THE COMMISSIONER OF INCOME TAX vs. COCHIN SHIPYARD LTD, COCHIN

ITA/723/2009HC KeralaKLHC01025484200901 March 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON10 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Cochin Shipyard Ltd., is a company engaged in building and repair of ships. For assessment years 1997-98 and 1998-99, the assessee claimed set-off of unabsorbed depreciation against business income and subsequently against interest income from bank deposits. The Commissioner of Income Tax initiated suo motu revision proceedings under Section 263, holding that such set-off against income from other sources was impermissible. The Income Tax Appellate Tribunal set aside the Commissioner's order. The Revenue appealed this decision to the High Court of Kerala.

What did the High Court hold?

The High Court held that for the assessment year 1997-98, the assessee is entitled to set off unabsorbed depreciation against income from other sources. This is because the amended provision, effective from 01.04.1997, allowed unabsorbed depreciation to be adjusted first against business profits, then against income from other sources (for that year alone), and any remaining amount to be carried forward against business profits for a further period of 8 years. The Court found that the amended provision in the statute was not in consonance with the Budget Speech or the Bill introduced, and confined its interpretation to the enacted law. For the assessment year 1998-99, the Court, referring to the Supreme Court's order in the Peerless General Finance case, held that unabsorbed depreciation as on 01.04.1997 could be set off against income from any head for the immediate assessment year following 01.04.1997 (i.e., 1997-98), and thereafter, any remaining unabsorbed depreciation could only be set off against business income for a period of eight assessment years. Therefore, the claim for set-off against income from other sources for assessment year 1998-99 was not allowable. The High Court allowed ITA No. 723/2009 (pertaining to AY 1998-99) and rejected ITA No. 768/2009 (pertaining to AY 1997-98).

What were the issues?

1. Whether the Income Tax Appellate Tribunal was right in setting aside the suo motu revision made by the Commissioner of Income Tax under Section 263, which declined the benefit of set-off of unabsorbed depreciation allowance as against income from other sources for the assessment year 1997-98 and 1998-99? (Mixed question of law and fact, turning on Section 32(2) of the Income Tax Act, 1961). Assessee's contentions: Relying on the Supreme Court judgment in Peerless General Finance and Investment Company Limited, the assessee argued that as per the amendment, unabsorbed depreciation could be set off against profits from business and then against income from other heads for the assessment year 1998-99 and subsequent years, only against business profits. Revenue's contentions: Relying on the Supreme Court judgment in Peerless General Finance and Investment Company Limited, the Revenue argued that the allowance could be claimed as per the amendment only for assessment year 1997-98. For subsequent years with carry forward of unabsorbed depreciation, it could only be allowed against profits and gains from business or profession.

Which sections of the Income-tax Act were involved?

Section 32,Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THUR AY, THE 1ST DAY OF MARCH 2018 / 10TH PHALGUNA, 1939 ITA.No. 723 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 162/COCH/2003 of INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 21-03-2006 APPELLANT(S)/RESPONDENT/REVENUE THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT/ASSESSEE: COCHIN SHIPYARD LTD., COCHIN-682 015. BY ADV. SRI.E.K.NANDAKUMAR (Sr.) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01-03-2018, ALONG WITH ITA NOS.768/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA 723/2009 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A : COPY OF ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT DATED 27.3.2001 FOR THE ASSESSMENT YEAR 1998-99. ANNEXURE-B : COPY OF ORDER OF THE CIT DATED 10.3.2003 PASSED UNDER SECTION 263. ANNEXURE-C : COP

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 32

All 2,691 judgments and leading authorities on Section 32 →

Recent GST High Court judgments

Search GST case law →