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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Indokem Ltd. ITO 410/411, Khatau House, Ward 6(1)(3) Mogul Lane, Mahim(W) Vs. Aayakar Bhavan, M.K. RD Mumbai—400016 Mumbai-400 020 PIN No. AAAC12959M Appellant .. Respondent Assessee by .. Shri Nitesh Joshi, AR Revenue by .. Shri Rajat Mittal, DRs Date of hearing .. 29-05-2017 Date of pronouncement .. 09-06-2017 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT(A)-12, Mumbai, in appeal No. CIT(A)-12/IT 23/ITO 6(3)(2)/2014-15 dated 02-11- 2015. The Assessment was framed by ITO 6(1)-3, Mumbai for the A.Y. 2008-09 vide order dated 29-12-2011 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in withdrawing carry forward and set off of brought forward business loss and unabsorbed depreciation pertaining to AY 2006-07. For this assessee has raised following ground No.1: -
“1. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of the AO resulting in withdrawal of Carry Forward & set-off of Brought Forward Business Loss of Rs. 89,24,855/- and Unabsorbed Depreciation of Rs. 104,49,874/- pertaining to Assessment
Indokem Ltd. A.Y:09-10 Year 206-07 allowed in the assessment order passed under section 143(3) while giving effect to the ITAT order.”
Briefly stated facts are that the AO noticed from the assessment order of AY 2006-07 that for AY 2006-07 loss of Rs. 1,93,74,729/- was set off against business income but as per order giving effect to the ITAT’s order dated 24-09-2013, the revise income was determined as nil income as there was no carry forward loss for AY 2006-07 in view of the Tribunal’s order. Now, before us, the learned Counsel for the assessee stated that a factual mistake has kept in the order of CIT(A) dated 02-11- 2015 wherein Tribunal’s order is referred as dated 24-09-2013 whereas actually, tribunal passed the order for AY 2006-07 on 20-02-2013 in ITA No.3807/Mum/2011. He also stated that the CIT(A)’s order dated 17-04- 2014 has dealt with the real issue wherein direction has been given to the AO to consider the revised computation of income filed by the assessee. The learned Counsel for the assessee drew our attention to the revised computation filed with the AO dated 26-12-2008 wherein in AY 2006-07 unabsorbed the depreciation under section 32(2) of the Act was at Rs.1,04,49,874/- and unabsorbed business loss under section 72 of the Act was at Rs.89,24,855/- to be allowed to carried forward and in this revised computation the claim made was neither quoted by the AO nor by CIT(A). Hence, the assessee has preferred this rectification application under section 154 of the Act, which was rejected by the AO and rejection was confirmed by the CIT(A). The learned Counsel for the assessee, Shri Nitesh Joshi made only limited submission that the matter can refer to the AO for limited verification, and in case this claim is made in the revised computation and this has not been set off against business income, the claim of the assessee should be allowed. On query from the Bench the learned Sr. DR fairly conceded that the issue can be remitted back to the file of the AO for verification of factual position whether the revised computation is part of return or not and this need verification.
Indokem Ltd. A.Y:09-10 4. After hearing both the sides and going through the facts of the case, we find that factually there is a mistake crept in the order of CIT(A) while referring to the Tribunal’s order for AY 2006-07 and the CIT(A) has clearly directed the AO vide order dated 17-04-2014 to verify the revised computation of income and after verification of the same, the claim can be considered. We also direct the AO to verify the revised computation and in case this is factually correct, the unabsorbed depreciation and unabsorbed business loss will have to be allowed as per law in term of the above decision. We set aside the matter is back to the file of the AO for fresh adjudication after allowing reasonable opportunity of being heard to the assessee.
The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in denying carry forward unabsorbed depreciation of Rs. 3,18,76,367/- and Rs.9,94,88,199/- pertaining to AYs 1995-96 and 1996-97 respectively. For this assessee has raised the following ground No.2: -
“2. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of the AO in denying Carry Forward of Unabsorbed Depreciation of Rs. 3,18,76,367/- and Rs. 9,94,88,199/- pertaining to AY 1995-96 & AY 1996-97 respectively, i.e. pertaining to assessment years prior to the amendments made by the Finance Act No.2 of 1996 which restricted carry forward of unabsorbed depreciation up to 8 years, in which the appellant had vested right to indefinite carry forward.”
Briefly stated facts are that the assessee made claim of unabsorbed depreciation pertaining to AYs 1995-96 of Rs. 3,18,76,367/-
Indokem Ltd. A.Y:09-10 for AY 1996-97 of Rs. 9,94,88,199/-. The AO denied the carry forward of unabsorbed depreciation for the reason that in AYs 1996-97 to 2001-02 the limit for carry forward of unabsorbed depreciation was for 8 years by virtue of amendment in the provisions of section 74(1) of the Act but with effect from 01-04-2003 this restriction was removed by another amendment in the provisions of section 74(1) of the Act and in between from the period of 1997-98 to 2001-02 this limit was in force. The learned counsel for the assessee stated that this issue is squarely covered in favour of assessee and against the Revenue by the decision of Hon’ble Gujarat High Court and other High Court judgements particularly in the case of General Motors India Pvt. Ltd. vs. DCIT (2012) 25 taxmann.com 364 Gujarat, wherein it is held that the unabsorbed depreciation prior to AY 1997-98 and after AY 2003-04, set off after a period of 8 years in regards with the section 32(2) of the Act is to be allowed in view of the amendment by the Finance Act 2001. The learned counsel for the assessee also relying on the CBDT circular clarifying the intend of the amendment in Section 74(1) of the Act and argued that it is for enabling the industry to conserve sufficient funds to replace the plants and machinery and accordingly, the amendment dispenses with the restriction of 8 years for carry forward and set off unabsorbed depreciation. In view of this, the learned counsel for the assessee stated that the orders of the lower authorities are vitiated and without any basis.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the issue is squarely covered in favour of assessee reason being the claim of carry forward of unabsorbed depreciation pertains to AY 1995-96 and 1997-98 and this restriction came from AY 1997-98 to 2001-02. This period is outside the ambit of restriction period and in view of the decision of the Hon’ble Gujarat High Court in the case of General Motors India Pvt. Ltd (Supra), which has interpreted the restricted period and hold the issue in favour of Indokem Ltd. A.Y:09-10 assessee. Respectfully, following the same, we allow the claim of the assessee. This issue of appeal of assessee is allowed.
In the result, the appeal of assessee partly allowed for statistical purposes. Order pronounced in the open court on 09-06-2017.