ACIT 6(2)(1), MUMBAI V. M/S. BROOK CROMPTON GREAVES LTD, MUMBAI

ITA 6347/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4837 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 25-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Depreciation; Fair market value; Unabsorbed depreciation
• Section: 32; 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI , . , , BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER, ITA NO.6347/MUM/2017 ASSESSMENT YEAR: 2009-10 ACIT - 6(2)(1 ), ROOM NO.504, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S BROOK CROMPTON GREAVES LTD. 6 TH FLOOR, CG HOUSE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400030 ( / REVENUE) ( !'# /ASSESSEE) P.A. NO.AAACC3840K $ %# / DATE OF HEARING : 04/02/2019 %# / DATE OF ORDER: 15/02/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE LD. CIT(APPEAL)-12, MUMBAI, DATED 26/07/2017 AND IT !' / REVENUE BY MS. BHARTI SINGH !'# !' / ASSESSEE BY SHRI PRADIP N. KAPASI 2 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. PERTAINS TO AY 2009-10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW SET OFF OF UNABSORBED DEPRECIATION LOSS A. Y. 1999-2000 OF RS. 1,87,23.31 8/- WHEN THERE WAS SPECIFIC PROHIBITION AS PER CLAUSE ( II)(B) IF SUB SECTION (2) IF SEC 32 TO ALLOW CARRY FORWARD OF UNABSORBED DEPRECIATION ALLOWANCE BEYOND 8 YEARS FR OM THE ASSESSMENT YEAR FOR WHICH THE DEPRECIATION ALLOWANC E WAS FIRST COMPUTED.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW SET OFF OF UNABSORBED DEPRECIATION LOSS OF A. Y. 1999-2000 BY TAKING RECO URSE TO AMENDMENT WHICH WAS BROUGHT IN SUB SECTION (2) O F SECTION 32 BY WAY OF FINANCE ACT 2001 W.E.F. 01.04. 2002 WHICH DID NOT OPERATE RETROSPECTIVELY IN RESPECT OF UNABSORBED DEPRECIATION ALLOWANCE OF YEARS PRIOR TO A. Y.2002-03.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF UNABSOR BED DEPRECIATION LOSS OF A. Y.2000-01 BY TAKING RECOURS E TO AMENDMENT WHICH WAS BROUGHT IN SUB SECTION (2) OF S ECTION 32 BY WAY OF FINANCE ACT 2001 W.E.F. 01.04.2002 WHI CH DID NOT OPERATE RETROSPECTIVELY IN RESPECT OF UNABSORBE D DEPRECIATION ALLOWANCE OF YEARS PRIOR TO A. Y.2002- 03.' 2. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURER AND SALE OF ELECTRICAL MOTORS, SPARE PARTS AND PUMPS ETC, FI LED ITS RETURN OF INCOME FOR AY 2009-10 ON 28/09/2009, DECLARING T OTAL INCOME AT RS.23,69,190/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) R.W.S. 147 OF THE INCOME TAX A CT, 1961 (HEREINAFTER THE ACT), DETERMINING THE TOTAL INCO ME AT 3 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. RS.3,79,89,880/-, INTER ALIA BY MAKING DISALLOWANCES OF UNABSORBED DEPRECIATION OF RS.93,18,079/- PERTAININ G TO A.Y.2000-01 ON THE GROUND THAT THE ASSESSEE HAS CLA IMED UNABSORBED DEPRECIATION BROUGHT FORWARD FOR MORE TH AN EIGHT YEARS WHICH IS NOT ALLOWABLE AS PER CLAUSE (II)(B) OF SUBSECTION (2) OF SECTION 32(2) OF THE INCOME TAX ACT, 1961 (H EREINAFTER THE ACT). 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. FIRST A PPELLATE AUTHORITY. BEFORE THE LD. CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE WHICH HA S BEEN REPRODUCED AT PARA-10 ON PAGE-5 TO 8 OF THE LD. CIT (A)S ORDER. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS LT D. 354 ITR 244 HELD THAT UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR PRIOR TO 2000-01 AND 2001-02 BROUGH T FORWARD TO SUBSEQUENT ASSESSMENT YEARS SHALL BE ADD ED TO THE DEPRECIATION ALLOWANCES FOR THE SAID ASSESSMENT YEA R AND SHALL BE DEEMED TO BE PART OF THAT UNABSORBED DEPRECIATIO N AS PER 4 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. THE AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT, ACCORDINGLY, DELETED THE ADDITION MADE BY THE AO TO WARDS DISALLOWANCE OF UNABSORBED DEPRECIATION OF AY 2000- 01. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE P RESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF THE I TAT, MUMBAI BENCH IN ASSESSEES OWN CASE FOR AY 2009-10 IN ITA NO.7065/MUM/2013, WHEREIN, THE CO-ORDINATE BENCH AF TER CONSIDERING THE RELEVANT PROVISIONS AND ALSO BY FOL LOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN GENER AL MOTORS LTD. (354 ITR 244), HELD THAT SET OFF OF THE UNABSO RBED DEPRECIATION WAS AVAILABLE TO THE ASSESSEE IN RESPE CT OF DEPRECIATION BROUGHT FORWARD FROM ASSESSMENT YEAR P RIOR TO AY 2002-03 AS PER THE AMENDED PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT. 5. THE LD. SR. DR FAIRLY ACCEPTED THAT THE ISSUE I S COVERED IN THE FAVOUR OF THE ASSESSEE BY THE DECISI ON OF THE ITAT, MUMBAI BENCH IN ASSESSEES OWN CASE IN ITA NO.7065/MUM/2013 FOR AY -2009-10. 5 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE OF BROUGHT FORWARD AND SET OFF OF UNABSORBED DEPRECIATION BEYOND THE PERIO D OF EIGHT YEARS IN VIEW OF AMENDED PROVISIONS OF SECTION 32 A S AMENDED BY THE FINANCE ACT, 2001 IS NO LONGER RES-JUDICATA . THE ITAT, IN ASSESSEES OWN CASE, FOR AY 2009-10 IN ITA NO.7065/MUM/2013 HAS CONSIDERED IDENTICAL ISSUE IN THE LIGHT OF PROVISIONS OF SECTION 32(2) AND BY FOLLOWI NG HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS IN DIA PVT. LTD. VS DCIT [354 ITR 244] AND ALSO BY CONSIDERING THE CBDT CIRCULAR NO.14 OF 2001 HELD THAT SET OFF OF UNABSOR BED DEPRECIATION OF EARLIER YEARS RELEVANT TO 2002-03 W AS AVAILABLE TO THE ASSESSEE AS THE SAME WAS GOVERNED BY PRE-AME NDED PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT, 196 1. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER: - 2.3 THE SECOND ISSUE UNDER THE APPEAL IS SET-OFF OF UNABSORBED DEPRECIATION PERTAINING TO AY 1999-2000. THE LD. AO , RELYING UPON THE DECISION OF SPECIAL BENCH, ITAT IN THE CASE OF TIME S GUARANTY LIMITED, ITA NO. 4917-18/MUM/2008 DATED 30/06/2010, OPINED T HAT SET-OFF OF THE SAME WAS NOT AVAILABLE TO THE ASSESSEE BEYOND E IGHT ASSESSMENT YEARS. 3. AGGRIEVED, THE ASSESSEE, INTER-ALIA, CONTESTED T HE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 04/10/2 013. THE COMMISSION DISALLOWANCE WAS DELETED BY LD. CIT(A) B Y MAKING FOLLOWING OBSERVATION:- 6 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. 2.1.13 THEREFORE, THE LAW REQUIRES THAT THE EXPEND ITURE, WHICH IS EXCESSIVE AND UNREASONABLE HAVING REGARD TO FAIR MA RKET VALUE OF GOODS, SERVICES OR FACILITIES, FOR WHICH PAYMENT IS MADE O R HAVING REGARD TO THE LEGITIMATE NEEDS OF THE BUSINESS OF THE ASSESSEE OR BENEFITS DERIVED THEREFROM SHALL NOT BE ALLOWED AS DEDUCTION. ALTHOU GH THE DISALLOWANCE IS BASED ON THE OPINION OF THE AO, WHICH HE CONSIDE RS AS EXCESSIVE OR UNREASONABLE, IT IS FUNDAMENTAL THAT THE AOS OPINI ON CANNOT BE ARBITRARY OR WITHOUT ANY BASIS. SUCH OPINION ALSO C ANNOT BE A SUBJECTIVE OPINION OF THE AUTHORITY. THEREFORE, THE OPINION OF THE AO SHOULD BE BASED ON THE MATERIAL OR EVIDENCE WITH RESPECT TO T HE APPELLANTS BUSINESS AND FAIR MARKET VALUE OF THE SERVICES AVAI LED BY IT. FURTHER, THE WORDS EXCESSIVE OR UNREASONABLE ARE NOT ABSOLUT E BUT ARE RELATIVE. MEANING, ASCERTAIN AS TO WHETHER THE PAYMENT IS EX CESSIVE OR UNREASONABLE, COMPARISON WILL HAVE TO BE MADE. TH EREFORE, COMPARISON WITH RESPECT TO FAIR MARKET VALUE IS IMPLICIT IN TH E SECTION, HOWEVER THE LEARNED AO HAS NOT DONE ANY COMPARISON. 2.1.14. THE PERUSAL OF THE ASSESSMENT ORDER SHOW TH AT THE LEARNED AO HAS COME TO CONCLUSION THAT THE APPELLANT HAS NOT D ERIVED BENEFIT FROM THE SERVICES AVAILED OR HAS STATED THAT THE PAYMENT IS EXCESSIVE AND UNREASONABLE WITHOUT HAVING ANY SUPPORTING MATERIAL . THE DECISION TO PAY THE COMMISSION FOR AVAILING SERVICES WOULD BE T HAT OF THE BUSINESS MAN, WHICH CANNOT BE QUESTIONED BY THE AO WITHOUT A NY MATERIAL. SECTION 40A(2) DOES NOT EMPOWER AO TO DISALLOW PAYM ENTS ON THE BASIS OF HIS SWEET WILL. FURTHER, AS FAR AS THE RATE OF T HE COMMISSION IS CONCERNED, AS MENTIONED, THE EXCESSIVE RATE OR UNRE ASONABLE RATE CAN ONLY BE ESTABLISHED BY CITING COMPARABLE CASES FOR AVAILING SIMILAR SERVICES. AS POINTED BY THE APPELLANT, THE LEARNED AO HAS NOT DISCUSSED THE FAIR MARKET VALUE OF THE SERVICES AVAILED BY IT . 2.1.15 IN ABSENCE OF ANY MATERIAL OF EVIDENCE AND D ISCUSSION ON FAIR MARKET VALUE OF AVAILING SIMILAR SERVICES, THE OPIN ION OF THE LEARNED AO IS A SUBJECTIVE OPINION, WHICH CAN BE SUCCESSFULLY CHA LLENGED. THEREFORE, I DO NOT FIND ANY FACTUAL OR LEGAL BASIS ON WHICH, TH E ADDITION CAN BE SUSTAINED. ACCORDINGLY, I DELETE THE ADDITION OF RS .1,71,99,634 MADE U/S 40A(2)(A). THE GROUND OF SET-OFF OF UNABSORBED DEPR ECIATION WAS ALLOWED AFTER CONSIDERING VARIOUS JUDICIAL PRONOUNCEMENTS, CBDT CIRCULAR AND STATUTORY PROVISIONS. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. SO FAR AS THE GROUND RELATING TO SET-OFF OF UNAB SORBED DEPRECIATION IS CONCERNED, WE CONCUR WITH THE SUBMISSIONS OF RESPEC TIVE REPRESENTATIVES THAT THE ISSUE STOOD SQUARELY COVER ED IN ASSESSEES FAVOR BY CATENA OF JUDGMENTS OF THE HIGHER AUTHORITY AND CBDT CIRCULAR AND IN PARTICULAR, BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF GENERAL MOTORS INDIA P. LTD. VS DCIT [3 54 ITR 244 23/08/2012] WHERE THE HONBLE COURT AFTER CONSIDERI NG THE RELEVANT STATUTORY PROVISIONS OF SECTION 32 AS AMENDED BY TH E FINANCE ACT, 2001 AND CBDT CIRCULAR NO. 14 OF 2001 HELD THAT SET-OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS WAS AVAILABLE TO THE ASSESSEE. FURTHER, 7 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. SPECIAL LEAVE PETITION [SLP] FILED BY THE REVENUE A GAINST THE SAID JUDGMENT HAS BEEN DISMISSED BY THE APEX COURT. THE REVENUE NEITHER COULD CONTROVERT THE SAME NOR WAS ABLE TO BRING ANY CONTRARY JUDGMENT ON RECORD. FOR EASE OF REFERENCE, THE RELEVANT PORT ION FROM THE SAID JUDGMENT IS EXTRACTED BELOW:- 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPREC IATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHIC H IT RELATES. 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, CARRIE D ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUC TIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OV ER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEE DING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEP RECIATION 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 ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNA BSORBED 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 SEC TION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 O F 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SE T OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBE D DEPRECIATION FROM A.Y.1997-98 UPTO THE A.Y.2001-02 GOT CARRIED FORWAR D TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE A CT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE JUDGMEN TS, WE HOLD THAT THE SET-OFF OF THE UNABSORBED DEPRECIATION WAS AVAILABL E TO THE ASSESSEE DURING THE IMPUGNED AY AND ACCORDINGLY, DISMISS GRO UND NUMBERS 2, 3 & 4 OF REVENUES APPEAL. 7. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH V IEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE FINDINGS OF THE LD. CIT(A) WHILE DELETING THE ADDITION MADE TOWARDS DISALLOWANCES OF BROUGHT FORWARD AND SET OFF OF UNABSORBED DEPRECIATION BEYOND THE P ERIOD OF EIGHT YEARS. HENCE, WE ARE INCLINED TO UPHOLD THE F INDINGS OF 8 ITA NO.6886/MUM/2016 M/S. BELLOR HOMES AND REALTORS PVT. LTD. THE LD. CIT(A), CONSEQUENTLY, APPEAL FILED BY THE R EVENUE IS DISMISSED. FINALLY, THE APPEAL FILED BY THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/02/2019. SD/- SD/- ( SANDEEP GOSAIN ) (G. MANJUNATHA) #'$ /JUDICIAL MEMBER %'$ / ACCOUNTANT MEMBER $ MUMBAI; & DATED : 15/02/2019 F{X~{T? P.S / /. .. &#'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. '() / THE APPELLANT (RESPECTIVE ASSESSEE) 2. *+() / THE RESPONDENT. 3. ,, $ -# ( ' ) / THE CIT, MUMBAI. 4. ,, $ -# / CIT(A)- , MUMBAI, 5. /0*#1 , ,''1 2 , $ / DR, ITAT, MUMBAI 6. 3!4 / GUARD FILE. ' / BY ORDER, /' (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI