COMMISSIONER OF INCOME TAX vs. UNITED TEXTILES LTD

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ITA/379/2014HC Punjab & HaryanaPHHC01109528201402 March 2015Bench: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE A.B. CHAUDHARI2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration. The Tribunal, in its order, noted that the issue concerning the option for set off and carry forward of unabsorbed depreciation is a debatable issue and not solely a question of law. The Tribunal also observed that the choice between set off and carry forward should be made based on what is more beneficial to the assessee, and depreciation from the year that lapses first should have priority. Therefore, even if the law were decided in favor of the Revenue, it would still be necessary to examine the facts to determine which period was more beneficial to the assessee. Consequently, the appeal filed by the Revenue was dismissed.

What were the facts?

The appeal concerns Assessment Year 2006-07. The respondent assessee had unabsorbed depreciation of approximately Rs. 2.53 crores from Assessment Years 1998-99 to 2004-05. The Assessing Officer (AO) initially allowed set off of this unabsorbed depreciation against available profits, amounting to Rs. 16,36,286, and permitted the remaining to be carried forward. Subsequently, the AO issued a notice under Section 154 of the Income Tax Act, 1961, proposing to rectify the order based on a Special Bench decision of the ITAT in DCIT vs. Times Guarantee Limited. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, and the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal against the CIT(A)'s order.

What were the issues?

1. Whether a substantial question of law arises for consideration before the High Court, given the ITAT's finding that the issue of set off and carry forward of unabsorbed depreciation is a debatable issue and not solely a question of law. Assessee's Contention: The assessee argued that the issue is debatable and not purely a question of law, referencing the Gujarat High Court's judgment in General Motors (India) Private Limited vs. DCIT. The assessee also contended that the option for set off and carry forward of unabsorbed depreciation should prioritize the period more beneficial to the assessee, with depreciation from the earliest year lapsing first. Revenue's Contention: The Revenue relied on the ITAT Special Bench decision in DCIT vs. Times Guarantee Limited to argue for a different treatment of unabsorbed depreciation. The Revenue's appeal to the High Court was based on the premise that a substantial question of law arises from the ITAT's order.

Which sections of the Income-tax Act were involved?

Section 260A,Section 154

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

INCOME TAX Appeal No.379 of 2014 (O&M)

DATE OF DECISION: 02.03.2015

Commissioner of Income Tax, Hisar …..Appellant versus

United Textiles Ltd.

.....Respondents

CORAM:- HON'BLE MR.JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE G.S. SANDHAWALIA

Present: Mr. Tajender K. Joshi, Advocate for the appellant

S.J. VAZIFDAR, ACTING CHIEF JUSTICE (Oral):

This is an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal dismissing the appellant’s appeal against the order of the CIT (Appeals) allowing the respondent’s appeal against the order of the Assessing Officer. 2. The issue pertains to the Assessment Year 2006-07. The respondent had filed its return of income on 15.12.2008. The unabsorbed depreciation at the end of the year i.e. 31.03.2005 relevant to the Assessment Year 1998-99 to 2004-05 was about Rs.2.53 crores. The unabsorbed depreciation and an amount of Rs.16,36,286/- was set off to the extent of the available profit. The remaining unabsorbed depreciation was allowed to be carried forward to the subsequent years. PARKASH CHAND 2015.03.09 14:07 I attest to the accuracy and authenticity of this document

ITA-379-2014

- 2 - 3. The Assessing Officer issued a notice under Section 154 of the Act in view of a subsequent decision of the Income Tax Appellate Tribunal, Special Bench at Mumbai, in the case of DCIT vs. Times Guarantee Limited. The respondent’s case is supported by the judgment of the Gujarat High Court in the case of General Motors (India) Private Limited vs. DCIT, Special Civil Application No.1773 of 2012. The Tribunal apart from following the judgment of the Gujarat High Court noted that this was a debatable issue and not a question of law alone. As noted by the Tribunal, the option for set off and carry forward of the unabsorbed depreciation should be of the period which is more beneficial to the assessee and depreciation of the year which lapses first should have a priority in setting off. Thus, even assuming that the question of law is decided in favour of the department, it would be necessary to revisit the issue even on facts regarding which period is more beneficial to the assessee. 4. In the circumstances, no question of law arises. 5. The appeal is accordingly dismissed.

(S.J. VAZIFDAR)

ACTING CHIEF JUSTICE

02.03.2015

(G.S. SANDHAWALIA) parkash*

JUDGE

PARKASH CHAND 2015.03.09 14:07 I attest to the accuracy and authenticity of this document

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