Century Enka Limited, Kolkata V. DCIT, C ircle- 6, Kolkata, Kolkata

ITA 561/KOL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5481 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 18-03-2010
• Court: TRIBUNAL
• Department Lawyers: D R SINDHAL
• Assessee Lawyers: A MANSINKA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 14A; 115JB; 80G; 32; 154

Judgement Text

1 , , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE . . . . . . . . , ,, , SHRI B.R.MITTAL, JUDICIAL MEMBER. ! ! ! ! /AND . .. .'# '#'# '#. .. . , $% SHRI C.D. RAO, ACCOUNTANT MEMBER !& !& !& !& / ITA NOS. 561 TO 563/KOL/2010 '( )* / ASSESSMENT YEARS : 2002-03 TO 2004-05 (,- / APPELLANT ) CENTURY ENKA LIMITED, KOL. (PAN:ADVPM 8614N) - ' - - VERSUS - (/0,-/ RESPONDENT ) DCIT, CIRCLE-6, KOLKATA ,- 1 2 $/ FOR THE APPELLANT: SHRI RAJAN VORA, MS. PREETI BHATNAGAR, SHRI D.AGARWAL & SHRI A.MANSINKA /0,- 1 2 $ / FOR THE RESPONDENT : SHRI D.R.SINDHAL $3 / ORDER ( . .. .'# '#'# '#. .. . ) $% PER SHRI C.D.RAO, A.M . THESE THREE APPEALS ARE PREFERRED BY THE ASSESSEE A GAINST THE ORDERS OF THE C.I.T.(A)-VI, KOLKATA ALL DATED 29.01.2010 FOR THE ASSESSMENT YEAR 2002-03 TO 2004- 05 RESPECTIVELY.. 2. THE GROUNDS TAKEN BY THE ASSESSEE IN ALL THE ASS ESSMENT YEARS ARE AS UNDER: ITA NO.561/KOL/2010 ASSESSMENT YEAR : 2002-03 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN UPHOLDING THE AOS ACTION OF SETTING-OFF OF INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION, IN THE SUBJECT AY. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN DISREGARDING THE APPELLANTS CONTENTION THAT THE AO DOES NOT HAVE THE JURISDICTION TO DECIDE ON A MATTER IN THE ORDER GIV ING EFFECT OF HONBLE ITATS ORDER WITHOUT SPECIFIC DIRECTIONS OF THE HONBLE IT AT. IN THE PRESENT FACTS, IN THE ABSENCE OF ANY SPECIFIC DIRECTION BY THE HONBL E ITAT IN ITS ORDER FOR THE 2 SUBJECT AY, THE AO ERRED IN SETTING-OFF OF INCOME U NDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION, IN THE SUBJECT AY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN DISREGARDING THAT THE AOS ACTION OF SETTING-OFF IN COME UNDER THE HEAD LONG TERM CAPITAL GAIN WITH UNABSORBED DEPRECIATION, REP RESENTS A FRESH POSITION ADOPTED BY THE AO IN THE COURSE OF ISSUING ORDER GI VING EFFECT TO THE HONBLE ITATS ORDER, CONSIDERING THAT IN THE ASSESSMENT OR DER FOR THE SUBJECT AY, THE AO HAS NOT UNDERTAKEN SUCH SET-OFF OF LONG TERM CAP ITAL GAINS AGAINST UNABSORBED DEPRECIATION. 4. WITHOUT PREJUDICE TO THE OTHER GROUNDS IN THIS A PPEAL, THE LEARNED CIT (A) ERRED IN FACT THAT THE SET-OFF OF INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION REPRESENTS A RECTIFICA TION BY THE AO OF HIS EARLIER ASSESSMENT ORDER FOR THE SUBJECT AY AND THE SAME SHOULD HAVE BEEN UNDERTAKEN PURSUANT TO RECTIFICATION PROCEEDINGS UN DER SECTION 154 OF THE ACT, THE TIME LIMIT WHEREOF HAS LAPSED IN THE PRESENT CA SE. 5. WITHOUT PREJUDICE TO THE OTHER GROUNDS IN THIS A PPEAL, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRE D IN CONFIRMING THE ACTION OF THE AO IN APPLYING THE PROVISIONS OF THE ACT AS EXI STING IN SUBJECT AY FOR THE PURPOSE OF THE AFORESAID SET-OFF, I.E. AY 2002-03 ( BEING THE YEAR OF SET-OFF OF THE UNABSORBED DEPRECIATION BY AO) ERRONEOUSLY DISREGAR DING THE FACT THAT THE APPELLANTS RIGHT TOWARDS THE UNABSORBED DEPRECIATI ON HAD ARISEN IN THE EARLIER YEARS, BEING AYS 1998-99 AND 1999-2000 AND THUS PROVISIONS AS APPLICABLE / PREVAILING IN SUCH AYS 1998-99 AND 199 9-2000 SHOULD APPLY. 6. WITHOUT PREJUDICE TO THE OTHER GROUNDS IN THIS A PPEAL, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT (A) ERRED IN NOT ACCEPTING THE APPELLANTS CONTENTION THAT THE PROVISIONS OF SECTI ON 32(2) OF THE ACT AS EXISTING IN THE YEAR IN WHICH THE UNABSORBED DEPRECIATION HA S ARISEN (I.E. AYS 1998-99 AND 1999-2000) SHOULD BE CONSIDERED APPLICABLE, AND NOT THE PROVISIONS AS PREVAILING IN ANY OTHER YEARS, I.E. YEAR IN WHICH S ET-OFF IS BEING CLAIMED. ITA NO.562/KOL/2010 : ASSESSMENT YEAR 2003-04 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT (A) ERRED IN UPHOLDING THE AOS ACTION OF SETTING-OFF INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION, IN THE PREVIOUS ASSESSMENT YEAR, (I.E., AY 2002- 03), THEREBY RESULTING IN LOWER AMO UNT OF UNABSORBED DEPRECIATION AVAILABLE FOR SET- OFF IN SUBJECT AY 2 003-04 AND CONSEQUENTLY, RESULTING IN SHORT MINIMUM ALTERNATIVE TAX (MAT) CREDIT AVAILABLE FOR SET-OFF IN THE SUBSEQUENT ASSESSMENT YEARS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN UPHOLDING THE AOS POSITION THAT THE APPELLANT IS E NTITLED TO SET-OFF OF UNABSORBED DEPRECIATION OF RS 147,291,101/-; RESULT ING IN MAT CREDIT CARRY 3 FORWARD OF RS NIL AS AGAINST APPELLANTS CLAIM FOR SET-OFF OF UNABSORBED DEPRECIATION OF RS 321,520,401/- AND MAT CREDIT CAR RY FORWARD OF RS 66,577,984/-. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN DISREGARDING THE APPELLANTS CONTENTION THAT FOR TH E PREVIOUS ASSESSMENT YEAR, I.E. AY 2002-03, THE AO HAS ERRED IN ALLOWING SET-O FF OF UNABSORBED DEPRECIATION AGAINST LONG TERM CAPITAL GAINS IN VIE W OF THE FOLLOWING: (A) THE LEARNED AO DID NOT HAVE THE JURISDICTION TO DECIDE ON A MATTER IN THE ORDER GIVING EFFECT TO HONBLE ITATS ORDER WITHOUT SPECIFIC DIRECTIONS OF THE HONBLE ITAT. (B) THE AOS ACTION OF SETTING-OFF INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN WITH UNABSORBED DEPRECIATION, REPRESENTS A FRESH PO SITION ADOPTED BY THE AO IN THE COURSE OF ISSUING ORDER GIVING EFFECT TO THE HO NBLE ITATS ORDER, CONSIDERING THAT IN THE ASSESSMENT ORDER FOR AY 200 2-03, THE AO HAS NOT UNDERTAKEN SUCH SET-OFF OF LONG TERM CAPITAL GAINS AGAINST UNABSORBED DEPRECIATION. (C) THE SET-OFF OF INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION BY THE AO FOR AY 2002-03 RE PRESENTS A RECTIFICATION BY THE AO OF HIS EARLIER ASSESSMENT ORDER AND THE S AME SHOULD HAVE BEEN UNDERTAKEN PURSUANT TO RECTIFICATION PROCEEDINGS UN DER SECTION 154 OF THE ACT, THE TIME LIMIT WHEREOF HAS LAPSED IN THE PRESENT CA SE. (D) THE LEARNED AO ERRED IN APPLYING THE PROVISIONS OF THE ACT AS EXISTING IN AY 2002-03 FOR THE PURPOSE OF THE AFORESAID SET-OFF (I E AY 2002-03 BEING THE YEAR OF SET-OFF OF THE UNABSORBED DEPRECIATION BY AO) ER RONEOUSLY DISREGARDING THE FACT THAT THE APPELLANTS RIGHT TOWARDS THE UNABSOR BED DEPRECIATION HAD ARISEN IN THE EARLIER YEARS, BEING AYS 1998-99 AND 1999-20 00 AND THUS, PROVISIONS AS APPLICABLE IN SUCH AYS 1998-99 AND 1999-2000 SHOULD APPLY . ITA NO.563/KOL/2010 : ASSESSMENT YEAR 2004-05 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT (A) ERRED IN UPHOLDING THE AOS ACTION OF SETTING-OFF INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION, IN THE AY 2002-03. CONSEQUENT TO SUCH ERRONEOUS SET-OFF OF UNABSORBED DEPRECIATION O F RS 174,229,300/- WITH LONG TERM CAPITAL GAIN IN AY 2002-03, THE SAME WAS NOT AVAILABLE FOR SET-OFF IN THE AY 2003 -04. IN VIEW OF THE SAME, THE ENTIRE MI NIMUM ALTERNATE TAX (MAT) CREDIT OF RS 87,068,183/- AVAILABLE TO THE APPELLANT WAS ADJUSTED BY THE LEARNED ASSESSING OFFICER IN AY 2003-04 ITSELF. ACCORDINGLY, MAT CREDIT OF RS 66,577,984/- WHICH SHOULD HAVE BEEN AVAILABLE FO R SET-OFF! ADJUSTMENT IN AY 2004-05 WAS NOT GRANTED BY THE AO IN THE ORDER UNDE R APPEAL. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN UPHOLDING THE AOS POSITION THAT THE APPELLANT IS E NTITLED TO MAT CREDIT OF RS 4 NIL AS AGAINST APPELLANTS POSITION THAT IT IS ENTI TLED TO MAT CREDIT OF RS 66,577,984/- FOR AY 2004-05. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN DISREGARDING THE APPELLANTS CONTENTION THAT FOR TH E AY 2002-03, THE AO HAS ERRED IN ALLOWING SET-OFF OF UNABSORBED DEPRECIATIO N AGAINST LONG TERM CAPITAL GAINS IN VIEW OF THE FOLLOWING: (A) THE LEARNED AO DID NOT HAVE THE JURISDICTION TO DECIDE ON A MATTER IN THE ORDER GIVING EFFECT TO HONBLE ITATS ORDER WIT HOUT SPECIFIC DIRECTIONS OF THE HONBLE ITAT. (B) THE AOS ACTION OF SETTING-OFF INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN WITH /UNABSORBED DEPRECIATION, REPRESE NTS A FRESH POSITION ADOPTED BY THE AO IN THE COURSE OF ISSUING ORDER GI VING EFFECT TO THE HONBLE ITATS ORDER, CONSIDERING THAT IN THE ASSES SMENT ORDER FOR Y 2002-03, THE AO HAS NOT UNDERTAKEN SUCH SET-OFF OF LONG TERM CAPITAL GAINS AGAINST UNABSORBED DEPRECIATION. (C) THE SET-OFF OF INCOME UNDER THE HEAD LONG TERM CAPITAL GAINS WITH UNABSORBED DEPRECIATION BY THE AO FOR AY 2002-03 RE PRESENTS A RECTIFICATION BY THE AO OF HIS EARLIER ASSESSMENT O RDER AND THE SAME SHOULD HAVE BEEN UNDERTAKEN PURSUANT TO RECTIFICATI ON PROCEEDINGS UNDER SECTION 154 OF THE ACT, THE TIME LIMIT WHEREO F HAS LAPSED IN THE PRESENT CASE. (D) THE LEARNED AO ERRED IN APPLYING THE PROVISIONS OF THE ACT AS EXISTING IN AY 2002-03 FOR THE PURPOSE OF THE AFORE SAID SET-OFF (I.E. AY 2002-03 BEING THE YEAR OF SET-OFF OF THE UNABSORBED DEPRECIATION BY AO) ERRONEOUSLY DISREGARDING THE FACT THAT THE APPELLAN TS RIGHT TOWARDS THE UNABSORBED DEPRECIATION HAD ARISEN IN THE EARLIER Y EARS, BEING AYS 1998-99 AND 1999-2000 AND THUS, PROVISIONS AS APPLI CABLE IN SUCH AYS 1998-99 AND 1999-2000 SHOULD APPLY. 3. BRIEF FACTS OF THE ABOVE ISSUES ARE THAT WHILE D OING THE SCRUTINY ASSESSMENT, THE AO HAS PASSED THE ORDER UNDER SECTION 254/143(3) BY OBSERVING AS UNDER: ITA NO.561/KOL/2010 ASSESSMENT YEAR : 2002-03 ITAT, E BENCH, KOLKATA HAS PASSED AN ORDER ON 09.8. 2006 IN ITA NO. 58/KO112006. IN THE SAID ORDER, THE ITAT HAS DIRECT ED TO RECOMPUTE THE EXPENSES TO BE DISALLOWED UNDER THE PROVISIONS OF S ECTION 14A OF THE I. T. ACT, 1901. EFFECT TO ITATS ORDER IS GIVEN AS BELOW: INCOME UNDER THE HEAD BUSINESS AS PER ASSESSMENT ORDER DTD. 30.3 .2005 111,84, 65,131 LESS, RELIEF ALLOWED BY ITAT 5 TOTAL EXPENSES U/S 14A DISALLOWED 60,006 LESS, DISALLOWANCE UPHELD BY ITAT 10,000 50,006 111,84,15,125 LESS, DEPRECIATION U/S.32 AS PER ORDER DTD.30.3.20 05 59,71,41,400 52,12,73,125 LESS, UNABSORBED DEPRECIATION OF EARLIER YEARS 52,12.73.125 NIL INCOME UNDER THE HEAD CAPITAL GAINS AS PER ASSESSMENT ORDER DTD. 30.3.2005 17,42,29 ,300 LESS, UNABSORBED DEPRECIATION OF EARLIER YEARS 1 7,42,29,300 NIL TOTAL INCOME FOR NORMAL TAXATION = NIL TAX IS 1EVIED U/S. 115JB AS PER ORDER DT. 30.3.2005 . CONSIDERING ALL EARLIER ORDERS THE AMOUNT OF UNABSO RBED DEPRECIATION AMOUNTING TO RS. 14,72,91,101/- IS ALLOWED FOR FURT HER CARRY FORWARD TO A.Y. 2003-04 . 3.1 SIMILARLY, THE AO PASSED THE ORDER UNDER SECTIO N 251/143(3) FOR THE ASSESSMENT YEAR 2003-04 BY OBSERVING AS UNDER: PURSUANT TO THE ORDER OF THE CIT(A) DEDUCTION U/S 801A IS TO BE ALLOWED @100% OF PROFIT OF THE UNDERTAKING SUBJECT TO AVAIL ABILITY OF TOTAL INCOME. CIT(A) ALSO DIRECTED FOR GIVING EFFECT TO UNABSORBE D LOSS & DEPRECIATION AVAILABLE AS ON DATE: THE POSITION OF UNABSORBED DEPRECATION IS AS FOLLOW S A/Y 98-99 AFTER CONSIDERATION & EFFECT OF ORDERS OF CIT(A) & ITAT RS.96,25,67,046/- AY- 99-00 AS PER RETURN AS PROCESSED U/S 143(1) RS.42,69,82,610/- AY- 00-01 INCOME AS PER ORDER U/S 251 DT. 28/11/03 (-) R S. 14,6131364/- AY- 01-02 INCOME AS PER ORDER U/S 154/254 DT. 29/05/09 (-) RS. 40,06,24,160/- AY- 02-03 A) BUSINESS INCOME AS PER ORDER U/S 143(3) AFTER CO NSIDERATION OF CURRENT DEPRECIATION AND ORDER OF ITAT (-) RS. 52,12,73,731/- B) CAPITAL GAIN AS PER ORDER U/S 143(3) DT. 30/03/0 5 (-) RS. 17,42,29,300/- AVAILABLE FOR SET OFF IN 03-04 RS. 14,72 ,91,101/- COMPUTATION OF TOTAL INCOME INCOME FROM BUSINESS OF TOTAL INCOME AS PER ORDER U/S 143(3) AFTER CONSIDERATION OF CURRENT DEPRECIAT ION RS. 56,74,75,445/- 6 INCOME FROM 0/S RS. 12,42,628/- INCOME FROM STCG RS. 1,21,231/- RS. 56,88,39,304/- LESS: B/F UNABSORBED DEPRECIATION RS. 14,72,91,101/ - GROSS TOTAL INCOME RS. 42,15,48,203/- LESS : U/S 80G RS. 12,500/- U/S 8OHHC RS. 13,41,690/- U/S 801A RS. 1,53,23,078/- U/S 8DM RS. 12,42,628/- RS. 1,79,19,896/- TOTAL INCOME RS. 40,36,28,307/- R/O RS. 40,36,28,310/- 3.4 AGAIN FOR THE ASSESSMENT YEAR 2004-05, THE AO P ASSED THE ORDER UNDER SECTION 251/143(3). IN THE SAID ORDER AGAINST GROUND NO. 3 THE CIT(A) H ELD THAT SINCE ASSESSEES GRIEVANCE OF MAT CREDIT HAS BEEN FULLY SATISFIED BY AN ORDER U/S 154 PASSED THE AO ON 28/12/06 THE ASSESSE DID NOT PRESS THE GROUND . HOWEVER IT IS NOW FOUND THAT AFTER ADJUSTING THE CREDIT FOR MAT U/S 115JAA( 5), THERE IS NO AMOUNT OF SUCH CREDIT AVAILABLE FOR ADJUSTMENT WITH CURRENT Y EARS DEMAND. SUBJECT TO THE ABOVE OBSERVATION EFFECT OF CIT(A)S ORDER IS GIVEN AS UNDER: GROSS TOTAL INCOME AS PER ORDER U/S 143(3) DT. 15/1 1/06 RS. 66,47,64,139/- (THERE IS NO B/F UNABSORBED DEPRECIATION FOR SET O FF AS EXHAUSTED IN 03-04) LESS : DEDUCTION U/S 80IA RS. 2,18,18 ,139/- TOTAL INCOME RS. 64,29,46,000/- CALCULATION OF TAX ON ABOVE (MAT IGNORED SINCE TAX AT NORMAL RATE IS MORE ) TAX & S/C RS. 23,06,56,877/- LESS: TDS ALLOWED RS. 36,08,967/ BALANCE PAYABLE RS.22,70,47,910/- LESS : ADV. TAX PAID RS.20,10,00,000/- PAYABLE RS. 2,60,47,910/- (** NO MAT CREDIT AVAILABLE AS IT HAS ALREADY BEEN EXHAUSTED IN A/Y 03-04) 4. ON APPEAL, THE LD. CIT(A) HAS CONFIRMED THE ACTI ON OF THE AO FOR ALL THE ASSESSMENT YEARS, AFTER TAKING INTO CONSIDERATION O F THE VARIOUS SUBMISSIONS AND ANALYZING THE FACTS THAT VARIOUS JUDICIAL PRONOUNCE MENTS AS MENTIONED AT PAGE NOS. 2 TO 14 AND FINALLY CONCLUDED AS UNDER: 6. THE VIEW OF THE HONBLE HIGH COURT WAS UPHELD B Y THE SUPREME COURT