The Dy. Commr. Income Tax, Circle,-1, RAJKOT-GUJARAT V. M/s Garnett Speciality Paper Pvt. Ltd., RAJKOT-GUJARAT

ITA 524/RJT/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6664 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Depreciation; Retrospective amendment; Question of law; Unabsorbed depreciation
• Section: 143(3); 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NARSIMHA CHARRY , MEMBER ITA NO S . 524 & 525 / RJT /201 4 ASS T. YEAR S : 200 7 - 0 8 & 2008 - 09 DCIT, CIRCLE - 1, RAJKOT (APPELLANT) VS M/S. GARNETT SPECIALITY PAPER PVT. LTD. 302, TIRTH APARTMENT, 6/11, JAGNATH PLOT, RAJKOT. PAN : AACCG3565F (RESPONDENT) APPELLANT BY : SHRI AVINASH KUMAR, DR RESPONDENT BY : NONE DATE OF HEARING : 2 0 /0 3 /201 7 DATE OF PRONOUNCEMENT : 22 /0 3 /201 7 O R D E R PER K. NARSIMHA CHARRY, MEMBER, JM : THESE TWO APPEALS ARE PREFERRED CHALLENGING THE ORDERS DATED 16.6.2014 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 1, RAJKOT (HEREINAFTER REFERRED TO AS LD. CIT(A) ). ITA NO. 524/RJT/2014 IS IN RESPECT OF ASSESSMENT YEAR 2007 - 08 WHEREAS ITA NO. 525/RJT/2014 IS IN RESPECT OF ASSESSMENT YEAR 2008 - 09. 2 M/S. GARNETT SPECIALITY PAPER PVT. LTD. ITA NOS. 524 & 525/RJT/2014 2. THE ONLY QUESTION INVOLVED IN THESE TWO APPEALS IS WHETHER THE UNABSORBED DEPRECIATION, WHICH REMAINED TO BE ADJUSTED BEYOND ASSESSMENT YEAR 2 001 - 02, BE ALLOWED TO SET OFF IN PERPETUITY OR THE MAXIMUM PERIOD IS 8 YEARS. FOR THE SAKE OF CONVENIENCE, THE FACTS RELATING TO ASSESSMENT YEAR 2007 - 08 ARE TAKEN. 3. FOR ASSESSMENT YEAR 2007 - 08, IN RESPECT OF THE ASSESSEE, BY ORDER DATED 11.12.2009 TH E ASSESSMENT WAS FINALIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DETERMINING THE INCOME OF ASSESSEE AS NIL. HOWEVER, SUBSEQUENTLY THE ASSESSING OFFICER NOTICED FROM THE AUDIT REPORT THAT A SUM OF RS.2,30,23,769/ - AS THE UNABSORBED DEPRECIATION CLAIMED BY THE ASSESSEE RELATES TO THE PERIOD UPTO 1999 - 2000 AND A SUM OF RS.48,56,733/ - PERTAINED TO ASSESSMENT YEAR 2000 - 01 . ACCORDING TO THE ASSESSING OFFICER, W.E.F. 1997 - 98 TILL 2001 - 02 THE LAW WAS AMENDED WHEREBY THE UNA BSORBED DEPRECIATION OF A PARTICULAR YEAR IS PERMISSIBLE TO BE CARRIED FORWARD FOR SET OFF AGAINST THE PROFITS & GAINS OF BUSINESS/PROFESSION ONLY FOR A PERIOD OF 8 YEARS. HOWEVER, BY FINANCE ACT, 2000 W.E.F. 1.4.2001, THE LAW EXISTING PRIOR TO ASSESSMENT YEAR 1997 - 98 WAS REINSTATED W.E.F. 2002 - 03. ON THIS, THE ASSESSING OFFICER ENTERTAINED THE OPINION THAT THE UNABSORBED DEPRECIATION FOR THE PERIOD BETWEEN 1997 - 98 AND 2001 - 02, WHICH REMAINED TO BE ADJUSTED BEYOND 2001 - 02, CAN BE SET OFF ONLY AGAINST THE INCOME UNDER THE HEAD PROFIT & GAINS OF BUSINESS/PROFESSION FOR A MAXIMUM PERIOD OF 8 YEARS. ACCORDINGLY, THE ASSESSING OFFICER PASSED AN ORDER U/S 154 OF THE ACT RECTIFYING THE MISTAKE WHICH ACCORDING TO HIM WAS APPARENT ON THE FACE OF RECORD AND 3 M/S. GARNETT SPECIALITY PAPER PVT. LTD. ITA NOS. 524 & 525/RJT/2014 DISAL LOWED THE UNABSORBED DEPRECIATION AMOUNT PERTAINING TO THE YEAR 1999 - 2000. 4. THE ORDER OF ASSESSING OFFICER WAS CHALLENGED BEFORE THE LD. CIT(A) STATING THAT THERE WAS NO MISTAKE APPARENT ON THE FACE OF RECORD WITHIN THE MEANING OF SEC. 154 OF THE ACT AN D ALSO THAT THE UNABSORBED DEPRECIATION PERTAINING TO THE YEARS UPTO 1999 - 2000 WAS ALLOWABLE FOR CARRY FORWARD. BY WAY OF THE IMPUGNED ORDER, LD. CIT(A) HELD THAT THE DISALLOWANCE OF CARRY FORWARD OF UNABSORBED DEPRECIATION BEYOND 8 YEARS IS NOT A MISTAKE APPARENT FROM RECORD, AS SUCH ORDER U/S 154 OF THE ACT IS BAD IN LAW. HE FURTHER HELD, WHILE FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTOR INDIA, 257 CTR 123 THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1.4.2002 WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SEC. 32(2) OF THE ACT (AS AMENDED BY THE FINANCE ACT, 2001) AND WAS AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS & GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. 5. CHALLENGING THE SAID FINDING OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US URGING THAT THE ISSUE OF CARRY FORWARD OF UNABSORBED DEPRECIATION BEYOND 8 YEARS WAS A MISTAKE APPARENT FROM THE RECORD, AS SUCH AVAILABLE TO THE ASSESSING OFFICER FOR RECTIFICATION U/S 154 OF THE ACT AND THE LD. CIT(A) WAS WRONG IN HOLDING THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE AS ON 1.4.2002 WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SEC. 32(2) OF THE ACT (AS AMENDED BY THE FINANCE ACT, 2001) AND ON THAT PREMISE TO ALLOW THE SAME FOR 4 M/S. GARNETT SPECIALITY PAPER PVT. LTD. ITA NOS. 524 & 525/RJT/2014 CARRY FORWARD AND SET OFF AGAINST THE PROFITS & GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. 6. P ER CONTRA , IT IS THE ARGUMENT OF THE LD. AR THAT THE ISSUE INVOLVED IN THIS MATTER REQUIRES DELIBERATIONS, ARGUMENTS AND DISCUSSIONS AND THERE IS POSSIBILITY OF MORE THAN ONE VIEW, AS SUCH IT IS NOT AVAILABLE TO BE RECTIFIED U/S 154 OF THE ACT. HE SUBMITS THAT WHA T IS RELEVANT TO BE CONSIDERED IS NOT THE ILLEGALITY OR OTHERWISE OF THE STAND TAKEN BY THE ASSESSING OFFICER, BUT THE ASSUMPTION OF JURISDICTION U/S 154 OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF EITHER SIDE. IT COULD BE SEEN FROM THE ORDER OF THE LD. CIT(A) THAT IT WAS ARGUED BEFORE HIM THAT IN VIEW OF THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HISTORIC RESORT HOTELS, 253 ITR 608 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.S. BALRAM V S WOCKHARDT BROTHERS, 82 ITR 50 (SC) AND MACCO INDUSTRIES LTD. VS CIT, 319 ITR 208 (SC) THE PRINCIPLE IS CLEAR THAT WHETHER OR NOT THE AMENDMENT TO SEC. 32 OF THE ACT IN THE YEAR 2002 - 03 IS OF PROSPECTIVE OR RETROSPECTIVE EFFECT ON THE APPLICATION OF DEPRE CIATION FOR THE CURRENT YEAR AND UNABSORBED BUSINESS LOSS AND DEPRECIATION FOR THE PURPOSE OF COMPUTATION OF INCOME TAX , IS A DISPUTABLE ISSUE AND DOES NOT FALL IN THE CATEGORY OF MISTAKE APPARENT FROM RECORD , THEREFORE, THAT SHOULD NOT HAVE BEEN DEALT W ITH U/S 154 OF THE ACT. THE LD. CIT(A) ACCEPTED THE SAME AND WHILE FOLLOWING THE BINDING PRECEDENTS, ALLOWED SUCH A CONTENTION OF THE ASSESSEE. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF HISTORIC RESORT HOTELS (SUPRA) HELD THAT WHETHER OR NOT THE AMENDM ENT TO SEC. 32 OF THE ACT, WHICH IS RELEVANT FOR OUR PURPOSE, HAS PROSPECTIVE OR 5 M/S. GARNETT SPECIALITY PAPER PVT. LTD. ITA NOS. 524 & 525/RJT/2014 RETROSPECTIVE EFFECT ON THE APPLICATION OF THE CURRENT YEARS DEPRECIATION AND UNABSORBED BUSINESS LOSS AND DEPRECIATION FOR THE PURPOSE OF COMPUTATION OF INCOME TAX , IS A DIS PUTED QUESTION OF LAW AND THE HONBLE SUPREME COURT IN THE CASE OF T.S. BALRAM VS WOCKHARDT BROTHERS (SUPRA) AND MACCO INDUSTRIES LTD. (SUPRA) HAS HELD THAT SUCH DISPUTED QUESTIONS DO NOT FALL IN THE CATEGORY OF MISTAKE APPARENT FROM RECORD , AS SUCH, SUC H MATTERS WILL NOT BE AVAILABLE FOR RECTIFICATION U/S 154 OF THE ACT. NEXTLY, WHILE PLACING RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GENERAL MOTOR INDIA (SUPRA) VIDE PARAGRAPHS 37 AND 38, THE LD. CIT(A) HELD THAT ANY UNABSO RBED DEPRECIATION AVAILABLE TO THE ASSESSEE ON 1 ST DAY OF APRIL 2002 (A.Y. 2002 - 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001, AND ONCE THE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSOR BED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y 1997 - 98 UPTO THE A.Y 2001 - 02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002 - 03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. REVENUE HAS NOT ESTABLISHED BEFORE US AS TO WHERE THE LEARNED CIT(A) WENT WRONG AND WHY THIS APPROACH OF TH E LD. CIT(A) CANNOT BE ACCEPTED. IN THESE CIRCUMSTANCES, WE FIND THAT THE LD. CIT(A) WAS PERFECT IN HIS REASONING BASING ON THE BINDING PRECEDENTS AND WE DO NOT SEE ANY ILLEGALITY OR IRREGULARITY IN THE FINDING REACHED BY LD. CIT(A) O N THIS ASPECT, SINCE T HE REASONING ADOPTED BY THE LD. CIT(A) IS 6 M/S. GARNETT SPECIALITY PAPER PVT. LTD. ITA NOS. 524 & 525/RJT/2014 IMPECCABLE. WE, THEREFORE, SEE NO REASON TO INTERFERE W ITH THE ORDER OF LD. CIT(A) AND, ACCORDINGLY, CONFIRM THE SAME. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH , 201 7 . SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NARSIMHA CHARRY ) JUDICIAL MEMBER MUMBAI, DATE : 22 ND MARCH , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, RAJKOT