M/S GOLDEN TRIANGLE FORT & PALACE,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

PER BHAGCHAND, AM

Both these appeals filed by the assessee emanate from separate

orders of the ld. CIT(A)-4, Jaipur dated 01-01-2018 for the Assessment

Years 2010-11 and 2011-12 raising therein following grounds of appeal.

ITA No. 277/JP/2018 – A.Y. 2010-11

‘’1. On the facts and in the circumstances of the case, the ld. CIT(A) has grossly erred in sustaining disallowance of Rs. 28,01624/- by observing that the disallowance so made by the AO was a mistake

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur apparent on record and holding the same as rectifiable under section 154 of the Act without appreciating that the same is debatable issue and outside the ambit of provision of sec 154 of the Act. Thus the order so passed deserves to be held void ab-initio and the consequent additions deserves to be deleted.

2.1 That the ld. CIT(A) has further erred in ignoring the amendment made w.e.f. A.Y. 2002-03 that the unabsorbed depreciation available as on 01-04-2002 would become the part of current year depreciation and thereafter treated as current year depreciation which could be carried forward for next years, thus in accordance with the said amendment, the unabsorbed depreciation deserves to be allowed.

2.2 That the ld. CIT(A) further erred in ignoring the decision of Hon'ble Gujarat High Court in the case of M/s. General Motors (India) Ltd vs DCIT, reported in 354 ITR 244, therefore, the impugned disallowance deserves to be deleted.’’

ITA No. 278/JP/2018 – A.Y. 2011-12

‘’1. On the facts and in the circumstances of the case, the ld. CIT(A) has grossly erred in sustaining disallowance of Rs. 38,09,013/- by observing that the disallowance so made by the AO was a mistake apparent on record and holding the same as rectifiable under section 154 of the Act without appreciating that the same is debatable issue and outside the ambit of

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur provision of sec 154 of the Act. Thus the order so passed deserves to be held void ab-initio and the consequent additions deserves to be deleted.

2.1 That the ld. CIT(A) has further erred in ignoring the amendment made w.e.f. A.Y. 2002-03 that the unabsorbed depreciation available as on 01-04-2002 would become the part of current year depreciation and thereafter treated as current year depreciation which could be carried forward for next years, thus in accordance with the said amendment, the unabsorbed depreciation deserves to be allowed.

2.2 That the ld. CIT(A) further erred in ignoring the decision of Hon'ble Gujarat High Court in the case of M/s. General Motors (India) Ltd vs DCIT, reported in 354 ITR 244, therefore, the impugned disallowance deserves to be deleted.

2.1 First of all, we take the appeal of the assessee in ITA No.

277/JP/2018 for the A.Y. 2010-11 for adjudication.

2.2 Apropos Ground No. 1 and 2 of the assessee, the facts as emerges

from the order of the ld. CIT(A) are as under:-

‘’3. In the present case, it is seen that the appellant filed its return of income on 29-09-2010 declaring Nil income. A search was conducted on 17-07-2013 in the case

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur of MRS Group, Jaipur to which the appellant belongs. Subsequently, assessment u/s 153A r.w.s. 143(3) was completed on 9-3-2016 accepting returned income. On verification of record, it was found that the appellant was allowed set off of unabsorbed depreciation of Rs. 21,32,776/- of A.Y. 2000-01 and Rs. 6,68,848/- of A.Y. 2001-02 which was irregular as the time limit for set off within 8 years has lapsed as per the provision of section 32(2)(iii) of the Act. As such, a notice u/s 154 was issued to the appellant on 19-12-2016 to rectify the mistake that the unabsorbed depreciation of Rs. 28,01,624/- was irregular as the time limit for set off within 8 years lapsed. In this regard, observation of the AO can be seen in para 6 to 8 of the AO’s order. 4….

With regard to the main ground, I find that the AO has correctly given effect to the section 32(2) as amended w.e.f. AYrs. 2002-03. This is very clear from the Circular No. 14 of 2001issued by CBDT in this regard. The unabsorbed depreciation of the A.Yr 2001-02 cannot be claimed in the A.Yr 2010-11 and 2011-12 as discussed by the AO. There is no infirmity in the order of the AO. On facts and in the circumstances of the case, the addition made by the AO is confirmed.

2.3 During the course of hearing, the ld.AR of the assessee challenged

the action of the ld. CIT(A) vide Ground No. 1 and Ground No. 2 to 2.2.

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur However, the ld.AR of the assessee filed the written to this effect which

has been taken into consideration.

2.4 On the other hand, the ld. DR supported the order of the ld.

CIT(A).

2.5 We have heard the rival contention and perused the material

available on record. In this case the assessment was completed u/s 143(3)

r.w.s. 153A wherein the AO has allowed the set-off of unabsorbed

brought forward depreciation pertaining to assessment years 2000-01 &

2001-02 totalling to Rs. 28,01,624/- [Rs. 21,32,776/- & Rs. 6,68,848/-

respectively]. Thereafter u/s 154 a rectification order was passed

withdrawing the set-off by holding that the same related to the assessment

years prior to the amendment made by Finance Act, 2001 u/s 32(2) and

accordingly the same is eligible to be carried forward for 8 years only

which stood expired and therefore assessee is not eligible for such set-off

in A.Y. 2010-11 i.e. the year under appeal. The ld. AR of the assessee

contended that the issue is debatable and has therefore to be decided by

various High Courts. Therefore the order of the assessee cannot be

rectified u/s 154 which is meant for rectification of mistake apparent on

record and as such the issue of allowance of brought forward unabsorbed

depreciation pertaining to assessment year 2000-01 and 2001-02 is not

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur mistake apparent of record, accordingly the ld.AR prayed for the

cancellation of the rectification order. On merits, the ld. AR referred the

amendment made in Finance Act, 2001 by which the section 32(2) has

been substituted w.e.f. 01.04.2002 which reads as under:

‘’32(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-s. (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-s. (2) of s. 72 and sub-s. (3) of s. 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years.’’

The ld. AR submitted that as per the new amended provisions unabsorbed

depreciation of A.Yrs. 2000-01 and 2001-02 which are legitimately

eligible for brought forward and to be set off in A.Y. 2002-03 became the

part of the current depreciation allowance of A.Y. 2002-03 and is eligible

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur for set-off as per the new amended provision for unlimited period as

current depreciation of next year and so on till there fully absorbed.

Besides this the ld. AR also referred the CBDT Circular No. 14 in which

the amendment made by Finance Act, 2001 the section 32(2) is discussed

and observed that with a view to enable the industry to conserve

sufficient funds to replace plant and machinery, especially in an era

where obsolescence takes place so often, the Act has dispensed with the

restriction of 8 years for carry forward and set off of unabsorbed

depreciation. For this reliance is placed on the direct decision of Hon’ble

Gujarat High Court in the case of General Motors (I) Pvt. Ltd. Vs. DCIT

354 ITR 244 wherein it has been held as under:

‘’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 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)

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur 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.’’

Further reliance is placed on the following decisions: (i) CIT vs. Gujarat Themis Biosyn Ltd. (2014) 105 DTR 72 (Guj.)

(ii) Bengal Tea &Fabrics Limited (ITA No 467/Kol/2012) dated 26th July, 2012 (iii) Cooperative Milk producers Federation Ltd. -vs.- DCIT 53 DTR 81 (Kar)

(iv) ITO -vs- Suraj Solvent Vanaspati Industries Ltd. (2008) 16 DTR 492 (Amritsar)

(v) Minda Sai Ltd Vs. ITO (ITAT DEL) dated 09.01.2015

(vi) ACIT Vs. M/s J K Tyre and Industries ltd (ITAT Kol) dated 12.08.2016

(vii) DCIT Vs. M/s Orient Paper & Industries Ltd. (ITAT Kol) dated 09.06.2017

Taking into consideration the materials and arguments of both the parties,

we find that the assessment order passed u/s 143(3) r.w.s. 153A was

rectified by taking shelter of section 154 though it is not a mistake

apparent on record and the issue is debatable. Further the Hon’ble Gujarat

High Court in the case of General Motors (I) P. Ltd. (supra) has

categorically decided this issue and held that any unabsorbed depreciation

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur from A.Yrs. 1997-98 to 2001-02 got carried forward to A.Y. 2002-03 and

became part thereof is to be governed by the provisions of amended

section 32(2) and were available for carried forward and set-off against

the profit and gains of subsequent years without any limit whatsoever.

Following the decision of Hon’ble Gujarat High Court in the case of

General Motors (I) Pvt. Ltd. Vs. DCIT, and CIT Vs. Gujarat Themis

Biosyn Ltd. (Supra), we hold that the assessee is eligible for carried

forward and set-off of the unabsorbed brought forward depreciation of

A.Yrs. 2000-01 and 2001-02 in the impugned assessment years i.e. 2010-

11 and in subsequent years without any time limit. Thus the addition

made by the AO on this account is deleted and the appeal of the assessee

is allowed.

3.1 It is further noted that the similar issue has been raised by the assessee in ITA No. 278/JP/18 for the Assessment Year 2011-12 (supra). It is pertinent to mention that identical issues have been decided by us in

the case of the assessee for A.Y. 2010-11 in ITA No. 277/JP/18 wherein

we have deleted the additions made by the AO and allowed the appeal of

the assessee by holding that the assessee is eligible for set-off for

unabsorbed depreciation of A.Y. 2000-01 & 2001-02 without any time

limit. In view of the decision taken by us in the case of the assessee for

ITA No.277 & 278/JP/2018 M/s. Golden Triangle Fort & Palace Pvt.Ltd vs DCIT, Central Circle-3, Jaipur the Assessment Year, 2010-11, the same shall apply mutatis mutandis in the Assessment Year 2011-12 of the assessee . Accordingly the appeal of the assessee is allowed. 4.0 In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on 02-07-2018.

Sd/- Sd/- ¼ fot; iky jko ½ ¼HkkxpUn½ (Vijay Pal Rao) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member

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