HICKSON & DADAJEE P.LTD, MUMBAI V. ACIT 5(1), MUMBAI

ITA 5882/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75737 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 22-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERJA PRADHAN
• Assessee Lawyers: VIPUL SHAH
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80G

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.5882 /MUM/2012 ( / ASSESSMENT YEAR : 2009-2010 M/S HICKSON & DADAJEE PVT. LTD., ROOM NO. 560, SHREE PANT BHUWAN, MAMASAHEB WAREKAR BRIDGE, MUMBAI 400 007. / VS. ACIT (5)(1), AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES, MUMBAI. ./ PAN : AAACH0986M ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY SHRI VIPUL SHAH R E SPONDENT BY : MS. NEERJA PRADHAN ) * / DATE OF HEARING : 22-1-2014 ) * / DATE OF PRONOUNCEMENT : 28-2-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) - 9, MUMBAI DATED 11-07-2012. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH IS APPEAL ARE THAT THE ASSESSEE COMPANY, CARRYING ON THE BUSINESS OF MANUF ACTURING OF DYES AND DYES INTERNATIONAL, HARMLESS FOOD COLOURS AS WELL A S CONSTRUCTION BUSINESS, FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION ON 28-9-2011 DECLARING TOTAL INCOME OF RS. 1,23,70,170/-. IN TH E SAID YEAR, THE ASSESSEE HAD DERIVED INCOME FROM SALE OF PLANT & MACHINERY A ND BUILDING WHICH WAS ITA 5882/M/12 2 OFFERED TO TAX AS DEEMED SHORT TERM CAPITAL GAIN U/ S 50 OF THE INCOME TAX ACT, 1961. AGAINST THE SAID INCOME, BROUGHT FORWARD BUSI NESS LOSSES OF THE EARLIER YEAR AND UNABSORBED DEPRECIATION WERE SET OFF BY TH E ASSESSEE. THE A.O., HOWEVER, DID NOT ALLOW THE CLAIM OF THE ASSESSEE FO R SUCH SET OFF ON THE GROUND THAT THE INCOME FROM SALE OF PLANT & MACHINERY AND BUILDING WAS CHARGEABLE TO TAX AS SHORT TERM CAPITAL GAIN U/S 50 OF THE ACT . ON APPEAL, THE LD. CIT(A) UPHELD THE ORDER OF THE A.O. ON THIS ISSUE RELYING ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DURA FO AM INDUSTRIES PVT. LTD. VS. JCIT (ITA NO. 4917 & 4918/MUM/2008). AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFO RE THE TRIBUNAL 2. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E THE TRIBUNAL, THE ASSESSEE HAS FILED THE REVISED GROUNDS OF APPEAL WH ICH READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX - APPEALS (CIT A) ERRE D IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE DEEMED SHORT TERM CAPITAL GAINS EARNED ON SALE OF BUILDING AND PLANT & MACHINERY. 2. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX APPEAL (CIT-A) ERRED IN NOT ALLOWING SET OFF OF BROUGHT FO RWARD UNABSORBED DEPRECIATION AGAINST THE SHORT TERM CAPITAL GAINS W ITHOUT APPRECIATING THE PROVISIONS OF SEC.32(2) OF THE I T ACT, 1961. 3. WITHOUT PREJUDICE TO ABOVE, ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND LAW THE LEARNED COMMISSIONER OF INCOME TAX - APPEALS ERRED IN NOT GRANTING DEDUCTION U/S 80 G OF THE INC OME TAX ACT, 1961. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED B Y THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLVED IN GROUND NO. 1 OF THE ASSESSEES APPEAL IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DIGITAL ELECTRONICS LTD. VS. ADDL. CIT REPORTED IN 49 SOT 65 WHEREIN THE CLAIM OF THE ASSESSEE FOR SET OFF OF BR OUGHT FORWARD BUSINESS ITA 5882/M/12 3 LOSSES AGAINST THE SHORT TERM CAPITAL GAIN ON SALE OF FACTORY BUILDING, PLANT AND MACHINERY WAS DISALLOWED BY THE A.O. ON THE GRO UND THAT AS PER SECTION 72 OF THE ACT, THE BROUGHT FORWARD BUSINESS LOSSES COULD BE SET OFF ONLY AGAINST PROFITS AND GAINS OF BUSINESS OR PROFESSION . WHEN THE LD. CIT(A) UPHELD THE DECISION OF THE A.O., THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE FOR SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AGAINST SHORT TERM CAPITAL GAIN BY HOLDING AS UNDER:- SECTION 72 PROVIDES THAT WHERE FOR ANY ASSESSMENT Y EAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION' IS A LOSS TO THE ASSESSEE, NOT BEING A LOSS SUSTAINED IN A SPECULATI ON BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME UNDER ANY H EAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71, SO MUCH OF THE LOSS AS HA S NOT BEEN SO SET OFF IS TO BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AND IS ALL OWABLE FOR BEING SET OFF 'AGAINST THE PROFITS, IF ANY, OF THAT BUSINESS OR PROFESSION CAR RIED ON BY HIM AND ASSESSABLE FOR THAT ASSESSMENT YEAR'. THUS, FOR SETTING OFF THE INCOME, WHILE THE LOSS TO BE CARRIED FORWARD HAS TO BE UNDER THE HEAD 'PROFITS AND GAINS OF BUSI NESS OR PROFESSION', THE GAINS AGAINST WHICH SUCH LOSS CAN BE SET OFF, HAS TO BE PROFITS O F 'ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE IN THAT ASSESSMENT YEAR'. IN OTHER WORDS, THERE IS NO REQUIREMENT OF THE GAINS BEING TAXABLE UNDER THE HE AD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND, THUS, AS LONG AS GAINS ARE 'OF ANY , BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE AND ASSESSABLE TO TAX FOR THAT ASSESSM ENT YEAR', THE SAME CAN BE SET OFF AGAINST LOSS UNDER THE HEAD PROFITS AND GAINS OF BU SINESS OR PROFESSION CARRIED FORWARD FROM EARLIER YEARS. IN THE CASE OF CIT V. COCANADA RADHASWAMI BANK LTD. [1965] 57 ITR 306 (SC), THE SUPREME COURT HELD THAT AS LONG AS THE PROFITS AND GAINS ARE IN THE NATURE OF BUSINESS PROFITS AND GAINS, AND EVEN IF THESE PROFITS ARE LI ABLE TO BE TAXED UNDER A HEAD OTHER THAN INCOME FROM BUSINESS AND PROFESSION, THE LOSS CARRIED FORWARD CAN BE SET OFF AGAINST SUCH PROFITS OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, THE OBJECTION RAISED BY THE AUTHORITIES BELOW ARE DEVOID OF ANY LEGAL SUBST ANCE. THEREFORE, THE INCOME EARNED IN THE RELEVANT YEAR, ALTHOUGH NOT TAXABLE AS 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION' WAS AN INCOME IN THE NATURE OF INCOME OF BUSIESS NEVERTHELESS. THE ASSESSEE WAS, THEREFORE, INDEED J USTIFIED IN CLAIMING SET OFF OF BUSINESS LOSSES AGAINST THE INCOME OF CAPITAL GAINS. 4. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS RAI SED IN GROUND NO. 1 IS SIMILAR TO THE ONE INVOLVED IN THE CASE OF DIGITAL ELECTRONICS LTD. (SUPRA), WE RESPECTFULLY FOLLOW THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA 5882/M/12 4 THE SAID CASE AND DIRECT THE A.O. TO ALLOW THE CLAI M OF THE ASSESSEE FOR SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AGAINST THE DEEM ED SHORT TERM CAPITAL GAIN ARISING FROM SALE OF PLANT & MACHINERY AND BUI LDING. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 5. AS REGARDS GROUND NO. 2, IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE ASSESSEES CLAIM FOR SET OFF OF BRO UGHT FORWARD UNABSORBED DEPRECIATION AGAINST THE SHORT TERM CAPITAL GAIN IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIG H COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LIMITED VS. DY. CIT (SPEC IAL CIVIL APPLICATION NO. 1773 OF 2012 DATED 23-8-2012) WHEREIN A SIMILAR ISS UE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 38 . IT CAN BE SAID THAT, CURRENT DEPRECIATION IS DEDUC TIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT R ELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF TH E PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FRO M THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THA T BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL B ALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAK EN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATIO N FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDE D TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION T HAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED W ITH, THE UNABSORBED DEPRECIATION FROM A.Y. 1997-98 UPTO THE A.Y. 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS O F SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQ UENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. ITA 5882/M/12 5 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA), WE DECIDE THIS ISSUE INVOLVED IN GROUND NO. 2 IN FAVOUR OF THE ASSESSEE AND ALLOW GR OUND NO. 2 OF THE ASSESSEES APPEAL. 6. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 3 RE LATING TO THE ASSESSEES ALTERNATE CLAIM FOR DEDUCTION U/S 80G OF THE ACT, T HE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY CONTENTION IN SUPPORT T HEREOF AT THE TIME OF HEARING BEFORE US. GROUND NO. 3 OF THE ASSESSEES A PPEAL IS ACCORDINGLY TREATED AS NOT PRESSED AND DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEB. 2014. . ) 0 1 28-2-20`4 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 286262014 [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. : () / THE CIT(A)24, MUMBAI. 4. : / CIT 13, MUMBAI 5. $> , * > , / DR, ITAT, MUMBAI H BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI