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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI RAMIT KOCHAR
आदेश / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER:
This appeal, filed by the Revenue, being 15-02-2013 passed by the learned Commissioner of Income Tax (Appeals)- 13, Mumbai (Hereinafter called “the CIT(A)”), for the assessment year 2009-10.
The grounds raised by the Revenue in the memo of appeal filed with the Tribunal read as under:-
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“i) The Learned CIT(A) has erred on facts and in law in directing the Assessing Officer to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB of the I.T. Act, 1961 without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer. ii) The Learned CIT(A) has erred on facts and in law in directing the Assessing Officer to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB of the I.T. Act, 1961 without properly appreciating the fact that the Assessing Officer is bound by law to accept only the claim made by the assessee along with the return of income.. iii] The Learned CIT(A) has erred on facts and in law in directing the Assessing Officer to allow set off of unabsorbed depreciation pertaining to A.Y. 1995-96 to A.Y. 1999-2000 against the 'Income from Other Sources' without appreciating the fact that the time period for claiming the above depreciation had already lapsed. iv) The Ld. CIT(A)'s order is contrary in law and on facts and deserves to be set aside. v] The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary.”
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The Brief facts of the case are that the assessee company is engaged in the business of manufacture of Chemical.
During the course of assessment proceedings u/s 143(3) of Income Tax Act,1961(Hereinafter called “the Act”) read with Section 143(2) of the Act, the learned assessing officer(Hereinafter called “the AO”) observed from the computation of income u/s 115JB of the Act that the assessee company has worked unabsorbed depreciation as well as business loss whichever is lower year-wise and not worked combined unabsorbed depreciation as well as business loss whichever is lower and reduced from book profit. The working of the said unabsorbed depreciation as well as business loss as per Companies Act (as reflected in page 2 of the assessment order by the AO ) is as follows:- Year ended Business loss (In Rs.) Depreciation Loss (in Rs.) 30/6/1999 1133949 -5449127 30/6/2000 -2932647 -5883426 30/6/2001 -6007658 -6343410 31/12/2002 -13728845 -10972069 31/03/2004 2640656 -10659176 31/03/2005 -8413978 -8507211 31/03/2006 7669896 -9244040 31/03/2007 -16216865 -11910166 31/03/2008 8575212 -13940945 Total 19502170 101461792 The assessee company with respect to the adjustment of brought forward losses to be adjusted, furnished a statement of losses before the AO which was different from the one which was claimed in the return of income and the same was not reconciled with the statement of accounts of the respective ITA 3346/M/13 4 years involved, therefore, the A.O. did not consider the same and did not take any cognizance thereof and the book loss was allowed to the assessee company by the AO as per the return of income filed. The A.O. held that the assessee company is eligible for the least of either the business loss or depreciation loss and accordingly the A.O. allowed brought forward business loss of Rs. 1,95,02,170/- to be adjusted as against the claim of Rs. 4,02,36,518/- made by the assessee company , vide assessment orders dated 26/12/2011 passed u/s 143(3) of the Act read with Section 143(2) of the Act. .
Aggrieved by the assessment orders dated 26/12/2011 passed by the AO, the assessee company carried the matter before the CIT(A) in first appeal and submitted before the CIT(A) that the A.O. should have considered the revised statement filed during the assessment proceedings pertaining to the revised figures of year-wise brought forward loss and unabsorbed depreciation for computing book profit u/s 115JB of the Act. The assessee company argued before the CIT(A) that in the said figures, there were positive incomes in some of the years. While totaling the brought forward loss of different years, the A.O. has totaled loss figures as well as positive figures which resulted in lowering the assessee’s final figure of brought forward business losses of all the years put together. The assessee company requested that the aggregate figure of different years should be considered ignoring the profit of some of the years wrongly considered by the A.O. The CIT(A) observed that for the year ended on 30th June,1999, 31st March 2004, 31st March 2006 and 31st March 2008, there were positive income and the CIT(A) held that as per the provisions of section 115JB of the Act, the lower of brought forward business loss or unabsorbed depreciation is required to be allowed as deduction from book profit. Since in these years there was no business loss being positive income and therefore in aggregate the positive income of these years was not required to be considered. Hence, the CIT(A) directed the A.O. vide orders ITA 3346/M/13 5 dated 15-02-2013 to consider lower of brought forward business loss ignoring positive income of respective years or unabsorbed depreciation whichever is less, that means the A.O. has to consider business loss at Rs. ‘nil’ in the years wherever positive income was shown and thereafter consider aggregate of lower business loss and unabsorbed depreciation . Thus, by holding as above, the CIT(A) duly considered the statement filed by the assessee company during the assessment proceedings before the AO pertaining to the revised figures of year-wise brought forward loss and unabsorbed depreciation for computing book profit u/s 115JB of the Act although the said claim was not in accordance with the claim made by the assessee company in the return of income filed with the Revenue and the CIT(A) decided the issues on merits .
Aggrieved by the orders dated 15-02-2013 of CIT(A), the Revenue is in appeal before the Tribunal .
7.The ld. D.R. , relied on the order of the A.O. and submitted that the CIT(A) erred in directing the A.O. to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee for computing book profit u/s 115JB of the Act during the course of assessment proceedings ignoring the fact that the A.O. is bound in law to accept only the claim made by the assessee company in the return of income filed with Revenue. On the other hand, the ld. Counsel for the assessee company submitted that the case of the assessee is squarely covered by the decision of Hon’ble Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders (P) Ltd., (2012) 349 ITR 336 (Bom) whereby the Hon’ble Bombay High Court has held that if there is an inadvertent error by the assessee company in not claiming the deduction in return of income filed with the Revenue , then said claim can always be raised by the tax payer before the AO and the appellate authorities has jurisdiction to consider a new additional claim raised by the taxpayer before the A.O and adjudicate the same on merits although inadvertently the ITA 3346/M/13 6 said claim was not claimed in the return of income filed with the Revenue by the taxpayer.
8.We have considered the rival submission and perused the material on record. We have observed that the assessee company has raised additional claim before the A.O. during the assessment proceedings by filing a revised statement of unabsorbed depreciation and book loss for computing the book profit u/s 115JB of the Act in which the losses were different from the one which was claimed in the return of income filed with Revenue, the said revised statement filed by the assessee company before the AO during assessment proceedings was not considered by the A.O and no cognizance was taken thereof by the AO on the ground that the assessee company’s claim raised vide return of income filed with Revenue can only be considered. The CIT(A) duly considered the said claim and has allowed the same on merits. We do not find any infirmity in the orders of the CIT(A) in considering the said claim as adjudicating authorities can always consider and decide on merits , any claim which the taxpayer has raised before the AO during assessment proceedings although the same is not claimed by the taxpayer vide Return of income filed with the Revenue as held by Hon’ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders (P) Ltd., (2012) 349 ITR 336 (Bom). Thus, the grounds of appeal raised by the Revenue in ground No. i and ii are , therefore, dismissed based on our above discussions . We order accordingly.
9. In ground No. iii, the Revenue contended that the CIT(A) erred in directing the A.O. to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee company for computation of book profit u/s 115JB of the Act without properly appreciating the fact that the time period has already expired.
10. The A.O. relying upon the decision of ITAT Special Bench in the case of DCIT v. Times Guaranty Ltd. (2010) 131 TTJ 257 (Mum) [SB] disallowed the ITA 3346/M/13 7 brought forward depreciation losses for the assessment year 1995-96 to 1999-2000 since the same have expired the term of eight years to be carried forward as per relevant applicable law. Aggrieved by the decision of A.O., the assessee company carried the matter before the CIT(A). The assessee company contended before the CIT(A) that the decision of Hon’ble Gujarat High Court in the case of General Motors India P. Ltd. in Civil Appeal Application No. 1773 of 2012 has taken a view different than taken by the ITAT, Special Bench in the case of Times Guaranty Ltd. (supra), after analyzing the existing and amended provision of section 32(2) of the Act and CBDT Circular, the Hon’ble Gujarat High Court held that the unabsorbed depreciation is required to be added to the current depreciation for such succeeding years and is deemed to be part thereof. Thus the CIT(A) following the decision of Hon’ble Gujarat High Court in the case of General Motors India P. Ltd. (supra), directed the A.O. to consider brought forward unabsorbed depreciation loss of earlier years as part of current year’s depreciation and allow deduction as per provisions of the Act. Aggrieved by the above decision of ld. CIT(A), the Revenue is in further appeal before the Tribunal.
11.The ld. D.R., relied upon the order of A.O., on the other hand, the ld. Counsel for the assessee relied upon the decision of Tribunal in the case of Dhadda Diamonds Pvt. Ltd. v. ITO in to 3911/Mum/2013 for assessment years 2005-06 to 2008-09 , order dated 25.03.2015 and also in the case of Milton’s Pvt. Limited, vs. CIT in ITA No. 3019/Mum/2012 for A.Y. 2007-08 , order dated 22.5.2013 whereby the Tribunal has followed the decision of Hon’ble Gujarat High Court in the case of General Motors India P. Ltd. (supra) and directed the A.O. to allow set off of unabsorbed depreciation in accordance with the decision of Hon’ble Gujarat High Court in the case of General Motors India Pvt. Ltd. (supra). The Tribunal in the case of Dhadda Diamonds Pvt. Ltd.(supra) held as under:-
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“5. After considering the material placed on record and the relevant finding of the Ld. CIT(A) and the decisions relied upon before us, the only issue for our adjudication is, whether the finding of the AO and Ld. C!T(A) based on the decision of Special Bench in the case of Times Guarantee would be applicable or not. The AO as well as Ld. CIT(A) after relying upon the Special Bench decision have held that the unabsorbed depreciation for the A.Y. 1997-98; A.Y. 1998- 99; A.Y. 1999-2000 and A.Y. 2000-01 shall be considered as lapsed in the A.Y. 2005-06, A.Y. 2006-07, A.Y. 2007-08 and A.Y. 2008-09 respectively because 8 years have lapsed. The Special Bench in the case of Times Guarantee Ltd. in para 38 of the judgment came to the following conclusion:-
''38. The legal position of current and brought forward unadjusted/unabsorbed depreciation/allowance in the three periods, is summarized as under:-
A. In the first period (i.e. up to assessment year 1996-97) (i) Current depreciation, that is amount of allowance for the year under section 32(1), can be set off against income under any head within the same year.
