Derco Cooling Coils Ltd., Sec-bad, Secunderabad V. ITO, Ward 17(1), Hyderabad, Hyderabad

ITA 641/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2449 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 01-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2016
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. AY. APPELLANT RESPONDENT 639/HYD/16 2009-10 M/S. DERCO COOLING COILS LTD., SECUNDERABAD [PAN: AAACD7314H] THE INCOME TAX OFFICER, WARD-17(1), HYDERABAD 640/HYD/16 2010-11 641/HYD/16 2009-10 642/HYD/16 2010-11 FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI V. SREEKAR, DR DATE OF HEARING : 01-06-2017 DATE OF PRONOUNCEMENT : 09-06-2017 O R D E R THESE FOUR APPEALS ARE BY ASSESSEE AGAI NST SIMILAR ORDERS FOR AYS. 2009-10 & 2010-11 DT. 26-02-2016 AND 29-02 -2016. IN EACH OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), HE HAS CONSIDERED BOTH APPEALS PREFERRED ON ORDERS U/S 143(1) AND 154 OF THE INCOME TAX ACT [ACT] IN EACH ASSESSMENT YEAR . SINCE COMMON ISSUES ARE INVOLVED IN ALL THE FOUR APPEALS, THEY ARE HEARD TOGETHER AND DISPOSED OF BY THIS ORDER. 2. THE ONLY ISSUE FOR ADJUDICATION IN ALL THESE FOU R APPEALS IS WITH REFERENCE TO SET-OFF OF CARRY FORWARD DEPRECIATI ON OF EARLIER YEARS. ASSESSEE FILED ITS RETURN OF INCOME WITH THE CEN TRAL M/S. DERCO COOLING COILS LTD., :- 2 - : PROCESSING CENTRE (CPC) CLAIMING CERTAIN SET-OFF. S INCE THE RETURNS WERE PROCESSED MECHANICALLY, THE DEFICIENCY IN PLACI NG THE CLAIMS IN RESPECTIVE COLUMNS HAS RESULTED IN NOT ALLOWING THE SET-OFF DEPRECIATION. ASSESSEE PREFERRED AN APPLICATION U/S . 154 WHICH WAS REJECTED AS THE CPC WAS NOT EMPOWERED TO RECTIFY TH ESE MISTAKES IN THE ABSENCE OF RECORD. ACCORDINGLY, ASSE SSEE PREFERRED APPEALS ON BOTH INTIMATION U/S. 141 AS WELL AS ORDER U /S 154 IN EACH ASSESSMENT YEAR. THERE ARE OTHER ADJUSTMENTS ALSO ON WHICH ASSESSEE WAS AGGRIEVED AND CIT(A) HAS GIVEN RELIEF. 3. THE ONLY ISSUE WHICH WAS TAKEN UP FURTHER AP PEAL IS WITH REFERENCE TO SET-OFF OF DEPRECIATION. LD.CIT(A) IN HI S ORDER HAS ALREADY DIRECTED THE AO VIDE PARA 7.2 TO EXAMINE THE C ONTENTIONS AND CLAIM OF ASSESSEE AND TO ALLOW SET-OFF OF UN-ABS ORBED DEPRECIATION, AFTER EXAMINATION OF PREVIOUS YEARS RETU RNS AND THE DATA AVAILABLE ON RECORD. HOWEVER, WHILE GIVING SUCH DIRECTION, HE ALSO HAD PLACED CERTAIN LIMITATIONS VIDE PARA 7.3 AND 7.4 OF THE ORDER. EVEN THOUGH DEPRECIATION UPTO 1996-97 WAS ALLO WED TO BE CARRIED FORWARD AND SET-OFF, THE DEPRECIATION PERTAINI NG TO AY. 1997-98 TO 2001-02 WAS DIRECTED TO BE SUBJECTED TO LIM IT OF EIGHT YEARS, AS PER THE THEN EXISTING PROVISIONS. EVEN THOUG H LD.CIT(A) NOTICED AND ANALYSED THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT-2 OF 1996 W.E.F. 1 ST APRIL, 1997 AND SUBSEQUENT AMENDMENT BY FINANCE ACT, 2001 W.E.F. 1 ST APRIL, 2002, WHICH RESTORED THE POSITION AS EXISTED PRIOR TO 1 ST APRIL, 1997, HE HOWEVER, DIRECTED THAT THE DEPRECIATION FOR AY. 1997-9 8 REMAINING UN-ABSORBED WILL BE GOVERNED BY THE UN-AMENDED PROV ISIONS AND WILL NOT BE CARRIED FORWARD BEYOND EIGHT YEARS. ASSE SSEE IS AGGRIEVED ON THESE DIRECTIONS AND RAISED THE GROUNDS A CCORDINGLY. M/S. DERCO COOLING COILS LTD., :- 3 - : 4. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P. LTD., VS. DY. COMMISSIONER OF INCOME TAX [354 ITR 244] (GUJ). THIS DECISION WAS CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF DY. COMMISSIONER OF INCOME TAX VS. FENOPLAST LTD., [42 IT R (TRIB) 138] (HYDERABAD), WHICH IS AS UNDER: 6.2 THE HON'BLE GUJARAT HIGH COURT HAD DISCUSSED T HE ISSUE OF CARRYING FORWARD OF UNABSORBED DEPRECIATION AT LENG TH IN THE CASE OF GENERAL MOTORS INDIA P. LTD. V. DEPUTY CIT [2013] 3 54 ITR 244 (GUJ) IN THE ORDER DATED AUGUST 23, 2012 AND HELD THAT THE UNABS ORBED DEPRECIATION CAN BE CARRIED FORWARD TO THE SUBSEQUENT YEARS WITH OUT ANY RESTRICTION. REFERRING TO AMENDMENT THROUGH FINANCE ACT, 2001 TH E HON'BLE GUJARAT HIGH COURT HELD THAT (PAGE 266) ' ... ACCORDINGLY T HE AMENDMENT DISPENSES WITH THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWA RD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABL E FROM THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2002 (ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE F INANCE ACT, 2001 AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEE N TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY THE FINANCE ACT, 2001 , IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, I T DOES NOT CONTAIN ANY SUCH PROVISION. HENCE, KEEPING IN VIEW THE PURPOSE OF THE AMENDMENT OF SECTION 32(2) OF THE ACT A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING THE TAXING STATUTES, RUL E OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONST RUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF THE A SSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFIT WITHIN THE AMBIT OF THE SECT ION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE AS SESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROF ESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SEC TION 32 S HALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AS AMEND ED BY THE FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWA NCE AVAILABLE IN THE ASSESSMENT YEARS 1997-98, 1999-2000, 2000-01 AND 20 01-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF T ILL THE ASSESSMENT YEAR M/S. DERCO COOLING COILS LTD., :- 4 - : 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE T IME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS.' 6.3 HAVING CONSIDERED THE CIRCULAR NO. 762 DATED FE BRUARY 18, 1998, CIRCULAR NO. 14 OF 2001 DATED NOVEMBER 22, 20 01 AND ALSO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF GENERAL MOTORS INDIA P. LTD. V. DEPUTY CIT [2013] 354 ITR 244 (GUJ ), THE UNABSORBED DEPRECIATION OF EARLIER YEARS INCLUDING ASSESSMENT YEAR 1996-97 CAN BE CARRIED FORWARD TO THE SUCCEEDING YEARS WITHOUT ANY TIME LIMIT. ACCORDINGLY, THE FIRST THREE GROUNDS OF APPEAL ARE ALLOWED.' 7. AS THINGS STAND NOW, THE RESTRICTION OF EIGHT YE ARS WAS REMOVED. EVEN THOUGH THE SPECIAL BENCH DECISION OF THE INCOM E-TAX APPELLATE TRIBUNAL IN THE CASE OF DEPUTY CIT V. TIMES GUARANT Y LTD. I.T.A. NOS. 4917 AND 4918/MUM/2008 [2010] 4 ITR (TRIB) 210 (MUMBAI) WAS RELIED ON BY THE COMMISSIONER OF INCOME-TAX AT THE TIME OF PASSI NG THE ORDER UNDER SECTION263, SUBSEQUENTLY, THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA P. LTD. V. DEPUTY CIT [2013] 3 54 ITR 244 (GUJ) HAS HELD THAT RESTRICTION IS NOT VALID AND UNABSORBED D EPRECIATION COULD BE SETOFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. IN VIEW OF THIS, I AGREE WITH THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) AND REITERATE THAT THE ASSESSEE IS ENTITLED TO SET OFF THE CARRIED FORWARD DEPRECIATION OF THE ASSESSMENT YEARS 1996-97 AND 19 97-98. IN VIEW OF THIS, WE DIRECT THE ASSESSING OFFICER TO MODIFY THE ORDERS IF NOT DONE SO FAR AND ALLOW THE SET-OFF ACCORDINGLY. 4.1. NOT ONLY THAT, IN THE CASE OF MOTOR AND GENERAL F INANCE LTD., VS. INCOME TAX OFFICER AND ANOTHER [393 ITR 60] (DE LHI) IT WAS HELD THAT: HELD, ALLOWING THE PETITION.. THE BENEFIT OF CARR YING FORWARD THE DEPRECIATION WAS LIMITED BY THE PRE-EXISTING RULING THAT IT COULD BE DONE FOR EIGHT YEARS. ALL THAT THE AMENDMENT BY THE FINANCE ACT, 2002 DID, WITH EFFECT FROM APRIL 1, 2002, WAS TO REMOVE THE CAP WH ICH MEANT THAT THE PREVIOUSLY LIMITED BENEFIT WAS NOT SUBJECTED TO SUC H RESTRICTIONS. 5. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS OF THE HON'BLE HIGH COURTS AND ALSO WITH THE DECISION OF THE CO-ORDIN ATE BENCH ON SIMILAR FACTS, I HOLD THAT ASSESSEE IS ENTITLED TO SE T-OFF OF UN- ABSORBED DEPRECIATION PERTAINING TO THE PERIOD 1997- 98 TO 2001-02 ALSO AND THE RESTRICTION OF EIGHT YEARS DOES NOT APPLY. AO IS M/S. DERCO COOLING COILS LTD., :- 5 - : DIRECTED TO MODIFY THE ORDERS ACCORDINGLY, IF NOT ALR EADY DONE. GROUNDS ARE ACCORDINGLY CONSIDERED ALLOWED. 6. IN THE RESULT, ALL THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH JUNE, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 9 TH JUNE, 2017 TNMM COPY TO : 1. M/S. DERCO COOLING COILS LTD., 133, R.P. ROAD, SECUNDERABAD. 2. THE INCOME TAX OFFICER, WARD-17(1), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-5, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.