TaxTMI 
TaxTMI 
2021 (11) TMI 923
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.... called " the Act"). The appeal in ITA No. 20/Alld/2020 for assessment year 2012-13 has been filed by assessee before tribunal against appellate order dated 07.08.2019 passed by ld. CIT(A) in Appeal Number : CIT(A), Allahabad/10432/2015-16, the appellate proceedings had arisen before ld. CIT(A) from assessment order dated 27.03.2015 passed by ld. Assessing Officer u/s. 143(3) of the 1961 Act. The appeal in ITA No. 21/Alld/2020 for assessment year 2013-14 has been filed by assessee before tribunal against appellate order dated 24.09.2019 passed by ld. CIT(A) in Appeal Number : CIT(A), Allahabad/10115/2016-17, the appellate proceedings had arisen before ld. CIT(A) from assessment order dated 31.03.2016 passed by ld. Assessing Officer u/s. 143(3) of the 1961 Act. These three appeals were heard by Division Bench of Income-Tax Appellate Tribunal, Allahabad Bench, Allahabad through Video Conferencing mode through Virtual Court, and are disposed off by this common order. 2. These three appeals were first heard on 19.07.2021, and while dictating order(s) it was observed that all these three appeals were filed by assessee late beyond the time prescribed u/s. 253(3) of the 1961 Act for fi....
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.... case before us, we condone delay in filing of all these three appeals by assessee with tribunal by exercising our powers u/s. 253(5) of the 1961 Act, beyond the time stipulated u/s. 253(3) of the 1961 Act, as in our considered view sufficient cause is shown by the assessee, and hence we condone the delay in filing of all these three appeals and proceed to adjudicate these three appeals on merits in accordance with law. We order accordingly. ITA No. 20/Alld/2020- AY 2012-13 3. First, we shall take up assessee's appeal in ITA No. 20/Alld/2020 for ay: 2012-13. The grounds of appeals raised by assessee in memo of appeal filed with tribunal reads as under:- 1. "Because the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts to confirm the disallowance made by the Assessing Officer on account of prior period adjustments amounting to Rs. 73,02,000/-. 2. Because the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts to confirm the disallowance made by the Assessing Officer on account of difference in Opening Stock to the tune of Rs. 44,000/-. 3. Because the order of Ld. C.I.T.(Appeals), Allahabad was bad in law an....
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....ass I.C.D. upto 31.03.2011 5,90,985.59 Page 126 73,01,827.59 5.2. The ld. CIT(A) rejected the contentions of the assessee and upheld the additions to the income made by the AO vide assessment order dated 27.03.2015 u/s. 143(3) of the 1961 Act passed by Assessing Officer, by holding as under, vide appellate order dated 07.08.2019.:- "I have perused the facts of the case and facts relied upon by AO and appellant. Appellant has neither given any reasons for claiming these prior period nor has clarified the nature of these prior period adjustment. Since appellant has not submitted anything in favour of this ground of appeal, the action of the AO is upheld. This ground is dismissed" 6. Still being aggrieved by the decision of ld. CIT(A) vide appellate order dated 07.08.2019, the assessee filed second appeal with tribunal. The assessee has filed paper book with Tribunal containing 35 pages and also filed copy of printed Annual Report for 2012 in the said paper book. Before us, it was submitted by ld. Counsel for the assessee that the assessee is in glass industry for last 40 years, since 1971 and is a leading glass company in Allahabad....
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.... Court fees paid against appeal was erroneously debited to account head "CST, Uttar Pradesh" during the preceding years which is now rectified by debiting the account head "Prior Period Expenses" during the financial year 2011-12. The ld. Counsel for the assessee relied upon the judgment of Hon'ble Delhi High Court in the case of Vishnu Industrial Gases (22 ITR/1998) and also decision of Delhi-tribunal in the case of ACIT v. NBCC in ITA no. 5870/Del/2010. Our attention was also drawn to the assessment order and appellate order passed by ld. CIT(A). 6.2. On the other hand, Ld. DR submitted that these are prior period expenses and hence the same cannot be allowed as deduction while computing income for the year under consideration, as these expenses did not pertained to year under consideration. Our attention was drawn by ld. DR to Note No. 21 in the Annual Return for the year 2012(Page 45 of Annual Report 2012), which reads as under: " Note No. 21 Prior Period Item Rs. in Lakhs) Prior Period Adjustment For the year ended 31 March 2012 For the year ended 31 March 2011 Prior Period Adjustment 73.02 32.11 73.02 32.11 It was submitted by....
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....rrect figures. 6.4. The ld. DR fairly submitted that there was an error on the parts of the authorities below and the contentions of the ld. Counsel for the assessee are correct, and that this issue may be decided in favour of the assessee. 7. We have considered rival contentions and perused the material available on record. We have observed that the assessee is in the business of manufacturing glass. We have observed that the assessee has filed paper book with tribunal, containing 35 pages and also copy of Printed Annual Report for 2012, which is also part of the paper book. The said paper book is placed on record in file. It is observed that this paper book does not contain certification required by to be done by the assessee certifying as to the documents which were filed by assessee before the authorities below, as well additional evidences filed before the tribunal for the first time. We have observed that the assessee had during the year of assessment under consideration claimed Prior Period expenses to the tune of Rs. 73.02 lacs. The relevant note concerning the said Prior Period Expenses is appearing as note number 21 in Annual report 2012(Page 45), is reproduced as h....
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....ce in the Opening Stock in Current Year with that of Closing Stock of the immediately preceding year. The Assessing Officer observed from the record that there is a difference in Opening Stock in Current Year with that of the Closing Stock of the immediately preceding year. The Assessing Officer has observed that the assessee has shown closing stock of Rs. 125.17 lacs in previous year, but in the current year, the opening stock of Rs. 124.73 lacs was shown, which led to the difference of 44,000/-, which was added to income of the assessee and brought to tax by the AO vide assessment framed u/s. 143(3) of the 1961 Act. The assessee carried the matter further before ld. CIT(A) by filing first appeal and explained that there is no difference in the closing stock of the earlier year with the opening stock in the current year, by making following submissions as under.:- "Value of Closing Stock of Finished Goods as on 31.03.2011 is Rs. 150.12 Lacs and Value of Opening Stock of finished Goods as on 01.04.2011 is Rs. 150.12 lacs. It has been duly disclosed in Note No. 16 (Changes in Inventories of Finished Goods, Work in progress and Stock in Trade) to the Audited Annual Accounts ....
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....cordingly. 9. In the result, the appeal filed by assessee in ITA no. 20/Alld/2020 for ay: 2012-13 is partly allowed for statistical purposes. We order accordingly. ITA No. 19/ALLD/2020 Assessment Year: 2012-13 10. We shall now take up assessee's appeal in ITA No. 19/Alld/2020 for ay: 2012-13. The grounds of appeals raised by assessee in memo of appeal filed with tribunal reads as under:- "1. Because the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts to confirm the disallowance made by the Assessing Officer on account of set off of brought forward business loss amounting to Rs. 38,84,38,396/- & unabsorbed depreciation amounting to Rs. 15,43,28,383/- determined in pursuance of return filed within time u/s. 139(1). 2. Because the order of Ld. CIT(Appeals) Allahabad was bad in law and on facts. 3. The appellant prays for adducing further or other grounds of appeal before or at the time of hearing the appeal." 11. The solitary issue in this appeal is regarding the allowability of set off of brought forward business losses and unabsorbed depreciation. The assessment for ay: 2012-13 was finalized by AO, vide assessment ....
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....y the same, the assessee has filed this appeal. We would like to submit that due to error of omission, amount of brought forward unabsorbed depreciation was taken as Rs. 15,43,28,383/- instead of Rs. 42,64,03,237/- in the Grounds of Appeal, which may please be ignored. Brought forward unabsorbed depreciation of Rs. 42,64,03,237/- can be verified from the assessment order u/s. 143(3) dated 29.12.2008 for A.Y. 2006-07. Please refer to the Chart of Computation of Taxable Income forming part of the Assessment Order u/s. 143(3) dated 27.03.2015, wherein the A.O. has erred in disallowing the set-off of brought forward business loss of Rs. 38,84,38,396/- and unabsorbed depreciation of Rs. 52,56,92,612/- against taxable income assessed by him for Rs. 27,20,480/- Detail of Brought forward Business Loss & Unabsorbed Depreciation has been furnished below: Assessment Year Business Loss (Rs.) Unabsorbed Depreciation (Rs.) Total Brought Forward Loss (Rs.) Up to 2006-07 - 42,64,03,237.00 42,64,03,237.00 2007-08 4,95,77,529.00 3,24,71,113.00 8,20,48,642.00 2008-09 15,64,43,000.00 2,59,47,004.00 18,23,90,004.00 2009-10 4,....
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....ot arise from this order and there is no material available on record to say that this is a prima facie mistake apparent from records. It is apparent that the appellant itself is not clear about the figures while filing the Appeal and wants to get undue benefit from the appeal order, which cannot be given. With these comments these grounds are dismissed." 13. Still Aggrieved by appellate order dated 23.09.2019 passed by ld. CIT(A), the assessee company has filed an appeal before tribunal. The ld. counsel for assessee submitted before the Division Bench during the course of hearing that the assessee is only seeking set off of earlier year brought forward business loss and brought forward unabsorbed depreciation, in accordance with law against income of current year and carried forward of the remaining business losses and remaining unabsorbed depreciation to subsequent years, to be set off against business income of subsequent year(s) in accordance with provisions of Section 72 and 32 of the 1961 Act. It is also submitted by Ld. Counsel for assessee that the assessee admittedly filed return of income for the impugned ay belatedly on 29.03.2014, which was beyond the time p....
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....previous years.] Carry forward and set off of business losses. 72. [(1) Where for any assessment year, the net result of the computation under the head "Profits and gains of business or profession" is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, [* * *] where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; [* * *] (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on :] [Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that s....
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....he prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1). We have observed that admittedly the assessee filed its return of income for the impugned assessment year 2012-13 on 29.03.2014, which return of income was filed belatedly beyond the time prescribed u/s. 139(1) of the 1961 Act. The assessee declared business loss of Rs. 2,15,19,363/- in the return of income filed with Revenue, while the AO in proceedings conducted u/s. 143(3) read with Section 143(2) of the 1961 Act, assessed income of the assessee at Rs. 27,20,480/-. The AO denied the benefit of set off of brought forward business losses of earlier years and un-absorbed depreciation, against the income assessed for the year under consideration. The ld. CIT(A) granted partial relief to the assessee so far as additions to the income made by the AO under various heads, and we have also adjudicated vide this common order two issues raised by assessee in its appeal in ITA no. 20/All/2020 for ay: 2012-13 which also concerns with additions made by the AO, in preceding para's of this order. These adjudication b....
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....f Section 72(2), the unabsorbed depreciation of the current previous year shall be added to the depreciation allowable u/s. 32(1) of the succeeding previous year and deemed to be part of the succeeding previous year to be set off against business income of the succeeding previous year and so on. There is no provision of the 1961 statute which is brought to our notice by rival parties which prohibits carry forward of unabsorbed depreciation even if return of income is filed belatedly for the current year beyond the due date stipulated u/s. 139(1) of the 1961 Act. Reference is drawn to decision of ITAT, Delhi Bench decision in ITA No. 504/Del/2017 for ay: 2012-13, vide order dated 23.07.2020 in the case of Addl. CIT v. Nortel Networks India Private Limited. So far as issue of earlier year brought forward business losses and unabsorbed depreciation is concerned, we are of the considered view that the assessee will be entitled to set off against business income of the current year and there is no bar to earlier year brought forward losses and unabsorbed depreciation to be adjusted against current year business income, even if current year return of income is filed belatedly beyond the ....
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....e it will be hit by provision of Section 80 and 139(3) of the 1961 Act. So far as quantum of brought forward business losses and unabsorbed depreciation which were assessed to be carried forward to subsequent years and its period of allowability is concerned, we are of the considered view that these facts requires verification by Assessing Officer from the record, and the material on record available before us is not sufficient to give conclusive finding on these facts, and hence we are setting aside this matter to the file of AO for verification of facts and quantum of allowability of brought forward business losses and unabsorbed depreciation, and while allowing the carry forward of business losses, the AO shall also verify that the return of income was filed by assessee in time within due date prescribed u/s. 139(1) for those years and the loss assessed by Revenue to be carried forward for each of the years and period of allowability of business loss for eight assessment years as is available u/s. 72(3) of the 1961 Act. The assessee has also grievance that unabsorbed deprecation amount is wrongly mentioned in grounds of appeal filed with tribunal, this aspect shall also be verif....
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....) observed that Allahabad Manufacturing unit was lying closed for last several years. The assessee was asked by AO to furnish complete details/bifurcations of fixed assets and depreciation claimed. The assessee failed to furnish the details/bifurcation of fixed assets before the AO. The AO observed that the assessee has admittedly closed its Allahabad Manufacturing unit for last many preceding years and fixed assets of Allahabad Manufacturing Unit were not utilized for business purposes for the entire year, and hence consequently the assessee is not entitled and eligible to claim depreciation u/s. 32 with respect to Allahabad Manufacturing unit. The Assessing Officer disallowed depreciation of Rs. 3,64,44,445/- i.e. 30% of total depreciation claimed on account of unverifiable fixed assets of closed unit at Allahabad and failure to establish usage of these assets for business purposes as is required u/s. 32 of the 1961 Act, vide assessment order dated 31.03.2016 passed by AO u/s. 143(3) of the 1961 Act. 17.2. The second issue concerns itself with disallowance of Rebate to the tune of Rs. 17,12,24,716/-. The assessee had claimed Rebate Expenses as deduction while computing income ....
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....sis of their performance i.e. on achieving sales target & increasing the overall business and to customers on making prompt payment, for which the company issues credit notes to such parties. Discount incentive allowed to such parties is not in the nature of any "Commission" on which provisions of deducting tax at source is applicable." 19. The ld. CIT(A) was pleased to dismiss appeal filed by the assessee on the first issue concerning disallowance of depreciation, vide appellate order dated 24.09.2019, by holding as under: "Decision I have gone through the facts and the written submissions filed along with the details filed enclose therein. AO disallowed the claim of depreciation made on the manufacturing unit at Allahabad which is admittedly non-functional for last 5-6 years due to Labour unrest. I agree with the action of AO even though the depreciation has been claimed only on building and motor vehicles. Applicant itself has not claimed depreciation on plant and machinery. It is not understandable as to how motor vehicles and building can be put to passive use. Depreciation on any unit can be allowed if the said assets are ready for use for want of busines....
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....e submitted before the Division Bench during the course of hearing that ad-hoc disallowance of depreciation was made by the authorities below @30% of the total depreciation claimed. It was submitted by ld. Counsel for the assessee that assessee has two Manufacturing unit, one at Allahabad(U.P.) and second at Rajamundari (Andhra Pradesh). It was submitted by ld. Counsel for the assessee that Manufacturing unit at Allahabad, U.P. is lying closed since 2006. It was submitted that the plants which were operational in Allahabad, U.P. were closed due to labour problem and huge financial losses, and thus it was a forced closure. It was submitted that the assets formed part of Block of Assets, and the assessee is entitled to claim depreciation on entire Block of Assets. The ld. Counsel for the assessee submitted that Allahabad Manufacturing unit is lying closed since 2006, till date. The ld. Counsel for the assessee submitted that the AO was not justified in making ad-hoc disallowance of depreciation computed @30% of total depreciation claimed by the assessee, and it was submitted that in any case the assessee continued to be in the business of manufacturing glass as its manufacturing unit....
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....(A) that Rs. 52 lacs was towards Rebate allowed to customers against breakage of glass. The assessee has filed paper book containing 229 pages and also filed in the said paper book additionally Printed 'Annual Report-2013'. There is no certification in the paper book as to which documents were filed before the authorities below. On being asked by the Bench, the ld. Counsel for the assessee made statement before the Bench that all the documents as are filed in the paper book filed with tribunal, were filed before both the authorities below. There are large number of credit notes filed by assessee, from page 98-182 which are towards rebate for breakage, but there is no such mention of rebate for breakage in orders of authorities below. Further, on page 183/paper book, is the account ledger of Rebate turnover, wherein total rebate -turnover is Rs. 2,10,000/- allowed during the year. Credit note of Rs. 2,10,000/- in the name of 'Auro Agencies' is placed at page 184/paper book. On page 185-187 is the details of Rebate for Rate difference, aggregating to Rs. 58,33,684/- allowed by assessee during the year under consideration. The assessee has stated by hand written note i....
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....ils are not furnished even before ld. CIT(A) and also before us. The assessee has claimed that the assets have lost identity once they form part of the Block of Assets and the entire block of assets will be eligible for the depreciation. The assessee has claimed that its manufacturing unit at Allahabad was lying closed for last several years owing to huge financial losses and labour unrest. It is an admitted position that Manufacturing Unit at Allahabad (U.P.) was lying closed for the entire previous year under consideration. The assessee has claimed that depreciation ought to have been allowed on the assets of Allahabad Manufacturing unit as the assets were ready to be put to use and thus, consequently owing to passive user of the assets, the assessee is entitled for depreciation u/s. 32 of the 1961 Act, because as per assessee passive user of the assets is as real as actual user of the Assets. The assessee has relied upon decision of Mumbai-tribunal in the case of Swati Synthetics Limited(supra) and Hon'ble Bombay High Court decision in the case of Visvanath Bhaskar Sathe(supra). The assessee has also claimed that there is a concept of 'Block of Assets' under the new ....
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....le assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, [not being goodwill of a business or profession,] owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-] *** ***" Thus, perusal of Section 32(1) clearly stipulates that user of the assets for the purposes of business or profession is a mandatory requirement, before claiming depreciation u/s. 32 of the 1961 Act. There is Section 38(2) in statute, wherein even where the assets forms part of Block of assets, and the same is not wholly and exclusively used for business, and is partly used for personal purposes, the depreciation shall be proportionately disallowed. Section 38(2) is reproduced hereunder: "Building, etc., partly used for business, etc., or not exclusively so used. 38. (1) *** (2) Where any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deduct....
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....FR initially agreed to the proposal and appointed an Operating Agency M/s. IDBI Bank Ltd., New Delhi. The Operating Agency was given the task of constituting an Assets Sales Committee which would handle the sale of Allahabad Plant. The Assets Sales Committee floated tenders twice for sale of the plant, but for some reasons or other, the sale could not materialize. As in subsequent BIFR meetings, no headway could be made in putting-up the unit for sale for a third time, the company decided to file a fresh MA before the BIFR requesting them once again to give permission for sale of plant in lots or as a whole. The Misc. Application before BIFR came up for hearing on 10.05.2012 wherein the BIFR passed orders detrimental to the interest of the Company and therefore the company had no option but to file an appeal before the Hon'ble AIFFR seeking stay of the BIFR order and permission for sale of the Allahabad unit. In the meantime, a number of buyers have come forward to buy the Plant and Machinery and the Plant as a whole which will help the company to finalize the sale once we get the necessary permission for sale. After a lot of follow up even at High Court Level....
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....gain the facts on record are not sufficient to give conclusive finding on this issue, in the absence of details/break-up furnished by the assessee. The assessee is also aggrieved that figure adopted by AO for disallowance of depreciation is not correct. Keeping in view totality of facts and circumstances of the case, we are of the considered view that the assessee will not be entitled for claiming depreciation on the closed Manufacturing unit at Allahabad, but, however, for verification and adjudication of other claims of the assessee as detailed by us in this order, such as user of building and Motor Vehicles of Allahabad Manufacturing unit for business purposes, that no depreciation was claimed in return of income filed with Revenue with respect to 'Plant and Machinery' installed at Allahabad Manufacturing unit, adoption of the correct amount of disallowance of depreciation, the matter need to be remitted back to the file of AO for fresh adjudication on merits in accordance with law. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. The evidences/explanations submitted by assessee in its defe....
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....issions were made before ld. CIT(A), explaining before ld. CIT(A) that Rs. 52.08 lacs was towards Rebate allowed to customers against breakage of glass. The assessee has filed paper book containing 229 pages and also filed in the said paper book additionally Printed 'Annual Report-2013'. There is no certification in the paper book as to which documents were filed before the authorities below. On being asked by the Bench, the ld. Counsel for the assessee made statement before the Bench that all the documents as are filed in the paper book filed with tribunal, were filed before both the authorities below. There are large number of credit notes filed by assessee, from page 98-182 which are towards rebate for breakage, but there is no such mention of rebate for breakage in orders of authorities below. Further, on page 183/paper book, is the account ledger of Rebate turnover, wherein total rebate - turnover is Rs. 2,10,000/- allowed during the year. Credit note of Rs. 2,10,000/- in the name of 'Auro Agencies' is placed at page 184/paper book. On page 185-187 is the details of Rebate for Rate difference, aggregating to Rs. 58,33,684/- allowed by assessee during the year u....