Income Tax Appellate Tribunal - Cochin
M/S.Kings Infra Ventures Ltd, Cochin vs The Acit, Cochin on 14 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER
I.T.A. No. 25/Coch/2017
Assessment Year : 2011-12
M/s. Kings Infra Ventures Ltd., Vs. The Assistant Commissioner of
A-1, Atria Apartment, Income-tax, Circle-1(2),Kochi.
Permanoor Road,
Thevara, Kochi.
[PAN: AACCV 3411D]
(Assessee-Appellant) (Revenue-Respondent)
Assessee by Shri Kuryan Thomas, Adv.
Revenue by Shri A. Dhanaraj, Sr. DR
Date of hearing 05/07/2017
Date of pronouncement 14th /07/2017
ORDER
Per GEORGE GEORGE K.,JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the CIT(A)-I, Kochi dated 24/11/2016. The relevant assessment year is 2011-12.
2. The grounds raised read as follows:
1. The learned Commissioner of Income Tax(Appeals)-I, erred in holding that the Appellant is not entitled to set off, the carried forward 2 I.T.A. No.25/Coch/2017 depreciation, relating to assessment year 1998-99 and onwards, against its income for Assessment year 2011-12 and onwards.
2. The learned Commissioner of Income Tax(Appeals)-I has wrongly held that since the assets have not been put to use during the financial years 1997-98 to 2008-09, the Appellant is not entitled to carry forward and set of the loss and depreciation claimed in the Return of Income for AY 1998-99 to 2009-10. He gave these findings in spite of accepting that the depreciation loss can be allowed to be carried forward even if the original business has changed.
3. The learned Commissioner of Income Tax(Appeals) has concurrent and coexistent power of assessment only in respect of assessments under appeal. He has exceeded his appellate jurisdiction, which was limited to assessment year 2011-12, by giving directions that the depreciation, pertaining the Assessment year 1998 to 2009-10, cannot be allowed to be carried forward and set off against the income for Assessment years 2010-11 and succeeding assessment years.
4. The learned Commissioner of Income Tax Appeal (I) ought to have directed the Assessing Officer to allow the claim of set off of depreciation loss of earlier years made in the Return of income for AY 2011-12, as there was no separate order either u/s. 143(1) or 143(3) of the Income Tax Act denying any claim of depreciation or business loss in each of the Assessment years from 1996-99 and onwards.
5. Any other ground of appeal as may arise during the appeal proceedings.
3. Briefly stated, the facts of the case are as follows:
The assessee is a private limited company which was engaged in the business of aqua farm culture and sale. The name of the company was initially M/s. Victory Aqua Farm Ltd. and was changed to M/s. Kings Infra Ventures Ltd.3 I.T.A. No.25/Coch/2017
In the year 2007, it ventured into construction business. For the assessment year 2011-12, the return of income was filed on 30/09/2011, disclosing 'nil' income after set off unabsorbed depreciation of Rs.34,29,210/- and Rs.1,55,827/- for assessment years 1996-97 and 1997-98 respectively. The balance unabsorbed depreciation of Rs.26,89,338/- relating to assessment year 1997-98 was sought to be set off in the later years along with unabsorbed depreciation relating to assessment years 1998-99 to 2009-10. The assessment was taken up for scrutiny by issuance of notice u/s. 143(2) of the Act. The Assessing Officer in the course of the assessment proceedings sought to deny the set off claimed by the assessee.
3.1 The assessee vide letter dated 20-12-2013 informed the Assessing Officer that it could not run aqua farm business from April 1999 onwards, as a consequence of Supreme Court judgment banning aqua farm culture. It was stated by the assessee that the assets had been kept ready for use and therefore, the claim of set off of unabsorbed depreciation is correct. The Assessing Officer, however, held that since the assessee has not performed any business during the financial year 1997-98, till the financial year 2006-07, the unabsorbed depreciation relating to assessment year 1996-97 onwards could not be allowed to be set off against the income of the current assessment year. The Assessing Officer therefore concluded the assessment by denying the claim of set off of unabsorbed depreciation. The assessment was completed u/s. 143(3) 4 I.T.A. No.25/Coch/2017 of the Act vide order dated 25-02-2014 at a total aggregate income of Rs.
35,85,037/-.
4. Aggrieved by the order of the assessment in denying the claim of set off of unabsorbed depreciation, the assessee preferred an appeal to the first appellate authority. The CIT(A) partly allowed the appeal of the assessee. The CIT(A) held that:
(a) The unabsorbed depreciation brought forward from Assessment years 1996-97 and 1997-98 could be allowed to be set off against the income for assessment year 2010-11 and succeeding assessment years.
(b) Unabsorbed depreciation claimed for the assessment years 1998-99 onwards could not be allowed to be set off as there was no business of aqua farming during these years.
4.1 The CIT(A) also directed the Assessing Officer to take necessary action including reopening of assessment for the assessment year 2010-11 and succeeding assessment years 2012-13 onwards to disallow the set off of unabsorbed depreciation claimed from 1998-99 onwards.
5. Aggrieved by the order of the CIT(A), the assessee has preferred the present appeal before the Tribunal. The Ld. Counsel for the assessee reiterated the submissions made before the Income Tax authorities. Further, it was submitted that the CIT(A) in the rectification application filed by the assessee 5 I.T.A. No.25/Coch/2017 had allowed unabsorbed depreciation for the assessment year 1998-99 also to be carried forward and set off against the income for assessment years 2012-13 onwards. A copy of the order passed in rectification application directing the Assessing Officer to allow unabsorbed depreciation for the assessment year 1998-99 to be carried forward for future years is also placed on record. The Ld. DR supported the orders of the Assessing Officer and the CIT(A).
6. I have heard the rival submissions and perused the material on record.
The assessee had claimed set off of unabsorbed depreciation for the assessment year 1996-97 to 2009-10. The details of the unabsorbed depreciation claimed by the assessee for the respective years are detailed in para 2.2 of the assessment order. The claim of set off and carry forward of unabsorbed depreciation was disallowed by the Assessing Officer for the reason that the assessee had dis-
continued its aqua culture business.
6.1 The CIT(A), on further appeal, allowed the set of off unabsorbed depreciation for assessment years 1996-97 and 1997-98. On rectification application filed by the assessee, the CIT(A) also allowed carry forward of unabsorbed depreciation for the AY 1998-99. The CIT(A) was of the view that no business was carried on by the assessee for the AY 1999-2000 to AY 2009-10 and therefore, the unabsorbed depreciation for the above said period could not be carried forward and set off for future years.
6 I.T.A. No.25/Coch/20176.2 The CIT(A) has elaborately considered the legislative history of the relevant provisions, namely section 32(2) of the Act and the judicial pronouncements on the same. After examining the legislative history and the judicial pronouncements, it was held by the CIT(A) that the claim of depreciation is allowable for both "active" and "passive" use of the asset including an asset that is in ready-for-use condition. The CIT(A) was of the view that "passive use" and "ready-to-use" does not imply a situation where the asset is simply lying idle for a long period of time and there is no re-starting of business. The CIT(A) examined the facts in depth and concluded that in the instant case the assets were not kept for ready for use condition. The detailed factual finding of the CIT(A) as regards non-usage of the assets for the relevant periods are reproduced below for ready reference.
"x) From all the above, the majority of the judicial decisions hold that a claim of depreciation allowable for both active and passive use of the asset including an asset that is in ready-for-use condition. However the phrases "passive use' and "ready-to-use" do not imply a situation where the assets in question are simply lying idle for a long period of time of several financial years in the instant case of the Appellant.
(i) The Appellant has stated in writing before the AO vide its referenced letter dated 20.12.2013 that for the period 01.04.1999 to 31.03.2006, the production facilities of "Victory aqua farm Ltd." (sic) were not used but were kept ready for use. To prove this ready-for-use status of the assets, it is always necessary to establish such actual status and certification for the same from the managers/employees of the Appellant and/or government authorities, which has not been done. No circumstantial evidences as to such status, for example, readiness to procure new materials and necessary process materials and any move to restart the aqua farm business, 7 I.T.A. No.25/Coch/2017 maintenance expenses towards keeping them in a well-oiled state of readiness, etc. have been provided.
(ii) As identified and cited by the AO, in Item No. l of Part B of the Notes on Accounts of the Appellant, it has been stated, among other things, that the "company was not in operation for a long period from 31-3-1997 to 2005" (sic) and that "at present, the company has diversified its activities and is pursuing land development and related activities". This mean that the company simply did not carry out any aqua farm-related activities, and being visibly detained by law as well as uninterested in carrying out such activities, and accordingly putting to use the assets owned towards such business. In Item No. 15 of Part B of the Notes on Accounts it has been, inter alia, stated that "out of the 33795.80 sq. ft. as on 01/04/2010 company has sold an area of 13674.36 sq. ft. during the current F.Y. and balance of 20121.44 sq. ft. Valued at Rs. 3,02,86,003/- as on 31.03.2011. The land held for project development is treated as inventories". In its Statement of Facts provided alongside the Grounds of Appeal, the Appellant has stated that the AO had failed to note that the lands along with the ponds owned by the Appellant which assets were employed for the aqua farm business had been retained.
(a) Taking together the above facts as averred by the Appellant, mean that the principal assets earlier employed for the aqua farm business were land and ponds which had remained inactive and idle. This is made clear by the Grounds of Appeal Numbered 5 preferred by the Appellant which states that the Appellant was "restarting the aqua farm business in view of the subsequent orders passed by the concerned authority". When there is a statement of "restarting of business" after a prolonged period (of several years) of quiescence and dormancy (to take a charitable interpretation), there cannot be a simultaneous acceptance of the contradicting statement that the attendant assets were in a "ready-for-use" condition. To reach such "ready-for-use" or even passive status, considerable groundwork would be required which includes re-registration of the proposed activities, re-certification of the lands, ponds and other associated assets as to their fitness to carry out the proposed activities, re-installation and re-commissioning of plant and machinery needed in the proposed activities, etc. Sans these, it cannot be stated that the assets in question are in a "ready-for-use" or even passive condition. To borrow from the parlance of geology, there is a difference between "active", "passive" (or "dormant") and "extinct". In the instant case, the assets in question were "extinct" in the sense that they were "simply there" or "extant" in their states of "unregistered" in the consciousness of the Appellant - presence". The Appellant has not shown that it was actively conscious of their presence/existence and has not shown that any steps were being taken to maintain them in a state of readiness. It happen sometimes, as geologists will testify that volcanoes that were originally believed to be extinct have come alive into active status. The present case of the Appellant is one such, that its 8 I.T.A. No.25/Coch/2017 aqua farm business which had been given up for dead following the ban imposed by the Hon'ble Supreme Court has suddenly sprung up to life in later favourable circumstances. The positions held by the Appellant that it was "restarting the business" after a prolonged period (of several years) of being condemned to "extinction" and had diversified into other active and fertile territories of business (of building and construction) and had also simultaneously kept its assets under reference in a "ready-to-use" condition, are self-serving, sweeping, inconsistent and unsubstantiated, factually or otherwise. It would have to be a very unnaturally credulous and biased-in-
favour of the Appellant person who would swallow such a rigmarole and tale.
(b) The Appellant has not shown any evidence, factual or otherwise to prove that it was even remotely interested in the aqua farm business, even as late as in the impugned F.Y, 2010-11). Indeed, all its averments have been to the contrary. It was only when the AO asked the relevant questions that the Appellant made the conveniently vague averments. In Item No, 8(a) of the Form 3CD even as late as for the impugned A. Y. 2011-12, the Appellant has mentioned that the nature of its business was "Builders" (sic). ltem No. 18 of Part B of the Notes on Accounts for the impugned A. Y. 2011-12 stated that "the "company is engaged in the business of development of infrastructure facilities which constitutes a single business segment. So primary and secondary reporting disclosures for business/geographical segment as envisaged in AS-17 are not applicable to the company". As repeated above and reiterated again, Item No. 1 of Part B of the Notes on Accounts for the impugned AY 2011-12 stated that the company was not in operation for a long period from 31-3-1997 to 2005 (sic) and that "at present the company has diversified its activities, and is pursuing land development and related activities". All of these mean that even in the FY 2010-11 relating to the impugned A.Y. 2011-12, the Appellant was getting its act ready and still preparing to re-start its aqua farm business. How long such preparations will continue and when the business will so restart (and did so restart) is anyone's guess from the view point of the date on which the statements were made.
(c) The assets used in the aqua farm business are principally stated by the Appellant as being of the nature of land and ponds, on which no visible, evidenced and/or well-documented maintenance or other activities have taken place. They were just lying there in a near-orphaned and undesired dead- investment status. All the present excitement of claiming the large amounts of unabsorbed depreciation has happened because of wisdom acquired in hindsight following the onset of favourable conditions. The situation is not unlike that of the prodigal delinquent offspring who is thrown out of the home as a do-no-good and/or valueless derelict, but returns to excitement and adulation, and resultant unscrupulous exploitation, following his prodigious success in far-off lands. What was held and ignored and mentally discarded or written-off as without value or earning-capacity or life has suddenly begun to pulse with life and action. The potential for claiming unabsorbed depreciation 9 I.T.A. No.25/Coch/2017 that has so far been carefully tended only in the accounts (by carrying out the routine computation and ensuring the filing on time of the Returns of income each year) has now become a potent instrument of undeserved tax reduction. The long period of several years when no value was ascribed to the assets cannot be ignored in a manner that is sufficient to bridge the desolate (for the prodigal son/or assets) interregnum into a life-giving continuum. It is also a fact that land values appreciate and do not depreciate, and therefore no claim of deductible depreciation can be made on their value. There is no evidence to show that there have been any expenses rendered or steps that have been continuously taken (other than the routine computations and ensuring the filling on time of the Returns of income each year, as mentioned above) in respect of the ponds (or other assets related to the aqua farm business) that show that they were in a "ready-to-use" or even "passive" state.
(d) As already stated earlier, from a perusal of its Annual Report for the F.Y. 2007-08 (available on the public domain being the internet), it is seen that the Appellant has undergone an image change and makeover which is keeping with its statement in the Grounds of Appeal preferred that "only from the F. Y. 1997·98 the assessee could not do the said business on account of the Supreme Court Ban", which position was reiterated in the Statemense of Facts submitted alongside. This, alongside the Appellant's Statement before the Assessing Officer vide its referenced letter dated 20.12.2013 that for the period 01.04.1999 to 31.03.2006 means that the total period of imputed inactivity and as accepted by the appellant from the aqua farm business would be the F.Yrs. 1999-98 to 2005-06. In reality, these will be shown below to be the F.Yrs. 1997-98 to 2010-11.
In its governing statement under the header "Corporate Information", that continues in the Annual Statements of all financial years from the F.Y. 2007-08 until the F. Y. 2014-15 the Appellant has stated that "The Company was incorporated on 23rd November I987 under the name Victory Aqua Farm Limited. During the year 2007 the company changed its name to Kings Infra Ventures Limited. The main objects of the company are to promote, develop, finance, establish, to enter into joint ventures, to establish special purpose vehicles, build, construct, equip operate and maintain infrastructure projects and facilities. There is no mention of any aqua farm activity. It is only in the Annual Statement for the F.Y. 2015-16 that there is mention of such activity.
From the statements in the Notes on Account referred to above, there is also no proof that the Appellant has carried out any aqua farm business even until the impugned F.Y. 2010-11, when it is still stated to be getting its act ready. Even as on date,the description of the company from its website http://www.kingsinfra.comcompany.htm, reads as follows: Kings Infra Ventures Ltd. the flagship of the Group was founded in the year 1987. After transformation in 2007, Kings Infra Ventures Ltd. has emerged as a leading player in the field of land banking and creating infrastructure for projects in 10 I.T.A. No.25/Coch/2017 the key sectors of integrated life spaces, logistics, warehousing, hospitality, healthcare, education and clean energy. There is no mention of aqua farms or even the whisper of an umbilicus to such activity in its Annual Report for the impugned F.Y. 2010-11. There is no mention of aqua farming as an intended activity. As already stated by the Assessing Officer, it simply states therein that "Thus the company was not in operation for a long period from 31.3.1997 to 2005". It also states separately in the Notes on Accounts that 'There are certain Income tax cases pending for the period when company was engaged in aqua culture business. While the management argued that aqua culture farming should be treated as agriculture, the department has not accepted this contention. Similarly there were contradictory conflicts in Hon. High Courts in regard to the treatment of prawn ponds for the purpose of depreciation. In one verdict it was found treated as plant and in another verdict it was treated as building. The entire matter is now under appeal with the Hon. Supreme Court". These clearly mean that the aqua farming business was treated by the company as a thing of the past. In the Annual Statement for the succeeding F.Y. 2011-12, once again there is not the remotest mention of aqua farming.
Separately, under the header "Opportunities, Outlook and Threats", the company has heralded its intended and imminent activities as follows: 'The Company is planning to develop a township project in Cochin and a Free Trade Warehousing Zone in Tuticorin. Most of the land required for the projects are tied up for development. The Company shall proceed with obtaining approvals from the Authorities at appropriate time and hopes to initiate the projects within the next 12 months. Meanwhile the Company 's sale of apartments in the Atria Project is also progressing and will be completed within this financial year. The Company will start work on its budget hotel project at Vadakkancherry during the coming year. It is hoped that by the time the Company would launch its township project, the real estate environment in Cochin would also be more conducive for the success of the project. The borrowing costs may escalate somewhat as the government is keen to rein in inflation, but the Company is confident that it can absorb the higher borrowing costs as and when incurred".
From the above it is clear that even in the succeeding FY 2011-12 not to speak of the impugned F.Y.2010-11 or earlier, the Appellant-company had not planned or prepared to re-commence aqua farm activities. Therefore, its protestations that the assets associated with aqua farming were being kept in a state of continuous and well-oiled well-being and ready-to-use condition appear to be false. These self-serving and unsubstantiated statements cannot be accepted. During the entire period of such non-use, the Appellant has claimed depreciation on the extinct assets now sought to be revived after having being sprinkled with life-giving waters by the "subsequent orders passed by the competent authority". (in Appellant-speak).
11 I.T.A. No.25/Coch/2017(e) The Appellant is entitled to carry out whatever business is explicitly desired and targeted by it and stated in its Memorandum and Articles of Association, and to reap the benefits of the carrying out of the same. For the reason being the ban imposed by the Hon'ble Supreme Court, the Appellant was not able to conduct its aqua farm business and dropped its business, and has consequently diversified into other (the building and construction) business for reasons of business opportunity. Now, it states that it plans to revive its earlier aqua farm business, and use whatever assets continue to be retained by it from the FY 1997-98 onwards, This is because of business opportunity seen in reviving the said earlier business in both decisions, that of engaging in the building and construction business and of re-starting the aqua farm business, the Appellant will earn the future revenue streams from the date of their respective commencement and the decisions themselves would have been taken based on the respective Net Present Value (NPVs) of such respective revenue streams as against the respective investments. The appellant will need to begin claiming the values of depreciation on the assets to be employed in the aqua farm business only from the start of such business, and would also be entitled to any revenue-natured claims of the expenses in repairing or commissioning or otherwise enabling the impugned assets. It cannot ask that it be allowed the claims of deductions on depreciations on the assets during the period of their non-use and "extinct" ("simply there" or "extant" in their states of "unregistered - in the consciousness of the Appellant - presence") status that are now sought to be revived. Therefore, no retrospective claims of depreciation on such assets, during the years of inactivity from F.Y. 1997-98 until the impugned F. Y. 2010-11 when there was not even an intention to commence aqua farm business activity, can be accepted. These capital investments represented sunk costs that were not in the radar-zone of the Appellant's consideration during its pursuit of the alternative business activities, and became alive through resuscitation only when the NPV analyses of the aqua farm business was carried out, which was definitely not even the intention of the Appellant until after the end of the FY 2011-12 in the investment budgeting analyses carried out to restart the aqua farm business activity, the NPV analyses would have duly incorporated the resuscitated sunk costs being the investments in assets (perhaps after revaluation) as above. The appellant cannot be allowed to both remain away from the aqua farming business activity for the long period as above, resulting in zero incomes or losses due to such inactivity and temporary extinction of assets, and also simultaneously claim benefits in the form of claim of deduction current-turned unabsorbed depreciation losses. The eating of the allowance of the claim of depreciation will need to be co-extensive with the voluntary use of the assets involved which will result in their true depreciation through such use. The Appellant cannot keep the cake of unused and undepreciated assets and also eat one of the claim of depreciation. The depreciation claims will be allowed when the assets are used passively, actively or in a ready-to-use condition, but not otherwise when they are in a state of suspended extinction and disuse.
12 I.T.A. No.25/Coch/2017(f) The responsibility to prove entries, deductions, and statements made on tax returns is entirely upon the tax payer. The burden of proof as well as the initial onus to prove the validity of a claim of depreciation being made lies on the claimant. It is for the Appellant to show cause why the benefits of the claims of the set-offs of unabsorbed depreciation losses brought forward from the multiple assessment years of visible and stated business inactivity and consequent inferred, apparent and uncontradicted disuse of the assets in question needed to be allowed in its favour. Once there is a statutory provision that sets out certain conditions (that the asset was actually put to use for the purpose of business, in the instant case) to be fulfilled while making a claim, it is the mandatory duty of the claimant to showcase the valid, reliable and verifiable evidences supporting such claim. The burden of proof in such matters is exclusively on the claimant and the fact remains that the Appellant has failed to substantiate its claim and fulfil the burden of proof and onus cast upon it is to prove conclusively that the assets in question were being actually put to use. In the case of Sumati Dayal v. CIT 214 ITR 801 (SC), the Hon'ble Supreme Court held that the onus to prove that the apparent (viz. which means in the instant case that the assets could not reasonably be held to have been put to use in the business) is not the real (viz. which means in the instant case that they were indeed put to such use) is on the party (the Appellant, in the instant case) who claims it to be so. In its decision dated 20 August, 1968 in the case of Metal Box. Co. of India Ltd v. Their Workmen [1969 AIR 612, 1969 SCR (1) 759), the Hon'ble Supreme Court held as follows: "Since the company claimed the deduction of depreciation, it stands to reason that the burden of proof that the depreciation claimed by it was the correct amount in accordance with the Income Tax Act was on the Company and that burden the company must discharge once its figures were challenged."
(y) From all of the above, it is held that the Appellant has been unable to satisfactorily discharge the burden and onus of proof cast on it to substantiate its claims of set offs of unabsorbed depreciation losses brought forward from the AY 998-99 to the AY 2009-10. In the absence of satisfactory proofs substantiating the use of the assets in reference, the unabsorbed losses of depreciation from the FY 1997-98 until the FY 2011-12 cannot be considered to be statutorily valid and acceptable current depreciations in the first place in the respective financial years as above and cannot be allowed to be brought forward and set off from the taxable incomes of the impugned F.Y. 2010-11, the preceding F.Y. 2009-10 (if applicable positive taxable incomes exist) and succeeding Financial Years, until the Financial Year is reached wherein the Appellant is able to clearly demonstrate that such aqua farm business activities had commenced (NB: as per available information before me as extracted from the Annual Reports of the Appellant, this would not be until the FY 2015-2016; however, the Appellant can be given the opportunity to contradict this and present an earlier applicable financial year of commencement in the respective assessment proceedings). The decisions of the judicial authorities that bear on the need for actual use of the assets in making a claim of depreciation including that of the Hon'ble Kerala High Court in the case of Forest industries 13 I.T.A. No.25/Coch/2017 Travancore Ltd. Vs. CIT (supra) and CIT vs. Geo-Tech Construction Corporation (supra) are inapplicable and distinguished on facts from those in the instant case because the assets in question, that have been lying in a state of disuse over several financial years, are held to be neither "ready-to-use" nor passive in their nature and condition. The ratio of Hon'ble Madras High Court in the case of CIT vs. Maps Tours & Travels (supra) is held to apply (the process of registration of the car in that case is akin to the process to re-enable the assets in the instant case) while that of the Hon'ble Bombay High Court in the case of Dineshkumar Gulabchand Agarwal vs. CIT (supra) is held to lend supportive value.
z) The above decisions enable us to arrive at the following positions in respect of the claims or unabsorbed depreciation losses sought to be brought forward and set off from the A.Y. 1996-97 to the A.Y.2009-10:
(i) The impugned aqua farm business of the Appellant was being carried out for the AYrs 1996-97 and 1997 -98. Therefore, the assets relating and associated to the said business were being put to use in these years and in consequence, the amounts of unabsorbed depreciation losses of Rs.34,29,210 relating to the AY 1996-97 and Rs.28,36,165/- relating to the AY 1997-98 (out of which of Rs.1,55,827/- has already been set off by the Appellant in the impugned AY 2011-12) can be allowed to be brought forward and set off in subsequent assessment years.
(ii) These have been already been claimed by the Appellant in the impugned A.Y. 2011-12 against the taxable income of Rs. 35,85,037/-, which is accepted. Therefore, the total taxable income for the impugned A.Y. 2011-12 is held to be Rs. Nil.
(iii) This would leave a balance unabsorbed depreciation losses of Rs.26,89,338 relating to the AY 1997-98 to be set off in subsequent assessment years. All of the other listed (in the assessment order) amounts of unabsorbed depreciation for the AYrs. 1998-99 to 2009-10, which along with the balance amount of Rs.26,89,338 relating to the AY 1997-98 as above total to Rs.1,52,76,459/- are to be disallowed from being brought forward and set off in the A.Yrs 2010-11 onwards until (as stated above based on the information as extracted from the Annual Reports) the F.Y. 2015-16. This is because until proved to be otherwise by the Appellant, the assets in question have not been put to use. These disallowances are only because of the clear and un-contradicted evidences of the assets not being put to use (as determined and discussed above) in the respective financial years above and despite the fact that the claims of carry forward and set off of unabsorbed depreciation losses are not barred by the 8 year limit or the fact that the original business has changed, as held in the judicial ratios discussed earlier.14 I.T.A. No.25/Coch/2017
(iv) The AO may therefore take necessary actions that may include the reopening of assessment proceedings for the A.Y. 2010-11 that precedes the impugned A.Y. 2011- 12 as well as for the succeeding A.Yrs 2012-13 onwards to disallow the claims of unabsorbed depreciation losses made in such years, Needless to say, if the assessment for the preceding A.Y. 2010-
11 disallows any concurrent claim of the unabsorbed depreciation losses of Rs.26,89,338 relating to the A.Y. 1997-98 as above, the necessary adjustment will need to be made to disallow any such equivalent value in the impugned A.Y. 2011-12 and succeeding assessment years, as applicable.
aa) The fact that the AOs have allowed the claims of unabsorbed depreciation losses brought forward from the A.Yrs. 1998-99 to 2009-10 in the assessments made u/s 143(3) of the Act for the A.Yrs 2012-13 and 2013-14, as proved through the submitted copies of the said assessment orders are not binding on this office. If anything, necessary rectifications or other corrective actions including their reopening will need to be carried out in respect of these assessments to disallow the claims erroneously allowed. The AO is directed to take the necessary actions in this regard.
bb) Any errors/omission deemed to have been committed by the AO, including non-application of the principle of the need for the assets in question to be put to use to allow a claim of depreciation and thus for the purpose of assessment are now held as having been corrected and cured by me through the analyses above. This has been done in exercise of concurrent and co-extensive powers of assessment conferred on me by the statute, as also sanctified by the ratio of the Hon'ble Supreme Court of India in the case of M/s. Jute Corporation of India Limited vs. Commissioner of Income-tax and Anr (1991) AIR 241, 1990 SCR Supl.(1)
340. In the cited ratio, the Hon'ble Apex Court held inter alia that "the declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income Tax Officer. If that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has the powers which the original authority may have in deciding the question before it subjects to restriction or limitation if any prescribed by the statutory provisions. In the absence of any statutory provisions to the contrary the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter". Consequently, all actions of the Assessing Officer including the computation of assessable and taxable income in the instant case will be those of this office determined in consonant and congruent supersession of those carried out by the 15 I.T.A. No.25/Coch/2017 Assessing Officer. The above would mean that this assessment can now be taken to be one completed as discussed in the body of the order above and as summarized below. There is nothing the Assessing Officer has done which is not curable through this action.
7. ln sum, the Appeal for the impugned A.Y. 2011-12 is partly allowed. The amounts of unabsorbed depreciation brought forward from the A.Yrs. 1996-97 and 1997-98 (Rs. 34,29,210 and Rs. 28,36,165 respectively) are allowed to be set off against the taxable incomes of the A.Yrs. 2010-11, 2011-12 (the impugned Assessment Year) and following years. The remainder amounts that relate to the A.Yrs. 1998-99 to 2009-10 are disallowed from being brought forward and set off in the A.Y. 2010-11, the impugned A.Y. 2011-12 and for the succeeding A.Yrs. 2012-13 onwards until (as stated above based on the information as extracted from the Annual Reports, and contestable on the basis of evidences of commencement of aqua farm business activity) the F.Y. 2015-16. The AO may take the necessary actions to reopen the assessment proceedings for the assessment years impacted. Besides and needless to say, if the assessment or re- assessment for the preceding AY 2010-11 serves to disallow any concurrent claim of the unabsorbed depreciation losses of Rs.26,89,338/- relating to the AY 1997-98 as above, the necessary adjustment will need to be made to disallow any such equivalent value in the impugned AY 2011-12 and succeeding assessment years, as applicable. Also, needless to say, the Assessing Officer may examine whether for each of the A.Yrs. 1996-97 to 2009-10 as well as 2010-11 onwards, the Appellant has filed its Return of Income within the timeframes stipulated u/s. 139(1) of the Act, and take necessary actions in respect of the disallowances of losses carried/brought forward and set off, if and as needed."
6.3 The above factual finding of the CIT(A) that the asset in question was not kept ready for use condition and there was no passive use of the same for the assessment years 1999-2000 to 2009-10, has not been dispelled by the assessee by placing any contrary evidence before the Tribunal. Therefore, I confirm the order of the CIT(A).
6.4 As regards the assessee's contention that the CIT(A) has exceeded his jurisdiction by giving direction to the Assessing Officer to make remedial measures to withdraw set off unabsorbed depreciation for the assessment year 16 I.T.A. No.25/Coch/2017 2010-11 and the assessment years 2012-13 onwards, I am of the view the assessee has to challenge the order of the Assessing Officer when remedial measures are taken by AO for the respective AY 2010-11 and AY's 2012-13 onwards. The Tribunal has to confine itself to examination of the issue concerning the current year, namely AY 2011-12.
6.5 For the aforesaid reasoning, I see no merit in the appeal filed by the assessee and I dismiss the same. It is ordered accordingly.
7. In the result, the appeal filed by the assessee is dismissed.
Pronounced in the open court on 14th-07-2017.
sd/-
(GEORGE GEORGE K.) JUDICIAL MEMBER Place: Kochi Dated: 14th July, 2017 GJ Copy to:
1. M/s. Kings Infra Ventures Ltd., A-1, Atria Apartment, Permanoor Road, Thevara, Kochi.
2. The Assistant Commissioner of Income-tax, Circle-1(2), Kochi.
3. The Commissioner of Income-tax(Appeals)-1, Kochi.
4. The Pr.Commissioner of Income-tax, Kochi.
5. D.R., I.T.A.T., Cochin Bench, Cochin.
6. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin