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Dy. Commissioner of Income Tax, Kolkata Versus M/s Budge Budge Refineries Ltd. and Vica-Versa

2016 (5) TMI 1138 - ITAT KOLKATA

Carried forward depreciation and loss - CIT(A) allowing the business loss to set off against the income of assessment year 2001-02 i.e. beyond eight years without appreciating the provisions of section 72(3) of the Act - whether the mistake committed by the auditor in the assessment year 2000-01 can be rectified in the assessment year 2001-02? - Held that:- AO while framing the assessment on the assessee should apply the provisions of the income tax act correctly. The assessee should not be depr .....

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ome-tax Officer who deals with the assessment of the subsequent year. A decision recorded by the Income-tax Officer who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. Relying on the aforesaid judgments, we have no hesitation in upholding the order of learned CIT(A).

Whether unabsorbed depreciation up to the Assessment Year 1996-97 will be added to the depreciation allowance of 1997-98 and .....

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ispensed with, the unabsorbed depreciation from assessment year 1997-98 up to the assessment year 2001- 02 got carried forward to the assessment year2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent yeas, without any limit whatsoever. - ITA No.1389/Kol /2010 & C.O. No.98/Kol /2010 - Dated:- 19-4-2016 - Shri N.V.Vasusdevan, Judicial .....

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nafter referred to as the Act ) vide his order dated 31.07.2009 for assessment year 2001-02. 2. At the time of hearing both appeal and CO of assessee are heard together and are being disposed by way of consolidate order for the sake of brevity. First we take up Revenue s appeal ITA No. 1389/Kol/2010. 3. Revenue has raised the following grounds of appeal : 1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the business loss of ₹ 45,53,906/- t .....

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ective issue raised by Revenue in ground number 1 & 2 is that Ld CIT(A) erred in deciding the issue of carried forward depreciation and loss pertaining to the assessment year 2000-01 in the appeal for the assessment year 2001-02. Before coming to the specific issue let us understand the brief history of the case. The assessee was having brought forward losses and unabsorbed depreciation for the earlier years as depicted in the tax audit report of the assessment 2000-01 which is reproduced be .....

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it is clear that the assessee has made a mistake in the tax audit report by adjusting the taxable profit for the AY 2000-01 of ₹ 82,17,845.00 against the unabsorbed depreciation of earlier years and the same was allowed by the then AO. As per law, the assessee was to claim the set off of brought forward business loss and unabsorbed depreciation in the following sequence : 1. Depreciation for the Current Year 2. Unabsorbed business loss of the earlier years 3. Unabsorbed depreciation of the .....

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f earlier years amounting to ₹ 86,65,509/-. Now coming to the specific issue of the case before us pertaining to the AY 2001-02, the AO during the assessment proceedings has observed that for the relevant AY assessee had taxable profit of ₹ 1,34,40,624/- which was adjusted against the brought forward losses and unabsorbed depreciation of ₹ 3,26,47,911/-. As a result of aforesaid adjustment the assessee filed its return of income by declaring a loss of ₹ 1,92,07,287/-. How .....

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ne through the assessment order and submissions of the appellant. I find that the dispute has arisen on account of set off of the income of Assessment Year 2000-01 against the brought forward losses and brought forward depreciation of earlier years. In Assessment Year 2000-01, appellant has returned a business income of ₹ 82,17,845/- and in the tax audit report filed in form 3CD with this return of income, at para 25 of this report, the auditor has set off the income of ₹ 82,17,845 w .....

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made against the business loss of ₹ 9602352/- of Assessment Year 1992-93 instead of the depreciations of Assessment years prior to Assessment Year 1989-90 and if auditor has made a mistake in this regard then Assessing Officer should have applied the correct sequence of set off as per law and calculated the business loss and depreciation available for set off in Assessment Year 2001-02 after correctly setting off the same against the business loss and depreciation for Assessment Year 2000 .....

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orward of losses of Assessment Year 1950-51 has to be decided in the assessment of Assessment Year 1951-52 and the decision of Assessing Officer in respect of non carry forward of losses in the assessment of Assessment Year 1950-51 is not binding. In present case, it is not the Assessing Officer but the auditor who made a mistake in the audit report of Assessment Year 29000-01 by stating that depreciation of Assessment Years prior to 1989-90 of ₹ 447664/- are available for carry forward an .....

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ing off the income of ₹ 82,17,845 from loss of ₹ 96,02,352) of Assessment Year 1992-93 could be available for carry forward to Assessment Year 2001-02 but as the carry forward will be for 9th year, NIL business loss of Assessment Year 1992-93 can be carried forward to Assessment year 2001-02. In view of the above mentioned judgement of Hon'ble Supreme Court the correct position of such carry forward of depreciation and loss from Assessment Year 2000-01 can be decided in the appea .....

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f Ld CIT(A) Revenue is in appeal before us. 5. We have heard rival contentions of both the parties and perused the materials available on record. Before us Ld. AR submitted a paper book which is running from pages 1 to 97 and stated that the AO has relied on the tax audit report for working out the business loss and unabsorbed depreciation without considering the year-wise detail of such losses and unabsorbed depreciation available with Revenue authorities. The AO was to allow the brought forwar .....

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e return of income must have been filed within the due date as specified under section 139(1) of the Act for claiming the set off of the loss of that year and he simply relied on the order of AO. From the facts of the case we find that the auditor of the assessee has adjusted the profit for the assessment year 2000 -01 against the unabsorbed depreciation of earlier years prior to the assessment years 1989-90. For the same assessment year there was brought forward business loss for the assessment .....

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claimed the set off of the loss of earlier years including the loss of the assessment year of 1992-93 but the AO denied the same. However the CIT(A) allowed the relief to the assessee. Now, the following questions arise before us for adjudication whether the mistake committed by the auditor in the assessment year 2000-01 can be rectified in the assessment year 2001-02. 6. In our considered view the AO while framing the assessment on the assessee should apply the provisions of the income tax act .....

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as to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. A decision recorded b the Income-tax Officer who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. Relying on the aforesaid judgments, we have no hesitation in upholding the order of learned CIT(A). Hence this ground of appeal of Revenue is dismissed. Coming to assessee s CO No. 98/Kol/2010. 7. During th .....

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uch unabsorbed depreciation could be carried forward for set off for a maximum period of eight years from the Assessment year 1997- 98. Regarding the dispute of unabsorbed depreciation and its carry forward to the subsequent years, we rely in the decision of Hon ble High Court of Gujrat in the case of General Motors India Pvt. Ltd. Vs DCIT 25 taxmann.com 364 where it was held as under:- Prior to the Finance Act No. 2 of 1996, the unabsorbed depreciation for any year was allowed to be carry forwa .....

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depreciation allowance of the next year and e deemed to be part thereof. [Para 31] So, the unabsorbed depreciation allowance of assessment year 1996-97 would be added to the allowance of assessment year 1997-98 and the limitation of 8 years for the carry-forward and set-off of such unabsorbed depreciation would start from assessment year 1997-98. [Para 32] The provision of section 32(2) was introduced by Finance (No. 2) Act, 1996 and further amended by the Finance Act, 2000. The provision introd .....

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ng that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (assessment year 2002-03) will be dealt within accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. It the intention of the Legislature has been to allow the unabsorbed depreciation allowance worked out in assessment year 1997-98 only for eight subsequent assessment years even after the amendment of sec .....

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to express clearly and the assessee becomes entitled for a benefit within the ambit of section by the clear words used in section, the benefit accruing to the assessee cannot be denied. However, Circular No. 14 of 2001 had clarified that under section 32(2), in computing the profits and 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 una .....

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which it relates. If such depreciation amount is in excess than the amount of the profits of that business, then such excess should be adjusted against the profits and gains from any other business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of 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 .....

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