TOLANI SHIPPINT CO. LTD, MUMBAI V. ASST CIT CEN CIR 17 & 28, MUMBAI

ITA 4214/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88029 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 15-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: S M AGAWAL
• Keywords: Depreciation; Rectification of order; Unabsorbed depreciation
• Section: 43CA; 143(3); 244A; 234B; 10B; 12

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, M UMBAI BEFORE HONBLE S/SHRI VIJAY PAL RAO (JM) , AND B.R.BASKARAN (AM) , . . , ./I.T.A. NO.4214/MUM/2012 ( / ASSESSMENT YEAR : 2004-05) M/STOLANI SHIPPING CO.LTD., 10-A BHAKTAWAR, NARIMAN POINT, MUMBAI-400021 / VS. DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 17 AND 28, MUMBAI. ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. :AAACT4127C ! / APPELLANT BY: SHRI S M AGAWAL ' ! /RESPONDENT BY : SHRI MANJUNATHA SWAMY # ' $% / DATE OF HEARING : 19.11.2014 &' ' $% /DATE OF PRONOUNCEMENT :14.1.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 19..3.2012 PASSED BY LD CIT(A)-39, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2004-05. THE FIRST ISSUE URGED IN THIS APPEA L RELATES TO THE VALIDITY OF SETTING OFF OF UNABSORBED DEPRECIATION FOR COMPUTING THE DE DUCTION U/S 33AC OF THE ACT. 2. FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OWNING AND OPERATING SHIPS IN INTER NATIONAL WATERS. THE ORIGINAL ASSESSMENT WAS COMPLETED ON 29.12.2006 U/S 143(3) O F THE INCOME TAX ACT, 1961(THE ACT). SUBSEQUENTLY, THE ASSESSEE FILED RE CTIFICATION PETITION U./S 154 OF THE ACT ON 9.2.2007 AND THE SAME WAS ALLOWED. THE ASSESSEE HAD CHALLENGED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT BY FILING THE APPEAL BEFORE THE LD. CIT(A). CONSEQUENT TO THE ORDER PAS SED BY THE LD.CIT(A), THE AO PASSED CONSEQUENTIAL ORDER. ITA NO.4214/M/2013 2 3. AT THE TIME OF PASSING RECTIFICATION ORDER DATED 09-02-2007 AS WELL AS AT THE TIME OF PASSING ORIGINAL ASSESSMENT ORDER, THER E WAS NO UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEARS REM AINING TO BE ADJUSTED. HOWEVER, CONSEQUENT TO THE ORDER PASSED BY LD CIT(A ) DATED 14.11.2007, THE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EARLIE R YEAR WAS DETERMINED AT RS.17,91,84,264/-. CONSEQUENTLY THE SAME WAS ADJUS TED AGAINST THE INCOME OF THE ASSESSEE IN YET ANOTHER RECTIFICATION ORDER DAT ED 30.1.2008. HOWEVER IN THE SAID RECTIFICATION ORDER, THE UNABSORBED DEPRECIATI ON WAS ADJUSTED AFTER ALLOWING DEDUCTION U/S 33AC OF THE ACT. THE DEDUCTION U/S 3 3AC IS ALLOWABLE IN RESPECT OF PROFITS DERIVED FROM THE BUSINESS OF OPERATION OF S HIPS. 4. HENCE HE ISSUED NOTICE DATED 26.5.2008 U/S 154 O F THE ACT, SINCE HE TOOK THE VIEW THAT THE PROFIT DERIVED FROM THE BUSINESS OF OPERATION OF SHIPS SHOULD BE COMPUTED BY REDUCING BROUGHT FORWARD UNABSORBED DEPRECIATION AND THE DEDUCTION U/S 33AC OF THE ACT SHOULD BE COMPUTED ON THE PROFIT SO ARRIVED AT. IN THIS REGARD, THE AO HAS PLACED RELIANCE ON THE PROV ISIONS OF SECTION 32(2) OF THE ACT, WHICH PROVIDES THAT BROUGHT FORWARD UNABSORBED DEPRECIATION SHALL BE ADDED TO THE AMOUNT OF CURRENT DEPRECIATION AND DEEMED TO BE A PART OF THAT ALLOWANCE OF THE CURRENT YEAR. THE ASSESSING OFFICER ALSO SE RVED ANOTHER NOTICE UPON THE ASSESSEE ALONG WITH THE CORRECT WORKING OF DEDUCTIO N ALLOWABLE U/S 33AC OF THE ACT AT RS.34.05 CRORES AS AGAINST THE AMOUNT OF RS. 46.00 CRORES ORIGINALLY ALLOWED. THE ASSESSEE, VIDE HIS LETTER DATED 27-04 -2010 OBJECTED TO THE METHODOLOGY OF WORKING OF DEDUCTION ALLOWABLE U/S 3 3AC OF THE ACT THAT WAS PROPOSED BY THE AO. THE CONTENTION OF THE ASSESSEE WAS THAT THE PROVISIONS OF SECTION 32(2) (RELATING TO UNABSORBED DEPRECIATION) IS SUBJECT TO THE PROVISIONS OF SECTION 72(2) (RELATING TO BROUGHT FORWARD LOSS) AN D HENCE THE UNABSORBED DEPRECIATION IS REQUIRED TO BE ADJUSTED ONLY AFTER GIVING EFFECT TO SET OFF OF BROUGHT FORWARD BUSINESS LOSS. ACCORDINGLY, THE AS SESSEE CONTENDED THAT, FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 33AC OF THE ACT, BROUGHT FORWARD UNABSORBED DEPRECIATION SHOULD NOT BE DEDUCTED. H OWEVER THE SAID CONTENTIONS DID NOT FIND FAVOUR WITH THE BOTH THE AO OR THE LD. CIT(A). ITA NO.4214/M/2013 3 5. WE HEARD BOTH THE PARTIES AND PERUSED THE RECORD . THE GROUND NOS. 1 TO 3 AND 6 RELATES TO THE DEDUCTION ALLOWABLE U/S 33AC OF THE ACT. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW SUBSECTION (1) OF SEC . 33AC:- [RESERVES FOR SHIPPING BUSINESS. 33AC. (1) [IN THE CASE OF AN ASSESSEE, BEING A GOVERNMEN T COMPANY OR A PUBLIC COMPANY FORMED AND REGISTERED IN INDIA WITH THE MAIN OBJECT OF CARRYING ON THE BUSINESS OF OPERATION OF SHIPS, THE RE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED A DEDUCTION OF AN AMOUNT NOT EXCEEDING FIFTY PER CENT OF PROFIT S DERIVED FROM THE BUSINESS OF OPERATION OF SHIPS (COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND BEFORE MAKING ANY DEDUCTION UNDER THIS SECTION), AS IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH THE DEDUCTION IS TO BE ALL OWED AND CREDITED TO A RESERVE ACCOUNT, TO BE UTILIZED IN THE MANNER LAID DOWN IN SUB-SECTION (2) :] THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ASB INTERNATIONAL (P) LTD V/S DCIT/ACIT (2012) 26 TAXMANN.COM 87 (MUM) AND SUBMIT TED THAT THE TRIBUNAL HAS HELD THAT THE CARRIED FORWARD BUSINESS LOSS AND DEPRECIATION CANNOT BE SET OFF AGAINST THE PROFIT OF UNDERTAKING WHILE WORKING OF THE CLAIM U/S 10B OF THE ACT. THE LD. COUNSEL POINTED OUT THAT THE TRIBUNAL, IN T HE ABOVE SAID CASE, HAS FOLLOWED THE BINDING DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S BLACK & VEATCH CONSULTING PRIVATE LTD. (201 2) 208 TAXMAN 144 (BOM)(MAG.)(348 ITR 72). THE LD. COUNSEL FURTHER SU BMITTED THAT THE SAME PRINCIPLE SHALL APPLY TO THE DEDUCTION ALLOWABLE U /S 33AC OF THE ACT. 6. ON THE CONTRARY, THE LD. DR PLACED RELIANCE ON T HE DECISION OF THE LD. CIT(A) AND SUBMITTED THAT THE PROVISIONS OF SECTION 32(2) IS VERY CLEAR IN THIS REGARD AND HENCE UNABSORBED DEPRECIATION IS REQUIRE D TO BE DEDUCED FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 33AC OF THE ACT. 7. WE NOTICE THAT THE ASSESSEE HAS ALSO CHALLENGED THE VALIDITY OF RECTIFICATION ORDER PASSED BY THE AO U/S 154 OF THE ACT FOR RE-COMPUTING THE DEDUCTION U/S 33AC OF THE ACT ON THE GROUND THAT TH E SAME IS DEBATABLE IN NATURE. HOWEVER, THE LD CIT(A) REJECTED THE SAID G ROUND AND THE ASSESSEE HAS NOT CHALLENGED THE SAME BEFORE US. HOWEVER, AT THE TIME OF HEARING THE LD A.R ITA NO.4214/M/2013 4 CONTENDED THAT THE IMPUGNED ISSUE IS A DEBATABLE ON E AND HENCE THE RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER U/S 154 IS NO T VALID. HOWEVER, WE ARE UNABLE TO AGREE WITH THE SAID CONTENTIONS FOR THE D ETAILS REASONS DISCUSSED INFRA. 8. WE HAVE EARLIER NOTICED THAT T HE LD A.R HAS PLACED RELIANCE ON THE DECISION RENDERED BY THE CO-ORDINATE BENCH OF TRIBU NAL IN THE CASE OF ASB INTERNATIONAL (P) LTD V/S DCIT/ACIT (SUPRA), WHEREI N THE DECISION RENDERED BY THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. BLACK AND VEATCH CONSULTING PVT LTD (SUPRA) WAS RELIED UPON B Y THE TRIBUNAL. IN THE ABOVE SAID CASES, IT WAS HELD THAT THE BROUGHT FORWARD UN ABSORBED DEPRECIATION AND LOSSES OF THE UNIT, THE INCOME OF WHICH IS NOT ELIG IBLE FOR DEDUCTION U/S 10A, CANNOT BE SET OFF AGAINST THE CURRENT PROFITS OF TH E ELIGIBLE UNIT FOR COMPUTING DEDUCTION U/S 10A OF THE ACT. ACCORDING TO LD A.R, THE SAME PRINCIPLE SHOULD BE APPLIED FOR COMPUTING DEDUCTION U/S 33AC OF THE ACT . 9. HOWEVER, WE NOTICE THAT THE HONBLE SUPREME COU RT HAS RENDERED A DECISION IN THE CASE OF HIMATSINGKA SEIDE LTD VS. C IT (CIVIL APPEAL NO.1501 OF 2008 DATED SEPTEMBER 19, 2013), WHEREIN THE HONBLE APEX COURT HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE CHALLENGING THE OR DER PASSED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. HIMATAS INGIKE SEIDE LTD (286 ITR 255). IN THE ABOVE SAID CASE, THE HONBLE KARNATAK A HIGH COURT HAD HELD THAT THE UNABSORBED DEPRECIATION SHOULD BE TAKEN INTO CO NSIDERATION WHILE COMPUTING THE DEDUCTION U/S 10B OF THE ACT. 10. THE DECISION RENDERED BY THE HONBLE SUPREME C OURT IN THE CASE OF HIMATSINGKA SEIDE LTD (SUPRA) APPROVES THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT, WHEREIN THE HONBLE KARNATAKA HIGH COURT HAD HELD THAT THE UNABSORBED DEPRECIATION SHOULD BE TAKEN INTO CO NSIDERATION WHILE COMPUTING THE DEDUCTION U/S 10B OF THE ACT. AS SUBMITTED BY LD A.R, THE DEDUCTION ALLOWABLE U/S 10A, 10B AND 33AC ARE IDENTICAL IN NA TURE, I.E., ON PROFITS DERIVED FROM A PARTICULAR SOURCE. IN VIEW OF THE DECISIO N OF HONBLE SUPREME COURT (REFERRED SUPRA), THE UNABSORBED DEPRECIATION SHOU LD BE TAKEN INTO CONSIDERATION WHILE DETERMINING THE PROFITS DERIVED FROM THE SHIP PING BUSINESS. 11. THIS ISSUE CAN BE EXAMINED FROM ANOTHER ANGL E. AS PER THE PROVISIONS OF SEC. 33AC OF THE ACT, THE PROFITS DERIVED FROM THE BUSINESS OF OPERATION OF SHIPS ITA NO.4214/M/2013 5 SHOULD BE COMPUTED UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS OF PROFESSION BEFORE MAKING DEDUCTION U/S 33AC OF THE ACT. FOR M EANING OF THE EXPRESSION DERIVED FROM, WE MAY REFER TO THE DECISIONS RENDE RED BY THE HONBLE SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUST RIAL CO. LTD. V. CIT (1978) 113 ITR 84 (SC) AND CIT VS. STERLING FOODS (1999) 237 ITR 579, ACCORDING TO WHICH THE EXPRESSION, DERIVED FROM HAVE NARROWER MEANING THAN THE EXPRESSIONS ATTRIBUTABLE TO. HENCE THE PROFITS DE RIVED FROM BUSINESS OF OPERATION OF SHIPS HAVE TO BE COMPUTED IN ACCORDANC E WITH THE PROVISIONS OF SEC. 38 TO 43CA OF THE ACT. THE QUESTION OF APPLICATION OF PROVISIONS OF SEC. 72(2) OF THE ACT RELATING TO SETTING OFF OF UNABSORBED BUSIN ESS LOSS SHALL ARISE ONLY AT THE STAGE OF AGGREGATION OF INCOME AS PER CHAPTER VI O F THE ACT. ONLY AT THAT STAGE, THE QUESTION OF GIVING PREFERENCE TO THE PROVISIONS OF SEC. 72(2) OVER TO SEC. 32(2) OF THE ACT SHALL ARISE. HENCE, IN OUR VIEW, THE PR OVISIONS OF SEC. 72(2) SHALL NOT HAVE RELEVANCE WHILE COMPUTING THE PROFITS DERIVED FROM SHIPPING BUSINESS AS PER THE PROVISIONS OF SEC. 38 TO 43CA OF THE ACT. WE MAY ALSO GAINFULLY REFER TO THE DECISION OF CO-ORDINATE BENCH RENDERED IN THE C ASE OF DEPUTY COMMISSIONER OF INCOME TAX VS GARWARE SHIPPING CORPN. LTD. (2002 ) 81 ITD 207 (MUM), WHEREIN IT WAS HELD THAT THE BROUGHT FORWARD UNABS ORBED INVESTMENT ALLOWANCE, WHICH FALLS U/S 32A, HAS TO BE CONSIDERED FIRST BE FORE GRANTING ANY DEDUCTION U/S 33AC OF THE ACT, EVEN THOUGH, AS PER THE ORDER OF SET OFF LISTED OUT BY THE ASSESSEE, IT IS PLACED IN THE LAST. 12. IN VIEW OF THE ABOVE, WE AGREE WITH THE DECIS ION OF LD CIT(A) THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION SHOULD BE D EDUCTED FIRST FROM THE PROFITS DERIVED FROM SHIPPING BUSINESS AND THE DEDU CTION U/S 33AC OF THE ACT SHOULD BE COMPUTED ON THE PROFIT SO ARRIVED AT. 13. IN GROUND NO.4 & 5, THE ASSESSEE HAS TAKEN AN ALTERNATIVE ARGUMENT BEFORE US, VIZ., THAT THE UNABSORBED DEPRECIATION A CTUALLY RELATED TO THE DE- MERGED COMPANY NAMED M/S TOLANI BULK CARRIERS LTD A ND HENCE THE SAME SHOULD NOT BE DEDUCTED FOR ARRIVING AT SHIPPING PRO FIT OF THE COMPANY. HOWEVER, WE NOTICE THAT THE ASSESSEE DID NOT RAISE THIS CONT ENTION EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD CIT(A). FURTHER WE NOTICE THAT THE ASSESSING OFFICER HAS INITIATED THE RECTIFICATION PROCEEDINGS TO CORRECT THE ERRORS NOTICED BY HIM. ACCORDINGLY, WE ARE OF THE VIEW THAT NEW CLAI M PUT FORTH BY THE ASSESSEE, ITA NO.4214/M/2013 6 WHICH WAS NOT BEFORE THE ASSESSING OFFICER, CANNOT BE CONSIDERED AT THIS STAGE. ACCORDINGLY, WE ARE UNABLE TO ENTERTAIN THESE GROUN DS. 14. IN GROUND NO.7, THE ASSESSEE IS QUESTIONING T HE DEDUCTION OF 19.62% OF THE FREIGHT INCOME. AGAIN THIS ISSUE ALSO DOES NOT ARISE OUT OF THE RECTIFICATION ORDER. FURTHER THE LD A.R DID NOT MAKE ANY SUBMISS IONS IN THIS REGARD. ACCORDINGLY, WE DECLINE TO ADDRESS THE SAME. 15. IN GROUND NO.8, 9 AND 10, THE ASSESSEE IS FIN DING FAULT WITH THE AO IN NOT PROPERLY GIVING EFFECT TO THE ORDER PASSED BY LD CI T(A). IN GROUND NO. 11, 12, 13 AND 14, THE ASSESSEE IS FINDING FAULT WITH THE A O IN COMPUTING INTEREST U/S 234B AND 244A OF THE ACT. IN GROUND NO.15, THE ASS ESSEE IS AGGRIEVED BY NOT ALLOWING PROPER AMOUNT OF CREDIT OF TDS AS PER THE TDS CERTIFICATES FILED. IT CAN BE NOTICED THAT ALL THESE ISSUES DO NOT ARISE OUT O F THE IMPUGNED RECTIFICATION ORDER. AT THE TIME OF HEARING ALSO, THE LD A.R DID NOT ADVANCE ANY ARGUMENTS ON THE ABOVE GROUNDS. HENCE WE DECLINE TO ADDRESS THE SAME. 16. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GR OUND, WHEREIN THE ASSESSEE IS CONTENDING THAT THE ASSESSING OFFICER SHOULD HAVE C ONSIDERED FOLLOWING INCOMES ALSO AS PROFITS DERIVED FROM SHIPPING BUSINESS. (A) TECHNICAL MANAGEMENT FEES 81,95,624 (B) BROKERAGE & COMMISSION ON INCHARTING SHIP 46 ,50,833 (C) FOREIGN EXCHANGE DIFFERENCE 2,03,29, 551 (D) CLAIMS RECEIVED FROM INSURANCE CO. 1, 44,86,719 BOTH THE PARTIES ADVANCED THEIR ARGUMENT ON THE ABO VE SAID GROUND. THE LD D.R SUBMITTED THAT THE ABOVE SAID RECEIPTS HAVE BEEN CO NSIDERED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 17. HOWEVER, WE HAVE ALREADY NOTICED THAT THE P RESENT APPEAL ARISE OUT OF RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER U/S 154 OF THE ACT PURSUANT TO THE NOTICE ISSUED BY THE AO. THE ASSESSEE IS MAKIN G FRESH CLAIMS BEFORE THE TRIBUNAL IN THIS APPEAL. HENCE, WE ARE OF THE VIEW THAT THIS IS NOT THE APPROPRIATE FORUM TO MAKE THESE CLAIMS. ACCORDINGL Y WE REJECT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. ITA NO.4214/M/2013 7 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14TH JAN, 2015 . &' # () * + 14TH JAN, 2015 ' ' 1 2 SD SD ( / VIJAY PAL RAO ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( # MUMBAI:14TH JAN,2015. . . ./ SRL , SR. PS !'# $#%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. # 4$ ( ) / THE CIT(A)- CONCERNED 4. # 4$ / CIT CONCERNED 5. 6. 51 $ 6 , % 6 , ( # / DR, ITAT, MUMBAI CONCERNED 17 8 / GUARD FILE. 9 # / BY ORDER, TRUE COPY : (ASSTT. REGISTRAR) % 6 , ( # /ITAT, MUMBAI