ITO 5(1)(4), MUMBAI V. HARDCASTLE RESTAURANTS P.LTD, MUMBAI

ITA 966/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0015 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN LD
• Assessee Lawyers: KUMAR KABRALD
• Keywords: Depreciation; Question of law; Unabsorbed depreciation
• Section: 143(3); 32

Judgement Text

ITA.NO.966/MUM/2016 HARDCASTLE RESTAURANTS PRIVATE LIMITED ASSESSMENT YEAR 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 966/MUM/2016 ( / ASSESSMENT YEAR: 2012-13) INCOME TAX OFFICER 5(1)(4) R.NO.569, AAYKAR BHAVAN M.K.ROAD MUMBAI-400 020 / VS. HARDC ASTL E RESTAURANTS PRIVATE LIMITED 1001-1002,10 TH FLOOR, TOWER-3 INDIABULLS FINANCE CENTRE SENAPATI BAPAT MARG ELPHINSTONE ROAD MUMBAI-400 013 ./ ./PAN/GIR NO. AAAFH-1333-H ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : SHREE KUMAR KABRA,LD. AR REVENUE BY : M.C.OMI NINGSHEN, LD. DR / DATE OF HEARING : 22/02/2018 / DATE OF PRONOUNCEMENT : 28 /02/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2012- 13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME- TAX (APPEALS)-10 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-10/ITO-5(1)(4)/242/2014-15 DATED 23/11/2015 BY RAISING THE FOLLOWING GROUNDS OF APPE AL: - 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT BROUGHT FORWAR DED UNABSORBED DEPRECIATION FOR A.Y. 98-99 TO A.Y. 2001-02 AMOUNTI NG TO RS.22026458/- ARE ITA.NO.966/MUM/2016 HARDCASTLE RESTAURANTS PRIVATE LIMITED ASSESSMENT YEAR 2012-13 2 ELIGIBLE FOR SET OFF AGAINST INCOME OF THE CURRENT YEAR WITHOUT APPRECIATING THE FACT THAT AS PER PROVISION OF PRE-AMENDED SEC.32(2) (PRIOR TO 01.04.2001 THE SET-OFF OF UNABSORBED DEPRECIATION ALLOWANCE (FOR T HE AY 1997-98 TO 2001-02) SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMEN T YEAR NOT BEING MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE A SSESSMENT YEAR FOR WHICH THE AFORESAID ALLOWANCE WAS FIRST COMPUTED. 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN RELYING ON THE JUDGMENT OF HON. GU JRAT HIGH COURT IN THE CASE OF M/S GENERAL MOTORS P. LTD. VS DCIT 354 ITR 244 W ITHOUT APPRECIATING THE FACT THAT IN THE SLP AGAINST THE SAID ORDER THE HON . SC HAS KEPT THE QUESTION OF LAW OPEN. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER 5(1)(4), MUMBAI [AO] U/S 143(3) OF THE INCO ME TAX ACT,1961 ON 13/11/2014. THE SOLITARY ISSUE INVOLVED IN THE APPE AL IS SET-OFF OF BROUGHT FORWARDED UNABSORBED DEPRECIATION PERTAINING TO ASS ESSMENT YEARS [A.Y] 1998-99 TO 2001-02. 2. BRIEFLY STATED THE ASSESSE BEING RESIDENT CORPORATE ASSESSE ENGAGED IN THE BUSINESS OF RUNNING MCDONALDS QUICK SERVICE RESTAURANT HAD BROUGHT FORWARD UNABSORBED DEPRECIATION AGGREGATING TO RS.2,20,26,458/- PERTAINING TO AYS 1998-99 TO 2001- 02, THE SET-OFF OF WHICH, IN THE OPINION OF LD. AO, WAS NOT AVAILABLE TO THE ASSESSEE IN IMPUGNED AY IN TERMS OF UN-AMENDED PROVISIONS OF SE CTION 32(2) SINCE EIGHT YEARS HAD ALREADY ELAPSED. THE LD. AO OPINED THAT THE BENEFIT OF AMENDED SECTION 32(2) WAS APPLICABLE ONLY FROM AY 2 002-03 AND NOT WITH RESPECT TO EARLIER YEARS. FINALLY, RELYING ON THE JUDGMENT OF THIS TRIBUNAL RENDERED IN DCIT VS. TIMES GUARANTEE LTD., THE SET-OFF OF THE STATED UNABSORBED DEPRECIATION WAS DENIED TO THE AS SESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 23/11/2015 WHE RE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY MAKING FOLLOWI NG OBSERVATIONS:- ITA.NO.966/MUM/2016 HARDCASTLE RESTAURANTS PRIVATE LIMITED ASSESSMENT YEAR 2012-13 3 4.2.1 AFTER CAREFUL EXAMINATION OF THE CASE I HOLD THAT THE UNABSORBED DEPRECIATION LOSSES FOR A.YS.1998-99 TO 2001-02 NEED TO BE ALLOW ED TO BE SET OFF FROM THE PROFITS DECLARED FOR THE PRESENT ASSESSMENT YEAR. T HE DECISION OF THE HONORABLE GUJRAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD (SUPRA) MADE THIS POINT VERY CLEAR. THE HONORABLE B OMBAY HIGH COURT IN THE CASE OF GODAVARI DEVI SARAF 113 ITR 589 AND THE HO NORABLE ITAT MUMBAI IN THE CASE OF PIYUSH C MEHATA 52 SOT 27 HAVE MADE IT CLEAR THAT THE DECISION OF A HIGHER JUDICIAL BODY NEEDS TO BE FOLLOWED EVEN IF ITS NON- JURISDICTIONAL ONE. IT IS ALSO TO BE NOTED THAT THE ITAT MUMBAI IN THE CASE OF BISLERI SALES LTD 58 SOT 73 HAS ALLOWED SUCH RELIEF BY FOLLOWING THE DECISION OF THE GUJRAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD. FURTHER IN APPELLANTS OWN CASE MY LEARNED PREDECESSOR HAS ALLOWED SIMILAR RELIEF FOR AY 2011-12. SINCE THE FACTS AND CIRCUMSTANCES FOR THE PRESENT A SSESSMENT YEAR ARE SAME, BY RESPECTFULLY FOLLOWING THE ABOVE DECISIONS CLAIM OF THE APPELLANT IS ALLOWABLE. ACCORDINGLY, THE GROUND IS ALLOWED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] PLACED RELIANCE ON THE STAND OF LD. AO WHEREAS LD. AUTHORIZED REPRESENTATI VE FOR ASSESSEE [AR] SUBMITTED THAT THE ISSUE STOOD COVERED IN ASSE SSEES FAVOR BY CATENA OF JUDGMENTS OF HIGHER JUDICIAL AUTHORITIES. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. AFTER CONSIDERING THE SAME, WE FIND THAT THE ISSUE, AT PRESENT STOOD SQUARELY COVERED IN ASSESSEES FAVOR BY CATENA OF JUDGMENTS OF THE HIGHER AUTHORITY AND CBDT CIRCULAR NO. 14 OF 2001 AND IN PARTICULAR, BY THE JUDGMENT OF HONBLE GUJARAT H IGH COURT RENDERED IN THE CASE OF GENERAL MOTORS INDIA P. LTD. VS DCIT [354 ITR 244 23/08/2012] WHERE THE HONBLE COURT AFTER CONSIDERING THE RELE VANT STATUTORY PROVISIONS OF SECTION 32 AS AMENDED BY TH E FINANCE ACT, 2001 AND CBDT CIRCULAR NO. 14 OF 2001 HELD THAT SET-OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS WAS AVAILABLE TO THE ASSESSEE. FURTHER, SPECIAL LEAVE PETITION [SLP] FILED BY THE REVENUE AGAINST THE SAID JUDGMENT HAS BEEN DISMISSED BY THE APEX COURT. THE REVENUE COULD NEITHER CONTROVERT THE SAME NOR WAS ABLE TO BRING A NY CONTRARY JUDGMENT ITA.NO.966/MUM/2016 HARDCASTLE RESTAURANTS PRIVATE LIMITED ASSESSMENT YEAR 2012-13 4 ON RECORD. FOR EASE OF REFERENCE, THE RELEVANT PORT ION FROM THE SAID JUDGMENT IS EXTRACTED BELOW:- 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 BUSIN ESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GAINS FROM ANY OTHE R BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LEFT EV EN 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 B ALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE U NABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEA R AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR S UCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNA BSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (A.Y. 2002- 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM A.Y.1997-98 UPTO THE A .Y.2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME P ART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMEN DED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINS T THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. FURTHER, WE FIND THAT THE REVENUE CONTESTED THE STA ND OF LD. CIT(A), IN SIMILAR MANNER, FOR AY 2011-12 BEFORE THIS TRIBUNAL VIDE ITA NO.4448/MUM/2015 ORDER DATED 15/06/2017 WHERE THE R EVENUES APPEAL HAS BEEN DISMISSED BY FOLLOWING THE RATIO OF ABOVE CITED JUDGMENT OF HONBLE GUJARAT HIGH COURT. FURTHER, OUR JURISDICTI ONAL BOMBAY HIGH COURT IN CIT VS. HINDUSTAN UNILEVER LTD. [72 TAXMANN.COM 325 26/07/2016] HAS CONFIRMED THE SIMILAR STAND OF TRIBUNAL BY NOT ADMITTING THE SUBSTANTIAL QUESTION OF LAW. THE RATIO OF THE D ECISION OF HINDUSTAN LEVER LTD. HAS FURTHER BEEN FOLLOWED BY HONBLE BOMBAY HIGH CO URT IN CIT VS HICKSON & DADAJEE PVT. LTD. [ITA NO. 1493 OF 2014 DATED 28/02/2017]. ITA.NO.966/MUM/2016 HARDCASTLE RESTAURANTS PRIVATE LIMITED ASSESSMENT YEAR 2012-13 5 6. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF C ATENA OF JUDGMENTS IN ASSESSEES FAVOR, WE CONFIRM THE STAND OF LD. FIRST APPELLATE AUTHORITY AND DISMISS REVENUES APPEAL. 7. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 28. 02.2018 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. !$- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI