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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri N.V.Vasusdevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is against the order of Commissioner of Income Tax,-2, Kolkata in appeal No.Pr.cit-2/DC(Hq)-2/Kol/263/2014-15/6036- 38 dated 24.03.2015. Assessment was framed by DCIT, Circle-4, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 13.03.2013 for assessment year 2010-11. Assessee raised following grounds:- “1. For that in view of the facts and in the circumstances, the Ld. CIT is wholly wrong and unjustified in initiating proceeding u/s. 263 and passing an arbitrary order u/s. 263 of the Act directing revision of A.Y. 2010-11 M/s Bengal Tea & Fabrics Ltd. vs. CIT,Kol-2 Page 2 original assessment ordered u/s. 143(3) without application of mind and without considering the facts and the law explained.
For that in view of the facts and in the circumstances, the order u/s 263 is wholly bad, illegal and void ab-initio and such order u/s/ 263 has been made by the Ld. CIT without properly taking into consideration the submission made by your petitioner by letter dt. 17.09.2014 and in view of the facts and in the circumstances such order u/s. 263 may kindly be quashed / cancelled.
3. For that without prejudice and even otherwise, the Ld. CIT is wholly unjustified in passing order u/s 263 ignoring the decisions of different High Courts and there being no contrary decision, the Ld. CIT is bound to follow such decisions of different High Courts and in view of the facts and in the circumstances the Ld. CIT may kindly be directed accordingly.
For that in view of the facts and in the circumstances and the matter having been fully settled in favour of your appellant by decisions of Hon'ble ITAT, Kolkata Benches for the AYs 2007-08 & 2008-09 and such decisions having been accepted by the Income-tax Department as no further appeal in this regard having been field before Jurisdictional High Court, the Ld. CIT was wholly unjustified in passing present order u/s. 263 ignoring such orders of Hon'ble ITAT, Kolkata Benches and in view of the facts and in the circumstances such order u/s. 263 may kindly be quashed / cancelled.
For that without prejudice and even otherwise by amendment through Finance Act, 2001, the status quo having been restored and unabsorbed depreciation for AYs 1996-97 & 1997-98 and subsequent assessment years having become fully adjustable against income for AYs 2002-03 and onwards the present action of the Ld CIT is wholly bad, illegal, unjustified and uncalled for and in view of the facts and in the circumstances such order u/s. 263 may kindly be quashed / cancelled.
For that in view of the facts and in the circumstances, the AO having taken a possible view in the matter, provisions of sec. 263 even otherwise also did not lie in the case.
For that in view of the facts and n the circumstances, the Ld. CIT having nowhere concluded that the order of the AO was erroneous inasmuch as prejudicial to the interest of revenue, order of the Ld. CIT(A) is even otherwise also wholly bad, illegal, unjustified and uncalled for and it may kindly be quashed / cancelled.”
A.Y. 2010-11 M/s Bengal Tea & Fabrics Ltd. vs. CIT,Kol-2 Page 3 2. The common issue raised by the assessee in this appeal is that the CIT erred in treating the order of the AO erroneous and prejudicial to the interest of Revenue on account of allowing the unabsorbed depreciation for the assessment years 2000-01 and 2001-02 to be carried forward for the subsequent assessment years.
2.1 The facts of the case are that the assessee in the present case is limited company and engaged in the business of manufacturer of tea, cloth and yarn. The AO framed the assessment for the year under consideration u/s 143(3) of the Act after making certain addition to the total income of the assessee. However Ld. CIT found the order of the AO erroneous in so far as it is prejudicial to the interest of revenue and exercised his power u/s 263 of the Act by issuing a show cause notice. The Ld. CIT treated the assessment order erroneous by observing that the assessee has been allowed to carry forward the unabsorbed depreciation to the subsequent years pertaining to the assessment years 2000-01, 2001-02 for an amount of Rs. 5,20,11,633/-. As the unabsorbed depreciation for the assessment years 2000-01 and 2001-02 pertained to the years beyond the stipulated period of 8 years, therefore the adjustment / set off of the same with the current year i.e. AY 2010-11 the income of assessee was not allowable. However, the AO has allowed the same against the current year income which resulted in excess set off of unabsorbed depreciation amounting to Rs.20,11,633/-. Accordingly the Ld. CIT issued notice u/s 263 to the assessee seeking the clarification about the issue as stated above. The assessee submitted that no transitional provision had been enacted to specifically provide that the unabsorbed depreciation of earlier years would be governed by post 1997 and pre 2002 provisions. As the present provisions for setting off the unabsorbed depreciation specifies that if full effect cannot be given to any allowance of depreciation in any previous year, the same would be considered to be the depreciation of the subsequent year or years. It was also contended that as the words used “any previous year” would cover even previous years prior to A.Y. 2002-03. A.Y. 2010-11 M/s Bengal Tea & Fabrics Ltd. vs. CIT,Kol-2 Page 4 However the ld. CIT has disregarded the contention of the assessee by observing as under : “The contention of the assessee cannot be accepted simply because a plain reading of the Act, as it stood prior to introduction of Finance Act, 2001, w.e.f. 01.04.2002 states that if the unabsorbed depreciation cannot be wholly set off, the amount not so set off shall be carried forward to the following AYrs, not being more than 8 A.Yrs. immediately succeeding the AY for which the depreciation allowance was first computed. As such, the AY to be reckoned is the AY for which the depreciation allowance was first computed which in the instant case is AY 2000-01 & 2001-02 and there is no clear cut provision in the Act to carry forward unabsorbed depreciation beyond 8 years to club it with the de allowance for AY 2002-03 and allow a fresh claim of depreciation for unlimited period thereafter.
I am, therefore, setting aside the order u/s. 143(3) dated 13.03.2013, with the direction that the Assessing Officer examines this issue and pass a speaking order after giving the assessee adequate opportunity of being heard.”
Being aggrieved by this order passed u/s 263 of the Act of the Ld. CIT preferred an appeal before us.
Shri Siddharth Jhajharia & Shri Sajay Sen Ld. Authorized Representatives appearing on behalf of assessee and Shri Sandeep Chaube, Ld. Departmental Representative appearing on behalf of Revenue.
We have heard rival submissions of both the parties and perused the materials available on record. Ld. AR relied on the order passed by AO whereas Ld. DR relied on the order passed by Ld. CIT. From the aforesaid discussion, we find that assessee’s claim of unabsorbed depreciation pertaining to AYs beginning from 2000-01 and 2001-02 for an amount of Rs. 5,20,11,633/- which was allowed to be carried forward by AO in his order for the relevant AY i.e. 2010-11 but Ld. CIT found that unabsorbed depreciation was not allowable to be carried forward for a period more than 8 years. Therefore, Ld. CIT opined that matter to be restored to file of AO for fresh adjudication. We further find that same issue has been decided by Hon'ble Gujarat High Court in the case of General Motors India (P) Ltd. vs. DCIT A.Y. 2010-11 M/s Bengal Tea & Fabrics Ltd. vs. CIT,Kol-2 Page 5 (2013) 354 ITR 244 (Guj) and head-note of extract portion is reproduced below:- “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 not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y 1997-98, 1999-2000, 2000-01 an 2001-2002 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years. Current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. Thus 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 2001-002 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) 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.”
ITA No.415/Kol/2015 A.Y. 2010-11 M/s Bengal Tea & Fabrics Ltd. vs. CIT,Kol-2 Page 6 4. We find that Hon'ble Gujarat High Court has given relief to assessee on the same line of facts in the case of General Motors India (P) Ltd. (supra). We are also relying in the order of the assessee in assessee’s own case in in “A” Bench dated 28.04.2014 for A.Y. 07-08 where the Tribunal has held as under:- “5. We find that admittedly the view taken by the assessee which was accepted in the original assessment proceedings, is a view which has been held by Hon’ble Karnataka High Court in the case of Karnataka Cooperative Milk producers Federation Ltd. (supra) and thee is nothing to the contrary thereto by Hon’ble jurisdictional High Court. This view, therefore, is not only a reasonable view of the mater but, as the law currently is correct view of the matter. The powers under section 263 clearly therefore cannot be invoked on the facts of this case to simply safeguard the interests of the revenue. This power can only be exercised when order sought to be revised is erroneous and prejudicial to the interest of the revenue, and an order cannot be treated as erroneous as long as the Assessing Officer has taken a possible view of the matter even though according to the Commissioner the view so taken is not the correct view of the matter. Bearing in mind all these factors, as also entirely of the case, we find the impugned revision order unsustainable in law and we, therefore, cancel the same. The assessee gets the relief accordingly.”
In this view of the matter, we find that the order passed by Assessing Officer is not only erroneous but also prejudicial to the interest of revenue. Accordingly, we reverse the order of Ld. CIT passed u/s. 263. This ground of assessee’s appeal is allowed.