The Madras Aluminium Company Ltd., Salem V. ITO, Salem

ITA 750/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96646 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 17-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N RENGARAJ
• Assessee Lawyers: RAMESH PATODIA
• Keywords: Depreciation; Rectification of order; Opportunity of being heard; Retrospective amendment; Bad and doubtful debts; Unabsorbed depreciation
• Section: 143(3); 115JB; 154; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . , ' # , $ & BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NOS . 749 & 750/MDS/2013 ( / ASSESSMENT YEARS: 2004-05 & 2006-07) M/S. VEDANTA LTD., METTUR DAM R.S. POST BOX NO.4, SALEM-636 402. VS THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-I, SALEM PAN:AAACT7655D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. RAMESH PATODIA, C.A /RESPONDENT BY : MR. N.RENGARAJ, CIT /DATE OF HEARING : 18 TH NOVEMBER, 2015 /DATE OF PRONOUNCEMENT : 30 TH DECEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS),SALEM DATED 31.01.2013 AND 29.01.2013 FOR THE ASSESSMENT YEARS 2004-05 AND 2006-07 ARISING OUT OF THE ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTIO N 154 AND 143(3) OF THE ACT RESPECTIVELY. ITA NO.749/MDS/2013:- 2. THE ISSUE IN THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IS THAT THE COMMISSIONER O F INCOME TAX (APPEALS) ERRED IN NOT ACCEPTING THE CON TENTION OF THE ASSESSEE THAT ISSUE REGARDING ALLOWABILITY OF PROVISION 2 ITA NOS.749 & 750 /MDS/2013 FOR DOUBTFUL ADVANCES AND PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS WHILE COMPUTING THE INCOME UNDER SECTIO N 115JB OF THE ACT IS NOT A DEBTABLE ISSUE AND IS ALLOWABLE TO BE RECTIFIED UNDER SECTION 154 OF THE ACT AS A MISTAKE IS APPARENT FROM RECORD, SUCH ACTION OF THE COMMISSIONER OF INC OME TAX (APPEALS) IS ARBITRARY, UNWARRANTED, UNJUSTIFIED AN D ILLEGAL. 3. BRIEF FACTS ARE THAT ASSESSING OFFICER PASSED OR DER UNDER SECTION 154 OF THE ACT ON 31.12.2009 STATING THAT FOR THE ASSESSMENT YEAR 2004-05 WHILE PASSING THE FOLL OWING ORDERS NAMELY I) ORDER UNDER SECTION 154 DATED 20.05.2009 II) ASSESSMENT ORDER U/S.143(3) DATED 31.03.2006 III) ORDER UNDER SECTION 143(3) R.W.S 263 DATED 18. 10.2007 IV) ORDER UNDER SECTION 143(3) R.W.S.263 DATED 29.1 2.2008, AND WHILE COMPUTING TAXABLE INCOME UNDER SECTION 11 5JB OF THE ACT I) PROVISION OF ` 3,13,43,000/- MADE FOR DOUBTFUL ADVANCES ON ACCOUNT OF INVESTMENT IN SHARES OF M/S. STERLITE INDUSTRIES LTD. AND II) PROVISION MADE FOR DIMINUTI ON IN THE VALUE OF INVESTMENT MADE IN THE SHARES OF M/S.INDIA FOILS LTD. FOR ` 8 CRORES WERE ALLOWED AS DEDUCTION. IT IS MENTIONE D IN 154 ORDER THAT THE ABOVE DEDUCTIONS WERE ALLOWED IN 3 ITA NOS.749 & 750 /MDS/2013 ACCORDANCE WITH VARIOUS HIGH COURT DECISIONS AND T HE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF C IT VS.HCL COMNET SYSTEMS & SERVICES (305 ITR 409). HOWEVER, THE FINANCE ACT, 2009 AMENDED THE PROVISI ONS OF SECTION 115JB WITH RETROSPECTIVE EFFECT FROM 01.04. 2001. THUS, THE ASSESSING OFFICER WAS OF THE VIEW THAT IN VIEW OF THE AMENDMENT DEDUCTIONS ALLOWED AS PER ORDERS REFE RRED TO ABOVE REQUIRE TO BE ADDED BACK. THEREFORE, HE PASSE D ORDER UNDER SECTION 154 OF THE ACT DISALLOWING THE PROVIS ION FOR DOUBTFUL DEBTS AND DIMINUTION IN VALUE OF INVESTME NTS AND COMPUTED INCOME FOR THE ASSESSMENT YEAR 2004-05 ACCORDINGLY. THE ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CONTENDING THA T ADJUSTMENT MADE BY THE ASSESSING OFFICER IN VIEW OF THE RETROSPECTIVE AMENDMENT OF THE PROVISION IS A HIGHL Y DEBATABLE ISSUE AND IS OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTION 154 OF THE ACT. HOWEVER, THE COMMISSIONE R OF INCOME TAX (APPEALS) SUSTAINED THE DISALLOWANCE REJ ECTING THE CONTENTIONS OF THE ASSESSEE THAT IT IS OUTSIDE THE SCOPE OF PROVISIONS OF SECTION 154 OF THE ACT. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESS ING OFFICER DISALLOWED THE PROVISION MADE FOR DOUBTFUL ADVANCES 4 ITA NOS.749 & 750 /MDS/2013 AND PROVISION MADE FOR DIMINUTION IN VALUE OF INVES TMENTS BY PASSING THE ORDER UNDER SECTION 154 OF THE ACT AMEN DING VARIOUS ORDERS EARLIER PASSED FOR THE ASSESSMENT YE AR 2004- 05 AND THIS IS NOT PERMISSIBLE UNDER SECTION 154 OF THE ACT AS BOTH THE ISSUES WHICH WERE EARLIER ALLOWED CANNO T BE DISALLOWED UNDER RECTIFICATION PROCEEDINGS AS THEY ARE HIGHLY DEBATABLE ISSUES. COUNSEL FURTHER SUBMITS THAT BASE D ON THE RETROSPECTIVE AMENDMENT RECTIFICATION ORDER UNDER S ECTION 154 MAKING DISALLOWANCE IS NOT PERMISSIBLE. 5. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT ASSESSI NG OFFICER IS FULLY JUSTIFIED IN PASSING RECTIFICATION ORDER IN VIEW OF THE RETROSPECTIVE AMENDMENT MADE TO SECTION 115JB O F THE ACT, WHEREIN IT WAS BROUGHT IN AN AMENDMENT FOR NOT ALLOWING PROVISION FOR DOUBTFUL DEBTS AND DIMINUTION IN VAL UE OF INVESTMENTS. HE VEHEMENTLY SUPPORTS THE ORDERS OF L OWER AUTHORITIES. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. AS FAR AS THE CONTENTION OF THE COUNSEL FOR THE ASS ESSEE THAT 154 ORDER CANNOT BE PASSED FOR MAKING DISALLOWANCE IN VIEW OF THE RETROSPECTIVE AMENDMENT BY THE STATUTE, WE A RE NOT FULLY IN AGREEMENT AS THE ASSESSING OFFICER HAS GOT AMPLE 5 ITA NOS.749 & 750 /MDS/2013 POWER TO RECTIFY UNDER SECTION 154 OF THE ACT WHERE THE STATUTE PROVIDES FOR DISALLOWANCE WITH RETROSPECTIV E EFFECT. 7. COMING TO THE MERITS OF THE DISALLOWANCE IN RESP ECT OF PROVISION FOR DOUBTFUL DEBTS, COUNSEL FOR THE ASSES SEE PLACING RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF TH IS TRIBUNAL IN THE CASE OF M/S. MURUGAPPA MORGAN THERMAL CERAMI CS LTD. VS. ACIT IN ITA NO.2208/MDS/2010 DATED 02.05.2 013 SUBMITS THAT PROVISION FOR BAD AND DOUBTFUL DEBTS THOUGH IT IS CALLED A PROVISION WHEN ONCE IT IS WRITTEN OFF AS DEBTS IN THE BOOKS, IT HAS TO BE ALLOWED AS DEDUCTION. WE HAVE P ERUSED THE ORDER OF THIS TRIBUNAL