DCIT, New Delhi V. M/s. S.R.L. Ltd., New Delhi

ITA 918/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6548 (ITAT-DELHI)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 14-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB; 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO. 918/DEL/2014 (ASSESSMENT YEAR 2006-07) APPELLANT BY : SH. S. S. RANA, CIT, DR RESPONDENT BY : MS. SHAILY GUPTA, ADV. DATE OF HEARING : 14.02.2017 DATE OF PRONOUNCEMENT: 17.02.2017 ORDER PER BEENA A. PILLAI, JM: 1. T HE PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST ORDER DATED 18.11.2013 PASSED BY LD. CIT (A) 11 ON FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.33,79 407/- MADE BY TH E AO ON ACCOUNT OF SET OFF AND CARRY FORWARD DEPRECIATION.' 2. 'THE APPELLANT CRAVES TO AMEND MODIFY, AL TER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL.' DCIT CIRCLE-9(1) NEW DELHI VS. S. R. L. LTD., PLOT NO. D3, A WING, 2 ND FLOOR, NEW DELHI GIR/PAN: AACS2809J (APPELLANT) (RESPONDENT) ITA NO. 918/DEL/2014 (AY 2006-07) PAGE 2 OF 8 2. BRIEF FACTS AS SUBMITTED BY ASSESSEE BEFORE LD. CI T(A) IN THE STATEMENT OF FACT ARE AS UNDER: FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD F ILED ITS RETURN OF INCOME ON 30.11.2006, DECLARING TOTAL TAXABLE INCOME OF RUPEES NIL AFTER ADJUSTING THE BROUGHT FORWARD LOSS OF RS.81,811,190/-. THE ACCUMULATED BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION AVAILABLE FOR SET OFF A S ON 01.04.2005 IS AS UNDER: ASSESSMENT YEAR BUSINESS LOSS (RS) DEPRECIATION LOSS (RS) TOTAL {RS} 1997-98 -- 19,062,677 19,062,677 1998-99 675,505 36,447,012 3.7,122,517 1999-00 29,293,124 36,974,432 66,267,556 2000-01 29,857,199 24,415,545 54,272,744 2001-02 5,239,435 18,252,989 23,492,424 TOTAL 65,065,263 135,152,655 200,217,918 3. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSING OFFICER PASSED ASSESSMENT ORDER ON 23.12. 2008. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFERRE D APPEAL BEFORE LD. CIT(A), WHEREIN PARTIAL RELIEF WAS ALLOW ED. THEREAFTER, ASSESSEE AS WELL AS THE REVENUE CAME IN TO APPEAL BEFORE THIS TRIBUNAL. THIS TRIBUNAL GRANTED RELIEF TO ASSESSEE VIDE ORDER DATED 16.12.2011 IN ITA NO. 434/DEL/2011 . CONSEQUENT TO THE ORDER GIVING EFFECT TO HONBLE TR IBUNALS ITA NO. 918/DEL/2014 (AY 2006-07) PAGE 3 OF 8 ORDER, THE INCOME OF ASSESSEE WAS COMPUTED AT NIL AND THEREFORE, INCOME DECLARED BY ASSESSEE UNDER SECTIO N 115JB WAS CONSIDERED TO BE TAXABLE INCOME IN THE HANDS OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 4. THEREAFTER, LD. AO ISSUED NOTICE DATED 14.12.2011 UNDER SECTION 154 OF THE ACT. LD. AO OBSERVED THAT WHILE COMPUTING THE TAXABLE INCOME UNDER NORMAL PROVISION S OF THE ACT, ASSESSEE HAD ADJUSTED UNOBSERVED DEPRECIATION OF RS. 19,062,677/- PERTAINING TO ASSESSMENT YEAR 1997-08 WHICH COULD HAVE BEEN CARRIED FORWARDED AND ADJUSTED UP T O 8 YEARS ONLY, AND THIS BENEFIT ENDED IN THE CASE OF ASSESSE E IN ASSESSMENT YEAR 2005-06. AS ASSESSEE HAD ADJUSTED T HE UNOBSERVED DEPRECIATION IN THE ASSESSMENT YEAR 2006 -07 (YEAR UNDER CONSIDERATION) WHICH IS 9 TH ASSESSMENT YEAR, FROM ORIGINAL YEAR OF LOSS AND THE SAME WAS ADDED BACK T O INCOME OF ASSESSEE. 5. AGGRIEVED BY ORDER OF LD. AO PASSED UNDER SECTION 154 OF THE ACT, ASSESSEE PREFERRED APPEAL BEFORE LD. CI T(A), WHO ALLOWED ASSESSEE IS CLAIM. LD. CIT(A) RELIED UPON D ECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS DCIT REPORTED IN 354 ITR 224 AND THE CIRCULAR ISSUED BY CBDT BEING CIRCULAR NO. 14 OF 20 01, DATED 09.11.2001. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US NOW. ITA NO. 918/DEL/2014 (AY 2006-07) PAGE 4 OF 8 7. LD. DR HAS PLACED RELIANCE UPON THE ORDER OF ASSES SING OFFICER. 8. LD. AR SUBMITTED LAW THAT IN RESPECT OF UNOBSERVED DEPRECIATION WAS AMENDED BY FINANCE ACT 2001 W.E.F. 01.04.2002, AND THE AMENDMENT APPLIES TO ASSESSMENT YEAR UNDER CONSIDERATION. LD. AR FURTHER SUBMITTED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OF F OF UNOBSERVED DEPRECIATION IS NO MORE APPLICABLE AND I T WOULD BE ALLOWED TO BE CARRY FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT ASSESSMENT YEAR S. 9. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH T HE SIDES AND THE LIGHT OF THE RECORDS PLACED BEFORE US . 10. BEFORE US LD. AR HAS PLACED HIS RELIANCE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS DCIT (SUPRA). IT IS ALSO BEEN POINTED OUT THAT THE DECISION OF GENERAL MOTORS INDIA PVT. LTD., (SUPRA) HAS BEEN FOLLOWED BY VARIOUS HIGH COURTS A ND COORDINATE BENCHES OF THIS TRIBUNAL. A REFERENCE OF THE SAME HAS BEEN PLACED IN THE PAPER BOOK FILED BEFORE US. THE JUDICIAL PRECEDENT ON THE ISSUE BY HONBLE GUJARAT HIGH COURT, IS HELD AS UNDER: THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR CLARIFIE S THE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PL ANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT ITA NO. 918/DEL/2014 (AY 2006-07) PAGE 5 OF 8 DISPENSES WITH THE RESTRICTION OF EIGHT YEARS FOR C ARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM THE ASSESSMENT YEAR 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 200 2- 03), WILL BE DEALT WITH IN .ACCORDANCE WITH THE PRO - VISIONS OF SECTION 32(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 THE INTENTION OF THE LEGISLATURE BEEN TO-ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN THE ASSESSMENT YEAR 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AFTER THE AMENDMENT OF SECTION 32(2) BY THE FINANCE ACT, 2001, IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONT AIN ANY SUCH PROVISION. HENCE, KEEPING IN VIEW THE PURPOSE OF THE AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOS IVE AND HARMONIOUS INTERPRETATION HAS TO BE TAKEN. WHIL E CONSTRUING THE TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND REASONABLE CONSTRUCTION TO THE LANGUAGE OF THE SECT ION WITHOUT LEANING TO THE SIDE OF THE ASSESSEE OR THE REVENUE. BUT IF THE LEGISLATURE FAILS TO EXPRESS DE ARLY AND THE ASSESSEE BECOMES ENTITLED FOR A BENEFIT WIT HIN 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 CLARIF IED THAT UNDER SECTION 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YE AR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32( 2) AS AMENDED BY THE FINANCE ACT, 2001, WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE ITA NO. 918/DEL/2014 (AY 2006-07) PAGE 6 OF 8 ASSESSMENT YEARS 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEA RS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE ASSESSMENT YEAR 2002- 03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT I S SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATIO N 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 COMES FOR ABSORPTION FRO M THE PROFITS AND GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUC TIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THE RE 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 SUCCEE DING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND I S DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CU RRENT DEPRECIATION FOR' SUCH SUCCEEDING YEAR, THE UNABSOR BED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPIN ION THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON THE 1 ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE-' W ITH 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 AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH,. THE UNABSORBED DEPRECIATION ITA NO. 918/DEL/2014 (AY 2006-07) PAGE 7 OF 8 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 FINANCE ACT, 2001, AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 11. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND A NY INFIRMITY IN THE FINDINGS OF LD. CIT(A). ACCORDINGL Y, THE GROUNDS RAISED BY THE REVENUE STANDS DISMISSED. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2017. SD/- SD/- (N. K.SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 17.02.2017 @M!T COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI.