Income Tax Appellate Tribunal - Delhi
Messe Dusseldorf India (P) Ltd., New ... vs Department Of Income Tax on 25 March, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ' E', NEW DELHI)
BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT
AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No.2642 /Del/2013
Assessment year : 2009-10
DCIT, Circle 6(1), Vs. Messe Dusseldorf India (P) Ltd.
New Delhi 1, Commercial Complex,
Pocket H & J, Sarita Vihar,
New Delhi
GIR / PAN: AABCC4880E
(Appellant) (Respondent)
Appellant by : Shri Piyush Kaushik, Adv.
Respondent by : Shri P Dam Kanunjha, Sr. DR
Date of hearing : 16.03.2015
Date of pronouncement : 25.03.2015
ORDER
PER T.S. KAPOOR, AM:
This is an appeal filed by Revenue against the order of Ld. CIT(A) dated 21.12.2011. The only grievance raised by Revenue was against action by Ld. CIT(A) by which he has allowed claim of brought forward of unabsorbed depreciation.
2. At the outset, the Ld. D.R. invited our attention to assessment order and submitted that the assessee had already exhausted the carry forward losses and moreover, there was change in shareholding and therefore, the claim of brought forward loss was not allowed u/s 79 of the I. T. Act, 1961.
3. Ld. A.R. on the other hand invited our attention to the relevant finding of Ld. CIT(A) and submitted that brought forward losses were due to 2 ITA No.2642/Del/2013 unabsorbed depreciation and were not carry forward losses and, therefore, Section 79 was not applicable. It was submitted that Hon'ble Supreme Court in the case of CIT Vs Shubh Laxmi Mills Ltd. 249 ITR 795 S.C. has clearly held that Section 79 applies only to carry forward of set off of losses and does not include carry forward of depreciation and unabsorbed depreciation. Ld. A.R. submitted that various High Courts including Kerala and Madras High Courts have followed Hon'ble Supreme Court's order and in this respect our attention was invited to paper book pages 3-17.
4. We have hard rival parties and have gone through the material placed on record. We find that Ld. CIT(A) had called for report for Assessment Year 2009-10 and from the records he found that assessee had claimed set off of depreciation for the income and its brought forward claimed were not on account of business losses. The Hon'ble Supreme Court in the case of CIT Vs Subhlaxmi Mills Ltd. (supra) has held as under:
"So far as question No.2 is concerned, the question is whether in applying section 79 of the Act, only the business loss should be taken into account and not the unabsorbed depreciation or unabsorbed development rebate. The High Court has answered the question saying that when section 79 speaks of loss, it does not include unabsorbed depreciation or unabsorbed development rebate. We agree with the High Court."
5. Ld. CIT(A) has already looked into the case law relied by assessee and for the sake of convenience, findings of Ld. CIT(A) are reproduced below:
"4. Before the undersigned the appellant has submitted:
"The assessee has thus claimed set off from brought forward "unabsorbed depreciation" only as noted by the AO itself in its order. The year wise details of "unabsorbed depreciation" of RS.6,236,736/- were duly stated in the Return of Income being in record of the AO.3 ITA No.2642/Del/2013
Computation forming part of Return of Income for A.Y. 2009-10 enclosed. From the said computation forming part of return of income it is thus abundantly clear that the assessee has claimed set off in respect of "unabsorbed depreciation" only without claiming any set off in respect of losses". From the extract of Tax audit report filed before the AO being Annexure 4 of the letter dated 24.10.11 before the AD it is clear that even though the asses e - w s having brought forward balance of "business losses" also, however the assessee has claimed set off in respect of "unabsorbed depreciation" only which is abundantly clear from the Return of Income (supra) and this fact has itself been admitted by the AO in the first line of its order. The assessee has thus not claimed any set off on account of "business losses" as a matter of fact and record. In the process of disallowance (as aforesaid) by the AO, the AO fails to take a note of the legal position as to whether "unabsorbed depreciation" being a item distinct from losses can at all fall under the clutches of section 79. In the present case the assessee has claimed set off in respect of "unabsorbed depreciation" only as a matter of fact as admitted by the AO itself in the first line of its order. No set off was claimed in respect of "business losses". It is a settled legal position that even in those cases where the provisions of section 79 are held to be applicable the disallowance will be confined to "business losses" only and will not extend to "unabsorbed depreciation". The decision of Hon'ble Supreme Court in the case of CIT Vs Subhulaxmi Mills Ltd. 249 ITR 795 SC (pages 17-18 paper book): The Hon'ble Supreme Court in this case very clearly held as under:
"So far as question No. 2 is concerned, the question is whether in applying section 79 of the Act, only the business loss should be taken into account and not the unabsorbed depreciation or unabsorbed development rebate. The High Court has answered the question saying that when section 79 speaks of loss, it does not include unabsorbed depreciation or unabsorbed development rebate. We agree with the High Court".
5. The records of the appellant for A.Y. 2009-10 were called for. From the record, it is seen that in the computation of total income filed by the appellant it has claimed brought forward and set off of depreciation of RS.62,36,736/- from the income of Rs.93,25,494/- as shown in the P&L account. It has returned the gross total income of Rs.30,88,758/-. The ITR 6 on the file shows in the Schedule BFLA, 4 ITA No.2642/Del/2013 (giving details of income after set off of brought forward losses of earlier years) that the appellant had not claimed brought forward loss set off, in fact it had claimed brought forward depreciation set off of Rs.62,36,736/-. In reply to notice u/s 143(2)/142(1) of the Act dated 21.07.2011 the assessee had replied to the AO on 24.08.2011 stating clearly at point 4 "clause 18 of your notice: There in no loss carried forward for the A.Y. 2009-10."
6. The legal proposition in the case of CIT Vs Subhulaxmi Mills Ltd. 249 ITR 795 (SC) states that section 79 applies only to carry forward and set off of losses in the case of certain companies and does not apply to the case of carry forward / unabsorbed depreciation. In the present case, the assessee is not carrying forward and setting off any loss but has unabsorbed depreciation, which is guided by the provisions of section 32(2) and not section 79. In view of the factual position on record of the AO, the submissions made before the undersigned and in view of the ratio laid down in the case of Subhulaxmi Mills Ltd. by the Hon'ble Supreme Court the grounds of appeal are allowed. The AO is directed to allow the appellant the claim of set off of carried forward "unabsorbed depreciation" of Rs.62,36,736/-."
6. We find that Ld. CIT(A) has duly verified the facts and had arrived at the conclusion that the carry forward loss was on account of unabsorbed depreciation only and therefore, as decided by Hon'ble Supreme Court in the case of CIT Vs. Shubhlaxmi Mills Ltd., Section 79 was not applicable and in view of the above, we do not find any infirmity in the order of Ld. CIT(A), therefore, appeal filed by Revenue is dismissed.
7. Order pronounced in the open court on 25th March, 2015.
Sd./- Sd./-
( G. C. GUPTA) (T.S. KAPOOR)
VICE PRESIDENT ACCOUNTANT MEMBER
Date: 25th March, 2015
Sp
5 ITA No.2642/Del/2013
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
True copy. By Order (ITAT, New Delhi).
S.No. Details Date Initials Designation
1 Draft dictated on 18/3 Sr. PS/PS
2 Draft placed before author 19,23,24 Sr. PS/PS
Draft proposed & placed before the
3 JM/AM
Second Member
Draft discussed/approved by Second
4 AM/AM
Member
5 Approved Draft comes to the Sr. PS/PS 25/3 Sr. PS/PS
6 Kept for pronouncement 25/3 Sr. PS/PS
7 File sent to Bench Clerk 25/3 Sr. PS/PS
Date on which the file goes to Head
8
Clerk
9 Date on which file goes to A.R.
10 Date of Dispatch of order