(ii) Amount of such current depreciation which cannot be so set off within the same year as per (i) above shall be deemed as depreciation under section 32(1), that is depreciation for the current year in the following year(s) to be set off against income under any head, like current depreciation.
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B. In the second period (i.e. assessment years 1997-98 to 2001-02) (i) Brought forward unadjusted .depreciation allowance for and up to assessment year 1996-97 (hereinafter called the First unadjusted depreciation allowance'), which could not be set off up to assessment year 1996-97, shall be carried forward for set off against income under any head for a maximum period of eight assessment years starting from assessment year 1997-98.
(ii) Current depreciation for the year under section 32(1) (for each year separately starting from assessment year 1997- 98 up to 2001-02) can be set off firstly against business income and then against income under any other head.
(iii) Amount of current depreciation for assessment years 1997-98 to 2001-02 which cannot be so set off as per (ii) above hereinafter called the 'Second unabsorbed depreciation allowance’ shall be carried forward for a maximum period of eight assessment years from the assessment year immediately succeeding the assessment year for which it was first computed, to be set off only against the income under the head 'Profits and gains of business or profession.
C. In the third period (i.e., assessment year 2002-03 onwards).
(i) 'First unadjusted depreciation allowance' can be set off up to assessment year 2004-05, that is, the remaining period ITA 3346/M/13 10 out of maximum period of eight assessment years [as per B(i) above} against income under any head.
(ii) 'Second unabsorbed depreciation allowance' can be set off only against the income under the head 'Profits and gains of business or profession' within a period of eight assessment years succeeding the assessment year for which it was first computed.
(iii) Current depreciation for the year under section 32(1}, for each year separately, starting from assessment year 2002- 03 can be set off against income under any head. Amount of depreciation allowance not so set off (hereinafter called the 'Third unadjusted depreciation allowance') shall be carried forward to the following year.
(iv) The 'Third unadjusted depreciation allowance' shall be deemed as depreciation under section 32(1), that is depreciation for the current year in the following year(s} to be set off against income under any head, like current depreciation, in perpetuity.
However, in a later decision, the Hon'ble Gujarat High Court vide order dated 23.08.2012 in the case of General Motors India Pvt. Ltd (supra), After considering the provision of section 32(2), before its amendment by Finance Act 2001 and also after the amendment and also the Board Circular No. 14 of 2001 observed and held as under:-
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''37. The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means 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 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. Hence keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to assessee cannot be denied. However, Circular No. 14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of ITA 3346/M/13 12 depreciation under section 32 shall be mandatory. 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, 2000-1 and 2001-02 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.
Therefore, it can be said that, 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. 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 ITA 3346/M/13 13
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) 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."
This decision of the Hon'ble Gujarat High Court has been followed in several decisions rendered by the Co-ordinate Benches of the Tribunal. Respectfully following the ratio of Hon'ble Gujarat High Court, we direct the AO to allow the set off of unabsorbed depreciation pertaining to the A.Y. 1997-98 to 2000-01 in the respective A.Ys. 2005-06 to 2008-09 in accordance with the decision of General Motors India Pvt. Ltd. (supra). Accordingly, the ground raised by the assessee in all the appeals are treated as allowed.”
Respectfully following the above decision of co-ordinate Bench of this Tribunal in the case of Dhadda Diamonds Pvt. Ltd. v. ITO in to 3911/Mum/2013 vide orders dated 25.03.2015 and also in the case of Milton’s Pvt. Limited, v. CIT-6 in ITA No. 3019/Mum/2012 vide orders dated 22.5.2013 whereby the Tribunal has followed the decision of Hon’ble Gujarat High Court in the case of General Motors India P. Ltd. (supra) , the ground no. iii raised by the Revenue in this appeal is dismissed.
ITA 3346/M/13 14
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 9th December, 2015. आदेश क� घोषणा खुले �यायालय म� �दनांकः 09-12-2015 को क� गई ।