Income Tax Appellate Tribunal - Ahmedabad
Arvind Ltd.,, Ahmedabad vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH - AHMEDABAD
(BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM)
ITA No.3440/Ahd/2010
A. Y.: 2004-05
The A. C. I. T., Circle-1, Vs M/s. Arvind Mills Ltd.,
Ahmedabad, 3rd floor, Jitendra Naroda Road,
Chambers, R. B. I. Lane, Ahmedabad
Ashram Road, Ahmedabad
PA No. AABCA 2390 D
(Appellant) (Respondent)
Appellant by Shri Kartar Singh, DR
Respondent by Shri P.M. Mehta, AR
ORDER
PER BHAVNESH SAINI: This appeal by the revenue is directed against the order of the learned CIT(A)-VI, Ahmedabad dated 04-10-2010, for assessment year 2004-05 on the following ground:
"1. The CIT(A) erred in law and on facts in deleting the addition on account of year wise unabsorbed depreciation or business loss whichever is less is required to be taken for the purpose of calculation of the book profit u/s. 115 JB of the Act, rather than the cumulative figures."
2. The facts of the case are that in this case assessment order u/s 143(3) of the IT Act was passed on 29-12-2006 determining the total income at nil. The AO observed that there was a mistake in computing the income u/s 115JB of the IT Act. The assessee had ITA No.3440/Ahd/2010 2 The ACIT, Cir-1, Ahmedabad VS M/s. Arvind Mills Ltd.
claimed set off of lower of brought forward loss or unabsorbed depreciation after aggregating the amount of brought forward loss and unabsorbed depreciation whereas the claim should have been lower or the brought forward loss or unabsorbed depreciation of each year without any aggregation. Since, it was found to be mistake apparent on record, the AO initiated proceedings u/s 154 of the IT Act. The assessee submitted reply before the AO in the rectification proceedings. According to it, the book profit was correctly computed at nil after allowing set off to the extent of Rs.93.44 Crores out of brought forward book loss of Rs.205.44 Crores as mentioned in the assessment order for assessment year 2003-04. The said amount in the assessment year 2003-04 was arrived at after set off of a sum of Rs.90.66 Crores out of total brought forward loss of Rs.296.11 Crores. The working of Rs.296.11 Crores was filed along with returns of income for assessment year 2003-04 and 2004-05. While making assessment u/s 143 (3) of the IT Act, the AO has considered the provisions of clause (iii) of the Explanation below section 115 JB (2) of the IT Act vis-à-vis brought forward business loss and depreciation. While working brought forward book loss of Rs.205.44 Crores and setting off of Rs.93.44 Crores has been correctly done request was made to drop the proceedings u/s 154 of the IT Act. The AO noted in the order u/s 154 of the IT Act that explanation (iii) below section 115JB of the IT Act has been substituted by Finance Act, 2002 with effect from 01-04-2001, according to it, the amount of loss brought forward or unabsorbed depreciation is to be considered for each year and lower of the two has to be allowed and if either of the two is nil, nothing is to be allowed. The AO accordingly, changed the calculation ITA No.3440/Ahd/2010 3 The ACIT, Cir-1, Ahmedabad VS M/s. Arvind Mills Ltd.
of deduction u/s 115 JB of the IT Act and passed the order u/s 154 of the IT Act. It was submitted before the learned CIT(A) that the issue involves long drawn process of interpretation of provisions of section 115JB of the IT Act, therefore, the AO was having no jurisdiction to pass order u/s 154 of the IT Act and relied upon the decision of the Hon'ble Supreme Court in the case of Volkart Bros. reported in 82 ITR. The assessee also submitted on merit that the issue is covered by the decision of ITAT, Mumbai Bench in the case of Amline Textiles (P) Ltd. 27 SOT 152.
3. The learned CIT(A) considering the issue held that the issue is covered by the order of the ITAT Mumbai Bench in the case of Amline Textiles (P) Ltd. (supra) as well as the issue is highly debatable, therefore, the AO should not have passed the rectification order. The same was canceled and the appeal of the assessee was allowed. The findings of the learned CIT(A) in Para 2.3 of the appellate order are reproduced as under:
"2.3 I have considered the facts of the case, rectification order and appellant's submission. Dispute between appellant and assessing officer is on the method of computing unabsorbed depreciation and brought forward losses as per books. Assessing officer adopted year to year basis whereas appellant considered cumulative figures. In the section singular figures are mentioned. The relevant clause of section 115 JB is quoted below-
"The amount of loss brought forward or unabsorbed depredation, whichever is less as per books of accounts are to be reduced from the net profit."ITA No.3440/Ahd/2010 4
The ACIT, Cir-1, Ahmedabad VS M/s. Arvind Mills Ltd.
From the plain reading of the above, it is clear that what is to be considered for reduction is lower of unabsorbed depreciation and business loss. It does not talk of unabsorbed depreciations and business losses. Since year wise working will involve multiple depreciation and business loss, prima -facie, assessing officer's stand appears incorrect. Since single business loss or single unabsorbed depreciation will always accumulated and not year wise, the very basis of assessing officer's stand is not correct. The decision of ITAT Mumbai in the case of Amline textiles private Ltd versus ITO 27 SOT 152 is on the identical issue. After detailed analysis of the provisions, ITAT concluded in para-18 as under-
" in view of the foregoing discussion we are of the considered opinion that the lower of the solitary figures of the unabsorbed depreciation or losses brought forward for all the earlier years taken together, is to be reduced for the purpose of computing book profit under section 115 JB."
Before reaching the above conclusion, 1TAT discussed the issue from all perspective. Apart from stressing on the language used in the provision, reference to section 71 to 73 was also made and it is held that loss as per books will be different than unabsorbed losses allowable for carried forward. Since the aforesaid order is quite reasoned and there is no judicial decision supporting the AO's action, the year wise calculation to arrive at the figure of unabsorbed depreciation and business loss is not approved. AO is directed to consider unabsorbed appreciation and business losses together for all the years.
Apart from the above discussion on merit in rectification order passed by the assessing officer, he is not justified in passing rectification order since the issue is highly debatable and conclusions can be drawn after long drawn discussions. On such issues rectification order ITA No.3440/Ahd/2010 5 The ACIT, Cir-1, Ahmedabad VS M/s. Arvind Mills Ltd.
cannot be passed. Therefore, the order passed by assessing officer does not stand even on law.
In the final result, appeal is allowed."
4. The learned DR relied upon the order of the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the issue is covered by the decision of the ITAT Mumbai Bench in the case of Amline Textiles (P) Ltd. (supra) and also relied upon the decision of the Hon'ble Supreme Court in the case of Mepco Industries Ltd. Vs CIT319 ITR 208 in which it was held that "mistake must be apparent on record. It must be patent mistake which is obvious and whose discovery is not dependent on elaborate arguments."
5. We have considered the rival submissions and do not find any merit in the appeal of the revenue. The identical issue is considered by ITAT Mumbai Bench in the case of Amline Textiles (P) Ltd (supra) and the issue was decided in favour of the assessee. The learned CIT(A) reproduced the operative portion of the order in the impugned order. Even, according to Explanation (iii) to section 115JB (2) of the IT Act the amount of loss brought forward or unabsorbed depreciation whichever is less as per the books of accounts shall have to be considered by the AO while completing the assessment. The same provision was taken into consideration while finalizing the assessment. The AO at the rectification stage had taken different interpretation of this provision in order to pass order u/s 154 of the IT ITA No.3440/Ahd/2010 6 The ACIT, Cir-1, Ahmedabad VS M/s. Arvind Mills Ltd.
Act. Therefore, the learned CIT(A) rightly held that the issue is debatable and the conclusion could be drawn after long drawn discussions. There was no mistake apparent on record; therefore, on a debatable issue the proceedings u/s 154 of the IT Act would not be valid. The learned DR merely relied upon the order of the AO u/s 154 of the IT Act and has not pointed out any infirmity in the order of the learned CIT(A). In view of the above, we do not find any merit in the appeal of the revenue. Same is accordingly dismissed.
6. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open Court on 05-08-2011 Sd/- Sd/-
(A. N. PAHUJA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date : 05-08-2011
Lakshmikant/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Dy. Registrar, ITAT, Ahmedabad