ACIT, Bellary V. M/s Kampli Co-Op Sugar Factory Limite, Kampli

ITA 829/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0364 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2016
• Assessment Year: 1997-1998
• Appeal Filed On: 20-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S PARTHASARATHI DR P K
• Keywords: Capital asset; Business income; Depreciation; Cost of acquisition; Valuation report; Revised return; Unabsorbed depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI A .K. GARODIA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 829 /BANG/201 4 (ASSESSMENT YEAR : 1997 - 98 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, BELLARY. V S. M/S. KAMPLI CO - OP. SUGAR FACTORY LIMITED, BELLARY ROAD, KAMPLI. APPELLANT RESPONDENT. C.O. NO.79/BANG/2015 (IN I.T.A. NO. 829 /BANG/201 4) (ASSESSMENT YEAR : 1997 - 98 ) (BY ASSESSEE) ASSESSEE BY : SHRI S. PARTHASARATHI, ADVOCATE. RESPONDENT BY : DR.P .K. SRIHARI, ADDL. CIT (D.R.) DATE OF H EARING : 24.05. 2016. DATE OF P RONOUNCEMENT : 27. 5. 201 6 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 25/03/2014, OF COMMISSIONER OF INCOME TAX (APPEAL) FOR THE ASSESSMENT YEAR 1997 - 98. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2 ITA NO. 829 /BANG/ 2014 & C.O. NO.79/BANG/2015 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT LAND VALUE AS ON 01 - 04 - 1981 IS TO ADOPTED AT RS 18,3001 - PER ACRE WITHOUT APPRECIATING THE FACT THA T THE ASSESSING OFFICER HAD ADOPTED THE VALUE OF LAND BASED ON THE VALUATION REPORT OF VALUATION OFFICER. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR SET OFF OF UNABSORBED DEPRECIATION OF RS 1,49,50,9 741 - RELYING ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS VIRMANI INDUSTRIES PVT. LTD REPORTED IN 216 ITR 607 (1995) WITHOUT APPRECIATING THE FACTS THAT THE DECISION IN 216 ITR 607 IS NOT SQUARELY APPLICABLE TO THE FAC TS OF THE CASE AND THE DECISION RELATES TO THE ASSESSMENT YEAR 1965 - 66. 4. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMENDMENTS TO SECTION 32(2) TAKES EFFECT FROM 1 ST APRIL 1997, AND WILL ACCORDINGLY, APPLY IN RELATION TO TH E ASSESSMENT YEAR 1997 - 98 AND SUBSEQUENT YEARS WITHOUT APPRECIATING THE FACT THAT THE AMENDMENTS TO SECTION 32(2) IS W.E.F. 01.04.0997 AND APPLICABLE FOR AY 1998 - 99. HENCE, UNABSORBED DEPRECIATION OF EARLIER YEARS CO ULD NOT TAKE THE CHARACTER OF CURRENT YEARS DEPRECIATION IN THE ASST. YEARS 1997 - 98 SA AS TO SET OFF AGAINST THE INCOME FROM OTHER THAN 'PROFITS FROM BUSINESS'. 5. THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSESSEE TO SET OFF CURRENT YEAR BUSINESS LOSS OF RS 43,00,9411 - FOR AY 1997 - 98 WITHOUT APPRECIATING THE FACT THAT AS PER THE ORIGINAL ORDER U/S. 143(3) DATED 24 - 8 - 99, ASSESSEE FILED REVISED COMPUTATION OF INCOME AFTER AGREEING ON SOME DISALLOWANCES, WHEREIN HE HAD SHO WN INCOME OF RS 15,50,693 WHICH WAS SET OFF TO THAT EXTENT AGAINST UNABSORBED BUSINESS LOSSES OF EARLIER YEARS WHICH RESULTED IN NIL BUSINESS INCOME FOR THE AY 1997 - 98. THEREFORE, THERE WAS NO CURRENT YEAR BUSINESS LOSS IN AY 1997 - 98. 6. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO ONE ANOTHER AND THE APPELLANT CRAVES TO ADD, DELETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. GROUND NO.1 IS G ENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 4. GROUND NO.2 IS REGARDING THE ADOPTION OF THE VALUE OF THE LAND AS ON 01/04/1981. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY AND WAS RUNNING 3 ITA NO. 829 /BANG/ 2014 & C.O. NO.79/BANG/2015 A SUGAR MILL. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 31 .10. 1997, WHEREIN THE ASSESSEE HAS COMPUTED THE CAPITAL GAIN ON TRANSFER OF BUSINESS AND CLAIMED SET OFF OF THE UNABSORBED LOSSES AND DEPRECIATION AGAI NST THE PROFIT COMPUTED. ACCORDINGLY, THE ASSESSEE OFFERED NIL INCOME IN THE RETURN OF INCOME. SUBSEQUENTLY, A REVISED RETURN WAS FILED ON 18/02/1999, WHEREIN THE CAPITAL GAIN WAS SHOWN AT NIL BY TAKING THE BUSINESS AS A LONG TERM CAPITAL ASSET AND ALSO CL AIMED BENEFIT OF CARRY FORWARD LOSSES. IN THE SCRUTINY ASSESSMENT COMPLETED ON 24/08/1999, UNDER SECTION 143(3) THE AO COMPUTED THE TOTAL INCOME AT RS.42,03,900/ - . THE AO CONSIDERED THE SALE AS SLUMP SALE AND CAPITAL GAIN WAS WORKED OUT BY CONSIDERING THE LAND AS LONG TERM CAPITAL GIVING RISE TO LONG TERM CAPITAL GAINS AND OTHER ASSETS LIKE BUILDING, PLANT AND MACHINERY AS SHORT TERM CAPITAL GAINS. THUS, THE AO HAS COMPUTED THE SHORT TERM CAPITAL GAIN OF RS.22,65,994/ - AND LONG TERM CAPITAL GAIN AT RS.19,37, 900/ - . AGGRIEVED BY THE ADDITIONS MADE BY THE AO AND DISALLOWANCE OF SETTING OFF OF THE UNABSORBED LOSSES AS WELL AS DEPRECIATION THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEAL). THE MATTER WAS CARRIED TO THIS TRIBUNAL AND THIS TRIBUNAL ORIGINALLY VID E ITS ORDER DATED 23/10/2000 DISPOSED OF THE APPEAL OF THE ASSESSEE. THE ASSESSEE FURTHER CARRIED THE MATTER TO THE HONOURABLE JURISDICTIONAL HIGH COURT BY FILING AN APPEAL IN ITA NUMBER 22/2001 WHEREIN VIDE DECISION DATED 29/03/2007 T HE MATTER WAS REMANDE D TO THE FILE OF THIS TRIBUNAL FOR RECONSIDERATION IN ACCORDANCE WITH LAW ON THE ISSUE OF THE DETERMINATION OF SALE PRICE OF VARIOUS ASSETS AS WELL AS THE ISSUE OF ADOPTING THE VALUE AS ON 1/04/1981. THE TRIBUNAL IN TURN REMANDED THESE ISSUES TO THE RECORD OF THE ASSESSING 4 ITA NO. 829 /BANG/ 2014 & C.O. NO.79/BANG/2015 OFFICER VIDE ORDER DATED 19/10/2010. THUS, THIS IS 2 ND ROUND OF LITIGATION WHEREIN THE CIT(APPEAL) HAS GRANTED THE RELIEF TO THE ASSESSEE ON THESE 2 ISSUES. 5. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT TH E CIT(APPEALS) HAS ACCEPTED THE LAND VALUE AS ON 1/04/1981 AT RS. 18,300/ - ON THE BASIS OF THE SAL E INCIDENT IN THE YEAR 1982, WHEREAS THE ASSESSEE S OWN COST OF ACQUISITION OF THE LAND IN QUESTION IN THE YEAR 198 0 HAS BEEN COMPLETELY IGNORED BY THE CIT(APP EALS). THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS FURTHER POINTED OUT THAT THE CIT(APPEALS) HAS NOT GIVEN THE FINDING WHETHER THE SALE INSTANCE TAKEN INTO CONSIDERATION WAS IN RESPECT OF THE PROPERTY SITUATED IN THE SAME LOCALITY AND COMPARABLE IN ALL RE SPECT INCLUDING THE NATURE OF DEVELOPMENT, THE ADVANTAGES AND DISADVANTAGES ATTACHED TO THE PROPERTIES. HENCE, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE CIT(APPEALS) HAS MERELY ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT GIVING THE FIN DING OF THE COMPARABILITY OF THE SALE INSTANCE WITH THAT OF THE ASSESSEE. 