Income Tax Appellate Tribunal - Mumbai
Shell India Markets P.Ltd, Mumbai vs Dcit Cir 15(3)(2), Mumbai on 12 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "H" MUMBAI
BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND
SHRI N.K. PRADHAN (ACCOUNTANT MEMBER)
ITA No. 2693/MUM/2015
Assessment Year: 2008-09
DCIT 15(3)(2) Shell India Market P. Ltd.
R. No. 451, 4th Floor, AayakarBhavan, Successor to Bharat Shell Ltd
M.K. Road Vs. 401-401 Powai Plaza, 4thFloor,
Mumbai - 400020 Hiranadani Business Park, Powai,
Mumbai - 400076
PAN No. AAICS1404P
(Appellant) (Respondent)
Cross Objection No. 22/Mum/2017
Assessment Year: 2008-09
Shell India Markets P. Ltd. Successor DCIT 15(3)(2)
to Bharat Shell Ltd. R. No. 451, 4th Floor, AayakarBhavan,
Tent House, Ist Floor, G Block Plot M.K. Road
No.-C60 BKC Bandra East Mumbai - 400020
Mumbai-400051
PAN No. AAICS1404P
(Appellant) (Respondent)
Revenue by: Mr. Rahul Raman, DR
Assessee by: Mr. Farrokh V. Irani & Mr. Madhur Agrawal,
AR
Date of Hearing: 18/04/2017
Date of Order: 12/07/2017
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2008-09. The appeal is directed against the order Commissioner ITA No. 2693/Mum/2015 2 (Appeals) - 24, Mumbai and arises out of order u/s 154 of the Income Tax Act, 1961 (the 'Act'). The assessee has filed a cross objection.
2. We begin with the grounds of appeal filed by the Revenue which read as under:
1. "On the facts and in the circumstances of the case, the learned CIT (A) erred in stating that the rectification u/s. 154 of the Act is without authority.
2. The appellant prays that the order of CIT (A) on the above ground be set aside and that of the assessing officer be restored."
3. Briefly stated, the facts of case are that the Assessing Officer (AO) completed the assessment of the assessee-company for the AY 2008-09 on 26.12.2001 u/s 143(3) of the Act. Subsequently, The AO noticed that the unabsorbed depreciation amounting to Rs.71,70,52,454/- was allowed during the year of which Rs.44,81,61,141/- pertained to AY 1995-96 to 1999-2000. The AO has observed that in the light of the order of the ITAT Special Bench, Mumbai in the case of Times Guaranty, the unabsorbed depreciation prior to AY 2002-03 can be allowed to be set off only for 8 years. Thus as per the AO in the instant case, the brought forward unabsorbed depreciation pertaining to AY 1995-96 to 1999-2000 cannot be allowed as 8 years have already elapsed. The AO was of the view that it was a mistake apart from record and therefore, he passed an order u/s 154 determining the total income as under:
1. Total Income as per the order u/s Rs.8,72,91,070 143(3) (ii) dated 26.12.2001 Add: Unabsorbed depreciation Rs.44,81,61,141 disallowed pertaining to A.Y. 1995-96 to AY 1999-2000 Rs.53,54,52,211 ITA No. 2693/Mum/2015 3
4. Aggrieved by the order passed by the AO u/s 154, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) has held that the issue whether unabsorbed depreciation beyond 8 years can be allowed to be set off or not is clearly a debatable issue and the same cannot be rectified by initiating proceeding u/s 154 of the Act. Therefore, the Ld. CIT(A) deleted the disallowance of loss of Rs.44,81,61,141/- made by the AO u/s 154 of the Act.
5. Before us, the Ld. DR relies on the order u/s 154 passed by the AO.
On the other hand, the Ld. Counsel of the assessee relies inter alia on the decision in the case of General Motors India (P.) Ltd. vs. Deputy Commissioner of Income-tax [2012] 25 taxmann.com 364 (Gujarat High Court), Deputy Commissioner of Income-tax Circle 3 (1) vs. Bajaj Hindustan Ltd. [2014] 47 taxmann.com 333 (Mumbai-Tribunal), Smith & Nephew Healthcare (P.) Ltd. vs. Deputy Commissioner of Income-tax [2014] 50 taxmann.com 420 (Mumbai-Tribunal) and T.S. Balram, Income Tax Officer vs. Volkart Brothers [1971] 82 ITR 50 (Supreme Court), CIT vs. M/s Hindustan Unilever Ltd. (ITA No. 1873 of 2013) by the Bombay High Court.
6. We have heard the rival submissions and perused the relevant material on record. We find that the issue raised in this appeal is covered in favour of the assessee by the judgment of Hon'ble Gujarat High Court in the case of General Motors India (P.) Ltd. (supra). The question before the Hon'ble High Court was whether the unabsorbed depreciation pertaining to AY 1997-98 could be allowed to be carried forward and set off after a period of eight years or it would be governed by section 32 as amended by Finance Act 2001? We find that the Hon'ble Gujarat High Court has held as under:
ITA No. 2693/Mum/2015 4"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) amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the AY 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 AY 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 such 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 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 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, 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 (AY 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 AY 1997-98 upto the AY 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." [Emphasis underlined] ITA No. 2693/Mum/2015 5 6.1 Now we refer to the judgment of the Hon'ble Bombay High Court in the case of M/s Hindustan Unilever Ltd. (supra). The relevant question of law before the High Court is mentioned below:
"7. Whether on facts and in circumstances of the case and in law the Tribunal was right in directing to allow the set off of brought forward depreciation losses of amalgamating company for the Assessment Years 1996-97 and 1997-98 i.e. for the period prior to amendment in sub-section (2) of Section 32 of the Act w.e.f. 01/04/2002?"
The Hon'ble High Court held as under:
"6. Regarding question No.7:
(a) The impugned order of the Tribunal has allowed the respondent-
assessee's appeal on the issue of allowing unabsorbed depreciation pertaining to Assessment Year 1996-97 and 1997-98 which was carried forward to be set off in the subject Assessment Year.
(b) The grievance of the Appellant is that in view of the fetter (of eight years) in carrying forward depreciation for Assessment Year 1997-98 upto Assessment Year 2002-03, the set off of the same cannot be allowed in this Assessment Year.
(c) We find that the impugned order of the Tribunal while allowing the Assessee-respondents' claim follows the decision of the Gujarat High Court in General Motors India Pvt. Ltd. vs. DCIT reported in 354 ITR 244 wherein on identical facts it was held that the unabsorbed depreciation for the Assessment Year 1997-98 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001. The above decision also placed upon the CBDT circular No. 14 of 2001 dated 22nd November, 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of section 32(2) of the Act as amended by the Finance Act 2001. Moreover, the Circular No. 14 of 2001 issued by the CBDT clarifies ITA No. 2693/Mum/2015 6 that restriction of the eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. Consequently, unabsorbed depreciation for the intervening periods between assessment year 1997-98 upto 2001-02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002-03 onwards. No decision contrary to the decision of the Gujarat High court has been shown to us. It is clarified that although the decision of the Gujarat High Court was rendered in context of re- opening notice it has also examined the issue on merits and drew support from the CBDT circular which is beneficial to the assessee to conclude as aforesaid. Nothing has been shown to us to indicate why the decision of the Gujarat High Court in General Motors (India) Ltd. should not be followed in the present facts."
6.2 In view of the ratio laid down by the Hon'ble Gujarat High Court in General Motors India (P.) Ltd. (supra) and Hon'ble Bombay High Court in M/s Hindustan Unilever Ltd. (supra), we uphold the order of the Ld. CIT(A).
7. In the result, the appeal filed by the Revenue is dismissed.
8. Now we turn to the cross objection filed by the assessee which reads as under:
1. Re: Non adjudication of allowability to set off unabsorbed depreciation of Rs.42,88,61,141 pertaining to AYs 1995-96 to 1999-2000:
On the facts and in the circumstances of the case and in the law, the Commissioner of Income-tax (Appeals), has erred in not adjudicating Ground No. 1 that unabsorbed depreciation amounting to Rs.42,88,61,141/- (pertaining to AYs 1996-96 to 1999-2000) is eligible to be carried forward and adjusted against the taxable income in the impugned year under appeal.ITA No. 2693/Mum/2015 7
9. As mentioned here-in-above, out of set off of unabsorbed depreciation of Rs.71,70,52,454/- allowed by the AO during the AY 2008- 09, an amount of unabsorbed depreciation of Rs.44,88,61,141/- pertains to AY 1995-96 to 1999-2000. The AO disallowed the above claim of unabsorbed depreciation by order u/s 154 dated 03.02.2014. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The relevant ground of appeal taken by the assessee reads as under:
"Ground 1: Disallowed of unabsorbed depreciation of Rs.44,81,61,141/- pertaining to AY 1995-96 to AY 1999-2000.
1.1 The Ld. AO erred in disallowing the unabsorbed depreciation of Rs.44,81,61,141 for the period AY 1995-96 to AY 1999-2000 on the ground the such depreciation cannot be carried forward and adjusted in the impugned year under appeal.
1.2. The Ld. AO erred in invoking powers under section 154 of the Act in disallowing the unabsorbed depreciation of Rs.44,81,61,141/e for the period of AY 1995-96 to AY 1999-2000 relying on the decision in the case of DCIT vs. Times Guaranty [41 DTR 193 (Mum.)].
1.3. The Ld. AO erred in holding that the issue under consideration is not a 'debatable issue' while placing reliance on a judicial decision, to disallow the unabsorbed depreciation.
1.4. The Ld. AO failed to appreciate that the power conferred by the provisions of section 154 of the Act is a power to correct apparent mistake and not a power of review.
1.5. Without prejudice to the above, the Ld. AO erred in wrongly disallowing unabsorbed depreciation of Rs.44,81,61,141/- as against Rs.42,88,61,141/- pertaining to AY 1995-96 to AY 1999-2000."ITA No. 2693/Mum/2015 8
10. As mentioned here-in-above, the Ld. CIT(A) has allowed the above ground of appeal filed by the assessee. Therefore, the cross-objection raised by the assessee on the above ground is dismissed.
11. To sum up, the appeal filed by the Revenue is dismissed. The cross objection filed by the assessee is dismissed.
Order pronounced in the open Court on 12/07/2017.
Sd/- Sd/-
(D.T. GARASIA) (N.K. PRADHAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai:
Dated: 12/07/2017
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai