TaxTMI 
TaxTMI 
2017 (7) TMI 1408
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs in spite of accepting that the depreciation loss can be allowed to be carried forward even if the original business has changed. 3. The learned Commissioner of Income Tax(Appeals) has concurrent and coexistent power of assessment only in respect of assessments under appeal. He has exceeded his appellate jurisdiction, which was limited to assessment year 2011-12, by giving directions that the depreciation, pertaining the Assessment year 1998 to 2009-10, cannot be allowed to be carried forward and set off against the income for Assessment years 2010-11 and succeeding assessment years. 4. The learned Commissioner of Income Tax Appeal (I) ought to have directed the Assessing Officer to allow the claim of set off of depreciation loss of earlier years made in the Return of income for AY 2011-12, as there was no separate order either u/s. 143(1) or 143(3) of the Income Tax Act denying any claim of depreciation or business loss in each of the Assessment years from 1996-99 and onwards. 5. Any other ground of appeal as may arise during the appeal proceedings. 3. Briefly stated, the facts of the case are as follows: The assessee is a private limited company which was engaged in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... aqua farming during these years. 4.1 The CIT(A) also directed the Assessing Officer to take necessary action including reopening of assessment for the assessment year 2010-11 and succeeding assessment years 2012-13 onwards to disallow the set off of unabsorbed depreciation claimed from 1998-99 onwards. 5. Aggrieved by the order of the CIT(A), the assessee has preferred the present appeal before the Tribunal. The Ld. Counsel for the assessee reiterated the submissions made before the Income Tax authorities. Further, it was submitted that the CIT(A) in the rectification application filed by the assessee had allowed unabsorbed depreciation for the assessment year 1998-99 also to be carried forward and set off against the income for assessment years 2012-13 onwards. A copy of the order passed in rectification application directing the Assessing Officer to allow unabsorbed depreciation for the assessment year 1998-99 to be carried forward for future years is also placed on record. The Ld. DR supported the orders of the Assessing Officer and the CIT(A). 6. I have heard the rival submissions and perused the material on record. The assessee had claimed set off of unabsorbed deprec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (sic) were not used but were kept ready for use. To prove this ready-for-use status of the assets, it is always necessary to establish such actual status and certification for the same from the managers/employees of the Appellant and/or government authorities, which has not been done. No circumstantial evidences as to such status, for example, readiness to procure new materials and necessary process materials and any move to restart the aqua farm business, maintenance expenses towards keeping them in a well-oiled state of readiness, etc. have been provided. (ii) As identified and cited by the AO, in Item No. l of Part B of the Notes on Accounts of the Appellant, it has been stated, among other things, that the "company was not in operation for a long period from 31-3-1997 to 2005" (sic) and that "at present, the company has diversified its activities and is pursuing land development and related activities". This mean that the company simply did not carry out any aqua farm-related activities, and being visibly detained by law as well as uninterested in carrying out such activities, and accordingly putting to use the assets owned towards such business. In Item No. 15 of Part ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... come alive into active status. The present case of the Appellant is one such, that its aqua farm business which had been given up for dead following the ban imposed by the Hon'ble Supreme Court has suddenly sprung up to life in later favourable circumstances. The positions held by the Appellant that it was "restarting the business" after a prolonged period (of several years) of being condemned to "extinction" and had diversified into other active and fertile territories of business (of building and construction) and had also simultaneously kept its assets under reference in a "ready-to-use" condition, are self-serving, sweeping, inconsistent and unsubstantiated, factually or otherwise. It would have to be a very unnaturally credulous and biased-infavour of the Appellant person who would swallow such a rigmarole and tale. (b) The Appellant has not shown any evidence, factual or otherwise to prove that it was even remotely interested in the aqua farm business, even as late as in the impugned F.Y, 2010-11). Indeed, all its averments have been to the contrary. It was only when the AO asked the relevant questions that the Appellant made the conveniently vague averments. In Item ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trument of undeserved tax reduction. The long period of several years when no value was ascribed to the assets cannot be ignored in a manner that is sufficient to bridge the desolate (for the prodigal son/or assets) interregnum into a life-giving continuum. It is also a fact that land values appreciate and do not depreciate, and therefore no claim of deductible depreciation can be made on their value. There is no evidence to show that there have been any expenses rendered or steps that have been continuously taken (other than the routine computations and ensuring the filling on time of the Returns of income each year, as mentioned above) in respect of the ponds (or other assets related to the aqua farm business) that show that they were in a "ready-to-use" or even "passive" state. (d) As already stated earlier, from a perusal of its Annual Report for the F.Y. 2007-08 (available on the public domain being the internet), it is seen that the Appellant has undergone an image change and makeover which is keeping with its statement in the Grounds of Appeal preferred that "only from the F. Y. 1997*98 the assessee could not do the said business on account of the Supreme Court Ban", which....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the period when company was engaged in aqua culture business. While the management argued that aqua culture farming should be treated as agriculture, the department has not accepted this contention. Similarly there were contradictory conflicts in Hon. High Courts in regard to the treatment of prawn ponds for the purpose of depreciation. In one verdict it was found treated as plant and in another verdict it was treated as building. The entire matter is now under appeal with the Hon. Supreme Court". These clearly mean that the aqua farming business was treated by the company as a thing of the past. In the Annual Statement for the succeeding F.Y. 2011-12, once again there is not the remotest mention of aqua farming. Separately, under the header "Opportunities, Outlook and Threats", the company has heralded its intended and imminent activities as follows: 'The Company is planning to develop a township project in Cochin and a Free Trade Warehousing Zone in Tuticorin. Most of the land required for the projects are tied up for development. The Company shall proceed with obtaining approvals from the Authorities at appropriate time and hopes to initiate the projects within the next 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respective revenue streams as against the respective investments. The appellant will need to begin claiming the values of depreciation on the assets to be employed in the aqua farm business only from the start of such business, and would also be entitled to any revenue-natured claims of the expenses in repairing or commissioning or otherwise enabling the impugned assets. It cannot ask that it be allowed the claims of deductions on depreciations on the assets during the period of their non-use and "extinct" ("simply there" or "extant" in their states of "unregistered - in the consciousness of the Appellant - presence") status that are now sought to be revived. Therefore, no retrospective claims of depreciation on such assets, during the years of inactivity from F.Y. 1997-98 until the impugned F. Y. 2010-11 when there was not even an intention to commence aqua farm business activity, can be accepted. These capital investments represented sunk costs that were not in the radar-zone of the Appellant's consideration during its pursuit of the alternative business activities, and became alive through resuscitation only when the NPV analyses of the aqua farm business was carried out, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 214 ITR 801 (SC), the Hon'ble Supreme Court held that the onus to prove that the apparent (viz. which means in the instant case that the assets could not reasonably be held to have been put to use in the business) is not the real (viz. which means in the instant case that they were indeed put to such use) is on the party (the Appellant, in the instant case) who claims it to be so. In its decision dated 20 August, 1968 in the case of Metal Box. Co. of India Ltd v. Their Workmen [1969 AIR 612, 1969 SCR (1) 759), the Hon'ble Supreme Court held as follows: "Since the company claimed the deduction of depreciation, it stands to reason that the burden of proof that the depreciation claimed by it was the correct amount in accordance with the Income Tax Act was on the Company and that burden the company must discharge once its figures were challenged." (y) From all of the above, it is held that the Appellant has been unable to satisfactorily discharge the burden and onus of proof cast on it to substantiate its claims of set offs of unabsorbed depreciation losses brought forward from the AY 998-99 to the AY 2009-10. In the absence of satisfactory proofs substantiating the use of the asset....
X X X X Extracts X X X X
X X X X Extracts X X X X
....28,36,165/- relating to the AY 1997-98 (out of which of Rs. 1,55,827/- has already been set off by the Appellant in the impugned AY 2011-12) can be allowed to be brought forward and set off in subsequent assessment years. (ii) These have been already been claimed by the Appellant in the impugned A.Y. 2011-12 against the taxable income of Rs. 35,85,037/-, which is accepted. Therefore, the total taxable income for the impugned A.Y. 2011-12 is held to be Rs. Nil. (iii) This would leave a balance unabsorbed depreciation losses of Rs. 26,89,338 relating to the AY 1997-98 to be set off in subsequent assessment years. All of the other listed (in the assessment order) amounts of unabsorbed depreciation for the AYrs. 1998-99 to 2009-10, which along with the balance amount of Rs. 26,89,338 relating to the AY 1997-98 as above total to Rs. 1,52,76,459/- are to be disallowed from being brought forward and set off in the A.Yrs 2010-11 onwards until (as stated above based on the information as extracted from the Annual Reports) the F.Y. 2015-16. This is because until proved to be otherwise by the Appellant, the assets in question have not been put to use. These disallowances are only becaus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Commissioner is co-terminus with that of the Income Tax Officer. If that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has the powers which the original authority may have in deciding the question before it subjects to restriction or limitation if any prescribed by the statutory provisions. In the absence of any statutory provisions to the contrary the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter". Consequently, all actions of the Assessing Officer including the computation of assessable and taxable income in the instant case will be those of this office determined in consonant and congruent supersession of those carried out by the Assessing Officer. The above would mean that this assessment can now be taken to be one completed as discussed in ....