ACIT. - 1(3), MUMBAI V. M/s. WEIZMANN LTD., MUMBAI

ITA 5697/MUM/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1783 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 24-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 09-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80HHC; 115JB; 32; 28; 10

Judgement Text

ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.5697/MUM/2008 (ASSESSMENT YEAR: 2003-04) ACIT 1 (3), ROOM NO.540/ 564, 5 TH FLOOR, AAYAKAR BHAVAN, MK ROAD, MUMBAI 400020 VS. WEIZMANN LTD, EMPIRE HOUSE, 214, DR. D.N. ROAD, ENT, A.K. NAYAK MARG, FORT MUMBAI 400001 PAN: AAACW 1260 H (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. NEERAJA PRADHAN, DR ASSESSEE BY: SHRI VIJAY MEHTA DATE OF HEARING: 05/02/2013 DATE OF PRONOUNCEMENT: 07/02/2013 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE CIT (A)-21 MUMBAI, DATED 24.06.2008. ASSESSEE IS A LIMITED COM PANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTS OF TEX TILES AND OTHER GOODS AND ALSO ENGAGED IN SERVICES LIKE LEASING, FI NANCING, MONEY LENDING AND BORROWINGS, BILL DISCOUNTING, FINANCIAL CONSULTANCY SERVICES AND IS A DEALER IN FOREIGN EXCHANGE AND IS ALSO ENGATED IN WIND POWER GENERATION. AO IN THE COURSE OF ASSESSME NT MADE CERTAIN ADDITIONS/DISALLOWANCES WHICH HAVE BEEN CHA LLENGED BEFORE THE CIT (A) WHO AFTER CONSIDERING THE SUBMISSIONS A ND PAST RECORDS DELETED THE SAME. REVENUE IS AGGRIEVED AND RAISED T HE FOLLOWING FOUR GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE ADDI TION OF ` .23,31,963 AGAINST DISALLOWANCES OF LEASE RENTAL, P AID ON WINDMILL, IGNORING THE FACT THAT ASSESSEE COMPAN Y WITH MUTUAL UNDERSTANDING FIRST PURCHASED AND THEN SOLD BACK TO THE MANUFACTURER AND AGAINST PURCHASED THRO UGH ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 2 OF 11 ITS SISTER CONCERN FROM WHOM IT HAS BORROWED THE SA ME ON LEASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN GRANTING SET OFF OF UN ABSORBED DEPRECIATION AGAINST INCOME FROM CAPITAL GAIN AND DIVIDEND INCOME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN DIRECTING AO TO ALLOW THE DEDUCTION UNDER SECTION 80HHC OF ` .1,23,80,610 WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF TH E ACT, INSPITE OF THE FACT THAT DEDUCTION UNDER SECTION 80 HHC COMPUTED UNDER CLAUSE (A), (B) & (C) OF SUB SECTION (3) OR SUB SECTION 3(A) IS NIL AS PROVIDED UNDER SECTION 1 15JB OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN DIRECTING AO TO RECOMP UTE THE DEDUCTION UNDER SECTION 80HHC BY TAKING THE TURNOVE R OF THE TAXABLE DIVISION ONLY ON STANDALONE BASIS AND IGNORING THE TURNOVER OF THE OTHER DIVISION WITHOUT CONSIDERING THE PROVISION OF THE SECTION 80AB OF TH E ACT WHICH TALK ABOUT THE GROSS PROFIT OF ASSESSEE AND N OT OF THE DIVISION . 2. WE HAVE HEARD THE LEARNED DR AND THE LEARNED COUNSE L. IT WAS SUBMITTED THAT MOST OF THE ISSUES ARE COVERED I N FAVOUR OF ASSESSEE BY THE ORDERS OF THE ITAT IN LATER YEAR OF 204-05 AND PLACED A CHART REFERRING TO THE GROUNDS AND THE ISS UES. 3. GROUND NO.1. THIS IS WITH REFERENCE TO THE LEASE RE NT. ASSESSEE PAID LEASE RENT OF ` .23,31,963 TO M/S WEIZMANN HOMES LTD ON ACCOUNT OF 250 KW WIND MILL TAKEN ON LEASE. AO DISCUSSED THE ISSUE ON PAGE 2, PARA-3 OF THE ORDER. THE SAID ADDITION WAS INITIALLY MADE IN ASSESSMENT YEAR 1998-99. IT WAS O BSERVED BY AO IN ASSESSMENT YEAR 1998-99 THAT THE SAID WIND MILL WAS INITIALLY PURCHASED BY ASSESSEE AND WAS SOLD TO MANUFACTURERS , WHO IN TURN SOLD TO ANOTHER PARTY AND WAS LEASED TO THE ASSESSE E COMPANY. CONSEQUENTLY, AO TREATED THE SAME AS SALE AND LEASE BACK TRANSACTION AND DISALLOWED THE LEASE RENT ON THE WI ND MILL TAKEN ON LEASE. CONSEQUENT TO THE ORDERS IN 1998-99 AND 1999 -2000 AND ALSO ITAT DECISION IN EARLIER YEARS, THE LEARNED CI T (A) DELETED THE ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 3 OF 11 ADDITION. THE ITAT IN ITA NO.4603/MUM/2008 FOR ASSE SSMENT YEAR 2004-05 IN ASSESSEES OWN CASE HAS DECIDED AS UNDER :- 3. HAVING HEARD THE RIVAL CONTENTIONS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) TO INTERFERE AS THE CIT (A) HAS FOLLOWED THE DECISION OF THE ITAT IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEARS 1998-99 AND 1999-200 ON SIMILA R FACTS, WHEREIN, THE TRIBUNAL HAS ALLOWED THE DEDUCTION OF LEASE RENTAL ON THIS WINDMILL, OBSERVING AS FOLLOWS:- 'WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE CASE OF THE AUTHORITIES BELOW IS THAT THERE WAS NO NEED FOR THE ASSESSEE TO SELL THE SE TWO WINDMILLS BECAUSE IN ANY CASE DIRECTLY OR INDIRECTLY THESE WINDMILLS WERE UTILIZED FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. AS TO WINDMILL 250 KW THE ASSESSEE TOOK IT BACK ON LEASE FROM WHL. WINDMILL 500 KW WAS FINALLY TAKEN ON LEASE BY TAPI ENERGY PRODUCT LTD (TAPI) WHO WAS A SISTER CONCERN OF THE ASSESSEE. TAPI WAS SHARING REVENUE FROM ASSESSEE'S SALE OF ELECTRICITY TO ANDHRA PRADESH GOVERNMENT. THE REVENUE HAS ALSO CONTENDED THAT THE SERIES OF TRANSACTIONS WERE ENTERED INTO BETWEEN THE GROUP CONCERNS WITH A VIEW TO AVOID TAX LIABILITY OF THE GROUP AS A WHOLE . THERE IS CERTAIN FLAW ON THE FACE OF THIS ARGUMENT IN AS MUCH AS BANK OF MADURA WHO PURCHASED WINDMILL 500 KW IS NOT PART OF THE ASSESSEE GROUP. SECONDLY, IT IS NOT FOR THE INCOME-TAX AUTHORITIES TO DETERMINE AS TO IN WHAT MANNER THE ASSESSEE SHOULD HAVE CONDUCTED HIS BUSINESS AFFAIRS. IT IS NOT IN DISPUTE THAT THE TRANSACTIONS WERE GIVEN EFFECT TO BY THE PARTIES. EVEN IF THE HUNCH OF THE LEARNED CIT(A) THAT WINDMILL 250 KW WAS NOT PHYSICALLY MOVED IS CORRECT THE FACT REMAINS THAT OWNERSHIP OF THE ASSESSEE OVER THE WINDMILL WAS SUBSTITUTED AND THE ASSESSEE THEREAFTER OPERATED THE WINDMILL AS A LESSEE. THE AUTHORITIES BELOW HAVE APPROACHED THE ISSUE FROM PHYSICAL POINT OF VIEW ALONE. THEY HAVE NOT GONE INTO THE FINANCIAL RESTRUCTURING PART OF THE TRANSACTIONS WHICH TOO COULD BE AN IMPORTANT CONSIDERATION FOR THE ASSESSEE. THE ASSESSEE HAS ARGUED BEFORE THE AUTHORITIES BELOW THAT THERE IS NO REDUCTION IN THE ASSESSEE'S TAX LIABILITY BY THE TRANSACTIONS AN DIN FACT THE ASSESSEE STOOD TO GAIN BY THE TRANSACTIONS IN AS MUCH AS THE ASSESSEE RECEIVED RS.550 LACS BY WAY OF LIQUIDATED DAMAGES. THE CASE OF THE REVENUE IS THAT ALL THESE ARRANGEMENTS MIGHT HAVE FACILITATED REDUCTION OF TAX LIABILITY OF THE ASSES SEE ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 4 OF 11 GROUP TAKEN AS A WHOLE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RIGHTLY ARGUED THAT THE ASSESSMENT OF THE ASSESSEE CANNOT BE AFFECTED BY WHAT HAPPENED IN THE CASE OF THERE ASSESSEE EVEN IF THEY WERE PART OF THE SAME GROUP AS THE ASSESSEE HIMSELF. ACTION, IF ANY WAS LEGALLY PERMISSIBLE, COULD BE TAKEN IN THE ASSESSMENT OF THERE ASSESSEES . FOR THE PURPOSE OF INCOME-TAX PROCEEDINGS EACH ASSESSEE IS A SEPARATE ENTITY. ABOVE ALL THERE IS CONSIDERABLE FORCE IN THE CONTENTION OF THE ASSESSE E THAT WHILE ON THE ONE HAND THE ASSESSEE'S CLAIM OF DEDUCTION OF LEASE RENTALS HAS BEEN DISALLOWED, THE INCOME EARNED BY THE ASSESSEE ON SALE OF POWER TO ANDHRA PRADESH GOVERNMENT HAS BEEN ASSESSED WITHOUT DEMUR. WE THEREFORE HOLD THAT THE DISALLOWANCE OF THE ASSESSEE'S CLAIM OF DEDUCTION ON ACCOUNT OF LEASE RENT PAID IN RESPECT OF WINDMIL L 250 KW IS WITHOUT ADEQUATE JUSTIFICATION AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION OF LEASE RENTAL ON THIS WINDMILL.' 4. RESPECTFULLY FOLLOWING THE VIEWS OF THE COORDINATE BENCH, WE CONFIRM THE ORDER OF THE LEARNED CIT (A) AND DECLIN E TO INTERFERE IN THE MATTER. 5. GROUND NO.2 IS WITH REFERENCE TO THE ACTION OF AO I N NOT ALLOWING SET OFF OF UNABSORBED DEPRECIATION OF EARL IER YEARS AGAINST THE SHORT TERM CAPITAL GAIN AND DIVIDEND INCOME. AF TER CONSIDERING THE LEGAL PROVISIONS AND SUBMISSIONS OF ASSESSEE ON THE ISSUE THE LEARNED CIT (A) ALLOWED THE CLAIM OF ASSESSEE BY HO LDING AS UNDER: 6.4 AS BOTH THE GROUNDS ARE INTERLINKED GROUNDS, I TAKE BOTH THE GROUNDS TOGETHER FOR DISPOSAL. I HAVE CONS IDERED THE SUBMISSIONS OF THE APPELLANT CAREFULLY. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. DURING THE YEAR, THE APPELLANT HAD AN INCOME OF ` .82,50,950 ON ACCOUNT OF SHORT TERM CAPITAL GAINS AND ` .8,78,000 AS DIVIDEND INCOME TOTALING TO ` .91,82,950. I HAVE NOTICED THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE IS A CUR RENT DEPRECIATION OF ` .1,41,12,292 AVAILABLE FOR SET OFF AND THE CARRY FORWARD UNABSORBED DEPRECIATION OF ` .6,95,88,082 IS ALSO AVAILABLE TO BE SET OFF, TOTALING TO ` .8,37,00,374. THE ISSUE TO BE DECIDED IS WHETHER THE SAID DEPRECI ATION COULD BE SET OFF AGAINST THE INCOME OF ` .91,28,950 ON ACCOUNT OF SHORT TERM CAPITAL GAINS AND DIVIDEND IN COME. THE APPELLANT HAS PLACED RELIANCE IN THIS REGARD ON THE PROVISIONS OF SECTION 32(2) OF THE ACT READ WITH PR OVISIONS ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 5 OF 11 OF SECTION 71. A COMBINED READING OF BOTH THE PROVI SIONS CLEARLY SHOW THAT A CARRY FORWARD UNABSORBED DEPRECIATION MERGES WITH THE DEPRECIATION OF THE CU RRENT YEAR AND THE WHOLE DEPRECIATION BECOMES THE DEPRECIATION OF THE CURRENT YEAR. IN THE SAID PROVI SIONS, IT IS CLEARLY MENTIONED THAT IF THE PROFITS OF THAT BU SINESS WERE NOT SUFFICIENT TO ABSORB THE DEPRECIATION ALLO WANCE OF THE CURRENT YEAR, THE SAID EXCESS ALLOWANCE COUL D BE ADJUSTED AGAINST THE CHARGEABLE INCOME FROM ANY OTH ER HEADS OF INCOME AS MENTIONED IN SECTION 14 OF THE A CT. I FIND THAT THE ISSUE WAS SETTLED BY THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. JAIPURIA CHINA CLAY MI NES (P) LTD (1966) 59 ITR 555 (SC) WHEREIN THE HON'BLE SUPR EME COURT HAS HELD THAT UNABSORBED DEPRECIATION OF AN E ARLIER YEAR COULD BE SET OFF AGAINST THE INCOME UNDER OTHE R HEADS. THE HON'BLE SUPREME COURT HAS FURTHER OBSERV ED THAT THE WORDS NO PROFITS OR GAINS CHARGEABLE FOR THAT YEAR ARE NOT CONFINED TO PROFITS AND GAINS DERIVED FROM THE BUSINESS WHOSE INCOME IS BEING COMPUTED UNDER SECTION 10 BUT THEY REFER TO THE TOTALITY OF THE PR OFITS OR GAINS COMPUTED UNDER THE VARIOUS HEADS AND CHARGEAB LE TO TAX. THE DELHI HIGH COURT IN THE CASE OF ESCORTS ELECTRONICS LTD VS. CIT (258 ITR 23) ALSO HELD THAT BROUGHT FORWARD DEPRECIATION COULD BE SET OFF AGAINST ALL T HE HEADS OF INCOME. THE SUPREME COURT IN AN ANOTHER DECISION IN THE CASE OF RAJAPALAYAM MILLS LTD V. CI T (1978) 115 ITR 777, HELD THAT NO UNABSORBED DEPRECIATION WAS NOT ONLY TO BE SET OFF AGAINST OTH ER HEADS OF INCOME IN THE RELEVANT PREVIOUS YEAR BUT W HERE IT IS CARRIED FORWARD, IT STANDS EXACTLY ON THE SAM E FOOTING AS THE CURRENT DEPRECIATION. THE SUPREME COURT IN AN ANOTHER CASE OF VIRMANI INDUSTRIES PVT. LTD (1995) 216 ITR 607 HELD THAT THOUGH ON THE FIRST IMPRESSION TH E EXPRESSION PROFITS OR GAINS CHARGEABLE APPEARS TO REFER ONLY TO PROFITS OR GAINS OF BUSINESS OR PROFESSION CHARGEABLE UNDER SECTION 28 IN VIEW OF THE SAID DEC ISIONS, THE SAID EXPRESSION IS NOT SO CONFINED AND IT REFER S TO INCOME FROM ALL THE HEADS OF INCOME SPECIFIED IN SE CTION 14 F THE ACT, WHICH INCLUDES INCOME FROM OTHER SOUR CES. IN ANOTHER DECISION IN THE CASE OF CIT VS. PRINCIPA L OFFICER, LAXMI SURGICAL PVT. LTD, REPORTED IN 202 ITR 601, T HE BOMBAY HIGH COURT HAS HELD THAT THE CARRIED FORWARD UNABSORBED DEPRECIATION IS DEEMED TO BE DEPRECIATIO N OF THE SUBSEQUENT YEAR TO WHICH IT IS CARRIED FORWARD, IT WOULD BE PERMISSIBLE TO SET OFF SUCH DEPRECIATION A GAINST THE INCOME OF SUBSEQUENT YEAR UNDER ANY HEAD. 6.5 CONSIDERING THE PLETHORA OF DECISIONS AVAILABLE ON THE ISSUE, I FIND THAT THE QUESTION OF SETTING OFF OF U NABSORBED ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 6 OF 11 CARRIED FORWARD DEPRECIATION AGAINST SHORT TERM CAP ITAL GAINS AND DIVIDEND INCOME, HAS NOW BEEN SETTLED. TH E CARRY FORWARD UNABSORBED DEPRECIATION MERGES WITH T HE CURRENT YEAR DEPRECIATION AND THUS WHOLE OF THE DEPRECIATION COMES THE CURRENT YEAR DEPRECIATION AN D THE SAME CAN BE SET OFF AGAINST THE INCOME FROM OTHER SOURCES. THUS THERE IS NO AMBIGUITY ON THIS ISSUE S O FAR AS THE LEGAL POSITION IS CONCERNED. I AM THEREFORE, OF THE CONSIDERED OPINION THAT THE APPELLANT IS ELIGIBLE T O GET THE SET OFF OF UNABSORBED CARRY FORWARD DEPRECIATION AL ONG WITH THE DEPRECIATION OF THE CURRENT YEAR. ACCORDIN GLY, AO IS DIRECTED TO ALLOW SET OFF OF DEPRECIATION AGAINS T THE SHORT TERM CAPITAL GAIN AND DIVIDEND INCOME AMOUNTI NG TO ` .91,13,950. 6. THE LEARNED DR IN SUPPORT OF AO, RELIED ON THE DECI SION OF THE CHENNAI BENCH IN THE CASE OF SOUTHERN TRAVELS VS. A CIT, 103 ITD 198 TO SUBMIT THAT THE UNABSORBED DEPRECIATION CAN NOT BE SET OFF TO THE CURRENT YEARS INCOME. THE LEARNED COUNSEL I N TURN RELIED ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF DC IT VS. TIMES GUARANTY LTD, 131 TTJ (MUM)(SB) 257 AND ALSO THE DE CISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GENERA L MOTORS INDIA (P) LTD VS. DCIT IN SPECIAL LEAVE APPLICATION NO.17 73 OF 2012 DATED 23.08.2012. THE ABOVE SPECIAL BENCH DECISION AND TH E HON'BLE GUJARAT HIGH COURT JUDGMENT ARE IN FAVOUR OF ASSESS EE. THE HON'BLE GUJARAT HIGH COURT ON THE FACTS ON THE ISSUE HELD A S UNDER: 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACH INERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OF F OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABL E FROM ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILAB LE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002 (A.Y. 2002 -03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISION S OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND N OT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFO RE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATUR E BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997-98 ONLY FOR EIGHT SUBSEQUEN T ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTIO N 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE INCORPORAT ED A ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 7 OF 11 PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONT AIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE O F AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRE TATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESS EE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO ASSESSEE CANNOT BE DENIED. HOWE VER, CIRCULAR NO.14 OF 2001 HAD CLARIFIED THAT UNDER SEC TION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINE SS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMEND ED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997-9 8, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWAR D TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF T ILL THE A.Y. 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF TH E BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BU SINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROF ITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF A NY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EV EN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INC OME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INC OME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS C URRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBE D DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION F OR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOME S THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR . WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANC E WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 8 OF 11 FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2 001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO THE A.Y.2001-02 GOT CARRIED FORWAR D 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 A ND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 7. NOT ONLY ON LEGAL PRINCIPLES, EVEN ON FACTS, CONTEN TIONS OF ASSESSEE ARE ACCEPTABLE. ASSESSEES UNABSORBED DEPR ECIATION FOR THE ASSESSMENT YEAR 2001-02 AND 2002-03 AND CURRENT YEA RS DEPRECIATION, AS HELD BY THE CIT (A) ARE MORE THAN THE CAPITAL GAINS AND DIVIDEND BEING BROUGHT TO TAX SEPARATELY BY AO. IN THESE CIRCUMSTANCES BOTH ON FACTS AS WELL AS ON LAW, ASSE SSEES CONTENTIONS ARE ALLOWABLE. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). ACCORDINGL Y THE GROUND IS REJECTED. 