DCIT, Jaipur V. AUTOLITE (INDIA) LTD., Jaipur

ITA 860/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5248 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVIR SINGH DUGAR
• Assessee Lawyers: MADHUKAR GARG CA DHK
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32; 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK ] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 860/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. CUKE VS. M/S. AUTOLITE (INDIA) LTD., D-469, VKI AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCA 4083 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAGHUVIR SINGH DUGAR (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MADHUKAR GARG (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.06.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 7/06/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS)- II, JAIPUR DATED 10.10.2014 PERTAINING TO A.Y. 2010 -11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT (APPEALS) HAS ERRED IN DIRECTING TO ALLOW CARRY FORWARD UNABSORBED DEPRECIATION OF RS. 67,06,559/- AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY L IMIT. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD.CIT (APPEALS) HAS ERRED IN DIRECTING TO ALLOW THE UNABSORBED DEPRECIATION BROUGHT FORWARD FROM A.Y. 2 001-02 AND EARLIER YEARS AGAINST THE INCOME OF RS. 1,52,16 ,223/- DETERMINED IN THE ORDER U/S 143(3)/154. (III) THE APPELLANT CRAVES ITS RIGHT TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2 ITA NO. 860/JP/2014 DCIT VS. M/S. AUTOLITE (INDIA) LTD. 2. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGAI NST DIRECTING THE AO TO ALLOW CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS. 67, 06,559/- AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT. THE L D. D/R SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT LD. CIT (A) WAS NOT JUSTIFIED IN DIRECTING THE AO FOR ALLOWING CARRY FORWARD OF UNABSORBED DEPRECIATION. ON THE CO NTRARY, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE JUDGMENTS OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASES OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, 354 ITR 244 (GUJ.) AND AU SOM ENTERPRISES LTD. VS. DCIT, 105 DTR 78 (GUJ.). 3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT (A) HAS DECIDED THE ISSUE BY F OLLOWING THE JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT IN THE CASES OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, 354 ITR 244 (GUJ.) AND AUSOM ENTERPRISES LTD. VS. D CIT, 105 DTR 78 (GUJ.) BY OBSERVING AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IN THE ORDER 143(3), THE INCOME DECLARED IN THE RETURN OF INCOME HAS WRO NGLY BEEN TAKEN AS (-) RS. 25,88,687,673/- INSTEAD OF RS. NIL . THIS IS A MISTAKE APPARENT FROM RECORD AND, THEREFORE, NOTICE U/S 154 AND THE ORDER U/S 154 HAS BEEN CORRECTLY PASSED. GR OUND NO. 1 IS DISMISSED. 2.4.1. WITH RESPECT TO GROUND NO. 2 & 3, THE ISSUE IN QUESTION IS WHETHER UNABSORBED DEPRECIATION PERTAINING TO A.Y. 2001-02 CAN BE ALLOWED TO BE CARRIED FORWARD AND SET OFF, A FTER A PERIOD OF 8 YEARS WITHOUT ANY LIMIT WHATSOEVER, IN ACCORDA NCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINAN CE ACT, 2001, W.E.F. A.Y. 2002-03. THIS QUESTION ALSO AROSE IN THE CASE OF GENERAL MOTORS INDIA (P) LTD. VS. DCIT (2012) 25 TAXMANN.COM 364 (GUJ.) IT HAS BEEN HELD IN THIS ORD ER AS UNDER :- 3 ITA NO. 860/JP/2014 DCIT VS. M/S. AUTOLITE (INDIA) LTD. 35. SECTION 32(2) OF THE ACT WAS AMENDED BY THE F INANCE ACT, 2001, AND THE PROVISION SO AMENDED READS AS UNDER : 'WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFF ECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHA RGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVI SIONS OF SUB- SECTION (2) OF SEC TION 72 AND SUB-SECTION (3) OF S ECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFF ECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AM OUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIO US YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE OF THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PR EVIOUS YEARS.' 36. THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIE D BY THE CENTRAL BOARD OF DIRECT TAXES IN CIRCULAR NO. 14 OF 2001 (SEE [2001] 252 ITR (ST.) 65, 90). THE RELEVANT PORTION OF THE SAID CIRCULAR READS AS UNDER : 'MODIFICATION OF PROVISIONS RELATING TO DEPRECIATIO N 30.1 UNDER THE EXISTING PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, CARRY FORWARD AND SET OFF OF UNABSORBED DEPREC IATION IS ALLOWED FOR EIGHT ASSESSMENT YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WHERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISP ENSED WITH THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AND SE T OFF OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROF ESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECT ION 32 SHALL BE MANDATORY. 30.5 THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1ST APRIL, 2002, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS ESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS.' 37. THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE A MENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT D ISPENSES WITH THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWA RD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABL E FROM THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSE E ON THE 1ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), W ILL BE DEALT 4 ITA NO. 860/JP/2014 DCIT VS. M/S. AUTOLITE (INDIA) LTD. WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 2(2) AS AMENDED BY THE FINANCE ACT, 2001, AND NOT BY THE PROVISIONS OF SECTION 32(2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD TH E INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPREC IATION ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AM ENDMENT OF SECTION 32(2) BY THE FINANCE ACT, 2001, IT WOULD HA VE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CO NTAIN ANY SUCH PROVISION. HENCE, KEEPING IN VIEW THE PURPOSE OF TH E AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOU S INTERPRETATION HAS TO BE TAKEN. WHILE CONSTRUING THE TAXING STATUT ES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND R EASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECTION WITHOUT LEANING TO THE SIDE OF THE ASSESSEE OR THE REVENUE. BUT IF THE LEG ISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSEE BECOMES ENTITLED F OR A BENEFIT WITHIN THE AMBIT OF THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNO T BE DENIED. HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINE SS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UN DER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SE CTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE U NABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE ASSESSMENT YEARS 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWAR D TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATIO N OR PART THEREOF COULD NOT BE SET OFF TILL THE ASSESSMENT YE AR 2002-03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OF F AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECI ATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COME S FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LE FT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS U NABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING Y EAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEP RECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDIN G YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPIN ION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINANCE ACT, 2001. AND ONCE CIRCULAR NO. 14 OF 2001 CLARIFIED THAT THE RESTRICTION OF EIGHT YEARS FOR CARRY FORWARD AN D SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, TH E UNABSORBED DEPRECIATION FROM THE ASSESSMENT YEAR 1997-98 UP TO THE ASSESSMENT YEAR 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE F INANCE ACT, 2001, AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE 5 ITA NO. 860/JP/2014 DCIT VS. M/S. AUTOLITE (INDIA) LTD. PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 2.4.2. THE ABOVE DECISION IN THE CASE OF GENERAL MO TORS HAS ALSO BEEN FOLLOWED BY THE GUJARAT HIGH COURT IN THE CASE OF AUSOM ENTERPRISES LTD. VS. DCIT 105 DTR 78 (GUJ.). THIS RATIO HAS ALSO BEEN FOLLOWED BY ITAT MUMBAI BENCH AND ITA T, CHENNAI BENCH IN THE CASES CITED BY THE APPELLANT. 2.5. IN VIEW OF THE ABOVE JUDGEMENTS OF THE GUJARAT HIGH COURT IN THE CASES CITED ABOVE, IT IS HELD THAT THE UNABSORBED DEPRECIATION FOR A.Y. 2001-02 GETS CARRIED FORWARD TO A.Y. 2002- 03 AND BECOMES PART THEREOF, IT IS GOVERNED BY THE AMENDED PROVISIONS OF SECTION 32(2) AND IS AVAILABLE FOR CA RRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. THEREFORE, THE DISALL OWANCE OF UNABSORBED DEPRECIATION OF RS. 67,06,559/- MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. GROUND NO. 2 & 3 ARE ALLOWED. THE REVENUE HAS NOT POINTED OUT HOW THE JUDGMENTS A S RELIED ON BY THE LD. CIT (A) ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE . IN OUR CONSIDERED VIEW, THE LD. CIT (A) HAS RIGHTLY DECIDED THE ISSUE IN THE LIGHT OF THE JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS (I NDIA) PVT. LTD. (SUPRA). THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF LD. CIT (A). THE SAME IS HEREBY CONFIRMED. GROUND NOS. 1 & 2 RAISED BY THE REVENUE ARE REJECTED. 4. GROUND NO. 3 IS GENERAL IN NATURE AND NEEDS NO A DJUDICATION. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 7/06/2016 . SD/- SD/- VH-VKJ-EHUK] ( DQY HKKJR ) ( T.R. MEENA) ( KUL BHART ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 7/06/2016. DAS/ 6 ITA NO. 860/JP/2014 DCIT VS. M/S. AUTOLITE (INDIA) LTD. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT, CIRCLE-4, JAIPUR. 2. THE RESPONDENT- M/S. AUTOLITE (INDIA) LTD., JAIP UR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 860/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR