The Commissioner Of Income Tax,Chennai v. M/S.dcm Hyundai Limited

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.08.2021 CORAM The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP The Commissioner of Income tax,Chennai... Appellant/Respondent -vs- M/s.DCM Hyundai Limited,No.2, Ground Floor, Sri Ram Nagar,Prakash Nagar Main Road,Thiruniravur-602 024.PAN: .. Respondent/Appellant Prayer :- Appeal under Section 260A of the Income Tax Act, 1961againsttheorderdated09.12.2015madeinI.T.A.No.1394/Mds/2015 on the file of the Income Tax AppellateTribunal, Madras 'A' Bench, Chennai for the assessment year2007-08 against the order of the Commissioner of Income Tax,Chennai-I, Chennai – 34 dated 29.03.2012 in C.No.218(49)/CIT-I/263/2011-12 and against the order of the AssistantCommissioner of Income-Tax, Company Circle-I(4), Chennai-34dated 23.12.2009 in PAN/GIR No. for the Assessmentyear 2007-08. For Respondent :Mr.B.Ramanakumar &Mr.S.Harish Kumar This appeal, by the appellant/Revenue, filed under Section260A of the Income Tax Act, 1961, is directed against the orderdated 09.12.2015 made in I.T.A.No.1394/Mds/2015 on the file of the Income Tax Appellate Tribunal 'A' Bench, Chennai for theassessment year 2007-08. 2.The appeal was admitted on 27.06.2016, on the followingsubstantial questions of law:-"1. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the appeals filed by theassessee before the CIT(A) has to be allowedespecially when the Assessee had consciouslywithdrawn the appeal filed before the CIT(A) byfiling a letter dated 21.01.2015 to that effectbefore the CIT (A)? 2. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that unabsorbed depreciationfor the AY 1996-97 can be set off against theshort term capital gains in the AY 2007-08? and3. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in law in setting aside the order passedu/s.263 when the AO did not conduct properexamination of the claim in respect of set offin respect of provisions of Act as on thatdate?" 3.Heard Mr.T.Ravikumar, learned Senior Standing Counsel forthe appellant/Revenue and Mr.B.Ramanakumar and Mr.S.HarishKumar, learned counsels for the respondent/assessee. 4.It is not in dispute that the substantial questions oflaw framed for consideration have been answered against theRevenue in the case of CIT Vs. Best & Crompton Engineering Ltd.,[T.C.A.No.844 of 2014, dated 02.08.2021]. The relevantparagraphs of the judgment read as follows:- “4.On going through the facts and circumstances,we find that the substantial questions of law, raisedin the present appeal, were considered by this Courtin the case of CIT vs. Sanmar Speciality ChemicalsLtd. reported in (2020) 428 ITR 237 (Madras). Therelevant portion of the judgment reads as follows:-“11. A similar issue was considered by aDivision Bench of the Bombay High Court in thecase of CIT v. Bajaj Hindustan Ltd. [IT AppealNos. 134 to 136 and 140, 141 and 148 of 2018,dated 13-6-2018] following the decision in thecase of CIT v. Hindustan Unilever Ltd. [2016]72 taxmann.com 325/[2017] 394 ITR 73 (Bom.).The special leave petition filed by the Revenue against the above decision was dismissed by theHon'ble Supreme Court in the decision in Pr.CIT v. Bajaj Hindustan Ltd. [SLP (C) Diary No.48020 of 2018, dated 25-1-2019]. 12. In the decision of the Punjab &Haryana High Court in the case of CIT v. G.T.M.Synthetics Ltd. [2013] 30 taxmann.com 83/[2012]347 ITR 458], an identical issue was consideredin the following terms : against the above decision was dismissed by theHon'ble Supreme Court in the decision in Pr.CIT v. Bajaj Hindustan Ltd. [SLP (C) Diary No.48020 of 2018, dated 25-1-2019]. 12. In the decision of the Punjab &Haryana High Court in the case of CIT v. G.T.M.Synthetics Ltd. [2013] 30 taxmann.com 83/[2012]347 ITR 458], an identical issue was consideredin the following terms : '8. The effect of omission of theaforesaid proviso was enumerated by the CentralBoard of Direct Taxes, vide Circular No. 794dated 9-8-2000 [(2000) 245 ITR (Statute)] 21that the unabsorbed depreciation allowancecould be set-off against the income under anyother head even where the business was notcarried on. Clause 22 of the said circular which isrelevant is as under:"22. Requirement of continuance of samebusiness for set-off of unabsorbed depreciationdispensed with: 22.1 Under the existing provisions of sub-section (2) of section 32 of the Income-taxAct, carried forward unabsorbed depreciation isallowed to be set-off against profits and gainsof business or profession of the subsequentyear, subject to the condition that thebusiness or profession for which depreciationallowance was originally computed continued tobe carried on in that year. A similar conditionin section 72 for the purpose of carry forwardand set-off of unabsorbed business loss wasremoved last year. 22.2 With a view to harmonise theprovisions relating carry forward and set-offof unabsorbed depreciation and unabsorbed loss,the Act has dispensed with the condition ofcontinuance of same business for the purpose ofcarry forward and set-off of unabsorbeddepreciation.22.3 This amendment will take effect from1st April, 2001, and will, accordingly, applyin relation to the assessment year 2001-2002and subsequent years."9. The CIT(A) and the Tribunal, thus,rightlyallowedunabsorbeddepreciationrelevant to the assessment year 1996-97 to beset-off against the income from long termcapital gains and income from other sources for the assessment year 2001-2002.' 13. Recently, in the decision of aDivision Bench of the Bombay High Court in thecase of Pr. CIT v. Gunnebo India (P.) Ltd.[2019] 104 CCH 227, the issue was considered infavour of the assessee after referring to thedecision of the Division Bench of the GujaratHigh Court in the case of General Motors India(P.) Ltd., wherein the relevant portions readthus : the assessment year 2001-2002.' 13. Recently, in the decision of aDivision Bench of the Bombay High Court in thecase of Pr. CIT v. Gunnebo India (P.) Ltd.[2019] 104 CCH 227, the issue was considered infavour of the assessee after referring to thedecision of the Division Bench of the GujaratHigh Court in the case of General Motors India(P.) Ltd., wherein the relevant portions readthus : "3. The Revenue carried the matter inappeal. The Appellate Tribunal dismissed theappeal of the Revenue making the followingobservations:- "16. We have observed thatthe current year's depreciation is allowed tobe set-off against the income from business aswell as against the other heads of income andunabsorbed depreciation in carry forward andbecome part of the depreciation of thesubsequent year and the total depreciationbecomes current year's depreciation as persection 32(1) of the Act, which is allowed tobe setoff against the income under any head ofincome. As per the provisions of section 32(2)of the Act r.w.s. 70, 71 and 72 of the Act, itbecomes very clear that the total depreciationcomprising of the depreciation of the relevantassessment year along with the unabsorbeddepreciation of the earlier years becomes thetotal current year's depreciation which isallowed to be set off against income under anyhead of income including long term capitalgain. Accordingly, we find no reason tointerfere with the order of CIT(A) qua thisissue and the same is hereby upheld. We alsohold that as per provisions of section 72 ofthe Act, the unabsorbed business loss (otherthan speculative loss) of earlier years shallbe allowed to be set-off only against theprofits and gains from business carried on bythe assessee of the current year and so on. Weorder accordingly. However, our above decisionwith respect to ground nos. (i) and (ii) raisedin memo of appeal filed by Revenue should beread in conjunction with and subject to ourfindings with respect to ground nos. (iii) and(iv) which are decided by us in the precedingpara's of this order and the computation shallbe made accordingly."4. Having heard the learned counsel for parties and having perused the documents onrecord, we do not find any error in the orderof the Appellate Tribunal. Gujarat High Courtin the case of General Motors India (P.) Ltd.(supra) had considered somewhat similar issue,of course in the backdrop of the assessee'schallenge to a notice of reopening of theassessment. The Gujarat High Court had held andobserved as under:- parties and having perused the documents onrecord, we do not find any error in the orderof the Appellate Tribunal. Gujarat High Courtin the case of General Motors India (P.) Ltd.(supra) had considered somewhat similar issue,of course in the backdrop of the assessee'schallenge to a notice of reopening of theassessment. The Gujarat High Court had held andobserved as under:- "38 Therefore, it can be said that,current depreciation is deductible in the firstplace from the income of the business to whichit relates. If such depreciation amount islarger than the amount of the profits of thatbusiness, then such excess comes for absorptionfrom the profits and gains from any otherbusiness or business, if any, carried on by theassessee. If a balance is left even thereafter,that becomes deductible from out of income fromany source under any of the other heads ofincome during that year. In case there is astill balance left over, it is to be treated asunabsorbed depreciation and it is taken to thenext succeeding year. Where there is currentdepreciation for such succeeding year theunabsorbed depreciation is added to the currentdepreciation for such succeeding year and isdeemed as part thereof. If, however, there isno current depreciation for such succeedingyear, the unabsorbed depreciation becomes thedepreciation allowance for such succeedingyear. We are of the considered opinion that anyunabsorbed depreciation available to anassessee on 1st April, 2002 (asst. yr. 2002-03)will be dealt with in accordance with theprovisions of section 32(2) as amended byFinance Act, 2001. And once the Circular No. 14of 2001 clarified that the restriction of 8years for carry forward and set-off ofunabsorbed depreciation had been dispensedwith, the unabsorbed depreciation from asst.yr. 1997-98 up to the asst. yr. 2001- 02 gotcarried forward to the asst. yr. 2002-03 andbecame part thereof, it came to be governed bythe provisions of section 32(2) as amended byFinance Act, 2001 and were available for carryforward and set-off against the profits andgains of subsequent years, without any limitwhatsoever."14. In our considered view, the above decisions will clearly enure to the benefit ofthe respondent - assessee. 15. Accordingly, the above tax case appeal isdismissed and the substantial question of law isanswered against the Revenue. No costs.” 5.Following the above decision, the substantialquestions of law, raised in this appeal, are answeredagainst the Revenue. Consequently, the tax caseappeal is dismissed.” 5.Thus, by following the above decision, this appeal standsdismissed and the substantial questions of law are answeredagainst the Revenue. No costs. abr18.08.2021 This Appeal having been posted on this day for beingmentioned pursuant to the order of this Court dated 18.08.2021and in the present of Mr.T.Ravikumar, Advocate for the Appellantand of Mr.B.Ramana Kumar, Advocate for the Respondent, the Courtmade the following order: When the matter was listed on 18.08.2021, the appeals weredismissed by answering the substantial questions of law againstthe Revenue, in view of the submissions made by the learnedcounsel on either side. Subsequently, the learned SeniorStanding Counsel mentioned before this Court that substantialquestion of law No.3 needs to be argued separately. Hence, thematter is listed under the caption 'for being mentioned'. 2.Mr.T.Ravikumar, learned Senior Standing Counsel for theappellant-Revenue submits that apart from the substantialquestion of law with regard to unabsorbed depreciation, thejurisdiction of the CIT(A) to invoke the provisions underSection 263 of the Act has also been framed as a substantialquestion of law. When the matter was listed on 18.08.2021, the appeals weredismissed by answering the substantial questions of law againstthe Revenue, in view of the submissions made by the learnedcounsel on either side. Subsequently, the learned SeniorStanding Counsel mentioned before this Court that substantialquestion of law No.3 needs to be argued separately. Hence, thematter is listed under the caption 'for being mentioned'. 2.Mr.T.Ravikumar, learned Senior Standing Counsel for theappellant-Revenue submits that apart from the substantialquestion of law with regard to unabsorbed depreciation, thejurisdiction of the CIT(A) to invoke the provisions underSection 263 of the Act has also been framed as a substantialquestion of law. 3.The other substantial question of law, which has beenframed for consideration is as to whether, on the materialsplaced before the Tribunal, the Tribunal was right in settingaside the order passed under Section 263 of the Act. 4.The learned Senior Standing Counsel appearing for theRevenue referred to paragraphs 8 and 9 of the order passed bythe CIT(A) and submitted that the Hon'ble Supreme Court in thecase of Malabar Industrial Company Ltd. Vs. CIT [reported in (2000) 243 ITR 83], which was relied upon by the assessee, heldthat the revision under Section 263 of the Act has to be filedonly on the ground that both the essential conditions namelybeing erroneous and prejudicial to the interest of the Revenuewere not fulfilled. 5.The CIT(A) observed that in the case of the assessee,there is only one view available as noted in paragraphs 4, 6 and7 and that both the conditions namely the order is erroneous andprejudicial to the interest of the Revenue co-exist andtherefore, the CIT(A) was justified in invoking the provisionsunder Section 263 of the Act. It is submitted that this findingof the CIT(A) was erroneously set aside by the Tribunal. 6.We have carefully gone through the order. We find thatthe Tribunal rightly noted the legal position as pointed out bythe Hon'ble Supreme Court in the case of Malabar IndustrialCompany Ltd., (supra) and observed that where two views arepossible, the one taken by the Assessing Officer in framing theassessment has to be upheld in the proceedings under Section 263of the Act. After noting the legal position, the Tribunal heldthat it is not in dispute that there were only two reasons inthe show cause notice i.e. the depreciation for the assessmentyear 1997-98 could not have been set off in the assessment year2007-08 and the other issue is that the depreciation has beenerroneously allowed to be set off by the Assessing Officeragainst the short term capital gains. 7.The Tribunal, after noting the decision of the GujaratHigh Court in the case of General Motors India Private LimitedVs. DCIT [reported in (2013) 257 CTR 123] held that both thereasons are no longer sustainable. Thus, noting that there wereno other reasons cited in the show cause notice and the factthat the order passed by the Court favoured the assessee, theTribunal held that there was no justification in reviving yetanother innings before the Assessing Officer as directed by theCIT(A) in the order dated 29.3.2012. 8.The factual position as pointed out by the Tribunal withregard to the reasons, which were referred to in the show causenotice has not been controverted before us and therefore, we areof the view that the Tribunal was right in reversing the orderpassed by the CIT(A) invoking his jurisdiction under Section 263of the Act. 9.For all the above reasons, the stand taken by the Revenueis rejected and substantial question of law No.3 is decidedagainst the Revenue. 10.In the result, all the substantial questions of law are answered against the Revenue as indicated above and in the lightof the order dated 18.08.2021 and the appeals are dismissed. Sd/- Assistant Registrar(CS-VI) //True Copy// Sub Assistant Registrar 8.The factual position as pointed out by the Tribunal withregard to the reasons, which were referred to in the show causenotice has not been controverted before us and therefore, we areof the view that the Tribunal was right in reversing the orderpassed by the CIT(A) invoking his jurisdiction under Section 263of the Act. 9.For all the above reasons, the stand taken by the Revenueis rejected and substantial question of law No.3 is decidedagainst the Revenue. 10.In the result, all the substantial questions of law are answered against the Revenue as indicated above and in the lightof the order dated 18.08.2021 and the appeals are dismissed. Sd/- Assistant Registrar(CS-VI) //True Copy// Sub Assistant Registrar RSTo1. The Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai.2. The Commissioner of Income Tax, Chennai-I, Chennai-34.3. The Assistant Commissioner of Income Tax, Company Circle-I(4), Chennai-34. +1cc to Mr.T.Ravikumar, Advocate, S.R.No.41545 T.C.A.No.409 of 2016 AJS(CO)SU(20/09/2021)