M S Rb Polymers Ltd Kolkata v. Dcit Cir 4 Kolkata Kolkata

In The Income Tax Appellate Tribunal B Bench Kolkata Before Shri A T Varkey Jm Dr A L Saini Am Ita No 202 Kol 2016 Assessment Year 2009 10 Rb Polymers Ltd 25 R N Mukherjee Road 4 Th Floor Suite F Kolkata 1 Vs Cit A 2 Kolkata Aayakarbhawan P 7 Chowringhee Square Kolkata 69 Pan Gir No Aabcr 3117 R Assessee Respondent Assessee By Shri Subash Agarwal Advocate Respondent By Shri Saurabh Kumar Addl Cit Dr Date Of Hearing 16 11 2017 Date Of Pronouncement 15 12 2017 O R D E R Per Dr Arjun Lal Saini Am The Captioned Appeal Filed By The Assessee Pertaining To Assessment Year 2009 10 Is Directed Against The Order Passed By The Commissioner Of Income Tax Appeals 2 Kolkata In Appeal No 1386 Cit A 2 Cir 4 2014 15 Dated 22 12 2015 Which In Turn Arises Out Of An Order Passed By The Assessing Officer Under Section 143 3 Of The Income Tax Act 1961 Hereinafter Referred To As The Act Dated 28 12 2011 2 The Assessee Has Raised The Following Grounds Of Appeal 1 That The Impugned Order Dated 22 Nd December 2015 Passed By The Learned Commissioner Of Income Tax Appeals 2 Is Liable To Be Quashed Since It Has Been Passed In Haste Without Application Of Mind And Without Considering The Evidences Furnished Submissions Made By The Appellant In Course Of Hearing Of The Appeal Rb Polymers Ltd Ita No 202 Kol 2016 Assessment Year 2009 10 Page 2 2 That On The Facts Circumstances And In Law The Learned Commissioner Of Income Tax Appeals 2 Ought To Have Held That Rectification Order Passed In The Instant Case Was Outside The Purview Of Power Vested With The Assessing Officer U S 154 Of The Income Tax Act 1961 In As Much As The Issues Involved Were Debatable Contentious And Required Deep Investigation Into Facts And As Such The Rectification Order Dated 7 Th July 2014 Passed By The Ld Dcit Circle 4 Was Liable To Be Quashed 3 That The Learned Commissioner Of Income Tax Appeals 2 Failed To Appreciate That The Conditions Precedent For Initiation Of Impugned Proceedings U S 154 Of The Act Instant Case Through The Impugned Notice Dated Nil Were Neither Present Nor Satisfied In The Instant Case And In This View Of Matter The Impugned Ex Parte Order Dated 07 07 2014 Passed By The Dcit Circle 4 U S 154 143 3 Of The Act Is Bad In Law And Not Maintainable 4 On The Facts And Circumstance Of The Case And In Law The Learned Commissioner Of Income Tax Appeals 2 Erred In Confirming The Disallowance Of Rs 50 04 177 Being Claimed For Set Off Of Brought Forward Unabsorbed Depreciation Relating To Asst Years 1995 96 To 2000 01 Against The Income Of Assessment Year 2009 10 5 On The Facts And Circumstances Of The Case And In Law The Learned Commissioner Of Income Tax Appeals 2 Erred In Holding That The Appellant Was Not Entitled And Or Eligible For Unabsorbed Depreciation Of Rs 50 04 177 For Assessment Years 1995 96 To 2000 01 For Beingcarried Forward And Set Offagainst The Income For The Assessment Year 2009 10 6 That In View Of Cbdt Circular Clarifying The Intent Of Amendment Also In View Of The Decided Case Laws Of The Honble Gujarat High Court Relied Upon By The Appellant The Learned Commissionerof Income Tax Appeals 2 Ought To Have Held That Unabsorbed Depreciation Can Be Carried Forward And Set Off In Subsequent Years Without Any Time Limit 7 The Appellant Craves Leave To Add Alter Amend And Modify Any Of The Grounds Before Or At The Time Of Hearing Of This Appeal 3 Although In This Appeal The Assessee Has Raised A Multiple Grounds Of Appeal But At The Time Of Hearing The Main Grievance Of The Assessee Has Been Confined To The Issue That Ao Disallowed The Claim Of Assessee For Set Off Of Brought Forward Unabsorbed Depreciation Relating To A Y 1995 96 To 2000 01 Against The Income Of A Y 2009 10 4 The Brief Facts Qua The Issue Are That On Scrutiny Of The Assessment Order Passed U S 143 3 On 28 12 2011 The Assessing Officer Found That Brought Forward Unabsorbed Depreciation For Assessment Years 1995 96 1997 98 1998 99 1999 2000 2000 01 Combining To A Total Of Rs 50 03 977 Was Allowed Set Off With The Assessed Income In Contravention To The Provision Of Section 32 Of The I T Act Therefore A Notice U S 154 155 Of The Act Was Served On To The Assessee On 18 10 2012 Notifying The Mistake The Rb Polymers Ltd Ita No 202 Kol 2016 Assessment Year 2009 10 Page 3 Mistake As Per Ao Was Being Apparent From Record And Pro Judicial To The Interest Of The Revenue Therefore The Order Passed U S 143 3 Was Rectified By Assessing Officer U S 154 Of The Act As Under Total Income As Assessed In Order U S 143 3 Nil Add Brought Forward Unabsorbed Depreciation A Y 1995 96 12 24 394 A Y 1997 98 23 43 144 A Y 1998 99 6 07 491 A Y 1999 00 3 69 781 A Y 2000 01 4 59 367 50 03 977 Revised Total Income 50 03 977 5 Aggrieved By The Rectification Order U S 154 Of The Act Passed By The Ao The Assessee Filed An Appeal Before The Ld Cit A Who Has Confirmed The Order Passed By The Ao U S 154 Of The Act The Ld Cit A Observed That The Issue Is To Be Decided As To What Should Be The Treatment Of Unabsorbeddepreciation Before Amendment Of Section 32 2 W E F 1 St April 2002 As The Amendment Wasnot Retrospective But Prospective Before Amendment The Treatment Of Brought Forwardunabsorbed Depreciation Was Governed By Section 32 2 Iii B Of The Act Which Reads Asfollows If The Unabsorbed Deprecation Allowance Cannot Be Wholly So Set Off The Amount Ofunabsorbed Depreciation Allowance Not So Set Off Shall Be Carried Forward To Thefollowing Assessment Year Not Being More Than Eight Assessment Years Immediatelysucceeding The Assessment Year For Which The Aforesaid Allowance Was Firstcomputed Therefore Going By The Provisions Of Section 32 2 As It Was Before Amendment Andsince The Amendment In Finance Act 2001 Was Not Retrospective Unabsorbed Depreciation Forthe Assessment Years 1995 96 To 2000 01 Could Not Be Set Off Beyond Eight Years For Example Unabsorbeddepreciation For The A Y 1995 96 Could Be Set Offagainst Profit Gains Upto A Y 2003 04 And Unabsorbed Depreciation For The A Y 2000 01 Could Be Set Off Against Profit Gains Upto A Y 2008 09 Nowhere In The Amended Section 32 2 Itwas Stated Thataccumulative Unabsorbed Depreciation As On 1 St April 2002 Could Be Carried Forward Indefinitely Had It Rb Polymers Ltd Ita No 202 Kol 2016 Assessment Year 2009 10 Page 4 Been The Intention Of The Legislature The Amendment Would Have Been Brought In With Retrospective Effect The Then Ao In His Order U S 143 3 Dated 28 12 2001 Had Made An Apparent And Patent Mistake By Allowing To Set Off These Brought Forward Depreciation Against The Income Of A Y 2009 10 And Therefore The Cit A Held That The Assessingofficer Was Within His Jurisdiction In Rectifying The Apparent Mistake In Terms Of Provision Of Section 154 Of The Act Therefore The Ld Cit A Confirmed The Rectification Order Passed By The Assessing Officer Under Section 154 Of The Act 6 Not Being Satisfied With The Order Of Ld Cit A The Assessee Is In Appeal Before Us The Ld Counsel For The Assessee Has Stated Before Us That Cbdt Has Issued Circular No 14 Of 2001 Wherein It Has Been Clarified That After Amendment Of Section 32 2 In The Finance Act 2001 W E F 1 St April 2002 Any Unabsorbed Depreciation Available To The Assessee As On 1 St April 2002 Would Be Carried Forward Indefinitely Till The Time It Is Set Off Against The Profits Gains Of Subsequent Years The Ld Counsel Placed Reliancehigh Court At Ahmedabad In The Case Of General Motors India Pvt Ltd Vs Dcit In The 354 Itr 244 Wherein It Was Held That The Unabsorbed Depreciation Can Be Carried Forward And Set Off In The Subsequent Years Without Any Time Limit 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 Rb Polymers Ltd Ita No 202 Kol 2016 Assessment Year 2009 10 Page 5 Depreciation Allowance For Such Succeeding Year We Are Of The Considered Opinion That Any Unabsorbed Depreciation Available To An Assessee On 1 St 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 I 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 The Ld Counsel Also Relied On The Judgment Of Hon Ble Gujarat High Court In The Case Of Cit V Gujarat Themis Biosyn Ltd 2014 44 Taxman Com 204 Gujarat Wherein It Was Held That These Amendments Will Take Effect From The 1 St April 2002 And Will Accordingly Apply In Relation To The Assessment Year 2002 03 And Subsequent Years 7 On The Other Hand Ld Dr For The Revenue Has Primarily Reiterated The Stand Taken By The Assessing Officer Which We Have Already Noted In Our Earlier Para And Is Not Being Repeated For The Sake Of Brevity 8 We Have Heard The Rival Submissions And Perused The Materials Available On Record We Note That 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 Dispensed 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 1 St 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 Rb Polymers Ltd Ita No 202 Kol 2016 Assessment Year 2009 10 Page 6 Allow The Unabsorbed Depreciation Allowance Worked Out In A Y 1995 96 To 2000 01 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 The 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 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 1995 96 To 2001 01 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 Rb Polymers Ltd Ita No 202 Kol 2016 Assessment Year 2009 10 Page 7 For Such Succeeding Year The Unabsorbed Depreciation Becomes The Depreciation Allowance For Such Succeeding Year Therefore Considering The Factual Position Discussed Above We Allow The Appeal Of The Assessee And We Direct The Ao To Allow Set Off Of Depreciation Pertaining To A Y 1995 96 To 2000 01 Against Income Of Assessment Year 2009 10 9 In The Result The Appeal Filed By The Assessee Is Allowed Order Pronounced In The Open Court On This 15 12 2017 Sd A T Varkey Sd Dr A L Saini Judicial Member Accountant Member Kolkata Dated 15 12 2017 Rs Sps Copy Of The Order Forwarded To True Copy By Order Senior Private Secretary Head Of Office D D O I T A T Kolkata Benches Kolkata 1 The Assessee Rb Polymers Ltd 2 The Respondent Cit A 2 Kolkata 3 The Cit A Kolkata 4 Cit 5 Dr Itat Kolkata 6 Guard File