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TMI Blog2008 (2) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... rward losses of Devangere Cotton Mills Limited which was merged with the petitioner w.e.f.1st July 1992. Respondent no.2 passed an assessment order dated 31st March 1995 under section 143(3) of the Act in which he determined the petitioner's total income at Rs.54,25,840 after setting off the entirety of the losses (Rs.4,17,02,772) of the erstwhile Devangere Cotton Mills Limited and 2/3rd of the unabsorbed depreciation and investment allowance as per the then prevailing law Rs.3,59,97,750 of the said erstwhile Devangere Cotton Mills Limited. Respondent No.2 recorded in the order that the balance of unabsorbed depreciation and investment allowance of Rs.1,79,98,975 was allowed to be carried forward to the next year. The amount comprised of unabsorbed depreciation of Rs.1,48,40,552 and unabsorbed investment allowance of Rs.31,58,423. Being aggrieved by the several disallowances and additions made by Respondent No.2, the petitioner filed an appeal before the Commissioner of Income-tax (Appeals) which was disposed of vide order dated 29th September 1995. Respondent No.2 passed an order dated 2nd August 1999 to give effect to the said order of the Commissioner (Appeals) and he dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Commissioner (Appeals) and he determined the petitioner's total income at Rs.2,67,71,123. (d) That on receipt of the order dated 16.9.2003 for the year 1993-94, the petitioner addressed an application dated 20th October 2003, addressed to the Deputy Commissioner of Income Tax. In this application, the petitioner referred to the order dated 16th September 2003 giving effect to the order of the Commissioner (Appeals) for the assessment year 1993-94 in which a loss of Rs.1,77,46,293 had been determined. The petitioner pointed out that the said loss was entitled to be carried forward and set off against the income for the assessment year 1994-95. It was also pointed out that the loss of Rs.76,52,499, being the unabsorbed depreciation of the assessment year 1992-93 would also be available for carry forward and set off against the income for the assessment year 1994-95. The petitioner annexed a detailed statement in which it was pointed out that if the aforesaid unabsorbed depreciation and investment allowances for the assessment year 92-93 (Rs.76,52,499) and the assessment year 1993-94 (Rs.1,77,46,293) were set off, the income for the assessment year 1994-95 would be Rs.13,72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1,79,98,975 was allowed to be carried forward out of which Rs.76,52,499 was set off against the income for assessment year 1993-94 and balance of Rs.1,03,46,476 was set off against the income of the assessment year 1994-95. He recorded that the balance amount of Rs.76,52,499 was carried forward depreciation available for set off. In respect of the assessment year 1993-94, Respondent No.2 noted that as per the assessment order the total income was determined at Nil after setting off the brought forward depreciation/investment allowance aggregating Rs.76,52,499 of the preceding year. He also noted that pursuant to the order dated 16th September 2003 passed to give effect to the order of the Commissioner (Appeals), the unabsorbed depreciation was worked out at Rs.1,77,46,283. He held that the income for the assessment year 1994-95 had to be determined after allowing carried forward unabsorbed depreciation of Rs.76,52,499 for the assessment year 1992-93 and Rs.1,77,46,283 for the assessment year 1993-94. After such set off, he determined the revised total income for the assessment year 1994-95 at Rs.13,72,341. (g) Respondent No.2 thereafter issued a notice dated Nil under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and cannot be rectified u/s.154. (k) In response to the said notice, the Petitioner addressed a letter dated 24th August 2006 in which it made the following points: (i) It was pointed out that vide effect order dated 16th September 2003 passed for the assessment year 1993-94, a loss (actually unabsorbed depreciation) of Rs.1,77,46,293 had been determined and Respondent No.2 was duty bound to set off the same against the income for the assessment year 1994-95 which had been determined at Rs.2,67,71,123 vide effect order dated 29th July 1999. (ii) The Petitioner relied on the section 240 of the Act which states that a refund becoming due to an assessee as a result of the order passed in appeal is required to be given even without any claim having been made. It was emphasized that the Petitioner had vide letter dated 20th October 2003 made the said claim for refund. (iii) It was further submitted without prejudice that when the effect order dated 29th July 1999 was passed for the assessment year 1994-95 determining the income at Rs.2,67,71,123, the Petitioner did not have the benefit of the order determining the loss of Rs.1,77,46,293 for the assessment year 1993-94 because it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of limitation for the assessment year 1994-95 had to be calculated from the end of the financial year in which the order giving effect to the order of the Commissioner (Appeals) for the assessment year 1993-94 was passed. (ii) On the merits, the Petitioner set out the provisions of section 32(2) of the Act as applicable for the assessment year 1994-95 and pointed out that carried forward unabsorbed depreciation was equivalent to current depreciation and could be set off against income chargeable under any head. It was emphasized that the unreported decision of the Tribunal in the case of E-Merck Limited relied upon by the Respondent No.2 was in favour of the Petitioner. (n) The petitioner further filed written submissions dated 31st August 2007 in which it made the following points :- (i) That an order passed to give effect to an appellate order was not an order of rectification under section 154, but was a mere recomputation of income which can be treated as having been passed under section 143 of the Act. The Petitioner relied on the sub-section (3) of section 153 of the Act which provides that the time limit for completion of assessment and reassessment are not applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsorbed depreciation of assessment year 1992-93 and 1993-94 to the tune of Rs.2,53,98,782/- was not valid and proper and therefore, this mistake has been rectified by respondent no.1 vide his order dated 7.9.2007. It was contended that the impugned order passed by respondent no.1 on 7.9.2007 was justified and in accordance with law. 5. On behalf of the petitioner, affidavit-in-rejoinder dated 4.1.2008 was filed by Mr. Vinod Joshi and it was contended that the reference to section 119(2)(b) was misconceived. That in the facts of the present case the question of the petitioner's application being "admitted" after the "expiry of the time limit" did not arise. The petitioenr's application was well within the time limit and his claim has been wrongly rejected on merits on the basis of an erroneous interpretation of the provisions of the Act. It was contended that in the impugned order, section 32(2) of the Act as it stood in the assessment year 1994-95, unabsorbed depreciation was akin to current depreciation and could be set off all categories of income. 6. On behalf of the revenue an additional reply came to be filed on 16.2.2008 and this contained a tabular form indicating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been challenged by them before the Commissioner of Income Tax (Appeals) and this appeal pertaining to the assessment year 1993-94 was disposed off vide an order dated 14.8.2002, granting certain benefits to the petitioner. Consequent to this appellate order, respondent no.2 had passed an order dated 16.9.2003 to give effect to the said appellate order. The net result was that it was determined that there was an unabsorbed depreciation of Rs.177,46,293 for the assessment year 1993-94 and than an amount of Rs.76,52,499 representing absorbed depreciation/investment allowance was "freed" thus being available for set off against future income. 10. For the assessment year 1994-95, the return was assessed and the matter was carried in appeal. In appeal, the Commissioner of Income Tax (Appeals) determined the petitioner's total income as Rs.2,67,71,123. This amount was fixed without accounting for unabsorbed depreciation of the assessment years 1992-93 and 1993-94. On the petitioners' application dated 20.10.2003 and their subsequent representations dated 6.6.2006 and 8.6.2006 requesting that the unabsorbed depreciation for the years 1992-93 and 1993-94 should be set off against the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nwhile, the Income-tax Officer had completed the assessment for the years 1967-68 to 1971-72. The Income-tax Officer determined the loss for the assessment year 1963-64 to be carried forward at Rs.18041 but he did not adjust it against the income of the subsequent years. On these facts, Madras High Court observed as under :- " Held, that once the Income-tax Officer had determined the loss for 1963-64 and held that the assessee was entitled to carry forward the same, he was not justified in his view that this loss could not be set off against business income in the assessment years 1970-71 and 1971-72. The Income-tax Officer was duty bound to rectify the assessments already completed by him and allow the set off." 13. The Division Bench of the Madras High Court in the case of L. Alagusundaram Chettiar v. CIT reported in [1994] 210 ITR 614 while deciding the question as to whether limitation prescribed under Section 154 or under section 147(b) were meant to be applied to amendments made consequential to the decisions of the High Court or the Supreme Court after referring to Kanaka [1989] 177 ITR 88 (Mad) held that the limitation prescribed under section 154 or under 147 (b) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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