CEAT LTD, MUMBAI v. DCIT RG 6(2), MUMBAI

ITA 2269/MUM/2013 | 2006-2007
Pronouncement Date: 31-07-2015 | Result: Allowed

Appeal Details

RSA Number 226919914 RSA 2013
Assessee PAN AAACC1645G
Bench Mumbai
Appeal Number ITA 2269/MUM/2013
Duration Of Justice 2 year(s) 4 month(s) 10 day(s)
Appellant CEAT LTD, MUMBAI
Respondent DCIT RG 6(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-07-2015
Date Of Final Hearing 24-12-2014
Next Hearing Date 24-12-2014
Assessment Year 2006-2007
Appeal Filed On 21-03-2013
Judgment Text
CEAT LTD. ITA S 2268 & 2269 /M/20 13 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI . . BEFORE SHRI G S PANNU ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDICIA L MEMBERITA ITA NO S . : 2268 AND 2269 /MUM/20 13 (ASSESSMENT YEAR S : 200 7 - 0 8 AND 200 6 - 07 ) M/S CEAT LTD. 463 DR. ANNIE BESANT ROAD MUMBAI - 400 030 .: PAN : AAACC 164 5 G VS DCIT - 10(3) R. NO. 451 4 TH FLOOR AAYAKAR BHAVAN M K ROAD MUMBAI 40 0 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI PRAVIN KUMAR /DATE OF HEARING : 18 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 31 - 07 - 2015 ORDER PER AMIT SHUKLA J.M. : TH E AFORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE AGAINST SEPARATE IMPUGNED ORDERS OF EVEN DATE PASSED BY CIT(A) - 12 IN RELATION TO THE ORDER PASSED U/S 154 OF THE INCOME TAX ACT 1961. THE EFFECTI VE GROUND RAISED BY THE ASSESSEE IN BOTH THE APPEAL S ARE AS UNDER: THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING UNABSORBED DEPRECIATION CLAIM OF RS. 14 59 34 125/ - CLAIMED AS SET OFF IN ASSESSMENT YEAR 2007 - 08 ON THE GROUND THAT THERE WAS NO UNABSORBED DEPRECIATION LEFT AFTER SETTING OFF UNABSORBED DEPRECIATION OF AY 2001 - 02 IN THE AY 2006 - 07. THE UNABSORBED DEPRECIATION OF RS. 14 59 34 125/ - DISALLOWED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PERTAINS TO AY 2005 - 06 WHICH IS NOT SET OFF AGAINST INCOME OF AY 2006 - 07.THUS THE COMMISSIONER CEAT LTD. ITA S 2268 & 2269 /M/20 13 2 (APPEALS ) WRONGLY AFFIRMED THE ORDER OF ASSESSING OFFICER WITHOUT GOING INTO THE FACTS OF THE CASE. 2. AT THE OUTSET THE LD. COUNSEL SHRI VIJAY MEHTA SUBMITTED THAT THIS ISSUE NOW STANDS COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT LTD VS DCIT (2013) 35 4 ITR GUJARAT 244 WHICH HAS BEEN FOLLOWED BY THE ITAT MUMBAI BENCHES IN VARIOUS DECISIONS. IN SUPPORT HE RELIED UPON TH E DECISION OF DCIT VS BAJAJ HINDUSTAN LTD REPORTED IN (2014) 149 ITD 709. 3. ON THE OTHER HAND LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A) AND ALSO ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF RPIL SIGNALING GEAR PVT LTD REPORTED IN 328 ITR 285; PIONEER ASIA PACKAGING P LTD. 310 ITR 198; AND S & S POWER SWITCH GEAR LTD 318 ITR 187. 4. BRIEF FACTS ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME AT RS. 23 61 82 884/ - UNDER THE NORMAL PROVISIONS OF THE ACT AND DECLARED BOOK PROFIT O F RS. 59 06 17 417/ - U/S 115JB. IN THE ASSESSMENT ORDER PASSED U/S 143(3) THE ASSESSING OFFICER HAS GIVEN SET OFF OF BROUGHT FORWARD OF BUSINESS LOSSES OF RS. 14 59 34 125/ - AND UNABSORBED DEPRECIATION LOSS OF RS. 25 70 76 319/ - AND THE TOTAL ADJUSTMENT M ADE BY THE ASSESSING OFFICER WERE IN THE FOLLOWING MAN N ER: ASSESSMENT YEAR UNABSORBED DEPRECIATION (RS) 1996 - 97 12 90 27 623 1997 - 98 10 44 56 115 2001 - 02 2 35 90 581 2005 - 06 14 59 34 125 TOTAL 40 30 10 444 5. THEREAFTER THE ASSESSING OFFICER IN HI S ORDER U/S 154 HELD THAT UNABSORBED DEPRECIATION UPTO 1996 - 97 CAN BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME ONLY UP TO THE ASSESSMENT YEAR 2004 - 05 AND UNABSORBED DEPRECIATION TO THE EXTENT OF RS. 21 69 36 795/ - ALLOWED TO THE APPELLANT FOR SET OFF AFTER GIVING EFFECT TO THE FIRST APPELLATE ORDER OF 2006 - 07 HAS CEAT LTD. ITA S 2268 & 2269 /M/20 13 3 WRONGLY BEEN GIVEN AS THE SAME PERTAINED TO THE ASSESSMENT YEAR 2005 - 06. WHILE COMING TO THIS CONCLUSION H E REFERRED TO THE AMENDMENTS MADE IN SECTION 32(2) AS AMENDED BY THE FINANCE ACT 19 9 6 W.E.F. 01.04.1997 AND SUBSTITUTED BY THE FINANCE ACT 2001 W.E.F. 01.04.2002. THUS HE DENIED THE CLAIM OF CARRIED FORWARD OF DEPRECIATION FOR THE AY 1996 - 97 . SIMILARLY HE DISALLOWED THE UNABSORBED DEPRECIATION WHICH WAS S ET OFF IN AY 2007 - 08 ALSO. IN THE FIRST APPEAL THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER AFTER DETAIL DISCUSSION AND RELYING UPON CERTAIN JUDICIAL PRECEDENTS. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ALSO ON THE PERUSAL OF THE IMPUGNED OR DER WE FIND THAT THE PRIMARY ISSUE INVOLVED IS WHETHER THE DISALLOWANCE OF CLAIM OF UNABSORBED DEPRECATION OF AY 1996 - 97 IS ALLOWED TO BE SET OFF IN THE YEARS UNDER CONSIDERATION OR NOT THAT IS OF RS. 21 69 36 795/ - TO BE SET OFF IN AY 2006 - 07 AND SIM ILAR CLAIM OF R S. 14 59 34 125/ - FOR SET OFF IN AY 2007 - 08 ESPECIALLY IN WAKE OF AMENDMENT MADE IN SECTION 32(2) W.E.F. 01.04.2002 WHEREIN TIME LIMIT FOR CARRIED FORWARD FOR UNABSORBED DEPRECATION UPTO 8 YEARS HAVE BEEN REMOVED . EARLIER THE TIME LIMIT WAS UPTO 8 YEARS ONLY W.E.F. 1.4.1997. THE POSITION UNDER THE STATUTE AS REGARD CARRY FORWARD OF UNABSORBED DEPRECIATION FOR VARIOUS YEARS WERE AS UNDER: ASSESSMENT YEAR CARRY FORWARD TILL 1996 - 97 INDEFINITELY 1997 - 98 TO 2001 - 02 8 YEARS 2002 - 03 ONWARDS TI ME LIMIT OF 8 YEARS REMOVED THE LD. CIT(A) HAS MAINLY REFERRED TO A DECISION OF S PECIAL B ENCH IN THE CASE OF TIME GUARANTEE LTD. (2010) 131 TTJ 257 AND MADRAS HIGH COURT DECISION . NOW T HIS ISSUE HAS BEEN DECIDED BY THE HONBLE GUJARAT HIGH COURT IN TH E CASE OF GENERAL MOTORS INDIA P LTD IN DETAIL MANNER AFTER ANALYZING THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT 1996 AS ALSO BY FINANCE ACT 2001 AND CEAT LTD. ITA S 2268 & 2269 /M/20 13 4 CBDT CIRCULARS . THE RELEVANT OBSERVATION AND PRINCIPLES LAID DOWN BY HONBLE GUJARAT HIGH COURT READS AS UNDER: 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 PROVI SIONS 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 EXP RESS 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 DEP RECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997 - 98 1999 - 2000 2000 - 01 AND 2001 - 02 TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS AND IF ANY UNABSORBED DEPRECIATION OR PART THEREOF COULD NOT BE SET CEAT LTD. ITA S 2268 & 2269 /M/20 13 5 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 O UT 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 DEPRECIATIO N 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 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 - 0 2 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 CEAT LTD. ITA S 2268 & 2269 /M/20 13 6 PROFITS AND GAINS OF SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. 7. FURTHER ITAT MUMBAI BENCH IN THE CASE OF BAJAJ HINDUSTAN LTD HAVE CONSIDERED VARIOUS DECISIONS INCLUDING THOSE OF MADRAS HIGH COURT AND HAS RELIED UPON BY LD. DR AND DECIDED THE ISSUE IN THE FOLLOWING MANNER: WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE BEEN CAREFULLY CONSIDERED. IT IS THE CONTENTION OF ID DR THAT AMENDED PROVISIONS OF SECTION 32(2) AS APPLICABLE FROM ASSESSMENT YEAR 2002 - 03 SHOULD NOT HE MADE APPLI CABLE TO THE UNABSORBED DEPRECIATION CARRIED FORWARD BY THE ASSESSEE FROM EARLIER YEARS. TO SUPPORT SUCH CONTENTION THE ID. DR HAS RELIED MAINL Y ON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF TIMES GUARANTY LTD. (SUPRA) WHICH IS DIRECTLY ON THE ISSUE. HOWEVER S UBSEQUENTLY ON THE SAME ISSUE THE HON'BLE GUJARAT HIGH COURT HAS RENDERED THE DECISION IN THE CASE OF GENERAL MOTORS INDIA (I?) LTD. (SUPRA). CONSIDERING THE DECISION OF HON'BLE GUJARAT HIGH COURT DESPITE THERE BEING EXISTING DECISION OF SPECIAL BENCH OF M UMBAI BENCH THE MUMBAI BENCHES HAVE TAKEN A VIEW THAT IN VIEW OF SUBSEQUENT DECISION OF HON'BLE GUJARAT HIGH COURT THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF TIMES GUARANTY LTD. (SUPRA) CANNOT BE FOL LOWED. FOR THIS PURPOSE REFERENCE HAS BE EN MADE BY ID. AR TO THE DECISION OF MUMBAI BENCH I.E. IN THE CASE HINDUSTAN UNILEVER LTD. (SUPRA) AND MI/TO C (P) LTD. (SUPRA). THE RELEVANT PORTION OF THE DECISION IN THE CASE OF MILTONS (P) LTD HAS ALREADY BEEN REPRODUCED. NO CONTRAR Y DECISION HAS BE EN BROUGHT TO OUR NOTICE. 10. SO FAR AS IT RELATES TO RELIANCE BY LD. DR ON THE DECISIONS OF HONBLE MADRAS HIGH COURT IN THE CASES OF (I) RPIL SIGNALLING SYSTEMS LTD. (II) PIONEER ASIA PACKAGING (P.) LTD. AND (III) S & S SWITHGEAR LTD. (SUPRA) IT MAY BE MENTIONED THAT THESE DECISIONS RELATED TO AMENDMENT BROUGHT INTO THE STATUTE FROM ASSESSMENT YEAR 1997 - 98 AND HONE OF THE DECISIONS RATES TO AMENDMENT BROUGHT INTO STATUTE BY FINANCE ACT 2001 RELEVANT TO ASSESSMENT YEAR 2002 - 03 ONWARDS. WHEREAS THE DECI SION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (I) LTD. (SUPRA) IS DIRECTLY ON THE AMENDMENT BROUGHT INTO STATUTE BY FINANCE ACT 2001 RELATES TO ASSESSMENT YEAR 2002 - 03 ONWARDS AND IS DIRECTLY APPLICABLE TO THE FACT OF THE RESE NT CASE. THEREFORE RELIANCE BY LD. CIT DR ON THE CEAT LTD. ITA S 2268 & 2269 /M/20 13 7 DECISIONS OF HON MADRAS HIGH COURT IS MISPLACED. 11. SO FAR AS IT RELATES TO ARGUMENT OF ID. DR THAT THE ISSUE BEFORE THE HON'BLE GUJARAT HIGH COURT WAS NOT RELATING TO INTERPRETATION OF AMENDMENT BROUGHT INTO STATUTE IN SECTION 32(2) BY FINANCE ACT 2001. IT MAY BE MENTIONED HERE THAT THIS CONTENTION OF ID. DR IS NOT CORRECT. THE RELEVANT PORTION OF DECISION OF GUJARAT HIGH COURT HAS ALREADY BEEN REPRODUCED IN PARA 7 OF THIS ORDER AND IT CAN BE SEEN FROM T HESE OBSERVATIONS SPECIFIC ISSUE WAS CONSIDERED AND DECIDED BY HONBLE GUJARAT HIGH COURT. THE ID. CIT(A) WHILE RENDERING THE DECISION HAS RELIED UPON THE AFOREMENTIONED DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (1).) LTD. (SUPRA). NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE BY THE ID. DR. MUMBAI BENCH OF THE TRIBUNAL HAVE ALSO FOLLOWED THE SAID DECISION AND HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. THERE IS NO MATERIAL ON RECORD TO PERSUADE US TO TAKE THE COUNTRY VIEW. THEREFORE WE DECLINE TO INTERFERE IN THE RELIEF GIVEN BY ID. CIT(A) AND DEPARTMENTAL APPEALS ARE DISMISSED. 8. THUS FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT WE HOLD THAT DEPRECIATION RELATING TO ASSESSMENT YEAR 1996 - 97 WOULD BE AVAILABLE FOR SETTING OFF FOR THE PERIOD BEYOND 8 YEARS AND THE AMENDED PROVISIONS OF SECTION 32(2) BY THE FINANCE ACT 2001 WOULD BE APPLICABLE TO UNABSORBED DEPRECIATION AVAILABLE FOR ASSESSMENT YEARS PRIOR TO THE AMENDMENT AND HENCE WO ULD BE ALLOWABLE FOR CARRIED FORWARD TO THE SUBSEQUENT YEARS AND IF ANY UNABSORBED DEPRECATION OR PART THEREOF CAN BE SET OFF THEN IT SHOULD BE CARRIED FORWARD TO SET OFF AGAINST PROFITS AND GAINS OF THE SUBSEQUENT YEARS. ACCORDINGLY ACTION OF THE AO AND CIT(A) ARE SET ASIDE AND THE GROUND S RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JU LY 2015. SD/ - SD/ - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATE: 31 ST JU LY 2015 CEAT LTD. ITA S 2268 & 2269 /M/20 13 8 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 12 MUMBAI 4 ) THE CIT 6 MUMBAI . 5 ) / THE D.R. C BENC H MUMBAI. 6 ) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI * . . *CHAVAN SR.PS