8. GROUND NO.3 PERTAINS TO THE CLAIM OF SECTION 80HHC OF ` .1,23,80,610 WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115JB. AO DISALLOWED THE CLAIM AS DEDUCTION UNDER S ECTION 80HHC WAS NOT ALLOWED IN THE REGULAR COMPUTATION, WHEREAS ASSESSEES CONTENTION WAS THAT THE DEDUCTION WAS ALLOWABLE ON THE PROFITS WORKED OUT UNDER SECTION 115JB. 9. THE LEARNED CIT (A) FOLLOWING THE DECISION OF THE K ERALA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. G.T.N. TEXTILES LTD. 248 ITR 372 AND THE ITAT DECISION IN THE CASE OF STARCHIK SPECIALITIES LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX, 90 ITD 34 ALLOWED THE CLAIM OF ASSESSEE. THE ITAT I N ASSESSMENT YEAR 2004-05 CONFIRMED THE SAME BY HOLDING AS UNDER : 9. THE LEARNED REPRESENTATIVES FAIRLY AGREE THAT TH E ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY TH E DECISION OF A COORDINATE BENCH IN THE CASE OF DCIT VS. M/S GLENMARK LABORATORIES LTD IN ITA NO.4155/M/2007 ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 9 OF 11 FOR THE ASSESSMENT YEAR 2004-05, WHEREIN THE TRIBUN AL FOLLOWING THE DECISION OF THE ITAT (SB) IN THE CASE OF SYNCOME FORMULATIONS (I) LTD (SUPRA) HAS AFFIRMED T HE VIEW OF THE CIT (A) DELETING THE SIMILAR ADDITION. IN ANY EVENT, THE VIEW TAKEN BY THE TRIBUNAL IN SPECIAL BE NCH DECISION IN THE CASE OF SYNCOME FORMULATIONS (SUPRA ) NOW STANDS APPROVED BY THE HON'BLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD VS. CIT (327 ITR 305) . 10. IN VIEW OF THIS, WE HAVE NO REASON TO INTERFERE WIT H THE ORDER OF THE CIT (A) AND ACCORDINGLY REVENUE GROUND IS DI SMISSED. 11. GROUND NO.4 PERTAINS TO THE DIRECTION OF THE CIT (A ) TO RE- COMPUTE THE DEDUCTION UNDER SECTION 80HHC BY TAKING OVER THE TURNOVER OF THE TAXABLE DIVISION ONLY ON STANDALON E BASIS. THIS ISSUE IS ALSO STAND COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2004-05 WHEREIN THE ISS UE WAS DECIDED AS UNDER: 16. WITH REGARD TO GROUND NO.4, LEARNED REPRESENTAT IVES FAIRLY AGREE THAT THE ISSUE IS COVERED BY THE DECIS ION OF THE ITAT IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEARS 199 8-99, 1999- 2000(SUPRA). WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE A CO-ORDINATE BENCH OF THIS TR IBUNAL AND IT WAS, INTER ALIA, OBSERVED AS FOLLOWS:- 'DURING THE COURSE OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSES SEE COMPANY WAS ENGAGED IN DIVERSIFIED BUSINESS ACTIVITIES AND EACH BUSINESS WAS DISTINCT AND SEPAR ATE FROM ANOTHER. FOR THIS PURPOSE THE ASSESSEE COMPANY HAD SEVERAL DIVISION VIZ. TEXTILE DIVISION, LEASE A ND HIRE PURCHASE DIVISION; POWER GENERATION DIVISION, FOREIGN EXCHANGE DIVISION & FINANCIAL AND OTHER SERVICES DIVISION. THESE ACTIVITIES WERE DISTINCT A ND SEPARATE FROM EACH OTHER. FOR THIS PURPOSE THE ASSESSEE HAD MAINTAINED SEPARATE BOOKS OF ACCOUNT I N RESPECT OF EACH DIVISION AND SEPARATE P & L A/S. AN D SEPARATE BALANCE SHEET WERE PREPARED IN RESPECT OF EACH DIVISION. FOR THE PURPOSE OF ANNUAL ACCOUNTS O F THE COMPANY AS A WHOLE THE ACCOUNTS OF VARIOUS DIVISIONS WERE CONSOLIDATED AND A CONSOLIDATED P & L A/S. AND BALANCE-SHEET WAS ALSO PREPARED. THE ASSESSING OFFICER HAD SIMPLY ADOPTED THE FIGURES APPEARING IN THE CONSOLIDATED ACCOUNT AND IGNORED THE SEPARATE ACCOUNTS OF TEXTILE DIVISION. IN THE C ASE ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 10 OF 11 OF AN ASSESSEE CARRYING ON MORE THAN ONE BUSINESS I T WAS ONLY THE BUSINESS OF WHICH EXPORT WAS A PART WA S REQUIRED TO BE TAKEN INTO CONSIDERATION AND NOT OTH ER BUSINESS WHICH HAD NOTHING TO DO WITH THE EXPORT BUSINESS. AT OUR DIRECTION THE ASSESSEE HAS FILED SEPARATE BALANCE SHEET AND P & L A/S. OF TEXTILE DIVISION AS ALSO AUDIT REPORT IN FORM NO.10CCAC. IN SUPPORT OF ITS CONTENTIONS THE LEARNED COUNSEL HAS RELIED UPON THE JUDGMENTS REPORTED IN 245 ITR 49 (BOM); 245 ITR 769 (BOM); 246 ITR 429 (BOM); 246 ITR 439 (BOM); 254 ITR 656 (MAD); 257 ITR 60 (MAD) AND 132 TAXMANN 297 (KER). THE LEARNED COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISIONS REPORTED IN 63 TTJ 409 (AHD); 66 ITD 353 AND THE DECISION OF ITAT MUMBAI BENCH 'A' IN ITA NO. 4205/MUM/96 IN THE CASE OF MIKU AGENCIES AND MUMBAI BENCH 'C' DECISION IN ITA NO.4259 & 4260/M/95 IN THE CASE OF M/S. TRAB ENTERPRISES. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT UNDER THE PROVISIONS OF SECTION 80HHC(3) NO DISTINCTION HAS BEEN DRAWN AS TO WHETHER THE ASSESS EE WAS ENGAGED IN A SINGLE BUSINESS OR MORE THAN ONE BUSINESS. FOR THE PURPOSE OF THAT SUB-SECTION ALL T HE BUSINESS OF THE ASSESSEE WERE REQUIRED TO BE AGGREGATED EVEN IF THE SAME WERE SEPARATE AND DISTINCT FROM EACH OTHER. IN SUPPORT OF THESE CONTENTIONS HE PLACED RELIANCE ON THE DECISION REPORTED IN 212 ITR (AT) 1 (DEL) AND 257 ITR 41 (KER ). ON CONSIDERATION OF THE MATTER WE FIND THAT THE CLA IM OF THE ASSESSEE FOR DEDUCTION U/S. 80HHC ON TEXTILE DIVISION ON STAND ALONE BASIS IS FULLY SUPPORTED BY THE DECISIONS OF ITAT MUMBAI BENCH 'A' MUMBAI DATED 29/8/02 IN ITA NO.4205/MUM/1996 IN THE CASE OF MIKU AGENCIES V. DCIT SPL. RG.9, MUMBAI FOR A.Y 1991-92 AND DECISION OF ITAT MUMBAI BENCH 'C' DATED 8/7/02 IN ITA NO. 4259 & 4260/MUM/95 IN THE CASE OF DCIT SPL. RG.22 MUMBAI VS. M/S. TRAB ENTERPRISES FOR A. Y.S 1990-91 AND 1991-92. IT IS SEEN THAT IN THE LATER CASE THE TRIBUNAL HAS FOLLOWED THE JUDGMENT O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF K.K. D OSHI & CO. 245 ITR 849 (BOM) RESPECTFULLY, FOLLOWING THES E DECISIONS OF THE TRIBUNAL WE ACCEPT THE ASSESSEE'S GROUNDS OF APPEAL NO.7 AND DIRECT THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S.80HHC ON THE BASIS OF THE BUSINESS TURNOVER AND BUSINESS PROFIT OF TEX TILE DIVISION ONLY WITHOUT TAKING INTO CONSIDERATION THE BUSINESS TURNOVER AND THE BUSINESS PROFIT OF OTHER DIVISIONS.' ITA NO.5697 OF 2008 WEIZMANN LIMITED MUMBAI PAGE 11 OF 11 17. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO DISTURB TH E CONCLUSIONS ARRIVED AT BY THE CIT(A) SINCE THE CIT (A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL (SUPRA) DIREC TING THE AO TO COMPUTE THE DEDUCTION UNDER SECTION 80 HHC IN RE SPECT TEXTILE DIVISION ON 'STAND- ALONE' BASIS TAKING INT O ACCOUNT THE TOTAL TURNOVER AND BUSINESS PROFITS OF TEXTILE DIVI SION ONLY, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CI T (A). THE VIEW SO TAKEN BY THE CIT(A) IS CONSISTENT WITH THE VIEWS OF THE COORDINATE BENCHES, AND NO CONTRARY DECISION HAS BE EN CITED BEFORE US. 18. ACCORDINGLY GROUND NO.4 IS DISMISSED . 12. THE VIEW TAKEN BY THE CIT (A) IS CONSISTENT WITH TH E VIEW OF THE COORDINATE BENCH AND ACCORDINGLY THERE IS NO NE ED TO INTERFERE WITH THE SAID DECISION. GROUND IS DISMISSED. 13. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH FEBRUARY, 2013 SD/- SD/- (AMIT SHUKLA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 7 TH FEBRUARY, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI