ACIT CIR 6(1), MUMBAI V. BRIGHT BROTHERS LTD, MUMBAI

ITA 7750/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71139 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Capital receipt; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI H L KARWA, PRESIDENT & SHRI N K BILLAIYA, ACCOUNTANT MEMBER ITA NO.7255/MUM/2011 FOR ASST. YEAR: 2008-09 BRIGHT BROTHERS LTD. 610-611, NIRMAN KENDRA, DR. E MOSES ROAD, MUMBAI- 400 011 PAN AAACB3010G VS. ADDL. CIT RANGE 6(1) MUMBAI (APPELLANT) (RESPONDENT) ITA NO.7750/MUM/2011 FOR ASST. YEAR: 2008-09 ADDL. CIT RANGE 6(1) MUMBAI VS. BRIGHT BROTHERS LTD. MUMBAI- 400 011 (APPELLANT) (RESPONDENT) FOR THE ASSESSEE : SHRI VIPUL J SHAH FOR THE REVENUE : SHRI SURENDRA KUMAR DATE OF HEARING : 17.09.2013 DATE OF PRONOUNCEMENT : 17.09.2013 O R D E R PER N.K.BILLAIYA (AM) : THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-14, MUMBAI, DATED 26.08.2011, P ERTAINING TO A.Y. 2008-09. AS BOTH THESE APPEALS WERE HEARD TOGETHER, THEY ARE DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 ITA NO.7255 & 7750/M/2011 AY:2008-09 ITA NO.7255/MUM/2011 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE C IT(A) ERRED IN CONFIRMING NON SET OFF OF UNABSORBED DEPRECIATION OF A.YS 1997-98 TO 2000-2001 AMOUNTING TO RS.6,97,22,047/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED SET OFF OF UNABSORBED DEPRECIATION RELATING TO A.YS 1997-98 TO 2006-07. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF THAT UNABSORBED DEPRECIATION RELATING TO A.Y. 1997- 98 TO 2002-03 IS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS APPLICABLE FOR A.Y 1997-98 TO A.Y. 2002-03. APPLYING THE PROVISIONS OF SECTION 32 (2) AS IT STOOD IN THOSE YEARS, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE UNABS ORBED DEPRECIATION AS PER THE PROVISIONS APPLICABLE FOR THOSE ASSESSMENT YEARS CO ULD BE CARRIED FORWARD ONLY FOR EIGHT ASSESSMENT YEARS. SINCE EIGHT ASSESSMENT YEA RS HAVE LAPSED, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF SET OFF OF RS.6,97, 22,047/-. THE ASSESSEE STRONGLY AGITATED THIS ISSUE BEFORE THE CIT(A) BUT WITHOUT A NY SUCCESS. AGGRIEVED, THE ASSESSEE IS BEFORE US. 3. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE TRIB UNAL, MUMBAI BENCH, IN THE CASE OF SURESH INDUSTRIES (P.) LTD. (54 SOT 450) AND BISLER I SALES LTD. (58 SOT 73) AS ALSO BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT I N THE CASE OF GENERAL MOTORS INDIA P. LTD. (210 TAXMAN 20). THE LEARNED DR COULD NOT BRING ANY DISTINGUISHING DECISIONS IN FAVOUR OF THE REVENUE. 4. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR TH E ASSESSEE. WE FIND FORCE IN THE CONTENTION OF THE COUNSEL. WE FIND THAT THE TRIBUN AL IN THE CASE OF BISLERI SALES (SUPRA) AT PARA 56 TO 58 HAS MADE THE FOLLOWING OBS ERVATION: 56. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEF ORE US THAT UNABSORBED DEPRECIATION PERTAINS TO ASSESSMENT YEAR 1997-98 AND IS ALLOWED TO BE SET-OFF IN THIS ASSESSMENT YEAR AGAIN ST SHORT TERM CAPITAL GAIN. HE SUBMITTED THAT EVEN THOUGH THE SPECIAL BE NCH DECISION ON 3 ITA NO.7255 & 7750/M/2011 AY:2008-09 THIS ISSUE IS AGAINST THE ASSESSEE, HOWEVER, THE SA ME HAS NOT BEEN COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA (P.) LTD. V. DY. CIT [2012] 25 TAXMANN.COM 364/210 TAXMAN 20 (GUJ.)(MAG). 57 LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY AGREE D THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE A FORESAID JUDGMENT OF GUJARAT HIGH COURT. 58. 59. THUS, RESPECTFULLY FOLLOWING THE AFORESAID JUDG MENT, WE HOLD THAT ASSESSEES CLAIM FOR SET-OFF OF UNABSORBED DEPRECIA TION IS ALLOWABLE AGAINST SHORT TERM CAPITAL GAIN. CONSEQUENTLY, GRO UND NO.3, IS HEREBY ALLOWED. WE FURTHER FIND THAT THE TRIBUNAL IN THE CASE OF SU RESH INDUSTRIES (P.) LTD. (SUPRA), HAS MADE THE FOLLOWING OBSERVATIONS: 14. WE HAVE ALREADY HELD THAT CURRENT YEARS DEPRE CIATION IS TO BE ALLOWED AS SET OFF FROM THE LONG TERM CAPITAL GAINS AND BROUGHT FORWARD DEPRECIATION IS TO BE TREATED AS CURRENT YE ARS DEPRECIATION AS PER THE LEGAL FICTION OF SECTION 32(2), THE SAME IS ALSO TO BE ALLOWED TO BE SET OFF FROM THE LONG TERM CAPITAL GAISN. ACCOR DINGLY, GROUNDNO.2 OF THE APPEAL IS ALSO ALLOWED. FACTS AND CIRCUMSTANCES BEING IDENTICAL, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE ASSESSEES CLAIM OF SET OFF OF UNABSORBED DEPRECIAT ION AS PER ITS COMPUTATION OF INCOME. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.7750/MUM/2011 5. GROUND NO.1 RELATES TO THE DELETION OF THE ADDIT ION OF RS.9,85,000/- ON ACCOUNT OF ADVERTISEMENT EXPENSES. THE ASSESSING O FFICER HAS DISCUSSED THIS DISALLOWANCE AT PARA 6 ON PAGE 10 OF HIS ORDER. TH E ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED ADVERTISEMENT EXPENDI TURE IN RESPECT OF A CERTAIN PRODUCT BUT HAS NOT SHOWN ANY INCOME FROM THE BUSIN ESS OF THE ADVERTISED PRODUCT. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASS ESSEE THAT THE SAID EXPENDITURE WAS INCURRED FOR BRAND BUILDING. THE ASSESSEE CARR IED THE MATTER BEFORE THE CIT(A). 4 ITA NO.7255 & 7750/M/2011 AY:2008-09 THE CIT(A) CONSIDERED THE GRIEVANCE OF THE ASSESSEE AT PARA 3.4 OF HIS ORDER. THE CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED T HE EXPENDITURE IN RESPECT OF HIS EXISTING BUSINESS AND NOT IN RESPECT OF ANY NEW LIN E OF BUSINESS. THE CIT(A) HAS FURTHER OBSERVED THAT A NEW PRODUCT HAS BEEN LAUNCH ED FOR WHICH SAID EXPENDITURE HAS BEEN INCURRED FOR BRAND BUILDING. THE CIT(A) W AS OF THE FIRM BELIEF THAT THE RATIO OF THE DECISION OF THE TRIBUNAL IN THE CASE OF AMAR RAJA BATTERIES LTD. 91 ITD 280 (HYD.) SQUARELY APPLY TO THE FACTS OF THE CASE AND, ACCORDINGLY, DELETED THE ADDITION. 6. BEFORE US THE DR RELIED UPON THE ASSESSMENT ORDE R. THE COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS AN UNDISPUTED FACT THAT THE ADVERTISEMENT EXPENDITURE HAS BEEN INCURRED FOR THE EXISTING BUSINESS ON THE LAUNCH OF A NEW PRODUCT. THE EXPENDITURE HAS BEEN INCURRED AS A PART OF BRAND BUILDING OF THE SAID PR ODUCT. FACTS ARE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF HYDERAB AD IN THE CASE OF AMAR RAJA BATTERIES LTD. (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, NO INTERFERENCE IS CALLED FOR WITH THE ORDER OF THE CIT(A). GROUND NO.1 IS DISMISSED. 7. GROUND NO.2 RELATES TO THE DELETION OF THE WRITE BACK OF SALES TAX LIABILITY ON SETTLEMENT OF LOAN ON THE BASIS OF NPV METHOD. T HE ASSESSEE HAD FILED REVISED COMPUTATION OF INCOME IN WHICH WRITE BACK OF DEFERR ED SALES TAX LIABILITY WAS CLAIMED AS CAPITAL RECEIPT. THE REVENUE DID NOT ACCEPT THI S REVISED COMPUTATION AND TREATED THE SAID WRITE BACK AS REVENUE RECEIPT. THE ASSESS EE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) FOLLOWED THE DECISION OF THE SP ECIAL BENCH OF MUMBAI BENCHES IN THE CASE OF SULZER INDIA LTD. AND DIRECTED THE ASSE SSING OFFICER TO EXCLUDE THE SAME FROM THE TOTAL INCOME. AGGRIEVED, BY THIS THE REVE NUE IS BEFORE US. 8. IT IS THE SAY OF THE REVENUE THAT THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF THE SPECIAL BENCH IN THE CASE OF SULZER INDIA LTD. THEREFORE, THE ORDER OF THE ASSESSING OFFICER DESERVES TO BE CONFIRMED. 9. WE HAVE CAREFULLY PERUSED THE ORDERS, FACTS RELA TING TO THE WRITE BACK OF DEFERRED SALES TAX LIABILITY AMOUNTING TO RS.20,85, 864/- ARE IN PARI MATERIA SAME AS 5 ITA NO.7255 & 7750/M/2011 AY:2008-09 FACTS IN THE CASE OF SULZER INDIA LTD. ITA 2871/MUM /2007). THEREFORE, RESPECTFULLY, FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF SULZER INDIA LTD., (SUPRA), WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE CI T(A). GROUND NO.2 IS ACCORDINGLY DISMISSED. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED AND THE REVENUES APPEAL IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER 2013. SD/- SD/- (H L KARWA) (N.K.BILLAIYA) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DT : 17 TH SEPTEMBER, 2013 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, MUMBAI 4. THE CIT (A)-14, MUMBAI 5. THE DR, B- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI