MEHTA COLD FORGE, Nashik V. JOINT CIT, RANGE - 02, NASHIK, Nashik

ITA 86/PUN/2009

• Counselvise Citation: 8624514 RSA 2009
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Keywords: Business income; Depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 86/PN/2009 (ASSTT. YEAR: 2004-05) M/S. MEHTA COLD FORGE S.NO. 22/3 NASHIK DINDORI ROAD MHASRUL, NASHIK PAN AAFFM 5999 K .. APPELLANT VS. JT. CIT RANGE 2, NASHIK .. RES PONDENT APPELLANT BY: SHRI NIKHIL PATHAK RESPONDENT BY: SHRI ABHAY DAMLE ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(II) NASHIK DATED 17-11-2008 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29-11-2006 PASSED BY THE A.O U/S 143(3) OF THE INCOME- TAX ACT 1961 (IN SHORT THE ACT), PERTAINING TO THE A.Y. 2004-05. 2. THE MAIN ISSUE RAISED IN THIS APPEAL RELATES TO THE DENIAL OF CREDIT FOR THE LOSSES BROUGHT FORWARD FROM THE EARL IER YEARS. WHILE COMPLETING THE ASSESSMENT, THE A.O DID NOT ALLOW TH E CREDIT FOR BROUGHT FORWARD LOSSES ON THE GROUND THAT STATUS OF THE ASS ESSEE WAS DETERMINED AS ASSOCIATION OF PERSONS (I.E. AOP) FOR THE FIRST TIME IN THE INSTANT ASSESSMENT YEAR, WHEREAS THE BROUGHT FORWAR D LOSSES CLAIMED FOR SET-OFF RELATED TO THE EARLIER ASSESSMENT YEARS WHEREIN THE ASSESSEE WAS ASSESSED UNDER A DIFFERENT STATUS. THE ASSESSING OFFICER DENIED THE CREDIT FOR THE BROUGHT FORWARD LOSSES AL SO BECAUSE IN THE YEAR UNDER CONSIDERATION THE MAJOR SOURCE OF INCOME WAS ASSESSED ITA NO. 86/PN/2009 MEHTA COLD FORGE 2 UNDER THE HEAD OTHER SOURCES AS AGAINST BUSINESS INCOME DECLARED BY THE ASSESSEE, WHEREAS IN THE PAST YEARS, THE LOS SES WERE ASSESSED AS BUSINESS LOSSES. HOWEVER, THE PLEA OF THE ASSESS EE FOR ASSESSING THE MAJOR INCOME I.E. RENTAL INCOME ON LEASE OF PLA NT AND MACHINERY AND BUILDING UNDER THE HEAD BUSINESS INCOME WAS A CCEPTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). THE ASSESSEE ALSO SUBMITTED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) THA T THE STATUS AS AOP WAS TO BE GRANTED EVEN FOR THE EARLIER YEARS FR OM 1997-98 AND THEREFORE THE LOSSES BROUGHT FORWARD CANNOT BE CONS IDERED TO HAVE BEEN ASSESSED IN A DIFFERENT STATUS AND THUS SUCH B ROUGHT FORWARD LOSSES COULD BE ALLOWED AS SET-OFF AGAINST THE CURR ENT INCOME. THE COMMISSIONER OF INCOME-TAX (APPEALS) UPHELD THE STA ND OF THE ASSESSING OFFICER THAT THE STATUS OF THE ASSESSEE W AS TO BE TREATED AS AOP, HOWEVER, ACCORDING TO HIM, THE ASSESSEE COUL D NOT CLAIM THE BENEFIT OF THE BROUGHT FORWARD LOSSES OF THE EARLIE R YEARS, SINCE THEY WERE DETERMINED IN PAST IN A DIFFERENT STATUS. AGAI NST THE AFORESAID ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT ONE OF THE PARTNERS OF THE FIRM DIED IN THE MONTH O F JUNE, 1996 AND NO NEW PARTNERSHIP DEED WAS DRAWN UP THEREAFTER AND TH EREFORE, THE ASSESSEE WAS TO BE UNDERSTOOD AS AOP SINCE THEN. IN THIS REGARD, IT WAS POINTED OUT THAT FOR THE ASSESSMENT YEAR 1997-9 8, THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT IN THE S TATUS OF AN UNREGISTERED FIRM, WHICH IS AKIN TO AN AOP. ACCORD ING TO THE LEARNED COUNSEL, THE ASSESSEE DOES NOT CONTEST THE STAND OF THE REVENUE THAT THE STATUS OF THE ASSESSEE IS TO BE RECKONED AS AO P AND THEREFORE, IN THE EARLIER YEARS ALSO THE LOSSES WERE INDEED INCUR RED BY SUCH AOP ITA NO. 86/PN/2009 MEHTA COLD FORGE 3 AND IN THAT LIGHT THE SAME WERE LIABLE TO BE CONSID ERED FOR SET-OFF AGAINST THE INCOME FOR THIS YEAR IN THE HANDS OF TH E ASSESSEE. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. FACTUALLY SPEAKING THERE IS NO DOUBT THAT AFTER THE DEATH OF ONE OF THE PARTNERS OF THE FIRM IN JUNE 1996, NO FURTHER PARTNERSHIP DEED HAS BEEN DRAWN UP. THEREFORE, THE STATUS OF THE ASSESSEE HAS BEEN RIGH TLY TAKEN BY THE ASSESSING OFFICER AS AOP IN THE YEAR UNDER CONSID ERATION. IT IS ALSO AN ADMITTED FACT THAT SIMILAR SITUATION PREVAILED P RIOR TO THE YEAR UNDER CONSIDERATION, THEREFORE, WHILE EVALUATING THE CRED IT FOR BROUGHT FORWARD LOSSES THE STATUS OF THE ASSESSEE IN THE PRIOR PERI OD CANNOT BE ADOPTED DIFFERENTLY. THE COMMISSIONER OF INCOME-TAX (APPEA LS), IN OUR VIEW, WRONGLY OBSERVED THAT THE STATUS IN THE EARLIER YEA RS WAS TO BE CONSTRUED DIFFERENTLY, INASMUCH AS THERE IS NO CHAN GE IN THE FACTS IN THE EARLIER YEAR IN COMPARISON TO THE YEAR UNDER CO NSIDERATION. THEREFORE, FACTUALLY SPEAKING IT IS SAFE TO DEDUCE THAT FROM THE ASSESSMENT YEAR 1997-98 ONWARDS, LOSSES HAVE BEEN I NCURRED BY THE ASSESSEE IN THE SAME CAPACITY AND STATUS AS IN THE YEAR UNDER CONSIDERATION AND THEREFORE, SUCH UNABSORBED PAST L OSSES CAN BE CONSIDERED FOR SET-OFF DURING THE YEAR UNDER CONSID ERATION AGAINST THE CURRENT INCOME IN ACCORDANCE WITH LAW. NO DOUBT, TH E STATUS OF THE ASSESSEE HAS BEEN DETERMINED BY THE ASSESSING OFFIC ER AS AN AOP DURING THE YEAR UNDER CONSIDERATION FOR THE FIRST T IME, IMPLYING THEREBY THAT IN THE PAST THE STATUS HAS BEEN DIFFERENTLY DE TERMINED BY THE ASSESSING OFFICER. HOWEVER, IT IS OPEN FOR THE ASSE SSING OFFICER OF THE ITA NO. 86/PN/2009 MEHTA COLD FORGE 4 YEAR UNDER CONSIDERATION TO EXAMINE WHETHER THE LOS SES OF THE EARLIER YEARS MAY BE SET-OFF AGAINST THE PROFITS OF THE INS TANT YEAR, AND IN THAT DIRECTION, THE CONDITIONS APPLICABLE FOR CARRYING F ORWARD AND SETTING-OFF OF THE BROUGHT FORWARD LOSS DURING THE YEAR CAN ALS O BE EXAMINED BY THE ASSESSING OFFICER OF THE INSTANT YEAR. RATHER, AS PER THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V M ANMOHAN DAS (DECD) 59 ITR 699 (SC) IT IS THE PREROGATIVE OF THE ASSESSING OFFICER WHO DEALS WITH THE ASSESSMENT OF THE SUBSEQUENT YEA R TO DETERMINE WHETHER THE LOSS OF THE PREVIOUS YEAR MAY BE SET-OF F AGAINST THE PROFITS OF THAT YEAR, AND A DECISION RECORDED BY THE ASSESS ING OFFICER IN A PREVIOUS YEAR IN THAT REGARD IS NOT BINDING ON THE ASSESSEE IN THE SUBSEQUENT YEAR. APPLYING THE ABOVE PARITY OF REASO NING TO THE INSTANT CASE, IT IS OPEN FOR THE ASSESSEE IN THE CURRENT YE AR TO DEMONSTRATE THAT ITS STATUS IN THE PAST WAS THE SAME AS IN THE YEAR UNDER CONSIDERATION, NOTWITHSTANDING THE POSITION THAT TH E SAME HAS NOT BEEN EXPLICITLY SO HELD IN THE PAST. IN OTHER WORDS, IT IS OPEN FOR THE ASSESSEE TO DEMONSTRATE THAT FROM THE ASSESSMENT YEAR 1997-9 8 ONWARDS, ITS STATUS IS THAT OF AN AOP, AS DETERMINED BY THE AS SESSING OFFICER DURING THE ASSESSMENT YEAR 2004-05 (I.E. THE YEAR U NDER CONSIDERATION) AND IN THIS MANNER THE BROUGHT FORWARD LOSSES OF TH E EARLIER YEAR CAN BE SET-OFF AGAINST THE CURRENT YEARS INCOME AND TH E SAME CANNOT BE DENIED FOR THE REASON THAT IN THE PAST ITS STATUS H AS NOT BEEN DETERMINED BY THE ASSESSING OFFICER AS AN AOP. QUIT E CLEARLY, IT IS NOT IN DISPUTE THAT THE CORRECT STATUS OF THE ASSESSEE IS AN AOP AS DETERMINED BY THE ASSESSING OFFICER. UNDER THESE CI RCUMSTANCES, WE HOLD THAT THE OBJECTION OF THE COMMISSIONER OF INCO ME-TAX (APPEALS) TO DENY THE BENEFIT OF THE BROUGHT FORWARD LOSSES IS N OT JUSTIFIED, AND ACCORDINGLY ON THIS POINT, WE SET ASIDE THE ORDER O F THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OF FICER TO ALLOW THE ITA NO. 86/PN/2009 MEHTA COLD FORGE 5 PLEA OF THE ASSESSEE FOR CREDIT OF THE BROUGHT FORW ARD LOSSES IN ACCORDANCE WITH LAW. THUS, ON THIS GROUND ASSESSEE SUCCEEDS. 6. APART FROM THIS, THE ASSESSEE HAS RAISED AN ADDI TIONAL GROUND TO THE EFFECT THAT THE DEPRECIATION ON SOME IDLE ASSET S OUGHT TO HAVE BEEN GRANTED SINCE SUCH ASSETS FORMED PART OF THE BLOCK OF ASSETS AND IN TERMS OF THE PROVISIONS OF SECTION 32 OF THE ACT, A SSESSEE WAS ENTITLED TO THE CLAIM OF DEPRECIATION. IN SUPPORT, RELIANCE WAS PLACED ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. YAMAHA MOTOR INDIA (P) LTD (2009) 226 CTR (DEL) 304. IT IS ALSO CONTENDED THAT THE AFORESAID ISSUE INVOLVES A PRINCIPLE OF LAW WITH NE CESSARY FACTS ALREADY ON RECORD IN TERMS OF PARA 10 OF THE ASSESSMENT ORD ER AND THEREFORE, THE ADDITIONAL GROUND RAISED BE ADMITTED FOR ADJUDI CATION. 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE OPPOSED THE PRAYER OF THE ASSESSEE AND HAS POINTED OUT THAT ADMISSION OF THE GROUND INVOLVES INVESTIGATION OF N EW FACTS. 8. HAVING CONSIDERED THE RIVAL PLEAS, WE FIND THAT THE ISSUE RAISED BY THE ASSESSEE INVOLVES A PURE POINT OF LAW AND TH E SAME IS INDEED RELEVANT TO ASCERTAIN THE CORRECT TAX LIABILITY OF THE ASSESSEE, AND THEREFORE, FOLLOWING THE PARITY OF REASONING LAID D OWN IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. V. CIT 229 ITR 383 (SC) THE SAID GROUND IS LIABLE TO BE ADMITTED FOR ADJUDICATION. W E HOLD SO. HOWEVER, WITH REGARD TO THE MERITS OF THE CLAIM, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER WHO SHALL CONSIDER AND EXAMINE THE CLAIM OF THE ASSESSEE IN A CCORDANCE WITH LAW. NEEDLESS TO MENTION THE ASSESSING OFFICER SHA LL AFFORD ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE, AND THEREAF TER PASS AN ORDER ON ITA NO. 86/PN/2009 MEHTA COLD FORGE 6 THIS ISSUE AS PER LAW. THUS, ON THIS GROUND ASSESSE E SUCCEEDS FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF MAY 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 13 TH MAY , 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A) II, NASHIK 4. THE CIT I, NASHIK 5. THE D.R, A BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE