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TMI Blog2018 (3) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... were offered to tax by the assessee in the respective returns of income and assessed as such, we find that the veracity of the said losses requires investigation of facts and enquiries by the ld AO and only after such verification , the ld AO could come to a conclusion that the said losses are genuine and is allowable. Hence we hold that the ld CITA had rightly rejected this plea of the assessee that the same cannot be done u/s 154 by placing reliance on the decision of T.S.Balaram vs Volkart Bros (1971 (8) TMI 3 - SUPREME Court). No infirmity in the order of the ld CIT-A in this regard. Accordingly, the cross objections of the assessee are dismissed for the Asst Years 2006-07, 2007-08 and 2008-09. - I.T.A Nos. 1194-1196/Kol/2016, C.O. Nos. 43-45/Kol/2016 - - - Dated:- 7-3-2018 - Hon ble Shri Aby. T. Varkey, JM And Shri M.Balaganesh, AM For the Appellant : Shri Arindam Bhattacharjee, Addl. CIT For the Respondent : Shri Subash Agarwal, Advocate ORDER Per Bench 1. These appeals of the Revenue and the Cross Objections of the assessee directed against the common orders passed by the Learned Commissioner of Income Tax (Appeals) 1, Kolkata (in short the ld CITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, it pleaded that since losses were offered to tax in earlier years and hence profits are not liable for taxation in subsequent years. Relying on the provisions of section 29 read with section 28 of the Act, the ld AO observed that the income from business has to be computed after taking into account all the businesses of the assessee together including the business of generation of electricity from the Dhule Unit. This would require add back of the entire book depreciation and corresponding allowance of depreciation u/s 32 of the Act on all the depreciable assets used in the assessee s business including that of Dhule unit. The ld AO further observed that Explanation 5 to section 32(1) of the Act would apply whether or not the assessee had claimed deduction in respect of depreciation. Accordingly, the ld AO recomputed the depreciation allowable in respect of Dhule unit in accordance with the provisions of section 32(1) of the Act. He added back book depreciation of Dhule unit amounting to ₹ 88,51,904/- but allowed depreciation u/s 32 of the Act in respect of the said unit which amounted to ₹ 11,96,299/-. He also added back profit from Dhule unit amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the said amount of depreciation of ₹ 11,96,299/- for the Asst Year 2009-10, had arrived at the correct written down value (WDV) of the relevant asset i.e the plant and machineries of the Dhule Unit, in accordance with the provisions of section 43(6) of the Act i.e taking the original cost and working out the depreciation for Asst Years 2006-07 , 2007-08 and 2008-09 (as if allowed on notional basis) and arriving at the correct WDV as on 1.4.08. It was pleaded that from the said workings, the assessee would be entitled for depreciation u/s 32(1) of the Act pursuant to Explanation 5 thereon, for the Asst Years 2006-07 to 2008-09 as under:-- Asst Year Depreciation eligible for allowance 2006-07 2,49,22,905 2007-08 2,99,07,486 2008-09 59,81,497 At the hearing on 20.03.2012 on the said rectification petition dated 01.09.2011 the assessing officer was pleased to call for several papers/documents for demonstrating the assessee s case beyond doubt. Inasmuch as it was not possible to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e overall book depreciation of ₹ 6,64,05,878/- has been reduced by the book depn Of Dhule unit in the said sum of ₹ 16990375/- and Thus the resulting figure of ₹ 4,94,15,503/- has been Added to the net profit as per P L account. 2008-09 86,53,629/ Loss of Dhule Unit after charging depreciation of ₹ 12263653/- as per Companies Act. In consequence Of such adjustment, the overall book depreciation of ₹ 4,89,24,360/- has been reduced by the book depn Of Dhule unit in the said sum of ₹ 12263653/- and Thus the resulting figure of ₹ 3,66,60,607/- has been Added to the net profit as per P L account. It was pleaded that the aforesaid adjustments in the return had been made by the assessee as it then understood, though wrongly, that the brought forward book losses of the earlier years in respect of Dhule unit could be set off against the book profit of the said unit. It was further pleaded that on reference to assessment order dated 23.6.08 u/s 143(3) of the Act for the Asst Year 2006-07, the starting point of computation of business income has been taken as the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation order by the AO has no legs to stand. Hence, the ground no. 1 is allowed. 6.1. With regard to challenging the action of the ld AO in not allowing the Depreciation on Dhule unit u/s 32(1)(ii) of the Act, the ld CITA observed that the assessee had placed reliance on the decision of the Hon ble Jurisdictional High Court in the case of Bridge Roof Co. (India) Ltd vs CIT reported in 338 ITR 15 (Cal) wherein the Hon ble Court held as under:- 15. We find that all the authorities below ignored the aforesaid point in their respective orders and thus, there was apparent error on the face of record justifying rectification. Merely because in the original return, there was a mistake on the part of the assessee, such fact cannot be a ground for refusing the prayer of rectification, when the mistake is apparent from the record and the dispute is also not debatable in view of the law settled by the Supreme Court long ago. As pointed out by the Supreme Court in the case of CITv. P. Firm Muar AIR 1965 SC 1216, if a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening work-in-progress of those assessment years as in our opinion there is an error apparent on the face of record in ignoring the aforesaid well-known principle of accounting which comes within the purview of section 154 of the Act. 6.2. The ld CITA in this regard held as under:- I find that in the instant case the appellant initially did not claim any depreciation u/s 32(1) on Dhule Power Plant. Later, the appellant claimed depreciation on Dhule Unit by filing a rectification petition following the assessment order for the assessment year 2009-10, against which no appeal has been filed by the appellant as submitted by the AR before me, wherein the AO allowed the depreciation on Dhule Unit in accordance with Explanation 5 to the provision of Sec.32(1) of the Act. I have also perused the Explanation 5 to the provisions of sec. 32(1) and find that the provision of sec 32 will apply whether or not the assessee has claimed the deduction on account of depreciation. Therefore, it was imperative on the part of the AO to allow depreciation and non allowance of such depreciation is purely a mistake which is apparent from record. Merely because in the original return the claim fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and simultaneously claimed depreciation on Dhule Unit to the tune of ₹ 2,99,07,486/- as per the Income Tax Act. Therefore, in view of the above, I direct the AO to allow the net claim of the appellant in respect of depreciation on Dhule Unit to the tune of ₹ 1,29,17,l11/- (2,99,07,486/- - 1,69,90,375/-). (iii) A.Y.: 2008 - 2009 I find that in the original computation for the above-mentioned year, the appellant neither added back depreciation on Dhule Unit as per the Companies Act nor claimed any depreciation on Dhule Unit as per the Income Tax Act. However, in. the revised computation filed alongwith rectification petition u/s. 154, the appellant added back depreciation on Dhule Unit to the tune of ₹ 1,22,63,653/- as per the Companies Act and simultaneously claimed depreciation on Dhule Unit to the tune of ₹ 59,81,497/- as per the Income Tax Act. Therefore, in view of the above, I direct the AO to added back the net amount of ₹ 62,82,156/- (1,22,63,653/- - 59,81,497/-) to the income of the appellant in respect of depreciation on Dhule Unit. ) 7. Aggrieved, the revenue is in appeal before us on the following grounds :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation into facts. Therefore, the said issue is outside the purview of section 154. Hon'ble Supreme Court in the case of T.S. Balram vs Volkart Bros. 82 ITR 50 has held that a mistake apparent on the records must be an obvious and patent mistake and not something which can be established by a long drawn process on points on which there may be two opinions. Hence, I do not agree with the contention of the AR and hold that the said loss cannot be allowed in the rectification proceedings u/s 154. In view of the above discussion and observation and following the judgment of the Hon ble Apex Court, I hold that the AO is justified in not allowing the losses of Dhule Unit while passing the order u/s 154 of the Act. Therefore, this ground of appeal of the appellant is dismissed accordingly. 9. Aggrieved, the assessee has preferred cross objections before us on the following grounds:- C.O No. 43/Kol/2016 for the assessment year 2006-07 1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing depreciation in respect of Dhule Unit. 2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Asst Years 2006-07 to 2008-09. Hence applying the provisions of Explanation 5 to section 32(1) of the Act, depreciation is to be granted to the assessee in the proceedings u/s 154 of the Act for the Asst Years 2006-07 to 2008-09. We find that the ld AO having applied the very same provision (i.e Explanation 5 to section 32 of the Act) for the Asst Year 2009-10, ought to have applied the same for the Asst Years 2006-07 to 2008-09 also in the interest of justice. We find that the ld CITA had rightly granted relief to the assessee in this regard. Accordingly, the grounds raised by the revenue for the Asst Years 2006-07 to 2008-09 are dismissed. 11. With regard to the allowability of book losses for the Asst Years 2006-07 to 2008- 09 in the rectification proceedings u/s 154 of the Act, which were offered to tax by the assessee in the respective returns of income and assessed as such, we find that the veracity of the said losses requires investigation of facts and enquiries by the ld AO and only after such verification , the ld AO could come to a conclusion that the said losses are genuine and is allowable. Hence we hold that the ld CITA had rightly rejected this plea of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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