SHINGAR LTD, MUMBAI V. ACIT 8(3) (OSD), MUMBAI

ITA 7691/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8036 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 05-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M MURALI
• Assessee Lawyers: N K BHUTA
• Keywords: Opportunity of being heard
• Section: 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI , ! '# $ $ $ $ , % && , , '# ' BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUICIAL MEMBER ./ I.T.A. NO.7691/MUM/2010 ( ( ( ( ( / ASSESSMENT YEAR :2006-07 M/S. SHINGAR LTD.,0 KALPATRU, 71, NUTAN LAXMI SOC., JVPD SCHEME, N.S. ROAD NO. 9, VILE PARLE (W), MUMBAI-400 049 / VS. THE ACIT-8(3) (OSD), MUMBAI #) ! ./ %* ./ PAN/GIR NO. : AABCS 4563J ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . / APPELLANT BY: SHRI N.K. BHUTA ,-)+ / . / RESPONDENT BY: SHRI M. MURALI / 01! / DATE OF HEARING :05.08.2014 23( / 01! / DATE OF PRONOUNCEMENT :08.08.2014 '4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-18, MUMBAI DT.7.9.2010 PERTAINING TO A.Y . 2006-07. 2. THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: ITA NO. 7691/MUM/2010 2 1. THE LD. CIT ERRED IN NOT ALLOWING THE CARRIED F ORWARD LOSS UNDER TO BE ADJUSTED AGAINST THE INCOME IF ANY DURING THE YEAR A.Y. LOSS 2004-05 9,07,116/- 2005-06 18,65,670/- ---------------- 27,72,786/- ======== 2. THE CIT ERRED IN NOT ALLOWING DEDUCTION U/S. 80I B ON THE PROFIT ELIGIBLE TO SUCH DEDUCTION. THE LD. CIT HAS RELYING ON THE JUDGMENT OF CIT VS SHIRKE CONSTRUCTI ON EQUIPMENT LTD. 291 ITR 380 (SC) 3. THE LD. AO & CIT ERRED IN REDUCING THE PROFIT OF UNIT ELIGIBLE TO DEDUCTION U/S. 80IB FROM RS. 56,35,642/ - TO RS. 8,55,738/- AND CONSEQUENTLY RESTRICTING THE DEDUCTION U/S. 80IB AT RS. 8,55,738/- INSTEAD OF RS . 66,86,621/-. 3. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO N OT ALLOWING THE CARRIED FORWARD LOSS TO BE ADJUSTED AGAINST THE INC OME DURING THE A.Y. 2004-05 AND 2005-06. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED FROM THE COMPUTATION OF I NCOME FILED BY THE ASSESSEE THAT RS. 52,68,841/- HAS BEEN BROUGHT FOR WARD AS ACCUMULATED LOSSES BY THE ASSESSEE FOR A.Y. 2002-03. THE AO OB SERVED THAT IN THE EARLIER YEARS, THE ASSESSEE HAS NOT ADJUSTED THE BR OUGHT FORWARD LOSSES BEFORE CLAIMING DEDUCTION U/S. 80IB. THE AO WAS OF THE OPINION THAT BROUGHT FORWARD BUSINESS LOSS OF EARLIER YEAR HAS T O BE ADJUSTED AGAINST BUSINESS PROFIT FOR DEDUCTION U/S. 80IB OF THE ACT. DRAWING SUPPORT FROM THE PROVISIONS OF SEC. 80IB AND THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS SHIRKE CONSTRUCTION EQUIPMENT LTD. 291 ITR 3 80 (SC), ITA NO. 7691/MUM/2010 3 THE AO DENIED THE ADJUSTMENT OF BROUGHT FORWARD LOS SES AS THE ASSESSEE HAD SUFFICIENT PROFIT IN THE EARLIER YEARS. 5. THIS GRIEVANCE OF THE ASSESSEE HAS BEEN CONSIDER ED BY THE LD. CIT(A) AT PARA-4 OF HIS ORDER. AFTER CONSIDERING TH E COMPUTATION OF INCOME AND THE ASSESSMENT ORDER OF 2003-04, 2004-05 AND 2005-06, THE LD. CIT(A) OBSERVED THAT UNABSORBED LOSS PERTAINING TO A.Y. 2002-03 OF RS. 50,68,568/- ONLY REMAINS. THE LD. CIT(A) FURTH ER OBSERVED THAT THIS LOSS HAS TO BE ADJUSTED AGAINST INCOME OF THE ASSES SEE. AFTER SUCH ADJUSTMENT THERE REMAINS NO INCOME AND ACCORDINGLY NO 80IB DEDUCTION CAN BE ALLOWED TO THE ASSESSEE. DRAWING SUPPORT FR OM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SHIRKE CONSTRUCTION EQUIPMENT LTD. 2891 ITR 380 (SUPRA) , THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE AO. 6. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REITE RATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT FAILURE OF THE AO TO ADJUST THE LOSS IN EARLIE R YEARS PROFIT CANNOT PRECLUDE THE ASSESSEE FROM CLAIMING BROUGHT FORWARD AND SET OFF OF SUCH LOSSES. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LOWER AUTHORITIES. 8. IT IS A SETTLED POSITION OF LAW THAT BROUGHT FOR WARD LOSSES HAVE TO BE ADJUSTED AGAINST THE PROFIT BEFORE CLAIMING DEDUCTI ON UNDER CHAPTER-VI- A. RELIANCE IS PLACED ON THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF CIT VS SHIRKE CONSTRUCTION EQUIPMENT LTD.(SUPRA). WE FIND THAT THE LD. CIT(A) HAS CONSIDERED THE COMPUTATION AND ASSESSMENT OF ITA NO. 7691/MUM/2010 4 EARLIER YEARS AND HAS DETERMINED THAT LOSS PERTAINI NG TO A.Y. 2002-03 ONLY REMAINS. THAT BEING THE FACT OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 & 2 A RE ACCORDINGLY DISMISSED. 9. GROUND NO. 3 RELATES TO THE REDUCING OF THE PROF IT OF ELIGIBLE UNIT U/S. 80IB OF THE ACT. 10. WHILE SCRUTINIZING THE RETURN OF INCOME DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE IS HAVING TWO UNITS OUT OF WHICH ONE UNIT IS ELIGIBLE FOR DEDUCTI ON U/S. 80IB OF THE ACT. THE AO FURTHER FOUND THAT THE ASSESSEE HAS SHOWN PR OFIT FROM ELIGIBLE UNIT AT RS. 56,35,642/- AND LOSS FROM NON ELIGIBLE UNIT AT RS. 13,95,646/-. ON VERIFYING THE UNIT-WISE EXPENDITURE, THE AO NOTI CED THAT THE EXPENSES HAVE NOT BEEN ALLOCATED IN PROPORTION OF TOTAL TURN OVER. THE AO PROCEEDED BY ALLOCATING THE EXPENDITURE ON THE BA SIS OF TOTAL TURNOVER AND RECOMPUTED THE PROFIT OF ELIGIBLE UNIT AT RS. 8 ,50,359 BY ALLOCATING EXPENDITURE OF RS. 47,85,283/-. 11. AGGRIEVED BY THIS ALLOCATION, THE ASSESSEE CARR IED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) AT PARA-4.10 OF HIS ORDER OBSERVED THAT AFTER ADJUSTING THE CARRY FORWARD LOSSES OF ASSESSM ENT YEAR 2002-03, THERE REMAINS NO PROFIT, THEREFORE 80IB DEDUCTION CANNOT BE GRANTED TO THE ASSESSEE. ACCORDINGLY THE LD. CIT(A) DID NOT CONSI DER IT NECESSARY TO GO INTO THE DETAILS OF METHODOLOGY ADOPTED BY THE AO IN ALLOCATING THE EXPENDITURE. ITA NO. 7691/MUM/2010 5 12. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THA T SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED AND AUDITED IN RESPECT OF E ACH UNIT THEREFORE, THE ALLOCATION OF EXPENDITURE BY THE AO IS UNCALLED FOR . 13. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. S INCE THE ASSESSEE IS MAINTAINING SEPARATE BOOKS OF ACCOUNT, WITHOUT POIN TING OUT ANY DEFICIENCY IN THE BOOKS OF ACCOUNT SO MAINTAINED, T HE AO CANNOT ALLOCATE THE EXPENDITURE ON THE BASIS OF THE TURNOVER. WE, ACCORDINGLY, DIRECT THE AO TO RECOMPUTE THE PROFIT OF NON ELIGIBLE AND ELIG IBLE UNIT WITHOUT ALLOCATING PROPORTIONATE EXPENDITURE AND ACCORDINGL Y RECOMPUTE THE ELIGIBLE DEDUCTION U/S. 80IB AS PER THE PROVISIONS OF LAW AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2014 '4 / 3( ! 5 6'7 08.08.2014 3 / & SD/- SD/ (SANJAY GARG ) (N.K. BILLAIYA) '# / JUDICIAL MEMBER ! '# / ACCOUNTANT MEMBER MUMBAI; 6' DATED : 8 TH AUGUST, 2014 . . ./ RJ , SR. PS ITA NO. 7691/MUM/2010 6 '4 '4 '4 '4 / // / ,0 ,0 ,0 ,0 8(0 8(0 8(0 8(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :& ,0 , , / DR, ITAT, MUMBAI 6. &; < / GUARD FILE. '4 '4 '4 '4 / BY ORDER, -0 ,0 //TRUE COPY// = == = / > > > > % % % % (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI