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TMI Blog2025 (5) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the provision for deferred tax liability as per AS 22 issued by the Institute of Chartered Accountants of India is an unascertained liability under Explanation (c) to sub-section (2) of Section 115JB for the purpose of computing minimum alternate tax, despite the standard being mandated by Section 211(3C) of the Companies Act, 1956? 3. In view of the submissions made by the learned counsel for the Appellant/Assessee and the learned counsel for the Respondent/Income Tax Department, we proceed to frame the following supplementary question of law as Substantial Question of Law No.4:- 4. Whether the Appellant/Assessee was precluded from pursuing the remedy under Section 154 of the Act, merely because an Appeal under Section 246A of the Act was filed subsequently before the Appellate Commissioner against the same assessment order against which the Appellant/Assessee had earlier filed application under Section 154 of the Act? 4. When the case was taken up for further hearing, the learned counsel for the Appellant/Assessee submitted that the Appellant/Assessee is not pressing the Substantial Question of Law No.3. 5. It is therefore submitted that the Substantial Ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led on 29.10.2004 for the Assessment Year 2002-2003 was filed beyond the statutory period of limitation under Section 139(5) of the Act. (viii) The revised Return of Income was actually filed pursuant to a Notice dated 16.04.2003 issued to the Appellant/Assessee under Section 143(2) of the Act before the regular Return of Income filed by the Appellant/Assessee on 31.10.2002 for the Assessment Year 2002-2003 was scrutinized. (ix) The Appellant/Assessee thus offered income from the sale of land as taxable income, since the land sold to its subsidiary company was converted into stock-in-trade and since the exemption claimed under Section 47A of the Act was withdrawn by the Appellant/Assessee. (x) While offering the aforesaid capital gains from the sale of land to its subsidiary company as taxable income, the Appellant/Assessee claimed to set off the unabsorbed depreciation that had remained unutilized from the Assessment Year 1999-2000 against the tax liability from the aforesaid capital gains under Section 32 read with Section 72 of the Act. (xi) Meanwhile, an Assessment Order dated 28.03.2005 was passed under Section 143(3) of the Act by the Appellant/Assessee for the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer under Section 154 of the Act, it was not open for the Appellate Commissioner to re-look into the same and that the Appellate Commissioner should have treated the appeal in so far as that issue is concerned as not pressed for. 10.1. It is further submitted that the Appellate Commissioner ought not to have passed an order adverse to Order dated 25.08.2005 of the Assessing Officer passed under Section 154 of the Act. 10.2. The learned counsel for the Appellant/Assessee would submit that even on merits, the Tribunal has committed an error in disallowing the claim for setting-off the tax liability arising out of long term capital gains against the unabsorbed depreciation which had remained unutilized. 10.3. It is submitted that the only remedy that was available to the Department was under Section 263 of the Act before the jurisdictional Commissioner of Income Tax in the exercise of the revisional power given to the Judicial Commissioner under the Act. 10.4. It is submitted that in the light of the Order dated 25.08.2005 of the Assessing Officer passed under Section 154 of the Act, the Order of the Appellate Commissioner dated 15.11.2006 disallowing the claim to set off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02-2003. 11.5. Therefore, it is submitted that during the period in dispute, there was no scope for allowing the unabsorbed depreciation to be set off against the income arising from capital gains and therefore the impugned order of the Tribunal does not merit any interference. 11.6. The learned counsel for the Respondent/Income Tax Department summarized his submissions as follows:- (i) The Appellant/Assessee cannot file an appeal against Order of an Assessing Officer when the issue is already before the Assessing Officer under Section 154 of the Act, notwithstanding the fact that Appellant/Assessee may or may not secure an Order under Section 154 of the Act. (ii) There is no scope for pursuing a petition under Section 154 Act once an appeal is filed against the same Assessment Order. (iii) There is no scope for allowing the unabsorbed depreciation for being set-off against the income arising from capital gains in view of the amendment to Section 32(2) vide Finance Act, 2001 with effect from 01.04.2002. Hence, prays for dismissal of this Appeal. 11.7. The learned counsel for the Respondent/Income Tax Department further submitted that the power under Section 251(1)(a) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intimation under sub-section (1) of section 200A;] (d) amend any intimation under sub-section (1) of section 206CB.] (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.] (2) Subject to the other provisions of this section, the authority concerned - (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice [by the assessee or by the deductor,] [or by the collector], and where the authority concerned is the Commissioner (Appeals)], by the [Assessing Officer] also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee [or the deductor] [or the collector], shall not be made under this section unless the authority concerned has given notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 116 of the Act only with a view to rectify the mistake apparent from the face of record in the Order that was earlier passed. It has to be borne in mind that an application under Section 154 of the Act is confined only to rectify an error apparent on the face of record. The machinery under Section 154 of the Act is not intended to be used as a substitute for an appeal. 21. Under no circumstances, an application under Section 154 of the Act can be allowed to be transformed into an appeal in dis-guise. This position stands clarified by several decisions of the Court. Reference can be made to the following decision of the Courts:- (i) CIT Vs. Hero Cycles (P) Ltd [1997] 94 Taxman 271 (SC); (ii) CIT Vs. Shri Eklingji Trust [2001] 119 Taxman 527 (Rajasthan); (iii) Yogendra Prasad Santhosh Kumar Vs. CIT(A) [2014] 44 Taxmann.com 299 (AII) and (iv) CIT Vs. Hero Cycles (P) Ltd [1997] 94 Taxman 271 (SC) 22. The learned counsel for the Appellant/Assessee heavily relied on sub-section (1A) to Section 154 of the Act to persuade us to come to a conclusion that the Appellant/Assessee was not precluded from pursuing the twin remedy both before the Assessing Officer under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pending, before the Appellate or the Revisional Authority as the case may be. The Original Authority can exercise the power vested with them under Section 154 of the Act, before the Appellate or the Revisional Authority as the case may be passes an Order within their domain. 29. The Original Authority before whom such an application is filed has to merely see whether the application is indeed filed for rectification of error apparent on the face of record and is not appeal in disguise. 30. It is not open for the Respondent/Income Tax Department to contend that if an appeal is pending before the Appellate Commissioner under Section 246A of the Act or any other proceedings are pending before any Revisional Authority under the Act, no order can be passed in view of Section 154(1A) of the Act. 31. All that Section 154(1A) of the Act contemplates is that an authority who has passed an Order against which an Appellate/Revisional Authority has passed an Order, the Original Authority who had earlier passed the Order which is sought to be rectified cannot pass an Order revising such order in respect of which such Appellate/Revisional Authority has passed an Order. 32. Merely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of being heard by way of a Show Cause Notice. This is evident from a reading of sub-bvsection (2) to Section 251 of the Act. Section 251(2) of the Act reads as under:- "251. Powers of the Commissioner (Appeals).- (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enchance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction Explanation.-In disposing of an appeal, the [Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [Commissioner (Appeals)] by the appellant." 40. Explanation to Section 251 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxpayer sought a writ of prohibition to prohibit the Special Commissioners from hearing the appeal. It was held by the Court of Appeal that notice of appeal having once been given, the Commissioners were bound to proceed in accordance with the Income-Tax Acts and determine the true amount of the assessment. At page 493 of the Report Lord Wright observed as follows : " -in making the assessment and in dealing with the appeals, the Commissioners are exercising statutory authority and a statutory duty which they are bound to carry out. They are not in the position of judges deciding an issue between two particular parties. Their obligation is wider than that. It is to exercise their judgment on such material as comes before them and to obtain any material which they think- is necessary and which they ought to have, and on that material to make the assessment or the estimate which the law requires them to make. They are not deciding a case interparties; they are assessing or estimating the amount on which, in the interests of the country at large, the tax- payer ought to be taxed." The principle that emerges as a result of the authorities of this Court is that the Appellate Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Orders passed under Section 154 of the Act. DECISION ON THE SUBSTANTIAL QUESTION OF LAW NO.2:- 46. We now proceed to answer the Substantial Question of Law No. 2 i.e., Whether the Tribunal was justified in upholding the Order of the Appellate Commissioner in so far as the order fails to recognize the claim of the Appellant/Assessee to set off the unabsorbed depreciation from the Assessment Year 1999-2000 against the profits arising from the long term capital gains in the Assessment Year 2002-2003. 47. The Impugned Order dated 18.05.2007 of the Tribunal deals with several aspects including the issue relating to unabsorbed depreciation. The present Tax Case Appeal relates to the Assessment Year 2002-2003 i.e., Previous Year 2001-2002. In other words, the dispute relates to the income earned by the Appellant/Assessee between 01.04.2001 and 31.03.2002. 48. The Appellant/Assessee had filed a Return of Income under Section 139(1) of the Act for the Assessment Year 2002-2003 on 31.10.2002 for the aforesaid period. A copy of the calculation in the book profit filed along with the aforesaid Return of Income for the purpose of Section 115JB of the Act is not available. 49. In the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed. 56. As per Section 32(2) of the Act as amended by Finance Act, 2000 with effect from 01.04.2001, where in the assessment of the assessee, full effect cannot be given to any allowance under clause (ii) of sub section (1) of Section 32 of the Act in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or that part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be:- (i) shall be set off against te profits and gains, if any, of any business or profession carried on him and assessable for that assessment year; (i) shall be set off against te profits and gains, if any, of any business or profession carried on him and assessable for that assessment year; (ii) if the unabsorbed depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be:- (i) shall be set off against the profits and gains, if any, of any business or profession carried on him and assessable for that assessment year; (i) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year; (iii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and clause (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and - (a) It shall be set off against the profits and gains if any of any business or profession carried on by him and assessable for that assessment year; (b) If the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment year immediately succeeding assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/Assessee had declared the business income as Rs.4,24,86,856/-. However, the Assessing Officer had also questioned the computation of the long term capital gains arising from the sale of land and building to its subsidiary. 62. The following table discloses the method adopted by the Appellant/Assessee and by the Department to arrive at the aforesaid long term capital gain of Rs. 2,96,47,500/- and Rs. 3,57,81,900/- respectively. As per Appellant/Assessee As per Department Fair market value of the land in 1981 (Rs.9,600 x 400 cents) = Rs.38,40,400/- (Rs.6,000x400 cents) = Rs.24,00,000/- Sale consideration of the land Rs.4,60,05,900/- Rs.4,60,05,900/- Index cost of fair value 426X 38,40,400/100 = Rs.1,63,58,400/- 426X 24,00,000/100 = Rs.1,02,24,000/- Long term capital gain Rs.2,96,47,500/- Rs.3,57,81,900/- 63. As per sub-clause (i) to subsection (2) to Section 32 of the Act, as it stood between 01.04.2001 to 31.03.2002, the unabsorbed depreciation could be set of against the profit and gains from business or any profession carried on by an Assessee which is assessable for that Assessment Year. 64. If the unabsorbed depreciation cannot be set off agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Tax Case Appeal stands disposed of and the Substantial Questions of Law are answered as follows:- Question No.1: Whether the Income Tax appellate Tribunal is right in not admiring a fresh ground raised for the first time before the Tribunal, when it involves a pre-question of law and involves no additional investigation into facts? Decision: Not Answered. Question No.2: Whether the unabsorbed depreciation can be set off against the long term capital gain for the assessment year in question? Decision: Answered in favour of the Appellant/Assessee and against the Respondent/Income Tax Department. Question No.3: Whether the Income Tax Appellate Tribunal is right in holding that the provision for deferred tax liability as per AS 22 issued by the Institute of Chartered Accountants of India is an unascertained liability under Explanation (c) to sub-section (2) of Section 115JB for the purpose of computing minimum alternate tax, despite the standard being mandated by Section 211(3C) of the Companies Act, 1956? Decision: Answered against the Appellant/Assessee. Question No.4: Whether the Appellant/Assessee precluded from pursuing the remedy under Section 154 of the Act, if an Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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