 AY 2008-09 1.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF APP ELLANTS CASE, AND IN LAW AND IN TOTAL DISREGARD OF THE ORDER DTD. 13-1-2 012 OF THE HONBLE ITAT, AHMEDABAD FOR THE ASST.YEAR 2004-05, THE LD.C IT(APPEALS) HAS ERRED UPHOLDING DISALLOWANCE OF DEDUCTION OF ADMINI STRATION AND INTEREST EXPENSES ETC., ON THE GROUND THAT IT HAS N OT BEEN ESTABLISHED THAT EXPENSES CLAIMED MEET THE REQUIREMENTS OF THE PROVISIONS OF SECTION 57(III) OF THE ACT WHILE COMPUTING THE INCOME UNDE R THE HEAD INCOME FROM OTHER SOURCES. ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 11 - YOUR APPELLANT SUBMITS THAT THE EXPENSES AS CLAIMED BY YOUR APPELLANT ARE ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE PRAYS YOU R HONOUR TO KINDLY HOLD SO NOW AND DIRECT THE LD.A.O. TO ALLOW THE DEDUCTIONS OF EXPENSES AS CLAIMED BY YOUR APPELLANT. 2.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF YO UR APPELLANTS CASE AND IN LAW, THE LD.CIT(APPEALS) HAS ERRED UPHOLDING THE DECISION OF NOT ALLOWING SET OFF OF BROUGHT FORWARD UNABSORBED DEPR ECIATION U/S.32(2) OF THE ACT AGAINST INCOME FROM OTHER SOURCES ON T HE GROUND THAT APPELLANT IS CEASED TO BE IN BUSINESS. APPELLANT SUBMITS THAT AS PER THE SECTION 32(2) OF THE ACT, APPELLANT IS ENTITLED TO SET OFF OF BROUGHT FORWARD UNABSORBED D EPRECIATION OF PAST YEARS AGAINST ITS INCOME ASSESSED UNDER HEAD INCOM E FROM OTHER SOURCES, SINCE AS PER THE SAID S.32(2), SUCH BROUG HT FORWARD UNABSORBED DEPRECIATION IS DEEMED DEPRECIATION OF T HE YEAR UNDER APPEAL EVEN IN CASES WHERE THERE IS NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR THERE IS NO ALLOWANCE FOR TH AT PREVIOUS YEAR. THEREFORE, APPELLANT PRAYS YOUR HONOUR TO HOLD SO N OW AND DIRECT THE LD.A.O. TO ALLOW SET OFF OF THE BROUGHT FORWARD OF UNABSORBED DEPRECIATION AGAINST ASSESSED INCOME. 9.1. THESE TWO APPEALS HAVE BEEN FILED BELATEDLY. AN APPLICATION FOR CONDONATION OF DELAY HAS BEEN FILED ON BEHALF OF HE ASSESSEE. AN AFFIDAVIT CITING REASONS FOR DELAY HAS BEEN FILED B Y THE LIQUIDATOR. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WA S NO MALA FIDE AND THERE WAS REASONABLE CAUSE FOR DELAY. TO BUTTRESS HIS CONTENTION, LD.COUNSEL FOR THE ASSESSEE RELIED UPON THE JUDGMEN T OF HONBLE SUPREME COURT RENDERED IN THE CASE OF N.BALAKRISHNAN VS. M. KRISHNAMURTHY REPORTED AT (1998) 7 SCC 123. 9.2. ON THE CONTRARY, SR.LD.DR OPPOSED THE APPLIC ATION AND SUBMITTED THAT THERE IS NO REASONABLE CAUSE FOR CONDONING THE DELAY. ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 12 - 10. WE HAVE HEARD THE RIVAL CONTENTIONS. THE HON BLE SUPREME COURT IN THE CASE OF N.BALAKRISHNAN VS. M.KRISHNAMURTHY ( SUPRA) HAS HELD AS UNDER:- IT MUST BE REMEMBERED THAT IN EVERY CASE OF DELAY, THERE CAN BE SOME LAPSE ON THE PART OF THE LITIGANT CONCERNED. THAT ALONE IS NOT ENOUGH TO TURN DOWN HIS PLEA AND TO SHUT THE DOOR AGAINST HIM . IF THE EXPLANATION DOES NOT SMACK OF MALA FIDES OR IT IS NOT PUT FORTH AS PART OF A DILATORY STRATEGY, THE COURT MUST SHOW UTMOST CONSIDERATION TO THE SUITOR. BUT WHEN THERE IS REASONABLE GROUND TO THINK THAT THE D ELAY WAS OCCASIONED BY THE PARTY DELIBERATELY TO GAIN TIME, THEN THE CO URT SHOULD LEAN AGAINST ACCEPTANCE OF THE EXPLANATION. WHILE CONDONING THE DELAY, THE COURT SHOULD NOT FORGET THE OPPOSITE PARTY ALTOGETHER. I T MUST BE BORNE IN MIND THAT HE IS A LOSER AND HE TOO WOULD HAVE INCUR RED QUITE LARGE LITIGATION EXPENSES. IT WOULD BE A SALUTARY GUIDEL INE THAT WHEN COURTS CONDONE THE DELAY DUE TO LACHES ON THE PART OF THE APPLICANT, THE COURT SHALL COMPENSATE THE OPPOSITE PARTY FOR HIS LOSS. 10.1. THE REVENUE COULD NOT POINT OUT THAT THERE WA S ANY DELIBERATE ACT FOR DELAY OR THE ASSESSEE HAS TRIED TO TAKE ADVANTA GE OF DELAY. THE REVENUE ALSO COULD NOT POINT OUT ANY MALA FIDE ON T HE PART OF THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE RA TIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF N.BALAKRISHNAN VS . M.KRISHNAMURTHY(SUPRA), WE HEREBY CONDONE THE DELAY . THE APPEALS ARE ADMITTED FOR ADJUDICATION. 10.2. IN BOTH THE APPEALS, FACTS ARE IDENTICAL TO T HE FACTS AS WERE IN ITA NO.411/AHD/2012 FOR AY 2006-07 IN ASSESSEES OWN CA SE(SUPRA) AND THE REVENUE HAS NOT PLACED ANYTHING CONTRARY ON RECORD. THEREFORE, ON THE SAME REASONING PASSED IN ITA NO.411/AHD/2012, WE AL LOW THE FIRST ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 13 - GROUND IN BOTH THE APPEALS FOR STATISTICAL PURPOSES AND REJECT THE SECOND GROUND IN BOTH THE APPEALS. AS A RESULT, ITA NOS.2 661 & 2662/AHD/2013 FOR AYS 2007-08 & 2008-09 ARE PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 11. LASTLY, WE TAKE UP THE ITA NO.2088/AHD/12 FOR A Y 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF APP ELLANTS CASE, AND IN LAW AND IN TOTAL DISREGARD OF THE ORDER DTD. 13-1-2 012 OF THE HONBLE ITAT, AHMEDABAD FOR THE ASST.YEAR 2004-05, THE LD.C IT(APPEALS) HAS ERRED UPHOLDING DISALLOWANCE OF DEDUCTION OF ADMINI STRATION AND INTEREST EXPENSES ETC., ON THE GROUND THAT IT HAS N OT BEEN ESTABLISHED THAT EXPENSES CLAIMED MEET THE REQUIREMENTS OF THE PROVISIONS OF SECTION 57(III) OF THE ACT WHILE COMPUTING THE INCOME UNDE R THE HEAD INCOME FROM OTHER SOURCES. YOUR APPELLANT SUBMITS THAT THE EXPENSES AS CLAIMED BY YOUR APPELLANT ARE ALLOWABLE AS DEDUCTION WHILE COMPUTING THE INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE PRAYS YOU R HONOUR TO KINDLY HOLD SO NOW AND DIRECT THE LD.A.O. TO ALLOW THE DEDUCTIONS OF EXPENSES AS CLAIMED BY YOUR APPELLANT. 2.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF YO UR APPELLANTS CASE AND IN LAW, THE LD.CIT(APPEALS) HAS ERRED UPHOLDING THE DECISION OF NOT ALLOWING SET OFF OF BROUGHT FORWARD UNABSORBED DEPR ECIATION U/S.32(2) OF THE ACT AGAINST INCOME FROM OTHER SOURCES ON T HE GROUND THAT APPELLANT IS CEASED TO BE IN BUSINESS. APPELLANT SUBMITS THAT AS PER THE SECTION 32(2) OF THE ACT, APPELLANT IS ENTITLED TO SET OFF OF BROUGHT FORWARD UNABSORBED D EPRECIATION OF PAST YEARS AGAINST ITS INCOME ASSESSED UNDER HEAD INCOM E FROM OTHER SOURCES, SINCE AS PER THE SAID S.32(2), SUCH BROUG HT FORWARD UNABSORBED DEPRECIATION IS DEEMED DEPRECIATION OF T HE YEAR UNDER APPEAL EVEN IN CASES WHERE THERE IS NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR OR THERE IS NO ALLOWANCE FOR TH AT PREVIOUS YEAR. ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 14 - THEREFORE, APPELLANT PRAYS YOUR HONOUR TO HOLD SO N OW AND DIRECT THE LD.A.O. TO ALLOW SET OFF OF THE BROUGHT FORWARD OF UNABSORBED DEPRECIATION AGAINST ASSESSED INCOME. 11.1. IN THIS APPEAL, THE FACTS ARE IDENTICAL TO TH E FACTS AS WERE IN ITA NOS.2661 & 2662/AHD/2013 FOR AYS 2007-08 & 2008-09 (IN ASSESSEES OWN CASE-SUPRA). THE LD.CIT(A) HAS FOLLOWED THE OR DER OF EARLIER YEAR IN ASSESSEES OWN CASE, I.E. AY 2007-08 AND THE REVENU E ALSO COULD NOT POINT OUT ANY CHANGE INTO FACTS AND CIRCUMSTANCES. THEREFORE, ON THE SAME REASONING AS RECORDED IN ASSESSEES OWN CASE-S UPRA, WE ALLOW THE FIRST GROUND OF APPEAL FOR STATISTICAL PURPOSES AND REJECT THE SECOND GROUND. AS A RESULT, THIS APPEAL OF THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE COMBINED RESULT, ALL THE FOUR APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/ 06 /2014 /'.., .../ T.C. NAIR, SR. PS ITA NOS.411/AHD /2012, 2661/AHD/2013, 2662/AHD/2013 & 2088/AHD/2012 M/S.PETROFILS CO-OPERATIVE LTD. VS. ACIT AYS 2006-07,07-08, 08-09 & 09-10 RESPECTIVELY - 15 - , & 0$1 21+$ , & 0$1 21+$ , & 0$1 21+$ , & 0$1 21+$/ COPY OF THE ORDER FORWARDED TO : 1. 34 / THE APPELLANT 2. 0534 / THE RESPONDENT. 3. !! $ '6 / CONCERNED CIT 4. '6() / THE CIT(A)-II/III, BARODA 5. 1 #7 0$ , , / DR, ITAT, AHMEDABAD 6. 789 :% / GUARD FILE. ,' ,' ,' ,' / BY ORDER, 51$ 0$ //TRUE COPY// ; ;; ;/ // / !< !< !< !< ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 23-25.6.14 (DICTATION-PAD 15+ 4PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25/6/14 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.27.6.14 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.6.14 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER