TMI Blog2013 (1) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts and other documents. 1.3 The Commissioner of Income tax erred in holding that the assessment order is erroneous and prejudicial to the interest of revenue merely because the decision of the Assessing Officer is not in consonance with the view of the CIT. 1.4 The Commissioner of Income Tax ought to have appreciated that if the Assessing Officer has taken one of the two possible views it cannot be termed as erroneous and prejudicial to the interests of revenue: [Malabar Industrial Co. vs CIT 243 ITR 83 (SC)]. 2. The Commissioner of Income tax erred in holding that the unabsorbed depreciation of earlier years could be set off only against the profits and gains of business or profession and not under any for other head. 2.1 He should have found that unabsorbed depreciation is to be considered as a part of the depreciation allowance for the year and, therefore, it is entitled to be set off either against income from business or profession or against income under any other head 2.2 He should have found that unabsorbed depreciation claimed under set off belongs to same business which is continued to be carried on and hence eligible for set off. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim for depreciation for the year was not correct. 10.1 The Appellant submits that the depreciation figures given in the show cause notice was book depreciation reserve and book depreciation which have been certified by the Statutory Auditors. The Appellant submit that for IT purposes, it is IT depreciation which has to be taken into account for income computation and that this has been taken correctly. 11. The Commissioner of Income tax erred in holding that the loss on sale shares of Kothari Sugars and Chemicals Ltd was not computed correctly. 11.1 The Commissioner of Income tax failed to note that the shares of M/s. Kothari Sugars and Chemicals Ltd, which had been quoting below par for most of the year during 1999-2000, had been sold at face value and the loss had been correctly computed. 12. The Appellant craves leave to adduce additional grounds at the time of hearing. 3. In support of the grounds, the AR representing the assessee has vehemently argued that the CIT has erred in directing the Assessing Officer to complete de novo assessment by exercising jurisdiction under section 263 of the Act . On merits as well, his contentions are that whilst finalizin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation vs. CIT 225 ITR 795, he held that the expenses incurred in connection with the shares issued has to be treated as capital expenditure. Accordingly, the Assessing Officer disallowed the amount of ₹ 7,17,202/- and added it in assessee s total income. Whilst finalizing the assessment, the Assessing Officer had also considered carried forward loss i.e. business loss and unabsorbed depreciation. 7. Since the Assessing Officer while finalizing the regular assessment aforesaid had not discussed or verified in detail, the issues of inter unit transfer of power and steam and computation of book profit, claim of depreciation on assets transferred to subsidiary, computation of profits on transfer of power undertaking, set off of unabsorbed depreciation against capital gains and loss on transfer of shares claimed under the head capital gains , the CIT served a notice under section 263 of the Act dated 05.03.2010 to the assessee for revising the assessment. The assessee filed reply to the same dated 16.03.2010 supporting the assessment order. The CIT was not convinced with the assessee s pleas in support of the assessment order. Therefore, he has directed the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue respectively; have challenged the order of the Commissioner of Income Tax (Appeals) III, Chennai dated 30.01.2012 in ITA No. 458/10-11/A-III for the assessment year 2000-01, in proceedings under section 143(3) r.w.s. 263 of the Income Tax Act 1961 [in short the Act ]. 10. In assessee s appeal No. 791/Mds/2012, the grounds raised read as under: 1. The order of The Commissioner of Income tax (Appeals) is contrary to law facts and circumstances of the case. 2. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of the depreciation applicable for the period 01.03.2000 to 31.03.2000 relating to the cogeneration division and added back in the income of the appellant. 2.1 The Commissioner of Income tax (Appeals) ought to have appreciated that the transfer of undertaking was as a going concern and the valuation had been approved by the High Court 2.2 The Commissioner of Income tax (Appeals) ought to have appreciated that the appellant held the assets of cogeneration division for 11 months from . April, 1999 to February, 2000 and transferred the assets to Terra Energy Ltd on 01.03.2000. Since the appellant held the assets for more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 to Form 3CD wherein the particulars of payments made to person specified under sec.40A(2)(b) are to be reported. 3.3 The CIT(A) ought to have appreciated that even in item no.11 to Note on accounts, though there is a mention of power purchased from Terra Energy Ltd at 65,19,146 kwh under the head 'Captive Consumption', there is no mention of either consumption of steam by the assessee or purchase of steam from Terra Energy Ltd. 3.4 The CIT(A) ought to have appreciated that there is no basis for the assessee's claim regarding purchase of steam by the assessee from Terra Energy Ltd as claimed before him and that the addition has been rightly made by the Assessing Officer. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored. 11. Brief facts common to both cases are that in pursuance to the above said order of the CIT dated 26.03.2010 passed under section 263 of the Act directing the Assessing Officer to make fresh assessment [subject matter of I.T.A. No. 653/Mds/2010 decided hereinabove], the Assessing Officer proceeded to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer did not subscribe to assessee s contention and held that the claim of depreciation was liable to be declined for the period from 01.03.2000 to 31.03.2000. The same has also been confirmed by the CIT(A). 15. The contentions of the assessee before us is that since the scheme of the Act i.e. section 32 (1) 2nd proviso stipulates that in case the assets are put to use for a period of less than 180 days a claim of depreciation is restricted to 50% and in case the assets were used by the assessee for more than 180 days, the claim is liable to be accepted. We are unable to accept this argument of the assessee. In our opinion, 2nd proviso has to be read in conjunction with the 5th proviso incorporated by the legislature by the Finance Act, 1999 with effect from 01.04.2000, which reads as under: Provided further that where an asset referred to in clause ( i) or clause (ii) or clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 2.5 7. Facts pertaining to these grounds are that in the consequential assessment in furtherance to the directions of the CIT under section 263 of the Act , when the Assessing Officer proceeded with the assessment, he noticed from the enclosures filed with the return that the assessee had set off unabsorbed depreciation and carried forward losses against capital gain. The capital gain above said had arisen on account of vesting of assessee s assets with M/s. Terra Energy Limited (supra). In the assessment order, the Assessing Officer disallowed assessee s contention by holding that under section 32(2)(iii) of the Act such claims of previous year can be set off only against income from business or profession not against capital gains. Therefore, by making reference to case law of Special Bench of Mumbai ITAT in DCIT vs. Times Guaranty Ltd. 4 ITR (Trib) 210 (Mum)(SB), the Assessing Officer made addition of an amount of ₹ 12,32,06,695/- in assessee s total income. 18. In appeal, the CIT(A) accepted assessee s contention for statistical purpose by observing that ratio of the above said Special Bench decision had, in fact, held that unadjusted depreciation brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed in response to notice under s. 148 of the Act. In the said return the assessee claimed set off of capital gains amounting to ₹ 10.57 lakhs against the brought forward unabsorbed depreciation. The assessee s explanation that prior to 1996 unabsorbed depreciation could be set off against any other head of income and could be carried forward individually. But as per the amendment under Finance Act, 1996 w.e.f. 1st April, 1997 the cumulated unabsorbed depreciation brought forward as on 1st April, 1997 could be set off against the taxable business profit or income under any other head for the asst. yr. 1997-98 and seven subsequent years was rejected and the AO brought the capital gains of ₹ 10,51,894 and assessed to tax and completed the assessment. Against that order, the assessee preferred an appeal before the CIT(A) and the CIT(A) upheld the order of the AO and dismissed the appeal filed by the assessee on the ground that the unambiguous amended provision did not support the case of the assessee. Against that order, the assessee preferred an appeal before the Tribunal. The Tribunal accepted the view of the assessee and remitted the case to the AO for verification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the unabsorbed depreciation against the profit of the succeeding years was limited to eight years. The clarification of the Finance Minister in the Parliament is also to the effect that inasmuch as the cumulated unabsorbed depreciation brought forward as on 1st April, 1997 could still be set off against the taxable business profit or income under any other head for the asst. yr. 1997-98 and seven subsequent years vide (1996) 222 ITR (St) 36. Circular of the CBDT No. 762 dt. 18th Feb., 1998 [(1998) 145 CTR (St) 5 : (1998) 230 ITR (St) 12] also clarifies the issue to the following effect (page 27) : Sub-s. (2) of s. 32, as it existed upto asst. yr. 1996-97, provided that the unabsorbed depreciation of a year shall be added to the amount of the allowance for depreciation of the following previous year and deemed to be part of that allowance. Therefore, the unabsorbed depreciation allowance, if any, of the asst. yr. 1996-97 shall be added to the amount of the allowance for depreciation of asst. yr. 1997-98 and deemed to be part of the allowance for this year. In other words, the unabsorbed depreciation allowance of asst. yr. 1996-97 shall be added to the allowance of 1997-98 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sturbed the findings of the Assessing Officer. On the other hand, on assessee s behalf, submissions have been made to uphold CIT(A) s order. 24. We have heard both sides at length and also gone through the relevant findings of the Assessing Officer as well as CIT(A) and case law cited by the assessee i.e. CIT vs. TANFAC Industries Ld.: S.L.P. (C) No. 18537 of 2009 decided by the Hon ble Supreme Court vide order dated 27.07.2009. Both parties are not disputing the facts relevant to the ground. The only question is that in the assessment order, the Assessing Officer had not taken into consideration the cost of steam purchased by the assessee for the purpose of producing power. In appeal, the CIT(A) has quantified the cost at ₹ 156/- per tonne. Before us, the Revenue has not produced any material so as to controvert the findings of the CIT(A) about the steam received and its cost. We also notice that in the above said case law as well, the Hon ble Supreme Court has held that in an issue pertaining to special deduction under section 80IA of the Act that the concerned assessee is entitled to claim deduction qua the value of the steam used for captive consumption. Nevertheless ..... X X X X Extracts X X X X X X X X Extracts X X X X
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