ACIT, Circle - 1, Margao V. M/s Advani Pleasure Cruise Co. Pvt. Ltd, Goa

ITA 74/PAN/2013

• Counselvise Citation: 7424114 RSA 2013
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 18-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT RAJ SINGH
• Assessee Lawyers: SHAILENDRA KUMAR SINGH
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 74 & 75 /PNJ/2013 : (ASST. YEAR S : 200 4 - 0 5 & 2005 - 06 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE (1), MARGAO, (APPELLANT) VS. M/S. ADVANI PLEASURE CRUISE CO. PVT. LTD., C/O. RENAISSANCE GOA RESORTS, VARCA BEACH, VARCA, SALCETE - GOA. PAN : AAECA1243J (RESPONDENT) APPELLANT BY : AMRIT RAJ SINGH, DR RESPONDENT BY : SHAILENDRA KUMAR SINGH, CA DATE OF HEARING : 05/09/2013 DATE OF PRONOUNCEMENT : 25 /10/2013 O R D E R PER P.K. BANSAL : 1. THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE ORDERS OF CIT( A) DT. 15.3.2013 FOR A.Y. 2004 - 05 & 2005 - 06. THE ONLY ISSUE INVOLVED IN BOTH THE APPEALS FILED BY THE REVENUE RELATE TO THE SETTING OFF OF THE UNABSORBED DEPRECIATION WHILE CALCULATING THE BOOK PROFIT U/S 115JB. DURING THE A.Y 2004 - 05 THE ASSESSEE DECLAR ED NET BOOK PROFIT OF RS. 92,92,351/ - AFTER SETTING OFF UNABSORBED DEPRECIATION LOSS OF RS. 1,27,03,512/ - AND THUS DECLARED NET BOOK PROFIT OF RS. ( - )34,11,161/ - . SINCE THE UNABSORBED DEPRECIATION LOSS/BUSINESS LOSS IS MORE THAN THE BOOK PROFIT, SET OFF O F THE UNABSORBED DEPRECIATION OR BUSINESS LOSS FROM THE BOOK PROFIT WAS NOT POSSIBLE AND CLAIM OF UNABSORBED DEPRECIATION LOSS OF RS. 1,27,03,512/ - FROM THE BOOK PROFIT WAS IMPROPER. SIMILARLY, IN A.Y. 2005 - 06 ALSO THE ASSESSEE DECLARED NET BOOK PROFIT 2 ITA NOS. 74 & 75/PNJ/2013 (ASST. YEARS : 2004 - 05 & 2005 - 06) OF RS.55,39,946/ - AFTER SETTING OFF UNABSORBED DEPRECIATION LOSS OF RS.1,89,14,774/ - . IT HAS DECLARED NET BOOK PROFIT/LOSS OF RS. ( - )1,33,74,828/ - . WHEN ASKED BY THE AO, THE ASSESSEE SUBMITTED IN A.Y. 2004 - 05 THAT THE NET PROFIT AS PER AUDITED ACCOUNTS WAS RS. 97,60,468/ - . FURTHER, THERE WAS LOSS OF RS. 4,53,13,304/ - BROUGHT FORWARD FROM THE LAST YEAR. THUS, THE LOSS CONSISTS OF UNABSORBED DEPRECIATION OF RS. 1,27,03,512/ - AND THE BALANCE WAS THE BUSINESS LOSS AMOUNTING TO RS. 3,26,09,792/ - . THE LOWER OF TWO IS DEPRECIATION LOSS OF RS. 1,27,03,512/ - AND THEREFORE THE ASSESSEE SET OFF THE DEPRECIATION LOSS OF RS. 1,27,03,512/ - AS PROVIDED IN ITEM (III) OF SEC. 115JB(2) . SIMILAR EXPLANATION HAS BEEN GIVEN FOR A.Y. 2005 - 06. THE AO DID NOT AGREE AND HE SET OFF UNABSORBED DEPRECIATION AT NIL IN EACH OF THE ASSESSMENT YEAR. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A), IN BOTH THE A.YS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING FOR THE A.Y. 2004 - 05 AS UNDER : 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER, ARGUMENTS OF THE APPELLANT AND PROVISIONS OF S. 115 JB OF THE I.T. ACT. IN MY OPINION, THE A,O. WAS NOT JUSTIFIED IN NOT ALLOWING THE SET OFF OF UNABSORBED DEPRECIATION WHICH WAS LOWER THAN THE UNABSORBED BUSINESS LOSS OF THE APPELLANT, A GAINST THE BOOK PROFITS AS PER THE PROVISIONS OF THE ACT. THE LOGIC THAT THE UNABSORBED DEPRECIATION IS HIGHER THAN THE BOOK - PROFIT AND THEREFORE, NOTHING CAN BE SET - OFF IS PLAINLY ILLOGICAL. THEREFORE, THE A.O. IS DIRECTED TO ALLOW SET OFF OF UNABSORBED D EPRECIATION AMOUNTING TO RS.92,92,351/ - AGAINST BOOK - PROFITS OF RS. 92,92,351/ - . THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. AND FOR A.Y 2005 - 06 AS UNDER : 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER, ARGUMENTS OF THE APPELLANT AND PROVISIONS OF S. 115 JB OF THE IT. ACT. IN MY OPINION, THE A.O. WAS NOT JUSTIFIED IN NOT ALLOWING THE SET OFF OF UNABSORBED DEPRECIATION WHICH WAS LOWER THAN THE UNABSORBED BUSINESS LOSS OF THE APPELLANT, AGAINST THE BOOK PROFITS AS PER THE PROVISIONS OF THE ACT. THE LO GIC THAT THE UNABSORBED DEPRECIATION IS HIGHER THAN THE BOOK - PROFIT AND THEREFORE, NOTHING CAN BE SET - OFF IS PLAINLY ILLOGICAL. THEREFORE, THE A.O. IS DIRECTED TO ALLOW SET OFF OF UNABSORBED DEPRECIATION AMOUNTING TO RS. 13,10,0577 - AGAINST BOOK - PROFITS OF RS. 55,39,946/ - . THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. RESULTANT BOOK - PROFIT SHALL AMOUNT TO RS. 42,29,889/ - . IN THE 3 ITA NOS. 74 & 75/PNJ/2013 (ASST. YEARS : 2004 - 05 & 2005 - 06) RETURN OF INCOME THE ASSESSEE HA D DECLARED NIL PROFITS FOR TAXATION UNDER MAT AND THEREFORE, IN THE RESULT, THE APPEAL IS PAR TLY ALLOWED. 2. BEFORE US, THE ASSESSEE SUBMITTED CHART SHOWING THE COMPUTATION OF THE ADJUSTED BOOK PROFIT UNDER THE PROVISIONS OF SEC. 115JB WHICH READS AS UNDER : COMPUTATION OF ADJUSTED BOOK PROFIT UNDER THE PROVISIONS OF SECTION 115JB ASSESSMENT YEAR - 2001 - 02 LOSS EXCLUDING DEPRECIATION 96,79,555 BOOK DEPRECIATION 7,03,574 NET LOSS AS PER BOOKS 103,83,129 C.F. BUSINESS LOSS 2001 - 02 96,79,555 C.F UNABSORBED DEPRECIATION 2001 - 02 7,03,574 ASSESSMENT YEAR - 2002 - 03 LOSS EXCLUDING DEPRECIATION 250,31,341 BOOK DEPRECIATION 59,15,118 NET LOSS AS PER BOOKS 309,46,459 C.F. BUSINESS LOSS 2001 - 02 96,79,555 C.F. BUSINESS LOSS 2002 - 03 250,31,341 C.F. UNABSORBED DEPRECIATION 2001 - 02 7,03,574 C.F. UNABSORBED DEPRECIATION 2002 - 03 59,15,118 ASSESSMENT YEAR - 2003 - 04 LOSS EXCLUDING DEPRECIATION 7,95,201 BOOK DEPRECIATION 60,84,820 UNABSORBED DEPRECIATION AS PER BOOKS 68,80,021 C.F. BUSINESS LOSS 2001 - 02 96,79,555 C.F. BUSINESS LOSS 2002 - 03 250,31,341 4 ITA NOS. 74 & 75/PNJ/2013 (ASST. YEARS : 2004 - 05 & 2005 - 06) C.F. BUSINESS LOSS 2003 - 04 7,95,201 C.F. UNABSORBED DEP. 01 - 02 7,03,574 C.F. UNABSORBED DEP. 02 - 03 59,15,118 C.F. UNABSORBED DEP. 03 - 04 60,84,820 ASSESSMENT YEAR - 2004 - 05 NET PROFIT BEFORE DEPRECIATION AS PER BOOKS 15,50,613 LESS: BOOK DEPRECIATION 62,11,262 NET PROFIT AS PER BOOKS 92,92,351 APPLICATION OF SECTION 115JB NET PROFIT AS PER BOOKS 92,92,351 LESS: DEDUCTION ALLOWED U/S 115JB (2) (12,703,512) (LOSS AMOUNT WHICH EVER IS LESS (I) & (II) TO BE ALLOWED) C.F. UNABSORBED DEP. 01 - 02 7,03,574 C.F. UNABSORBED DEP. 02 - 03 59,15,118 C.F. UNABSORBED DEP. 03 - 04 60,84,820 TOTAL (I) 127,03,512 C.F. BUSINESS LOSS 2001 - 02 96,79,555 C.F. BUSINESS LOSS 2002 - 03 250,31,341 C.F. BUSINESS LOSS 2003 - 04 7,95,201 TOTAL (II) 355,06,097 BOOK PROFIT U/S 11SJB (3,411,161) AMOUNTS TO BE CARRIED FORWARD AS PER SUB SECTION (2) OF SECTION 115JB UNABSORBED DEPRECIATION 34,11,161 (10602408 - 9292351) BUSINESS LOSS 35,506,097 (9679555+250331341) ( - ) INCOME, HENCE TAX NIL ASSESSMENT YEAR - 2005 - 06 NET PROFIT BEFORE DEPRECIATION AS PER BOOKS 118,54,783 LESS: BOOK DEPRECIATION 63,14,837 NET PROFIT AS PER BOOKS 55,39,946 APPLICATION OF SECTION 115JB NET PROFIT AS PER BOOKS 55,39,946 5 ITA NOS. 74 & 75/PNJ/2013 (ASST. YEARS : 2004 - 05 & 2005 - 06) LESS: DEDUCTION ALLOWED U/S 115JB (2) (3,411,161) (LOSS AMOUNT WHICH EVER IS LESS (I) & (II) TO BE ALLOWED) C.F. UNABSORBED DEP. 01 - 02 - C.F. UNABSORBED DEP. 02 - 03 - C.F. UNABSORBED DEP. 03 - 04 34,11,161 TOTAL (I) 34,11,161 C.F. BUSINESS LOSS 2001 - 02 96,79,555 C.F. BUSINESS LOSS 2002 - 03 250,31,341 C.F. BUSINESS LOSS 2003 - 04 7,95,201 TOTAL (II) 355,06,097 BOOK PROFIT U/S 115JB 21,28,785 TAX ON THE ABOVE BOOK PROFIT IS PAID AT THE SPECIAL RATE OF UNDER MAT PROVISIONS AMOUNTS TO BE CARRIED FORWARD AS PER SUB SECTION (2) OF SECTION 115JB UNABSORBED DEPRECIATION NIL BUSINESS LOSS 347,10,896 NO FURTHER LOSSES TO BE ALLOWED U/S 115JB THE LD. AR ALSO RELIED ON THE DECISION OF THE ITAT, HYDERABAD BENCH IN DCIT VS. KIRBY BUILDING SYSTEMS INDIA LTD. IN ITA NOS. 1490/HYD/2008 AND 1509/HYD/2008 IN WHICH THIS TRIBUNAL HAS HELD THAT THE AGGREGATE OF THE UNABSORBED DEPRECIATION OR THE LOSS, WHICHEVER IS LESS AS PER THE BOOKS OF ACCOUNTS HAS TO BE REDUCED WHILE COMPUTING THE BOOK PROFIT U/S 115JB. 3. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE TAX AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATTER ON RECORD. WE NOTED THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE HON'BLE HYDERABAD BENCH IN ITA NOS. 1490/HYD/2008 AND 1509/HYD/2008 IN WHICH THIS TRIBUNAL HAS HELD AS UNDER : 6 ITA NOS. 74 & 75/PNJ/2013 (ASST. YEARS : 2004 - 05 & 2005 - 06) 3. WE HAVE ALSO CAREFULLY GONE THROUGH THE IMPUGNED ORDER OF THE CIT(A) AND THAT OF THE ASSESSING OFFICER. THE ASSESSING OFFICER FOUND THAT THE ACCOUNTS ARE PREPARED YEAR TO YEAR AND PROFIT OR LOSS IS COMPUTED YEAR WISE FOR TAX PURPOSES. THEREFORE, THE BOOK PROFIT U/S 115JB IS ALSO BE COMPUTED YEAR WISE. THE ASSESSING OFFICER FURTHER FOUND THAT THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS COMPUTED YEAR AFTER YEAR IS TO BE REDUCED FROM THE BOOK PROFIT. EXPLANATION L (III) TO SEC. 115 JB CLEARLY SAYS THAT THE AMOUNT OF LOSS OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT SHALL BE REDUCED WHILE COMPUTING THE INCOME FROM THE BOOK PROFIT . THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF AMLINE TEXTILES (P) LTD. EXAMINED THIS ISSUE ELABORATELY AND FOUND THAT THE UNABSORBED DEPRECIATION OR LOSS BROUGHT FORWARD FOR ALL THE EARLIER YEARS IS TO BE REDUCED FROM THE BOOK PROFIT FOR COMPUTING THE BOOK PROFIT U/S 115JB. SINCE THE MUMBAI BENCH OF THIS TRIBUNAL CONSIDERED THE ISSUE ELABORATELY AND FOUND THAT UNABSORBED DEPRECIATION OR LOSS BROUGHT FORWARD FOR EARLIER YEARS TAKEN TOGETHER IS TO BE REDUCED FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT U/S 115JB, IN OUR OPINION, THE CIT(A) HAS RIGHTLY FOUND THAT THE AGGREGATE OF THE UNABSORBED DEPRECIATION OR LOSS WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT SHALL BE REDUCED. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES. ACCORDINGLY, THE SAME IS CONFIRMED. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE DO NOT FIND ANY ILLEGALITY OR IN FIRMITY IN THE ORDER OF CIT(A) IN BOTH THE ASSESSMENT YEARS. IN OUR OPINION, THE CIT(A) HAS RIGHTLY ALLOWED THE SET OFF OF UNABSORBED DEPRECIATION TO THE ASSESSEE IN BOTH THE ASSESSMENT YEARS. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE STAND DISMISSED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 /10/2013. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 2 5 /10/ 2013 *SSL* 7 ITA NOS. 74 & 75/PNJ/2013 (ASST. YEARS : 2004 - 05 & 2005 - 06) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA