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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJPAL YADAV, HON’BLE & DR. MANISH BORAD, HON’BLE
O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The present appeal is directed at the instance of the revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter the “ld. CIT(A)”) dt. 28/12/2022, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2020-21.
The Registry has pointed out that there is a delay of 24 (twenty four) days in filing the present appeal before the Tribunal. The revenue has filed a petition for condonation stating the reasons for the said delay. After perusing the same, we are convinced that the revenue was prevented by sufficient cause from filing the appeal in time. Accordingly, we condone the delay and proceed to admit the appeal for hearing.
The revenue has raised the following grounds of appeal:-
Assessment Year: 2020-21 M/s. Gobind Sugar Mills Ltd. 2 “1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in not applying the provisions under clause (i) of sub- section (2) of Section 115BAA of the I.T Act 1961.
2. That the CIT(A) has erred in deleting the addition as a result of disallowance of claim of adjustment of brought forward additional depreciation in determining the taxable income u/s 115BAA of the I.T Act, 1961.
3. That the CIT(A) has erred in ignoring the clarification issued by CBDT vide Circular No. 29 of 2019 dated 02.10.2019 [F. No 142/20/2019-TPL dated 02.10.2019].
4. That the appellant craves leave to add any new ground or alter any of the grounds and to represent the case/submit written submissions at the appellate stage.”
Facts in brief are that the assessee is a private limited company engaged in the business of manufacturing of white sugar and sulphur- free refined sugar. It declared loss of Rs. 78,35,01,150/- in the e-return filed on 13/02/2021 for Assessment Year 2020-21. During the relevant Assessment Year, the assessee has opted for a lower tax rate of 22% u/s 115BAA of the Act claiming to have complied with the specific conditions laid down therein. The assessee had claimed additional depreciation of Rs.58,22,41,198/- upto Assessment Year 2019-20 and was allowed as per the provisions of Section 32(1)(iia) of the Act. In order to comply with the conditions specified in Section 115BAA of the Act, the assessee adjusted the amount of fixed assets by adding back the additional depreciation claimed in the past and then computed the depreciation on the written down value (WDV) of plant and machinery. However, when the return was processed u/s 143(1)(a) of Assessment Year: 2020-21 M/s. Gobind Sugar Mills Ltd. 3 the Act, depreciation claim of Rs. 13,95,53,373/- was denied by the CPC. Basically this was the depreciation claimed on the additional depreciation claimed upto Assessment Year 2019-20 but which was added back to the WDV of plant and machinery and then the depreciation on the revised WDV is claimed.
This action of the CPC was challenged by the assessee and the ld. CIT(A) after considering the submissions of the assessee allowed the said claim observing that since the assessee has opted to be covered u/s 115BAA of the Act for paying lower tax @ 22%, the reverse adjustment of additional depreciation claimed till Assessment Year 2019-20 has been made by adding it back to the value of assets and then depreciation has been claimed on the revised value and, therefore, the adjustment made by the Assessing Officer is not correct. 6. Aggrieved, the revenue is now in appeal before this Tribunal. 7. The ld. D/R vehemently argued supporting the orders of the Assessing Officer. On the other hand, the ld. Counsel for the assessee referring to the written submissions filed before the ld. CIT(A) and also the finding given by ld. CIT(A), stating that CPC erred in making the alleged adjustment by denying the claim of the depreciation of Rs.13,95,53,373/-. 8. We have heard rival contentions and perused the material placed before us. We notice that the provisions of section Section 115BBA of the Act, has a direct bearing on this issue and, therefore, the same is reproduced below:-
Assessment Year: 2020-21 M/s. Gobind Sugar Mills Ltd. 4 “35[Tax on income of certain domestic companies.36 115BAA. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAB, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent, if the conditions contained in sub-section (2) are satisfied: Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the total income of the company shall be computed,— (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of 37[Chapter VI-A other than the provisions of section 80JJAA or section 80M]; (ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); (iii) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and (iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed. (3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year: Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020. (4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of , which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under shall be available to such Unit subject to fulfilment of the conditions contained in the said section. Explanation.—For the purposes of this sub-section, the term "Unit" shall have the same meaning as assigned to it in clause (zc) of section 238 of the Special Economic Zones Act, 2005 (28 of 2005).
Assessment Year: 2020-21 M/s. Gobind Sugar Mills Ltd. 5 (5) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner39 on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years: Provided that in case of a person, where the option exercised by it under section 115BAB has been rendered invalid due to violation of conditions contained in sub-clause (ii) or sub- clause (iii) of clause (a), or clause (b) of sub-section (2) of said section, such person may exercise option under this section: Provided further that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.
8.1. Now from perusal of the above section we notice that in case the assessee wants to opt for lower rate of tax i.e., 22% from Assessment Year 2020-21 and onwards, the assessee has to exercise the option in the prescribed manner, as provided under Rule 21AE in Form 10-IC to be filled on or before the due date specified u/s 139(1) of the Act so as to cover itself u/s 115BAA of the Act. Further the assessee has to fulfill the conditions specified in sub-section (2) of Section 115BAA of the Act, which provides for the computation of total income. Now, the issue under consideration is arising on account of the proviso to sub- section (3) which states that where there is depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020. Now, we notice that for the purpose of computing income for Assessment Year 2020-21 under section 115BAA of the Act, the Assessment Year: 2020-21 M/s. Gobind Sugar Mills Ltd. 6 assessee will not be able to claim any deduction as mentioned in Section 115BAA(2)(i) or Section 32AD of the Act. Further the assessee will not be allowed to set off of any loss brought forward. If such loss or depreciation is attributable to any deduction referred to any clause of Section 115BAA(2)(i) of the Act. Also the assessee will not be allowed to set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in Section 115BAA(2)(i) of the Act. However the assessee will be entitled to claim depreciation, if any, under the provisions of Section 32 except for clause (iia) of sub-section 32(1)(iia) of the Act, i.e., additional depreciation.
So, one important aspect is that assessee will be entitled for normal depreciation u/s 32 of the Act. Now the proviso to sub-section 115BAA of the Act, requires that the WDV as on 01/04/2019 needs to be adjusted in the prescribed manner in case the depreciation allowance in respect of a block of asset has not been given full effect prior to the assessment year beginning on 1st day of April, 2020. Now as claimed by the assessee that additional depreciation could not be set off in the past i.e., Assessment Year 2019-20 at Rs.58,22,41,198/-, in order to comply the provisions of Section 115BAA of the Act assessee had made an adjustment by way of adding the accumulated additional depreciation to the WDV of plant and machinery as on 01/04/2019 and thereafter, calculated the depreciation for the year. This exercise of the assessee has been carried out without placing any details on record Assessment Year: 2020-21 M/s. Gobind Sugar Mills Ltd. 7 as to what procedure has been adopted for giving the corresponding effect to the WDV of such block of assets. No details have been filed about the computation of income and the conditions of sub-section (2) of Section 115BAA of the Act, whether have been satisfied. Copy of the Form No. 10-IC through which the option has been filed also needs to be examined. Further, sub-section (3) of Section 115BAA of the Act refers that the loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year. Due to lack of sufficient details and explanation not given by the ld. Counsel for the assessee so far as the case of the assessee is concerned, prima-facie it seems that the unabsorbed additional depreciation claimed in the past by the assessee u/s 32(1)(iia) of the Act, is deemed to have been given the full effect and thus no further deduction can be claimed. The adjustment made by the assessee has given rise to the effect that the assessee is again claiming depreciation on the amount of accumulated additional depreciation. Once it is established that in the past full effect has been given to additional depreciation then how this alleged claim of the assessee can be justified. The ld. CIT(A) has summarily, dealt and observed as follows:- “8.2. Decision:- I have perused the intimation u/s 143(1), ground of appeal
and submission of the Appellant. I find force in the contention raised by the Appellant. I find that the Appellant has adjusted the WDV as on 01/04/2019 as per provisions of section 115BAA and not claimed the depreciation because the Appellant opted to pay the lower tax @ 22%. However, AO has made adjustment of Rs.13,955,3,372/- which is not correct. Therefore the Assessment Year: 2020
21. M/s. Gobind Sugar Mills Ltd. 8 adjustment made by AO of Rs. 13,955,3,372/- is deleted. In view of the above, the ground of appeal raised by the Appellant is allowed.”