The Asstt. Commissioner of Income Tax 2(1), Bhopal v. M/s. M.P.State Industries Corporation Ltd., Bhopal

ITA 393/IND/2010 | 2005-2006
Pronouncement Date: 11-07-2011 | Result: Dismissed

Appeal Details

RSA Number 39322714 RSA 2010
Assessee PAN AABCM9653P
Bench Indore
Appeal Number ITA 393/IND/2010
Duration Of Justice 1 year(s) 25 day(s)
Appellant The Asstt. Commissioner of Income Tax 2(1), Bhopal
Respondent M/s. M.P.State Industries Corporation Ltd., Bhopal
Appeal Type Income Tax Appeal
Pronouncement Date 11-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 11-07-2011
Assessment Year 2005-2006
Appeal Filed On 16-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARMA A.M. PAN NO. : AABCM9653P I.T.A.NO. 393 / IND /20 10 A.Y. : 2007 - 08 ACIT M/S. M.P.STATE INDUSTRIAL CORPORATION LIMITED 35 SULTANIA RO AD 2(1) VS IMAMIGATE BHOPAL. BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI ARUN DEWAN SR. DR RESPONDENT BY : SHRI S.S.DESHPANDE C.A. O R D E R PER R. C. SHARMA A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 10 TH MARCH 2010 FOR THE ASSESSMENT YEAR 200 5 - 06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME - TAX ACT 1961. 2. FOLLOWING THREE GROUNDS HAVE BEEN RAISED BY THE REVENUE : - - : 2 : - 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE L D CIT (A) HAS ERRED IN : - I. DIRECTING THE A.O. TO ALLOW SET OFF OF UNABSORBED DEPRECIATION OF RS. 2 16 29 306/ - FOR A.YS 1997 - 98 TO 2004 - 05 AGAINST THE INCOME FROM OTHER SOURCES OF THE A. Y. 2005 - 06. 2. DIRECTING THE A.O. TO ALLOW SET OFF OF UNABSORBED DEPR ECIATION OF RS 2 16 29 306/ - FOR A. YS. 1997 - 98 TO 2004 - 05 AGAINST THE INCOME FROM OTHER SOURCES OF THE A Y 2005 - 06 PARTICULARLY BEAUSE THE UNABSORBED DEPRECIATION OF RS. I0 19 480/ - RELATING TO A.Y. 1997 - 98 & 2000 - 01 COULD ONLY BE SET OFF AGAINST THE INC OME FROM BUSINESS & PROFESSION IN THE A.Y. 2005 - 06 AND ONLY IF THE ORIGINAL BUSINESS IN WHICH THE LOSS WAS INCURRED CONTINUED TO BE CARRIED ON BY THE ASSESSEE IN THE A. Y. 2005 - 06 WHEN THESE CONDITIONS WERE NOT FULFILLED IN THE CASE OF THE ASSESSEE FOR TH E A. Y.2005 - 06. 3. DIRECTING THE A.O. TO ALLOW SET OFF OF THE UNABSORBED - : 3 : - 3 DEPRECIATION OF RS. 2 16 29 306/ - FOR A . YS 1997 - 98 TO 2004 - 0S AGAINST THE INCOME FROM OTHER SOURCES OF THE A.Y.2005 - 06 PARTICULARLY BECAUSE THE UNABSORBED DEPRECIATION OF RS. 24 90 540/ - RELATING TO THE A.Y.2001 - 02 COULD ONLY BE SET OFF AGAINST THE INCOME FROM BUSINESS & PROFESSION IN THE A.Y.2005 - 06 WHICH CONDITION WAS NOT FULFILLED IN THE CASE OF THE ASSESSEE FOR THE A. Y .2005 - 06.' 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECOR DS PERUSED. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A LIMITED COMPANY REGISTERED UNDER INDIAN COMPANIES ACT 1956 AND WAS INCORPORATED ON 11.04.1961. IT IS A GOVERNMENT COMPANY AND GOVT. OF M.P. OWNS ITS 100 % SHARE CAPITAL. THE CORPORATION HAD 22 MANUFACTURING UN ITS IN WHICH DIFFERENT MANUFACTURING AND TRADING ACTIVITIES LIKE FURNITURE POULTRIES SHOES SUGAR ALCOHOL WATCHES ETC. WERE CARRIED. THREE UNITS WERE ALREADY CLOSED. TWO OF THE UNITS VIZ . DEWAS UDYOG DEWAS AND RATLAM ALCOHOL PLANT RAT LAM WERE GIVEN ON MANAGEMENT - : 4 : - 4 CONTRACT FROM JUNE 1998 AND JANUARY 1997 RESPECTIVELY. THE GOVERNMENT HAD DECIDED TO CLOSE THE COMMERCIAL ACTIVITIES OF 13 UNITS WHICH WERE IN CONTINUOUS LOSSES AND TO TRANSFER TWO SUGAR UNITS TO COOPERATIVE SOCIETIES. PURSUAN T TO THE DIVISION OF THE STATE OF MADHYA PRADESH 2 UNITS SITUATED IN CHHATISGARH WERE TRANSFERRED TO THE CHHATISGARH STATE. VOLUNTARY RETIREMENT WAS GIVEN TO EMPLOYEES OF UNITS IN BATCHES FROM 2000 TO 2002. SOME OF THE EMPLOYEES WERE RETAINED AS CORE STAF F IN HEAD OFFICE AND CERTAIN UNITS TO LOOK AFTER THE STATUTORY COMPLIANCE AND SAFE GUARD THE ASSETS OF THE CORPORATION. THE ASSESSEE FURNISHED ITS RETURN OF INCOME FOR A.Y. 2005 - 06 ON 31.10.2005 DECLARING TAXABLE TOTAL INCOME OF RS.NIL AFTER SETTING OFF CU RRENT YEAR'S INCOME OF RS. 90 7 3 362/ - FROM B/F LOSSES. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE COMPANY HAD EARNED MANAGEMENT C ONTRACT FEE AND INTEREST ON FDR . THE INTEREST OF RS. 21 10 906/ - WAS EARNED ON FIXED DEPOSITS WITH T H E BANK AND THE MANAGEMENT CONTRACT FEE OF RS. 2 49 451 / - WAS RECEIVED ON THE LEASE OF THE TWO OF ITS UNITS. THE A O HELD THAT THESE RECEIPTS WERE 'INCOME FROM OTHER SOURCES'. SINCE THE - : 5 : - 5 AO T REATED TH E SE ITEMS OF INCOME AS 'INCOME FROM OTHER SOURCES' THE A O HAD NOT ALLOWED SET OF F OF BROUGHT FORWARD BUSINESS LOSSES WAS RESTRICTED TO THE EXTENT OF BUSINESS INCOME RESULTING INTO ASSESSMENT OF TAXABLE INCOME OF RS. 23 60 353/ - . 5. BY THE IMPUGNED ORDER THE LD. CIT(A) ALLOWED THE SET - OFF OF UNABSORBED DEPRECIAT ION AGAINST INCOME FROM OTHER SOURCES AFTER HAVING THE FOLLOWING OBSERVATIONS : - 4.4. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. I FIND FORCE IN THE SUBMISSION OF THE APPELLANT THAT UNABSORBED DEPRECIATION CARRIED FORWARD STAN DS EXACTLY ON THE SAME FOOTING AS THE CURRENT DEPRECIATION AND IS ALLOWABLE TO SET OFF AGAINST BUSINESS INCOME AS WELL AS OTHER HEADS OF INCOME INCLUDING INCOME FROM OTHER SOURCES. IT WOULD BE FRUITFUL TO REPRODUCE PROVISIONS OF SECTION 32(2) WHICH READS AS UNDER: '(2) WHERE IN THE ASSESSMENT OF ASSESSEE FULL EFFECT - : 6 : - 6 CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB - SECTION (1) IN ANY PREVIOUS YEAR OWING TO THERE BEING NO PROFITS OR GAINS CHARGEABLE FOR THAT PREVIOUS YEAR PROFITS OR GAINS CHARGEABLE FOR THE AT PREVIOUS YEAR OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE THEN SUBJECT TO THE PROVISIONS OF SUB - SECTION (2) OF SECTION 72 AND SUB SECTION (3) OF SECTION 73 THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NO T BEEN GIVEN AS THE CASE MAY BE SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR BE DEEMED TO BE .THE ALLOWANC E FOR THAT PREVIOUS YEAR AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS' FROM THE ABOVE PROVISIONS IT IS EVIDENTLY CLEAR THAT UNABSORBED DEPRECIATION CARRIED FORWARD IN EARLIER YEARS IS TO BE ADDED TO THE AMOUNT OF DEPRECIATION OF THE CURRENT YEAR AND IT DEEMS TO BE PART OF THE CURRENT YEAR'S DEPRECIATION ALLOWANCE. THEREFORE IF THE UNABSORBED DEPRECIATION IS TREATED AS PART OF THE CURRENT YEAR'S - : 7 : - 7 DEPRECATION THE SAME IS ALLOWABLE TO BE SET OFF AGAINST 'INCOME FROM OTHER SOURCES' ALSO. IT MAY BE NOTED THAT THE CASE LAWS RELIED UPON BY THE APPELLANT ALSO SUPPORT THIS VIEW. THEREFORE THE AO IS DIRECTED TO ALLOW SET OFF OF UNABSORBED DEPRECIATION AGAINST THE 'INCOME FROM OTHER SOURCES' OF THE CURRENT YEAR AFTER VERIFICATION. 6. WE HAVE CONSIDERED THE RIVA L CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT THE AO HAS DECLINED SET OFF OF UNABSORBED DEPRECIATION AGAINST INCOME FROM OTHER SOURCES ON THE PLEA THAT SUCH UNABSORBED DEPRECIATION IS PART OF BROUGHT FORWARD BUSINESS LOSSES WHICH CAN BE ALLOWED TO SET OFF TO THE EXTENT OF SPECIFIED PERIOD AS MENTIONED U/S 73(3. AS PER OUR CONSIDERED VIEW JOINT READING OF SECTION 32(2) WITH SECTION 72(2) AND 73(3) CLEARLY PROVIDE THAT UNABSORBED DEPRECIATION CARRIED FO RWARD IN EARLIER YEARS IS TO BE ADDED TO THE AMOUNT OF DEPRECIATION OF THE CURRENT YEAR AND IT IS DEEMED TO BE PART OF THE CURRENT YEAR S DEPRECIATION ALLOWANCE. ONCE THE UNABSORBED DEPRECIATION IS TREATED AS A PART OF THE CURRENT - : 8 : - 8 YEAR S DEPRECIATION THE RESULTANT BUSINESS LOSS OF CURRENT YEAR IS ELIGIBLE TO BE ALLOWED TO BE SET OFF AGAINST INCOME FROM OTHER SOURCES. THIS VIEW IS FULLY SUPPORTED BY THE JUDICIAL PRONOUNCEMENTS IN FOLLOWING CASES : - (I) CIT V. JAIPUR CHINA CLAY MINES (P) LIMITED (1996) 59 ITR 555 (SC) GARDEN SILK WVG. (II) GARDEN SILK WVG . FACTORY V. CIT (1991) 189 I TR 512 (SC) (III) CIT VS. VRMANI INDUSTIRES PVT. LTD. ETC. ETC (1995) 216 ITR 607 (SC) . (IV) RAJAPALAYAM MILLS LTD. VS. CIT (1978) 115 ITR 777 (SC) (V) ESCORTS ELECTRONICS LTD. VS. CIT (2002) 1 24 TAXMAN 718 DELHI . (VI) JT. CIT V. INFOCON INTERNATIONAL LTD (2005) 2 SOT 444 (BANG.) (VII) CIT V. HIMATASINGIKA SEIDE LTD. (2006) 286 ITR 255/156 TAXMAN 151 (KAR.) 7. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) F OR ALLOWING SET OFF OF - : 9 : - 9 UNABSORBED DEPRECIATION BY TREATING THE SAME AS PART OF THE CURRENT YEAR S DEPRECIATION AGAINST INCOME FROM OTHER SOURCES. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT O N 11 TH JU LY 2011. SD/ - SD/ - (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH JU LY 2011 . CPU* 7 11 7