M/S. HEATSHRINK TECHNOLOGIES, V. THE DY CIT 8(3),

ITA 9404/MUM/2004

• Counselvise Citation: 940419914 RSA 2004
• Duration Of Justice: 6 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-05-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 23-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Assessee Lawyers: PRADIP N KAPASI; TARAL DEDHIA
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI RAJENDRA S INGH ,(AM) ITA NO.9404/MUM/2004 ASSESSMENT YEAR : 2000-01 HEATSHRINK TECHNOLOGIES LTD. PLOT NO.112, 13 TH ROAD M.I.D.C. MAROL NAKA ANDHERI (E) MUMBAI-400 093. ..( APPELLANT ) P.A. NO. (AAACR 2591 J) VS. ASSTT. COMMISSIONER OF INCOME TAX -8(2) AAYAKAR BHAVAN, M.K. ROAD MARINE LINES MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI PRADIP N. KAPASI AND SHRI TARAL DEDHIA RESPONDENT BY : SHRI A JIT KUMAR SINHA O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 5.11.2004 OF THE CIT(A) FOR THE ASSESSMENT YEAR 200 0-01. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES IN RELATION TO A DDITION OF LONG TERM CAPITAL GAIN AND LEVY OF INTEREST UNDER SECTION 234 B. SUBSEQUENTLY THE ASSESSEE ALSO FILED ADDITIONAL GROUND VIDE LETTER D ATED 23.11.2007 WHICH READS AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN NOT ALLOWING SET OFF OF UNABSOR BED DEPRECIATION AGAINST THE CAPITAL GAINS ASSESSED BY ERRONEOUSLY HOLDING T HAT SUCH SET OFF IS NOT PERMITTED UNDER THE PROVISIONS OF THE INCOME TAX AC T WITH EFFECT FROM 1.4.1997 ALTHOUGH UNDER THE PROVISIONS OF THE ACT S UCH UNABSORBED DEPRECIATION IF CARRIED FORWARD FROM ASSESSMENT YEA R 1996-97 WAS TO BE CONSIDERED TO BE PART OF DEPRECIATION ALLOWANCE FOR EACH SUCCESSIVE YEAR ITA NO.9404/M/04 A.Y:00-01 2 AND THUS ELIGIBLE TO BE SET OFF AGAINST ANY INCOME (INCLUDING CAPITAL GAINS) OF SUCH SUCCESSIVE ASSESSMENT YEARS. 2. THE ADDITIONAL GROUND BEING LEGAL GROUND WAS ADMITT ED BY THE TRIBUNAL FOR ADJUDICATION. THIS GROUND BEING LEGAL GROUND IS BEING TAKEN UP FIRST. THE FACTS IN BRIEF ARE THAT THE ASSESSIN G OFFICER IN THE ASSESSMENT DID NOT PASS ANY ORDER WITH REGARD TO BR OUGHT FORWARD UNABSORBED DEPRECIATION. THE ASSESSEE BEFORE THE L D. CIT(A) RAISED THE GROUND FOR SET OFF OF UNABSORBED DEPRECIATION FOR A SSESSMENT YEAR 1995- 96 ONWARDS. THE CIT(A) ON PERUSAL OF RECORDS OB SERVED THAT THERE WAS NO UNABSORBED DEPRECIATION UPTO 1998-99 AND THERE W AS UNABSORBED DEPRECIATION OF RS.2,29,90,603/- FOR THE ASSESSMENT YEAR 1999-00 WHICH AS PER PROVISIONS OF SEC.32(2)(II) AS APPLICABLE W. E.F. 1.4.1997 COULD BE SET OFF ONLY AGAINST BUSINESS INCOME. SINCE THE ASSESS EE DID NOT HAVE ANY BUSINESS PROFITS IN THE CURRENT YEAR, THE SAME WAS NOT SET OFF BY THE CIT(A). AGGRIEVED BY THE DECISION, THE ASSESSEE AP PEALED BEFORE THE TRIBUNAL. 2.1. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTE D THAT THE CIT(A) WAS NOT CORRECT IN STATING THAT THE ASSESSEE DID NOT HA VE ANY UNABSORBED DEPRECIATION UP TO ASSESSMENT YEAR 1998-99. IT WAS POINTED OUT THAT THERE WAS UNABSORBED DEPRECIATION OF RS.2,40,39,504 /- FOR THE ASSESSMENT YEAR 1996-97 WHICH WAS DULY MENTIONED IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 FILED ON 20 .11.1997 AS PER COPY OF ACKNOWLEDGEMENT SLIP PLACED ON RECORD. THE LD. AR ALSO FILED COMPUTATION OF INCOME FOR ASSESSMENT YEAR 1996-97 S HOWING UNABSORBED DEPRECIATION OF RS.2,40,39,504/-. IT WA S FURTHER ARGUED THAT UNDER PROVISIONS OF SEC.32(2)(II) APPLICABLE UP TO ASSESSMENT YEAR 1996- 97, THE UNABSORBED DEPRECIATION FOR THOSE YEARS HAS TO BE CARRIED FORWARD AND SET OFF AGAINST BUSINESS PROFITS OR INC OME UNDER ANY OTHER HEAD. THE PROVISION FOR SETTING OFF OF UNABSORBED DEPRECIATION ONLY AGAINST BUSINESS PROFITS WAS APPLICABLE FOR ASSESSM ENT YEAR 1997-98 IN VIEW OF THE AMENDED PROVISIONS W.E.F. 1.4.1997. IT WAS URGED THAT ITA NO.9404/M/04 A.Y:00-01 3 UNABSORBED DEPRECIATION UP TO 1996-97 SHOULD BE ALL OWED TO BE SET OFF AGAINST THE INCOME UNDER ANY OTHER HEAD IN THIS YEA R. THE LD. DR ON THE OTHER HAND SUBMITTED THAT NO CLAIM OF UNABSORBED DE PRECIATION HAD BEEN MADE BY THE ASSESSEE IN THE RETURN OF INCOME FOR TH E ASSESSMENT YEAR UNDER CONSIDERATION AND THEREFORE THE CLAIM COULD N OT BE ALLOWED. 2.2. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATERIAL CAREFULLY. THE DISPUTE IS REGARDING THE CLAIM OF U NABSORBED DEPRECIATION FOR ASSESSMENT YEAR 1996-97 TO BE SET OFF AGAINST I NCOME UNDER ANY HEAD FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. FIRST, WE HAVE TO DEAL WITH THE LEGAL ISSUE AS TO WHETHER BROUGHT FOR WARD UNABSORBED DEPRECIATION UP TO ASSESSMENT YEAR 1996-97 COULD BE SET OFF AGAINST INCOME UNDER ANY HEAD IN THE SUBSEQUENT YEAR. THE PROVISIONS RELATING TO CARRY-FORWARD AND SET OFF OF UNABSORBED DEPRECIA TION HAVE UNDERGONE SEVERAL CHANGES OVER A PERIOD OF TIME. UNDER THE P ROVISIONS OF LAW APPLICABLE UP TO ASSESSMENT YEAR 1996-97, BROUGHT F ORWARD UNABSORBED DEPRECIATION FOR AND UP TO ASSESSMENT YEAR 1996-97 WHICH COULD NOT BE SET OFF UP TO 1996-97 HAS TO BE CARRIED FORWARD FOR SETTING OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD OF EIGHT YEARS STARTING FROM ASSESSMENT YEAR 1997-98. THE PROVISIONS WERE AMENDED FROM 1997-98 WHICH REMAINED IN FORCE UP TO ASSESSMENT YE AR 2001-02 AND AS PER THESE PROVISIONS, THE CURRENT DEPRECIATION FOR ANY OF THESE YEARS HAS TO BE FIRST SET OFF AGAINST BUSINESS INCOME AND THE N AGAINST INCOME UNDER ANY HEAD AND THE UNABSORBED DEPRECIATION FOR ANY OF THESE YEARS COULD BE CARRIED FORWARD FOR MAXIMUM PERIOD OF EIGHT YEAR S STARTING FROM ASSESSMENT YEAR IMMEDIATELY SUCCEEDING ASSESSMENT Y EAR FOR WHICH IT WAS FIRST COMPUTED, TO BE SET OFF ONLY AGAINST INCO ME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION. TH E PROVISIONS WERE AGAIN AMENDED W.E.F. ASSESSMENT YEAR 2002-03 AND AS PER THESE PROVISIONS, THE CURRENT DEPRECIATION FOR ANY OF THE SE YEARS CAN BE SET OFF AGAINST INCOME UNDER ANY HEAD. THE UNABSORBED DEPR ECIATION FOR ANY OF THESE YEARS IS DEEMED AS DEPRECIATION U/S.32(1) FOR THE CURRENT YEAR TO BE SET OFF AGAINST INCOME UNDER ANY HEAD LIKE CURRE NT DEPRECIATION FOR AN ITA NO.9404/M/04 A.Y:00-01 4 INDEFINITE PERIOD. THE LEGAL PREPOSITION SET OUT A BOVE IS SUPPORTED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF DY. CIT VS. TIMES GUARANTY LTD. [4 ITR (TRIB.) 210]. THE JUDGM ENT OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. RPIL SIGNALLING SYSTEMS LTD. (328 ITR 283) ON WHICH RELIANCE HAS BEEN PLACED BY THE L D. AR. THUS, SO FAR AS LEGAL POSITION IS CONCERNED, THE UNABSORBED DEPRECI ATION UP TO ASSESSMENT YEAR 1996-97 CAN BE SET OFF AGAINST INCO ME UNDER ANY HEAD FOR ASSESSMENT YEAR 2000-01 WHICH IS THE YEAR UNDER CONSIDERATION. AS REGARDS FACTUAL POSITION, WE FIND THAT THE CIT(A) H AS GIVEN A FINDING THAT THE ASSESSEE HAD NO UNABSORBED DEPRECIATION FOR AS SESSMENT YEAR 1996-97. HOWEVER ASSESSEE HAS FILED CERTAIN DOCUMEN TS SHOWING THAT THERE WAS UNABSORBED DEPRECIATION FOR 1996-97. THI S ASPECT THEREFORE, IN OUR VIEW, REQUIRES VERIFICATION. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH O RDER ON THIS ISSUE AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 3. NOW WE TAKE UP THE FIRST GROUND AS PER ORIGINAL GROUNDS OF APPEAL IN WHICH THE ASSESSEE HAS DISPUTED THE ADDITION OF RS.10.00 CRORES ON ACCOUNT OF LONG TERM CAPITAL GAINS MADE BY THE ASSE SSING OFFICER WHILE COMPUTING LONG TERM CAPITAL GAINS. THE ASSESSEE HA D ADJUSTED THE WORK- IN-PROGRESS OF RS.10.00 CRORES AGAINST SALE CONSIDE RATION WHICH WAS NOT ALLOWED BY THE ASSESSING OFFICER. IN APPEAL, THE A SSESSEE DID NOT PURSUE THIS ISSUE BEFORE THE CIT(A) THOUGH BEFORE THE TRIB UNAL THE ASSESSEE HAS AGAIN RAISED THIS GROUND. THE LD. AR SUBMITTED THA T THE ASSESSEE DID NOT WISH TO PRESS THIS GROUND. WE THEREFORE DISMISS THIS GROUND AS NOT PRESSED. 4. THE SECOND DISPUTE IN THE ORIGINAL GROUND OF APP EAL IS WITH REGARD TO LEVY OF INTEREST U/S.234B. THE LD. AR SUBMITTED THAT THIS ISSUE WAS ONLY CONSEQUENTIAL. THE ASSESSING OFFICER WILL THE REFORE, RECOMPUTE INTEREST AT THE TIME OF GIVING EFFECT TO THE ORDER OF THE TRIBUNAL. ITA NO.9404/M/04 A.Y:00-01 5 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.5.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 25.5.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.