Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income Tax, ... vs M/S. Kanhaiyal Lal Rameshwar Dass, Kota on 29 July, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES 'B' JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA. No. 523 & 524/JP/2019
fu/kZkj.k o"kZ@Assessment Year : 2011-12 & 2012-13
Assistant Commissioner of cuke M/s Kanhaiya Lal Rameshwar
Income Tax, Vs. Das,
Central Circle-3, Jaipur Rishabh Bhawan, New Colony,
Gumanpura, Kota, Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFK4323K
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph (JCIT)
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s Assessee by : Sh. S. R. Sharma &
Sh. Rajnikant Bhatra (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 18/07/2019
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 29/07/2019
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. These are two appeals filed by the Revenue against the consolidated order of ld. CIT(A)-4, Jaipur dated 13.02.2019 for the Assessment Year 2011-12 & 2012-13.
2. In ITA No. 523/JP/2019, the assessee has taken following grounds of appeal:
"1. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the disallowance of Rs.2 ITA No. 523 & 524/JP/2019
ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota 19,42,447/- made by the AO on account of unabsorbed depreciation u/s 32(2) of the I.T. Act, 1961.
2. Whether on the facts and in the circumstances of the case the CIT(A) was right in allowing the appeal of the assessee holding that in absence of any incriminating material, the completed assessment can't be interfere with by the AO while making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search which were not produced or not already disclosed."
3. Briefly stated, the facts of the case are that the assessee firm is engaged in the business of mining and dealing in sand stone. The assessment u/s 153A read with 143(3) was completed on 16.12.2016 wherein unabsorbed depreciation brought forward from earlier years was allowed. Thereafter, the AO issued notice u/s 154 on the ground that the appellant was allowed set off of brought forward unabsorbed depreciation of Rs. 19,42,447/- of AY 2001-02 and earlier years which was irregular as the time limit for set off within 8 years has lapsed as per the provisions of section 32(2)(iii) of the Act. In response, the assessee filed its explanation before AO and relied upon various judicial precedents. However, the same were not found acceptable to the Assessing officer and by order u/s 154 has withdrawn the set off of unabsorbed depreciation of Rs. 19,42,447/- and enhanced the income of the assessee to that extent. On appeal, the ld. CIT(A) held that unabsorbed depreciation as on 01.04.2002 will be allowed to be set off and carried forward as per the amended provision of section 32(2) of the Act. In support, he relied on the order of CIT vs RB Polymers 89 3 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota taxmann.com 87. Against the said findings of the ld CIT(A), the Revenue is in appeal before us.
4. During the course of hearing, the ld. DR relied on the order of the Assessing Officer.
5. Per contra, the ld. AR submitted that the matter is squarely covered by the decision of Hon'ble Gujarat High Court in case of General Motors India vs. DCIT (2013) 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. It was further submitted that the following the said decision, the Hon'ble Jurisdictional High Court in case of Pr. CIT, Alwar vs. M/s Ginni International Ltd., Alwar (in DBIT Appeal No. 131 of 2017 dated 5.12.2017) has decided the matter in favour of the assessee and SLP filed by the Department has since been dismissed by the Hon'ble Supreme Court of India vide its order dated 13.07.2018. It was further submitted that similar view has been taken by the Coordinate Bench in case of ACIT vs. Emgee Cables & Communication Ltd. (in ITA No. 357/JP/2014 vide its order dated 31.03.2017). It was further submitted that the ld CIT(A)- 4, Jaipur in his subsequent decision in another case of M/s Kanhaiya lal Rameshwar Das (Appeal No. 175 & 176/2017-18 dated 30.01.2019) has since decided the matter in favour of the assessee and therefore, the said decision also support the case of the assessee company.
6. It was further submitted by the ld AR that identical issues was involved in case of M/s K. R. Marbles P. Ltd., Kota vs. DCIT, Jaipur & others (ITA No. 932 & 933/JP/2018 dated 31.05.2019) wherein the Bench has decided the identical issue in favour of the 4 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota assessee company. In this regard, our reference was drawn to para 7 and 8 of the said order which reads as under:-
"7. We have heard the rival contentions and pursued the material available on record. Undisputedly, the matter is covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court as well as Hon'ble Rajasthan High Court. The Co-ordinate Bench (speaking through one of us) had an occasion to examine the similar matter in case of ACIT vs. Emgee Cables & Communication Ltd. (supra) wherein it was held as under:-
"3. In its solitary ground of appeal, the Revenue has challenged the action of ld. CIT(A) in directing to allow set off of unabsorbed depreciation pertaining to A.Y. 2000-2001 and A.Y 2001-02 from income under the head "income from other sources" pertaining to the year under consideration in view of the amendment effected by the Finance Act 2001 which has been stated to be applicable from A.Y. 2002-03 only.
3.1 It is noted that the provision of section 32(2) of the Act which deals with the set off of unabsorbed depreciation has been subject to several amendments in the past and the latest amendment which is in consideration has been brought in by the Finance Act 2001. In the instant case, the question that arises for consideration is how should the provision of section 32(2) should be applied regarding set off of unabsorbed depreciation pertaining to A.Y 2000-01 and AY 2001-2002 when the pre- amended law was applicable and which has now been claimed to be set off at the point of time i.e. in A.Y 2009-10 when post amendment law was applicable. The Assessing Officer has relied 5 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota on the decision of Special bench of ITAT in case of DCIT vs. Times Guaranty Ltd for 4 ITR (Trib) 210 wherein the Special Bench has held as under:-
"amount of current depreciation for asst. yrs. 1997-98 to 2001-02 which cannot be so set off as per (ii) above 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.' 3.2 Subsequently, the matter came up for consideration before the Hon'ble Gujarat High Court in case of General Motors India Pvt. Ltd. 354 ITR 244 wherein the question for consideration before the Hon'ble High Court was "whether unabsorbed depreciation pertaining to the A.Y 1997-98 could be allowed to be carried forward and set off after a period of 8 years or would it be governed by the provisions of section 32(2) as amended by the Finance Act 2001. The relevant finding of the Hon'ble High Court of Gujarat are contained at para 35 to 38 of its order which reads as under:-
"35. Section 32 (2) of the Act was amended by Finance Act, 2001 and the provision so amended reads as under:-
"Where, in the assessment of the assessee, full effect 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, or owing to the profits or gains chargeable for that previous year, 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 not been given, as the case may be, shall be added to the amount of the 6 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota 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 allowance of that previous year, and so on for the succeeding previous years."
36. The purpose of this amendment has been clarified by Central Board of Direct Taxes in the Circular No. 14 of 2001. The relevant portion of the said Circular reads as under:-
"Modification of provisions relating to depreciation 30.1 Under the existing provisions of section 32 of the Income-
tax Act, carry forward and set off of unabsorbed depreciation is allowed for 8 years.
30.2 With a view to enable the industry to conserve sufficient funds to replace plant and machinery, specially in an era where obsolescence takes place so often, the Act has dispensed with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The Act has also clarified that in computing the profits and gains of business or profession for any previous year, deduction of depreciation u/s 32 shall be mandatory.
30.3 Under the existing provisions, no deduction for depreciation is allowed on any motor car manufactured outside India unless it is used (i) in the business of running it on hire for tourists, or (ii) outside in the assessee's business or profession in another country.
30.4 The Act has allowed depreciation allowance on all imported motor cars acquired on or after 1st April, 2001.
30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years."
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 7 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota 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) 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 u/s 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, 2000-01 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.
38. 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 the year. In case there is a still balance left over, it is to be 8 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota 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. 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. 2001-02 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."
3.3 On perusal of the above decision, it is noted that the matter was exhaustively examined by the Hon'ble High Court and it was held that any unabsorbed depreciation available to assessee on 1st, April, 2002 (A.Y 2002-03) will be dealt with in accordance with the provisions of section 32 (2) as amended by the Finance Act 2001. It was further held that amended provisions of section 32(2) by the Finance Act 2001 would allow unabsorbed appreciation available in the A.Y 1997-98, 1999- 2000, 2000-01 and 2001-02 to be carried forward to the succeeding years and if unabsorbed appreciation or part thereof could not be set off till A.Y. 2002-03, then it would be carried forward till the time it is set off against the profit gains of subsequently years. Following the said decision of the Hon'ble High Court, a similar view has been reiterated by various 9 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota Coordinate Benches as referred by the assessee in its submissions before us.
3.4. In view of subsequent decision of the Hon'ble Gujarat High Court in case of General Motors (supra), the decision of Special Bench in case of Times Guaranty (Supra) is no more a binding precedent. A similar view has been taken by the various coordinate Benches. Further, no contrary jurisdictional or other authority has been quoted before the Bench. In view of the above and respectfully following the decision of the Hon'ble Gujarat High Court, we are unable to agree to the contention of the Revenue. In our view, it is the amended section 32(2) of the Act that shall apply in relation to unabsorbed depreciation pertaining to A.Y. 2000-01 and A.Y 2001-02 and the restriction of 8 years which was in force till the law was amended by the Finance Act 2001 does not apply. In the instant case, it is not in dispute that the unabsorbed depreciation pertaining to A.Ys 2000-01 and 2001-02 have not been set off in the earlier years and the same is being carried forward to the year under consideration for being set off. In light of above, ground taken by the Revenue is dismissed."
8. The decision of the Hon'ble Gujarat High Court in case of General Motors (supra), as followed by us in above decision, has since been followed by the Hon'ble Rajasthan High Court in case of Ginni International (supra) as well as by the Hon'ble Delhi High Court in case of Pr CIT vs British Motor Car Co. [2018] 90 taxmann.com 370 (Delhi). The issue is therefore no more res integra and following the legal proposition so laid down, in the instant case, unabsorbed depreciation for AY 2001-02 and earlier years got carried forward to AY 2002-03 and 10 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota becomes part thereof and will be governed by the provisions of section 32(2) as amended by the Finance Act, 2001 and will be available for carry forward and set off against the profits and gains of subsequent years including the impunged assessement year 2015-16. In light of above discussions and in the entirety of facts and circumstances of the case and respectfully following the decisions referred supra, the matter is decided in favour of the assessee and against the Revenue."
7. We find that the facts and circumstances of the case are exactly identical as in M/s K. R. Marbles P. Ltd., Kota (supra) wherein we have examined the matter in detail and following the said decision, the matter is decided in favour of the assessee company.
8. Both the parties fairly submitted that identical facts and circumstances are prevalent in ITA No. 524/JP/19 for AY 2012-13. Therefore, following our decision in ITA No. 523/JP/19, the matter is decided in favour of the assessee company.
In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open Court on 29/07/2019.
Sd/- Sd/-
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(Vijay Pal Rao) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 29/07/2019.
*Ganesh Kr.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- ACIT, Central Circle-3, Jaipur
2. izR;FkhZ@ The Respondent- M/s Kanhaiya Lal Rameshwar Das, Kota
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A) 11 ITA No. 523 & 524/JP/2019 ACIT, Jaipur vs. Ms Kanhaiya Lal Rameshwar Das, Kota
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File { ITA No. 523 & 524/JP/2019} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar