TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 923
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....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 filing of an appeal with tribunal, the delay wa....
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....f 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 and on facts. 4. The Appellant prays for adducing further or other gro....
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....ed 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. The ld. Counsel for the assessee submitted before the Bench that M/s. Bawa Float Glass Ltd. was allowed discount @ 12%, amounting to ....
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....ctified 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 ld. DR that no details/evidences were furnished by the assessee before the Assessing Officer. It was submitted by ld. DR that the assessee furnished some detail....
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....see 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 hereunder: " 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 Ad....
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....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 for the F.Y. 2011-2012. (Refer page 42 of the Printed Annual Report, 2012) The Ld. A.O. has erroneously added Rs. 44,000/- being difference between Value of Increase in Closing Stock of Finished Goo....
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....ssee'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 order dated 27.03.2015 passed u/s. 143(3) of the 1961 Act. The income assessed was Rs. 27,20,480/- as against returned loss of Rs. 2,15,19,363/-. The AO did not allow set off of brought forward business losses and unabsorbed depreciation. Admittedly return of income for ay:....
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....,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 4,56,00,512.00 2,26,24,009.00 6,82,24,521.00 2010-11 6,87,88,355.00 97,86,320. 00 7,85,74,675.00 2011-12 6,80,29,000.00 84,60,929.00 7,64,89,929.00 Total 38,84,38,396.00 52,56,92,612.00 91,41,31,008.00 Copy of assessment orders u/s. 143(1)/143(3)/154 for the assessment years 2006-07, 2008-09, 2009-10 and 2011-12 has been enclosed from Page No. 03-34 for your per....
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..... 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 prescribed u/s. 139(1) of the 1961 Act, and hence the assessee will not be entitled for carried forward of current year business losses to subsequent years. Our attention was drawn to provisions of Section 32(2), 72, 80 and 139(3) of the 1961 Act. The ld. Counsel for the assessee drew our attention to appellate order passed by ld. CIT(A). The ld. Counsel for the assessee stated before the Bench that there is an error in the figure of b....
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.... 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 section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established, reconstructed or revived, and- (a) it shall be set off against the profits and gains, if any, of that business or any other business carr....
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....ion 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 by appellate authorities have bearing on the assessed income computed under Chapter-IVD and consequently assessed total income of the assessee, for impugned assessment year. So far as carried forward of business losses for the current year under consideration is concerned, it is fairly conceded by ld. Counsel for the assessee and rightly so, that in view of Section 80 and 139(3) of the 1961 Act, the assessee will not be eligible to carry forward current year business losses to subsequent years, as the return of income for the impugned ay: 2012-13 was filed belatedl....
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....eference 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 due date prescribed u/s. 139(1) of the 1961 Act. Similarly, earlier year brought forward business losses and unabsorbed depreciation (to the extent not set off against current year business income) shall be allowed to be carry forward to the succeeding year viz. ay: 2013-14 and so on, and their carry forward to subsequent years will not be affected merely because the return of income for ay: 2012-13 was filed belatedly beyond the time prescribed u/s. 139(1) of the 1961 Act. However, the overall carry forward of business losses shall be subject to period of eight a....
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....tum 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 verified by the AO from records and correct amount be accordingly considered after due verification of records. Needless to say that the AO shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law, to carry on directions as per our order. The AO shall admit all necessary evidences/explanation filed by assessee in support of its contentions and adjudicate the same on merits in accordance with law. The AO is directed to pass detailed and reasoned order. This ground of appeal is partl....
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....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 chargeable to tax under the head " Profits and Gains from Business or Profession". The assessee was asked to explain the same by AO in the proceedings conducted by AO u/s. 143(3) read with Section 143(2) of the 1961 Act. The assessee submitted credit notes issued to different persons, and submitted before the AO that such rebate is attributable to the promptness of payments and also to performance. The AO observed that these credit notes referred to payments as 'Commission'. The AO further observed that the assessee has not deducted income-tax at source on these payments, even though these payme....
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....ils 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 business, and in absence of business they are ready to be used potentially, which is legally held as real use. Appellant's contention that the assets of the Allahabad unit could not be segregated for the purpose of calculating the depreciation is also not acceptable for the reason that appellant themselves have claimed depreciation only on the part of the assets, meaning thereby that they could segregate the depreciation on assets. As a limited company the appellant is to maintain a fixed asset register as per Company's Act also where complete details are to be maintained in respect of each asset purchased or sold, therefore this submi....
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.... 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 at Rajamundari(A.P.) was in operations even during the year under consideration, while only manufacturing unit at Allahabad, U.P. was closed. The ld. Counsel for the assessee relied upon decision of Mumbai-tribunal in the case of Swati Synthetics Limited v. ITO, in ITA No. 1165/M/2006, order dated 17.12.2009. The ld. Counsel for the assessee also relied upon Hon'ble Bombay High Court decision in the case of CIT v. Visvanath Bhaskar Sathe reported in (1937) 5 ITR 621(Bom.). The ld. Counsel for the assessee submitted that Registered office of the company is situated at Allahabad premises. It was submitted that Motor Vehicles were used by Directors of ....
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....ge, 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 in page 187, that out of Rs. 1,17,06,172/- paid towards Rebate Rate Difference, an amount of Rs. 58,72,488/- was commission paid to M/s. Chakku & Sons, and hence net Rebate for Rate difference allowed was Rs. 58,33,684/-. The details of commission paid to Chakku & Sons is at page 222/paper book. It was submitted that Rs. 58.72 lacs was paid towards commission on which the assessee was required to deduct income-tax at source u/s. 194H, but the income-tax was not deducted at source. The Rebate for rate differences credit notes are placed in page 189-221. The ld. Counsel for the assessee conceded that the disallowance is to be restricted to Rs. 58,72,488/- as ....
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....dy 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 regime of allowability of depreciation, and once the assets formed part of 'Block of Assets', then the individual asset will lose its identity and depreciation is to be allowed on the entire 'Block of Asset' under the new regime of allowability Depreciation u/s. 32 of the 1961 Act. The assessee has also claimed that it never claimed depreciation on 'Plant and Machinery' which are situated at Allahabad Manufacturing unit, and only depreciation is claimed on Building as well Motor Vehicles at Allahabad. It is claimed that the Building at Allahabad Manufacturing unit is used for Registered Office of the assessee company, and secondly Motor V....
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....orms 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 deductions under sub-clause (ii) of clause (a) and clause (c) of section 30, clauses (i) and (ii) of section 31 and [clause (ii) of sub-section (1)] of section 32 shall be restricted to a fair proportionate part thereof which the [Assessing] Officer may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession." Reference is also drawn to Special Bench decision of Chandigarh-tribunal in the case of Gulati Saree Centre(Supra) and decision of Chandigarh-tribunal decision in the case of Singla Agencies(supra), as relied upon by ld. DR, wherein it is held that the individual assets will not lose their identity merely because they form part of 'Block of Asset'. ....
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....ompany 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 as AAIFR Board had been dismantled, we were eventually able to get a favorable order from Hon'ble AIFFR on 19.03.2013 wherein they remanded back our case to BIFR for reconsideration. BIFR on 21.03.2013 accepted the recommendation of AIFFR and passed orders to Operating Agency to take steps for sale of the Allahabad Plant as per BIFR guidelines. The Operating agency has started the process of reconstituting the sale committee, etc." Conjoint reading of the factual status as stated by ld. Counsel for the assessee before the Bench that the Allahabad manufacturing unit was lying closed for several years with the above note in Directors Report, clearly reveals that the assets of Manufacturing unit at Allahabad were not being used during the year, both ac....
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....lant 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 defense shall be admitted by AO, and adjudicated by AO on merits in accordance with law. In case the assessee do not co-operate before the AO in set aside proceedings by bringing on record complete details/break-up of assets of Allahabad Manufacturing unit, Rajamundari Manufacturing unit and other assets, or in providing other required details, then the AO shall be free to proceed on merits in accordance with law, based on material available on record. This ground of appeal is partly allowed for statistical purposes. We order accordingly. 21.2. So far as second issue is concerned which concerns itself with disallowance of Rebate Expenses claimed by the assessee as deduction while computing income chargeable to tax under the head 'Profits and Gains from Bus....
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....te 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 in page 187, that out of Rs. 1,17,06,172/- paid towards Rebate for Rate Difference, an amount of Rs. 58,72,488/- was commission paid to M/s. Chakku & Sons, and hence net Rebate for Rate difference allowed was Rs. 58,33,684/-.The assessee has claimed that these are not commission expenses, while the authorities below held the same to be Commission. It is further held by authorities below that no income-tax was deducted at source by assessee u/s. 194H and the same is not allowable as deduction while computing income chargeable to tax. The assessee is claiming these expenses as deduction while computing income chargeable to tax under the provisions of the 1961 Act and the primary onus is on the ass....