DCIT RG 8(1), MUMBAI V. ASSOCIATED CABLES P.LTD, MUMBAI

ITA 6761/MUM/2013

• Counselvise Citation: 676119914 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

, E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , ! '# $ %, & ' BEFORE SHRI B.R. BASKARAN, AM AND SHRI AMIT SHUKLA, JM . / ITA NO.6761/MUM/2013 ( / ASSESSMENT YEAR : 2009-10 ) DCIT RG 8(1) R.NO.260A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. RD. MUMBAI 400020 .. / APPELLANT V/S ASSOCIATED CABLES P. LTD., AJANTA HOUSE, 2 ND FLOOR, 8/35, MORAL CO-OP INDL. ESTATE, M.V. ROAD, MIDC, MORAL NAKA, ANDHERI (E) MUMBAI 4000 59 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AABCA2809H REVENUE BY : SHRI ASGHAR ZAIN (DR) RESPONDENT BY : NONE ! '# / DATE OF HEARING 20.04.2015 $% &' ! '# / DATE OF ORDER 29 .04.2015 $ / ORDER '# $ %, & (! / PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE A GAINST ORDER DATED 19 TH AUGUST 2013, PASSED BY THE LEARNED COMMISSIONER (APPEALS)16, MUMBAI, FOR THE QUANTUM OF ASSESSMENT P ASSED UNDER ASSOCIATED CABLES P. LTD 2 SECTION 143(3), FOR THE ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING SET-OFF AND CARRY-FORW ARD OF UNABSORBED DEPRECIATION OF RS.84,933/- AND RS.2,20, 57,213/- RELATING TO A.Y. 1999-2000 AND A.Y. 200001 RESPECTI VELY WITHOUT APPRECIATING THAT CARRY FORWARD AND SET-OFF OF UNAB SORVED DEPRECIATION PERTAINING TO A.Y.1999-2000 AND A.Y.2000-01 IS NOT ALLOWABLE BEYOND EIGHT YEARS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING SET-OFF AND CARRY-FORW ARD OF UNABSORBED DEPRECIATION OF RS.84,933/- AND RS.2,20, 57,213/- RELATING TO A.Y. 1999-2000 AND A.Y. 200001 RESPECTI VELY WITHOUT APPRECIATING THAT AO HAD RIGHTLY DISALLOWED THE SAM E IN VIEW OF THE DECISION OF THE JURISDICTIONAL ITAT, SPECIAL BENCH, IN THE CASE OF TIMES GUARANTY LTD. 92010) 40 SOT 14.' 2. FACTS IN BRIEF ARE THAT, THE ASSESSEE COMPANY IS E NGAGED IN THE BUSINESS OF MANUFACTURING OF INSTRUMENTATION, POWER A ND CONTROL CABLES. THE LD. ASSESSING OFFICER ON THE PERUSAL OF THE TAX AUDIT REPORT NOTICED THAT THE ASSESSEE HAS CLAIMED CARRY-FOR WARD OF EARLIER YEARS BUSINESS LOSSES AND UNABSORBED DEPRECIATION AS UNDER: A.Y. UNABSORBED DEPRECIATION (RS) 1999 - 00 84,933 2000 - 01 2,20,57,213 2001 - 02 2,21,04,207 2002 - 03 1,99,73,261 2003 - 04 1,57,39,964 2004 - 05 1,24,19,612 2005 - 06 98,02,941 TOTAL 10,21,82,131 ASSOCIATED CABLES P. LTD 3 HE HELD THAT AS PER THE DECISION OF HONBLE SPECIAL BENCH, ITAT MUMBAI IN THE CASE OF TIMES GUARANTY LIMITED, CARRY F ORWARD AND SET- OFF OF UNABSORBED DEPRECIATION PERTAINING TO A.YS. 19 99-2000 & 2000- 01 IS NOT ALLOWABLE BEYOND THE PERIOD OF EIGHT YEARS. ACCORDINGLY, HE DISALLOWED THE ASSESSEES CLAIM FOR CARRY-FORWARD O F UNABSORBED DEPRECIATION FOR A.YS. 1999-00 & 2000-01 AMOUNTING TO RS.2,21,42,146/-. 3. BEFORE THE LD. CIT(A), THE ASSESSEE RELIED UPON TH E DECISION BY HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA P . LTD. V. DCIT (2012) 25 TAXMANN.COM 364 (GUJ.) AND OTHER DECISIONS OF THE ITAT MUMBAI BENCH FOLLOWING SAID DECISION OF THE HONBLE GUJARAT HIGH COURT. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND FOLLOWING THE DECISION OF GUJARAT HIGH COURT AND OTHER THE DECISIONS OF THE ITAT MUMBAI BENCH, DIRECTED THE AO TO ALLOW THE CARRY-FORWARD OF UNABSORBED DEPRECIATION IN ACCORDA NCE WITH THE AMENDED PROVISION OF SECTION 32(2) OF THE ACT. 4. ON BEHALF OF THE ASSESSEE NONE APPEARED DESPITE S ERVICE OF NOTICE. 5. AFTER HEARING THE LD. DR AND ON PERUSAL OF THE IMPU GNER ORDER, WE FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE O F GENERAL MOTORS INDIA PVT. LTD. AFTER CONSIDERING THE RELEVANT PROVISIO N OF SECTION 32(2) ASSOCIATED CABLES P. LTD 4 BEFORE AMENDMENT BY FINANCE ACT 2001 AND ALSO THE SUB SEQUENT PROVISIONS, OBSERVED AND HELD AS UNDER:- 'THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR CLARIFI ES THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO C ONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWA RD AND SET OFF OF UNAB- SORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FR OM THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DA Y OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACC ORDANCE WITH THE PRO- VISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001, AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSE- QUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY THE FINANCE ACT, 2001, IT WOULD HAVE INCORPORATED A PRO VISION TO THAT EFFECT- HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HE NCE, KEEPING IN VIEW THE PURPOSE OF THE AMENDMENT OF SECTION 32(2) OF TH E ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHILE CO NSTRUING THE TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE A PPLIED, GIVING FAIR AND REA- SONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF THE ASSESSEE OR THE REVENUE. BUT IF THE LEG ISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BEN EFIT WITHIN THE AMBIT O THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENIED. HOWEVER, CIRCULAR NO . 14 OF 2001 HAD CLARI- FIED THAT UNDER SECTION 32(2), IN COMPUTING THE PRO FITS AND GAINS OF BUSI- NESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDE SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVI SIONS OF SECTION 32(2) A AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE U NABSORBED DEPRE- CIATION ALLOWANCE AVAILABLE IN THE ASSESSMENT YEARS 1997-98, 1999-200 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SU CCEEDING YEARS, AND R ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD N OT BE SET OFF TILL THE ASSOCIATED CABLES P. LTD 5 ASSESSMENT YEAR 2002-03 THEN IT WOULD BE CARRIED FO RWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATIO N IS DEDUCTIBLE IN THE 40 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 BUSI- NESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM TH E 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 INC OME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, I T 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 THE 1ST DAY OF APRIL, 2 002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001. AND ONCE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED W ITH, THE UNABSORBED DEPRECIATION FROM THE ASSESSMENT YEAR 19 97-98 UP TO THE ASSESSMENT YEAR 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 THE FINANCE ACT, 2001, AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS A ND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. ASSOCIATED CABLES P. LTD 6 6. THIS DECISION OF HONBLE GUJARAT HIGH COURT HAVE BEEN FOLLOWED IN MANY CASES BY THE COORDINATE BENCH OF ITAT MUMBAI . THUS, THE DECISIONS OF THE CIT(A), FOLLOWING THE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. IS UPHELD. ACCORDINGLY , GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF APRIL 2015. SD/- SD/- SD/ - . . B.R. BASKARAN ACCOUNTANT MEMBER SD/ - '# $ % & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, )* DATED: 29.04.2015 PATEL $% ! '( ) *)' / COPY OF THE ORDER FORWARDED TO : (1) +' / THE ASSESSEE; (2) , / THE REVENUE; (3) -'( ) / THE CIT(A); (4) -' / THE CIT, MUMBAI CITY CONCERNED; (5) )01 '2, # 2, / THE DR, ITAT, MUMBAI; (6) 14 5 / GUARD FILE. ) ' ' / TRUE COPY $% / BY ORDER 6 / 7 , / (DY./ASSTT. REGISTRAR) # 2, / ITAT, MUMBAI