Kerala small Industries Dev.Corpn Ltd, Trivandrum V. ACIT, Trivandrum

ITA 505/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58314 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2010
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: VIJAY NARAYAN GOVIND
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE: SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.505/COCH/2010 ASSESSMENT YEAR : 2007-08 M/S. KERALA SMALL INDUSTRIES DEVELOPMENT CORPORATION LTD., 6 TH FLOOR, HOUSING BOARD BUILDING, SANTHI NAGAR, P.B. NO. 50 TRIVANDRUM. [PAN: AAACK 9435C] THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), TRIVANDRUM. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI VIJAY NARAYAN GOVIND, CA RESPONDENT BY: SMT. VIJAYAPRABHA, JR. DR DATE OF HEARING: 27/02/2012 DATE OF PRONOUNCEMENT: 29/02/2012 ORDER PER SHRI B.R.BASKARAN, ACCOUNTANT MEMBER:- THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25-06-2010 PASSED BY LD CIT(A)-1, TRIVANDRUM AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETHER THE LD CIT(A) IS JUSTIFIED IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM SET OFF OF CARRY FORWARD DEPRECIATION AGAINST THE INCOME FROM CAPITAL GAIN COMPUTED FOR T HE YEAR UNDER CONSIDERATION. 3. THE FACTS RELATING TO THERETO ARE SET OUT IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING FURNITURE, MARKETING OF GOODS AND DEVELOPMENT OF INDUSTRIES. IN ITS RETURN OF INCOME IT CLAIMED SET OFF OF UNABSORBED DEPRECIATION OF RS.1,07,62,134/- AGAINST THE INCOME RETURNED UNDER THE HEAD CAPITAL GAIN. THE AO DID NOT ACCEPT THE SAME AND ACCORDING LY DENIED THE SET OFF AS CLAIMED BY I.T.A. NO. 505/COCH/2010 2 THE ASSESSEE. THE SAID VIEW OF THE AO WAS ALSO CONF IRMED BY LD CIT(A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM THE PRECEDING YEARS TAKES THE FORM OF CURRENT DEPRECIATION U/S 32(2) OF THE ACT AND HENCE IT CAN BE SET OFF AGAINST THE INC OME FROM CAPITAL GAIN. ON THE CONTRARY, THE LD DR SUBMITTED THAT THE UNABSORBED D EPRECIATION CAN BE SET OFF AGAINST THE INCOME FROM BUSINESS ONLY. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE PROVISIONS OF SEC. 32(2) READS AS UNDER:- (2) WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FUL L EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN AN Y PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS, CHARGEAB LE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB- SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73, ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN AS TH E CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPREC IATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF T HAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR TH E SUCCEEDING PREVIOUS YEARS. ON A CAREFUL READING OF THE SAME, WE NOTICE THAT TH E UNABSORBED DEPRECIATION CARRIED FORWARD TO THE FOLLOWING PREVIOUS YEAR IS ADDED TO THE AMOUNT OF DEPRECIATION OF THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE THE PART O F THE DEPRECIATION ALLOWANCE OF THAT YEAR OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREV IOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS I.T.A. NO. 505/COCH/2010 3 YEARS. THUS, BY DEEMING PROVISION, THE BROUGHT FORWARD D EPRECIATION TAKES THE COLOUR OF CURRENT DEPRECIATION. 6. HOWEVER, WE NOTICE THAT THE LD CIT(A), WITHO UT APPRECIATING THE PROVISIONS OF SEC. 32(2) AS APPLICABLE TO THE YEAR UNDER CONSIDERATION , HAS OBSERVED THAT THE UNABSORBED DEPRECIATION CAN BE SET OFF ONLY AGAINST THE BUSINE SS INCOME. THE VIEW EXPRESSED BY LD CIT(A) WAS IN THE STATUTE FOR A LIMITED PERIOD A ND THE SAID PROVISIONS ARE NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION. ACCORD INGLY, THE BENCH QUESTIONED THE LD COUNSEL TO SPECIFY THE PERIOD OR PERIODS TO WHICH T HE IMPUGNED UNABSORBED DEPRECIATION BELONGS TO. IN RESPONSE THERETO, THE ASSESSEE HAS FILED A DETAILED CHART GIVING BREAK UP DETAILS OF THE UNABSORBED DEPRECIAT ION. 7. THE LD COUNSEL FOR THE ASSESSEE, BY PLACING RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF KARNATAKA CO -OPERATIVE MILK PRODUCERS FEDERATION LTD VS. D.C.I.T (2011)(53 DTR (KAR) 81), SUBMITTED THAT THERE IS NO NECESSITY TO CATEGORISE THE BROUGHT FORWARD DEPRECI ATION INTO TWO CATEGORIES, VIZ., THOSE BELONGING TO THE PERIOD TO WHICH RESTRICTIONS WERE PLACED IN THE STATUTE AND OTHER PERIODS. HOWEVER, ON A CAREFUL CONSIDERATION OF TH E ABOVE SAID DECISION, WE NOTICE THAT THE ASSESSEE ONLY HAS CANVASSED THE ABOVE SAID VIEW BEFORE THE HONBLE HIGH COURT, BUT THE HIGH COURT DID NOT PASS ANY ORDER ON SUCH S UBMISSIONS AND THE MATTER WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 8. IN THE INSTANT CASE, WE NOTICE THAT THE TAX AUTHORITIES HAVE SIMPLY REJECTED THE CLAIM OF THE ASSESSEE FOR SET OFF. HENCE, THERE WA S NO OCCASION FOR THEM TO APPLY THE PROVISIONS OF SEC. 32(2) OF THE ACT. HENCE, WE DEC LINE TO PASS ANY ORDER ON THE ISSUE OF CATEGORISATION OF THE BROUGHT FORWARD DEPRECIATION AND WE FEEL IT PROPER TO LEAVE THE SAME TO THE WISDOM OF THE AO. 9. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS EN TITLED TO CLAIM SET OFF OF BROUGHT FORWARD DEPRECIATION AGAINST THE INCOME FROM LONG T ERM CAPITAL GAINS, HOWEVER, THE QUANTUM OF SET OFF MAY BE DECIDED BY THE AO IN ACCO RDANCE WITH THE LAW. WITH THESE I.T.A. NO. 505/COCH/2010 4 OBSERVATIONS, WE SET ASIDE THE IMPUGNED ORDER OF LD CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF THE DISCUSSIONS MADE IN THE PRECEDING PARA GRAPHS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 29-02-2012 SD/- SD/- (N.R.S.GANESAN) (BR BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER ERNAKULAM DATED: 29TH FEBRUARY, 2012 GJ COPY TO 1 M/S. KERALA SMALL INDUSTRIES DEVELOPMENT CORPORAT ION LTD., 6 TH FLOOR, HOUSING BOARD BUILDING, SANTHI NAGAR, P.B. NO. 50 TRIVANDRUM. 2 THE ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-1 (1), TRIVANDRUM. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, TRIVAN DRUM 4 THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. THE DR, ITAT, COCHIN BENCH. 6 GUARD FILE. BY ORDER A SSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH