M/s Vasundhara Rasayans Limited, Hyderabad V. Dy.CIT, Circle-3(3), Hyderabad

ITA 624/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5523 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: SURESH KUMAR RATHI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 624 /HYD/13 : ASSTT. YEAR 200 8 - 0 9 M/ S.VASUNDHARA RASAYAN S LTD., HYDERABAD ( PAN - AAACV 7246 G ) V/S. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3 ( 3 ), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI SURESH KUMAR RATHI RESPONDENT BY : SHRI P.SOMA SEKHAR REDDY DATE OF HEARING 17.2.2014 DATE OF PRONOUNCEMENT 17.2.2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX III , HYDERABAD DATED 9. 1.2013, PASSED UNDER S.263 OF THE ACT, FOR THE ASSESSMENT YEAR 200 8 - 0 9 . 2. EFFECTIVE GROUND OF THE ASSESSEE IN THIS APPEAL READS AS FOLLOWS - 1. 2. THE HONOURABLE COMMISSIONER ERRED IN NOT ALLOWING THE SET OFF UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 1997 - 98 AND 1998 - 1999 AGAINST THE INCOME OF THE ASSESSMENT YEAR 2008 - 09 RESTORED BY WAY OF AMENDMENT MADE BY THE FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001. 3. .. 3. WE H E ARD BOTH SIDES AND PERUSED THE IMPUGNED ORDER OF THE COMMISSIONER OF I NCOME - TAX PASSED UNDER S.263 OF THE ACT, IN THE LIGHT OF OTHER MATERIAL AVAILABLE ON RECORD. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS AGAINST THE OBSERVATION OF THE COMMISSIONER THAT A CLEAR READING OF THE PROVISION OF S.32(2) AND ITS AMENDMENT BY THE FINANCE ACT, 2001 WITH EFFECT FROM ASSESSMENT YEAR 2002 - 03 WOULD MAKE IT CLE A R THAT THE DISPENSING OF RESTRICTION I TA NO. 624 / HYD/2013 M/S. VASUNDHARA RASAYANS LIMITED, HYDERABAD 2 OF EIGHT Y E ARS WAS NO T APPLICABLE FOR THE UNABSORBED LOSSES PERTAINING TO THE ASSESSMENT YEARS 1997 - 98 TO 2001 - 02, AND HIS CONSEQUENT DIRECTION TO THE ASSESSING OFFICER TO WITH D RAW THE SET OFF OF UNABSORBED DEPRECIATION OF ASSESSMENT YEARS 1997 - 98 AND 1998 - 99 OF RS.17,87,633 , A LLOWED EARLIER . THE ISSUE RELATING TO ALLOWABILITY O F SET OFF OF UNABSORBED DEPRECIATION IS COVERED BY THE DECISION OF THE HYDERABAD BENCH B OF THE TRIBUNAL IN ITA NO.2067/HYD/2011 IN TH E CASE OF M/S.DERCO COOLING COILS LTD., S E CUN D E R ABAD V/S. ITO WARD 1 (2), HYDERABAD, FOR ASSESSMENT YEAR 2007 - 08 WHEREI N THE TRIBUNAL, VIDE ITS ORDER DATED 19.7.2013, TO WHICH ONE OF US, VIZ. ACCOUNTANT MEMBER IS A PARTY, CONSIDERING IDENTICAL FACTS AND CIR C UMSTANC E S OF THE CASE, CANCELLED THE ORDER UNDER S.263 OF THE ACT PASSED BY THE COMMISSIONER OF INCOME - TAX IN THAT C ASE, IN THE FOLLOWING MANNER - 5. THE AMENDMENT TO SECTION 32 IN 1997 - 98 TO 1999 00 AND THE EFFECT OF SUCH AMENDMENT IN SUBSEQUENT ASSESSMENT YEAR IS SUBJECT MATTER OF DEBATE AND CREATE DIVISION OF OPINION ON THIS ISSUE. 6. FROM THE FACT THAT THE ISS UE OF CARRY FORWARD OF UNABSORBED DEPRECIATION IN THE CONTEXT OF VARIOUS AMENDMENTS TO SEC 32(2) FROM 1.4.1998 HAS BEEN TAKEN TO THE SPECIAL BENCH IN THE CASE OF TIMES GUARANTY LTD WOULD SHOW THAT THERE IS MORE THAN ONE POSSIBLE VIEW ON THIS ISSUE. FURTHER PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. G. T. M. SYNTHETICS LTD.(347 ITR 458) HAS HELD THAT: SECTION 32(2) OF THE INCOME - TAX ACT, 1961, RELATES TO CARRY FORWARD OF UNABSORBED DEPRECIATION. IT WAS AMENDED BY THE FINANCE A CT, 2000, WITH EFFECT FROM APRIL 1, 2001, AND IS APPLICABLE TO THE ASSESSMENT YEAR 2001 - 02. THE FIRST PROVISO AND THE WORD 'FURTHER' IN THE SECOND PROVISO WERE DELETED. THE EFFECT OF OMISSION OF THE PROVISO WAS ENUMERATED BY THE CENTRAL BOARD OF DIRECT T AXES CIRCULAR NO. 794, DATED AUGUST 9, 2000, ([2000] 245 ITR (ST.) 21) TO THE EFFECT THAT THE UNABSORBED DEPRECIATION ALLOWANCE COULD BE SET OFF AGAINST THE INCOME UNDER ANY OTHER HEAD EVEN WHERE THE BUSINESS WAS NOT CARRIED ON. 7. IN THE RECENT DECISION OF GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA LIMITED HAVE TAKEN THE VIEW THAT AFTER ASSESSMENT YEAR 2002 - 03 UNABSORBED DEPRECIATION WILL BECOME THE DEPRECIATION OF THE RELEVANT ASSESSMENT YEAR AND THEREFORE WOULD BE ENTITLED TO SET OFF I TA NO. 624 / HYD/2013 M/S. VASUNDHARA RASAYANS LIMITED, HYDERABAD 3 AGAINS T ANY INCOME AND WOULD ALSO BE ENTITLED TO CARRIED FORWARD INDEFINITELY AS PER THE AMENDED PROVISIONS. 8. WE ARE NOT PRONOUNCING OUR JUDGMENT ON THE MERITS OF THE CASE. HOWEVER, WE HAVE TO HOLD THAT AS THERE IS MORE THAN ONE VIEW POSSIBLE ON THIS PURELY L EGAL ISSUE, THE ORDER OF THE AO CANNOT BE SAID AS LEGALLY UNSUSTAINABLE. IN THESE CIRCUMSTANCES, WE REFER TO THE DECISION OF THE APEX COURT IN THE CASE OF MALABAR INDUSTRIES REPORTED IN 243 ITR 83 WHEREIN IT HAS BEEN HELD AS UNDER: - THE PHRASE PREJUDI CIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME - TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME - TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES N OT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. 9. RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COURT WE HOLD THAT THE CIT ERR ED IN ASSUMING JURISDICTION UNDER SECTION 263 WITH RESPECT OF THE ISSUE OF SET OFF OF CARRIED FORWARD OF DEPRECIATION OF RS. 22,37,711/ - TO SUBSEQUENT YEARS. ACCORDINGLY, WE SET ASIDE THE ORDER OF REVISION OF THE CIT AND ALLOW THE APPEAL OF THE ASSESSEE . FACTS AND CIRCUMSTANCES IN THE CASE ON HAND BEING IDENTICAL TO THE ONES CONSIDERED BY THE TRIBUNAL IN THE DECISION CITED ABOVE, IN THIS CASE ALSO, FOR THE DETAILED REASONS DISCUSSED IN PARAS 5 TO 9 OF THE ORDER DATED 19.7.2013 EXTRACTED ABOVE, SET ASIDE TH E IMPUGNED ORDER OF THE COMMISSIONER OF INCOME - TAX PASSED UNDER S.263 OF THE ACT. 4. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 17.2.2014 SD/ - SD/ - (SAKTIJIT DEY) (CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT/ - 17 TH FEBRUARY, 2014 I TA NO. 624 / HYD/2013 M/S. VASUNDHARA RASAYANS LIMITED, HYDERABAD 4 COPY FORWARDED TO: 1. M/S.VASUNDHARA RASAYANS LTD., NO.42A,PHASE II, IDA MALLAPUR, HYDERABAD 2 . DY. COMMISSIONER OF INCOME - TAX CIRCLE 3(3), HYDERABAD 3. COMMISSIONER OF INCOME - TAX III, HYDERABAD 4. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S 1. DATE OF DICTATION 17 - 2 - 2014 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SENIOR P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER AND OTHER MEMBER 18 . 2 .2014 5. DATE ON WHICH THE FAIR ORDER GOES TO THE SR. P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8. DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR 9. DATE OF THE DESPATCH OF THE TRIBUNAL ORDER