ITO, New Delhi V. M/s Aditya Chemical Ltd., New Delhi

ITA 5625/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61669 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-05-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 10-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32; 147; 148

Judgement Text

ITA NO. 5625/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 5625/DEL/2010 A.Y. : 1997-98 ITO COY. WARD 1(2), ROOM NO. 398-B, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S ADITYA CHEMICAL LTD., C/O RRA TAX INDIA, D-28, SOUTH EXTENSION PART-I, NEW DELHI 110 049 (PAN/GIR NO. : AAACA2825J) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. ASHWANI TANEJA, ADVOCATE DEPARTMENT BY : MRS. ANUSHA KHURANA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, NEW DEL HI DATED 20.1.2010 PERTAINING TO ASSESSMENT YEAR 1997-98. 2. THE GROUNDS RAISED IN THE APPEAL READ AS UNDER:- THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRE D ON FACTS AND IN LAW IN DIRECTING TO ADJUST BROUGHT F ORWARD UNABSORBED DEPRECIATION IGNORING AS : A) BUSINESS OR PROFESSION FOR WHICH THE DEPRECIATION ALLOWANCE WAS ORIGINALLY COMPUTED DOES NOT ITA NO. 5625/DEL/2010 2 CONTINUE TO BE CARRIED ON BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR OF SET OFF. B) RELIANCE PLACED BY LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE DECISION OF HONBLE ITAT IN ITO V S. 762 DATED 18.2.1998 IS UNFOUNDED AS THE UNABSORBED DEPRECIATION OF THE YEAR OF ORIGIN NEVER CEASES ITS IDENTITY AND DOES NOT MERGE WITH THE LOSSES OF SUBSEQUENT YEARS AND BECOME TO BE CALLED THE UNABSORBED DEPRECIATION OF ANY SUBSEQUENT ASSESSMENT YEAR. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS A PPEAL. 3. IN THIS CASE ASSESSING OFFICER DID NOT ALLOW S ET OFF THE DEPRECIATION TO THE TUNE OF ` 3,57,84,387/-. IT WA S STATED BY THE ASSESSING OFFICER THAT BROUGHT FORWARD LOSSES HAVE NOT BEEN ALLOWED AS THE COMPANY WAS NOT CARRYING OUT BUSINESS ACTIVIT Y. 4. AGAINST THIS ORDER, ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). BEFORE THE L D. COMMISSIONER ITA NO. 5625/DEL/2010 3 OF INCOME TAX (APPEALS) ASSESSEE REFERRED TO THE AME NDMENT BROUGHT ABOUT IN SECTION 32(2) FOR A.Y. 1997-98. ASSESSEE ALSO RELIED UPON THE DECISIONS IN C.I.T. VS. JAIPURIA CHINA CLAY MINES PV T. LTD. 59 ITR 555(SC), VIRMANI INDUSTRIES VS. C.I.T. 216 ITR 607 (SC) AND ESCROTS ELECTRONICS LTD. VS. C.I.T. 258 ITR 23 (DELHI). RE LIANCE HAS ALSO BEEN PLACED ON THE SPEECH OF THE FINANCE MINISTER WHILE MO VING FINANCE BILL, 1996 ON 11.9.1996 AND THE CBDT CIRCULAR NO. 762. IT WAS VEHEMENTLY ARGUED THAT THE CIRCULAR OF THE CBDT WAS BINDING ON THE TAX AUTHORITIES. IT WAS STATED THAT AS PER THE AM ENDED LAW, DEPRECIATION UPTO ASSESSMENT YEAR 1996-97 SHALL BE T REATED AS DEPRECIATION OF ASSESSMENT YEAR 1997-98 AND IT WILL BE SET OFF AGAINST THE BUSINESS INCOME OF THE ASSESSEE AND SHALL BE TRE ATED AS DEPRECIATION OF THE BUSINESS WHICH WAS CARRIED OUT IN A.Y. 1997-98. FURTHER, THE ASSESSEE RELIED UPON THE DELHI TRIBUNAL DECISION IN SELCHEM ENGINEERS PVT. LTD. 84 TTJ 101 (DEL.) AND UT TAM AIR PRODUCTS (P) LTD. VS. DCIT 99 TTJ 718. LD. COMMISSIONER OF I NCOME TAX (APPEALS) THEREAFTER REFERRED THE DECISION OF THE TRIBUNAL IN SELCHEM ENGINEERS PVT. LTD. (SUPRA) AND LD. COMMISSIONER OF I NCOME TAX (APPEALS) CONCLUDED THAT CIRCULAR NO. 762 DATED 18 .2.1998 WAS BINDING ON THE ASSESSING OFFICER. SIMILARLY, HE HEL D THAT THE DECISION OF THE DELHI TRIBUNAL IS ALSO BINDING. LD. COMMISS IONER OF INCOME TAX ITA NO. 5625/DEL/2010 4 (APPEALS) HELD THAT IN VIEW OF THE BINDING DECISION OF THE TRIBUNAL AND THE CBDT CIRCULAR REFERRED, THE ASSESSEE SUCCEEDS. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISIO N OF THE TRIBUNAL REFERRED IN THE LD. COMMISSIONER OF INCOME TAX (APPE ALS)S ORDER. LD. COUNSEL OF THE ASSESSEE FURTHER REFERRED THE DECISI ON OF THE HONBLE GUJRAT HIGH COURT IN THE CASE OF DEVESH METCASH LTD. VS. JCIT 338 ITR 130 AND HONBLE MADRAS HIGH COURT IN THE CASE OF C.I .T. VS. RPIL SIGNALLING SYSTEMS LTD. (328 ITR 283). HE FURTHER REFERRED TO THE CBDTS CIRCULAR NO. 762 DATED 18.2.1998. 6.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT ISSUE INVOLVED IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE. AS PER THE AMENDED LAW, DEPRECIATION UPTO ASSESSMENT YEAR 1 996-97 SHALL BE TREATED AS DEPRECIATION OF ASSESSMENT YEAR 1997-98 A ND IT WILL BE SET OFF AGAINST THE BUSINESS INCOME OF THE ASSESSEE AND SHALL BE TREATED AS DEPRECIATION OF THE BUSINESS WHICH WAS CARRIED OUT IN A.Y. 1997-98. ITA NO. 5625/DEL/2010 5 THE IMPUGNED ASSESSMENT YEAR BEING 1997-98, THE ABOV E WILL CLEARLY APPLY IN THIS CASE. IN THE CBDT CIRCULAR NO. 762 IN PARA 23.5 FOLLOWING HAS BEEN MENTIONED:- SUB-S. (2) OF S. 32, AS IT EXISTED UPTO ASSTT. YEA R 1996-97, PROVIDED THAT THE UNABSORBED DEPRECIATION OF A YEAR SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION OF THE FOLLOWING PREVIOUS YEAR A ND DEEMED TO BE PART OF THAT ALLOWANCE. THEREFORE, THE UNABSORBED DEPRECIATION ALLOWANCE, IF ANY, OF THE ASSTT. YEAR 1996-97 SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION OF ASSTT. YEAR 1997 -98 AND DEEMED TO PART OF THE ALLOWANCE FOR THIS YEAR. IN OTHER WORDS, THE UNABSORBED DEPRECIATION ALLOWANCE OF ASSTT. YEAR 1996-97 SHALL BE ADDED TO THE ALLOWA NCE OF 1997-98 AND WILL BE DEEMED TO BE THE ALLOWANCE O F THAT YEAR. THE LIMITATION OF EIGHT YEARS SHALL S TART FROM THE ASSTT. YEAR 1997-98. 7.1 SIMILARLY, WE FIND THAT HONBLE GUJRAT HIGH COURT IN THE CASE OF DEVESH METCASH LTD. VS. JCIT 338 ITR 130 HAS HELD AS UNDER: (HEADS NOTES ONLY):- ITA NO. 5625/DEL/2010 6 REASSESSMENT REOPENING BASED ON ERRONEOUS INTERPRETATION OF PROVISIONS OF S. 32(2) FOR ASSTT . YEAR 1997-98, ASSESSEE-COMPANY CLAIMED SET OFF OF CARRIED FORWARD DEPRECIATION FOR ASSTT. YEARS 1993-94 TO 19 96- 97 AGAINST SHORT TERM CAPITAL GAIN CLAIM OF SUCH SE T OFF ACCEPTED UNDER S. 143(1) ASSESSING OFFICER LATER ISSUED NOTICE UNDER SECTION 148 FOR THE REASONS THA T UNABSORBED DEPRECIATION OF EARLIER YEARS COULD SE T OFF ONLY AGAINST BUSINESS INCOME AND NOT AGAINST SHORT TERM CAPITAL GAIN IN VIEW THE AMENDED PROVISIONS OF S. 32(2) THERE IS NO ESCAPEMENT OF ANY INCOME AS UNABSORBED DEPRECIATION ALLOWANCE FOR ASSTT. YEARS . 1993-94 TO 1996-97, BY OPERATION OF THE PROVISIONS OF SUB-S. (2) OF S. 32 AS IT STOOD PRIOR TO 1 ST APRIL, 1997 WAS DEEMED TO BE PART OF THE ALLOWANCE FOR THE PREVIOUS YEAR RELEVANT TO ASSTT. YEAR 1997-98 AND F OR ALL INTENTS AND PURPOSES, THE UNABSORBED DEPRECIATION FOR ASSTT. YEARS 1993-94 TO 1996-97 WAS DEEMED TO BE THE DEPRECIATION ALLOWANCE FOR ASSTT. YEAR 1997-98 SUBSEQUENTLY, SUB-S. (2) OF S. 32 CA ME BE SUBSTITUTED W.E.F. 1 ST APRIL, 1997 BY THE FINANCE (NO. ITA NO. 5625/DEL/2010 7 2) ACT, 1996 WHEREBY THE EARLIER YEARS UNABSORBED DEPRECIATION BEING DEEMED TO BE PART OF THE DEPRECIATION OF THE FOLLOWING PREVIOUS YEAR WAS NO LONGER CONTINUED AND FURTHER, UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD FOR A PERIOD OF EIGHT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE SAID ALLOWANCE IS FIRST COMPUTE D ASSESSING OFFICER HAS OVERLOOKED THE FACT THAT IN LIGHT OF THE OPERATION OF SUB-S. (2) OF S. 32 AS IT STOOD PRIOR TO 1 ST APRIL, 1997, THE UNABSORBED DEPRECIATION OF ASSTT. YEARS 1993-94 TO 1996-97 ALREADY FORMED PART OF THE DEPRECIATION ALLOWANCE FOR THE PREVIOUS YEAR RELEVANT TO ASSTT. YEAR 1997-98 WHEN THE SUBSTITUT ED PROVISION CAME INTO EFFECT THE FINANCE MINISTERS SPEECH AND THE CBDT CIRCULAR CLARIFY THE STATUTORY PROVISIONS - ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER S. 147 IS, THEREFORE, INVA LID AND NOTICE UNDER S. 148 CANNOT BE SUSTAINED NOTIC E UNDER S. 148 IS QUASHED. ITA NO. 5625/DEL/2010 8 7.2 SIMILARLY, THE HONBLE MADRAS HIGH COURT IN THE CASE OF C.I.T. VS. RPIL SIGNALLING SYSTEMS LTD. (328 ITR 283) HAS HELD AS UNDER: (HEADS NOTES ONLY):- DEPRECIATION (UNABSORBED) CARRY FORWARD AND SET O FF EFFECT OF AMENDMENT OF S. 32(2) W.E.F. 1 ST APRIL, 1997 BY THE AMENDMENT, THE DEEMING FICTION OF TREATING THE EARLIER YEARS UNABSORBED DEPRECIATION AS CURREN T YEAR DEPRECIATION WAS REMOVED PERIOD AVAILABLE F OR ABSORBING THE UNABSORBED DEPRECIATION AGAINST THE PROFIT OF SUCCEEDING YEARS WAS LIMITED TO EIGHT YEAR S AS PER CLARIFICATION OF THE FINANCE MINISTER AS ALSO BY CBDT CIRCULAR NO. 762, DATED 18 TH FEB., 1998 UNABSORBED DEPRECIATION BROUGHT FORWARD AS ON 1 ST APRIL, 1997 COULD BE SET OFF AGAINST BUSINESS INC OME OR INCOME UNDER ANY OTHER HEAD FOR ASSTT. YEAR 1997- 98 AND SEVEN SUBSEQUENT YEARS TRIBUNAL WAS THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THA T CONCLUSION THAT THE ASSESSEE IS ENTITLED TO THE UNABSORBED DEPRECIATION BROUGHT FORWARD AS ON 1 ST APRIL, 1997, AND COULD BE SET OFF AGAINST THE SHORT TERM CAPITAL GAINS. ITA NO. 5625/DEL/2010 9 7.3 RESPECTFULLY FOLLOWING THE PRECEDENTS ABOVE AND THE INSTRUCTIONS OF THE CBDT CIRCULAR AS CITED ABOVE, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ), ACCORDINGLY, WE UPHOLD THE SAME AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/5/2012. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 11/5/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES