M/s. Zenith Exports Limited, Kolkata V. ACIT, Circle - 5, Kolkata, Kolkata

ITA 6/KOL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99767 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 03-01-2011
• Court: TRIBUNAL
• Department Lawyers: ALOK KR NAG
• Assessee Lawyers: MANISH TIWARI
• Keywords: Depreciation; Opportunity of being heard; Condonation of delay; Unabsorbed depreciation
• Section: 143(3); 10B; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI WASEEM AHMED , AM ] I.T . A NO S . 05 & 06 /KOL/20 1 1 ASSESSMENT YEAR: 200 4 - 0 5 M/S. ZENITH EXPORTS LIMITED VS. ASSISTANT COMMISSIONER OF INCOME - TAX, (PAN: AAACZ0986F) CIRCLE - 5, KOLKATA. ( /APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 03 . 0 9 .201 5 DATE OF PRONOUNCEMENT: 22 . 0 9 .201 5 FOR THE A PPELLANT : SHRI MANISH TIWARI, FCA FOR THE RE SPONDENT : SHRI ALOK KR. NAG, JCIT, SR. DR ORDER PER MAHAVIR SINGH, JM : BOTH THESE APPEAL S BY ASSESSEE ARE ARISING OUT OF SEPARATE ORDER S OF CIT (A) - VI , KOLKATA IN APPEAL NO. 035/CIT(A) - VI/09 - 10/CIR - 5/KOL & 1093/CIT(A) - VI/CIR - 5/2009 - 10 BOTH DATED 29 . 1 0.20 1 0 . SEPARATE A SSESSMENT S W ERE FRAMED BY ACIT, CIRCLE - 5, KOLKATA U/S. 147/ 143(3) & U/S. 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR AY 200 4 - 0 5 , V IDE HIS ORDER S DATED 2 6 . 1 1 .20 0 9 AND 29 .12.200 6 RESPECTIVELY . 2. THE ONLY ISSUE IN ITA NO. 05/K/2011 OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF AO BY HOLDING THAT UNABSORBED DEPRECIATION CANNOT BE SET OFF AGAINST THE PROFIT FOR THE RELEVANT ASSESSMENT YEAR AS THE ASSESSEE BEING A 100% EXPORT ORIENTED UNIT ( EOU) ON WHICH DEDUCTION U/S. 10B OF THE ACT HAS BEEN CLAIMED IN AY 1997 - 98. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 1 AND 2: 1. THAT THE OBSERVATION OF LD. CIT (A) WHICH READS THAT PROVISIONS CONTAINED IN SECTION 10B(6) OF IN COME TAX ACT, 1961 DOES NOT MENTION THAT UNABSORBED DEPRECIATION WILL NOT BE CARRIED FORWARD ONLY WHEN DEDUCTION U/S 10B IS CLAIMED IS OPPOSED TO HIS OWN OBSERVATION WHEREIN IT IS STATED THAT 'HERE THE CRITERION IS NOT BASED ON CLAIM OF DEDUCTION U/S 10B B UT BASED ON THE UNDERTAKING BEING 100 % EOU ON WHICH DEDUCTION U/S. 10B HAS BEEN CLAIMED IN ANY YEARS. 2 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS WRONG AND UNJUSTIFIED IN HOLDING UNABSORBED DEPRECIATION OF RS.7,67,01,019/ - RE LATABLE TO THE UNIT M/S. ZENITH TEXTILES FOR ASSESSMENT YEAR 1997 - 98 CANNOT BE SET OFF WITH THE PROFIT FOR ASSESSMENT YEAR 2004 - 05 EVEN THOUGH THE APPELLANT DID NOT CLAIM ANY DEDUCTION U/S 10B IN RESPECT OF ITS UNIT ZENITH TEXTILES FOR ASSESSMENT YEAR 1997 - 98. 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURE OF INDUSTRIAL LEATHER HAND GLOVES, LEATHER MADE - UPS, FABRICS, YARNS AS WELL AS NATURAL SILK FABRICS WHICH ARE MAINLY EXPORTED OUTSIDE INDIA. THESE ACTIVITIES ARE CARRIED ON THROUGH MAIN DIVISIONS 2 ITA NOS.05 & 06/K/2011 M/S. ZENITH EXPORTS LIMITED , AY:2004 - 05 AT KOLKATA AND FACTORY SITES AT AHMEDABAD UNDER THE NAME OF ZENITH SPINNERS AS WELL AS 100% EOU AT KARNATAKA IN THE NAME OF ZENITH TEXTILES. THE ASSE SSEE CLAIMED ADJUSTMENT OF UNABSORBED DEPRECIATION IN RESPECT OF ZENITH TEXTILES A 100% EOU AND A LSO FILED SUPPORTING DOCUMENTS AND THE EVIDENCE BEFORE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BUT THE AO REJECTED THE EXPLANATION AND DISALLOWED CARRIED FORWARD OF UNABSORBED DEPRECIATION IN RESPECT OF 100% EOU KNOWN AS ZENITH TEXTILES AS DETAILE D BELOW: ASSESSMENT YEAR AMOUNT OF UNABSORBED DEPRECIATION DENIED TO BE CARRIED FORWARD 1997 - 98 RS. 7,67,01,019/ - 1998 - 99 RS. 5,98,94,082 RS.13,65,95,001/ - THE AO NOTED THE PROVISION OF SECTION 10B(6) AND SECTION 32 OF THE ACT AND THAT IN VIEW OF THESE PROVISIONS THE DEDUCTION FOR ANY OF THE RELEVANT ASSESSMENT YEAR ENDING BEFORE 01.04.2007 IS TO BE TREATED AS GIVEN FULL EFFECT FOR THE ASSESSMENT YEAR ITSELF. THEREFORE, THE AO OBSERVED AS UNDER: THEREFORE, UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 2000 - 01 OR EARLIER HYEARS CANNOT BE ALLOWED TO BE CARRIED FORWARD AND SET OFF. THEREFORE, THE AMOUNT OF UNABSORBED DEPRECIATION TO BE ALLOWED TO BE CARRIED FORWARD FOR ASSESSMENT YEAR 199 7 - 98 WOULD BE RS.1,21,17,053/ - (UNABSORBED DEPRECIATION DETERMINED OF RS.8,88,18,072/ - MINUS UNABSORBED DEPRECIATION NOT ALLOWED TO BE CARRIED FORWARD RELATING TO ZENITH TEXTILES OF RS.7,67,01,019/ - . 7. AND THE AMOUNT OF UNABSORBED DEPRECIATION ALLOWED TO BE CARRIED FORWARD FOR AY 1998 - 99 WOULD BE ONLY RS.5,57,854/ - (UNABSORBED DEPRECIATION DETERMINED OF RS.6,04,51,882/ - MINUS UNABSORBED DEPRECIATION, WHICH RELATED TO ZENITH TEXTILES RS.5,98,94,082/ - ). THEREFORE, THE AO FOR THE RELEVANT AY 2004 - 05 D ISALLOWED THE CLAIM OF UNABSORBED DEPRECIATION TO BE CARRIED FORWARD U/S. 10B(6) OF THE ACT RELATING TO ZENITH TEXTILES AT RS.7,67,01,019/ - . 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE CONFI RMED THE ACTION OF AO IN RELATION TO THE CLAIM OF UNABSORBED DEPRECIATION RELATING TO AY 1997 - 98 AS UNDER: 7. ON THE MERIT OF THE ACTION TAKEN BY THE AO DURING THE APPELLATE PROCEEDINGS ALSO THE AR OF THE ASSESSEE MADE THE SAME SUBMISSIONS WHICH WERE MADE DURING ASSESSMENT PROCEEDINGS. I HAVE CO NSIDERED ALL THE FACTS AND CIRCUMSTANCES OF THIS ISSUE AND THE SUBMISSIONS MAD E BY THE AR OF TH E ASSESSEE. IN HIS SUBMISSI ON THE LD. AR HAS ACCEPTED THAT ACCORDING TO THE PROVISIONS OF SECTION 10 B (6) UNABSORBED DEPRECIATION OF E O U RELATING TO ASSESSMENT YEARS 3 ITA NOS.05 & 06/K/2011 M/S. ZENITH EXPORTS LIMITED , AY:2004 - 05 UPTO 2000 - 01 IS NOT ADMISSIBLE WHILE COMPUTING INCOME OF SUBSEQUENT ASSTT. YEARS . HOWEVER, LD. A. R. SUBMITTED THAT THE DISALLOWANCE OF SET - OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF ASSESSMENT YEARS 1997 - 98 AND 1998 - 9 9 IS WRONG ON THE PART OF THE AO . FOR ASSESSMENTS YEAR 1997 - 98 AND 1998 - 99 IS WRONG ON THE PART OF THE AO. FOR ASSESSMENTS YEAR 1997 - 98 LD. AR CLAIMED THAT THE SET - OFF OF UNABSORBED DEPRECIATION SHOULD BE ALLOWED BECAUSE IN THAT YEAR THE ASSESSEE DID NOT CLAIM DEDUCTIONU/S.10B. FOR ASSESSMENT YEAR 1998 - 99 LD. AR. HAS POINTED OUT THAT THE UNABSORBED DEPRECIATION HAS ALREADY BEEN REDUCED BY THE ASSESSEE ITSELF IN THE REVISED COMPUTATION OF INCOME AND THEREFORE, THE QUESTION OF NOT ALLOWING SET OFF OF SUCH UNABSORBED D EPRECIATION DOES NOT ARISE. I WOULD LIKE TO TAKE UP THIS ISSUE FOR THE TWO ASSESSMENT YEARS SEPARATELY. ASSESSMENT YEAR 1997 - 98 I N RESPECT OF THIS ASSESSMENT YEAR IF WE LOOK AT THE LANGUAGE OF SECTION 10B(6) IT CAN BE SEEN THAT ACCORDING TO THIS SECTION DEPRECIATION IN RELATION TO ANY BUILDING, MACHINERY, PLANT OR FURNITURE USED FOR THE PURPOSES OF THE BUSINESS OF THE EOU RELATED TO ANY PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2000 - 01 OR BEFORE SHALL BE TREATED AS GIVEN FULL E FFECT TO FOR THAT ASSESSMENT YEAR ITSELF AND NO DEPRECIATION SHALL BE ALLOWED TO BE CARRIED FORWARD AS PROVIDED IN CLAUSE (2) OF SECTION 32. FROM THE LANGUAGE OF THIS PROVISION IT IS CLEAR THAT FOR ANY 100% EOU UNDERTAKING BELONGING TO THE ASSESSEE DEPREC IATIONS RELATED TO PREVIOUS YEARS RELEVANT TO ASSTT. YEARS 2000 - 01 AND BEFORE ARE NOT ALLOWED TO BE CARRIED FORWARD. THIS PROVISION DOES NOT MENTION THAT THE UNABSORBED DEPRECIATION WILL NOT BE CARRIED FORWARD. THIS PROVISION DOES NOT MENTION THAT THE UN ABSORBED DEPRECIATION WILL NOT BE CARRIED FORWARD ONLY WHEN THE DEDUCTION U/S. 10B IS CLAIMED BY THE ASSESSEE. HERE THE CRITERION IS NOT BASED ON CLAIM OF DEDUCTION U/S. 10B HAS BEEN CLAIMED IN ANY YEARS. THEREFORE, I AGREE WITH THE AO THAT THE UNABSORBE D DEPRECIATION OF RS.7,67,01,019/ - RELATED TO 100% EOU UNIT M/S. ZENITH TEXTILE FOR ASSTT. YEAR 1997 - 98 WILL NOT BE ALLOWED TO BE CARRIED FORWARD AND CANNOT BE SET OFF WITH THE PROFIT FOR ASST. YEAR 2004 - 05. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 5 . WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. B EFORE US, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE UNIT OF ZENITH TEXTILES RUN BY THE ASSESSEE COMPANY IS A 100% EOU AND IT IS SUBSIDIARY OF THE ASSESSEE COMPANY. LD. COUNSEL ALSO STATED THAT THERE IS NO DISPUTE THAT ACCORDING TO THE PROVISIONS OF SEC TION 10B(6) OF THE ACT UNABSORBED DEPRECIATION OF EOU RELATING TO AY UPTO 2001 - 02 IS NOT ADMISSIBLE WHILE COMPUTING INCOME OF SUBSEQUENT ASSESSMENT YEARS. ACCORDING TO HIM, THE AO FAILED TO CONSIDER THAT ZENITH TEXTILES WAS APPROVED BY GOVT. OF INDIA AS A 100% EOU ON 26.09.1997 AND ASSESSEE DID NOT MAKE ANY CLAIM FOR DEDUCTION U/S. 10B OF THE ACT FOR THAT ASSESSMENT YEAR I.E AY 1997 - 98 . ACCORDING TO HIM, THE RESTRICTION IMPOSED U/S. 10B(6) OF THE ACT SO FAR AS UNABSORBED DEPRECIATION OF RS.7,67,01,019/ - C ANNOT HOLD GOOD A S THE ASSESSEE DID NOT CLAIM ANY DEDUCTION U/S. 10B OF THE ACT IN AY 1997 - 98 AND THE SAME CAN BE VERIFIED FROM THE COMPUTATION SHEET ATTACHED WITH THE RETURN OF INCOME. THE ASSESSEE DREW OUR ATTENTION TO APPROVAL ORDER OF GOVT. OF INDIA D ATED 26.09.1997 FILED IN THE PAPER BOO K ALONG WITH COMPUTATION SHEET AND RETURN OF INCOME. WE HAVE GONE THROUGH 4 ITA NOS.05 & 06/K/2011 M/S. ZENITH EXPORTS LIMITED , AY:2004 - 05 THE APPROVAL GRANTED BY ASSISTANT DEVELOPMENT COMMISSIONER, COCHIN EXPORT PROCESSING ZONE DATED 26.09.1997 IN REGARD TO M/S. ZENITH TEXTILES, A UNIT OF ZENITH EXPORTS LTD. WHEREBY IT IS DECLARED AS 100% EOU. IT MEANS THAT THIS CONCERN WAS DECLARED AS 100% EOU W.E.F. 26.09.1997. AS PER THE PROVISIONS OF SECTION 10B OF THE ACT, WHICH ARE ATTRACTED TO EOUS LIKE ONE OF THE UNITS RUN BY THE ASSESSEE COMPANY I.E. ZENITH TEXTILES, THERE IS NO CONTROVERSY THAT UNDER THE PROVISIONS OF SECTION 10B(6) READ WITH SECTION 32 OF THE ACT, IF ANY DEDUCTION FOR ANY RELEVANT ASSESSMENT YEARS ENDING BEFORE 01.04.2001 HAS BEEN GIVEN FULL EFFECT THEN THE SAME NEUTRALI ZES THE PROVISION OF SECTION 32(2) OF THE ACT. HOWEVER, IN THE PRESENT CASE, WHILE WORKING OUT UNABSORBED DEPRECIATION FOR AY 1997 - 98, THE AO HAS CONSIDERED INCORRECT FACTS AND FIGURES. THE FACT IS THAT M/S. ZENITH TEXTILES WAS APPROVED UNDER SPECIAL SCH EME OF GOVT. OF INDIA AS A 100% EOU ONLY ON 26.09.1997 AND ACCORDINGLY, ASSESSEE CLAIMED DEDUCTION U/S. 10B OF THE ACT IN RESPECT THIS UNIT FOR AND FROM AY 1998 - 99. ACCORDING TO US, THERE BEING NO CLAIM MADE FOR DEDUCTION U/S. 10B OF THE ACT IN AY 1997 - 98 , THE UNABSORBED DEPRECIATION RELATABLE TO ZENITH TEXTILES IS NOT HIT BY THE PROVISION OF SECTION 10B(6) OF THE ACT FACTUALLY. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE S CLAIM OF UNABSORBED DEPRECIATION RELATABLE TO AY 1997 - 98 IS TO BE ALLOWED AND THE AO IS DIRECTED ACCORDINGLY. THE ORDERS OF THE LOWER AUTHORITIES I.E. THE AO AND THAT OF THE CIT(A) ARE REVERSED. THIS ISSUE OF ASSESSEE S APPEAL IS ALLOWED. 6. THE APPEAL FOR AY 2004 - 05 IN ITA NO. 06/K/2011 IS AGAINST THE ORDER OF CIT(A) IN NOT ADMITTING THE APPEAL AS THERE WAS A DELAY IN FILING OF APPEAL FOR AN ABOUT 6 MONTHS AND 19 DAYS. FOR THIS, ASSESSEE HAS CHALLENGED THAT IT WAS NOT ALLOWED REASONABLE OPPORTUNITY OF BEING HEARD AND FOR THIS FOLLOWING THREE GROUNDS ARE RAISED: 1. T HAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS WRONG AND UNJUSTIFIED IN HOLDING THAT THERE IS NO EVIDENCE OF SICKNESS OF THE ACCOUNTANT WITHOUT ALLOWING THE APPELLANT REASONABLE, ADEQUATE AND EFFECTIVE OPPORTUNITY TO PRODUCE CERTIFICA TE OF ILL HEALTH. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS WRONG IN HOLDING THAT THE DELAY IN PRESENTING APPEAL IS NOT DUE TO SUFFICIENT CAUSE BY ENTERTAINING IRRLELEVANT AND EXTRANEOUS FACTS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DISMISSING ASSESSEE S APPEAL BY REJECTING THE CONDONATION PETITION FOR DELAY. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET LD. COUNSEL FOR TH E ASSESSEE STATED THAT HE IS READY TO PRODUCE 5 ITA NOS.05 & 06/K/2011 M/S. ZENITH EXPORTS LIMITED , AY:2004 - 05 EVIDENCES BEFORE CIT(A) IN RESPECT TO ILLNESS OF THE ACCOUNTANT AND WILL PROVE THAT THE DELAY IS NOT DELIBERATE AND WILLFUL. ON QUERY FROM THE BENCH, LD. SR. DR FAIRLY AGREED THAT LET THE ISSUE BE SET ASIDE TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION, FIRST ON DELAY AND THEREAFTER HE CAN DECIDE MERITS ALSO. IN VIEW OF THE CONCESSION GIVEN BY BOTH THE SIDES, WE REMAND THE MATTER BACK TO THE FILE OF CIT(A), WITH A DIRECTION TO CIT(A) THAT HE WILL ALLOW REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO PROVE HIS BONA FIDES IN RESPECT TO CONDONATION OF DELAY AND IF DELAY IS CONDONED, THEN ON MERITS ALSO. THIS APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8 . IN THE RESULT, APPEAL OF ASSESSEE IN I TA NO. 05/KOL/2011 IS ALLOWED AND ITA NO. 06/KOL/2011 IS ALLOWED FOR STATISTICAL PURPOSES. 9 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.09.2015 SD/ - SD/ - ( WASEEM AHMED ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND SEPTEMBER, 2015 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT - M/S. ZENITH EXPORTS LIMITED, 19, R. N. MUKHERJEE ROAD, KOLKATA - 700 001. 2 / RESPONDENT ACIT, CIRCLE - 5, KOLKATA. 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .