Tca/90/2009 Of Alankar Business Corpn Ltd v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE C.V.KARTHIKEYAN T.C.A.No.90 OF 2009 M/s.Alankar Business Corporation Ltd.(Formerly Chennai Bottling Co.Ltd) 15, Shastri Road, Ram Nagar,Coimbatore. .. Appellant -vs- The Income Tax Officer, Company Ward – I (1),Chennai- 600 034. ... Respondent Appeal under Section 260A of the Income Tax Act,1961,against the order of the Income Tax Appellate Tribunal, Chennai'A' Bench, dated 18.07.2008, passed in ITA No.286/Mds/2006,against the order of the Commissioner of Income Tax(Appeals)-VIII, Chennai dated 21.11.2005 made in ITA Tr.No.21/2004-05against the order dated 30.03.2004 passed by the Income TaxOfficer, Company ward I(1), Chennai 34. For Appellant : Mr.V.S.Jayakumar For Respondent : Mr.T.Ravi Kumar, Senior Standing Counsel. JUDGMENT(By Dr.Vineet Kothari,J.) This Appeal has been filed by the Assessee, namely,M/s.Alankar Business Corporation Ltd., Coimbatore, under Section260A of the Income Tax Act, in short, 'Act', raising thefollowing Substantial Questions of Law, which were admitted by aCo-ordinate Bench of this Court on 26.03.2009, arising from the https://hcservices.ecourts.gov.in/hcservices/ order of the learned Income Tax Appellate Tribunal, Chennai 'A'Bench, dated 18.07.2008, for Assessment Year 2001-2002. ''1. Whether the Tribunal was right in holdingthat the Unabsorbed Depreciation is not eligible tobe carried forward under Section 32 (2) of theIncome Tax Act,1961 ? 2. Whether the Tribunal was right in rejectingthe alternative plea and holding that the UnabsorbedDepreciation cannot be set off against the ShortTerm Capital Gain under Section 50 read with Section72 of the Income Tax Act,1961 ? 2. The question about carry forward of 'UnabsorbedDepreciation' was dealt with by the learned Tribunal and claimwas disallowed with the following observations : ''20. We heard both sides in detail on thisissue. As already stated, the treatment ofunabsorbed depreciation allowance was similar andanalogous upto assessment year 1996-97 by virtue ofthe amendment brought in by the Taxation Laws(Amendment & Miscellaneous) Act,1986 which was witheffect from 1.4.88 and also by virtue of DirectTaxation (Amendment) Laws,1987 which was with effectfrom 1.4.1989 and the same position was re-introduced from the assessment year 2002-2003onwards by Finance Act,2001. The unabsorbeddepreciation can be carried forward to subsequentassessment year which will take the colour ofcurrent depreciation of that subsequent year and canbe set off against any income arising in thatparticular assessment year and further possible tobe carried forward to subsequent years without anytime limit. But, this was not the positionavailable in the interim period from the assessmentyear 1996-97 to 2001-02. The period of carryforward was restricted to eight years; so also thebrought forward unabsorbed depreciation can be setoff only against business income of the subsequentassessment year. Literally speaking, this lawapplies to the impugned assessment year 2001-02 forwhich the assessee is in appeal before us. Eventhough the earlier position was re-introduced by asubsequent amendment, as far as the impugnedassessment year 2001-02 is concerned, the relevantlaw was declared by the Finance (No.2) Act,1996.The restriction imposed on carry forward and set offof unabsorbed depreciation allowance is clearlyapplicable to a case falling in the assessment year2001-02. The consequent amendment brought in by the Finance Act,2001 does not change the position. Thisis because the Act has made it very clear that theamendment could be effective with effect from1.4.2002; that is for the assessment year 2002-03onwards. When the amending statute declares thatthe amended law is applicable with effect from aparticular assessment year onwards, no rule forretrospectively can be applied thereto. As the wordsof statute were clear, there is no need of anyexertion of interpretation. Therefore, in the lightof the decisions cited by the ld. Senior D.R., wefind that the assessee is governed by the positionof law declared by Finance Act,1996 and therefore,fettered by the restrictions and accordingly theunabsorbed depreciation cannot be set off againstshort term capital gains. This issue is decidedagainst the assessee. 21. The third and alternative ground raised bythe ld. C.A. at the time of argument and reiteratedin the written submission filed by him is that theshort term capital gains sought to be set off by theassessee should be treated as business income as theshort term capital gains was computed under Section50 of the Income-tax Act,1961. 22. It is the case of the ld. C.A. that eventhough the computation was made under the head''capital gains'', virtually the point arises out ofthe sale of assets used in the business anddepreciable in the course and therefore, always inthe nature of business profit. 23. The above alternative contention alsocannot be accepted for the reason that the profitarises out of the sale of block of assets has beenspecifically treated as short term capital gainunder Section 50 of the Income-tax Act,1961 and headof income under which it has to be computed is''income from other sources'' and not ''profits andgains of business or profession''. When the statutestates for the interim period that the broughtforward unabsorbed depreciation cannot be set offagainst any income other than the business income itis not possible to set off the unabsorbeddepreciation to the short term capital gainscomputed under a specific head ''capital gains''. 24. In this context, it is fruitful to refer tothe decision of Supreme Court in the case of ApolloTyres Ltd. v. CIT (2002) 255 ITR 273 (SC) where theCourt has held that Assessing Officer cannot disturbthe book profit as certified under the Companies Actand where the issue was whether the UTI dividends could be treated as part of business income. Butthe crucial difference in that case considered bythe Supreme Court is that the dividend income wasconsidered as income of the eligible business andnot the income computed as such under the head''profits and gains of business or profession''.Therefore, no analogy can be drawn from thatdecision either. Therefore, this contention alsofails. 25. In result, this appeal filed by theassessee is dismissed.'' 3. Mr.V.S.Jayakumar, learned counsel for the Assesseehas urged before us that the learned Tribunal has erred inrejecting the said claim of the Assessee because prior toAmendment to Section 32 by the Finance Act,2001, with effectfrom 01.04.2002, the carry forward of the said 'UnabsorbedDepreciation' was allowed without limitation of eight years andthe Assessment Year 2001-2002 in question being the last year,the Assessee was entitled to carry forward and set off the'Unabsorbed Depreciation' for the present year also. 25. In result, this appeal filed by theassessee is dismissed.'' 3. Mr.V.S.Jayakumar, learned counsel for the Assesseehas urged before us that the learned Tribunal has erred inrejecting the said claim of the Assessee because prior toAmendment to Section 32 by the Finance Act,2001, with effectfrom 01.04.2002, the carry forward of the said 'UnabsorbedDepreciation' was allowed without limitation of eight years andthe Assessment Year 2001-2002 in question being the last year,the Assessee was entitled to carry forward and set off the'Unabsorbed Depreciation' for the present year also. 4. On the contrary, Mr.T.Ravikumar, learned SeniorStanding Counsel for the Revenue, has relied upon a decision ofthe Hon'ble Supreme Court in the case of Peerless GeneralFinance and Investment Co. Ltd. v. Commissioner of Income Tax,(2016) 380 ITR 165 (SC), by which, the Hon'ble Supreme Court, bya short order, affirmed the judgment of the Calcutta High Court.The said order passed by the Hon'ble Supreme Court is quotedbelow for ready reference :''1. Heard the learned counsels for theparties and perused the relevant material.2. The special leave petition is dismissedsubject to the observation that the unabsorbeddepreciation as on April 1, 1997, can be set offagainst the income from any head for the immediateassessment year following April 1, 1997(assessment year 1998-99)*, and thereafter ifthere still is any unabsorbed depreciation thesame can be set off only against the businessincome for a period of eight (08) assessmentyears.3. The special leave petition is disposed ofin the above terms.* As corrected by the order of the SupremeCourt dated 16-12-2015.'' 5. Having heard the learned counsels for the parties,we are of the opinion that since the matter of calculation of'Unabsorbed Depreciation' in which it was first computed and thelimitation of eight years prior to amendment has not been https://hcservices.ecourts.gov.in/hcservices/ properly computed in the present case, the matter deserves to beremanded back to the learned Assessing Authority for undertakingsuch computational exercise once again. 6. Therefore, without answering the aforesaid questionsof law framed for our consideration, we remand the matter backto the learned Assessing Authority in the present case forAssessment Year 2001-2002 for fresh consideration. The Assesseewill be free to raise his factual as well as legal contentionsbefore the learned Assessing Authority and the AssessingAuthority will be free to take a fresh view in the matter. TheAssessing Authority may pass fresh orders within six months fromtoday. 7. Appeal of the Assessee disposed of accordingly. Nocosts. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant RegistrardixitTo1.The Income Tax Officer, Company Ward – I (1), Chennai- 600 034.2.Income Tax Appellate Tribunal, Chennai 'A' Bench, Chennai.3.The Commissioner of Income Tax (Appeals-VIII) Chennai.+1cc to Mr.V.S.Jayakumar, Advocate, S.R.No.32370+1cc to Mr.T.Ravikumar, Advocate, S.R.No.32340T.C.A.No.90 OF 2009 PM(CO)vrn/20.05.2019