IN ITA NO.2208/MDS/2010 DATED 02.05.2013 WHEREIN THE TRIBUNAL HELD AS UNDER:- 9. COMING TO THE MERITS OF THE ISSUE, NO DOUBT, ASSESSEE HAD CLAIMED THE AMOUNT AS PROVISION FOR BA D AND DOUBTFUL DEBTS. NEVERTHELESS, A LOOK AT THE AUDITE D FINAL ACCOUNTS OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR WOULD SHOW THAT AT SCHEDULE 7, WHICH IS THE BREAK-U P OF CURRENT LIABILITIES AND PROVISIONS AS ON 31.3.1998 (PAPER- BOOK PAGE 7), HAS NO AMOUNT WHATSOEVER UNDER THE HE AD PROVISION FOR BAD DEBTS. A LOOK AT THE BREAK-UP OF SUNDRY DEBTORS BALANCE GIVEN AT SCHEDULE 6, PLACED AT PAPE R-BOOK PAGE 6, SHOWS THAT THE AMOUNT FOR PROVISION FOR BAD DEBTS HAS BEEN REDUCED BY THE ASSESSEE FROM SUCH DEBTS AN D ONLY THE BALANCE SHOWN IN THE BALANCE SHEET. THUS THOUGH THE ASSESSEE CALLED THE AMOUNT A PROVISION, WHAT WA S EFFECTIVELY DONE WAS ONLY A WRITE-OFF OF BAD DEBTS. HON'BLE APEX COURT IN THE CASE OF VIJAYA BANK (SUPRA) HAS H ELD THAT WHERE THERE IS A DEBIT IN THE PROFIT & LOSS ACCOUNT AS PROVISION FOR BAD AND DOUBTFUL DEBTS, BUT IF A CORR ESPONDING AMOUNTS STOOD OBLITERATED FROM LOANS AND DEBTS ON T HE ASSET SIDE OF THE BALANCE SHEET, IT IS NOT NECESSAR Y FOR THE ASSESSEE TO SHOW THAT THE WRITE-OFF IS EFFECTED IN EACH AND 6 ITA NOS.749 & 750 /MDS/2013 EVERY INDIVIDUAL ACCOUNT OF THE DEBTORS. WE ARE OF THE OPINION THAT THIS DECISION OF HON'BLE APEX COURT CO MES TO THE AID OF THE ASSESSEE. NEVERTHELESS, THE SAID DE CISION WAS GIVEN IN THE CONTEXT OF CLAIM UNDER NORMAL PROV ISIONS OF THE ACT, VIZ. SECTION 36(1)(VII) OF THE ACT. HO WEVER, AS POINTED OUT BY THE LEARNED A.R., HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. YOKOGAWA INDIA LTD. (20 4 TAXMAN 305), HAS HELD THAT IF BAD OR DOUBTFUL DEBT IS REDUCED FROM LOANS AND DEBTORS SHOWN IN THE BALANCE SHEET, EXPLANATION TO SECTION 115JA OR 115JB IS NOT AT ALL ATTRACTED. THUS EVEN THOUGH THE AMENDMENT TO THE A CT HAS BEEN MADE RETROSPECTIVELY, ASSESSEE CAN ALWAYS CLAIM THAT THE PROVISION FOR DOUBTFUL DEBTS WAS IN FACT R EDUCED FROM DEBTORS ACCOUNT AND THIS WAS NO MORE A PROVISI ON FOR DIMINUTION IN VALUE OF ASSETS OR PROVISION FOR ANY UNASCERTAINED LIABILITY. WE ARE OF THE OPINION THA T IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE CASE O F VIJAYA BANK (SUPRA) AND THAT OF HONBLE KARNATAKA HIGH COU RT IN THE CASE OF YOKOGAWA INDIA LTD. (SUPRA), CLAIM OF T HE ASSESSEE HAS TO SUCCEED. THE ADDITION OF ` 13,77,393/- MADE UNDER SECTION 115JA IS DELETED. 8. AS COULD BE SEEN FROM THE ABOVE, THE CO-ORDINATE BENCH HELD THAT EVEN THOUGH THE AMENDMENT TO THE A CT HAS BEEN MADE RETROSPECTIVELY THE ASSESSEE CAN ALWAYS CLAIM THAT PROVISION FOR DOUBTFUL DEBTS WAS IN FACT REDUC ED FROM DEBTORS ACCOUNT AND THIS WAS NO MORE A PROVISION FO R ANY UNASCERTAINED LIABILITY. IF THE ASSESSEE ESTABLISHE S THAT PROVISION FOR DOUBTFUL DEBTS WAS IN FACT REDUCED FR OM DEBTORS ACCOUNT AND IT IS NO MORE A PROVISION FOR DIMINUTIO N IN VALUE OF ASSETS OR PROVISION FOR UNASCERTAINED LIABILITY, IT HAS TO BE ALLOWED AS A DEDUCTION. THEREFORE, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAM INE THE FACTS IN ASSESSEES CASE AND DECIDE THE ISSUE AFRE SH KEEPING 7 ITA NOS.749 & 750 /MDS/2013 IN VIEW THE DECISION OF THIS TRIBUNAL IN THE CASE O F M/S. MURUGAPPA MORGAN THERMAL CERAMICS LTD. (SUPRA). 9. WE ALSO FIND THAT COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT ON EXAMINATION OF THE LEDGE R COPY FURNISHED IN THE CASE OF S.S.KANTILAL ISHWARLAL SEC URITIES P.LTD., THE ASSESSEE HAS PURCHASED SHARES OF STERLI TE INDUSTRIES LTD. ON VARIOUS DATES FOR WHICH THE AMO UNTS WERE ADVANCED. SINCE THE ADVANCES COULD NOT BE RECOVERED THE AMOUNT WAS WRITTEN OFF. IN SUCH CIRCUMSTANCES, IT HAS TO BE VERIFIED IF THE CLAIM OF WRITE OFF OF ADVANCES ARE INDEED BAD AND WHETHER IT CAN BE CLAIMED AS BAD DEBTS. IT WAS ALSO OBSERVED THAT THE HONBLE APEX COURT IN THE CASE OF A.V.THOMAS & CO. VS. CIT (46 ITR 67) HELD THAT NON - RECOVERY OF ADVANCES GIVEN FOR PURCHASES OF SHARES TO A NEW COMPANY CANNOT BE HELD AS INCIDENTAL TO THE BUSINES S ACTIVITIES OF THE COMPANY AND THE SAME CANNOT BE HE LD AS BAD DEBTS. THUS, THE ASSESSING OFFICER SHALL EXAMIN E ALL THESE ASPECTS WHILE DECIDING THE ISSUE AFRESH, AFTE R PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 8 ITA NOS.749 & 750 /MDS/2013 ITA NO.750/MDS/2013:- 10. GROUND NOS. 1 TO 3 IN THE GROUNDS OF APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 RELATE TO LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION ON REINSTAT EMENT OF ECB WHETHER ELIGIBLE FOR DEDUCTION UNDER SECTION 1 15JB OF THE ACT OR NOT. 11. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHI LE COMPLETING THE ASSESSMENT IN THE NORMAL COMPUTATIO N AND ALSO IN THE COMPUTATION UNDER SECTION 115JB OF THE ACT ADDED BACK TO THE BOOK PROFITS AN AMOUNT OF ` 43,00,000/- REPRESENTING FOREIGN EXCHANGE ON EXTERNAL COMMERCIA L BORROWING (ECB) HOLDING THAT FOREIGN EXCHANGE FLUC TUATION ON ACCOUNT OF REINSTATEMENT OF ECB REMAINED AS A NOTIO NAL LIABILITY SET ASIDE FOR MEETING UNASCERTAINED LIABI LITY. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) SUSTAI NED THE ADDITION MADE TO BOOK PROFITS. 12. COUNSEL FOR THE ASSESSEE SUBMITS THAT AN IDENTI CAL ISSUE HAS BEEN CONSIDERED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ECHJAY FORGINGS P.LTD. (251 ITR 15) WHEREIN THE HIGH COURT HELD THAT LIABILITIES DUE TO FOREIGN EXCHANGE 9 ITA NOS.749 & 750 /MDS/2013 FLUCTUATION DEBITED TO PROFIT AND LOSS ACCOUNT UNDE R COMPANIES ACT NOT TO BE INCLUDED IN NET PROFIT FOR THE PURPOSE OF COMPUTING BOOK PROFITS UNDER SECTION 115JA OF TH E ACT. 13. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 14. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE DECISION RELIED ON. ON GOING THROUGH THE D ECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE CIT VS. E CHJAY FORGINGS P.LTD. (SUPRA), WE FIND THAT THE ISSUE IN THIS APPEAL IS SQUARELY COVERED BY THE SAID DECISION, WHEREIN THE HIGH COURT HELD AS UNDER:- 10. THE ASSESSEE DEBITED THE AFORESAID AMOUNT ON ACCOUNT OF THE FOREIGN EXCHANGE RATE FLUCTUATIONS. THEY CLAIMED DEDUCTION OF THE AFORE STATED AMOUNT AS REV ENUE EXPENDITURE. ACCORDING TO THE ASSESSING OFFICER, TH E SAID EXPENDITURE WAS INCURRED FOR PURCHASE OF PLANT AND MACHINERY AND, THEREFORE, THE AMOUNT WAS REQUIRED T O BE ADDED BACK TO THE COST OF THE ASSET SUBJECT TO DEPR ECIATION. HE, ACCORDINGLY. DIRECTED RS. 1,38,234 TO BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THIS ORDER WAS CO NFIRMED IN APPEAL BY THE COMMISSIONER (APPEALS). HOWEVER. O N FACTS, THE TRIBUNAL FOUND THAT THE ASSESSEE HAD TAK EN A FOREIGN EXCHANGE LOAN FROM ICICI AND THOUGH, NORMAL LY, UNDER THE PROVISIONS OR THE ACT SUCH INCREASE IN TH E LIABILITY DUE TO F1UETUATIONS IN THE FOREIGN EXCHANGE RATES I S NORMALLY TAKEN AS ON CAPITAL ACCOUNT, THE SAME IS D EBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE COMPANIES ACT . WE AGREE WITH THE VIEW EXPRESSED BY THE TRIBUNAL. WHIL E APPLYING SECTION 115J, THE ASSESSING OFFICER HAS TO GO BY COMPUTATION OF THE BOOK PROFIT AS PERMIT RED UNDER THE COMPANIES ACT. BY VIRTUE OF SECTION 115J, IN THE CA SE OF A COMPANY WHOSE TOTAL INCOME AS COMPUTED UNDER THE INCOME-TAX ACT IS LESS THAN 30 PER CENT OF THE BOOK PROFIT, THE TOTAL INCOME CHARGEABLE TO TAX WILL BE 30 PER C ENT OF THE BOOK PROFIT AS COMPUTED. THAT, FOR THE PURPOSES OF SECTION 115J BOOK PROFIT WILL BE THE NET PROFIT AS SHOWN IN THE PROFIT 10 ITA NOS.749 & 750 /MDS/2013 AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH SCHED ULE VI TO THE COMPANIES ACT SUBJECT TO CERTAIN ADJUSTMENTS . THE NET PROFIT, AS CALCULATED ABOVE, WILL BE INCREASED, INTER ALIA. BY THE AMOUNTS DEBITED TO THE PROFIT AND LOSS ACCOU NT. IN THE PRESENT CASE, THE TRIBUNAL HAS FOUND, ON FACTS, CORRECTLY , THAT THE SAID AMOUNT OF RS.1,38,234 HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE COMPANIES ACT. HENCE, THE DEPARTMENT ERRED IN ADDING THE SAID AMOUNT TO THE NET PROFIT. 15. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DE LETE THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F FOREIGN EXCHANGE FLUCTUATION ON REINSTATEMENT OF ECB. 16. THE REMAINING GROUNDS 4 & 5 RELATE TO THE ISSUE OF DISALLOWING THE CLAIM OF LOWER OF BROUGHT FORWARD L OSS OR DEPRECIATION WHICHEVER IS LESS AS PER EXPLANATION T O SECTION115JB OF THE ACT. 17. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THI S TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005 -06 IN ITA NO.1552/MDS/2009 DATED 25.06.2013. 18. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF LOWER AUTHORITIES. 19. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH IS ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH AGAINST T HE 11 ITA NOS.749 & 750 /MDS/2013 ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 IN ASSESSE ES OWN CASE IN ITA NO.1552/MDS/2009 DATED 25.06.2013, WHEREIN THE TRIBUNAL HELD AS UNDER:- 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY AND IS MANUFACTURER OF ALUMINIUM INGOTS. RO DS AND OTHER ROLLED ALUMINIUM PRODUCTS, THE ASSESSEE F ILED ITS RETURN OF . INCOME FOR THE /VSSCSSMCNT YEAR (AY ) 2005-06 ON 29-10-2005 DECLARING ITS INCOME TO BE 'NIL' UNDER REGULAR COMPUTATION. UNDER MAT PROVISIONS, TH E BOOK PROFIT WAS DETERMINED AT RS. 52,91,48.582/-. T HE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE INCOME TAX ACT (HEREIN AF TER REFERRED TO AS 'THE ACT') WAS ISSUED TO THE ASSESSE E ON 31-03- 2006. WHILE COMPUTING BOOK PROFITS UNDER MAT PROVISIONS. THE ASSESSEE CLAIMED UN-ABSORBED DEPRECIATION OF ` 2,81,50,988/-, THE ASSESSING OFFICER WHILE COMPUTING BOOK PROFITS U/S. 115.JB ADDED BACK UN- ABSORBED DEPRECIATION . ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS ALREADY CLAIMED AFOREMENTIONED UNABSORBED DEPRECIATION IN THE /\ Y. 2001-02. THE ASSESSING OFFICER FINALIZED THE ASSESSMENT VIDE ORDER DATED 07-12-2007 BY MAKING CERTAIN ADDITIONS/DISALLOWANCES INTER ALIA ON ACCOU NT OR UNABSORBED DEPRECIATION. 4. AGGRIEVED AGAINST THE ASSESSMENT ORDER DATED 07-12- 2007, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) WHO RELYING ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R THE .A. Y. 2002-03 IN ITA NO.1786/MDS/2005 AND 2003--04 IN 1852/MDS/2005 DECIDED ON 12TH OCTOBER, 2007 REMITTE D THE MATTER BACK TO ASSESSING OFFICER FOR EXAMINING THE ISSUE AFRESH ON THE HAS IS OR EARLIER DIRECTIONS 0F THE TRIBUNAL. AGGRIEVED AGAINST THE ORDER OR CIT(A), TH E ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. 5. SHRI RAMCSH PATODIA, C.A, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT UN-ABSORBED DEPRECIATIO N HAS BEEN CLAIMED BY THE ASSESSEE IN ACCORDANCE WITH CLAUSE (III) OR EXPLANATION I TO SECTION 115.JB(2) OF THE ACT. ACCORDING TO THIS CLAUSE, AN AMOUNT OF LOSS BR OUGHT FORWARD OR UN- ABSORBED DEPRECIATION WHICHEVER IS L ESS AS PER THE BOOKS OR ACCOUNTS HAS TO BE DEDUCTED WHI LE COMPUTING BOOK PROFITS. THE LD. AR PLACED ON RECORD THE DETAILS (WORKING SHEET) OR UN-ABSORBED DEPRECIATION AND BUSINESS LOSS UNDER MAT PROVISIONS FROM THE A Y. 12 ITA NOS.749 & 750 /MDS/2013 1999-99 TO A Y. 2005-06, IN THE WORKING SHEET. THE AR HAS BIFURCATED UN-ABSORBED DEPRECIATION AND UN- ABSORBED BUSINESS LOSS FOR THE AFOREMENTIONED A YS. THE AR REFERRING TO WORKING SHEET POINTED OUT THAT THE UN- ABSORBED DEPRECIATION BEING THE LOWER OR THE TW O HAS BEEN REDUCED FROM THE PROFITS TO ARRIVE AT THE BOOK PROFIT IN ACCORDANCE WITH THE PROVISIONS O F SECTION 115JB, AS REGARDS THE PROCEEDINGS IN THE MATTERS A Y. 2002-03, WHICH WAS REMITTED BA CK TO THE ASSESSING OFFICER BY THE TRIBUNAL IN ITA NO, I786/MDS/2005, THE LD. AR SUBMITTED THAT THE ASSESS ING OFFICER HAS AGAIN REJECTED THE CLAIM OF THE ASSESSE E AND THE ASSESSEE IS IN APPEAL. 6. ON THE OTHER HAND SHRI ARUN C. BHARAT, REPRESENT ING THE DEPARTMENT STRONGLY SUPPORTED THE ORDERS OR THE AUTHORITIES BELOW AND PRAYED FOR THE DISMISSAL OR APPEAL OR THE ASSESSEE, 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OR BOTH THE SIDES AND HAVE PERUSED THE ORDERS 01' THE AUTHORITIES BELOW, A PERUSAL OR THE WORK SHEET WHICH HAS BEEN PLACED ON RECORD BY THE LD AR OR THE ASSESSEE SHOWS THAT THE ASSESSEE HAS BEEN CARRYING FORWARD UN- ABSORBED DEPRECIATION FROM THE AY. 1998-99 ONWARDS, IN THE AY, 1998-99, THE UN- ABSORBED DEPRECIATION WAS RS. 97,62,778/- WHICH WAS INCREASED TO RS. 2,81,50,988/- IN THE A Y. 1999-200 0 AFTER ADDING UP UN ABSORBED DEPRECIATION FOR THE YE AR, THEREAFTER THE SAME AMOUNT HAS BEEN CARRIED FORWAR D YEAR AFTER YEAR UP TO A Y. 2005-06, AS FAR AS THE PRINCIPLE OR REDUCING BROUGHT FORWARD LOSS OR UN- ABSORBED DEPRECIATION WHICHEVER IS LESS FOR ARRIVIN G AT BOOK PROFIT IS CONCERNED, THERE IS NO DISPUTE, THE ASSESSING OFFICER HAS CATEGORICALLY STATED IN HIS ASSESSMENT ORDER THAT THE ASSESSEE HAS ALREADY CLAIMED UN-ABSORBED DEPRECIATION IN THE EARLIER A Y AND THE SAME WAS ALLOWED, THE LD. AR HAS NOT BEEN ABLE TO CONTROVERT THE CATEGORIC FINDING OR ASSESSING OFFICER OR GIVE ANY PLAUSIBLE REASON AS TO WHY UN- ABSORBED DEPRECIATION WAS CARRIED FORWARD YEAR AFTE R YEAR DESPITE THE FACT THAT THE ASSESSEE HAS BEEN FI LING RETURN OR INCOME UNDER MAT PROVISIONS FOR THE EARLI ER A YS. IF UN-ABSORBED DEPRECIATION HAS ALREADY BEEN ALLOWED IN THE EARLIER A.YS, THE UNABSORBED DEPRECI ATION IN THE SUBSEQUENT A.YS WOULD BE NIL. AS NO AMOUNT O R DEPRECIATION FOR THE ASSESSMENT YEAR 2000-01 TO 20 05- 06 IS ADDED IN THE FIGURE OF' UNABSORBED DEPRECIATI ON BEING CARRIED FORWARD FROM THE ASSESSMENT YEAR 199 9- 2000 ONWARDS, THEREFORE, THE AMOUNT WHICH COULD HAV E BEEN DEDUCTED ILL ACCORDANCE WITH THE PROVISIONS OR CLAUSE (III) OR EXPLANATION I TO SECTION 115JB IS UN- ABSORBED DEPRECIATION OR UN-ABSORBED BUSINESS LOSS 13 ITA NOS.749 & 750 /MDS/2013 WHICHEVER IS LESS, THE AMOUNT OR DEPRECIATION BEING LESS I.E NIL IS DEDUCTIBLE FOR ARRIVING AT BOOK PROFITS FOR THE A Y. 2005-06, WE DO NOT FIND FORCE IN THE SUBMISSIONS MADE BY THE LEI, AR, WE ARE IN CONSONANCE WITH THE TREATMENT GIVEN BY THE AO TO UNABSORBED DEPRECIATION WHILE DETERMINING BOOK PRO/ITS U/S. I15JB FOR THE A Y. 2005-06. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS DISMISSED AS IT IS DEVOID OF ANY MERIT. 20. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THIS TRIBUNAL, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE ASSE SSEE ON THIS ISSUE. 21. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IS PARTLY ALLOWED FOR STATI STICAL PURPOSES AND THAT OF THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2015. SD/- SD/- ( . $ ) ( & () ) (D.KARUNAKARA RAO) (CHALLA NAGENDR A PRASAD ) + / ACCOUNTANT MEMBER ( + / JUDICIAL MEMBER ( /CHENNAI, - /DATED 30 TH DECEMBER, 2015 SOMU /0 10 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 2 () /CIT(A) 4. 2 /CIT 5. 0 6 /DR 6. /GF .