ITO, Chandigarh V. M/s Steel Strips Ltd., Chandigarh

ITA 656/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1577 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: NISHITH BANSAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.656/CHD/2014 ASSESSMENT YEAR:2008-09 THE ITO, VS. M/S STEEL STRIPS LTD. WARD 5 (1) SCO 49-50, SECTOR 26 CHANDIGARH CHANDIGARH PAN NO. AACCS5076K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. MITTAL RESPONDENT BY : SH. NISHITH BANSAL DATE OF HEARING : 09/09/2015 DATE OF PRONOUNCEMENT :22/09/2015 ORDER PER ANNAPURNA MEHROTRA, A.M THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE LD. CIT(A), CHANDIGARH, DT. 25/04/2014. 2. THE ONLY ISSUE IN THE PRESENT APPEAL IS REGARDIN G CARRY FORWARD OF UNABSORBED DEPRECIATION OF AY 1998-99 TO 2000-01 BE YOND EIGHT ASSESSMENT YEARS. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE IMPU GNED ASSESSMENT YEAR THE APPELLANT HAD CLAIMED BROUGHT FORWARD DEPRECIATION LOSSES AMOUNTING TO RS. 2,27,51,933/- PERTAINING TO A.Y. 1998-99 TO 2000-01 . THE AO DENIED THE SAME ON THE GROUND THAT DEPRECIATION LOSSES PERTAINING TO A Y 1998-99 TO 2000-01 COULD BE CARRIED FORWARD ONLY FOR A PERIOD OF EIGHT YEARS AS PER THE PROVISIONS OF 2 SECTION 32(2) THEN PREVAILING AND AS PER THE DECIS ION OF HONBLE SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF M/S TIMES GUARANTY L TD. 131 TTJ 257. 4. IN APPEAL BEFORE THE LD. CIT(A), THE ASSESSSEE S UBMITTED THAT THE DECISION OF THE HONBLE SPECIAL BENCH, MUMBAI HAD BEEN REVER SED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S GENERAL MOTORS INDIA LTD. VIDE ORDER DT. 23/08/2012 IN THE SPECIAL CIVIL APPLICATION NO. 1773 OF 2012. CONSIDERING THE ABOVE SUBMISSION OF THE ASSESSEE THE LD. CIT(A) REJECTED THE DISALLOWANCE MADE BY THE AO AND UPHELD THE PLEA OF THE ASSESSEE BY HOLDI NG AT PARA 5 OF HIS ORDER AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT . IT IS CORRECT THAT THE DECISION OF HONBLE SPECIAL BENCH, MUMBAI IN THE CA SE OF M/S TIMES GUARANTY LTD. (SUPRA) HAS BEEN OVERRULED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S GENERAL MOTORS INDIA LTD. (SUPRA). HENCE, THE APPEL LANT IS ELIGIBLE FOR CARRY FORWARD OF UNABSORBED DEPRECIATION RELATING TO A.Y. 1998-99 TO 2001-01 EVEN BEYOND EIGHT YEARS AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ACCORDINGLY DELETED. 5. AGGRIEVED BY THE SAME THE REVENUE FILED THE PRES ENT APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT AP PRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT UNABSORBED DEPRECIATION RELAT ED TO THE ASSESSMENT YEARS 1998-99 TO 2000-01 IS TO BE DEALT WITH AS PER AMENDED PROVISION OF SECTION 32(2) AS AMENDED THROUGH FINANCE ACT, 2001 WHEREAS AS PER CBDT CIRCULAR NO. 14 OF 2001 AMENDED PROVISION SHALL APP LY TO THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING UNABSORBED DEPRECIATION FOR THE P ERIOD 1998-99 TO 2000-01 TO BE CARRIED FORWARD TO THE AY 2009-10 AND BEYOND EVEN THOUGH THE PERIOD OF 8 YEARS HAS ALREADY ELAPSED. 6. BEFORE US THE LD. DR REPEATED THE ARGUMENTS TAKE N BEFORE THE LD. CIT(A) AND STATED THAT AS PER THE PROVISIONS OF SECTION 32 (2) APPLICABLE TO THE ASSESSMENT YEAR 1998-99 TO 2000-01 UNABSORBED DEPRE CIATION COULD BE CARRIED FORWARD ONLY FOR A PERIOD OF EIGHT YEARS AND NOT BE YOND THAT. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE SPECIAL BENCH OF ITAT, MUMBAI IN THE CASE OF M/S TIMES GUARANTY LTD. (131 TTJ 257) AND STATED THAT THE UNABSORBED DEPRECIATION 3 PERTAINING TO THE PERIOD 1998-99 TO 2000-01, SHOULD NOT BE ALLOWED TO BE CARRY FORWARD TO THE IMPUGNED ASSESSMENT YEAR SINCE THE P ERIOD OF EIGHT YEARS HAD EXPIRED. 7. THE LD. AR RELIED ON THE ORDER OF HONBLE GUJARA T HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA LTD. (SUPRA) AND THE ORDER OF LD. CIT(A) IN SUPPORT OF HIS CONTENTION. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE DOCUMENTS PLACED BEFORE US. 9. WE FIND THAT THE ASSESSEE HAS CLAIMED CARRY FORW ARD OF UNABSORBED DEPRECIATION TO THE EXTENT OF RS. 2,27,51,933/- WHI CH PERTAINED TO AY 1998-99 TO 2000-01. THE PROVISIONS OF SECTION 32(2) DURING THI S PERIOD RESTRICTED THE SET-OF AND CARRY FORWARD OF UNABSORBED DEPRECIATION TO A PERIOD OF EIGHT YEARS. THEREAFTER THE PROVISION WAS AMENDED BY FINANCE ACT , 2001, ALLOWING UNABSORBED DEPRECIATION TO BE SET-OFF AND CARRIED F ORWARD INDEFINITELY. THE ISSUE BEFORE US IS WHETHER , FOR THE PURPOSE OF CARRY FOR WARD AND SET OFF OF UNABSORBED DEPRECIATION, THE PROVISIONS OF SECTION 32(2) PREVA ILING IN THE YEAR TO WHICH DEPRECIATION RELATED WOULD PREVAIL OR THE PROVISION S RELATING TO THE YEAR IN WHICH CARRY FORWARD AND SET OFF IS BEING CLAIMED WOULD PR EVAIL. 10. ON AN IDENTICAL ISSUE, THE SUPREME COURT, IN T HE CASE OF RELIANCE VS. CIT 120 ITR 921(SC), HAS HELD AS FOLLOWS: THE ASSESSMENT FOR ONE ASSESSMENT YEAR CANNOT, IN THE ABSENCE OF A CONTRARY PROVISION, BE AFFECTED BY THE LAW IN FORCE IN ANOTH ER YEAR. A RIGHT CLAIMED BY AN ASSESSEE UNDER THE LAW IN FORCE IN A PARTICULAR ASS ESSMENT YEAR IS ORDINARILY AVAILABLE ONLY IN RELATION TO A PROCEEDING PERTAINI NG TO THAT YEAR. THE APPELLANT CLAIMED SET OFF OF UNABSORBED LOSS OF THE ASSESSMENT YEAR 1950-51, AGAINST ITS INCOME FOR THE ASSESSMENT YEAR 1960-61, ON THE GROUND THAT BY VIRTUE OF S. 24(2) (III) OF THE INDIAN I.T. ACT, 1922, AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1957, IT HAD A VESTED RIGHT TO HAVE THE UNABSORBED LOSS CARRIED FORWARD FROM YEAR TO YEAR UNTIL IT WAS COMP LETELY ABSORBED AND THE SUBSEQUENT AMENDMENT MADE BY THAT ACT LIMITING THE PERIOD FOR CARRYING FORWARD TO EIGHT YEARS COULD NOT DIVEST THE APPELLA NT OF THAT VESTED RIGHT WHICH HAD ACCRUED TO IT: HELD, REJECTING THE APPELLANTS CLAIM, THAT WHEN TH E ASSESSMENT FOR THE ASSESSMENT YEAR 1960-61 WAS TO BE MADE AND S.24(2) WAS INVOKED, IT WAS S.24(2)AS IN FORCE IN THAT ASSESSMENT YEAR, VIZ., S . 24(2) AS AMENDED BY THE FINANCE 4 (NO. 2) ACT, 1957, WHICH HAD TO BE APPLIED: THERE W AS NO QUESTION OF THE ASSESSEE POSSESSING ANY ACQUIRED RIGHT UNDER THE LAW AS IT S TOOD BEFORE THE AMENDMENT. IN AS MUCH AS S.24(2) AS AMENDED IN 1957 GOVERNED THE ASSESSMENT FOR THE ASSESSMENT YEAR 1960-61, THE UNABSORBED LOSS FOR 19 50-51 COULD NOT BE CARRIED FORWARD FOR MORE THAN EIGHT YEARS AND COULD NOT THE REFORE BE SET OFF AGAINST THE INCOME OF THE APPELLANT FOR THE ASSESSMENT YEAR 196 0-61. IN VIEW OF THE ABOVE ,IT IS ABUNDANTLY CLEAR THAT T HE PROVISIONS OF SECTION 32(2) AS PREVAILING DURING THE IMPUGNED ASSESSMENT YEAR WOUL D APPLY TO THE PRESENT CASE. ACCORDINGLY THE ASSESSEE IS ENTITLED TO CARRY FORWARD ITS UNABSORBED DEPRECIATION BEYOND EIGHT YEARS, EVEN IF THE UNABSO RBED DEPRECIATION RELATES TO AY 1997-98 2000-01. 11. THE GUJARAT HIGH COURT IN THE CASE OF GENERAL M OTORS INDIA (P)LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (2013) 257 CTR 01 23 HAS DEALT WITH THIS ISSUE REFERRING TO CIRCULAR NO.14 OF 2001 AND HAS HELD A T PARA 38 OF ITS ORDER AS FOLLOWS : WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSOR BED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (A.Y. 2002-03) WILL BE DEALT WIT H IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32 (2)AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO. 14 OF 2001 CLARIFIE D THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECA TION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y. 1997-98 UPTO THE A.Y. 2001-02 GOT CARRIED FORWARD 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 ACT,2001 AND WERE AVAILABLE FOR CARRY FORWARD AND S ET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSO EVER. IN VIEW OF THE ABOVE DISCUSSION WE CONCUR WITH THE VIEW OF THE LD. CIT(A) AND HOLD THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD ITS UNABSORBED DEPRECIATION RELATING TO AY 1998-99 2000-01 AMOUNTING TO RS. 2 ,27,51,933/- IN THE IMPUGNED ASSESSMENT YEAR. 12. IN THE RESULT, APPEAL OF THE REVENUE IS THEREFO RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/09/2015 SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED :22/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR