TaxTMI 
TaxTMI 
2012 (6) TMI 702
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....f assets to NDDB and remission of liabilities requires to be taxed. (c) Book profit u/s.115JB of the Income Tax Act, 1961, claimed as exempt under the provisions of SICA, 1985, requires to be examined. 2. The Learned Commissioner of Income Tax, Gandhinagar has erred in law in holding that the income from other sources of Rs.10,16,010/- cannot be set off against unabsorbed depreciation. 3. The Learned Commissioner of Income Tax, Gandhinagar has erred in law and on facts of the case by holding that the surplus on transfer of assets to NDDB and remission of liabilities is taxable in spite of the fact that BIFR order dated 14/01/2003 has been passed in case of the Appellant, exempting capital gain and profit u/s.41 of the Income Tax Act, 1961. 4. The Learned Commissioner of Income Tax, Gandhinagar has erred in law in holding that tax on book profit u/s.115JB is leviable though profits of sick industrial company are to be reduced from book profit of the company as per the provision of Explanation (vii) of Section 115JB(2) of the Income Tax Act, 1961. 5. Your Appellant, therefore, prays to cancel the order passed u/s.263 of the Income Tax....
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....d in the said order. The assessee is still having the ownership of surplus land of the Dairy at Jamnagar measuring 20405 sq.mt and Ahmedabad Dairy along with the plant and machinery land measuring 37,729 sq.mt (equivalent to 45107 sq.yd). In compliance to the BIFR's order, the assets were transferred to NDDB on 01.03.2005. The sale consideration in excess of the liability of the assessee receivable from the NDDB was treated by the assessee as capital reserve written back to the profit and loss account amounting to Rs.12.23 crores. Further, an amount of Rs.15.86 crores was also credited to the profit and loss account as remission of liability of NDDB account. The assessee has shown a net profit of Rs.26,38,48,170 in the profit and loss account before deducting Voluntary Retirement Scheme expenses. From the above amount, the assessee had reduced Rs.12.23 crores as capital reserve written back and after making some other deductions there was a positive income of Rs.14,15,00,443 which was set off against the business losses of the A.Ys. 1997-98 to 2003-2004." (c) The third objection was claiming exemption on the ground of Sick Industrial Company while applying the p....
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....d to make fresh assessment as per the law. Your explanation in the matter should reach the undersigned within 7 days of the receipt of this notice." 3. Finally, it was held by ld.Commissioner that the order passed by the AO u/s.143(3) of the Act for AY 2005-06 dated 03/09/2007 was erroneous and prejudicial to the interest of the Revenue. The said order of the AO was cancelled with a direction to make a fresh assessment after verifying the facts of the case. 4. In respect of the first objection, while passing the order u/s.263, ld. Commissioner have commented that on perusal of the profit and loss account, it was found that the interest income of Rs.10,16,010/- was shown under the head "other income" which had already been accounted for and adjusted against the brought forward business loss in the statement of income. In respect of the second issue, ld. Commissioner has noted that the business of the assessee was closed since long. The assessee has not shown the brought forward losses in the statement of income while filing the return of income for AYs 1998-99 to 2202-03. Ld. Commissioner has commented that since the assessee was not carrying on the business, therefore,....
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....me u/s.28 of the I.T. Act. The AO has, therefore, held that the said interest income was to be added to the total income of the assessee, under the head "other sources". To that extent the unabsorbed depreciation was granted and total income at Rs.NIL was assessed. Ld.AR has further mentioned that the AO had properly applied his mind and decided the issue after considering the legal as well as the factual aspect of the case. The AO has discussed a decision of Hon'ble Madras High Court in the case of Indian Bank Ltd. 152 ITR 557 (Mad), wherein the assessee has claimed unabsorbed carried forward loss of the previous years to be set off against the interest income. According to AO, in that case, the Hon'ble Court had held that because the assessee was not carrying on the business during that years of claim, therefore, not entitled for such set off. However, assessee was entitled for the claim of set off of unabsorbed depreciation and in this connection the AO has placed reliance on Deepa Textile 168 ITR 773 (Guj). 6.1. In respect of surplus on transfer of assets to National Dairy Development Board (NDDB), ld.AR has mentioned that the said amount of surplus of Rs.15.86 crores....
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.....DR has also placed reliance on paragraph No.11 of the order in question reproduced below for ready reference:- "11. From the aforesaid facts and circumstances, reasons given, a fortiori, it becomes evident and palpably manifest that the assessment order dated 3-9-2007 (supra) is erroneous and prejudicial to the interest of revenue. Accordingly, the said order is hereby cancelled with a direction to make a fresh assessment by correctly verifying the facts of this case by affording reasonable opportunity to the assessee." He has thus argued that no prejudice had caused to the assessee by the said directions of ld. Commissioner because he has not given any final finding, but simply directed the AO to pass a fresh assessment after verifying the facts of the case. As far as the claim of unabsorbed depreciation, ld.DR has also pointed out that the business was not carried out during the intervening period, hence, returns were not filed in time, therefore, there was no question of carried forward losses for the subsequent years. He has also pointed out that the question of subsidy which was received by the assessee has not been considered by the AO. 7. We ha....
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....ne-qua-non for the deduction of allowances like depreciation. Upto this extent, once the AO had made requisite enquiry and on investigation he was of the view that the set off of depreciation against the interest income was legally sustainable following Hon'ble Gujarat High Court decision of Deepak Textile Industries Ltd.(supra), therefore, we can hold that no prejudice was caused to the Revenue and upto that extent the order of the AO cannot be termed as an erroneous order. 7.1. Now the question of about rest of the two objections as raised by the ld.Commisisioner are concerned, those were in respect of surplus on transfer of assets to NDDB and the taxability of book profit u/s.115JB of the Act. At the outset, it is to be placed on record that the admitted factual position was that the AO had not made any enquiry in respect of these two issues. It has not been demonstrated before us that the AO had either issued a show cause notice to enquire these two aspects or from the side of the assessee any clarification/explanation was ever tendered before the AO for his consideration. So, it is apparent that the AO as well as the assessee both were silent on these two issues. The....