M/s. TVS Motor Company Ltd., CHENNAI V. DCIT, CHENNAI

ITA 53/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96000 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 30-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Depreciation; Search and seizure; Additional depreciation; Earning of tax free income; Question of law; Difference of opinion; Right to appeal
• Section: 143(3); 14A; 32; 263; 2; 15

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEM BER I.T.A. NO S . 756 / MDS/2009 & 53/MDS/2014 ASSESSMENT YEAR : 200 4 - 0 5 M/S. TVS MOTOR COMPANY LTD., NO. 29, HADDOWS ROAD, CHENNAI 600 006. [PAN: A A ACS7032B ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE III(2), CHENNAI 600 034. ( / APPELLANT ) ( / RESPONDENT ) I.T.A. NO. 942/MDS/2011 ASSESSMENT YEAR: 2004 - 05 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(2), NEW BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. TVS MOT OR COMPANY LTD., JAYALAKSHMI ESTATES , NO. 29 (OLD NO. 8), HADDOWS ROAD, CHENNAI 600 006. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI N. RENGARAJ, CIT - DR / DATE OF HEARING : 30 . 06 .201 5 / DATE OF P RONOUNCEMENT : 28 .08 .201 5 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : TH E APPEAL IN I.T.A. NO. 756/MDS/2009 FILED BY THE ASSESSEE IS D IRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX , CHENNAI I, C HENNAI , DATED 31 . 0 3 .20 09 RELEVANT TO THE ASSESSMENT YEAR 200 4 - 0 5 PASSED I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 2 UNDER SECTION 263 OF THE INCOME TAX ACT . THE OTHER CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) III, CHENNAI DATED 21.02.2011 FOR THE ASSESSMENT YEAR 2004 - 05. I.T.A. NO. 756/MDS/2009 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUF ACTURE AND SALE OF TWO WHEELERS. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 29.12.2006 BY DETERMINING TOTAL INCOME OF THE ASSESSEE AT .201,90,40,968/ - . THEREAFTER, THE LD. CIT, WHILE EXERCISING POWER UNDER SECTION 263 OF THE ACT ISSUE D NOTICE FOR THE FOLLOWING REASONS: A) THE ASSESSEE HAS CLAIMED ARREARS OF ADDITIONAL DEPRECIATION OF .5,82,81,045 RELATING TO ASSETS INSTALLED IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2003 - 04 AT ITS MYSORE PLANT AND THE SAME WAS ALLOWED BY THE A.O. THE A.O . HAS NOT EXAMINED WHETHER THE SAME IS ADMISSIBLE UNDER SECTION 32(IIA) AS ADDITIONAL DEPRECIATION CAN BE CLAIMED ONLY ON ASSETS INSTALLED DURING THE RELEVANT PREVIOUS YEAR. B) THE ASSESSEE HAS RETURNED LONG TERM CAPITAL GAIN ON SALE OF SUNDARAM BOND SAV ER (BONUS UNITS) OF . 8,31,02,733 AND AFTER SETTING OFF THE BROUGHT FORWARD LOSSES THE CAPITAL GAINS COMPUTED WAS . 8,05,38,781. THIS HAS BEEN TAXED AT 10% INSTEAD OF 20% AS APPLICABLE. THE A.O. HAS NOT EXAMINED WHETHER THE UNITS SOLD BY THE ASSESSEE WOULD FALL WITHIN THE D EFINITION GIVEN IN EXPLANATION TO SECTION 115A B . THE A.O. HAS ALSO NOT EXAMINED WHETHER THE PROVISO TO SECTION 112 WOULD APPLY TO THE ASSESSEE AS THE SAID PROVISO WOULD APPEAR TO APPLY ONLY TO THOSE SHARES, BONDS OR UNITS WHICH ARE ELIGIBLE FOR INDEXATION BENEFIT UNDER SECOND PROVISO TO SECTION 48 READ WITH THIRD PROVISO THEREOF. THE A.O. ALSO HAS NOT EXAMINED WHETHER FOR THE PURPOSE OF COMPUTING EXCESS OVER 10% OF THE CAPITAL GAINS FOR PURPOSES OF PROVISO TO SECTION 112, THE ASSESSEE COULD TAKE THE I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 3 AMOUNT REMAINING AFTER SET OFF OF BROUGHT FORWARD LOSSES OR ON THE ACTUAL GAIN ON SALE OF SECURITIES/UNITS. C ) IN THE COMPUTATION OF TOTAL INCOME DIVIDEND OF . 9,12,26,401 WAS CLAIMED AS EXEMPT UNDER SECTION 10(34). THE A.O. HAS NOT CONSIDERED DISALLOWANCE OF EXPENDITURE RELATING TO EXEMPT INCOME AS PROVIDED IN SECTION 14A OF THE INCOME TAX ACT. 3. IN RESPONSE TO NOTICE UNDER SECTION 263, THE ASSESSEE FILED WRITTEN SUBMISSION BEFORE THE LD. CIT. AFTER CONSIDERING THE WRITTEN SUBMISSIONS IN RESPECT OF ADDITION AL DEPRECIATION, THE LD. CIT HAS OBSERVED THAT ACCORDING TO THE ASSESSEE, AS PER CLAUSE (IIA) OF SECTION 32(1) IN CASE OF NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INSTALLED, THE ASSESSEE IS ELIGIBLE TO CLAIM AN ADDITIONAL DEPRECIATION OF 15% PROV IDED THE CONDITIONS AS STATED UNDER THE SAID SECTION IS FULFILLED. THE ASSESSEE HAS FURTHER SUBMITTED THAT ACCORDING TO S EC TION 32(1)(II), IF THE ASSETS WAS NOT PUT TO USE FOR MORE THAN 180 DAYS, THE ELIGIBLE DEPRECIATION WOULD BE 50%. HENCE 50 % OF THE ADD ITIONAL DEPRECIATION WAS CLAIMED IN THE FINANCIAL YEAR 2002 - 03 AND THE REMAINING 50% WAS CLAIMED IN THE FINANCIAL YEAR 2003 - 04. BY CONSIDERING THE ABOVE EXPLANATION, THE LD. CIT HAS OBSERVED THAT THERE IS NO PROVISIONS IN LAW WHICH STATES THAT ADDITIONAL D EPRECIATION WILL BE CARRIED ON THE SUBSEQUENT YEAR AND ALLOWED IN THAT YEAR. AND THE ASSESSEE IS ONLY ELIGIBLE FOR 7.5% AND LAW DOES NOT PERMIT TO CARRY FORWARD THE REMAINING BALANCE OF 7.5% OUT OF 15% IF THE ASSET IS NOT PUT TO USE FOR MORE THAN 180 DAYS. I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 4 4. IN SO FAR AS SET OFF OF BROUGHT FORWARD CAPITAL LOSS AND BENEFIT UNDER SECTION 112 OF THE INCOME TAX ACT ARE CONCERNED, THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT THAT THE SUNDARAM MUTUAL FUNDS ARE REGISTERED UNDER SEBI ACT, 1992. THEREFORE, THEY FALL UNDER THE EXPLANATION TO SECTION 115AB OF THE ACT. AS THE UNITS ARE HELD FOR MORE THAN 12 MONTHS, THE UNITS ARE LONG TERM CAPITAL ASSETS AS PER SECTION 2(42A) OF THE ACT. THE LD. CIT, AFTER CONSIDERING THE ABOVE SUBMISSIONS, HAS HELD AS UNDER: 4.1 I HAVE CAREFULLY CONSIDERED THE ASSESSEE S REPLY. WHILE IT IS ACCEPTED THAT THE UNITS OF SUNDARAM MUTUAL FUND IS A LONG TERM CAPITAL ASSET AND A UNIT U/S.10(23D) OF THE INCOME - TAX ACT, WHETHER IT IS ELIGIBLE FOR THE BENEFIT OF 10% UNDER PROVISO TO SEC.112 H AS NOT BEEN EXPLAINED. THE MUTUAL FUND REFERRED BY THE ASSESSEE IS NOT ELIGIBLE FOR INDEXATION WITH THIRD PROVISO THEREOF. ONLY THE CAPITAL INDEXED BONDS ISSUED BY THE GOVERNMENT ARE ELIGIBLE FOR INDEXATION BENEFIT UNDER SECOND PROVISO TO SEC. 48. THAT BEI NG THE CASE, THE QUESTION IS WHETHER THE ASSESSEE WILL BE ELIGIBLE FOR THE BENEFIT OF PROVISO TO SEC.112, WHICH STATES THAT 10% TAX IS TO BE COMPUTED BEFORE INDEXATION. PROVISO TO SEC.112 STATES THAT 10% TAX IS TO BE COMPUTED BEFORE INDEXATION. PROVISO TO SEC.112 INITIALLY APPLIED ONLY TO THE SHARES WHICH ARE ELIGIBLE FOR INDEXATION BENEFIT. WHEN THE UNITS WERE INCLUDED, THESE WERE RESTRICTED TO THE UNITS AS DEFINED IN CLAUSE (B) OF EXPLANATION 1 TO SEC.115AB THOUGH THESE WERE NOT ELIGIBLE FOR INDEXATION BENEFIT, ONE COULD CONTEND THAT THE, ASSESSEE WOULD BE ELIGIBLE FOR THE BENEFIT OF PROVISO TO SEC.112 NOTWITHSTANDING THAT IT IS NOT ELIGIBLE FOR INDEXATION BENEFIT ACCORDING TO THE SECOND PROVISO TO SEC.48. HOWEVER, AS THE ISSUE OF APPLICATION OF PROVISO TO SEC.112 WAS NOT CONSIDERED BY THE ASSESSING OFFICER, I WOULD SET ASIDE THE ISSUE TO HIM WITH A DIRECTION TO EXAMINE THE SAME IN THE LIGHT OF THE ASSESSEE S REPLY 4.2 THE ASSESSEE S REPLY ON THE ISSUE OF APPLICATION OF SEC.112 BASED ON CBDT CIRCULAR WA S CONSIDERED. CBDT CIRCULAR ONLY SPEAKS OF APPLICATION OF FLAT RATE OF TAX U/S.112 AND NOT ON THE APPLICATION OF PROVISO TO SEC.112 WHICH IS WITH REFERENCE TO TAX PAYABLE ON TRANSFER OF SHARES OR SPECIFIED UNITS OR ZERO COUPON BONDS. WHILE, FLAT RATE OF TA X IS APPLICABLE ON INCOME AS FINALLY COMPUTED UNDER THE HEAD CAPITAL GAINS , WHAT WILL GO INTO CALCULATION FOR THE PURPOSES OF THE PROVISO TO I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 5 SEC.112 IS GAIN FROM THE PARTICULAR UNITS BEFORE SETTING OFF LOSS ON SALE OF ASSETS. THEREFORE ASSESSEE S REPLY I S NOT ACCEPTED. HOWEVER THE ASSESSING OFFICER HAS NOT CONSIDERED THIS ISSUE. THE ASSESSEE S REPLY ON THE APPLICATION OF PROVISO TO SEC. 112 ON THE NET INCOME RATHER THAN GROSS MAY ALSO BE EXAMINED BY THE ASSESSING OFFICER ON THE BASIS OF CBDT CIRCULAR IN 7 21 OF 13.09.1995. 5. IN SO FAR AS DISALLOWANCE UNDER SECTION 14A IS CONCERNED , IT WAS SUBMITTED BEFORE THE LD. CIT THAT DIVIDEND INCOME IS EXEMPT UNDER SECTION 10(34) AND THE ASSESSEE HAD INCURRED ANY EXPENDITURE IN RELATION TO THE DIVIDEND INCOME. FURT HER, THE INVESTMENTS WERE NOT MADE OUT OF ANY BORROWED FUNDS AND HENCE NO INTEREST EXPENDITURE WAS INCURRED. HOWEVER, THE LD. CIT WAS OF THE OPINION THAT THE DISALLOWANCE ON ACCOUNT OF EXPENDITURE AT THE RATE OF 2% ON THE EXEMPT INCOME UNDER SECTION 14A WA S DISALLOWED AND OBSERVED THAT THE ASSESSING OFFICER HAS NOT AT ALL DISCUSSED THE ISSUE IN THE ASSESSMENT ORDER AND ACCORDINGLY, THE LD. CIT SET ASIDE THE ISSUE TO THE ASSESSING OFFICER TO REDO THE ASSESSMENT. 6. THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE TRIBUNAL. 7. WITH REGARD TO ADDITIONAL DEPRECIATION, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SPECIFICALLY ASKED THE ELIGIBILITY IN RESPECT OF ADDITIONAL DEPRECI ATION WHICH HAS BEEN POINTED BY THE LD. COUNSEL FOR THE ASSESSEE FROM PAPER BOOK PAGE NO. 11. HE FURTHER SUBMITTED THAT AS PER THE QUESTION RAISED BY THE ASSESSING OFFICER, THE ASSESSEE HAS REPLIED WITH I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 6 REGARD TO ADDITIONAL DEPRECIATION IN PAPER BOOK PAGE NOS. 17, 22 & 27 AND THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER, AFTER CONSIDERING THE DETAILED SUBMISSIONS MADE BY THE ASSE SSEE AND APPLICATION OF HIS MIND, ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, IT CANNOT BE SUBJECT MATTER UNDER SECTION 263 OF THE ACT. ALTERNATIVELY, HE HAS SUBMITTED THAT THE ISSUE INVOLVED IS IN RESPECT OF ADDITIONAL DEPRECIATION AND TWO VIEWS ARE POSSIBLE AND THE VIEW WHICH WAS TAKEN IN FAVOUR OF THE ASSESSEE HAS TO BE UPHELD, BUT IT CANN OT BE TAKEN UNDER SECTION 263 FOR THAT HE HAS RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DEVI POLYMERS PVT. LTD. V. ACIT IN I.T.A. NO. 165/MDS/2014 DATED 09.04.2014. 8. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT AS PER CLAUSE (IIA) OF S ECTION 32(1), IN CASE OF NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INSTALLED, THE ASSESSEE IS ELIGIBLE TO CLAIM ADDITIONAL DEPRECIATION OF 15% PROVIDED THE CONDITIONS AS STATED UNDER THE SAID SECTION IS FULFILLED. THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT PUT TO USE THE NEW MACHINERY FOR MORE THAN 180 DAYS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSEE IS ONLY ELIGIBLE FOR 50% FOR THE YEAR IN WHICH NEW MACHINERY HAS BEEN USED BY THE ASSESSEE AND THE PROVISO HAS NOT PR OVIDED CARRY FORWARD OF REMAINING BALANCE 50% IN SUBSEQUENT YEARS. THEREFORE, THE ASSESSING OFFICER IS UNDER BOUNDEN DUTY TO FOLLOW THE PROVISIONS OF LAW AND ACCORDINGLY, THE CLAIM HAS TO BE ALLOWED. IN THIS CASE, THE ASSESSING OFFICER I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 7 HAS SIMPLY ACCEPTED THE EXPLANATION MADE BY THE ASSESSEE AND ALLOWED FURTHER 50% IN SUBSEQUENT YEAR WHICH IS NOT PERMITTED UNDER LAW. 9. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS A PPEAL IS WITH REGARD TO ALLOWABILITY OF ADDITIONAL DEPRECIATION. THE FACTS ARE NOT DISPUTED WITH REGARD TO USE OF MACHINERY WAS BELOW 180 DAYS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE AS PER PAPER BOOK PAGE NO. 11 TO FURNISH LIST OF MACHINERY ON WHICH ADDITIONAL DEPRECIATION IS CLAIMED AND EXCLUDE THE MACHINERY THAT ARE NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION UNDER THE PROVISIONS OF SECTION 32(1) (IIA) AND ALSO ASKED WHETHER ADDITIONAL DEPRECIATION IS CLAIM ED ON COST OF DIES? IN REPLY AT PAGE NO. 17 OF THE PAPER BOOK, THE ASSESSEE HAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION , WE HAVE CLAIMED ADDITIONAL DEPRECIATION IN RESPECT ASSETS ADDED IN MYSORE PLANT ONLY AS THE CAPACITY INCREASED WAS ONLY 63% - DETAILS OF ASSETS ON WHICH ADDITIONAL DEPRECIATION HAS BEEN CLAIMED IN PAGE NOS. 457 TO 526 OF THE RETURN OF INCOME AND CONFIRM THAT WE HAVE CLAIMED ADDITIONAL DEPRECIATION ONLY ON THE ELIGIBLE ASSETS. IT WAS ALSO STATED THAT WE ALSO CONFIRM THAT WE HAV E NOT CLAIMED ADDITIONAL DEPRECIATION ON DIES. AT PAGE 27, IT HAS ALSO SUBMITTED A NOTE ON ADDITIONAL DEPRECIATION CLAIMED ON ASSETS ACQUIRED BETWEEN 01.10.2002 TO 31.03.2003. CLAUSE I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 8 (IIA) OF SECTION 32 (1) PROVIDES FOR AN ALLOWANCE OF 20% OF THE ACTUAL COS T OF THE ASSET OF CERTAIN CONDITIONS ARE FULFILLED. WE HAVE COMPLIED WITH SUCH CONDITIONS AND HENCE WE ARE ELIGIBLE AND CLAIMED ADDITIONAL DEPRECIATION. HOWEVER, AS PER SECOND PROVISO TO SECTION 32 (1) (II), THE ADDITIONAL DEPRECIATION SHOULD BE RESTRICTED T O 50% WHEN THE ASSET WAS NOT PUT TO USE FOR MORE THAN 180 DAYS. AS WE ARE ENTITLED FOR ADDITIONAL DEPRECIATION @ 20% ON THE ELIGIBLE ASSETS, THE SAME HAS BEEN CLAIMED OVER A PERIOD OF TWO YEARS I.E. FOR THE ASSETS USED FOR LESS THAN 180 DAYS, 50% IS CLAIME D IN THE ASSESSMENT YEAR 2003 - 04 AND THE BALANCE 50% IN THE ASSESSMENT YEAR 2004 - 05. WE WISH TO CONFIRM THAT WE HAVE NOT CLAIMED MORE THAN 20% AS ADDITIONAL DEPRECIATION CONSIDERING BOTH THE YEARS TOGETHER . THE ASSESSING OFFICER, BY FOLLOWING THE ABOVE CO MPUTATION GIVEN BY THE ASSESSEE, ALLOWED THE CLAIM OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PROVISION OF SECTION IS REPRODUCED AS UNDER: PROVIDED: ( IIA ) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HA S BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2002, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO FIFTEEN PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALL OWED AS DEDUCTION UNDER CLAUSE ( II ) : 10. AS PER THE ABOVE PROVISIONS OF LAW, IF THE ASSESSEE HAS NOT USED THE NEW ASSETS FOR MORE THAN 180 DAYS, THE ASSESSEE IS ONLY ELIGIBLE TO CLAIM I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 9 ADDITIONAL DEPRECIATION AT 50% . THE STATUTE PROVIDES 50% FOR THE YEA R UNDER CONSIDERATION IN WHICH IT I S PUT TO USE. THE STATUTE DOES NOT PROVIDE ANYTHING TO CLAIM ADDITIONAL DEPRECIATION IN THE SUBSEQUENT YEAR. THEREFORE, THE ASSESSING OFFICER, WITHOUT APPLYING HIS MIND, SIMPLY ACCEPTED THE EXPLANATION GIVEN IN THE NOTE B Y THE ASSESSEE AND ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN OUR OPINION, THE LD. CIT HAS RIGHTLY INVOKED SECTION 263 OF THE ACT . THEREFORE, WE CONFI RM THE ORDER OF THE LD. CIT ON THIS ISSUE. 11. SO FAR AS ALTERNATIVE PLEA RAISED BY THE ASSESSEE WHETHER TWO VIEWS ARE POSSIBLE IS CONCERNED, T HE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M.M. FORGINGS LTD. V. ADDL. CIT [201 2 ] 349 ITR 6 73 , BY CON SIDERING SECTION 32(1) AS WELL AS 32(1)(IIA) OF THE ACT, HAS HELD AS UNDER: 3. T HE ASSESSING AUTHORITY BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, RESTRICTED THE ALLOWABILITY OF THE DEPRECIATION TO 50 PER CENT OF THE AMOUNT PERMISSIBLE U NDER SECTION 32(1)(IIA)OF THE ACT. ACCORDING TO THE APPELLANT, WHEN IT SATISFIED ALL THE CONDITIONS STIPULATED UNDER THE PROVISOS TO SECTION 32(1)(IIA) OF THE ACT, THE ASSESSING AUTHORITY OUGHT NOT TO HAVE RESTRICTED THE DEPRECIATION PERMISSIBLE UNDER THE SAID SECTION BY RESORTING TO THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THE LEARNED COUNSEL HOWEVER FAIRLY POINTED OUT BEFORE US THAT IN THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, THAT VERY CLAUSE (IIA) ITSELF WAS INSERTED BY FINANCE ACT, 2002 WI TH EFFECT FROM 01.04. 2003. THEREFORE, IT WAS IMPERATIVE THAT ON AND AFTER 01.04.2003, THE CLAIM OF THE ASSESSEE MADE UNDER SECTION 32(1)(IIA) OF THE ACT, HAD TO BE NECESSARILY ASSESSED BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THEREFORE, WHEN THERE WAS STATUTORY STIPULATION PROVIDING FOR RESTRICTION TO 50 PER CENT OF THE AMOUNT ALLOWABLE UNDER SECTION 32(1)(IIA) OF THE ACT, NO FAULT CAN BE FOUND WITH I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 10 THE CONCLUSION OF THE ASSESSING AUTHORITY AS WELL AS THAT OF THE APPELLATE AUTHORITY AND THE TRIBUNAL IN HAVING AFFIRMED THE ACTION OF THE ASSESSING AUTHORITY. WE, THEREFORE, DO NOT FIND ANY SCOPE TO ENTERTAIN THE SAID QUESTION OF LAW. 15. IN VIEW OF THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, THERE IS NO POSSIBILITY OF TW O VIEWS AND THERE IS ONLY ONE VIEW WHICH WAS EXPRESSED BY THE HON BLE HIGH COURT. EVEN IF THERE IS DIFFERENCE OF OPINION OF COORDINATE BENCH OF THE TRIBUNAL, THE VIEW EXPRESSED BY THE HON BLE HIGH COURT HAS TO BE ACCEPTED. THEREFORE, THE ARGUMENT OF THE LD . COUNSEL FOR THE ASSESSEE IS REJECTED. 16. IN SO FAR AS SET OFF OF BROUGHT FORWARD LOSS AND BENEFIT UNDER SECTION 112 OF THE ACT ARE CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ALL THE DETAILS IN RESPECT OF THE ABOVE ARE FILED BEFORE THE ASSESSING OFFICER AS POINTED OUT FROM PAPER BOOK PAGE NO. 43, 46, 47 & 48. HE FURTHER SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE JUDGEMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. ANUJA A SHETH, HUF 324 ITR 191 . T HEREFORE, HE HAS SUBMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER CANNOT BE SAID THAT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 17. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER, WITHOUT MAKING ANY ENQUIRY, SIMPLY AL LOWED THE CLAIM OF THE ASSESSEE. THEREFORE, IT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 11 REVENUE AND THE LD. CIT HAS RIGHTLY EXERCISED THE JURISDICTION ON THIS GROUND AND REQUESTED THAT THE SAME MAY BE UPHELD. 18. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS APPEAL IS RELATING TO SET OFF OF BROUGHT FORWARD LOSS AND BENEFIT UNDER SECTION 112 OF THE ACT . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE AT ALL AND SIMPLY ALLOWED THE CLAIM OF THE ASSESSEE. THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF IN THE CASE OF CIT V. ANUJA A SHETH, HUF (SUPRA) AND THEREFORE, HE HAS SUBMITTED THAT IT CANNOT BE S AID THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND. WE HAVE CAREFULLY GONE THROUGH THE JUDGEMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. ANUJA A SHETH, HUF (SUPRA), WHEREIN THE HON BLE BOMBAY HIGH COURT HAS CONSIDERED THAT THE LONG TERM CAPITAL GAINS ON SALE OF SHARES, THE ASSESSEE IS ENTITLED TO BENEFIT OF INDEXATION UNDER SECTION 112 OF THE ACT. THE ABOVE JUDGEMENT OF THE HON BLE BOMBAY HIGH COURT IS RELATING TO CAPITAL GAINS ON SALE OF SHARES. THE ISSUE INVOLVED IN THIS APPEAL IS CAPI TAL GAINS IN RESPECT OF SUNDARAM BONDS. THEREFORE, IT CANNOT BE SAID THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE ABOVE DECISION OF THE HON BLE BOMBAY HIGH COURT. THE ORDER PASSED BY THE LD. CIT IS VALID IN VIEW OF THE INADEQUATE ENQUIRY BY THE ASSESSING OFFICER SINCE THE ASSESSING OFFICER HAS NOT EXAMINE D THE APPLICABILITY OF I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 12 PROVISO TO SECTION 112 OF THE ACT AND ALSO NOT EXAMINED WHETHER THE SUNDARAM BOND SAVER IS A UNIT AS PER SECTION 10(23D) OF THE ACT . THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS FAILED TO DISCHARGE HIS DUTY TO EXAMINE THE ISSUE. ACCORDINGLY, THE LD. CIT HAS RIGHTLY INVOKED SECTION 263 OF THE ACT ON THIS ISSUE. 19. SO FAR AS CLAIM OF EXEMPTION UNDER SECTION 14A OF THE ACT, THE ASSESSING OFFICER HAS NOT E XAMINED THE ISSUE AT ALL AND SIMPLY ALLOWED THE CLAIM OF THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION THAT THE LD. CIT HAS RIGHTLY INVOKED SECTION 14A OF THE ACT 20. IN VIEW OF THE ABOVE, WE FIND THAT IN THE PRESENT CASE, THE ASSESSING OFFICER HAS FAIL ED TO MAKE SUFFICIENT ENQUIRIES, WHICH IS NECESSARY TO DETERMINE THE TAX AND THEREFORE, THE LD. CIT HAS EXERCISED HIS POWER UNDER SECTION 263 OF THE ACT AND DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSMENT. THUS, WE UPHOLD THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. I.T.A. NO. 942/MDS/2011 (REVENUE APPEAL) 21. BRIEF FACTS OF THE CASE ARE THAT IN THIS CASE, THE ASSESSMENT WAS COMPLETED ON 21.09.2006 UNDER SECTION 143(3) OF THE ACT. THEREAFTER, THE LD. CIT, CHENNAI I, CHENNAI HAS PASSED AN ORDER UNDER SECTION 263 ON 31.03.2009 BY DIRECTING THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 13 ASSESSEE WITH REGARD TO SET OFF OF BROUGHT FORWARD CAPITAL LOSS AND BENEFIT UNDER SECTI ON 112 OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CLUBBED BOTH THE ISSUES OF SET OFF OF BROUGHT FORWARD CAPITAL LOSS AND BENEFIT UNDER SECTION 112 OF THE ACT AND DENIED THE CLAIM OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) ALLOWED THE BE NEFIT UNDER SECTION 112 OF THE ACT TO THE ASSESSEE. IN SO FAR AS BROUGHT FORWARD CAPITAL LOSS IS CONCERNED, BY CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND ALLO W THE SAME. 22. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL IN RESPECT OF SET OFF OF BROUGHT FORWARD CAPITAL LOSS AS WELL AS BENEFIT UNDER SECTION 112 OF THE ACT. THE LD. DR HAS SUBMITTED THAT THE ASSESSEE NEITHER ELIGIBLE FOR SET O FF OF BROUGHT FORWARD CAPITAL LOSS NOR BENEFIT UNDER SECTION 112 OF THE ACT. 23. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE JUDGEMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. ANUJA A SHETH, HUF 324 ITR 191. 24. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ISSUE IN RESPECT OF SET OFF OF BROUGHT FORWARD CAPITAL LOSS, THE ASSESSING OFFICER CLUBBED THE I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 14 ISSUE ALONG WITH BENEFIT UNDER SEC TION 112 AND DENIED THE BENEFIT CLAIMED BY THE ASSESSEE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN RESPECT OF BROUGHT FORWARD CAPITAL LOSS AND WHETHER THE CLAIM IS ALLOWABLE OR NOT. EVEN WE FIND THAT THE ASSESSEE HAS FAIL ED TO SUBMIT BEFORE THE ASSESSING OFFICER IN RESPECT OF THE ABOVE CLAIM OF BROUGHT FORWARD CAPITAL LOSS. BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THAT AS PER SECTION 74 OF THE ACT, THE BROUGHT FORWARD CAPITAL LOSS HAS TO BE SET OFF OF AGAINST CAPI TAL GAINS. THE LD. CIT(A) HAS ACCEPTED THE SUBMISSION OF THE ASSESSEE AND OBSERVED THAT NO RESTRICTION HAS BEEN PLACED ON SET OFF OF SUCH LOSSES AGAINST THE CAPITAL GAIN OF THE SUBSEQUENT YEAR. WE FIND THAT THE ABOVE FINDINGS OF THE LD. CIT(A) IS NOT CORRE CT AS PER SECTION 74(1)(B) IN SO FAR AS SUCH LOSS RELATES TO A LONG TERM CAPITAL ASST, IT SHALL BE SET OFF AGAINST INCOME, IF ANY, UNDER THE HEAD CAPITAL GAINS ASSESSABLE FOR THAT ASSESSMENT YEAR IN RESPECT OF ANY OTHER CAPITAL ASST NOT BEING A SHOR T - TERM CAPITAL ASSET . FROM THE ABOVE, IT IS VERY CLEAR THAT CARR IED FORWARD CAPITAL LOSS RELATES TO LONG TERM CAPITAL LOSS , WHICH CANNOT BE SET OFF AGAINST THE SHORT TERM CAPITAL GAIN IN THE FINANCIAL YEAR . IN VIEW OF THE ABOVE, WE DIRECT THE ASSESSING OF FICER TO EXAMINE THE DETAILS OF SET OFF OF BROUGHT FORWARD CAPITAL LOSS KEEPING IN VIEW OF THE PROVISIONS OF SECTION 74(1)(B) OF THE ACT AND DECIDE THE ISSUE DE NOVO. I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 15 25. IN SO FAR AS BENEFIT UNDER SECTION 112 OF THE ACT IS CONCERNED, THE ASSESSING OFF ICER WAS OF THE OPINION THAT THE SUNDARAM BOND SAVER IS ONLY A BOND AND NOT UNIT AND HE HAS NOT CONSIDERED EXPLANATION (B) TO SECTION 115 AND CLAUSE 23(D) TO SECTION 10 OF THE ACT. FOR THE PURPOSE OF EXAMINING WHETHER THE SUNDARAM BOND SAVER IS A UNIT OR N OT, IT IS NECESSARY FOR THE ASSESSING OFFICER TO EXAMINE WHETHER THE SUNDARAM BOND SAVER IS RECOGNIZED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 OR REGULATIONS MADE THEREUNDER. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT DISCUSSED THE ABOVE DETAILS AND THE LD. CIT(A) HAS SIMPLY ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 112 OF THE ACT BY CONSIDERING THE SUNDARAM BOND SAVER IS A UNIT. 26. FURTHER, BEFORE THE LD. CIT(A), THE ASSESSEE HAS PLACED RELIANCE ON THE CERTIFICATE DATE D 21.08.2009 ISSUED BY THE SUNDARAM BNP PARIBAS MUTUAL, WHICH READS AS UNDER: THIS IS TO CERTIFY THAT SUNDARAM BNP PARIBAS MUTUAL (FORMALLY KNOWN AS SUNDARAM MUTUAL FUND) IS REGISTERED WITH SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) VIDE REGISTRATION N O.MF/034/97/2. SUNDARAM BNP PARIBAS BOND SAVER (FORMALLY KNOWN AS SUNDARAM BOND SAVER) IS A SCHEME FLOATED BY SUNDARAM BNP PARIBAS MUTUAL AND THE UNITS UNDER THE SCHEME ARE SECURITIES AS DEFINED UNDER THE SECURITIES CONTRACTS (REGULATION) ACT 1956. HOWEV ER, WE FIND THAT BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS NOT FILED THE ABOVE CERTIFICATE AND COPIES OF REGISTRATION WITH SEBI. ACCORDINGLY, IT IS FRESH EVIDENCE, WHICH WAS PRODUCED BEFORE THE LD. CIT(A), WHICH IS THE I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 16 BASIS FOR H IS CONCLUSION. IN OUR OPINION, IT IS APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 2 7 . SINCE THE SET OFF OF BROUGHT FORWARD CAPITAL LOSS AND BENEFIT UNDER SECTION 112 OF THE ACT ARE INTERLINKED, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) ON THESE ISSUES AND , IN VIEW OF THE ABOVE FINDINGS , THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUES DE NOVO IN ACCORDANCE LAW AFTER GIVING OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STAT ISTICAL PURPOSES. 2 8 . THE NEXT ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS RELATING TO DISALLOWANCE UNDER SECTION 14A. THE ASSESSING OFFICER, BY INVOKING THE PROVISIONS OF RULE 8D READ WITH SECTION 14A OF THE ACT WORKED OUT THE EXPENDITURE ATTRIBUTAB LE TO EXEMPT INCOME AT .1,48,57,381/ - AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 2 9 . ON APPEAL, THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HAS OBSERVED AS UNDER: 8.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AN D THE SUBMISSION OF THE LD. AR. I HAVE ALSO GONE THROUGH DECISIONS RELIED ON BY THE LD. AR. THE LD. AR HAS EXPLAINED THAT SINCE NO PART OF LOAN FUNDS WERE USED TO INVEST IN TAX - FREE INCOME TERRITORY, NO INTEREST CAN BE ATTRIBUTED TO EARNING THE EXEMPT INC OME. THE LD.AR HAS, HOWEVER, REQUESTED TO CONSIDER DISALLOWANCE AT 2 PER CENT OF DIVIDEND INCOME FOLLOWING DECISION OF ITAT. I FIND THAT SIMILAR ISSUE CAME UP FOR ADJUDICATION IN APPELLANT'S OWN CASE FOR A.Y. 200506. THE L D. CIT ( A) IN THAT CASE HAD HELD T HAT THE DISALLOWANCE OF 2% MADE BY THE AO WAS NOT CORRECT IN VIEW OF RULE 8 D INTRODUCED SUBSEQUENTLY. HE HELD THAT I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 17 THE DISALLOWANCE SHOULD BE MADE IN ACCORDANCE WITH RULE 8D. HOWEVER, THE HON'BLE ITAT IN ITA NO.697, 757, 976 & 1017/MDS/2009 DATED 22.12.201 0 FOR A.YS 2000 - 01 AND 200506 CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 2% ONLY BY HOLDING AS UNDER: '6. THE SECOND GROUND RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE UNDER SEC.14A. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING AU THORITY HAS DISALLOWED 2% OF THE EXPENDITURE AS PERTAINING TO EARNING OF DIVIDEND INCOME. EVEN THROUGH THIS DISALLOWANCE WAS RAISED BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) IN FIRST APPEAL, THE ISSUE WAS NOT PRESSED BEFORE HIM. BUT THE COMMISSIONER OF INCOME - TAX (APPEALS) FOUND THAT THE DISALLOWANCE OF 2% MADE BY THE ASSESSING AUTHORITY WAS NOT CORRECT IN VIEW OF THE RULE 80 INTRODUCED SUBSEQUENTLY. THE COMMISSIONER OF INCOME - TAX (APPEALS) HELD THAT THE DISALLOWANCE SHOULD BE MADE IN ACCORDANCE WITH RULE 8D . ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO ENHANCE THE QUANTUM OF DISALLOWANCE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD V. DCIT (320 ITR 81) HAS HELD THAT THE OPERATION OF RULE 8 D IS ONLY PROSPECTIVE AND NOT RETROSPECTIVE. IN VIEW OF THAT JUDGMENT, RULE 8D DOES NOT APPLY TO THE IMPUGNED ASSESSMENT YEAR 2005 - 06. I. T.A. T. MUMBAI BENCH 'G' IN THE CASE OF M/S GODREJ AGROVET LTD. V. ACIT (2010 - T/OL - ITAT - MUM) HAS HELD THAT RULE IS PROSPECTIVE IN NATURE AND THERE FORE, CANNOT BE APPLIED IN RESPECT OF EARLIER ASSESSMENT YEARS. IN VIEW OF THE ABOVE, WE VACATE THE DIRECTION OF THE COMMISSIONER OF INCOME - TAX (APPEALS) AND CONFIRM 2% DISALLOWANCE MADE BY THE ASSESSING AUTHORITY AND ACCORDINGLY ALLOW THIS GROUND RAISED B Y THE ASSESSEE. IT IS CLEAR FROM THE ABOVE THAT PROVISIONS OF RULE 8D, WHICH HAS BEEN NOTIFIED WITH EFFECT FROM 24.03.2008, SHALL APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008 - 09 ONWARDS. SINCE THE ASSESSMENT YEAR INVOLVED IS A.Y. 2006 - 07, PROVISIONS OF R ULE 8D WILL NOT APPLY FOR THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE ABOVE FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT IN APPELLANT'S OWN CASE, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 30 . AFTER HEARING BOTH SIDES, WE FIND THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2004 - 05 AND THEREFORE, THE PROVISIONS OF RULE 8D R.W.S. 14A I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 18 HAS NO APPLICATION SINCE THE SAID PROVISIONS OF RULE 8D HAS BEEN NOTIFIED W ITH EFFECT FROM 24.03.2008 AND APPLICABLE WITH EFFECT FROM THE ASSESSMENT YEAR 2008 - 09. THEREFORE, THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE TRIBUNAL AND RESTRICTED THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 3 1 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . I.T.A. NO. 53/MDS/2014 3 2 . SO FAR AS APPEAL OF THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) III, CHENNAI DATED 21.02.2011 PASSED UNDER SECTION 143(3) R.W.S. 263 OF THE ACT IS CONCERNED, THE SAME IS FOUND TO HAVE FILED LATE BY 980 DAYS. T HE ASSESSEE HAS FILED AN AFFIDAVIT TO CONDONE THE DELAY , WHEREIN T HE REASONS STATED BY THE ASSESSEE ARE AS UNDER: 2. I STATE THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WAS RECEIVED BY THE COMPANY ON 04.03.2011 AND THE APPEAL SHOULD HAVE BEEN FILED ON OR BEFORE 03.05.2011. HOWEVER, THE APPEAL WAS ACTUALL Y FILED ON 07.01.2014 RESULTING IN A DELAY OF 980 DAYS. 3. FOR THE ABOVE ASSESSMENT YEAR, ORDER WAS PASSED BY THE CIT UNDER SECTION 263 AGAINST WHICH APPEAL HAS BEEN FILED BY THE COMPANY AND IS PENDING BEFORE THE ITAT. WHILE GIVING EFFECT TO THE CIT(A) PASSED U/S.263, THE AO BY ORDER DATED 29.12.2009 HAS CONFIRMED ALL THE ADDITIONS DIRECTED BY THE CIT. AGAINST WHICH APPELLANT PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DISALLOWED THE CLAIM OF THE APPELLANT REGARDING ADDITIONAL DEPRECIATION AND ALLO WED ALL OTHER CLAIMS MADE BY THE APPELLANT. AGAINST WHICH THE DEPARTMENT FILED AN APPEAL BEFORE THE TRIBUNAL AND IS PENDING. I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 19 THE APPELLANT DID NOT PURSUE APPEAL BEFORE THE TRIBUNAL WITH REGARD TO DISALLOWANCE OF ADDITIONAL DEPRECIATION. 4. I STATE THAT NOW THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2007 - 08 HAS LEVIED THE PENALTY U/S.271 (1)1 AS THE APPELLANT HAS NOT PURSUE APPEAL BEFORE THE TRIBUNAL AGAINST THE DISALLOWANCE CONFIRMED BY THE CIT(A), WITH REGARD TO ADDITIONAL DEPRECIATION. 5. I STATE THAT IN VIEW OF THE ABOVE, THE APPELLANT IS AFRAID THAT THE ASSESSING OFFICE MAY LEVY PENALTY UNDER SECTION 271 (1)1 OF THIS YEAR 2004 - 05 ALSO AS THE APPELLANT HAS NOT FILED APPEAL REGARDING DISALLOWANCE OF ADDITIONAL DEPRECIATION CONFIRMED BY THE CIT(A) BY ORDER DATED 21.02.2011. SUBSEQUENTLY DURING DISCUSSIONS WITH OUR ADVOCATES WE WERE ADVISED THAT IT IS BETTER WE SHOULD FILE AN APPEAL AGAINST THE ORDER OF THE FIRST APPELLATE AUTHORITY TO THE TRIBUNAL. I SUBMIT THAT THE OMISSION TO FILE THE APPEAL WAS BECAUSE OF THE MISTAKEN INTERPRETATION OF THE PROVISIONS BY ME AND IT WAS INADVERTENT AND NOT WILLFUL. 3 3 . THE LD. DR HAS STRONGLY OBJECTED FOR CONDONING SUCH HUGE DELAY IN FILING THE APPEAL. 3 4 . WE HAVE HEARD BOTH SIDES. WE FIND THAT THE REASONS FO R THE DELAY AS EXPLAINED BY THE ASSESSEE IN THE AFFIDAVIT THAT THE ASSESSEE HAS AFRAID THAT THE ASSESSING OFFICER MAY LEVY PENALTY UN D ER SECTION 271(1)(C) OF THE ACT AND THE ADVOCATE HAS ADVISED THAT IT IS BETTER TO FILE AN APPEAL AND ACCORDINGLY THE APPEAL WAS FILED WITH DELAY. THE ASSESSEE IS A LIMITED COMPANY HAVING ITS OWN TEAM OF LEGAL ADVISORS. WITHOUT FILING THE APPEAL IN TIME AND EXPLAINING THAT BECAUSE PENALTY IS LEVIED AND ON THE ADVICE OF THE ADVOCATES, THE ASSESSEE HAS FILED THE PRESENT APPEAL IS NOT SUFFICIENT CAUSE TO CONDONE SUCH A HUGE DELAY OF 980 DAYS. FROM THE REASONS STATED IN THE AFFIDAVIT, IT IS VERY CLEAR THAT THE A SSESSEE WAS VERY MUCH AWARE THAT AGAINST I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 20 THE ORDER OF THE LD. CIT(A) DATED 21.02.2011, THE DEPARTMENT HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. HOWEVER, THE ASSESSEE HAS NOT FILED ANY APPEAL IN TIME. THE LAW ASSISTS THOSE WHO ARE VIGILANT AND NOT THOSE WHO SLEEP OVER THEIR RIGHTS. THIS PRINCIPLE IS EMBODIED IN THE DICTUM: VIGILANTIBUS NON DORMIENTIBUS JURA SUBVENIUNT. IN T HE AFFIDAVIT FILED BY THE ASSESSEE , THE ASSESSEE HAS MADE BALD STATEMENT. ON GOING THROUGH THE REASONS STATED IN THE AFFIDAVIT , WE FIN D THAT THERE EXISTS NO SUFFICIENT CAUSE TO CONDONE THE INORDINATE DELAY. OUR VIEW FIND SUPPORT FROM THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MADHU DADHA V. ACIT [2009] 317 ITR 458, WHEREIN THE HON BLE HIGH COURT DISMISSED THE A PPEAL FILED BY THE ASSESSEE AND CONFIRMED THE ORDER OF THIS TRIBUNAL SINCE THE ASSESSEE HAD NOT TAKEN PROPER PLEA TO SHOW SUFFICIENT CAUSE FOR CONDONING THE DELAY IN FILING THE APPEAL . IN THE PRESENT CASE, THE NEGLIGENT ATTITUDE OF THE ASSESSEE CANNOT BE TAKEN CARE TO PRESERVE THE RIGHT OF APPEAL SINCE THE ASSESSEE HAS SLEPT OVER FOR 980 DAYS AND NOT EXPLAINED SUFFICIENT CAUSE TO CONDONE THE INORDINATE DELAY IN FILING THE APPEAL. IN THE AFFIDAVIT FILED BY THE ASSESSEE , WE FIND NO MERIT IN THE CASE OF THE A SSESSEE FOR CONDONING THE DELAY AND THEREFORE, THE SAME IS DISMISSED. SINCE WE HAVE DISMISSED THE APPLICATION OF THE ASSESSEE FOR CONDONATION OF DELAY, THE APPEAL IS NOT MAINTAINABLE AND CONSEQUENTLY, THE SAME IS DISMISSED. I.T.A. NO S . 756 /M/ 09, 53/M/14 & I.T.A. NO. 942/M/11 21 3 5 . IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE IN I.T.A. NO. 756/MDS/2009 AND 53/MDS/2014 ARE DISMISSED AND THE APPEAL FILED BY THE REVENUE IN I.T.A.NO. 942/MDS/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON FRIDAY OF AUGUST 28 TH , 2015 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( V. DURGA RAO ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 0 8 .201 5 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.