OF INDIA IN RELIANCE JUTE AND INDUSTRIES LTD. V. CO MMISSIONER OF INCOME TAX IN 120 ITR 921 BY STATING THAT THE ASSESSMENT FOR ONE ASSESSMENT YEAR CANNOT IN 7 THE ABSENCE OF A CONTRARY PREVISION BE AFFECTED BY THE LAW IN FORCE IN ANOTHER YEAR. A RIGHT CLAIMED BY AN ASSESSEE UNDER THE LAW IN FORCE IN A PARTICULAR ASSESSMENT YEAR IS ORDINARILY AVAILABLE ONLY IN REL ATION TO A PROCEEDING PERTAINING TO THAT YEAR. IN THE PRESENT APPELLANTS CASE, THE FACTS ARE SIMI LAR TO THE CASE DECIDED BY HONBLE ITAT DELHI BENCH IN CASE OF JAIUSHIN LIM ITED VS. DEPUTY COMMISSIONER OF INCOME TAX [2008] 305 ITR (AT) 0210 . THE ASSESSING OFFICER HAS RIGHTLY SET OFF UNABSORBED DEPRECIATION WITH LO NG TERM CAPITAL GAINS. IN MY OPINION HE HAS NOT STEPPED OUTSIDE THE JURISDICT ION OF HONBLE ITATS DIRECTIONS IN DOING SO. THERE WAS NO NECESSITY FOR THE AO TO TAKE RECOURSE TO SEC. 154 OF ACT AS SUBMITTED BY THE APPELLANT. THE APPELLANT SHOULD APPRECIATE THAT A.O. HAS FOLLOWED THE LAW AS ON THE DAY OF PAS SING THE ORDER. RELYING ON THE ABOVE DISCUSSION THE GROUNDS OF APPEAL ARE DISM ISSED. 5. AGGRIEVED BY THIS, NOW THE ASSESSEE IS IN APPEAL S BEFORE US. 6. AT THE TIME OF HEARING, THE LD. COUNSEL, APPEARI NG ON BEHALF OF THE ASSESSEE, HAS SUBMITTED THE FOLLOWING. THAT THE LEARNED ASSESSING OFFICER IN THE ASSESSMEN T ORDER [DATED 30 MARCH 2005 ISSUED UNDER SECTION 143(3) OF THE ACT] ACCEPT ED THE APPELLANTS COMPUTATION OF TAX ON LONG TERM CAPITAL GAIN WITHOU T SET-OFF OF THE SAME WITH AVAILABLE UNABSORBED DEPRECIATION. HOWEVER, IN THE ORDER GIVING EFFECT TO THE ITAT ORD ER, THE LEARNED ASSESSING OFFICER CHANGED ITS POSITION BY SETTING OFF THE LON G TERM CAPITAL GAIN OF SUBJECT AY AGAINST THE AVAILABLE UNABSORBED DEPRECIATION, W ITHOUT ANY SPECIFIC DIRECTION OF THE HONBLE ITAT. THAT THE ASSESSING OFFICER IS BOUND TO FOLLOW THE D IRECTIONS OF A SUPERIOR AUTHORITY. IN THIS CONNECTION, WE WISH TO HIGHLIGHT THE JUDICIAL PRONOUNCEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF UOI VS KAMALAKSHMI FINANCE CORPORATION LIMITED [(1992) AIR (SC) 711)], WHEREIN , WITH REGARD TO BINDING NATURE OF JURISDICTIONAL HIGHER AUTHORITIES, THE AP EX COURT OBSERVED AS FOLLOWS: THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNRESERVED LY BY SUBORDINATE AUTHORITIES AND THE MERE FACT THAT THE ORDER OF THE APPELLATE AUTHORITY IS NOT ACCEPTABLE TO THE DEPARTMENT IN ITSELF AN O BJECTIONABLE PHRASE- 8 AND IS THE SUBJECT- MATTER OF AN APPEAL CAN FURNISH NO GROUND FOR NOT ALLOWING IT UNLESS ITS OPERATIONS HAS BEEN SUSPENDE D BY A COMPETENT COURT . IF THIS HEALTHY RULE IS NOT FOLLOWED, THE RESULT WILL ONLY BE UNDUE HARASSMENT TO APPELLANTS AND CHAOS IN ADMINISTRATIO N OF TAX LAWS. FURTHER, THE ASSESSING OFFICER / LOWER AUTHORITY IN PURSUANCE OF AN ORDER FROM A SUPERIOR AUTHORITY IS NOT EMPOWERED TO MAKE ANY ADJ USTMENT OTHER THAN THE ADJUSTMENTS SPECIFICALLY DIRECTED BY THE SUPERIOR A UTHORITIES IN ITS ORDER. ACCORDINGLY, IN THE PRESENT CASE, THE LEARNED ASSES SING OFFICER EXCEEDED HIS JURISDICTION BY SETTING OFF THE LONG TERM CAPITAL G AIN WITH UNABSORBED DEPRECIATION SINCE SUCH ADJUSTMENT WAS NOT SPECIFIC ALLY DIRECTED BY THE HONBLE ITAT. 6.1 FURTHER, IN SUPPORT OF THE SUBMISSIONS, THE LD. COUNSEL RELIED ON THE FOLLOWING CASE LAWS. I. ITO VS- RYAM SUGAR COMPANY LTD. [(1976) 105 ITR 819 (HC CAL)] II. SURENDRA OVERSEAS LTD. VS CIT [(1979) 120 IT R 872 (HC CAL)] III. KATIHAR JUTE MILLS (P) LTD. VS CIT [(1979} 1 20 ITR 861 (HC CAL)] IV. SAHELI SYNTHETICS PRIVATE LTD.VS CIT [(2008} 302 ITR 126 (HC GUJ)] V. CIT VS MAHINDRA AND CO [(2004} 269 ITR 426 (H C RAJ)] VI. CIT VS LAL CHAND AGAWAM [(2003} 259 ITR 497 ( HC RAJ)] VII. CIT VS MAHINDRA & CO. [(1995} 215 ITR 922 ( HC RAJ)] VIII. CIT VS DIVAKAR (SV) [(1993} 201 ITR 914 (HC ORISSA)] IX . BHAGWANDAS ASSOCIATES VS ITO [(2008} 119 TTJ 663 (ITAT PUNE)] 6.2 AS REGARDING THE UNABSORBED DEPRECIATION AVAILA BLE FOR SET OFF FOR THE ASSESSMENT YEAR 1997-97 TO 2000-01, THE LD. COUNSEL SUBMITTED THAT THE SPECIAL BENCH OF THE ITAT, MUMBAI IN ITA NOS. 4917 & 4918/M UM/2008 FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 IN THE CASE OF DCIT-VS- M/S . TIMES GUARANTY LTD. REPORTED IN 41 DTR (MUM)(SB)(TRIB) 193 CONCLUDED THAT THE Q UESTION POSED BEFORE THIS SPECIAL BENCH IS, THEREFORE, ANSWERED IN FAVOUR OF THE REVENUE BY HOLDING THAT THE UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEAR 1997-98 TO 1999-2000 IS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 32(2) AS APPLICABLE FOR ASSESSMENT YEAR 1997-98 TO 1999-2000. THEREFORE, H E REQUESTED TO SET ASIDE THE ORDER OF THE REVENUE AUTHORITIES FOR THE ASSESSMENT YEAR 2002-03. HE FURTHER SUBMITTED THAT 9 SINCE FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05, WHICH ARE CONSEQUENTIAL IN NATURE, HE REQUESTED TO SET ASIDE THOSE ORDERS ALSO . 7. ON THE OTHER HAND, THE LD. D.R. HEAVILY RELIED O N THE ORDERS OF THE REVENUE AUTHORITIES. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, THE FIRST QUESTION INVOLVED I N THIS ISSUE IS WHILE GIVING EFFECT OF THE TRIBUNALS ORDER OTHER THAN THE ISSUE RAISED BE FORE THE TRIBUNAL, THE AO IS JUSTIFIED TO DO OTHER ADJUSTMENTS, WHILE PASSING THE ORDER UN DER SECTION 254/143(3) OF THE I.T. ACT. IN THE FACTS OF THE PRESENT CASE, IT IS APPARE NT FROM THE ORDER PASSED UNDER SECTION 254/143(3) THAT THE ITAT HAS DIRECTED TO RECOMPUTE THE EXPENSES DISALLOWED UNDER THE PROVISIONS OF SECTION 14A OF THE I.T.ACT WHEREAS, W HILE GIVING EFFECT OF THIS DIRECTION, THE AO HAS RECOMPUTED THE INCOME OF THE ASSESSEE BY MAKING ADJUSTMENT OF THE DEPRECIATION UNDER SECTION 32 AND THE UNABSORBED DE PRECIATION OF EARLIER YEARS WHICH WAS SETTLED BY THE AO UNDER SECTION 143(3) ORDER DA TED 30.3.2005. IN OUR CONSIDERED OPINION, THE AO IS HAVING NO JURISDICTION TO MAKE S UCH ADJUSTMENTS, WHILE PASSING THE ORDER UNDER SECTION 154/143(3) OF THE I.T.ACT, AS T HERE IS NO DIRECTION FROM THE ITAT TO THIS EFFECT. THEREFORE, IN OUR CONSIDERED VIEW, IF AT ALL, ANY ADJUSTMENTS ARE REQUIRED, THERE IS A LAID DOWN PROCEDURE EITHER UNDER SECTION 154 OR UNDER SECTION 147/148. HENCE, IN OUR CONSIDERED OPINION, THE AO HAS EXCEED ED HIS JURISDICTION, WHILE DOING THE ABOVE ADJUSTMENTS IN THE ORDER PASSED UNDER SEC TION 254/143(3) OF THE I.T.ACT. 8.1 AS REGARDING THE MERITS ALSO, KEEPING IN VIEW O F THE DECISION OF THE SPECIAL BENCH OF THE ITAT, MUMBAI IN THE CASE OF DCIT-VS- M /S. TIME GUARANTY LTD. REPORTED IN 41 DTR (MUM)(SB)(TRIB) 193, WHEREIN IT WAS HELD THAT UNABSORBED DEPRECIATION RELATING TO THE ASSESSMENT YEARS 1997- 98 TO 1999-2000 IS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS APPLICABLE FOR ASSESSMENT YEARS 1997-98 TO 1999-2000, THEREFORE, THE ASSESSEE CANNO T CLAIM SET OFF OF UNABSORBED DEPRECIATION RELATING TO THE ASSESSMENT YEARS 1997- 98 TO 1999-2000 AGAINST THE INCOME UNDER ANY HEAD OTHER THAN THE PROFITS & GAI NS OF BUSINESS AND PROFESSION IN ASSESSMENT YEARS 2003-04 AND 2004-05. APPLYING THE SAME PRINCIPLE TO THE FACTS OF THE 10 PRESENT CASE, THE REVENUE IS NOT JUSTIFIED TO MAKE THE UNABSORBED DEPRECIATION OF THE EARLIER YEARS IN THE ASSESSMENT YEAR 2002-03. THERE FORE, WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES FOR THE ASSESSMENT YEAR 2002-03 AND ALLOW THE APPEAL OF THE ASSESSEE. 8.2 SINCE THE OTHER TWO APPEALS FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 ARE CONSEQUENTIAL TO THE ORDER PASSED BY THE REVENUE FO R THE ASSESSMENT YEAR 2002-03, THE SAME ARE ALSO ALLOWED. 9. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED. 4 $3 5 6' 7 48 THIS ORDER IS PRONOUNCED IN THE COURT ON 26.11.20 10. SD/- SD/- . . . . . . . . , ,, , B.R.MITTAL, JUDICIAL MEMBER . .. .'# '#'# '#. .. . , $% C.D. RAO, ACCOUNTANT MEMBER ( (( (#% #% #% #%) )) ) DATE: 26.11.2010 MST(SR.P.S.) $3 1 /9 :$9);- COPY OF THE ORDER FORWARDED TO: 1. CENTURY ENKA LIMITED, KOL 2. DCIT, CIRCLE-6, KOLKATA 3. THE CIT(A), 4. THE CIT 5 . DR, KOLKATA BENCHES, KOLKATA 09 // TRUE COPY, $3'6/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 11 .