Dolphin Hotels Limited, R.R.Dist V. DCIT, Hyderabad

ITA 94/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53850 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO.94/HYD/2010 ASSESSMENT YEAR 2006-07 M/S DOLPHIN HOTELS LTD., RR DISTRICT, HYDERABAD (PAN AAACD7740B) VS THE DCIT, CIRCLE 16(2), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI V. SIVA KUMAR RESPONDENT BY : SHRI V. SRINIVAS DATE OF HEARING : 13.12.2011 DATE OF PRONOUNCEMENT : 27.12.2011 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) V, HYDERABAD DATED 13.1 1.2009 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COMPANY OPERATING HOTELS BY THE NAME OF DOLPHIN. FOR THE A SSESSMENT YEAR 2006-07, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.12.2008 DECLARING INCOME OF RS.6,42,05,247/- AND NIL INCOME AFTER SET OFF OF CARRIED FORWARD LOSSES UNDER NORMAL PROVISIONS OF T HE ACT AND BOOK PROFIT OF RS.3,82,79,294/- UNDER SPECIAL PROVISIONS OF SECTION 115JB OF THE ACT. THE DCIT, CIRCLE 16(2), HYDERABAD COMP LETED THE ASSESSMENT ON 29.12.2008 U/S 143(3) OF THE ACT DETE RMINING THE INCOME BEFORE SET OFF OF LOSSES AT RS.6,42,36,784/- UNDER SPECIAL PROVISIONS OF SECTION 115JB OF THE ACT. WHILE DOING SO THE ASSESSING OFFICER ADDED BACK ARREARS OF DEPRECIATION OF RS.2, 98,78,490/- DEBITED ITA NO.94/H/2010 DOLPHIN HOTELS LTD., RR DISTT. 2 TO PROFIT AND LOSS ACCOUNT STATING THAT ARREARS OF DEPRECIATION RELATING TO THE EARLIER YEARS IS NOT ALLOWABLE UNDER THE PRO VISION TO SUB SECTION (2) OF SECTION 115JB OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT CLAUSE (III) OF THE PROVISO TO SUB SECTION (2) REQUIRES THAT WHILE PREPARING THE ANNUAL ACCOUNTS, THE METHOD AND RATES ADOPTED FOR CALCULAT ING DEPRECIATION SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURP OSE OF PREPARING PROFIT AND LOSS ACCOUNT WHICH IS LAID DOWN BEFORE T HE COMPANY AT ITS ANNUAL GENERAL MEETING. THE ASSESSEE SUBMITTED THA T IT HAD NOT DEVIATED FROM CLAUSE (III) OF PROVISO TO SUB SECTIO N (2) SINCE THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION WHILE COMPUTING BOOK PROFITS ARE SAME AS THAT PROVIDED ON THE ASSET S IN THE BOOKS OF ACCOUNT. THE ASSESSEE SUBMITTED THAT DURING THIS A SSESSMENT YEAR, DEPRECIATION OF THE FINANCIAL YEAR 1999-2000 IS DEB ITED TO P&L ACCOUNT TOWARDS ARREARS OF DEPRECIATION AND THE ARR EARS OF DEPRECIATION IS ALLOWABLE AS DEDUCTION WHILE COMPUT ING THE BOOK PROFITS U/S 115JB IN VIEW OF THE DECISION OF THE HO NBLE SC IN THE CASE OF APOLLO TYRES LTD. VS. CIT (255 ITR 273J). HENCE THE ASSESSING OFFICER IS NOT JUSTIFIED IN ADDING BACK ARREARS OF DEPRECIATION OF RS.2,98,78,490 WHILE COMPUTING THE BOOK PROFITS U/S 115JB OF THE ACT. 4. THE CIT(A) HAS HELD AS FOLLOWS: IT IS CLEAR THAT WITH RESPECT TO SECTION 115JB ONL Y THE PROFITS RELATING TO THE CURRENT FINANCIAL YEAR ARE TO BE CO NSIDERED. THE ASSESSEE CANNOT SUDDENLY INTRODUCE DEPRECIATION OF AN EARLIER YEAR WHICH IT HAD NEVER CLAIMED. IN THE CURRENT CA SE, THE ASSESSEE CLAIMED THAT IT DID NOT CLAIM DEPRECIATION FOR THE ASSESSMENT YEAR 1999-2000 AND 2000-01 IN THE BOOKS. THIS WAS BECAUSE THERE WAS LOSS IN THOSE ASSESSMENT YEAR S. ITA NO.94/H/2010 DOLPHIN HOTELS LTD., RR DISTT. 3 THEREFORE, NO TAX WAS PAYABLE AS PER PROVISIONS OF MAT. HOWEVER, IN THE CURRENT ASSESSMENT YEAR I.E. 2006-0 7, THE ASSESSEE SUDDENLY FINDS THAT IT HAS BOOK PROFITS AM OUNTING TO RS.6.81 CRORES. IN ORDER TO REDUCE THE TAX LIABILI TY, THE ASSESSEE DECIDED TO CLAIM DEPRECIATION PERTAINING TO ASSESSM ENT YEAR 2001-02 IN THE CURRENT ASSESSMENT YEAR SO AS TO SUB STANTIALLY REDUCE BOOK PROFITS AS WELL AS ITS TAX LIABILITY. FIRSTLY, THE CALCULATIONS ARE INCONSISTENT WITH THE SCHEME SECTI ON 115JB. SECONDLY, IF ITS IS ALLOWED THEN THE VERY PURPOSE O F SECTION 115JB WOULD BE DEFEATED AS THE ASSESSEE CAN AT ANY TIME R EDUCE DEPRECIATION PERTAINING TO ANY PREVIOUS YEAR WERE T HERE WAS A LOSS. THE RELIANCE BY THE ASSESSEE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF APOLLO TYRES VS. CIT 255 ITR 273 IS MISPLACED BECAUSE THIS DECISION O F THE HONBLE COU RT WAS MADE IN THE CONTEXT OF SECTION 115J ONLY. MOREOVER, IN THIS PARTICULAR CASE, THE ISSUE PERTAINED TO THE EXISTING PROVISION S OF DEPRECIATION, BOTH CURRENT AND CARRIED FORWARD. IN THAT CASE, THE ASSESSEE HAD NOT SUDDENLY INTRODUCED DEPRECIATION F ROM A LOSS MAKING YEAR AS HAS BEEN DONE BY THE ASSESSEE. THER EFORE, THE FACTS AND THE PROVISIONS OF LAW BEING DIFFERENT, TH E ASSESSEE CANNOT CLAIM THAT THE DECISION OF THE HONBLE APEX COURT IN THE AFORE MENTIONED CASE IS APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN VIEW OF THE DISCUSSIONS, WE FIND NO INTER FERENCE WITH THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCO UNT. 5. AGGRIEVED, THE ASSESSEE HAS PREFERRED APPEAL BE FORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI V. SIVA KUMAR , RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF APOLLO TY RES VS. CIT (255 ITR 272). 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE TRIBUNAL DATED 31.3.2011 IN ITA NO.490 & OTHERS ETC. IN THE CASE ITA NO.94/H/2010 DOLPHIN HOTELS LTD., RR DISTT. 4 OF SINGARENI COLLIERIES VS. ACIT., KHAMMAM & IN TH E CASE OF GILT PACK LIMITED VS. UNION OF INDIA (163 TAXMAN 333 MP). 7. WE HEARD BOTH THE PARTIES. THE CASE LAWS RELI ED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS DISTINGUISHABLE IN A S MUCH AS THEY RELATE TO PRIOR PERIOD DEPRECIATION AND THE FACTS I N THE PRESENT CASE ARE DIFFERENT. WE FIND THAT THE ARREARS OF DEPRECI ATION DEBITED TO THE P&L ACCOUNT WHICH IS PREPARED IN ACCORDANCE WITH LA W PART II & III OF THE SCHEDULE VI OF THE COMPANIES ACT AND CERTIFIED TO BE CORRECT BY THE STATUTORY AUTHORITY IS ALLOWABLE WHILE COMPUTIN G THE BOOK PROFITS U/S 115JB OF THE ACT. IN VIEW OF THE HONBLE SC DE CISION IN THE CASE OF APOLLO TYRES (255 ITR 273)(SC), WE ALLOW THE AS SESSEES APPEAL. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT 27.12.2011 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 DECEMBER, 2011 COPY FORWARDED TO: 1. M/S DOLPHIN HOTELS LTD., HOTEL SITARA, RAMOJI FILM CITY, HAYATNAGAR MANDAL, RR DISTT. 2. THE DCIT, CIRCLE 16(2), HYDERABAD 3. THE CIT(A)- V 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/