ACIT CEN CIR 21, MUMBAI V. ETERNITY JEWELS, MUMBAI

ITA 93/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92720 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 02-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REEPAL G TRALSHAWALA
• Assessee Lawyers: NEIL PHILIP
• Keywords: Business income; Depreciation; Rectification of order; Difference of opinion; Change of opinion
• Section: 54; 6; 10; 154; 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 93/MUM/2013 ASSESSMENT YEAR: 2004-05 DCIT CC-21, R. NO. 403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. RD. MUMBAI 400 020 . (APPELLANT) VS. M/S. ETERNITY JEWELS C-11, GEMS & JEWELLERY COMPLES NO. II SEEPZ, ANDHERI (E) MUMBAI 400 096 PAN: AAAFE 7145 E (R ESPONDENT) APPELLANT BY : SHRI REEPAL G. TRALSHAWALA RESPONDENT BY : SHRI NEIL PHILIP DATE OF HEARING : 0 2.06.2015 DATE OF PRONOUNCEMENT : 05.06.2015 O R D E R PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE CIT(A)- 39, MUMBAI DATED 10.10.2012 RELATING TO ASSESSMENT YEAR 2004-05 AGAINST ORDER PASSED UNDER SECTION 154 OF THE I.T. ACT. ITA NO. 93/MUM/2013 ASSESSMENT YEAR: 2004-05 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL:- 1. THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN ALLOWING THE CLAIM OF THE ASSESSEE REGARDING THE CARRIED FOR WARD OF LOSS OF RS.1,07,57,326/- PERTAINING TO A.Y. 2003-04. 2. THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN HOLDING THAT THE ISSUE IS A DEBATABLE ISSUE NOT AMENABLE TO RECTIFICATION/S 154 OF THE I.T. ACT. 3. THE ISSUE ARISING FOR THE PRESENT APPEAL IS AGAI NST THE RECTIFICATION ORDER PASSED U/S 154 OF THE I.T. ACT UNDER WHICH TH E AO HAD ADJUSTED CARRIED FORWARD LOSSES AGAINST THE BUSINESS INCOME OF THE INSTANT ASSESSMENT YEAR. THE CIT(A) ON THE OTHER HAND ALLOW ED THE CLAIM OF THE ASSESSEE U/S 10A OF THE I.T. ACT AND HELD THAT THE SAID BROUGHT FORWARD LOSSES ARE NOT TO BE ADJUSTED AGAINST THE BUSINESS INCOME, SINCE AFTER GRANTING EXEMPTION U/S 10A OF THE ACT, THERE WAS NI L INCOME. THE CIT(A) ALSO HELD THAT THE ISSUE BEING DEBATABLE WAS NOT AMENABLE TO RECTIFICATION U/S 154 OF THE ACT. 4. THE REVENUE IS AN APPEAL AGAINST THE AFORESAID F INDINGS OF THE CIT(A). THE LD. DR FOR THE REVENUE POINTED OUT THAT THE AO HAD PASSED THE ORDER U/S 154 OF THE ACT AND HAD ADJUSTED THE B ROUGHT FORWARD LOSSES OF THE EARLIER YEARS AND NO DEDUCTION U/S 10 A OF THE ACT WERE ALLOWED TO THE ASSESSEE. REFERENCE WAS MADE TO THE OBSERVATIONS OF THE CIT(A) AND IT WAS POINTED OUT THAT THE DEDUCTION U/ S 10A OF THE ACT IS TO BE ALLOWED ON THE BALANCE INCOME, AFTER ADJUSTING T HE BROUGHT FORWARD LOSSES. 5. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE EXEMPTION CLAIMED U/S 10A WAS A SEPARATE PROVISION AND IN CAS E AFTER ADJUSTMENT OF THE 10A EXEMPTION, THERE ARE NO PROFITS LEFT THE N, NO ADJUSTMENT OF BROUGHT FORWARD LOSSES CAN BE MADE IN THE HANDS OF THE ASSESSEE. ITA NO. 93/MUM/2013 ASSESSMENT YEAR: 2004-05 3 RELIANCE IN THIS REGARD, WAS PLACED UPON THE RATIO LAID DOWN BY THE DELHI BENCH OF TRIBUNAL IN CANAM INTERNATIONAL PVT. LTD. VS. ACIT IN ITA NO. 1885/DEL/2010 RELATING TO A.Y. 2005-06, ORDER DATED 21.11.2014. ANOTHER SUBMISSION MADE BY THE LD. AR FOR THE ASSES SEE WAS THAT THE ISSUE BEING DEBATABLE, COULD NOT BE RECTIFIED U/S 1 54 OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF DIAMON D STUDDED GOLD JEWELLERY. THE ORIGINAL ASSESSMENT IN THE CASE OF T HE ASSESSEE WAS COMPLETED U/S 143(3) R.W.S. 153A OF THE ACT, UNDER WHICH, EXEMPTION U/S 10A WAS GRANTED TO THE ASSESSEE. THEREAFTER, TH E AO NOTED THAT THERE WAS A MISTAKE APPARENT FROM RECORD WITHIN THE MEANING OF SECTION 154 OF THE ACT. THE AO FURTHER OBSERVED THAT IN THE NOTE BELOW THE COMPUTATION OF INCOME, THE ASSESSEE HAD DECLARED TH AT IT WAS ENTITLED TO CARRY FORWARD OF THE BROUGHT FORWARD LOSSES OF ASSE SSMENT YEAR 2003-04 OF RS.1,07,57,326/- FOR THE PURPOSE OF SET OFF IN T HE SUCCEEDING YEAR. SINCE THE ASSESSEE HAD DECLARED PROFIT FOR THE INST ANT ASSESSMENT YEAR, AS PER THE AO, THE LOSS OF EARLIER YEAR WAS REQUIRE D TO BE SET OFF AGAINST THE SAID PROFITS AND THE BALANCE LOSSES HAD TO BE C ARRIED FORWARD TO THE SUBSEQUENT YEAR. NOTICE U/S 154 WAS ISSUED TO THE A SSESSEE AND AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE AO, HELD THAT BEFORE GRANTING THE EXEMPTION U/S 10A OF THE ACT, BROUGHT FORWARD L OSSES OF THE UNITS WERE REQUIRED TO BE SET OFF. THE AO RECOMPUTED THE INCOME IN THE HANDS OF THE ASSESSEE. 7. ON APPEAL BEFORE THE CIT(A) THE CONTENTION OF TH E ASSESSEE WAS THAT THE RECTIFICATION CARRIED ON BY THE AO WAS BAS ED ON CHANGE OF OPINION AND ON A POINT OUT OF LAW WHERE TWO VIEWS W ERE POSSIBLE. ITA NO. 93/MUM/2013 ASSESSMENT YEAR: 2004-05 4 HENCE, NO RECTIFICATION COULD BE CARRIED OUT UNDER SECTION 154 OF THE ACT. ANOTHER PLEA RAISED BY THE ASSESSEE BEFORE THE CIT( A) WAS THAT SECTION 10A(6) HAD BEEN AMENDED W.E.F. 01.04.2001 AND THE L OSSES RELATING TO ASSESSMENT YEARS ENDING BEFORE 01.04.2001 SHALL NOT BE ALLOWED TO BE CARRIED FORWARD OR SET OFF. SINCE THE ASSESSEE WAS HAVING LOSSES IN A.Y. 2003-04, IT WAS ENTITLED TO CARRY FORWARD OF SUCH L OSSES TO SUBSEQUENT YEARS. THE CIT(A) VIDE PARA 5 OBSERVED AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE, THE REASO NING OF THE AO, AND THE ARGUMENTS AS RAISED BY THE APPELLANT. ACCOR DING T THE AO, THE DEDUCTION U/S 10A IS A UNIT BASED DEDUCTION AND THEREFORE PAST LOSSES OF THE UNITS ARE REQUIRED TO BE SET OFF AS IF IT IS THE ONLY SOURCE OF INCOME. THE PROVISIONS OF SEC 10A HAS A SPECIFIC PROVISION RELATING TO LOSSES IN SUB. SEC 6 WHICH HAS UNDERGONE A CHANGE, MAKING A DIFFERENCE FOR AND FRO M A.Y. 2001-02. IT SPECIFICALLY BARS CARRIED FORWARD OR SE T OFF WHERE THE LOSS RELATED TO A.YRS. ENDING PRIOR TO 01.04.2001. IT THUS TRANSPIRES THAT SUCH ADJUSTMENTS ARE PERMISSIVE FRO M A.Y. 2001- 02 AND ONWARDS. THE LOSS CLAIMED AS CARRIED FORWARD BY THE ASSESSEE PERTAINS TO A.Y. 2003-04. MOREOVER, IT IS ALSO A FACT THAT THE LIMITATION AS PRESCRIBED IN SEC. 80AB IS APPLIC ABLE ONLY FOR RELIEF UNDER CHAPTER VIA AND NOT FOR RELIEF UNDER C HAPTER III OF THE ACT. IN ANY CASE, THE ISSUE AT STAKE INVOLVES I NTERPRETATION OF THE PROVISIONS OF THE STATURE AND WHERE TOW VIEWS A RE POSSIBLE AND THUS IS DEBATABLE, IT IS TO BE HELD THAT IT CAN NOT BE MADE AMENABLE TO RECTIFICATION U/S 154 OF THE I.T. ACT. UNDER THE CIRCUMSTANCES, I AM UNABLE TO SUSTAIN THE ORDER PAS SED BY THE ASSESSING OFFICER U/S 154 OF THE ACT. 8. THE ISSUE ARISING BEFORE US IS WITH REGARD TO SU CH EXERCISE OF POWER OF RECTIFICATION UNDER SECTION 154 OF THE ACT . WITH REFERENCE TO THE MERITS OF THE CASE, WE FIND THAT SIMILAR ISSUE OF C LAIM OF DEDUCTION U/S 10A VIS--VIS SETTING OFF OF A BROUGHT FORWARD LOSS ES AROSE BEFORE THE DELHI BENCH OF THE TRIBUNAL IN CANAM INTERNATIONAL PVT. LTD VS. ACIT (SUPRA). THE TRIBUNAL IN TURN RELYING ON THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN CIT VS. TEI TECHNOLOGIES PVT. LTD 361 ITR 36 (DEL) NOTED ITA NO. 93/MUM/2013 ASSESSMENT YEAR: 2004-05 5 THAT THE HONBLE HIGH COURT HAD HELD THAT SECTION 1 0A OF THE ACT THOUGH WORDED AS DEDUCTION PROVISION, WAS IN SUBSTANCE AN EXEMPTION PROVISION. IT WAS FURTHER HELD BY THE HONBLE HIGH COURT AS UNDER:- WE HAVE ALREADY SEEN THAT SECTION 10A, AS IT PRE SENTLY STANDS, THOUGH WORDED AS DEDUCTION PROVISION, IS ESSENTIALLY AND I N SUBSTANCE AN EXEMPTION PROVISION. WE HAVE ALSO HELD THAT THE IMP LICATION OF AN EXEMPTION PROVISION IS THAT THE PARTICULAR INCOME W HICH IS EXEMPT FROM TAX DOES NOT ENTER THE FIELD OF TAXATION AND IS NOT SUBJECT ANY COMPUTATION. THE COMPUTATION PROVISIONS OF THE ACT DO NOT GET ATTRACTED AT ALL TO THE EXEMPTED INCOME. THESE JUDG MENTS, THEREFORE, ARE NOT APPOSITE TO THE CONTROVERSY BEFORE US. 9. SIMILAR PROPOSITION HAD BEEN LAID DOWN BY THE H ONBLE BOMBAY HIGH COURT IN CIT VS. BLACK AND VEATCH CONSULTING P VT. LTD. 348 ITR 78 (MUM) AND OTHER HIGH COURT. THE TRIBUNAL IN CANAM I NTERNATIONAL PVT. LTD. VS. ACIT(SUPRA). THUS HELD THAT DEDUCTION UNDE R SECTION 10A OF THE ACT WAS TO BE CALCULATED BEFORE REDUCING THE UNABSO RBED LOSSES AND DEPRECIATION FROM THE PROFITS OF THE UNDERTAKING. 10. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE DELHI BENCH OF TRIBUNAL IN CANAM INTERNATIONAL PVT. LTD. VS. ACIT(SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE FIND NO MERIT IN GROUND NO. 1 OF APPEAL RAISED BY THE REVENUE AND THE SAME IS DIS MISSED. 11. IN ANY CASE IN VIEW OF THE VARIOUS JUDICIAL PRE CEDENTS ON THE ISSUE, THE SAID ISSUE IS DEBATABLE AND IS NOT AMENABLE TO THE PROVISION OF RECTIFICATION PROVIDED UNDER SECTION 154 OF THE ACT . WE UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD AND DISMISS THE GROUND NO. 2 OF APPEAL. ITA NO. 93/MUM/2013 ASSESSMENT YEAR: 2004-05 6 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF JUNE, 2015. SD/- SD/- (R. C. SHARMA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATED: 05.06.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.