ASSOCIATED CABLES P. LD, MUMBAI V. ADDL CIT 8(1), MUMBAI

ITA 5556/MUM/2012

• Counselvise Citation: 555619914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND RAJENDRA (AM) . . , , ./I.T.A. NO.5556/MUM/2012 ( / ASSESSMENT YEAR:2008-09) M/S ASSOCIA T ED CABLES PVT.LTD., AJANTA HOUSE, 2 ND FLOOR, 8/35, MAROL CO-OP INDL.ESTATE, M.V.ROAD, MAROL, ANDHERI-EAST, MUMBAI-400059 / VS. ADDL. COMMISSIONER OF INCOME TAX - 8(1), ROOM NO.211, 2 ND FLOOR, AYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( & / APPELLANT) .. ( ' & / RESPONDENT) ./ ./PAN/GIR NO. : AABCA2809H & / APPELLANT BY : SHRI JAYESH B KAPANI AND SHRI AMIT SALVI ' & * /RESPONDENT : SHRI JAVED AKHTAR * - / DATE OF HEARING : 28.10.2013 * - /DATE OF PRONOUNCEMENT : 31.10.2013 / O R D E R PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2008-09 AGAINST ORDER OF LD. CIT(A) DATED 16.7.2012 ON FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. ASSESSING OFFICER ERRED IN DISALLOWING UNABSORBED D EPRECIATION OF RS.4,76,81,470/- PERTAINING TO AYS 1997-98 TO 1999 -2000 AGAINST THE BUSINESS INCOME OF AY 2008-09; 2. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE APPE LLANTS SUBMISSIONS OF APPLICABILITY OF THE LAW AS PREVAILING ON THE FIR ST DAY OF THE ASSESSMENT YEAR ALSO SUPPORTED BY THE ORDERS OF VARIOUS SUPERIOR C OURTS. 2. ASSESSEE FILED RETURN OF INCOME DECLARING TAXAB LE INCOME OF RS.NIL AND BOOK PROFIT U/S 115JB OF RS.4,41,29,438/-. IN THE RE TURN OF INCOME THE ASSESSEE CLAIMED SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF EARLIER YEARS AMOUNTING TO RS.14,97,78,668/- WHICH INCLUDES BROUGHT FORWARD UN ABSORBED DEPRECIATION OF EARLIER I.T.A. NO.5556/MUM/2012 2 ASSESSMENT YEARS 1997-98 TO 1999-2000 OF RS.4,76,8 1,470/-. AO STATED THAT BROUGHT FORWARD UNABSORBED DEPRECIATION OF EARLIER YEARS CA NNOT BE CONSIDERED AS CURRENT DEPRECIATION. THAT SUCH UNABSORBED DEPRECIATION C ANNOT BE ALLOWED TO BE CARRIED FORWARD BEYOND 8 YEARS PERIOD. THEREFORE, AO DISA LLOWED UNABSORBED DEPRECIATION OF RS.4,76,81,470/-. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. LD. CIT(A) BY FOLLOWING THE DECISION OF SPECIAL BENCH OF TRIBUNAL (MUMBAI) IN THE CASE OF DCIT V/S TIMES GUARANTEE LTD. (41 I TR 193) CONFIRMED THE ACTION OF AO. HENCE, THIS APPEAL FILED BY ASSESSEE BEFORE US. 3. DURING THE COURSE OF HEARING, LD. AR SUBMITTED T HAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT.LTD V/S DCIT IN SPECIAL CIVIL APPLICATION NO. 1 773 OF 2012, DATED 23.8.2012 WHEREIN THEIR LORDSHIPS OF THE HONBLE GUJARAT HIGH COUR T HAVE HELD THAT THE AMENDMENT MADE BY FINANCE (NO.1) ACT, 2001 WAS CLARIFIED BY CENTRAL BOARD OF DIRECT TAXES VIDE CIRCULAR NO.14 OF 2001. THAT THE SAID AMENDMENT I S APPLICABLE FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THAT UNABSORBED DEPR ECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002-03) WILL BE DE ALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED BY FINANCE (NO.1)ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFO RE THE SAID AMENDMENT. THEIR LORDSHIPS HAVE STATED THAT HAD THE INTENTION OF TH E LEGISLATURE BEING TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y . 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMEN T TO SECTION 32(2) BY FINANCE (NO.1) ACT, 2001 IT WOULD HAVE INCORPORATED A PROVI SION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. THEIR LORDSHIPS H AVE HELD THAT THE PROVISION OF SECTION 32(2) AS AMENDED BY FINANCE (NO.1) ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.YS. 1997- 98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE A.Y. 200 2-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAIN S OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. HE SUBMITTED THAT ITAT, MUMBAI BENCH BY FOLLOWING THE SAID ORDER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CONFIDEN CE PETROLEUM INDIA LTD V/S DCIT IN ITA NO.1937/MUM/2012 (AY-2007-08) VIDE ORDER DATED 24.7.2013 ALSO DECIDED THE ABOVE ISSUE IN FAVOUR OF ASSESSEE. LD. AR ALSO FI LED A COPY OF THE SAID ORDER OF TRIBUNAL TO SUBSTANTIATE HIS SUBMISSIONS. 4. LD. DR HAS NOT DISPUTED THE ABOVE CONTENTIONS OF LD. AR SAVE AND EXCEPT RELYING ON THE ORDERS OF AUTHORITIES BELOW. I.T.A. NO.5556/MUM/2012 3 5. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. REPRES ENTATIVES OF THE PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HOLD THAT THE ABOV E ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF GENERAL MOTORS INDIA PVT.LTD (SUPRA) WHICH HAS BEEN FOLLOWED BY ITAT, MUMBAI BENCH IN THE CASE OF CONFIDENCE PETROLEUM INDIA LTD (SUPRA) TO WHICH BOT H OF US ARE THE PARTIES. FURTHER, SAID ISSUE WAS ALSO CONSIDERED BY ITAT MUMBAI IN THE CASE OF ITO V/S GRAHAM FIRTH STEEL PRODUCTS (I) LTD (2008) 24 SOT 106(MUM). IN THE SAID CASE THE UNABSORBED DEPRECIATION IN AYS 1997-98 TO 2001-2002 WAS ADD ED TO THE AMOUNT TO THE ALLOWANCE OF DEPRECIATION FOR THE ASSESSMENT YEAR 2002-03 AN D HELD THAT BE DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR I.E. ASSESSMENT YEAR 2002-03 BE DEEMED TO BE ALLOWANCE FOR THAT PR EVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEAR, WHICH MEANS UNABSORBED D EPRECIATION UP TO ASSESSMENT YEAR 2001-02 COULD BE CARRIED FORWARD FOR SET OFF FOR I NDEFINITE PERIOD. WE CONSIDER IT PRUDENT TO REPRODUCE PARA 8 OF THE SAID ORDER AS U NDER : 8. ON READING THE PROVISIONS OF SECTION 32(2) AS I T STOOD PRIOR TO THE AMENDMENT MADE BY THE FINANCE (NO. 2) ACT, 1996, I.E., OPERATIVE UP TO AND INCLUDING ASSESSMENT YEAR 1996-97, IT IS SEEN THAT WHERE, IN THE ASSESSMENT OF ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO THE DEPREC IATION ALLOWANCE OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALL OWANCE, THEN SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB -SECTION (3) OF SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFF ECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE AL LOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART O F THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEE MED TO BE THE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PR EVIOUS YEARS. THE EFFECT OF THESE PROVISIONS IS THAT THE UNABSORBED DEPRECIATIO N FOR A PARTICULAR YEAR BECOMES, BY LEGAL FICTION, PART OF THE DEPRECIATION ALLOWANCE FOR THE SUCCEEDING YEAR AND SO ON WITHOUT ANY TIME LIMIT. WHAT SECTION 32(2) AS OPERATIVE UP TO AND INCLUDING ASSESSMENT YEAR 1996-97 CONTEMPLATES IS T HAT CURRENT DEPRECIATION IS DEDUCTIBLE, IN THE FIRST PLACE, FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES; IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOU NT OF THE PROFITS OF THAT BUSINESS, THEN SUCH PROCESS IS DEDUCTIBLE FROM THE PROFITS OR GAINS OF ANY OTHER BUSINESS/ES, IF ANY, CARRIED ON BY THE ASSESSEE, AN D IF A BALANCE IS LEFT EVEN THEREAFTER, THAT COMES FOR ABSORPTION FROM THE INCO ME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR; AND IN CASE THERE IS STILL A BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBE D DEPRECIATION AND IT SHALL BE CARRIED FORWARD TO THE NEXT SUCCEEDING YEAR, AND WH ERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORB ED DEPRECIATION BROUGHT FORWARD FROM EARLIER YEAR IS ADDED TO THE CURRENT D EPRECIATION FOR SUCH, SUCCEEDING YEAR AND IS DEEMED, BY LEGAL FICTION, A PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDIN G YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCCEEDING YEAR. IN THIS VIEW OF THE MATTER, SECTION 32(2) CONTAINED AN INDE PENDENT PROVISION FOR SETTING OFF UNABSORBED DEPRECIATION CARRIED FORWARD FROM A PRECEDING YEAR. THE UNABSORBED DEPRECIATION CAN BE ALLOWED TO BE CARRIE D FORWARD AND SET OFF AGAINST I.T.A. NO.5556/MUM/2012 4 INCOME FROM OTHER SOURCES IN A SUBSEQUENT YEAR NOTW ITHSTANDING THE FACT THAT THE BUSINESS IN RESPECT OF WHICH IT AROSE CEASED TO EXIST IN THE YEAR OF SUCH SET OFF. HOWEVER, CERTAIN RESTRICTIONS HAVE BEEN PUT, F OR AND FROM ASSESSMENT YEAR 1997-98 BY AN AMENDMENT MADE BY THE FINANCE (NO. 2) ACT, 1996, ON ALLOWANCE OF UNABSORBED DEPRECIATION AS THE OLD SECTION 32(2) OPERATIVE UP TO ASSESSMENT YEAR 1996-97 HAS BEEN SUBSTITUTED. ACCORDING TO SEC TION 32(2), AS SUBSTITUTED BY THE FINANCE (NO. 2) ACT, 1996 WITH EFFECT FROM 1-4- 1997, THE UNABSORBED DEPRECIATION OF EARLIER YEARS CAN BE CARRIED FORWAR D TO THE FOLLOWING ASSESSMENT YEAR AND CAN ONLY BE SET OFF AGAINST THE PROFIT AND GAINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE AND ASSESS ABLE FOR THAT ASSESSMENT YEAR AND FOLLOWING ASSESSMENT YEAR NOT BEING MORE THAN E IGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHIC H THE AFORESAID ALLOWANCE WAS FIRST COMPUTED. HOWEVER, FOR AVAILING THE BENEF IT OF CARRIED FORWARD OF UNABSORBED DEPRECIATION, IT IS ESSENTIAL THAT THE B USINESS OR PROFESSION FOR WHICH THE ALLOWANCE WAS ORIGINALLY COMPUTED CONTINUED TO BE CARRIED ON BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT FOR THAT ASS ESSMENT YEAR AS STIPULATED IN THE 1ST PROVISO TO SECTION 32(2)( III ) AS SUBSTITUTED WITH EFFECT FROM 1-4-1997. IN THIS CONTEXT, IT MAY BE OBSERVED THAT AMENDED SECTI ON 32(2) AS SUBSTITUTED BY THE FINANCE (NO. 2) ACT, 1996 (WITH EFFECT FROM 1-4 -1997) HAS BEEN SUBSTITUTED BY THE FINANCE ACT, 2001, WITH EFFECT FROM 1-4-2002 AND STATUS QUO ANTE HAS BEEN RESTORED WITH EFFECT FROM ASSESSMENT YEAR 2002 -03. THE NEW SUB-SECTION (2) OF SECTION 32 AS SUBSTITUTED BY THE FINANCE ACT , 2001 WITH EFFECT FROM 1-4- 2002 HAS RESTORED THE SUB-SECTION (2) OF SECTION 32 AS IT STOOD IN THE ASSESSMENT YEAR 1996-97. IN OTHER WORDS, THE RESTRICTIONS IMPO SED BY THE FINANCE (NO. 2) ACT, 1996 WITH EFFECT FROM 1-4-1997 IN THE MATTER O F SET-OFF OF UNABSORBED DEPRECIATION HAS BEEN DISPENSED WITH BY SUBSTITUTIN G THE SECTION 32(2) BY THE FINANCE ACT, 2001 WITH EFFECT FROM 1-4-2002 AND STATUS QUO ANTE , I.E., STATUS QUO OF SECTION 32(2) AS EXISTED PRIOR TO THE AMENDMENT MADE BY FINANCE (NO. 2) ACT, 1996 WITH EFFECT FROM 1-4-1997 HAS BEEN RESTORED. FURTHER, THE SAID ISSUE HAS ALSO BEEN CONSIDERED B Y ITAT, MUMBAI BENCH IN THE CASE OF M/S ARCH FINE CHEMICALS PVT.LTD. V/S ACIT IN ITA NO S.2414 AND 2415/MUM/2012(AYS 2005-06 & 2006-07) ORDER DATED 9.10.2013 TO WHICH ONE OF US (JM) IS ALSO PARTY. IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSEE IS ENTITLE D TO CLAIM SET OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1997-98 TO 1999-2000 AGAINST BUSINESS INCOME OF THE ASSESSMENT YEARS UNDER CONSIDERATION. HENCE, GROUND OF APPEAL TAKEN BY ASSESSEE IS ALLOWED BY REVERSING THE ORDERS OF AUTH ORITIES BELOW. 6. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31ST O CTOBER, 2013 * 1 2 31ST OCTOBER, 2013 * SD SD ( /RAJENDRA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER I.T.A. NO.5556/MUM/2012 5 MUMBAI; 2 DATED 31/10/2013 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. & / THE APPELLANT 2. ' & / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- CONCERNED 4. 6 / CIT CONCERNED 5. 7 '9 , - 9 , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) - 9 , /ITAT, MUMBAI