"H" Û
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND
SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
./I.T.A. No. 3346 /Mum/2013
( [ [ / Assessment Year : 2009-10)
Income Tax Officer 7(2)(4), / M/s Sunshield
Room No. 618, Chemicals Ltd.,
v.
M.K. Road, N.K.M. International
Mumbai 400 020 House,
178, Backbay
Reclamation,
Babubhai Chinai Marg,
Mumbai 400 020.
è . / PAN :AAFCS8219K
( /Appellant) .. (× / Respondent)
Revenue by Shri Nitin Waghmode
Assessee by : Shri Jitendra Jain
/ Date of Hearing : 02-11-2015
/Date of Pronouncement : 09-12-2015
/ O R D E R
PER RAMIT KOCHAR, ACCOUNTANT MEMBER:
This appeal, filed by the Revenue, being ITA No. 3346/Mum/2013, is
directed against the order dated 15-02-2013 passed by the learned
Commissioner of Income Tax (Appeals)- 13, Mumbai (Hereinafter called "the
CIT(A)"), for the assessment year 2009-10.
2. The grounds raised by the Revenue in the memo of appeal filed with the
Tribunal read as under:-
2 ITA 3346/M/13
"i) The Learned CIT(A) has erred on facts and in law in directing
the Assessing Officer to consider the revised statement of
unabsorbed depreciation and book loss furnished by the assessee
for computation of Book Profit u/s 115JB of the I.T. Act, 1961
without properly appreciating the factual and legal matrix as
clearly brought out by the Assessing Officer.
ii) The Learned CIT(A) has erred on facts and in law in directing
the Assessing Officer to consider the revised statement of
unabsorbed depreciation and book loss furnished by the assessee
for computation of Book Profit u/s 115JB of the I.T. Act, 1961
without properly appreciating the fact that the Assessing Officer is
bound by law to accept only the claim made by the assessee along
with the return of income..
iii] The Learned CIT(A) has erred on facts and in law in directing
the Assessing Officer to allow set off of unabsorbed depreciation
pertaining to A.Y. 1995-96 to A.Y. 1999-2000 against the 'Income
from Other Sources' without appreciating the fact that the time
period for claiming the above depreciation had already lapsed.
iv) The Ld. CIT(A)'s order is contrary in law and on facts and
deserves to be set aside.
v] The appellant prays that the order of CIT(A) on the above
grounds be set aside and that of the AO restored. The appellant
craves leave to amend or alter any ground or add a new ground
that may be necessary."
3 ITA 3346/M/13
3. The Brief facts of the case are that the assessee company is engaged in the
business of manufacture of Chemical.
4. During the course of assessment proceedings u/s 143(3) of Income Tax
Act,1961(Hereinafter called "the Act") read with Section 143(2) of the Act, the
learned assessing officer(Hereinafter called "the AO") observed from the
computation of income u/s 115JB of the Act that the assessee company has
worked unabsorbed depreciation as well as business loss whichever is lower
year-wise and not worked combined unabsorbed depreciation as well as
business loss whichever is lower and reduced from book profit. The working
of the said unabsorbed depreciation as well as business loss as per
Companies Act (as reflected in page 2 of the assessment order by the AO ) is
as follows:-
Year ended Business loss (In Rs.) Depreciation Loss
(in Rs.)
30/6/1999 1133949 -5449127
30/6/2000 -2932647 -5883426
30/6/2001 -6007658 -6343410
31/12/2002 -13728845 -10972069
31/03/2004 2640656 -10659176
31/03/2005 -8413978 -8507211
31/03/2006 7669896 -9244040
31/03/2007 -16216865 -11910166
31/03/2008 8575212 -13940945
Total 19502170 101461792
The assessee company with respect to the adjustment of brought forward
losses to be adjusted, furnished a statement of losses before the AO which
was different from the one which was claimed in the return of income and the
same was not reconciled with the statement of accounts of the respective
4 ITA 3346/M/13
years involved, therefore, the A.O. did not consider the same and did not take
any cognizance thereof and the book loss was allowed to the assessee
company by the AO as per the return of income filed. The A.O. held that the
assessee company is eligible for the least of either the business loss or
depreciation loss and accordingly the A.O. allowed brought forward business
loss of Rs. 1,95,02,170/- to be adjusted as against the claim of Rs.
4,02,36,518/- made by the assessee company , vide assessment orders dated
26/12/2011 passed u/s 143(3) of the Act read with Section 143(2) of the Act.
.
5. Aggrieved by the assessment orders dated 26/12/2011 passed by the AO,
the assessee company carried the matter before the CIT(A) in first appeal and
submitted before the CIT(A) that the A.O. should have considered the revised
statement filed during the assessment proceedings pertaining to the revised
figures of year-wise brought forward loss and unabsorbed depreciation for
computing book profit u/s 115JB of the Act. The assessee company argued
before the CIT(A) that in the said figures, there were positive incomes in some
of the years. While totaling the brought forward loss of different years, the
A.O. has totaled loss figures as well as positive figures which resulted in
lowering the assessee's final figure of brought forward business losses of all
the years put together. The assessee company requested that the aggregate
figure of different years should be considered ignoring the profit of some of
the years wrongly considered by the A.O. The CIT(A) observed that for the
year ended on 30th June,1999, 31st March 2004, 31st March 2006 and 31st
March 2008, there were positive income and the CIT(A) held that as per the
provisions of section 115JB of the Act, the lower of brought forward business
loss or unabsorbed depreciation is required to be allowed as deduction from
book profit. Since in these years there was no business loss being positive
income and therefore in aggregate the positive income of these years was not
required to be considered. Hence, the CIT(A) directed the A.O. vide orders
5 ITA 3346/M/13
dated 15-02-2013 to consider lower of brought forward business loss ignoring
positive income of respective years or unabsorbed depreciation whichever is
less, that means the A.O. has to consider business loss at Rs. `nil' in the years
wherever positive income was shown and thereafter consider aggregate of
lower business loss and unabsorbed depreciation . Thus, by holding as above,
the CIT(A) duly considered the statement filed by the assessee company
during the assessment proceedings before the AO pertaining to the revised
figures of year-wise brought forward loss and unabsorbed depreciation for
computing book profit u/s 115JB of the Act although the said claim was not
in accordance with the claim made by the assessee company in the return of
income filed with the Revenue and the CIT(A) decided the issues on merits .
6. Aggrieved by the orders dated 15-02-2013 of CIT(A), the Revenue is in
appeal before the Tribunal .
7.The ld. D.R. , relied on the order of the A.O. and submitted that the CIT(A)
erred in directing the A.O. to consider the revised statement of unabsorbed
depreciation and book loss furnished by the assessee for computing book
profit u/s 115JB of the Act during the course of assessment proceedings
ignoring the fact that the A.O. is bound in law to accept only the claim made
by the assessee company in the return of income filed with Revenue. On the
other hand, the ld. Counsel for the assessee company submitted that the case
of the assessee is squarely covered by the decision of Hon'ble Bombay High
Court in the case of CIT v. Pruthvi Brokers & Shareholders (P) Ltd., (2012)
349 ITR 336 (Bom) whereby the Hon'ble Bombay High Court has held that if
there is an inadvertent error by the assessee company in not claiming the
deduction in return of income filed with the Revenue , then said claim can
always be raised by the tax payer before the AO and the appellate authorities
has jurisdiction to consider a new additional claim raised by the taxpayer
before the A.O and adjudicate the same on merits although inadvertently the
6 ITA 3346/M/13
said claim was not claimed in the return of income filed with the Revenue by
the taxpayer.
8.We have considered the rival submission and perused the material on
record. We have observed that the assessee company has raised additional
claim before the A.O. during the assessment proceedings by filing a revised
statement of unabsorbed depreciation and book loss for computing the book
profit u/s 115JB of the Act in which the losses were different from the one
which was claimed in the return of income filed with Revenue, the said
revised statement filed by the assessee company before the AO during
assessment proceedings was not considered by the A.O and no cognizance
was taken thereof by the AO on the ground that the assessee company's claim
raised vide return of income filed with Revenue can only be considered. The
CIT(A) duly considered the said claim and has allowed the same on merits.
We do not find any infirmity in the orders of the CIT(A) in considering the said
claim as adjudicating authorities can always consider and decide on merits ,
any claim which the taxpayer has raised before the AO during assessment
proceedings although the same is not claimed by the taxpayer vide Return of
income filed with the Revenue as held by Hon'ble Bombay High Court in CIT
v. Pruthvi Brokers & Shareholders (P) Ltd., (2012) 349 ITR 336 (Bom). Thus,
the grounds of appeal raised by the Revenue in ground No. i and ii are ,
therefore, dismissed based on our above discussions . We order accordingly.
9. In ground No. iii, the Revenue contended that the CIT(A) erred in directing
the A.O. to consider the revised statement of unabsorbed depreciation and
book loss furnished by the assessee company for computation of book profit
u/s 115JB of the Act without properly appreciating the fact that the time
period has already expired.
10. The A.O. relying upon the decision of ITAT Special Bench in the case of
DCIT v. Times Guaranty Ltd. (2010) 131 TTJ 257 (Mum) [SB] disallowed the
7 ITA 3346/M/13
brought forward depreciation losses for the assessment year 1995-96 to
1999-2000 since the same have expired the term of eight years to be carried
forward as per relevant applicable law. Aggrieved by the decision of A.O., the
assessee company carried the matter before the CIT(A). The assessee
company contended before the CIT(A) that the decision of Hon'ble Gujarat
High Court in the case of General Motors India P. Ltd. in Civil Appeal
Application No. 1773 of 2012 has taken a view different than taken by the
ITAT, Special Bench in the case of Times Guaranty Ltd. (supra), after
analyzing the existing and amended provision of section 32(2) of the Act and
CBDT Circular, the Hon'ble Gujarat High Court held that the unabsorbed
depreciation is required to be added to the current depreciation for such
succeeding years and is deemed to be part thereof. Thus the CIT(A) following
the decision of Hon'ble Gujarat High Court in the case of General Motors
India P. Ltd. (supra), directed the A.O. to consider brought forward
unabsorbed depreciation loss of earlier years as part of current year's
depreciation and allow deduction as per provisions of the Act. Aggrieved by
the above decision of ld. CIT(A), the Revenue is in further appeal before the
Tribunal.
11.The ld. D.R., relied upon the order of A.O., on the other hand, the ld.
Counsel for the assessee relied upon the decision of Tribunal in the case of
Dhadda Diamonds Pvt. Ltd. v. ITO in ITA Nos. 3908 to 3911/Mum/2013 for
assessment years 2005-06 to 2008-09 , order dated 25.03.2015 and also in
the case of Milton's Pvt. Limited, vs. CIT in ITA No. 3019/Mum/2012 for A.Y.
2007-08 , order dated 22.5.2013 whereby the Tribunal has followed the
decision of Hon'ble Gujarat High Court in the case of General Motors India P.
Ltd. (supra) and directed the A.O. to allow set off of unabsorbed depreciation
in accordance with the decision of Hon'ble Gujarat High Court in the case of
General Motors India Pvt. Ltd. (supra). The Tribunal in the case of Dhadda
Diamonds Pvt. Ltd.(supra) held as under:-
8 ITA 3346/M/13
"5. After considering the material placed on record and the relevant
finding of the Ld. CIT(A) and the decisions relied upon before us,
the only issue for our adjudication is, whether the finding of the AO
and Ld. C!T(A) based on the decision of Special Bench in the case
of Times Guarantee would be applicable or not. The AO as well as
Ld. CIT(A) after relying upon the Special Bench decision have held
that the unabsorbed depreciation for the A.Y. 1997-98; A.Y. 1998-
99; A.Y. 1999-2000 and A.Y. 2000-01 shall be considered as
lapsed in the A.Y. 2005-06, A.Y. 2006-07, A.Y. 2007-08 and A.Y.
2008-09 respectively because 8 years have lapsed. The Special
Bench in the case of Times Guarantee Ltd. in para 38 of the
judgment came to the following conclusion:-
''38. The legal position of current and brought forward
unadjusted/unabsorbed depreciation/allowance in the three
periods, is summarized as under:-
A. In the first period (i.e. up to assessment year 1996-97) (i)
Current depreciation, that is amount of allowance for the
year under section 32(1), can be set off against income under
any head within the same year.
(ii) Amount of such current depreciation which cannot be so
set off within the same year as per (i) above shall be deemed
as depreciation under section 32(1), that is depreciation for
the current year in the following year(s) to be set off against
income under any head, like current depreciation.
9 ITA 3346/M/13
B. In the second period (i.e. assessment years 1997-98 to
2001-02) (i) Brought forward unadjusted .depreciation
allowance for and up to assessment year 1996-97
(hereinafter called the First unadjusted depreciation
allowance'), which could not be set off up to assessment
year 1996-97, shall be carried forward for set off against
income under any head for a maximum period of eight
assessment years starting from assessment year 1997-98.
(ii) Current depreciation for the year under section 32(1) (for
each year separately starting from assessment year 1997-
98 up to 2001-02) can be set off firstly against business
income and then against income under any other head.
(iii) Amount of current depreciation for assessment years
1997-98 to 2001-02 which cannot be so set off as per (ii)
above hereinafter called the 'Second unabsorbed
depreciation allowance' shall be carried forward for a
maximum period of eight assessment years from the
assessment year immediately succeeding the assessment
year for which it was first computed, to be set off only
against the income under the head 'Profits and gains of
business or profession.
C. In the third period (i.e., assessment year 2002-03
onwards).
(i) 'First unadjusted depreciation allowance' can be set off up
to assessment year 2004-05, that is, the remaining period
10 ITA 3346/M/13
out of maximum period of eight assessment years [as per B(i)
above} against income under any head.
(ii) 'Second unabsorbed depreciation allowance' can be set
off only against the income under the head 'Profits and gains
of business or profession' within a period of eight
assessment years succeeding the assessment year for
which it was first computed.
(iii) Current depreciation for the year under section 32(1}, for
each year separately, starting from assessment year 2002-
03 can be set off against income under any head. Amount of
depreciation allowance not so set off (hereinafter called the
'Third unadjusted depreciation allowance') shall be carried
forward to the following year.
(iv) The 'Third unadjusted depreciation allowance' shall be
deemed as depreciation under section 32(1), that is
depreciation for the current year in the following year(s} to
be set off against income under any head, like current
depreciation, in perpetuity.
However, in a later decision, the Hon'ble Gujarat High Court vide
order dated 23.08.2012 in the case of General Motors India Pvt.
Ltd (supra), After considering the provision of section 32(2), before
its amendment by Finance Act 2001 and also after the amendment
and also the Board Circular No. 14 of 2001 observed and held as
under:-
11 ITA 3346/M/13
''37. The CBDT Circular clarifies the intent of the amendment
that it is for enabling the industry to conserve sufficient
funds to replace plant and machinery and accordingly the
amendment dispenses with the restriction of 8 years for
carry forward and set off of unabsorbed depreciation. The
amendment is applicable from assessment year 2002-03
and subsequent years. This means that any unabsorbed
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 not by the provisions of section 32(2) as it stood
before the said amendment: Had the intention of the
Legislature been to allow the unabsorbed depreciation
allowance worked out in A.Y. 1997-98 only for eight
subsequent assessment years even after the amendment of
section 32(2) by Finance Act, 2001 it would have
incorporated a provision to that effect. However, it does not
contain any such provision. Hence keeping in view the
purpose of amendment of section 32(2) of the Act, a
purposive and harmonious interpretation has to be taken.
While construing taxing statutes, rule of strict interpretation
has to be applied, giving fair and reasonable construction to
the language of the section without leaning to the side of
assessee or the revenue. But if the legislature fails to
express clearly and the assessee becomes entitled for a
benefit within the ambit of the section by the clear words
used in the section, the benefit accruing to assessee cannot
be denied. 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
12 ITA 3346/M/13
depreciation under section 32 shall be mandatory. Therefore,
the provisions of section 32(2) as amended by Finance Act,
2001 would allow the unabsorbed depreciation allowance
available in the A. Y. 1997-98, 1999-2000, 2000-1 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 A. y. 2002-03 then it would be carried forward
till the time it is set off against the profits and gains of
subsequent years.
38. Therefore, it can be said that, current depreciation 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 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
depreciation 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 that any unabsorbed depreciation
available to an assessee on 1st day of April 2002 (A. Y.
2002-03) will be dealt with in accordance with the provisions
13 ITA 3346/M/13
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 part thereof, it came to be governed 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."
This decision of the Hon'ble Gujarat High Court has been followed
in several decisions rendered by the Co-ordinate Benches of the
Tribunal. Respectfully following the ratio of Hon'ble Gujarat High
Court, we direct the AO to allow the set off of unabsorbed
depreciation pertaining to the A.Y. 1997-98 to 2000-01 in the
respective A.Ys. 2005-06 to 2008-09 in accordance with the
decision of General Motors India Pvt. Ltd. (supra). Accordingly, the
ground raised by the assessee in all the appeals are treated as
allowed."
12. Respectfully following the above decision of co-ordinate Bench of this
Tribunal in the case of Dhadda Diamonds Pvt. Ltd. v. ITO in ITA Nos. 3908 to
3911/Mum/2013 vide orders dated 25.03.2015 and also in the case of
Milton's Pvt. Limited, v. CIT-6 in ITA No. 3019/Mum/2012 vide orders dated
22.5.2013 whereby the Tribunal has followed the decision of Hon'ble Gujarat
High Court in the case of General Motors India P. Ltd. (supra) , the ground
no. iii raised by the Revenue in this appeal is dismissed.
14 ITA 3346/M/13
13. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 9th December, 2015.
Û 09-12-2015
Sd/- sd/-
(AMIT SHUKLA) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated 09-12-2015
[
.../ R.K., Ex. Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. × / The Respondent.
3. È() / The CIT(A)- concerned, Mumbai
4. È / CIT- Concerned, Mumbai
5. , , / DR, ITAT, Mumbai H Bench
6. [ / Guard file.
/ BY ORDER,
× //True Copy//
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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