Nakoda Textile Industries Ltd., Surat V. The Income tax Officer,Ward-1(4), Surat

ITA 574/AHD/2009

• Counselvise Citation: 57420514 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S PARIDA
• Keywords: Depreciation; Unabsorbed depreciation; Revenue expenditure

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND A. K. GAROD IA, AM NAKODA TEXTILE INDUSTRIES LTD.738, AJANTA SHOPPING CENTRE, RING ROAD, SURAT. VS. INCOME-TAX OFFICER, WARD 1(4), SURAT. APPELLANT RESPONDENT APPELLANT BY: SHRI HIREN VEPARI, AR RESPONDENT BY : SHRI S. S. PARIDA, CIT, DR DATE OF HEARING : 2/9/2011 DATE OF PRONOUNCEMENT : 21/10/2011 O R D E R PER A. K. GARODIA, ACCOUNTANT MEMBER . THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I, SURAT, DATED 15.01.2009 FOR ASST. YEAR 20 06-07. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- (1) THE CIT(A) ERRED IN CONFIRMING NON-GRANTING OF LOWE R OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION AS CONTEMPLATED IN CLAUSE (III) OF SECTION 115JB(II) O F THE ACT. (2) THE CIT(A) WENT ABOUT WITH EXTRANEOUS CONSIDERATION OF APPLICABILITY OF APPOLO TYRES 255 ITR 273 WHILE THE SAME DID NOT APPLY AT LEAST ON THE FACTS OF THE CASE. (3) THE CIT(A) ERRED IN FOLLOWING CONCEPTUAL ERROR PROP OUNDED BY THE AO OF INCORRECT COMPARISON OF CURRENT YEAR PROF IT/LOSS ITA NO.574/AHD/2009 ASST. YEAR :2006-07 ITA NO.574/AHD/2009 ASST. YEAR 2006-07 2 WHEREAS THE STATUTE TALKS OF COMPARISON OF UNABSORB ED DEPRECIATION/UNABSORBED LOSS. 3. BRIEF FACTS OF THE CASE ARE NOTED BY THE LD. CIT (A) IN PARA 2.1 OF HIS ORDER WHICH IS REPRODUCED BELOW :- THIS IS REGARDING DISALLOWANCE OF DEDUCTION OF UNA BSORBED DEPRECIATION OF RS.3,20,71,109/- CLAIMED BY THE ASSESSEE FROM TH E BOOK PROFIT COMPUTED U/S 115JB. IN THE ASSESSMENT ORDER, THE AO HAS STATED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF UNABSORBED DEPREC IATION OF RS.3,20,71,109/- U/S 115JB(2)(III) BEING LOWER OF U NABSORBED BUSINESS LOSS OF RS.5,40,98,338/- OR UNABSORBED DEPRECIATION OF RS.4,30,60,873/- BUT RESTRICTED TO THE AVAILABLE BOOK PROFIT OF RS.3 ,20,71,109/-. THE AO COMPUTED THE BROUGHT FORWARD BUSINESS LOSS AND UNAB SORBED DEPRECIATION AS PER THE PROFIT & LOSS ACCOUNT OF VARIOUS YEARS A S PER THE CHART PREPARED BY THE AO ON PAGE-4 OF THE ASSESSMENT ORDER AND ALS O REPRODUCED THE CHART PREPARED BY THE ASSESSEE ON PAGE-3 AS CHART-A . THE AO STATED THAT THE PERUSAL OF CHART-B OF PAGE -4 SHOWS THAT THE BR OUGHT FORWARD BUSINESS LOSS AS ON 31.03.2000 WAS RS.42,97,050/- AND THEREA FTER THERE IS NET PROFIT BEFORE DEPRECIATION AS PER THE PROFIT & LOSS ACCOUN T OF THE ASSESSEE. HENCE, ACCORDING TO THE AO AS ON 31.03.2005 AND 31. 03.2006 THERE IS NO BUSINESS LOSS IN THE PROFIT & LOSS ACCOUNT, THERE I S ONLY CARRIED FORWARD UNABSORBED DEPRECIATION. SINCE LOWER OF BUSINESS LO SS OR UNABSORBED DEPRECIATION IS ONLY BUSINESS LOSS AS PER THE PROVI SIONS OF SECTION 115JB(2)(III), NO DEDUCTION OF DEPRECIATION CAN BE GIVEN BECAUSE BUSINESS LOSS IS NIL. HE, THEREFORE, TAXED THE BOOK PROFIT W ITHOUT DEDUCTING THE UNABSORBED DEPRECIATION BECAUSE THE BUSINESS LOSS W AS NIL. ITA NO.574/AHD/2009 ASST. YEAR 2006-07 3 4. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE LD. CIT(A) THAT THERE ARE CERTAIN ITEMS OF REVENUE EXPENDITURE WHICH WERE CLAIMED BY THE ASSESSEE BELOW THE LINE IN THE APPROPRIATION ACCOUN T AND HENCE, THESE EXPENSES SHOULD HAVE ACTUALLY BEEN CLAIMED IN THE N ORMAL PROFIT & LOSS ACCOUNT ABOVE THE LINE. THE ASSESSEE HAD FURNISHED A CHART BEFORE LD. CIT(A) BY WHICH THE ASSESSEE HAD BROUGHT THESE ITEM S ABOVE THE LINE FROM APPROPRIATION ACCOUNT AND IT WAS CLAIMED BEFOR E THE LD. CIT(A) THAT NET PROFIT SHOULD BE REDUCED BY THESE EXPENSES AND IF THAT IS DONE, THE NET BUSINESS LOSS WILL BE MORE. THIS ARGUMENT OF THE AS SESSEE WAS REJECTED BY LD. CIT(A) BY FOLLOWING THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF APOLLO TYRES LTD. 255 ITR 273 (SC) WHEREIN IT WAS HELD THAT THE BOOK PROFIT MEANS NET PROFIT AS PER THE PROFIT & LO SS ACCOUNT, AS INCREASED OR DECREASED BY VARIOUS PROVISIONS MENTIONED IN EXP LANATION (1) OF SECTION 115JB. THE LD. CIT(A) OBSERVED THAT IT IS S TATED BY HONBLE APEX COURT THAT UNLESS THERE IS A QUALIFICATION BY THE A UDITOR, NO TAMPERING CAN BE DONE TO THE BOOK PROFIT MEANING THAT NET PROFIT AS SHOWN IN THE PROFIT & LOSS ACCOUNT IS TO BE ACCEPTED. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. ONE ADDITIONAL GROUND WAS RAISED BY THE ASSESSEE WHICH IS AS UNDER:- WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL CONTENDED, IT IS PLEADED TO DIRECT ENABLING OF TAX CREDIT (MAT) AS P ROVIDED IN SECTION 115JAA(1A) OF THE INCOME-TAX ACT, 1961. ITA NO.574/AHD/2009 ASST. YEAR 2006-07 4 NO ARGUMENT WAS ADVANCED FOR THIS GROUND AND HENCE, THIS GROUND IS NOT ADMITTED. 6. REGARDING THE MAIN GROUND, IT WAS SUBMITTED BY T HE LD. AR THAT THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.03.2 006 RELEVANT TO THE YEAR UNDER CONSIDERATION IS APPEARING ON PAGE 13 OF THE PAPER BOOK AS PER WHICH THERE IS PROFIT IN THE PRESENT YEAR AS WELL A S IN THE PRECEDING YEAR AND IN THE BALANCE SHEET ALSO, THERE IS RESERVE AT THE END OF THE PRESENT YEAR AND ALSO AT THE END OF THE PRECEDING YEAR. THE REAFTER, HE DREW OUR ATTENTION TO THE CHART APPEARING AT PAGE 33 OF THE PAPER BOOK, AS PER WHICH, CERTAIN EXPENDITURE WERE DIRECTLY DEBITED TO BALANCE SHEET AND NOT CLAIMED AS EXPENSES. HE SUBMITTED THAT AS PER THE D ECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KHAITAN CHEMICALS & FERTILIZERS LTD. 175 TAXMAN 195, THE EXPENSES WHICH ARE DEBITED IN THE B ALANCE SHEET AND WHICH ARE CONNECTED WITH P/L A/C SHOULD ALSO BE CON SIDERED FOR WORKING OUT THE BUSINESS LOSS OF THE ASSESSEE. 7. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF LOWER AUTH ORITIES. WE FIND THAT THERE IS NO DISPUTE ON THIS ASPECT THAT AS PER AUDI TED PROFIT AND LOSS ITA NO.574/AHD/2009 ASST. YEAR 2006-07 5 ACCOUNT THERE IS PROFIT EVEN AFTER CLAIMING DEPRECI ATION AND HENCE, THERE IS NEITHER ANY UNABSORBED BUSINESS LOSS NOR UNABSORBED DEPRECIATION AS PER BOOKS OF ACCOUNT AND AUDITED BALANCE SHEET AND PROF IT AND LOSS ACCOUNT. EVEN IN THE CHART OF THE ASSESSEE ON PAGE 33 OF PAP ER BOOK; THE ASSESSEE HAS WORKED OUT NET PROFIT BEFORE DEPRECIATION OF RS .69,620,971/- AS ON 31.03.2005. AS PER THIS VERY CHART, TOTAL OF SUCH E XPENSES WHICH ARE DIRECTLY DEBITED TO BALANCE SHEET AND ALSO WHICH AR E DEBITED TO PROFIT AND LOSS BUT BELOW THE LINE, THE TOTAL OF SUCH EXPENSES COMES TO RS.11,08,94,591/- AND TOTAL PROFIT BEFORE DEPRECIAT ION IS RS.29,47,37,819/- FOR THE PERIOD 31.03.1990 TO 31.0 3.2006. HENCE, EVEN AFTER REDUCING THESE EXPENSES FROM THE PROFIT BEFOR E DEPRECIATION OF RS.2947.37 LACS, THERE IS NO BUSINESS LOSS AND HENC E, THE ASSESSEE IS NOT ENTITLED TO GET ANY DEDUCTION FROM BOOK PROFIT ON A CCOUNT OF BUSINESS LOSS OR UNABSORBED DEPRECIATION WHICHEVER IS LESSER EVEN IF WE ACCEPT THE CLAIM OF THE ASSESSEE. WE FIND THAT THERE IS NO BUS INESS LOSS EVEN AFTER REDUCING THESE EXPENSES WHICH ARE NOT DEBITED BY TH E ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AND HENCE, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE REJECTED BECAUSE IT HAS NO MERIT. UNDER THESE FACTS , WE DO NOT COMMENT ABOUT ALLOWABILITY OF THIS CLAIM SINCE IT IS OF ACA DEMIC INTEREST ONLY. HENCE, THE GROUNDS RAISED BY THE ASSESSEE ARE REJEC TED. THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.574/AHD/2009 ASST. YEAR 2006-07 6 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 21.10.2011. SD/- SD/- (MUKUL KR. SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 02/92010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 20/10/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..