Sayaji Hotels Limited, Baroda V. The Income tax Officer,Ward-4(3), Baroda

ITA 657/AHD/2012

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5849 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 19-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A KHAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB

Judgement Text

ITA NOS.: 655, 656 AND 657/AHD/2012 ASSESSMENT YEARS: 2004-05, 2005-06 AND 2006-07 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND MAHAVIR PRASAD, JUDICIAL MEMBER ITA NOS.: 655, 656 AND 657/AHD/2012 ASSESSMENT YEARS: 2004-05, 2005-06 AND 2006-07 SAYAJI HOTELS LIMITED VS. INCOME TAX OFFICER OPP RAJASHRI TALKIES, KALAGHODA WARD 4(3), VADODARA . SAYAJIGUNJ, VADODARA 390 005 [PAN:AADCS2086A] (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S N SOPARAKAR ALONG WITH PARIN SHAH RESPONDENT BY: SHRI M S A KHAN DATE OF HEARING : 19.09.2018 DATE OF PRONOUNCEMENT 14.12.2018 O R D E R PER BENCH: 1. THESE THREE APPEALS PERTAIN TO THE SAME ASSESSEE , INVOLVE INTERRELATED ISSUES AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, TH EREFORE, ALL THE THREE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER . 2. GRIEVANCES RAISED IN THESE APPEALS ARE AS FOLLOW S: ITA NO.655/AHD/2012; AY 2004-05 1) THE LEARNED CIT ( A) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE ACTION OF THE ID. AO NOT ALLOWING THE SET OFF OF THE LOWER OF THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AS APPEARING IN THE BOOK S OF ACCOUNT OF THE ASSESSEE COMPANY AS AT 01.04.2003 AMOUNTING IN AGGREGATE RS. 12,86,76,662/- FROM THE PROFIT FOR THE FINANCIAL YEAR 2003-04 TO ARRIVE AT THE BOOK PROFIT AS ENVISAGED IN SUB-CLAUSE (III) OF CLAUSE (I) OF EXPLANATION 1 TO SUB-SECTION (2) OF THE SEC. 115JB THOUGH CLAIMED IN THE RETURN OF INCOME. THE ID. CIT(A) M ISERABLY FAILED TO APPRECIATE THAT S. 115JB IS A CODE BY ITSELF AND HEN CE THE REDUCTION OF AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS T O BE ALLOWED AS PER BOOKS KEPT AS PER THE COMPANIES ACT. THE BOOK PROFIT COMPUTED BY APPELLANT BE ACCEPTED. 2) THE ID. CIT(A) FURTHER ERRED BOTH IN LAW AND ON F ACTS IN HOLDING THAT UNABSORBED DEPRECIATION AND BUSINESS LOSSES AS PER BOOKS FOR A.Y. 2000-01 AND 2001-02 HAD BEEN SET OFF IN A.Y. 2003-04 AND HENCE THE REDUCTION CLAIMED BY THE APPELLANT IN A.Y. 2004-05 WAS NOT CORRECT. 3) THE ID. CIT(A) FURTHER ERRED BOTH IN LAW AND ON F ACTS IN OBSERVING THAT THE APPELLANT WAS NOT FOLLOWING THE METHOD OF BIFURCATIN G THE UNABSORBED DEPRECIATION ITA NOS.: 655, 656 AND 657/AHD/2012 ASSESSMENT YEARS: 2004-05, 2005-06 AND 2006-07 PAGE 2 OF 4 AND BUSINESS LOSS CONSISTENTLY AND THEREBY NOT ACCEP TING THE FIGURES FURNISHED AS PER AUDITED BOOKS OF ACCOUNTS WITH DETAILED EXPLANAT ION. ITA NO.656/AHD/2012; AY 2005-06 1) THAT THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS BY CONFIRMING THE DECISION OF THE ASSESSING OFFICER WHO DID NOT ALLO W THE SET OFF OF THE LOWER OF THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AS A PPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY AS AT 01.04.2004 AMO UNTING IN AGGREGATE RS.9,78,48,555/- FROM THE PROFIT FOR THE FINANCIAL Y EAR 2004-05 TO ARRIVE AT THE BOOK PROFIT AS ENVISAGED IN SUB-CLAUSE (III) OF CLA USE (I) OF EXPLANATION 1 TO SUB- SECTION (2) OF THE SEC. 115JB THOUGH CLAIMED IN THE RE TURN OF INCOME. THE ID. CIT(A) MISERABLY FAILED TO APPRECIATE THAT S. 115JB IS A CO DE BY ITSELF AND HENCE THE REDUCTION OF AMOUNT OF LOSS BROUGHT FORWARD OR UNABS ORBED DEPRECIATION IS TO BE ALLOWED AS PER BOOKS KEPT AS PER THE COMPANIES ACT. THE BOOK PROFIT COMPUTED BY APPELLANT BE ACCEPTED. 2) THE ID.CIT(A) FURTHER ERRED BOTH IN LAW AND ON FA CTS IN HOLDING THAT THE UNABSORBED DEPRECIATION WAS NIL AND HENCE THE REDUCT ION CLAIMED BY THE APPELLANT IN WAS NOT CORRECT. ITA NO.657/AHD/2012; AY 2006-07 1) THAT THE LEARNED CIT(A) HAS ERRED BY CONFIRMING T HE DECISION OF THE ASSESSING OFFICER WHO DID NOT ALLOW THE SET OFF OF T HE LOWER OF THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY AS AT 01.04.2005 AMOUNTING IN AGGR EGATE RS.5,38,81,897/- FROM THE PROFIT FOR THE FINANCIAL YEAR 2005-06 TO ARRIVE A T THE BOOK PROFIT AS ENVISAGED IN SUB-CLAUSE (III) OF CLAUSE (I) OF EXPLANATION 1 TO SUB-SECTION (2) OF THE SEC. 115JB THOUGH CLAIMED IN THE RETURN OF INCOME. THE ID. CIT(A) M ISERABLY FAILED TO APPRECIATE THAT S. 115JB IS A CODE BY ITSELF AND HEN CE THE REDUCTION OF AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS T O BE ALLOWED AS PER BOOKS KEPT AS PER THE COMPANIES ACT. THE BOOK PROFIT COMPUTED BY APPELLANT BE ACCEPTED. 2) THE ID. CIT(A) FURTHER ERRED BOTH IN LAW AND ON FA CTS IN HOLDING THAT THE UNABSORBED DEPRECIATION WAS NIL AND HENCE THE REDUCT ION CLAIMED BY THE APPELLANT IN WAS NOT CORRECT. 3) THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING THE GROUND NO. (VI) OF THE GROUNDS OF APPEAL WHICH WAS AS UNDER IN THE FORM NO. 3 5 OF THE APPEAL. VI ) THAT THE LD. AO HAS ERRED IN ADDING PRIOR PERIOD EX PENSES RS.10,37,385/- TO THE BOOK PROFIT AS THE SAME IS AG AINST THE PROVISIONS CONTAINED IN SEC.115JB OF THE ACT. 3. WHEN THESE APPEALS WERE CALLED OUT FOR HEARING, LEARNED REPRESENTATIVES FAIRLY AGREED THAT THE ISSUE IN APPEAL IS NOW COVERED BY T HE COORDINATE BENCH DECISION IN THE CASE OF VODAFONE ESSAR EAST LTD VS JCIT AND VICE VE RSA (ITA NOS 356 AND 343/KOL/2009; ITA NOS.: 655, 656 AND 657/AHD/2012 ASSESSMENT YEARS: 2004-05, 2005-06 AND 2006-07 PAGE 3 OF 4 ORDER DATED 15 TH DECEMBER 2017) WHEREIN THE COORDINATE BENCH DECISI ON HAS INTER ALIA OBSERVED AS FOLLOWS: 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE INSTAN T CASE RELATES TO THE UNABSORBED DEPRECIATION FOR RS.6,67,29,000/- PERTAI NING TO THE ASSESSMENT YEAR 2002-03 WHICH WAS NOT ALLOWED TO SET OFF WHILE DETERMI NING THE BOOK PROFIT FOR THE YEAR UNDER CONSIDERATION. AS PER THE AO THERE WAS NO LOSS IN THE ASSESSMENT YEAR 2002-03 AND THEREFORE THE AMOUNT OF DEPRECIATION PERT AINING TO THAT ASSESSMENT YEAR IS NOT ELIGIBLE FOR DEDUCTION IN THE SUBSEQUENT YEAR WHILE DETERMINING THE BOOK PROFIT U/S 115JB OF THE ACT. THUS, THE AO WHILE DETER MINING THE BOOK PROFIT FOR THE YEAR UNDER CONSIDERATION U/S 115JB OF THE ACT HAS NOT ALLOWED THE DEDUCTION OF THE DEPRECIATION FOR RS.6,67,29,000/- PERTAINING TO THE ASSESSMENT YEAR 2002-03. HOWEVER, THE LD CIT(A) REVERSED THE ORDER OF AO BY OB SERVING THAT CUMULATIVE BROUGHT FORWARD LOSSES AND CUMULATIVE UNABSORBED DEP RECIATION AS PER BOOKS ARE REQUIRED TO BE COMPARED BEFORE ALLOWING THE SET OFF WHILE DETERMINING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 9.1 NOW THE ISSUE BEFORE US ARISES FOR OUR ADJUDIC ATION SO AS TO WHETHER THE UNABSORBED DEPRECIATION FOR RS.6,67,29,000/- PERTAI NING TO THE ASSESSMENT YEAR 2002-03 IS ELIGIBLE FOR SET OFF WHILE DETERMINING THE BOOK PROFIT FOR THE YEAR UNDER CONSIDERATION IN THE GIVEN FACTS & CIRCUMSTANCES. AT THIS JUNCTURE WE FIND IMPORTANT TO REPRODUCE THE P ROVISIONS OF SECTION 115 JB OF THE ACT WHICH READS AS UNDER:- [SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN CO MPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN AN Y OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEING A COMP ANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON OR AFTER THE 1ST DAY OF APRIL, 2001, IS LESS THAN SEVEN AND ONE- HALF PER CENT OF ITS BOOK PROFIT, [SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUC H TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RATE OF SEVEN AND O NE-HALF PER CENT]. (2)------------ EXPLANATION.FOR THE PURPOSES OF THIS SECTION, BOO K PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION (2), AS INCREASED BY (A) -------- (B) (C) (D) (E) (F) IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (F) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY [(I) ---- ITA NOS.: 655, 656 AND 657/AHD/2012 ASSESSMENT YEARS: 2004-05, 2005-06 AND 2006-07 PAGE 4 OF 4 (II) (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR U NABSORBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (A) THE LOSS SHALL NOT INCLUDE DEPRECIATION; (B) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL; OR] A PLAIN LOOK AT THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION OF EITHER BROUGHT FORW ARD LOSSES OR UNABSORBED APPRECIATION WHICHEVER IS LESS AS PER THE BOOKS OF ACC OUNTS. IN THE CASE ON HAND WE FIND THAT THE AMOUNTS OF BROUGHT FORWARD LOSSES ARE GR EATER THAN THE AMOUNT OF UNABSORBED DEPRECIATION. THEREFORE, THE ASSESSEE IS E NTITLED FOR UNABSORBED DEPRECIATION AMOUNTING TO RS.37,35,12,000/- ONLY. I NDEED, THERE WAS A PROFIT IN THE ASSESSMENT YEAR 2002-03 FOR RS.2,79,09,000/- BEFORE THE CLAIM OF THE DEPRECIATION PERTAINING TO THAT AY 2002-03. HOWEVER, IN THE YEAR U NDER CONSIDERATION THE ASSESSEE HAD SHOWN BROUGHT FORWARD BUSINESS LOSSES OF RS.1,60,85,45,000/- AND UNABSORBED DEPRECIATION OF RS.37,35,12,000/-. AS THE UNABSORBED DEPRECIATION IS LOWER THAN THE AMOUNT OF BROUGHT FORWARD LOSSES THEREFO RE IN OUR CONSIDERED VIEW THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION OF UN ABSORBED DEPRECIATION WHILE DETERMINING THE PROFIT U/S 115JB OF THE ACT. THE AMOU NT OF UNABSORBED DEPRECIATION IS INCLUSIVE OF THE DEPRECATION PERTAIN ING TO THE ASSESSMENT YEAR 2002- 03 FOR RS.6,67,29,000/-. THUS, IN THE GIVEN FACTS AND CIRCUMSTANCES IT CANNOT BE CONCLUDED THAT THE AMOUNT OF UNABSORBED DEPRECIATION RS.6,67,29,000/- IS NOT ELIGIBLE FOR DEDUCTION WHILE THAT DETERMINING THE BO OK PROFIT U/S 115JB OF THE ACT. IN VIEW OF ABOVE, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF LD. CIT(A). HENCE, THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 4. RESPECTFULLY FOLLOWING THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH, WITH WHICH WE ARE IN CONSIDERED AGREEMENT, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO MAKE THE RECOMPUTATION OF THE SET OFF ON THAT BASIS. THE PLEA IS THUS ACCEPTED IN PRINCIPLE AND THE MATTER IS SENT T O THE ASSESSING OFFICER TO GRANT THE RESULTANT RELIEF. 5. IN THE RESULT, ALL THE THREE APPEALS ARE ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 14 TH DAY OF DECEMBER, 2018. SD/- SD/- PRAMOD KUMAR MAHAVIR PRASAD (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED THE 14 TH DAY OF DECEMBER, 2018 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD