I.T.O Wd - 7(2),kolkata., Kolkata V. M/s Winsome Breweries Limited, New Delhi

ITA 622/KOL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100168 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-03-2013
• Court: TRIBUNAL
• Department Lawyers: SHITAL C DAS
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 194C; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO. 622/KOL/2013 ASSESSMENT YEAR: 2009-10 INCOME-TAX OFFICER, WD-7(2), KOLKATA. VS. M/S. WI NSOME BREWERIES LTD. (PAN: AAACW0174E) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 30.11.2015 DATE OF PRONOUNCEMENT: 16.12.2015 FOR THE APPELLANT: SHRI SHITAL C. DAS, JCIT, SR. DR . FOR THE RESPONDENT: SHRI MANOJ KATARUKA, ADVOCAT E ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-VIII, KOLKATA IN APPEAL NO. 305/CIT(A)-VIII/KOL/11-12 DATED 07.12.2012. AS SESSMENT WAS FRAMED BY ITO, WD-7(2), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE ITS ORDER DATED 30.12.201 1. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF DISALLOWANCE OF JOB WORK CHARGES WITHOUT DEDUCTION OF TDS U/S. 194C OF THE ACT BY INVOKING T HE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GR OUND NO.1: 1. THAT THE LD. CIT(A)-VIII, KOLKATA HAS ERRED IN FACTS IN DELETING THE ADDITION MADE BY THE AO FOR RS.1,10,42,997.00 U/S. 40(A)(IA) OF THE I. T. ACT, 1961 FOR NON DEDUCTION OF TAX U/S. 194C. 3. BRIEFLY STATED FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE COMPANY HAD MADE THE FOLLOW ING PAYMENTS ON ACCOUNT OF THE JOB WORK FOR PROCURING PRINTED MATERIALS AS PER THE SPE CIFICATION OF THE ASSESSEE COMPANY FROM VARIOUS PARTIES: SL. NO. LEDGER HEAD AMOUNT 1. 2. 3. 4. 5. 6. 7. 8. 9. CARTON LARGER CARTON BULLET CARTON KFS CROWN BULLET CROWN KFL CROWN KFS FOIL BULLET FOIL KFS FOIL KPL 164189.50 4214639.53 61278.00 1895343.00 56454.00 96035.00 1709170.80 68040.00 41925.37 2 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 10. 11. 12. 13. 14. 15. LABEL BULLET LABEL BULLET BACK LABEL KFL LABEL KFL BACK LABEL KFS LABEL KFS BACK 1087655.00 1138995.00 178800.00 28645.00 249828.00 51999.00 TOTAL : RS. 11042997.20 THE ASSESSING OFFICER NOTED THAT AS PER THE CBDT'S CIRCULAR NO. 715 DATED 08.08.1995 SECTION 194C OF THE ACT IS APPLICABLE FOR SUPPLY OF PRINTED MATERIALS AS PER PRESCRIBED SPECIFICATION. HE OBSERVED FROM THE BILLS SUBMITTED BY THE ASSESSEE COMPANY THAT THE ASSESSEE HAD MADE THE ABOVE PAYMENTS UNDER THE HEAD PROCURING PRINTED MATERIALS FROM VARIOUS PARTIES AND THE SUPPLIERS HAD DONE THE JOB WORK OF PRINTING ON THE MATERIALS SUBMITTED BY THEM AS PER SPECIFICATIONS OF THE ASSE SSEE. THE MATERIALS OBTAINED FROM THE ABOVE PARTIES, ACCORDING TO AO, WERE PRINTED LABELS , FOILS AND CARTONS USED FOR LABELING AND PACKING BOTTLES OF BEER MANUFACTURED BY THE ASS ESSEE. THE AO FURTHER OBSERVED FROM THE BILLS SUBMITTED BY THE ASSESSEE IT IS QUITE CLE AR, THAT THE ABOVE PARTIES HAVE SUPPLIED THE PRINTED MATERIALS TO THE ASSESSEE AFTER PERFORM ING EXACTLY SPECIFIED JOB WORK OF PRINTING ON VARIOUS MATERIALS AS PER DIRECTION OF T HE ASSESSEE. THUS, ACCORDING TO AO, THE PARTIES HAD DONE THE JOB WORK IN SUCH CASES AND HEN CE, SECTION 194C OF THE ACT WAS APPLICABLE ON ABOVE PAYMENTS OF RS.L,10,42,997/-. A CCORDINGLY, HE MADE ADDITION BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF JOB WORK CHARGES WITHOUT DEDUCTION OF TDS U/S. 194C OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLA IM OF THE ASSESSE BY OBSERVING AS UNDER:- 5.2.5 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE MATERIAL PLACED ON RECORD AND THE SUBMISSIONS AND ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT. FROM A CAREFUL READING OF THE PROVISIONS OF SECTION 194C AND THE CIRCULARS ISSUED BY THE CBDT FROM TIME TO TIME, IT IS CLEAR THAT THE TERM 'WORK' DOES NOT COVER THE FO LLOWING: (A) CONTRACTS FOR SALE OF GOODS. (B) WHERE CONTRACTOR UNDERTAKES TO SUPPLY ANY ARTIC LE OR THING FABRICATED ACCORDING TO THE SPECIFICATIONS GIVEN BY THE PAYER AND THE PROPERTY IN SUCH ARTICLE OR THING PASSES TO SUCH PAYER ONLY AFTER SUCH ARTICLE OR THING IS DELIVERED . (C) WHERE THE PRINCIPAL OBJECTIVE OF WORK UNDERTAKE N BY THE PAYER OF THE PRICE IS NOT TO TRANSFER OF A CHATTEL QUA CHATTEL. [CHATTEL- THE TE RM IN ENGLISH LAW INCLUDES ALL KINDS OF PROPERTY EXCEPT THE FREE HOLD AND THINGS WHICH ARE PARCEL OF IT - PERSONAL PROPERTY COMPRISING GOODS] (D) CONTRACTS FOR RENDERING PROFESSIONAL SERVICE BY LAWYERS, PHYSICIANS SURGEONS, ENGINEERS, ACCOUNTANTS, ARCHITECTS, CONSULTANTS, ETC. CAN ALSO NOT BE REGARD AS 'CONTRACT FOR CARRYING OUT 3 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 ANY WORK' AND ACCORDINGLY NO DEDUCTION OF INCOME -T AX SHALL BE MADE UNDER THIS SECTION. IT WILL COVERED UNDER SECTION 194J. WHERE THERE WAS AN AGREEMENT FOR SUPPLY OF CORRUGAT ED BOXES WITH LABELS PRINTED ON THEM, IT WAS HELD THAT PREDOMINANT OBJECT UNDERLYING THE CON TRACT WAS ONE FOR SALE OF GOODS AND NOT OF WORK CONTRACT. [CIT V. DABUR INDIA LTD. (2006) 2 83 ITR 197 (DEL.) 5.2.6 IN BALSARA HOME PRODUCTS LTD. V. ITO 94 ITJ 9 70 (AHD.) : THE ISSUE BEFORE AHEMADABAD TRIBUNAL WAS THAT THE APPLICABILITY OR O THERWISE OF SECTION 194C TO PURCHASE OF PREPRINTED PACKING MATERIALS LIKE TUBES, CARTONS, C ORRUGATED BOXES, ETC. THE ASSESSING OFFICER CONTENDED THAT PRINTING ACCORDING TO SPECIF ICATIONS SETTLED BY THE ASSESSEE INVOLVES CONTRACT OF WORK LIABLE TO TDS UNDER SECTION 194C. THE TRIBUNAL DID NOT ACCEPTED THIS VIEW AND FOLLOWING BOMBAY HIGH COURT'S DECISION IN THE C ASE OF BDS LTD. DATED 08.03.2004, IT HELD THAT THE TRANSACTION IS CONTRACT OF SALE NOT L IABLE TO TDS UNDER SECTION 194C. IT HELD THAT .THE PRINTING ON THE MATERIAL IS INCIDENTAL TO SUPPLY OF MATERIAL I.E. SALE OF MATERIAL. THE BOMBAY HIGH COURT IN THE CASE OF BDA LTD. CITED SUPRA HELD THAT WHERE AN INDEPENDENT ESTABLISHMENT WAS ENGAGED IN THE BUSINESS OF SUPPLY ING PRINTED PACKAGING MATERIAL TO VARIOUS UNITS AND WAS NOT A CAPTIVE UNIT OF THE ASS ESSEE, THE PRINTING WORK THOUGH CARRIED OUT TO THE SPECIFICATIONS OF THE ASSESSEE CANNOT BE A C ONTRACT FOR WORK BIT WAS ONLY PURCHASE OF MATERIAL AND THEREFORE, THERE WAS NO NEED TO DEDUCT TAX AT SOURCE UNDER SECTION 194C. THE BOMBAY HIGH COURT HELD THAT WHEN THE-PRINTING W ORK WAS BEING-CARRIED OUT IN THE PREMISES OF M, THOUGH AS PER THE SPECIFICATIONS OF THE ASSESSEE, SUPPLY WAS LIMITED TO THE QUANTITY SPECIFIED IN THE PURCHASE ORDER. THERE WAS NOTHING ON RECORD TO SHOW THAT, ALL MOTHER ANCILLARY COSTS LIKE THE LABELS, INK, PAPERS , SCREEN-PRINTING, SCREENS, ETC. WERE BEING SUPPLIED BY THE ASSESSEE TO M. IN THE FACTS OF THIS CASE, THE SUPPLY OF PRINTED LABELS BY M TO THE ASSESSEE WAS A 'CONTRACT OF SALE' AND IT COULD NOT BE TERMED A ''WORKS CONTRACT' HENCE THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE. 5.2.7 WHILE DELIVERING THE JUDGMENT THE HON.BLE BOM BAY HIGH COURT HAD CONSIDERED THE OBSERVATIONS OF THE SUPREME COURT IN STATE OF TAMIL NADU V. ANNANDAM VISWANATHAN (1989) 73 STC 1 (SC), WHERE THE HEM. SUPREME COURT OBSERVE D THAT 'LIKE IN THE CASE OF PAINTING WHICH IS FINISHED PRODUCT BEING A WORK OF ART, THE BILL BOOKS AND VOUCHERS' ARE NEW PRODUCTS BEING PRINTED MATERIALS; AND THE SALE OF SUCH GOOD S DOES NOT INVOLVE A COMPOSITE CONTACT WHICH CAN BE BIFURCATED INTO AN AGREEMENT FOR THE S ALE OF GOODS - BE THEY CANVAS AND PAINT OR PAPER AND INK - AN AGREEMENT FOR WORK'. ON THE SAME ISSUE THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH KOLKATA IN ITA NO. 2132/KOL/2005 FOR A.YR. 2004-05 IN THE CASE OF KHAD IM SHOE PVT. LTD. KOLKATA VS. ACIT CIRCLE 58 (TDS), KOLKATA VIDE ORDER DATED 12.05.200 6 ALSO HELD THAT IN THE CASE OF OUTSOURCING OF FINISHED GOODS, THERE IS NO LIABILIT Y TO DEDUCT TAX AT SOURCE UNDER SECTION 194C AS OUTSOURCING OF MANUFACTURING ACTIVITY DOES NOT AMOUNT TO 'WORK CONTRACT' AND HENCE NO TAX DEDUCTIBLE UNDER SECTION 194C. 5.2.8 IN THE LIGHT OF THE DISCUSSION AND THE LEGAL PROPOSITION AS DISCUSSED ABOVE, AFTER PERUSING THE FACTS OF THE CASE AND OTHER MATERIALS BROUGHT ON RECORD, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT WAS LIABLE TO MAKE DEDUCTION OF TAX FROM THE TOTAL PAYMENTS MADE TO VA RIOUS PARTIES AGGREGATING TO RS.1,10,42,997/- U/S. 194C OF THE ACT. THEREFORE, THE DISALLOWANCE MADE BY HIM U/S. 40(A)(IA) OF THE ACT OF THE LIKE AMOUNT IS TO BE UN WARRANTED. THEREFORE, THE CONSEQUENT ADDITION MADE TO THE INCOME RETURNED IS HEREBY DELE TED. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE BEFORE AO ARGUED TH AT THE SUPPLY OF PRINTED MATERIALS WAS A SALE AND COULD NOT BE CONSIDERED AS WORK CONTRACT AND TAX WAS NOT REQUIRED TO BE DEDUCTED U/S.194C OF THE ACT, SINCE THE ANCILLARY M ATERIALS WERE NOT SUPPLIED BY THE 4 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 ASSESSEE. IT WAS ALSO CONTENDED THAT CLAUSE (IV)(E) OF EXPLANATION WITH SECTION 194C OF THE ACT AS INTRODUCED BY FINANCE (NO.2) ACT, 2009, HAS PLACED THE POSITION BEYOND DOUBT BY INCORPORATING LANGUAGE TO THE EFFECT THAT EXPRES SION WORK SHALL NOT INCLUDE MANUFACTURE OR SUPPLY OF A MATERIAL WHICH IS PURCHA SED FROM A PERSON OTHER THAN SUCH CUSTOMER. THE ASSESSEE HAD FURTHER RELIED ON CIRCUL AR NO.715 DATED 08.08.1995 WHICH PROVIDES THAT SUPPLY OF PRINTED MATERIAL IS COVERED BY SECTION 194C OF THE ACT IS ALSO NOT APPLICABLE IN THIS CASE SINCE THIS CIRCULAR DOES NO T MEAN THAT ALL CASES OF SUPPLY OF PRINTED MATERIAL ARE LIABLE TO DEDUCTION OF TAX AT SOURCE. WE ARE OF THE VIEW THAT IT WAS ONLY WHEN THE CONTRACT IS FOR PRINTING OF MATERIALS AND NOT F OR PURCHASING OF MATERIAL THAT THE CIRCULAR MAY BE APPLICABLE. IT IS A FACT THAT THE ASSESSEE MADE OUTRIGHT PURCHASES OF GOODS FOR RS.1,10,42,997/- FROM VARIOUS SUPPLIERS O N WHICH SALES TAX STANDS PAID AND AS SUCH, THE TRANSACTION IS ONE OF THE SALE AND NOT WO RK AND DOES NOT FALL UNDER THE SCOPE AND AMBIT OF SECTION 194C OF THE ACT. DETAILS OF E XPENSES OF RS.11042997 ARE CONTAINED IN THE PAPER BOOK ALONG WITH SAMPLE PHOTOCOPIES OF SOME BILL. ALL THE ORIGINAL BILLS WERE PRODUCED AT THE TIME OF HEARING. FROM THE PERUSAL O F THE BILL IT IS VERY MUCH APPARENT THAT ALL THE EXPENSES ARE FOR OUTRIGHT CONTRACT OF PURCH ASES AND SUPPLIER HAS CHARGED VAT/EXCISE IN THEIR SALE BILL. THE PROVISIONS OF SE CTION 194C OF THE ACT ARE APPLICABLE ONLY IN RELATION TO WORK CONTRACT AND DOES NOT COVE R CONTRACT OF SALE OF GOODS. WHEN ALL THE AMOUNTS WERE FOR OUTRIGHT PURCHASE AND IN THE S ALE BILLS THE VENDOR HAS CHARGED VAT AND AS SUCH THE TRANSACTION AMOUNTS TO CONTRACT OF SALE AND SECTION 194C OF THE ACT IS NOT APPLICABLE. EVEN IN VIEW OF CIRCULAR NO. 681 DATED 08.03.1994, SECTION 194C OF THE ACT DOES NOT APPLY 'WHERE CONTRACTOR UNDERTAKES TO SUPPLY AND ARTICLE OR THING FABRICATED ACCORDING TO SPECIFICATION GIVEN BY THE PAYER AND THE PROPERTY I N SUCH ARTICLE OR THING PASSES TO SUCH PAYER ONLY A FTER SUCH ARTICLE OR THING IS DELIVERED. 5. IN SECTION 194C OF THE ACT IN THE LAST IT HAS BE EN PROVIDED AS SUCH, WHICH READS OUT AS FOLLOWS: 'WORK DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER'. AS RELIANCE WAS PLACED BY THE ASSESSEE ON THE CASE OF BDA LTD. VS. ITO (TDS) (2006) 281 ITR 99 (BOM), WHEREIN IT IS HELD THAT SUPPLY OF PRINTED MATERIALS CONSTITUTES SALE UNDER THE SALE OF GOODS ACT; AND SECTION 194C OF TH E ACT IS NOT APPLICABLE. IN THAT CASE IT 5 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 WAS HELD THAT SUPPLY OF PRINTED PACKAGING LABELS ME RELY BECAUSE THE PRINTING WAS DONE AS PER REQUIREMENT/SPECIFICATIONS OF THE ASSESSEE, IT COULD NOT BE SAID THAT ANY WORK WAS CARRIED OUT ON BEHALF OF THE ASSESSEE. WE FIND THAT SIMILAR ISSUE WAS DEALT BY VARIOUS COURTS, WHEREIN IT HAS BEEN HELD THAT SUPPLY OF ANY ARTICLE OR THING FABRICATED ACCORDING TO THE SPECIFICATION OF THE PURCHASER AND THE PROPERTY IN SUCH ARTICLE PASSES TO THE PERSON ONLY AFTER THE SAME IS DELIVERED, THE CONTRACT WILL BE A CONTRACT ON SALE AND AS SUCH FALLS OUTSIDE THE PURVIEW OF SECTION 194C OF THE ACT. THE REFORE, THE ASSESSING OFFICER ERRED IN LAW IN MAKING DISALLOWANCE OF RS.1,10,42,997/- DESP ITE THE FACTS THAT THE SAID AMOUNT IS PAID FOR PURCHASES AND SECTION 194C OF THE ACT IS N OT APPLICABLE. ACCORDINGLY, NO DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CAN BE MADE. THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 6. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE BY ALLOWING SET OFF OF UNABSORBED DEPR ECIATION LOSS AGAINST CURRENT YEARS INCOME. FOR THIS, REVENUE HAS RAISED FOLLOWING GRO UND NO.2: 2. FOR THAT IN THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE THE LD. CIT(A) IS NOT CORRECT BY ALLOWING SET OFF OF UNABSORBED DEPRECIAT ION LOSS AGAINST THE CURRENT YEARS INCOME. 7. BRIEF FACTS RELATING TO THE CASE ARE THAT IN TH E ASSESSMENT ORDER, THE AO NOTED THAT, THE UNABSORBED DEPRECIATION FOR THE AY 1989-1999 & 1999-2000 CLAIMED BY THE ASSESSEE IS NOT ALLOWED TO BE SET OFF THIS YEAR SIN CE AS PER THE ACT, UNABSORBED DEPRECIATION ALLOWANCE FOR THE ABOVE ASSESSMENT YEA RS ARE ONLY ALLOWED TO BE CARRIED FORWARD FOR 8 SUBSEQUENT ASSESSMENT YEARS. AS PER T HE SCRUTINY ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008-09 ONLY THE UNABSORBED DEPRECI ATION FOR ASSESSMENT YEAR 2002-03 RS.1,47,98,454/- AND UNABSORBED DEPRECIATION FOR AS SESSMENT YEAR 2003-04 OF RS.18,76,759/- WERE ALLOWED TO BE CARRIED FORWARD A ND THE SAME IS ALLOWED TO BE SET-OFF WITH THE INCOME OF THE ASSESSMENT YEAR 2009-10. FUR THER, NO UNABSORBED DEPRECIATION IS ALLOWED TO BE CARRIED FORWARD. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS U NDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSION BEHALF OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE DECISION RENDERED GUJRAT HIGH COURT. ON A PLAIN READING OF PROVISIONS OF SECTION 32(2), IT IS AMPLY CLEAR THAT THIS SECTION DOES NOT PRESCRIBE ANY TIME LIMIT FOR CARRY FORWARD AN UNABSORBED DEPRECIATION. IN CIT V. JAIPURIA CHINA CLAY MINES (P) LTD. [1966] 59 ITR 555 (SC), THE HON'BLE SUPREM E COURT HAS HELD THAT IT IS WRONG TO 6 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 ASSUME THE SECTION 72 ALSO DEALS WITH THE CARRYING FORWARD OF DEPRECIATION'. ACCORDING TO THE HON'BLE COURT, THIS CARRY FORWARD HAVING BEEN P ROVIDED IN SECTION 32(2) IN A DIFFERENT MANNER, ON 72 DEALS WITH LOSSES OTHER THAN LOSSES D UE TO DEPRECIATION. THERE IS NO TIME LIMIT PRESCRIBED UNDER SECTION 32(2) OF THE ACT. FROM THE PROVISIONS OF THE ACT AND THE RATIO LAID DOWN IN THE CASES CITED, SUPRA, THE FOLLOWING STEPS ARE TO BE KEPT IN MIND WHILE DEALING WITH UNABSORBED DEPRECIATION: STEP ONE DEPRECIATION ALLOWANCE OF THE PREVIOUS YEAR IS FIRST DEDUCTIBLE FROM THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION. STEP TWO IF DEPRECIATION ALLOWANCE IS NOT FULLY D EDUCTIBLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION' BECAUSE OF ABSENCE OR I NADEQUACY OF PROFITS, IT IS DEDUCTIBLE FROM INCOME CHARGEABLE UNDER OTHER HEADS OF INCOME (EXCE PT INCOME UNDER THE HEAD 'SALARIES') FOR THE SAME ASSESSMENT YEAR. STEP THREE IF DEPRECIATION ALLOWANCE IS STILL UNA BSORBED, IT CAN BE CARRIED FORWARD TO THE SUBSEQUENT ASSESSMENT YEAR(S) BY THE SAME ASSESSEE [SEE ALSO THE POINTS GIVEN BELOW] 1. TIME LIMIT IS FIXED FOR THE PURPOSE OF CARRYING FORWARD OF UNABSORBED DEPRECIATION; IT CAN BE CARRIED FORWARD FOR INDEFINITE PERIOD, IF NECESS ARY. 2. IN THE SUBSEQUENT YEAR(S), UNABSORBED DEPRECIATI ON CAN BE SET OFF AGAINST ANY INCOME WHETHER CHARGEABLE UNDER THE HEAD 'PROFITS AND GAIN S OF BUSINESS OR PROFESSION' OR UNDER ANY OTHER HEAD (EXCEPT INCOME UNDER THE HEAD 'SALAR IES'). IN THE MATTER OF SET OFF, THE FOLLOWING ORDER OF PRIORITY IS FOLLOWED IN THE SUBS EQUENT YEAR(S): . A) CURRENT DEPRECIATION. B) BROUGHT FORWARD BUSINESS LOSS C) UNABSORBED DEPRECIATION IT MAY BE SAID THAT IF IN THE SUBSEQUENT YEAR(S), T HERE IS NO BROUGHT FORWARD BUSINESS LOSS, UNABSORBED DEPRECIATION CAN BE ADDED TO CURRENT DEP RECIATION FOR THE PURPOSE OF CLAIMING DEDUCTION. 3. CONTINUITY OF BUSINESS IS NOT RELEVANT FOR THE P URPOSE OF ABOVE SET OFF AND CARRY FORWARD. 4. DEPRECIATION CAN BE CARRY FORWARD BY THE SAME AS SESSEE. THIS RULE IS, HOWEVER, NOT APPLICABLE IN SOME CASES. IN VIEW OF THE FOREGOING DISCUSSION, THE CLAIM OF T HE ASSESSEE COMPANY, IN MY OPINION, THE DISALLOWANCE OF THE CLAIM OF SET OFF OF UNABSORBED DEPRECIATION LOSS AGAINST THE CURRENT INCOME IS NOT JUSTIFIED. THE ASSESSING OFFICER IS HEREBY DIRECTED TO ALLOW THE SAME ON THE BASIS OF THE STEPS GIVEN ABOVE IN ACCORDANCE WITH L AW WHILE GIVING EFFECT TO THIS ORDER. AGGRIEVED, REVENUE CAME IN SECOND APPEAL BEFORE TRI BUNAL. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE MADE A CLAIM OF UNA BSORBED DEPRECIATION LOSS OF SEVERAL YEARS STARTING FROM A.Y. 1998-99 TO 2004-05. THE UN ABSORBED DEPRECIATION LOSS FOR ASSESSMENT YEAR 1988-89 IS RS. 19696049/- AND FOR A SSESSMENT YEAR 1999-2000 IS RS. 25777920/- BUT THE AO IN THE IMMEDIATE PRECEDING YE AR I.E. IN THE ASSESSMENT YEAR 2008- 09 ALSO DID NOT ALLOW THE CLAIM OF SET OFF UNABSORB ED DEPRECIATION LOSS OF ASSESSMENT YEAR 1998-99 AND 1999-2000. THE CLAIM FOR THE SAID TWO Y EARS WAS NOT ALLOWED ON THE GROUND THAT UNABSORBED DEPRECIATION LOSS COULD BE CARRIED FORWARD FURTHER FOR 8 YEARS ONLY. 7 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 ACCORDINGLY, IN THE ASSESSMENT YEAR 2008-09 THE ASS ESSED TOTAL INCOME OF RS.37850399/- (INCLUSIVE OF ADDITION OF RS.22401596/-) U/S. 40(A) (IA) WAS FULLY ADJUSTED WITH THE UNABSORBED DEPRECIATION OF ASSESSMENT YEAR 2001-200 2 TO ASSESSMENT YEAR 2002-03 WITHOUT ADJUSTING UNABSORBED DEPRECIATION FOR ASSE SSMENT YEAR 1998-99 AND 1999-2000. IT IS FOUND THAT IN THE ASSESSMENT ORDER FOR THE AS SESSMENT YEAR 2009-10, THE AO ADJUSTED THE UNABSORBED DEPRECIATION LOSS OF RS.16675213/- ( SUM TOTAL OF UNABSORBED DEPRECIATION LOSS FOR A.Y.2003-04 & OVERDUE BALANCE LOSS OF 2002 -03) AND ON THE BALANCE AMOUNT OF TOTAL INCOME OF RS.1,20,95,096/- RAISED THE DEMAND OF RS.54,67,796/-. IT IS ALSO FOUND THAT IN THE ASSESSMENT FOR ASSESSMENT YEAR 2009-10 ALSO, THE AO HAS NOT ADJUSTED THE UNABSORBED DEPRECIATION LOSS OF RS. 1,96,96,049 FOR A.Y. 1998-99 AND RS. 2,57,77,920 FOR A.Y. 1999-2000 ON THE GROUND THAT UNABSORBED DEPREC IATION LOSS FOR THESE TWO YEARS ARE ONLY ALLOWED TO BE CARRIED FORWARD TO 8 SUBSEQUENT YEARS. IN VIEW OF THESE FACTS, WE ARE OF THE VIEW THAT PRIOR TO THE FINANCE ACT NO.2 OF 1996 UNABSORBED DEPRECIATION COULD BE CARRIED FORWARD INDEFINITELY. THE FINANCE ACT NO.2 OF 1996 RESTRICTED THE PERIOD OF CARRY FORWARD & SET-OFF OF UNABSORBED DEPRECIATION TO 8 Y EARS FROM AY I997-98. THE CIRCULAR 762 DATED 18.2.1998 CLARIFIED THAT BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE EARLIER YEARS WOULD BE ADDED TO DEPRECIATION FOR AY 1997-98 AND PERIOD OF 8 YEARS WOULD BEGIN FROM AY 1997-98 ONWARDS. S. 32 (2) WAS AGAIN AMENDE D BY FINANCE ACT, 2001 W.E.F. AY 2002-03 TO RESTORE THE POSITION AS IT WAS PREVAILIN G PRIOR TO THE FINANCE ACT NO. 2 OF 1996 AND THE PERIOD OF 8 YEARS WAS DONE AWAY WITH. ACCOR DINGLY, THE UNABSORBED DEPRECIATION LOSS FOR ASSESSMENT YEAR 1998-99 AND 1999-2000 BECA ME THE UNABSORBED DEPRECIATION LOSS FOR ASSESSMENT YEAR 2008-09 AND CAN BE CARRIED FORW ARD FOR SET OFF INDEFINITELY. IN CIRCULAR NO.14 OF 2001, THE CBDT CLARIFIED THE REMOVAL OF TH E 8 YEAR TIME PERIOD WAS 'WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY'. THE EFFECT OF THE AMENDMENT IS THAT THE UNABSORBED DEPR ECIATION AVAILABLE TO AN ASSESSEE ON 1.4.2002 (AY 2002-03) HAS TO BE DEALT WITH IN ACCOR DANCE WITH THE S. 32(2) AS AMENDED BY THE FINANCE ACT, 2001 AND NOT BY S. 32(2) AS IT STO OD PRIOR TO THE SAID AMENDMENT. 9. HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF GEN ERAL MOTORS INDIA PVT. LTD V DCIT (2013) 354 ITR 244 (GUJ) CONSIDERING THE SAME ISSUE ENUNCIATED THE PROPOSITION OF LAW AS UNDER:- 'HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN AY 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE 8 ITA NO. 622/KOL/2013 WINSOME BREWERIES LTD. AY 2009-10 AMENDMENT OF S. 32(2) BY FINANCE ACT, 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION AND SO A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. THEREFOR E, THE UNABSORBED DEPRECIATION PERTAINING TO AY 1997-98 CAN BE CARRIED FORWARD FOR SET-OFF INDEFINITELY (A.Y'2006-07). ' IT IS POINTED OUT THAT IN THIS CASE, WHICH IS AS UN DER:- 'WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSORB ED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002-03) WI LL BE DEALT WITH IN ACCORDANCE WITH THE PROVISION OF SECTION 32(2) AS AMENDED BY FINANCE AC T,2001 AND ONCE THE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS F OR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, TH E UNABSORBED DEPRECIATION FROM A.Y 1997-98 UP TO THE A.Y 2001-02 GOT CARRIED FORWARD T O THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF IT CAME TO BE GOVERNED BY THE P ROVISION OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY F ORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WH ATSOEVER.' IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE GUJAR AT HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT THE UNABSORBED DEPRECIATION LOSS OF A.Y. 1997-98 & 1998-99 IS ALLOWABLE AND SHOULD BE ADJUSTED WITH THE TOTAL COMPUTED INCOME U NABSORBED DEPRECIATION LOSS SHOULD BE CARRIED FORWARD. THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF UNABSORBED DEPRECIATION LOSS OF THE ASSESSEE AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.12. 2015 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16TH DECEMBER, 2015 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-7(2), KOLKATA. 2 RESPONDENT M/S. WINSOME BREWERIES LTD., S-521, GR EATER KAILASH PART-II, NEW DELHI-110048. 3 . THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .