BOND SAFETY BETTS, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 12(2), MUMBAI

MA 831/MUM/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7083 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: P B CHHAPGAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) MA NO. 831 / MUM/20 17 (ITA NO. 2270/MUM/2015) ASSESSMENT YEAR: 2010 - 11 M/S BOND SAFETY BELTS GR. FLOOR, BAKHTAVAR OPP. COLABA POST OFFICE COLABA, MUMBAI - 400005 VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 12(2), MUMBAI PAN NO. AAAFBO275C APPELLANT RESPONDENT ASSESSEE BY : MR. P.B. CHHAPGAR , AR REVENUE BY: MR. SAURABH DESHPANDE , SR. DR DATE OF HEARING : 04/05/2018 DATE OF PRONOUNCEMENT: 01/08/2018 ORDER PER N.K. PRADHAN, AM THE ASSESSEE HAS FILED THIS MISCELLANEOUS APPLICATION (MA), SEEKING AMENDMENT OF THE ORDER DATED 22.06.2017 IN ITA NO. 2270/MUM/2015 PASSED BY THE TRIBUNAL. 2. THE LD. COUNSEL OF THE ASSESSEE FILES A WRITTEN SUBMISSION IN SUPPORT OF HIS ARGUMENT STATING T HAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION IS ALLOWED TO BE SET OFF AGAINST INCOME FROM CAPITAL GAINS AND THE ASSESSEE HAS CORRECTLY SET OFF THE SAME WHILE COMPUTING ITS TOTAL INCOME FOR THE ASSESSMENT YEAR 2010 - 11. IT IS SUBMITTED THAT THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE M/S BOND SAFETY BELTS M.A. NO. 831/MUM/2017 2 HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS (P) LTD. V. D CIT (2013) 354 ITR 244 (GUJ), WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE IS ALLOWED TO CARRY FORWARD UNABSORBED DEPRECIATION PERTAINING TO AYS 1997 - 98 TO 2001 - 02 FORWARD INDEFINITELY WITHOUT THE RESTRICTION OF EIGHT YEARS. RELIANCE IS ALSO PLACED BY HIM ON THE DECISION IN DCIT V. BISLERI SALES LTD . (2013) 58 SOT 73 (MUMBAI - TRIB) AND SURESH INDUSTRIES V. ACIT (2012) 54 SOT 450 (MUMBAI - TRIB). THE LD. COUNSEL THUS SUBMITS THAT AS PER THE DECISION IN GENERAL MOTORS (P.) LTD . (SUPRA) , THE BROUGHT FORWARD UNABSORBED DEPRECIATION IS ALLOWED TO BE SET OFF AGAINST INCOME FROM CAPITAL GAINS. 3. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE TRIBUNAL HAS CORRECTLY INTERPRETED THE DECISION IN GENERAL MOTORS (P.) LTD . (SUPRA) AND THIS CANNOT BE CASE OF RECTIFICATION U/S 254(2) OF THE ACT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISION ARE GI VEN BELOW. THE ISSUE IN THE INSTANT CASE IS WHETHER THE UNABSORBED DEPRECIATION OF EARLIER YEARS I.E. 1996 - 97 TO 2001 - 02 AMOUNTING TO RS.13,89,661/ - CAN BE SET OFF AGAINST THE CAPITAL GAINS AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2010 - 11. IN GENERAL MOTORS INDIA (P.) LTD. (SUPRA), THE HONBLE GUJARAT HIGH COURT HAS HELD: HOWEVER, CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SECTION 32 (2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION U/S 32 SHALL BE MANDATORY. THEREFORE, THE PROVISIONS OF SECTION 32(2) AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE AY 1997 - 98, 1999 - M/S BOND SAFETY BELTS M.A. NO. 831/MUM/2017 3 2000, 2000 - 01 AND 2001 - 02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE AY 2002 - 03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATION IS DEDUCTIBLE IN SUCH 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 FROM 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 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 BALANCE 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 UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIAT ION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION TH AT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST DAY OF APRIL 2002 (AY 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 REST RICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSED WITH, THE UNABSORBED DEPRECIATION FROM AY 1997 - 98 UPTO THE AY 2001 - 02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002 - 03 AND BECAME PART THEREOF, IT CAME TO BE G OVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 4.1 IN A RECENT DECISION IN THE CASE OF PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. (2016) 380 ITR 165 (SC), ON A PETITION BY THE ASSESSEE FOR SPECIAL LEAVE TO APPEAL AGAINST THE DECISION OF THE HIGH M/S BOND SAFETY BELTS M.A. NO. 831/MUM/2017 4 COURT HOLDING THAT THE INTENTION OF THE LEGISLATURE APPEARING FROM THE AMENDMENT TO SECTION 3 2 OF THE INCOME TAX ACT, 1961, MADE BY THE FINANCE (NO.2) ACT, 1996, WAS THAT THE DEPRECIATION UNABSORBED OR OTHERWISE OR CURRENT WOULD BE SET OFF AGAINST THE INCOME ARISING FROM BUSINESS OR PROFESSION OR ANY OTHER INCOME BUT THE LEFT OVER PORTION THEREOF COULD NOT BE SET OFF IN THE ASSESSMENT YEAR 1998 - 99 EXCEPT AGAINST THE INCOME ARISING FROM BUSINESS OR PROFESSION, THE HONBLE SUPREME COURT DISMISSED THE SPECIAL LEAVE PETITION SUBJECT TO THE OBSERVATION THAT THE UNABSORBED DEPRECIATION AS ON APRIL 01, 19 97, CAN BE SET OFF AGAINST INCOME FROM ANY HEAD FOR THE IMMEDIATE ASSESSMENT YEAR FOLLOWING APRIL 01, 1997 AND THEREAFTER, IF THERE STILL IS ANY UNABSORBED DEPRECIATION IT CAN BE SET OFF ONLY AGAINST THE BUSINESS INCOME FOR A PERIOD OF EIGHT ASSESSMENT YEA RS. 4.2 WE ARE CONCERNED HERE WITH ASSESSMENT YEAR 2010 - 11. IN VIEW OF THE RATIO LAID DOWN IN GENERAL MOTORS INDIA (P.) LTD . AND PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD ., THERE IS NO MERIT IN THE MA FILED BY THE ASSESSEE. 5. IN THE RESULT, THE MA IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/08/2018. SD/ - SD/ - ( MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 01/08/2018 RAHUL SHARMA , SR. P.S. M/S BOND SAFETY BELTS M.A. NO. 831/MUM/2017 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI