GANESH POLYCHEM LTD, MUMBAI V. ITO RG 10(3)(1), MUMBAI

ITA 5826/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4230 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEELIMA V NADKARNI
• Assessee Lawyers: DEEPESH T CHHEDA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.5826/MUM/2014 ASSESSMENT YEAR-2010-11 GANESH POLYCHEM LIMITED, 2 ND FLOOR, UDYOG KSHETRA, MULUND, GOREGAON LINK ROAD, MUMBAI-400080 / VS. ITO, RANGE-10(3)(1), MUMBAI PAN NO. AABCG 6160B ( / ASSESSEE ) ( / REVENUE) / ASSESSEE BY SHRI DEEPESH T. CHHEDA / REVENUE BY MRS. NEELIMA V. NADKARNI - DR / DATE OF HEARING : 07/04/2016 / DATE OF ORDER: 07/04/2016 ITA NO.5826/MUM/2014 GANESH POLYCHEM LIMITED . 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 20/06/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTA INS TO ADJUSTMENT OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD LOSSES OF NON-ELIGIBLE UNDERTAKING AGAINST THE PROFIT OF ELIGIBLE UNDERTAKING BEFORE ALLOWING DEDUCTION U /S 10B OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. DURING HEARING, AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE, SHRI DEEPESH T. CHEDA, CLAIMED THAT T HE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TR IBUNAL IN GANESH POLYCHEM LTD. VS ITO (ITA NO.3270/MUM/201 4) ORDER DATED 06/01/2016 IN THE CASE OF ASSESSEE ITSE LF FOR ASSESSMENT YEAR 2009-10. THIS FACTUAL MATRIX WAS NO T CONTROVERTED BY THE LD. DR, MRS. NEELIMA V. NADKARN I . 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER DATED 06/01/2016 FOR READY REFERENCE AND ANALYSIS:- 5. IN GROUNDS NO.2 AND 2.1, ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) I N ADJUSTING THE BROUGHT FORWARD LOSS AND DEPRECIATION BEFORE ALLOWIN G EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961 (FOR S HORT 'THE ACT'). ITA NO.5826/MUM/2014 GANESH POLYCHEM LIMITED . 3 6. BRIEFLY STATED THE FACTS ARE, ASSESSEE A COMPANY I S ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS. FOR THE ASSES SMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOM E ON 26TH SEPTEMBER 2009, DECLARING NIL INCOME AFTER CLAIMING EX EMPTION UNDER SECTION 10B OF THE ACT. DURING THE ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER, WHILE VERIFYING ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10B, NOTICED THAT ASSESSEE HAS TWO MANUFACT URING UNITS I.E., ONE AT VAPI WHICH IS AN ELIGIBLE UNIT UNDER SECTION 10B AND ANOTHER UNIT AT DOMBIVALI, WHICH IS A NONELIGIBLE UNIT. HE FURTHER NOTICED THAT IN RESPECT OF THE ELIGIBLE UNIT AT VAPI, ASSESSEE HA D DECLARED NET BUSINESS INCOME OF RS. 8,93,29,055, AND IN RESPECT O F NONELIGIBLE UNIT AT DOMBIVALI HAS SHOWN NET LOSS OF RS. 52,689. FROM THE COMPUTATION OF INCOME FILED BY THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS.7,58,07,6 50 UNDER SECTION 10B AND THEREAFTER HAS SETOFF BROUGHT FORWARD UNABSORB ED DEPRECIATION AND BUSINESS LOSS, THE ASSESSING OFFICE R WAS OF THE VIEW THAT CLAIM OF DEDUCTION UNDER SECTION 10B FROM TOTAL INCOME BEFORE SETTINGOFF BROUGHT FORWARD LOSS IS INCORRECT. HE ALSO N OTICED THAT SIMILAR CLAIM MADE IN THE ASSESSMENT YEAR 200809 WAS ALSO DISALLOWED IN ASSESSMENT COMPLETED UNDER SECTION 143 (3) OF THE ACT AGAINST WHICH ASSESSEE IS IN APPEAL. THOUGH, ASSESS EE CONTENDED THAT SIMILAR CLAIM MADE FOR THE ASSESSMENT YEAR 200708, BY THE ASSESSEE WAS UPHELD BY THE TRIBUNAL WHILE DISMISSING DEPARTMEN TS APPEAL BUT THE ASSESSING OFFICER OPINING THAT THE DEPARTMENT HA S PREFERRED APPEAL BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT AG AINST THE ORDER OF THE TRIBUNAL ULTIMATELY HELD THAT BEFORE ALLOWING ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10B, ADJUSTMENT OF UNABSO RBED DEPRECIATION AND BROUGHT FORWARD LOSS HAVE TO BE MADE F ROM THE ITA NO.5826/MUM/2014 GANESH POLYCHEM LIMITED . 4 GROSS TOTAL INCOME. BEING AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 7. BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS P LEADED BY THE ASSESSEE THAT BROUGHT FORWARD UNABSORBED DEPRECIATION AN D BUSINESS LOSS OF NONELIGIBLE UNIT CANNOT BE SETOFF OF AGAI NST THE CURRENT PROFIT OF THE ELIGIBLE UNIT BEFORE COMPUTING DEDUCTION UNDE R SECTION 10B OF THE ACT. THE LEARNED COMMISSIONER (APPEALS), FINDING THAT THE ASSESSING OFFICER BEFORE ALLOWING ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10B HAS NOT MADE ANY SUCH SETOFF UNABSORBED DEPRECIATION AND BUSINESS LOSS OF NONELIGIBLE UNIT AGAINST PROFI TS OF ELIGIBLE UNIT REJECTED ASSESSEES CLAIM. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEF ORE US, UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LO SS CANNOT BE SETOFF / ADJUSTED AGAINST THE CURRENT PROFIT OF T HE ELIGIBLE UNIT BEFORE COMPUTING DEDUCTION UNDER SECTION 10B OF THE A CT. FOR SUCH PROPOSITION, HE RELIED UPON THE DECISION OF THE COORD INATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200506 T O 200809 AND THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT WHILE DISMISSING DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 200607 A ND 200708. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OT HER HAND, SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER (APPEALS ). 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL READING O F THE IMPUGNED ASSESSMENT ORDER, WE NOTICE THAT THOUGH THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER HAS, OBSERVED THAT BRO UGHT FORWARD BUSINESS LOSS HAS TO BE SETOFF BEFORE CLAIM OF DEDU CTION UNDER ITA NO.5826/MUM/2014 GANESH POLYCHEM LIMITED . 5 SECTION 10B BUT WHILE COMPUTING THE DEDUCTION UNDER SECTION 10B, THE ASSESSING OFFICER IN FACT HAS NOT MADE ANY SUCH ADJU STMENT / SETOFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSS. HOWEVER, ON A PERUSAL OF THE ORDERS OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 200506 TO 200809 IN ASSESSEES OWN CASE WHICH WERE PLACED BEFORE US BY THE LEARNED COUNSEL IN THE CO URSE OF HEARING, WE NOTICE THAT THE TRIBUNAL IS CONSISTENT IN ITS VIE W THAT UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSS OF NONE LIGIBLE UNIT CANNOT BE SETOFF AGAINST THE CURRENT PROFIT OF ELIGIB LE UNIT WHILE COMPUTING DEDUCTION UNDER SECTION 10B. MOREOVER, THE HIGH COURT HAS UPHELD THE AFORESAID VIEW OF THE TRIBUNAL WHILE D ISMISSING DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 200607 AN D 200708 IN ITA NO.2083 OF 2012 AND 2301 OF 2011 RESPECTIVELY . SINCE THE LEARNED COMMISSIONER (APPEALS), WHILE DECIDING GROUND NO.3 RAISED BY THE ASSESSEE HAS DIRECTED THE ASSESSING OFFICER TO VERIFY AND ALLOW ASSESSEES CLAIM OF SETOFF OF UNABSORBED DEPRECIATIO N AND BROUGHT FORWARD BUSINESS LOSS, WE DIRECT THE ASSESSING OFFICER TO CONSIDER ASSESSEES CLAIM OF SETOFF / ADJUSTMENT OF UNABSORB ED DEPRECIATION AND BUSINESS LOSS KEEPING IN VIEW THE DECISION OF T HE TRIBUNAL AND HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN C ASE HOLDING THAT UNABSORBED DEPRECIATION AND BROUGHT FORWARD LOSS OF NON ELIGIBLE UNIT CANNOT BE SETOFF AGAINST THE CURRENT PROFIT OF ELIGIBLE UNIT WHILE COMPUTING DEDUCTION UNDER SECTION 10B. THE GROUNDS RAI SED BY THE ASSESSEE ARE CONSIDERED TO BE ALLOWED. 2.2. IN THE AFORESAID ORDER FOR ASSESSMENT YEAR 20 09- 10, ISSUE AND THE FACTS ARE IDENTICAL, THEREFORE, CONSIDERING/FOLLOWING THE AFORESAID ORDER DATED ITA NO.5826/MUM/2014 GANESH POLYCHEM LIMITED . 6 06/01/2016, WE DIRECT THE LD. ASSESSING OFFICER TO FOLLOW THE REASONING/DIRECTION CONTAINED IN THE AFORESAID ORDER AND DECIDE ACCORDINGLY FOR THE IMPUGNED ASSESSMENT YEAR ALSO, THUS, THE APPEAL OF THE ASSESSEE IS DISPOSED OF IN TERMS INDICATED HEREINABOVE. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/04/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 07/04/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI, 5. /01 )2 , + %& %23 , / DR, ITAT, MUMBAI 6. 14 5 / GUARD FILE. / BY ORDER, */& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI