ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3, NAGPUR vs. M/S INDOWORTH INDIA LIMITED, NAGPUR

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ITA 108/NAG/2020Status: DisposedITAT Nagpur12 October 2023AY 2009-10Bench: SHRI SATBEER SINGH GODARA (Judicial Member), DR. DIPAK RIPOTE (Accountant Member)9 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the addition on unabsorbed depreciation, relying on jurisdictional High Court precedents. Similarly, the disallowance under Section 36(1)(iii) was also deleted as the assessee had non-interest bearing funds exceeding interest-free loans.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of additions made on account of unabsorbed depreciation and disallowance under Section 36(1)(iii). The assessee did not appear for the hearing, and the case proceeded ex-parte.

What were the issues?

Whether the CIT(A) was justified in deleting additions related to unabsorbed depreciation and disallowance of interest expenses under Section 36(1)(iii).

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, NAGPUR BENCH : NAGPUR

Before: SHRI SATBEER SINGH GODARA & DR. DIPAK RIPOTE

Hearing: 20.09.2023Pronounced: 12.10.2023

ORDER PER SATBEER SINGH GODARA, J.M. :

This Revenue’s appeal arises against the CIT(A)-2, Nagpur, Nagpur’s order in case no.CIT(A)-2/166/2014-15- ITBA.No.10398, dated 27.07.2020, involving proceedings u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short “the Act”).

Despite service of notice, none appears at assessee’s behest. It is accordingly proceeded ex-parte.

2 ITA.No.108/Nag./2020 2. The Revenue pleads the following substantive grounds in the instant appeal :

1.

“Whether on the facts and in circumstances of the case and in law the learned CIT(A)-2, Nagpur was justified in deleting addition made by the AO on account of unabsorbed depreciation who had relied on the decision of the Honorable ITAT, Mumbai in the case of DCIT-Cir-3, Mumbai -vs- Times Gurently Ltd. (2010) 40 SOT (Mum) wherein the Honourable ITAT has opined on the issue of carry forward of unabsorbed depreciation and which is squarely applicable to the facts and circumstances of this case.

2.

Whether on facts and in the circumstances of the case and in law the Ld. CIT(A)-2, was justified in deleting the additions made on account of disallowances u/s 36(l)(iii) of the Income Tax Act, 1961 in spite of the fact that the as per audit report submitted by the assessee it was clear that assessee had given interest free advances and therefore, the AO had charged notional interest on it and disallowed the interest expenses claimed by the assessee. 3. Any other grounds of appeal at the time of hearing.”

3. Coming to the Revenue’s first and foremost issue of carry forward of the assessee’s unabsorbed depreciation disallowed by the Assessing Officer in his assessment dated 3 ITA.No.108/Nag./2020 03.02.2014; we note that the CIT(A) has accepted the latter’s stand as under :

4 ITA.No.108/Nag./2020 5 ITA.No.108/Nag./2020

4.

Suffice to say, it has come on record that the instant issue as to whether the assessee is entitled to carry forward it’s unabsorbed depreciation/losses only for a period of eight years or not; is hardly res integra in light of honble jurisdictional high court’s decision in M/s. Hindustan Unilever Ltd., (supra). The Revenue could hardly pinpoint any illegality or infirmity to this settled legal proposition. We uphold the learned CIT(A)'s findings therefore.

6 ITA.No.108/Nag./2020 5. The outcome would be hardly any different in the Revenue’s later substantive ground seeking to revive sec.36(1)(iii) interest disallowance/addition of Rs.4,88,97,486 which has been reversed in the CIT(A)'s detailed discussion as under :

7 ITA.No.108/Nag./2020 8 ITA.No.108/Nag./2020

6.

The Revenue could hardly rebut the clinching fact that the assessee had been having non-interest bearing funds exceeding the interest free loans (supra). That being the case, we conclude that the CIT(A) has rightly followed the foregoing various judicial precedents to conclude that the necessary inference in such an instance is of utilisation of interest free funds only. The Revenue’s instant second substantive ground also fails therefore.

7.

This Revenue’s appeal is dismissed. Order pronounced in the open Court on 12.10.2023.

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