6. ON THE OTHER HAND, THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT WHEN THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE AO AS WELL AS CIT(APPEALS) A SALE INSTANCE IN TH E LOCALITY THEN THE PRICE AS PER THE SALE IN THE LOCALITY WAS RIGHTLY ADOPTED AS A VALUE AS ON 1/04/1981. HE HAS RELIED UPON THE ORDER OF THE CIT(APPEALS). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE FIND THAT THE CIT(APPEALS) HAS ACCEPTED THE REVISED COMPUTATION OF CAPITAL GAIN AS PRODUCED BY THE ASSESSEE ON THE BASIS OF THE LAND VALUE AS ON 01/04/1981 AT RS.18,300/ - . 5 ITA NO. 829 /BANG/ 2014 & C.O. NO.79/BANG/2015 THIS VALUE OF THE LAND AS ON 1/4/1981 WAS ACCEPTED BY THE CIT(APPEALS) BEING SUPPOR TED BY AN INSTANCE OF SALE HOWEVER THERE IS NO DISCUSSION ABOUT THE SAID INSTANCE OF SALE IN THE FINDING OF THE CIT(APPEALS). FOR THE SAKE OF THE READY REFERENCE WE REPRODUCE THE RELEVANT FINDING OF THE CT AT PAGES 16 & 17 AS UNDER : THERE IS A CLEAR F INDING BY THE HON'BLE HIGH COURT OF KARNATAKA THAT CAPITAL GAIN IS COMPUTABLE. ACCORDINGLY, THE ASSESSING OFFICER WAS OBLIGED TO COMPUTE THE CAPITAL GAINS. NO DOUBT, THE HON'BLE SUPREME COURT IN THE CASE OF PNB FINANCE LTD. VS. CIT (2008) 307 ITR 75 (SC) HAS HELD THAT WHEN SALE CONSIDERATION CANNOT BE SPLIT, NO CAPITAL GAIN IS COMPUTABLE. THE HON'BLE HIGH COURT FOR THIS PURPOSE HAS DIRECTED THE ASSESSING OFFICER TO LOOK INTO THE SPLIT - UP OF CONSIDERATION AS PROVIDED IN THE BOOKS OF THE BUYER. BUT NO ATT EMPT HAS BEEN MADE IN THIS REGARD. TO THIS EXTENT, THE ASSESSING OFFICER HAS NOT FOLLOWED THE DIRECTIONS OF THE HIGH COURT WHICH HAS ALSO BEEN OBSERVED BY THE TRIBUNAL IN ITS ORDER REFERRED TO SUPRA WHILE RESTORING THE CASE BACK TO THE FILE OF THE ASSESSI NG OFFICER. ACCORDINGLY , THE COMPUTATION OF CAPITAL GAINS AS MADE BY THE ASSESSING OFFICER IS NOT ON THE DIRECTION CLAIMED BY THE HON'BLE HIGH COURT OF KARNATAKA AND THE ITAT, BANGALORE. IN THIS CONNECTION, I FIND THAT THE APPELLANT ITSELF GIVEN THE RE VISED COMPUTATION OF CAPITAL GAINS IN THE COURSE OF CONSEQUENTIAL PROCEEDINGS BEFORE THE ASSESSING OFFICER WHEREIN HE HAS TAKEN THE LAND VALUE AS ON 1.4.1981 AT RS.18,300/ - . I HAVE PERUSED THE COMPUTATION AS DONE BY THE APPELLANT. IT IS SUPPORTED BY INS TANCES OF SALE AND ALSO THE SUB - REGISTRAR S VALUATION. SIMILARLY, THE SHORT TERM CAPITAL GAINS COMPUTED BY TAKING INTO THE BOOK VALUE HAS BEEN RIGHTLY ADOPTED. CONSEQUENTLY, THE CAPITAL GAINS AS DETERMINED AT RS.2,99,27,814 IS REQUIRED TO BE ADOPTED. A. O. IS DIRECTED TO COMPUTE THE CAPITAL GAINS AS PER THE REVISED COMPUTATION SUBMITTED BY THE ASSESSEE TO THE ASSESSING OFFICER AT THE TIME OF REASSESSMENT. HENCE THIS GROUND OF APPEAL IS PARTLY ALLOWED. AS IT IS CLEAR FROM THE FINDING OF THE CIT(APPEALS ) THAT HE HAS ACCEPTED THE COMPUTATION FURNISHED BY THE ASSESSEE BASED ON THE LAND VALUE ADOPTED AS ON 1/04/1981 AT RS.18,300/ - WITHOUT GIVING A FINDING THAT THE SALE INSTANCE WAS CONSIDERED BY THE ASSESSEE FOR THIS PURPOSE WAS ACTUALLY COMPARABLE WITH THE PROPERTY OF THE ASSESSEE IN QUESTION. FURTHER, WE FIND THAT THE ASSESSEE ITSELF HAS SHOWN THE COST OF THE LAND AS ON 27/8/1980 WHICH HAS NOT BEEN CONSIDERED FOR THE PURPOSE OF ADOPTING THE VALUE AS ON 1/04/1981. IN THE FACTS AND 6 ITA NO. 829 /BANG/ 2014 & C.O. NO.79/BANG/2015 CIRCUMSTANCES OF THE CASE WHEN THE CIT(APPEALS) HAS NOT EXAMINED THE ISSUE PROPERLY WE SET ASIDE THIS ISSUE TO THE RECORD OF THE CIT(APPEALS) FOR GIVING A PROPER FINDING WITH SPEAKING ORDER ON THIS ISSUE. 8. GROUND NOS.3 TO 5 ARE REGARDING SETTING OFF OF THE UNABSORBED DEPRECIATI ON. 9. WE HAVE HEARD THE LEARNED D.R. AS WELL AS THE LEARNED A.R. AND CONSIDERED THE RELEVANT MATERIAL ON THE COURT. THE AO HAS DENIED THE SETTING OFF OF THE UNABSORBED DEPRECIATION AGAINST THE BUSINESS INCOME FOR THE YEAR UNDER CONSIDERATION ON THE GROUND THAT AS PER THE AMENDED PROVISIONS OF SECTION 32(2) OF THE ACT IT CANNOT BE BROUGHT FORWARD FOR MORE THAN 8 YEARS. THE CIT(APPEALS) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY GIVING THE REASONS THAT AS PER THE UNAMENDED PROVISIONS OF SECTION 32(2) OF THE ACT, THE UNABSORBED DEPRECIATION OF A YEAR SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION OF THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE. THEREFORE, THE UNABSORBED DEPRECIATION ALLOWANCE IF ANY OF THE ASSESSMENT YEAR 1996 - 97 SHALL BE AD DED TO THE AMOUNT OF THE ALLOWANCE FOR THIS YEAR. ACCORDINGLY, THE CIT(APPEALS) WAS OF THE VIEW THAT THE UNABSORBED DEPRECIATION PERTAINING TO THE ASST. YEAR 1996 - 97 AND PRIOR TO THAT WILL BE DEEM ED TO BE PART OF THE ALLOWANCE FOR THE FOLLOWING PREVIOUS YEAR AND THEREFORE, NO LIMITATION OF 8 YEARS SHALL BE APPLICABLE ON SUCH CLAIM. WE FIND THAT THE AMENDED PROVISIONS OF SECTION 32 BY FINANCE ACT, 1996 HAS PUT A RESTRICTION OF CARRY FORWARD OF BUSINESS LOSS FOR A PERIOD OF 8 YEARS WHEREAS THE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM THE EARLIER YEARS IS GOV E RNED BY SECTION 32(2) OF THE ACT AND IT WILL BE DEEMED TO BE PART OF THE 7 ITA NO. 829 /BANG/ 2014 & C.O. NO.79/BANG/2015 DEPRECIATION OF THE NEXT PREVIOUS YEAR AND THEREFORE THE SAID RESTRICTION PUT IN PLACE BY THE AMENDED PROVISIONS WOULD NOT BE APPLICABLE FOR SETTING OFF THE UNABSORBED DEPRECIATION. IT IS PERTINENT TO NOTE THAT THE PROVISIONS OF SECTION 32 HAS BEEN FURTHER AMENDED AND IT WAS AGAIN BROUGHT TO THE OR I GINAL STATE AND THEREFORE, WE DO NOT FIND ANY ERROR OR I LLEGALITY IN THE IMPUGNED ORDER OF THE CIT(APPEALS), FOR THIS ISSUE OF ALLOWING THE CLAIM OF SETTING OFF OF THE BROUGHT FORWARD UNABSORBED APPRECIATION IN THE YEAR UNDER CONSIDERATION. 10. AS REGARDS THE SETTING OFF OF THE BUSINESS LOSSES, THE CIT(APPEA LS) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE AND THE ASSESSEE HAS NOT CHALLENGED THE FINDING OF THE CIT(APPEALS) BEFORE US. CROSS OBJECTION NO.79/BANG/2015 11. AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS STA TED THAT THE ASSESSEE HAS NOT RAISED ANY NEW ISSUE IN THIS C.O. BUT IT IS ONLY IN SUPPORT OF THE CIT(APPEALS). IN VIEW OF OUR FINDING ON THE REVENUE S APPEAL, THE C.O. FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND CONSEQUENTLY DISMISSED. 12. IN THE R ESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE C.O. OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH DAY OF MAY, 201 6 . SD/ - (A . K. GARODIA ) ACCOUNTANT MEMBER SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER *REDDY GP