M/s Escapade Resorts (P) Ltd., Cochin V. ACIT, Ernakulam

ITA 455/COCH/2004

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64970 (ITAT-COCHIN)
• Duration Of Justice: 8 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-10-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 17-05-2004
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Keywords: Depreciation; Tangible material; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 80C; 80HHC; 115JB; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 455/COCH/2004 ASSESSMENT YEAR: 2001-02 M/S. ESCAPADE RESORTS (P) LTD., W/ISLAND, C/O CASINO HOTEL, KOCHI-682 003. [PAN:AAACE 5978L] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) I.T.A. NOS. 661 & 718/COCH/2007 ASSESSMENT YEARS: 2003-04 & 2004-05 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), ERNAKULAM VS. M/S. ESCAPADE RESORTS (P) LTD., W/ISLAND, C/O CASINO HOTEL, KOCHI-682 003. [PAN:AAACE 5978L] (REVENUE-APPELLANT) (ASSESSEE -R ESPONDENT) C.O. NO. 58/COCH/2007 (ASG. OUT OF I.T.A. NO. 661/COCH/2007) ASSESSMENT YEAR: 2003-04 M/S. ESCAPADE RESORTS (P) LTD., W/ISLAND, C/O CASINO HOTEL, KOCHI-682 003. [PAN:AAACE 5978L] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI G. SARANGAN, SR. COUNSEL, FOR SHRI P.K. SASIDHARAN, CA REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 10/10/2012 DATE OF PRONOUNCEMENT 16/11/2012 O R D E R I.T.A. NO.455/COCH/2004 & ORS. 2 PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS/CROSS OBJECTION ARE FILED BY THE PARTIES CITED ABOVE AND ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A )-II, KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS MENTIONED AGAINST THEIR RESPECTIVE NAMES IN THE CAPTION CITED ABOVE. 2. SINCE THE IDENTICAL ISSUES ARE AGITATED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, WE PREFER TO DISPOSE OF THE APPEALS ASSESS MENT YEAR WISE. 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE A SSESSEE FOR THE ASSESSMENT YEAR 2001-02. THE FOLLOWING ISSUES ARE AGITATED IN THIS APPEAL. A) DISALLOWANCE OF CLAIMS FOR DEDUCTION U/S.80-IB AND 80HHD. B) ENHANCEMENT OF BOOK PROFIT COMPUTED U/S. 115JB BY ADDING THE UNABSORBED DEPRECIATION. C) VALIDITY OF INTEREST CHARGED U/S. 234C OF THE ACT. 4. THE FACTS RELATING TO THE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING TOURIST HOTELS AND IT HA S GOT TWO BUSINESS UNITS, VIZ. SPICE VILLAGE AT THEKKADY AND MARARI BEACH RESORT AT MARA RIKULAM. IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2001- 02, IT CLAIMED DEDUCTION U/S. 80IB AND 80HHD OF THE ACT. THE ASSESSING OFFICER NOTICE D THAT THE GROSS TOTAL INCOME OF THE ASSESSEE HAS RESULTED IN NIL FIGURE. BY INVOKING T HE PROVISIONS OF SEC. 80A(2), THE ASSESSING OFFICER DECLINED TO ALLOW DEDUCTION U/S. 80IB AND 80HHD OF THE ACT, AS THE GROSS TOTAL INCOME WAS NIL. 5. IN THE COMPUTATION OF BOOK PROFIT U/S. 115JB OF THE ACT, THE ASSESSEE HAD CLAIMED DEDUCTION TOWARDS UNABSORBED DEPRECIATION A S PER CLAUSE (III) TO EXPLANATION 1 OF SEC. 115JB OF THE ACT. THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE DID NOT HAVE ANY CARRY FORWARD BUSINESS LOSS AND IT HAD ONLY UNA BSORBED DEPRECIATION. THE ASSESSING OFFICER NOTICED THAT THE PROVISIONS OF EXP LANATION (III) BELOW SEC. 115JB(2) PROVIDE FOR DEDUCTION OF EITHER UNABSORBED DEPRECIA TION OR BROUGHT FORWARD LOSS, WHICHEVER IS LOWER. SINCE THE BROUGHT FORWARD LOSS WAS NIL, THE ASSESSING OFFICER TOOK I.T.A. NO.455/COCH/2004 & ORS. 3 THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO DEDUC T THE UNABSORBED DEPRECIATION. ACCORDINGLY, HE ADDED THE SAME TO THE BOOK PROFIT. THE ASSESSING OFFICER ALSO LEVIED INTEREST U/S. 234C OF THE ACT ON THE TAX COMPUTED U /S 115JB OF THE ACT, AS THE INSTALMENTS OF ADVANCE TAX PAID WAS LOWER THAN THE PRESCRIBED AMOUNT. AGGRIEVED, THE ASSESSEE CARRIED ALL THE MATTERS IN APPEAL BEFORE T HE LD. CIT(A) BUT COULD NOT SUCCEED. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DEDUCTION CLAIMED U/S. 80IB AN D 80HHD OF THE ACT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE SAID DEDUCTIO NS ARE ALLOWABLE, EVEN IF THERE IS NO GROSS TOTAL INCOME, SINCE THESE SECTIONS ARE SELF R EGULATED PROVISIONS. HOWEVER, WE NOTICE THAT THIS BENCH OF THE TRIBUNAL HAS CONSIDER ED AND DECIDED AN IDENTICAL ISSUE IN THE CASE OF M/S. HOTEL AND ALLIED TRADERS (P) LTD. IN I.T.A. NO. 378/COCH/2005 AND OTHERS. THE RELEVANT OBSERVATIONS MADE IN THAT CAS E ARE EXTRACTED BELOW FOR THE SAKE OF CONVENIENCE: 6. BY ADVERTING OUR ATTENTION TO THE PROVISIO NS OF SUB SEC.7 OF SEC. 80IA (SUB. SEC. 5 IN NEW SECTION 80IA INTRODUCED WITH EFFECT FROM 2000-2001 AND THE SAID SEC. 80IA(5) IS MADE APPLICABLE TO SEC. 80IB ALSO AS PER THE SUB SEC. 13 OF SEC. 80IB), THE LEARNED COUNSEL FOR THE ASSESSEE CONTEN DED THAT DEDUCTION U/S. 80IA HAS TO BE COMPUTED ON THE PROFITS OF THE ELIGIBLE UNIT, BY TREATING THE SAME AS THE ONLY SOURCE OF INCOME. HE FURTHER SUBMITTED T HAT SEC. 80IA/80IB IS A SELF CONTAINED REGULATION AND IT HAS OVERRIDING EFFECT OVER ALL OTHER PROVISIONS OF THE ACT. HENCE THE AMOUNT OF DEDUCTION COMPUTED THERE UNDER IS ELIGIBLE FOR DEDUCTION EVEN IF THE GROSS TOTAL INCOME RESULTS I N A LESSER FIGURE OR LOSS, SINCE SUB SECTION 5 OF SEC. 80IA OVERRIDES ANY OTHER PRO VISIONS OF THE ACT INCLUDING SEC. 80A(2) AND SEC. 80AB OF THE ACT. THUS, ACCORDING TO THE ASSESSEE, THE AMOUNT OF DEDUCTION COMPUTED U/S 80IA IS ELIGIBLE FOR DED UCTION EVEN IF THERE IS NO GROSS TOTAL INCOME OR THE GROSS TOTAL INCOME RESULTS IN A MINUS FIGURE. ON THE CONTRARY, THE LD D.R STRONGLY SUPPORTED THE ORDER OF LD CIT(A) ON THIS ISSUE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE PROVISIONS OF SEC. 80A(2) AND SEC. 80AB AND SUB SEC. 7 OF SEC. 80IA A RE RELEVANT HERE. HENCE, WE EXTRACT THE RELEVANT PROVISIONS FOR THE SAKE OF CO NVENIENCE. 80A(2) : THE AGGREGATE AMOUNT OF THE DEDUCTIONS UNDER THI S CHAPTER* SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL INCO ME OF THE ASSESSEE. I.T.A. NO.455/COCH/2004 & ORS. 4 (* CHAPTER VI-A, WHICH INCLUDES DEDUCTIONS SPECIFIE D IN SEC. 80C TO 80VV, INCLUDING DEDUCTION U/S 80IA). 80AB :- WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR A LLOWED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEAD ING C DEDUCTIONS IN RESPECT OF CERTAIN INCOMES ** IN RESPECT OF ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION , FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SHALL ALONE BE DEEMED TO BE THE AMOUN T OF INCOME OF THAT NATURE WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL INCOME. (** DEDUCTION U/S 80IA FALLS IN THIS CATEGORY) 80IA(7):- NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT , THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL , FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB-SECTION (5) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF S UCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURI NG THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVER Y SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 8. A CAREFUL READING OF SECTION 80IA(7), REFERR ED SUPRA, SUGGESTS THAT THE SAID SUB SECTION OVERRIDES ANY OTHER PROVISIONS OF THE ACT ONLY FOR THE LIMITED PURPOSE OF DETERMINING THE QUANTUM OF DEDUC TION UNDER SUB SEC. 5 OF SEC. 80IA. HOWEVER, IT CAN BE SEEN THAT THE PRO VISIONS OF SEC. 80AB OVERRIDES THE PROVISIONS OF SEC. 80IA, SINCE THE DE DUCTION U/S 80IA FALLS IN UNDER THE HEADING C DEDUCTIONS IN RESPECT OF CER TAIN INCOME. THE LEGAL POSITION IN THIS REGARD WAS EXPLAINED BY THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORY LTD VS. DCIT (266 I TR 521) AS UNDER:- SECTION 80AB IS ALSO IN CHAPTER VI-A. IT STARTS W ITH THE WORDS WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLO WED UNDER ANY SECTION OF THIS CHAPTER. THIS WOULD INCLUDE SECTI ON 80HHC. SECTION 80AB FURTHER PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION. THUS SECTION 80AB HAS BEEN GIVEN I.T.A. NO.455/COCH/2004 & ORS. 5 OVERRIDING EFFECT OVER ALL OTHER SECTIONS IN CHAPTE R VI-A. SECTION 80HHC DOES NOT PROVIDE THAT ITS PROVISIONS ARE TO P REVAIL OVER SECTION 80AB OR OVER ANY OTHER PROVISIONS OF THIS A CT. SECTION 80HHC WOULD THUS BE GOVERNED BY SECTION 80AB. ACCORDING TO SEC. 80AB, THE AMOUNT OF INCOME OF THE NATURE SPECIFIED IN SEC. 80IA, WHICH IS INCLUDED IN THE GROSS TOTAL INC OME, SHALL BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE DERIVED O R RECEIVED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IA OF THE ACT, I.E., THE AMOUNT OF DEDUCTION U/S 80IA SHALL BE COMPUTED ONLY WITH REFERENCE TO THE AMOUNT OF INCOME FROM ELIGIBLE BUSINESS, WHI CH IS INCLUDED IN THE GROSS TOTAL INCOME. THIS PROVISION SHALL HAVE AP PLICATION IF THE PROFITS AND GAINS OF ELIGIBLE BUSINESS COMPUTED UNDER SEC. 80IA GET REDUCED WHILE INCLUDING THE SAME IN THE GROSS TOTAL INCOME. 9. ACCORDINGLY, IN OUR VIEW, A COMBINED READING OF THE PROVISIONS OF SUB SEC. 7 OF SEC. 80IA AND SEC. 80AB WOULD SUGGEST TH AT (A) THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS , TO WHICH THE PROVISIONS OF SEC. 80IA(1) SHALL APPLY, SHALL BE RESTRICTED TO THE AMOUNT OF INCOME OF THAT NATURE THAT IS INCLUDED IN THE GROSS TOTAL INC OME AND (B) THE QUANTUM OF DEDUCTION SHALL BE COMPUTED ON S UCH PROFIT, AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THE QUESTION WHETHER THE QUANTUM OF DEDUCTION SO CO MPUTED IS FULLY ELIGIBLE FOR DEDUCTION OR NOT HAS TO BE DETERMINED BY CONSIDERING THE PROVISIONS OF SUB SEC.2 OF 80A, WHICH PROVIDES THAT THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPTER VIA SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL INCOME. IN OUR VIEW, THE WORDS IN ANY CASE HAVE GREATER SIGNIFICANCE IN THIS SUB SECTION. THE WORDS SHALL NOT, BY THEMSELVES INDICATE THE MANDATORY NATURE OF THIS SECTION. TH E WORDS IN ANY CASE ATTACHED TO THE WORDS SHALL NOT WOULD INDICATE TH AT THE STATUTE INTENDS TO MAKE DOUBLE SURE ITS INTENTION THAT THE AGGREGAT E AMOUNT OF DEDUCTIONS SHOULD NOT EXCEED THE GROSS TOTAL INCOME . WE MAY HERE MENTION THAT THE DETERMINATION OF AMOUNT OF DEDUCTI ON U/S 80IA IS ONE THING AND THE QUANTUM OF AMOUNT ACTUALLY ALLOWABLE IS ANOTHER THING. IN OUR VIEW; SUB. SEC. 7 OF 80IA PROVIDES FOR DETERMIN ATION OF AMOUNT OF DEDUCTION AND SEC. 80AB & SUB. SEC. 2 OF SEC. 80A P ROVIDE FOR THE AMOUNT ACTUALLY ALLOWABLE WHILE COMPUTING THE TOTAL INCOME . HENCE WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT THE PROVISIONS OF SEC. 80IA IS CODE BY ITSELF TO WHICH THE PROVISIONS OF S EC. 80A(2) AND 80AB SHALL NOT APPLY. ......................... I.T.A. NO.455/COCH/2004 & ORS. 6 12. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2000-2001. THE ASSESSEE IS ASSAIL ING THE DECISION OF THE LD CIT(A) IN CONFIRMING THE COMPUTATION OF DEDU CTION MADE U/S 80HHD AND SEC. 80IB OF THE ACT...... BE THAT AS IT MAY, IT IS AN ADMITTED FACT THAT THE GROSS TOTAL INCOME RETURNED BY THE AS SESSEE RESULTED IN NEGATIVE FIGURE AND THE AO HAS ALSO COMPUTED THE GR OSS TOTAL INCOME, AFTER MAKING CERTAIN DISALLOWANCES AND ADJUSTMENTS, AT (-) RS.2.15 CRORES. IN VIEW OF THE SAID LOSS, THE AO DENIED THE DEDUCTI ON CLAIMED BY THE ASSESSEE U/S 80HHD AS WELL AS U/S 80IB OF THE ACT. THE SAID ORDER OF THE AO WAS ALSO CONFIRMED BY THE LD CIT(A). 13. WE HAVE ALREADY NOTICED THAT THE PROVISIONS O F SEC. 80A(2) MANDATES THAT THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPT ER VI-A SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL INCOME OF THE ASSE SSEE. IN VIEW OF THE DISCUSSIONS MADE IN THE PRECEDING PARAGRAPHS, WE AR E OF THE VIEW THAT THE LD CIT(A) WAS RIGHT IN LAW UPHOLDING THE DENIA L OF DEDUCTION U/S 80HHD AND 80IB OF THE ACT. ACCORDINGLY, WE UPHOLD HIS ORDER. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, IT IS AN ADMITTED FACT THAT THE GROSS TOTAL INCOME WAS COMPUTED AT NIL FIGURE. IN THE ABOVE CI TED CASE, THIS BENCH OF THE TRIBUNAL HAS HELD THAT THE PROVISIONS OF SEC. 80A(2) MANDATE S THAT THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPTER VI-A SHALL NOT, IN ANY CAS E, EXCEED THE GROSS TOTAL INCOME OF THE ASSESSEE AND HENCE DEDUCTIONS PRESCRIBED IN CHA PTER VI-A CANNOT BE DEDUCTED IF THERE IS NO GROSS TOTAL INCOME AT ALL. BY FOLLOWIN G THE SAID DECISION, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 80H HD AND 80IB DURING THE YEAR UNDER CONSIDERATION. 7. THE NEXT ISSUE RELATES TO THE COMPUTATION OF BOO K PROFIT U/S. 115JB OF THE ACT, I.E., WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DED UCTION OF UNABSORBED DEPRECIATION WHEN THE BROUGHT FORWARD BUSINESS LOSS IS NIL. T HIS BENCH OF THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF M/S. H OTEL AND ALLIED TRADERS (P) LTD. IN I.T.A. NO. 666/COCH/2007. WE EXTRACT BELOW THE REL EVANT OBSERVATIONS MADE BY THE TRIBUNAL IN THIS REGARD. 19. THE NEXT ISSUE IN THE APPEAL FILED BY THE R EVENUE FOR THE ASSESSMENT YEAR 2003-04 RELATES TO THE DEDUCTION OF CARRY FORWARD DEPRECIATION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAS I.T.A. NO.455/COCH/2004 & ORS. 7 DEDUCTED THE CARRY FORWARD DEPRECIATION AMOUNTING TO RS.73,54,058/-, WHICH WAS COMPUTED UNDER THE INCOME TAX ACT, WHERE AS THE CL AUSE (III) OF EXPLANATION 1 TO SECTION 115JB PROVIDES FOR DEDUCTION AS UNDER:- (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSO RBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT . EXPLANATION:- FOR THE PURPOSES OF THIS CLAUSE,- - (A) THE LOSS SHALL NOT INCLUDE DEPRECIATION; (B) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY I F THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL. ACCORDINGLY THE AO HELD THAT THE ASSESSEE IS NOT EN TITLED TO DEDUCT THE CARRY FORWARD DEPRECIATION COMPUTED UNDER THE INCOME TAX PROVISIONS FROM THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THE AO FURT HER NOTICED THAT THE BOOKS OF ACCOUNT DID NOT SHOW ANY BROUGHT FORWARD LOSS. SI NCE THE BROUGHT FORWARD LOSS AS PER BOOKS OF ACCOUNT WAS NIL, THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OF ANY AMOUNT AS PER CLAUSE (III) OF EXPL ANATION 1 TO SEC. 115JB OF THE ACT....... 20. HOWEVER, WE FIND MERIT IN THE OBSERVATIONS MADE BY THE AO. FIRST OF ALL, CLAUSE (III) OF EXPLANATION 1 TO SEC. 115JB, WHICH IS EXTRACTED ABOVE, MANDATES THAT THE DEDUCTION OF AMOUNT OF LOSS BROUGHT FORWA RD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS SHOULD BE AS PER BO OKS OF ACCOUNT. HENCE THE ASSESSEE WAS WRONG IN LAW IN CLAIMING DEDUCTION OF CARRY FORWARD DEPRECIATION, WHICH WAS DETERMINED UNDER THE INCOME TAX ACT. SE CONDLY, THE AO HAS GIVEN A SPECIFIC FINDING THAT THERE IS NO CARRY FORWARD LO SS AS PER THE BOOKS OF ACCOUNT, IN WHICH CASE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM ANY DEDUCTION UNDER CLAUSE (III) IN VIEW OF SPECIFIC PROVISIONS CONTAINED IN CLAUSE (B) OF THE EXPLANATION GIVEN UNDER THE ABOVE SAID CLAUSE (III). ACCORDINGLY, W E SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSES SING OFFICER. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CITED C ASE, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION OF UNABSORBED DEPRECIAT ION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT, SINCE THERE IS NO BROUGHT FORWARD LOSS. 8. THE LAST ISSUE RELATES TO THE CHARGING OF INTERE ST U/S. 234C OF THE ACT ON THE TAX PAYABLE U/S. 115JB OF THE ACT. THIS ISSUE HAS BEEN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF ROLTA INDIA LIMITED (330 ITR 4 70) IN WHICH IT HAS BEEN HELD THAT I.T.A. NO.455/COCH/2004 & ORS. 8 THE ASSESSEE IS LIABLE TO PAY INTEREST FOR DEFERME NT OF ADVANCE TAX PAYABLE IN RESPECT OF THE INCOME COMPUTED U/S. 115JB OF THE ACT. ACCORDI NGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 9. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2003-04 AND THE CROSS OBJECTION FILED BY THE ASSESS EE FOR THAT YEAR. IN THIS YEAR ALSO, THE AO DENIED DEDUCTION CLAIMED U/S 80HHD AND 80IB OF THE ACT, AS THE GROSS TOTAL INCOME RESULTED IN NIL FIGURE. HOWEVER, THE LD CIT (A) DIRECTED THE AO TO ALLOW BOTH THE DEDUCTIONS AS CLAIMED BY THE ASSESSEE. THE AO ADDED THE CLAIM OF UNABSORBED DEPRECIATION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT, AS THERE WAS NO BROUGHT FORWARD LOSS. HOWEVER, THE LD CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION OF UNABSORBED DEPRECIATION. AGGRIEVED BY THE SAID DECI SIONS OF LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE CONSIDERED IDENTICAL ISSUES IN THE PRECEDING PARAGRAPHS WHILE CONSIDERING THE APPEAL FILED BY THE ASSESSEE FOR TH E ASSESSMENT YEAR 2001-02. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE SET ASID E THE ORDERS OF LD CIT(A) ON BOTH THE ISSUES AND RESTORE THAT OF THE AO. 11. IN THE CROSS OBJECTION, THE ASSESSEE IS ASS AILING THE DECISION OF LD CIT(A) IN NOT GIVING SPECIFIC DIRECTION WITH REGARD TO THE DEDUCT ION OF MAT CREDIT U/S 115JAA OF THE ACT. IN THE ASSESSMENT ORDER, THE AO DID NOT ALLOW CREDIT OF TAX PAID FOR THE ASSESSMENT YEAR 1998-99 AS REQUIRED UNDER THE PROVI SIONS OF SEC. 115JAA OF THE ACT. THE LD CIT(A) DIRECTED THE AO TO OBTAIN THE NECESSA RY DETAILS AND ALLOW THE CLAIM. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) SHO ULD HAVE HELD THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE IN LAW. 12. WE NOTICE THAT THE AO DECLINED TO ALLOW THE TAX CREDIT PERTAINING TO THE ASSESSMENT YEAR 1998-99, AS HE FELT THAT THE TIME P ERIOD PRESCRIBED U/S 115JAA(3) FOR GIVING CREDIT HAS LAPSED IN ASSESSMENT YEAR 2003-04 . FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW SUB SEC. 3 OF SEC. 115JAA. I.T.A. NO.455/COCH/2004 & ORS. 9 (3) THE AMOUNT OF TAX CREDIT DETERMINED UNDER SUB -SECTION (2) SHALL BE CARRIED FORWARD AND SET OFF IN ACCORDANCE WITH THE PROVISIO NS OF SUB-SECTIONS (4) AND (5) BUT SUCH CARRY FORWARD SHALL NOT BE ALLOWED BEYOND THE FIFTH ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR IN WHICH THE TAX CREDIT BECOMES ALLOWABLE UNDER SUB SECTION (1). IN THE INSTANT CASE, THE TAX CREDIT PERTAINS TO THE ASSESSMENT YEAR 1998-99. THE TIME PERIOD PRESCRIBED IN THE ABOVE SAID SUB. SECTION IS FIVE ASSESSMENT YEARS SUCCEEDING THE ASST. YEAR 1998-99. ACCORDINGLY, THE TAX CREDI T CAN BE CLAIMED IN ANY YEAR COMMENCING FROM THE ASSESSMENT YEAR 1999-2000 TO 20 03-04. THUS THE FIFTH YEAR FOR CLAIMING TAX CREDIT IS THE ASSESSMENT YEAR 2003-04 AND HENCE THE ASSESSEE IS ENTITLED TO CLAIM ELIGIBLE AMOUNT OF TAX CREDIT OUT OF THE TAX PAID IN THE ASSESSMENT YEAR 1998-99. ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE ELIGIBLE AMOUNT OF TAX CREDIT IN THIS YEAR. 13. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2004-05. IN THIS YEAR ALSO, THE AO DENIED DEDUCTI ON CLAIMED U/S 80HHD AND 80IB OF THE ACT, AS THE GROSS TOTAL INCOME RESULTED IN NIL FIGURE. HOWEVER, THE LD CIT(A) DIRECTED THE AO TO ALLOW BOTH THE DEDUCTIONS AS CLA IMED BY THE ASSESSEE. THE AO ADDED THE CLAIM OF UNABSORBED DEPRECIATION WHILE CO MPUTING BOOK PROFIT U/S 115JB OF THE ACT, AS THERE WAS NO BROUGHT FORWARD LOSS. HOW EVER, THE LD CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION OF UNABSORBED DEPRECIATION. AGGRIEVED BY THE SAID DECISIONS OF LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 14. WE HAVE CONSIDERED IDENTICAL ISSUES IN THE PR ECEDING PARAGRAPHS WHILE CONSIDERING THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE SET ASIDE THE ORDERS OF LD C IT(A) ON BOTH THE ISSUES AND RESTORE THAT OF THE AO. 15. IN THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05, THE ASSESSEE CLAIMED FOLLOWING AMOUNTS AS REVENUE EXPENDITURE. NEW PLAY GROUND RS. 2,49,677/- NEW COMPOUND WALL RS.12,48,957/- I.T.A. NO.455/COCH/2004 & ORS. 10 THE AO HAS OPINED THAT THESE CONSTRUCTIONS HAVE GIV EN BIRTH TO NEW ASSETS. ACCORDINGLY HE HELD THAT THE ABOVE SAID EXPENDITURE S ARE CAPITAL IN NATURE AND ACCORDINGLY DISALLOWED THE SAID CLAIM. THE AO ALSO ALLOWED DEPRECIATION @ 10% ON THE ABOVE SAID AMOUNTS. THE LD CIT(A) DELETED THE DISA LLOWANCES BY HOLDING THAT THEY ARE INCURRED IN REPLACEMENT OF EXISTING ASSETS. AGGRIE VED THE REVENUE IS IN APPEAL BEFORE US. 16. THE OBSERVATION OF LD CIT(A), THAT THE AMO UNT INCURRED ON CONSTRUCTION OF NEW PLAY GROUND AND NEW COMPOUND WALL WERE TOWARDS REPL ACEMENT OF EXISTING ASSETS, ARE NOT BORNE OUT OF RECORD. THE ASSESSEE HAS ALSO NOT ADDUCED ANY EVIDENCE IN SUPPORT OF THE SAME. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO UNDERSTAND AS TO HOW THE LD CIT(A) HAS COME TO SUCH A CONCLUSION WITHOUT BASING HIS DECISION ON ANY TANGIBLE MATERIAL. AS OBSERVED BY THE AO, THE ASSESSEE ITS ELF HAS CATEGORISED THE NATURE OF ASSETS AS NEW PLAY GROUND AND NEW COMPOUND WALL . HENCE, WE ARE OF THE VIEW THAT THE AO WAS RIGHT IN TREATING THE EXPENDITURE I NCURRED ON THESE TWO ITEMS AS CAPITAL EXPENDITURE. ACCORDINGLY, WE SET ASIDE THE ORDER O F LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02 IS DISMISSED. THE CROSS OBJECTION FILED BY THE ASSESS EE FOR THE ASSESSMENT YEAR 2003-04 IS ALLOWED. THE APPEALS FILED BY THE REVENUE FOR A SSESSMENT YEARS 2003-04 AND 2004- 05 ARE ALLOWED. PRONOUNCED ACCORDINGLY ON 16 -11-2 012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16TH NOVEMBER, 2012 GJ I.T.A. NO.455/COCH/2004 & ORS. 11 COPY TO: 1. M/S. ESCAPADE RESORTS (P) LTD., W/ISLAND, C/O CA SINO HOTEL, KOCHI-682 003. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1( 1), ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN