ADIT, Bangalore V. Hazarath Mahaboob Subhani (HMS), Tumkur

ITA 748/BANG/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7571 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G KAMALADHAR
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 12A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.748/BANG/2012 ASSESSMENT YEAR : 2008-09 THE ASSISTANT DIRECTOR OF INCOME TAX (E), CIRCLE 17(1), BANGALORE. VS. M/S. HAZARATH MAHABOOB SUBHANI (HMS) EDUCATION SOCIETY, SHETTIHALLI MAIN ROAD, TUMKUR 572 103. PAN: AAATH 4185R APPELLANT RESPONDENT CO NO.27/BANG/2013 [IN ITA NO.748/BANG/2012] ASSESSMENT YEAR : 2008-09 M/S. HAZARATH MAHABOOB SUBHANI EDUCATION SOCIETY, TUMKUR. PAN: AAATH 4185R VS. THE ASSISTANT DIRECTOR OF INCOME TAX(E), CIRCLE 17(1), BANGALORE. CROSS OBJECTOR RESPONDENT REVENUE BY : SHRI G. KAMALADHAR, STANDING COUNSEL ASSESSEE BY : SHRI V. CHANDRASHEKAR, ADVOCATE DATE OF HEARING : 26.07.2017 DATE OF PRONOUNCEMENT : 22.09.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THE APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(APPEALS) ON THE SOLITARY GROUND THAT THE CIT(AP PEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR UNABSORBED DEPREC IATION OF EARLIER YEARS WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD NOT FILED RETURNS PRIOR TO A.Y. 2006-07, THEREBY REVENUE HAD NO OCCASION TO EX AMINE WHETHER THE ITA NO.748/BANG/2012 & CO NO.27/BANG/2013 PAGE 2 OF 6 CONDITIONS FOR ALLOWING THE DEPRECIATION WERE FULFI LLED IN THOSE YEARS AND THEREFORE, THE BENEFIT OF CARRY FORWARD CANNOT BE G RANTED. 2. THE ASSESSEE HAS ALSO FILED THE CROSS OBJECTION BY RAISING THE FOLLOWING CONCISED GROUNDS:- 1. THE ORDER OF THE LEARNED AUTHORITIES, IN SO FAR AS IT IS AGAINST THE RESPONDENT / CROSS OBJECTOR IS OPPOSED TO LAW, EQUITY, FACTS, WEIGHT OF EVIDENCE, PROBABILITIES AND CIRCUM STANCES OF THE CASE. 2. THE RESPONDENT/CROSS OBJECTOR DENIES ITSELF LIAB LE TO BE ASSESSED TO TAX OVER AND ABOVE THE DECLARED TOTAL I NCOME OF RS. NIL BY THE RESPONDENT/CROSS OBJECTOR UNDER THE FACT S AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF UNABSORBED DEPRECIATION OF RS .16,13,452/- AS AGAINST THE ACTUAL UNABSORBED DEPRECIATION AMOUN T OF RS. 79,15,745/- CLAIMED BY THE RESPONDENT / CROSS OBJEC TOR IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS ] FAILED TO APPRECIATE THAT FILING OF RETURN IS NOT MANDATOR Y FOR SETTING-OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS UNDER T HE PROVISIONS OF SECTION 32 OF THE ACT IN THE FACTS CIRCUMSTANCES OF THE CASE. 5. THE RESPONDENT/CROSS OBJECTOR CRAVES LEAVE TO ADD, ALTER, DELETE, SUBSTITUTE ANY OR ALL OF THE GROUNDS OF APP EAL ABOVE. 6. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF J USTICE AND EQUITY. 3. IN THE APPEAL AND CO, THE CONTROVERSY REVOLVES AROUND THE ALLOWABILITY OF UNABSORBED DEPRECIATION IN THE ABSE NCE OF FILING OF RETURN OF INCOME. THE FACTS IN BRIEF BORNE OUT FROM THE RECO RD ARE THAT THE ASSESSEE IS A TRUST ENGAGED IN RUNNING EDUCATIONAL INSTITUTI ONS AND GOT REGISTRATION ITA NO.748/BANG/2012 & CO NO.27/BANG/2013 PAGE 3 OF 6 U/S. 12A W.E.F. AY 2010-11. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE HAS BEEN SHOWING A SUM OF RS.5,68,32,533 IN ITS BALANCE SHEET ON THE LIABILITY SIDE AS BUILD ING AND EQUIPMENT FUND. THE AO ASKED THE ASSESSEE TO RECALCULATE THE ACTUAL WRITTEN DOWN VALUE FOR THE PURPOSE OF CLAIMING DEPRECIATION. AFTER SUCH R ECALCULATION BY THE AR OF THE ASSESSEE, THE AO COMPLETED THE ASSESSMENT AND A FTER ALLOWING DEPRECIATION OF THE CURRENT YEAR, THE AO ARRIVED AT A TOTAL INCOME AT RS.1,22,19,830. WHILE DOING SO, THE AO REJECTED T HE CLAIM OF THE ASSESSEE WITH REGARD TO UNABSORBED DEPRECIATION OF EARLIER YEARS ON THE GROUND THAT THE ASSESSEE DID NOT FILE RETURNS OF IN COME FOR THE EARLIER YEARS. 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APP EALS) CHALLENGING THE DISALLOWANCE OF UNABSORBED DEPRECIATION WITH TH E SUBMISSION THAT THE AO HAS NOT CONSIDERED THE UNABSORBED DEPRECIATION O F THE PREVIOUS ASSESSMENT YEARS. THE AO HAS FAILED TO APPRECIATE THE FACT THAT UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD AND SET OFF AGAINST INCOME OF THE SUCCEEDING ASSESSMENT YEAR, EVEN IF NO RETUR NS WERE FILED FOR THE PREVIOUS YEAR. RELIANCE WAS PLACED UPON THE JUDGME NT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. HARYANA HOTELS LTD., 276 ITR 521 AND 216 ITR 607. IT HAS FILED WRITTEN SUBMISSIONS BEFORE THE CIT(APPEALS) WHICH WERE CONFRONTED TO THE AO AND HI S COMMENTS WERE CALLED. THE CIT(APPEALS) BRIEFLY EXAMINED THE LEGA L PROVISIONS AND WAS OF THE VIEW THAT THERE WAS NO STIPULATION IN THE INCOM E-TAX ACT, 1961 [THE ACT] THAT FOR THE PURPOSE OF CLAIMING UNABSORBED D EPRECIATION OF EARLIER ITA NO.748/BANG/2012 & CO NO.27/BANG/2013 PAGE 4 OF 6 YEARS, RETURNS OF INCOME SHOULD BE FILED. HE ACCOR DINGLY DIRECTED THE AO TO ALLOW THE UNABSORBED DEPRECIATION. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL AND PLACED HEAVY RELIANCE UPON THE ASSESSMENT ORDER, WHEREAS T HE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE PROVISION S OF SECTION 32(2) OF THE ACT, ACCORDING TO WHICH, THE UNABSORBED DEPRECIATIO N OF PREVIOUS YEARS SHALL BE ADDED TO THE AMOUNT OF ALLOWANCE FOR DEPRE CIATION FOR THE FOLLOWING PREVIOUS YEAR AND TAKEN TO BE PART OF THAT ALLOWANC E. WHILE ALLOWING UNABSORBED DEPRECIATION, THERE IS NO CONDITION PREC EDENT IN THE ACT THAT RETURN OF INCOME SHOULD BE FILED FOR THE EARLIER YE ARS. 6. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT DEPRECIATION IS TO BE ALLOWED AS PER PROVISIONS OF SUB-SECTION (2) OF SECTION 32 OF THE ACT AND ACCORDING TO THIS SUB-SECTION, WHERE FULL EFFECT CANNOT BE GIVEN TO A NY ALLOWANCE UNDER SUB- SECTION (1) OF SECTION 32 IN ANY PREVIOUS YEAR OWIN G TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THE PREVIOUS YEAR O R FOR ANY OTHER REASON, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHIC H EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AM OUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AN D DEEMED TO BE PART OF THAT ALLOWANCE. SUB-SECTION (2) OF SECTION 32 IS E XTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 32 (2) WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY ITA NO.748/BANG/2012 & CO NO.27/BANG/2013 PAGE 5 OF 6 PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR G AINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB-SECTION (3) O F SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO T HE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PR EVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THER E IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDIN G PREVIOUS YEARS. 7. WHILE ALLOWING UNABSORBED DEPRECIATION, THERE IS NO CONDITION PRECEDENT IN THE ACT THAT RETURN OF INCOME SHOULD H AVE BEEN FILED FOR THE EARLIER YEARS. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE CIT(APPEALS) HAS RIGHTLY ADJUDICATED THE ISSUE FOLL OWING THE PROVISIONS OF THE ACT AND THE JUDGMENT OF HONBLE PUNJAB & HARYAN A HIGH COURT. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(AP PEALS), WE CONFIRM HIS ORDER. SINCE THE REVENUES APPEAL HAS BEEN DISMIS SED, THE CO OF THE ASSESSEE HAS BECOME INFRUCTUOUS AND STANDS DISMISSE D. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND CO OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF SEPTEMBER, 2017. SD/- SD/- ( JASON P. BOAZ ) ( SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 22 ND SEPTEMBER, 2017. / D ESAI S MURTHY / ITA NO.748/BANG/2012 & CO NO.27/BANG/2013 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.