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Income Tax Officer Versus M/s Sunshield Chemicals Ltd.

MAT - computation of income u/s 115JB - unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB - Held that:- We have observed that the assessee company has raised additional claim before the A.O. during the assessment proceedings by filing a revised statement of unabsorbed depreciation and book loss for computing the book profit u/s 115JB of the Act in which the losses were different from the one which was claimed in the return of income filed wi .....

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s can always consider and decide on merits, any claim which the taxpayer has raised before the AO during assessment proceedings although the same is not claimed by the taxpayer vide Return of income filed with the Revenue as held by Hon’ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders (P) Ltd., (2012 (7) TMI 158 - BOMBAY HIGH COURT). - Decided against revenue

CIT(A) directing the A.O. to consider the revised statement of unabsorbed depreciation and book loss furnished by .....

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reinafter called "the CIT(A)"), for the assessment year 2009-10. 2. The grounds raised by the Revenue in the memo of appeal filed with the Tribunal read as under:- "i) The Learned CIT(A) has erred on facts and in law in directing the Assessing Officer to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB of the I.T. Act, 1961 without properly appreciating the factual and legal matrix as clearly .....

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n law in directing the Assessing Officer to allow set off of unabsorbed depreciation pertaining to A.Y. 1995-96 to A.Y. 1999-2000 against the 'Income from Other Sources' without appreciating the fact that the time period for claiming the above depreciation had already lapsed. iv) The Ld. CIT(A)'s order is contrary in law and on facts and deserves to be set aside. v] The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the AO restored. The appella .....

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at the assessee company has worked unabsorbed depreciation as well as business loss whichever is lower year-wise and not worked combined unabsorbed depreciation as well as business loss whichever is lower and reduced from book profit. The working of the said unabsorbed depreciation as well as business loss as per Companies Act (as reflected in page 2 of the assessment order by the AO ) is as follows:- Year ended Business loss (In Rs.) Depreciation Loss (in Rs.) 30/6/1999 1133949 -5449127 30/6/20 .....

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th the statement of accounts of the respective years involved, therefore, the A.O. did not consider the same and did not take any cognizance thereof and the book loss was allowed to the assessee company by the AO as per the return of income filed. The A.O. held that the assessee company is eligible for the least of either the business loss or depreciation loss and accordingly the A.O. allowed brought forward business loss of ₹ 1,95,02,170/- to be adjusted as against the claim of ₹ 4, .....

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absorbed depreciation for computing book profit u/s 115JB of the Act. The assessee company argued before the CIT(A) that in the said figures, there were positive incomes in some of the years. While totaling the brought forward loss of different years, the A.O. has totaled loss figures as well as positive figures which resulted in lowering the assessee s final figure of brought forward business losses of all the years put together. The assessee company requested that the aggregate figure of diffe .....

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eing positive income and therefore in aggregate the positive income of these years was not required to be considered. Hence, the CIT(A) directed the A.O. vide orders dated 15-02-2013 to consider lower of brought forward business loss ignoring positive income of respective years or unabsorbed depreciation whichever is less, that means the A.O. has to consider business loss at Rs. nil in the years wherever positive income was shown and thereafter consider aggregate of lower business loss and unabs .....

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ved by the orders dated 15-02-2013 of CIT(A), the Revenue is in appeal before the Tribunal. 7. The ld. D.R., relied on the order of the A.O. and submitted that the CIT(A) erred in directing the A.O. to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee for computing book profit u/s 115JB of the Act during the course of assessment proceedings ignoring the fact that the A.O. is bound in law to accept only the claim made by the assessee company in the .....

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ays be raised by the tax payer before the AO and the appellate authorities has jurisdiction to consider a new additional claim raised by the taxpayer before the A.O and adjudicate the same on merits although inadvertently the said claim was not claimed in the return of income filed with the Revenue by the taxpayer. 8. We have considered the rival submission and perused the material on record. We have observed that the assessee company has raised additional claim before the A.O. during the assess .....

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me filed with Revenue can only be considered. The CIT(A) duly considered the said claim and has allowed the same on merits. We do not find any infirmity in the orders of the CIT(A) in considering the said claim as adjudicating authorities can always consider and decide on merits, any claim which the taxpayer has raised before the AO during assessment proceedings although the same is not claimed by the taxpayer vide Return of income filed with the Revenue as held by Hon ble Bombay High Court in C .....

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eciating the fact that the time period has already expired. 10. The A.O. relying upon the decision of ITAT Special Bench in the case of DCIT v. Times Guaranty Ltd. (2010) 131 TTJ 257 (Mum) [SB] disallowed the brought forward depreciation losses for the assessment year 1995-96 to 1999-2000 since the same have expired the term of eight years to be carried forward as per relevant applicable law. Aggrieved by the decision of A.O., the assessee company carried the matter before the CIT(A). The assess .....

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ion for such succeeding years and is deemed to be part thereof. Thus the CIT(A) following the decision of Hon ble Gujarat High Court in the case of General Motors India P. Ltd. (supra), directed the A.O. to consider brought forward unabsorbed depreciation loss of earlier years as part of current year s depreciation and allow deduction as per provisions of the Act. Aggrieved by the above decision of ld. CIT(A), the Revenue is in further appeal before the Tribunal. 11. The ld. D.R., relied upon th .....

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and directed the A.O. to allow set off of unabsorbed depreciation in accordance with the decision of Hon ble Gujarat High Court in the case of General Motors India Pvt. Ltd. (supra). The Tribunal in the case of Dhadda Diamonds Pvt. Ltd.(supra) held as under:- "5. After considering the material placed on record and the relevant finding of the Ld. CIT(A) and the decisions relied upon before us, the only issue for our adjudication is, whether the finding of the AO and Ld. C!T(A) based on the .....

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e following conclusion:- "38. The legal position of current and brought forward unadjusted/unabsorbed depreciation/allowance in the three periods, is summarized as under:- A. In the first period (i.e. up to assessment year 1996-97) (i) Current depreciation, that is amount of allowance for the year under section 32(1), can be set off against income under any head within the same year. (ii) Amount of such current depreciation which cannot be so set off within the same year as per (i) above sh .....

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ard for set off against income under any head for a maximum period of eight assessment years starting from assessment year 1997-98. (ii) Current depreciation for the year under section 32(1) (for each year separately starting from assessment year 1997- 98 up to 2001-02) can be set off firstly against business income and then against income under any other head. (iii) Amount of current depreciation for assessment years 1997-98 to 2001-02 which cannot be so set off as per (ii) above hereinafter ca .....

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is, the remaining period out of maximum period of eight assessment years [as per B(i) above} against income under any head. (ii) 'Second unabsorbed depreciation allowance' can be set off only against the income under the head 'Profits and gains of business or profession' within a period of eight assessment years succeeding the assessment year for which it was first computed. (iii) Current depreciation for the year under section 32(1}, for each year separately, starting from asses .....

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y. However, in a later decision, the Hon'ble Gujarat High Court vide order dated 23.08.2012 in the case of General Motors India Pvt. Ltd (supra), After considering the provision of section 32(2), before its amendment by Finance Act 2001 and also after the amendment and also the Board Circular No. 14 of 2001 observed and held as under:- "37. The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machi .....

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ndment: Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statute .....

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gains of business or profession for any previous year, deduction of depreciation under section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A. Y. 1997-98, 1999-2000, 2000-1 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A. y. 2002-03 then it would be carried forward till the time it is .....

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income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however; there is no current depreciation for such succeeding year; the unabsorbed depreciation b .....

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