DCIT, MORADABAD vs. M/S HTE ENTERPRISES (P) LTD., MORADABAD

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ITA 4092/DEL/2013Status: DisposedITAT Delhi18 September 2017AY 2009-106 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in allowing the claim for unabsorbed depreciation without proper year-wise breakup and verification. It also found that the short-term capital loss claimed was not supported by evidence of sale during the assessment year and could not be set off against normal income.

What were the facts?

The assessee company, facing financial difficulties and declared sick, sold its factory land and machinery. The Assessing Officer disallowed a claimed capital loss and limited the set-off of brought forward losses and unabsorbed depreciation. The CIT(A) allowed the assessee's appeal, deleting the additions.

What were the issues?

Whether unabsorbed depreciation can be allowed without proper year-wise details, and if short-term capital loss from asset sale can be set off against normal business income without sufficient evidence.

Which sections of the Income-tax Act were involved?

Section 50,Section 71,Section 74

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI

Before: SHRI B.P. JAIN & SHRI KULDIP SINGH

For Appellant: Shri Puneet Sachdev, CA
For Respondent: Shri Arun Kumar Yadav, Senior DR
Hearing: 31.08.2017

PER KULDIP SINGH, JUDICIAL MEMBER :

1.

Appellant, Deputy Commissioner of Income-tax, Circle II, New Delhi (hereinafter referred to as ‘the Revenue’), by filing the present appeal sought to set aside the impugned order dated 17.04.2013 passed by the Commissioner of Income-tax (Appeals), Bareilly, for the Assessment Years 2009-10 on the grounds inter alia that :-

“1. That the Ld. Commissioner of Income Tax(Appeals) has erred in law in allowing the claim of unabsorbed depreciation of Rs.3,59,47,305/-to the assessee without appreciating the facts mentioned in the assessment order regarding total loss available & to be set off from total income.

2. That the Ld. Commissioner of Income Tax(Appeals) has erred in law in allowing the claim of unabsorbed depreciation of Rs.3,59,47,305/- to the assessee without appreciating the fact that there is no year wise breakup of such absorbed depreciation to verify correctness of such unabsorbed depreciation.

3. That the Ld. Commissioner of Income Tax (Appeals) has erred in law in not rejecting the claim of unabsorbed depreciation of Rs.3,57,47,305/- of the assessee as such loss was not determined in any of the assessment completed under scrutiny.

4. Ld. Commissioner of Income Tax (Appeals) has erred in law in allowing the short term capital loss of Rs.86,52,832/-with reference to provisions of section 71 of the Income Tax Act 1961 as capital gain loss cannot be set off from income under any other head.”

2.

Briefly stated the facts necessary for adjudication of the controversy at hand are : During the year under assessment, the assessee company has not carried out any business activity but shown income from consultancy, commission and loss on sale of assets and at the same time, the assessee company has applied for declaring the assessee unit as sick before BIFR. Consequently, assessee company was allowed to dispose off the factory land with plant and machinery with scrap etc. in order to utilize the sale proceeds for settlement of dues of OBC.

3.

Assessing Officer noticed from profit & loss account that the assessee has claimed impairment loss of Rs.44,75,000/- but subsequently surrendered this impairment loss and total income from business and profession, worked out at Rs.62,75,479/- which has been set off from the capital loss of Rs.86,52,932/-. On query, the assessee filed copies of bills of plant and machinery sold for Rs.6,00,000/-, Rs.8,50,000/- and Rs.3,50,000/- sold on 25.04.2007, 28.04.2007 and 28.05.2007 respectively. AO after noticing that all the plant and machinery were sold during AY 2008-09 and no bills/vouchers or any documentary evidence in respect of sale of assets during the year under assessment have been filed, disallowed the capital loss claimed by the assessee to the tune of Rs.86,52,832/-.

4.

Assessee also claimed set off brought forward losses of Rs.56,70,868/-, Rs.1,85,914/- and Rs.43,236/- for AYs 2004-05, 2005-06 and 2008-09 respectively and unabsorbed depreciation of Rs.3,75,461/-. AO noticed that the assessee has set off carry forward losses to the tune of Rs.1,42,42,001/- for AY 2007-08 from the gross total income of AY 2007-08 and there remained no amount to further carry forward as losses to be set off. So, the AO has allowed set off carry forward losses of Rs.15,31,941/- only and assessed the total income of the assessee at Rs.48,97,240/-.

5.

Assessee carried the matter by way of filing appeal before the ld. CIT (A) who has deleted the disallowance of 48,97,240/- by allowing the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of challenging the impugned order passed by ld. CIT (A).

6.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

GROUNDS NO.1, 2 & 3 7. AO has not disputed the depreciation claimed by the assessee company but from the assessment order it is difficult to make out as to for which years the depreciation pertains. Perusal of the impugned order at page 3 goes to show that the ld. CIT (A) has allowed the set off by relying upon the assessment order for AY 2008-09 without seeking clarity from the assessee company as well as AO that as to which year the unabsorbed depreciation claimed by the assessee company actually pertains. Even there is no such detail before the AO nor before the ld. CIT (A). In these circumstances, we are of the considered view that this issue is required to be set aside by remanding the same to the file of the AO who shall decide afresh after providing an opportunity of being heard to the assessee. Consequently, Grounds No.1, 2 & 3 are determined in favour of the Revenue for statistical purposes.

GROUND NO.4

8.

Undisputedly, the assessee company has sold its fixed assets during the year under assessment and calculated the loss on the sale under provisions contained u/s 50 of the Act. The ld. DR for the Revenue contended that short term capital loss cannot be allowed with normal income and this proposition of law has not been disputed by the ld. AR for the assessee. Even otherwise, no block of assets left with the assessee to claim the capital loss. When undisputedly the fixed assets to the tune of Rs.6,00,000/-, Rs.8,50,000/- and Rs.3,50,000/- were sold by the assessee on 25.04.2007, 28.04.2007 and 28.05.2007 respectively during AY 2008-09, the same cannot be allowed being short term capital loss with normal business income. Moreover, the assessee has not brought on record any bills or vouchers or any other documentary evidences to prove the sale of assets during the year under assessment. So, we are of the considered view that ld. CIT (A) has erred in deleting the addition by invoking the provisions contained u/s 50 of the Act read with section 71 & 74 of the Act. So, ground no.4 is determined in favour of the Revenue.

9.

Resultantly, the appeal of the Revenue is allowed for statistical purposes. Order pronounced in open court on this 18th day of September, 2017.

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