M/S. DCIT 8(3), MUMBAI V. THE SHREYAS INTERMEDIATE LTD, MUMBAI

ITA 5871/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6381 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 24-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Depreciation; Scheme of amalgamation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 5871/M/2008 ASSESSMENT YEAR: 2004-05 DY. COMMISSIONER OF INCOME TAX, APPELLANT ROOM NO. 204, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S SHREYAS INTERMEDIATES LTD., RESPONDENT SOLARIS 2, UNIVERSAL INDUSTRIAL ESTATE, SAKI VIHAR ROAD, ANDHERI (E), MUMBAI 400 072. APPELLANT BY : MR. D. SONGATE RESPONDENT BY : MR. M. SUBRAMANIAN . ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-XXIX, MUMBAI, PASSED ON 24/07/2008 FOR THE A SSESSMENT YEAR 2004-05 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUND OF APPEAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSESSEES CLAIM OF CARRY FORWARD OF LOSSES ON ACCOUNT OF UNABSORBED DEPRECIA TION OF ` . 1,45,96,622/- AND BUSINESS LOSS OF RS. 20,42,774/- OF THE AMALGAMATING COMPANY M/S SHRUTI COLORANTS, THOUGH T HE ASSESSEE HAD VIOLATED THE CONDITIONS LAID DOWN IN S ECTION 72A(2)(II) OF THE IT ACT, 1961. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE M/S S HRUTI COLONANTS LTD. INCORPORATED UNDER THE COMPANY LAW AMALGAMATED WITH THE ASSESSEE COMPANY WITH EFFECT FROM 01/10/2003. THE A MALGAMATING ITA NO. 5871/M/08 M/S SHREYAS INTERMEDIATE LTD. 2 COMPANY HAD BROUGHT FORWARD LOSSES OF RS. 20,42,774 /- AND UNABSORBED DEPRECIATION OF RS. 1,45,96,655/-. THE A O DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE HAD NOT FILED ALL THE DETAILS AND ALSO VIOLATED THE PROVISIONS OF SEC TION 72A OF THE ACT. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSE SSEE ON THE GROUND THAT AFTER CALLING THE REMAND REPORT FROM THE AO AN D ON PERUSAL OF THE SAME, IT IS CLEAR THAT THE ASSESSEE HAS FULFILLED T HE CONDITIONS LAID DOWN UNDER THE PROVISIONS OF SECTION 72A(2)(A)(II) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE H AS VIOLATED THE PROVISIONS OF SECTION 72A BY TRANSFERRING SOME OF THE ASSETS ON DIFFERENT DATES, NAMELY, ON 30/06/2003 AMOUNTING TO RS. 73,780/-, & ` . 1,71,000/- AND ON 30/09/2003 AMOUNTING TO RS. 13, 630,480.07. THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS SUBMITTED THAT THE ASSESSEE SOLD THE MACHINERIES, A S POINTED OUT BY THE LEARNED DR, BEFORE THE DUE DATE OF THE AMALGAMA TION, WHICH IS EVIDENT FROM THE PAGE 11 OF THE PAPER BOOK WHERE DE DUCTION DETAIL OF PLANT AND MACHINERY FOR THE PERIOD 2003-04 HAS BEEN SHOWN. THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT TH AT AFTER AMALGAMATION, THE ASSESSEE HAS ONLY SOLD TWO ITEMS, NAMELY, ON 31/12/2003 AMOUNTING TO RS. 75,208/- AND ON 31/01/0 4 AMOUNTING TO RS. 45,106/-. THEREFORE, HE SUBMITTED THAT THE A SSESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 72A(2)(A)(II) OF THE ACT. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE ONLY POINT FOR CONSIDERATIO N BEFORE US IS WHETHER THE ASSESSEE HAS FULFILLED THE CONDITIONS L AID DOWN UNDER THE PROVISIONS OF SECTION 72A(2)(A)(II) OF THE ACT, FOR ELIGIBILITY OF CARRY ITA NO. 5871/M/08 M/S SHREYAS INTERMEDIATE LTD. 3 FORWARD LOSS ON ACCOUNT OF UNABSORBED DEPRECIATION AMOUNTING TO RS. 1,45,96,655/- AND BUSINESS LOSS OF RS. 20,42,774/-. THE ASSESSEE HAS RECEIVED EFFLUENT TREATMENT PLANT WORTH RS. 3,94,03 ,555/- AFTER AMALGAMATION FROM THE AMALGAMATED COMPANY, I.E. M/S SHRUTI COLONANTS LTD. AND THE DATE OF AMALGAMATION WAS 01/ 10/2003. WE FIND THAT AS PER THE PAGE 11 OF PAPER BOOK THE ASSE SSEE HAS TRANSFERRED TWO ITEMS I.E. ON 31/12/2003 AMOUNTING TO ` . 75,208/- AND ON 31/01/04 AMOUNTING TO ` . 45,106/-. IN THIS CONNECTION, WE REFER TO THE SECTION 72A(2)(A)(II), WHICH READS AS UNDER:- 72A(2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SE CTION (1), THE ACCUMULATED LOSS SHALL NOT BE SET OFF OR CARRIE D FORWARD AND THE UNABSORBED DEPRECIATION SHALL NOT BE ALLOWED IN THE ASSESSMENT OF THE AMALGAMATED COMPANY UNLESS B)THE AMALGAMATED COMPANY I) HOLDS CONTINUOUSLY FOR A MINIMUM PER IOD OF FIVE YEARS FROM THE DATE OF AMALGAMATION AT LEAST THREE FOURTHS OF THE BOOK VALUE OF FIXED ASSETS OF THE AMALGAMATING COMPANY A CQUIRED IN A SCHEME OF AMALGAMATION. 7. ON PERUSAL OF SECTION 72A(2)(B)(I), WE FIND THAT AFTER THE AMALGAMATION, THE ASSESSEE HAS TO RETAIN 3/4 TH OF THE BOOK VALUE OF THE FIXED ASSETS OF THE AMALGAMATED COMPANY AS PER THE SCHEME OF AMALGAMATION. THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT FROM THE PAGE 11 OF THE PAPER BOOK THAT THE ASSESSE E ONLY TRANSFERRED AFTER THE AMALGAMATION TWO ASSETS ON 31/12/2003 AMO UNTING TO ` . 75,208/- AND ON 31/01/04 AMOUNTING TO ` . 45,106/-. IT IS VERY CLEAR FROM THE PAGE NO.11 OF THE PAPER BOOK, THE ASSESSEE HAS TRANSFERRED THREE ITEMS ONE ON 30.6.2003 AMOUNTING TO ` 73,780 AND ON THE SAME DATE ANOTHER ITEM AMOUNTING TO ` 1,71,000, ON 30.9.2003 THE ASSESSEE HAS SOLD PLANT AND MACHINERY TO SHRUTI COL ORANTS AMOUNTING TO ` 1,36,30,480. THE DATE OF AMALGAMATION WAS ON 1.10 .2003, THEREFORE THE ABOVE THREE TRANSACTIONS MADE BY THE ASSESSEE BEFORE THE DATE OF AMALGAMATION. THEREFORE THE TRANSACTIO N MADE BY THE ASSESSEE BEFORE THE DATE OF AMALGAMATION I.E. 1.10. 2003 DOES NOT COME WITHIN THE PURVIEW OF SECTION 72A(2)(B)(I) OF THE INCOME TAX ACT, 1961. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ELI GIBLE FOR THE ITA NO. 5871/M/08 M/S SHREYAS INTERMEDIATE LTD. 4 DEDUCTION OF CARRY FORWARD LOSS AND ALSO DEPRECIATI ON CLAIMED BY THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER OF CIT( A) IN ALLOWING THE ASSESSEES CLAIM OF CARRY FORWARD LOSS OF ` . 20,42,774/- AND UNABSORBED DEPRECIATION OF RS. 1,45,96,655/-. WE TH EREFORE DISMISS THE APPEAL RAISED BY THE REVENUE ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2010. SD/- SD/- (R.S. SYAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 26TH NOVEMBER, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// GPR /KV ASST. REGISTRAR, I.T.A.T., MUMBAI. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 15/11/10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 18/11/10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS 23.11.10 SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER