ITO 18(1)(2), MUMBAI V. WESTERN REGRIGERATION CORPORATION, MUMBAI

ITA 4124/MUM/2009

• Counselvise Citation: 412419914 RSA 2009
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Business income; Depreciation
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI R.K. PANDA (A.M.) ITA NO. 4124/MUM /2009 ASSESSMENT YEAR 2005-06 I.T.O. 18(1)(2), R. NO. 104, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012. VS. M/S W ESTERN REFRIGERATION CORPORATION, 4, REDDY MONEY TERRACE, DR. A.B. ROAD, WORLI, MUMBAI 400018. PAN : AAAFW2681D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. NAYAK RESPONDENT BY : NONE O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 25.2.2009 PASSED BY THE LD. CIT (A) FOR THE A .Y. 2005-06. 2. AT THE TIME OF HEARING, NONE ATTENDED ON BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNMENT DESPITE THE F ACT THAT NOTICE OF THE DATE OF HEARING WAS DULY SERVED UPON ON THE ASSESSE E THROUGH REGD. A/D, AND ALSO BY DEPARTMENT FOR WHICH THE ACKNOWLED GEMENTS SLIPS ARE AVAILABLE ON RECORD. IT WAS, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE ON MERITS AFTER HEARING THE LD. D.R. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN REFRIGERATED DISPLAY CABINETS, REFRIGERATION SPARE & PARTS, FILED RETURN DECLARING TOTAL INCOME OF ` ITA 4124/M/09 WESTERN REFRIGERATION CORPORATION 2 5,170/-. DURING THE COURSE OF ASSESSMENT PROCEEDING S, IT WAS INTER ALIA OBSERVED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED BROUGHT FORWARD BUSINESS LOSS FOR THE A.Y. 2002-03 ` 1094151/- TO BE ADJUSTED AGAINST THE BUSINESS INCOME FOR THE YEAR UNDER CONSIDERATIO N. AFTER CONSIDERING THE ASSESSEES CLAIM THAT THE SHORT FALL/LOSS OR DE FICIENCY SUFFERED BY THE ASSESSEE ON TRANSFER OF DEPRECIABLE ASSETS IS A BUS INESS DEDUCTION U/S 32(1)(III) AND THE SAME IS DIFFERENT FROM CAPITAL G AIN WHICH WILL BE FICTIONALLY ASSESSED U/S 50 AND WHILE FILING THE RE TURN OF INCOME CORRECTLY TREATED THE BROUGHT FORWARD LOSS OF ` 1094151/- IS NOT A CAPITAL LOSS BUT IN FACT BUSINESS LOSS DETERMINED UNDER THE PROVISIO N OF SECTION 32(1)(III) BEING TERMINAL DEPRECIATION ALLOWABLE TO THE ASSESS EE, HELD THAT THE SAME IS NOT ALLOWABLE AS IT IS A CAPITAL LOSS IN VIEW OF THE CONDITION LAID DOWN U/S 50 OF THE ACT AND ACCORDINGLY DISALLOWED THE SE T OFF OF BROUGHT FORWARD LOSS FOR A.Y. 2002-03 AMOUNTING TO ` 1094211/- AND COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 10.12.2007 DETERMINING TOTAL INCOME AT ` 1182510/-. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF AMERICAN EXPORT ISBRANDTSEN LINES LTD. V. CIT (1985) 156 ITR 360 : (1987) 30 TA XMAN 199 (CAL), HOWEVER, ALLOWED THE LOSS OF ` 1094211/- OF A.Y. 2002-03 TO BE ADJUSTED AGAINST THE BUSINESS INCOME AND ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US BY TAKING THE FOLLOWING GROUNDS OF APPEAL :- I) IN THE FACTS & LAW, THE CIT(A) ERRED IN HOLDING THE SHORT TERM CAPITAL LOSS OF ` 10,94,151/- AS BUSINESS LOSS BY VIRTUE OF SEC. 50 AND ALLOWING TO SET OFF AGAINST THE BUSINESS INCOME FOL LOWING THE PROVISIONS OF SEC. 71. II) ON FACTS 7 LAW, THE CIT(A) MISINTERPRETED THE P ROVISIONS OF SEC. 32(1)(III) WHICH IS APPLICABLE IN THE CASE OF AN UN DERTAKING ENGAGED IN THE BUSINESS OF GENERATION AND DISTRIBUTION OF POWER AS REFERRED TO THE CLAUSE 32(1)(I). ITA 4124/M/09 WESTERN REFRIGERATION CORPORATION 3 5. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS THAT T HE DECISION RELIED ON BY THE LD. CIT(A) IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITS THAT THE PROVISIONS OF SECTION 3 2(1)(III) IS APPLICABLE IN THE CASE OF AN UNDERTAKING ENGAGED IN THE BUSINESS OF GENERATION AND DISTRIBUTION OF POWER AS REFERRED TO THE CLAUSE 32( 1)(I) OF THE ACT AND IN SUPPORT RELIANCE WAS ALSO PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. SAMKRG PISTONS & RINGS LTD. [2009] 34 SOT 401 (HYD.) WHEREIN IT HAS BEEN HELD THAT TERMINAL ALLOWANCE AL LOWED UNDER SECTION 32(1)(III) APPLIES ONLY TO POWER GENERATION AND DIS TRIBUTION UNITS AND NOT TO OTHER UNITS. HE ALSO PLACED ON RECORD A COPY OF THE SAID ORDER. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE A.O . BE RESTORED. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE LD . D.R. AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND T HAT THE ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE LD. CIT(A) IN THE LI GHT OF THE PROVISIONS OF SECTION 32(1)(III) OF THE ACT. THE ASSESSEE HAS AL SO NOT PLACED ANY MATERIAL ON RECORD AS TO HOW THE BUSINESS LOSS IS A LLOWABLE U/S 32(1)(III) OF THE ACT. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE, THE MATTER SHOULD GO BACK TO THE FILE OF THE LD. CIT(A) AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY TH E LD. CIT(A) ON THIS ACCOUNT AND SEND BACK THE MATTER TO HIS FILE WHO SH ALL DECIDE THE SAME AFRESH IN THE LIGHT OF THE OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW INCLUDING THE DECISION IN THE CASE OF DCIT V. SAMKR G PISTONS & RINGS LTD. (SUPRA) AFTER PROVIDING A REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE REVENUE ARE , THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSE. ITA 4124/M/09 WESTERN REFRIGERATION CORPORATION 4 7. IN THE RESULT, REVENUES APPEAL STANDS PARTLY AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 08.04.2011 SD/- (R.K. PANDA) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 8 TH APRIL, 2011. RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- XVIII, M UMBAI 4. COMMISSIONER OF INCOME TAX, MC XVIII, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 4124/M/09 WESTERN REFRIGERATION CORPORATION 5 1 DRAFT DICTATED ON 2 9 .3.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 30 .3.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS