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TMI Blog2018 (5) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Shri Satish Kumar Goyal, Agra vs. JCIT, Range-1, Agra ITA.No.143/Ag/2014 dated 04.05.2016, copies of the same are placed on record. He has submitted that identical issue have been decided by ITAT, Delhi Bench in the case of ACIT, Circle- 1, Muzaffarnagar vs. M/s. Pushkar Steels Pvt. Ltd., Muzaffarnagar in ITA.No.5473/Del./2011 dated 29.02.2012 following the decision of Special Bench of ITAT, Mumbai in the case of DCIT vs. Times of Guaranty Ltd., (2010) 131 TTJ 257 (Mum.) (SB). Learned Counsel for the Assessee also submitted that against the outstanding demand assessee has paid substantial amount. 4. The Ld. D.R. did not dispute the above fact. 5. With the consent of both the parties, the appeals are decided along with stay applications. 6. Both the appeals by the same assessee are directed against different orders of the Ld. CIT(A)-3, Gurgaon, dated 17.02.2017 for A.Ys. 2012-2013 and 2013-2014. The issue is common in both the appeals. Therefore, appeal of assessee for A.Y. 2012-2013 is decided for the purpose of both the appeals. ITA.No.2777/Del./2017 - A.Y. 2012-2013 : 7. The assessee raised on the following grounds : 1. The Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. Such other income is the income disclosed during the course of survey by the assessee-company by surrendering share application money received during the year. The surrender letter filed by the assessee-company is reproduced at page-11 of the assessment order. In the computation of income, the assessee- company has set-off the current year unabsorbed deprecation as well as earlier years unabsorbed deprecation, total amounting to Rs. 1.51 crores against this other income surrendered during the course of survey and this has resulted the total income of assessee-company for the year under consideration at -NIL-. The assessee-company has paid tax under section 115JB of the I.T. Act at book profit of Rs. 29,41,582/-. The assessee-company was asked to explain as to how the undisclosed income declared during the course of survey amounting to Rs. 1.51 crores is eligible to be set-off against the unabsorbed deprecation of current year and earlier year. The contention of assessee-company was invited towards Judgment of Punjab & Haryana High Court in the case of Kim Pharma (P) Ltd. vs. CIT (2013) 258 CTR 454 (P&H). The submission of the assessee-company is reproduced in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of survey was disallowed. 9. The assessee-company challenged the assessment order before Ld. CIT(A). The written submissions of the assessee-company is reproduced in the appellate order. The Ld. CIT(A), however, dismissed the appeal of assessee-company. 10. We have considered the rival submissions. The assessee-company relied upon the order of ITAT, Chandigadh Bench in the case of M/s. Liberty Plywood Private Ltd., Ambala Cantt. vs. ACIT, Ambala (supra) and submitted that the issue is covered by the said decision, copy of which is also filed on record, in which, the Tribunal followed the decision of the Special Bench of the Tribunal in the case of DCIT vs. Times of Guaranty Ltd., (2010) 131 TTJ 257 (Mum.) (SB) and decided the identical issue in favour of the assessee. The decision in the case of M/s. Liberty Plywood Private Ltd., Ambala Cantt. vs. ACIT, Ambala (supra) has been followed by ITAT, Chandigadh Bench in the case of ACIT, Circle-1, Ludhiana vs. M/s. Raghav Woollen Mills 2016-(8) TMI 421 in which it was held as under : "3. On ground Nos. 1 and 2, revenue challenged the order of Ld. CIT (Appeals) in allowing the assessee to set off unabsorbed depreciation upto the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee surrendered during survey under section 133A to be treated as deemed income under section 69, 69A, 69B and 69C and the same cannot be set off against business loss/depreciation loss. The assessee reiterated the same submissions before ld. CIT(Appeals) and submitted that there was no issue of set off of depreciation including unabsorbed depreciation under section 32 against the amount surrendered in survey and treated as deemed income. On the same facts, ITAT Chandigarh Bench in the case of Liberty Plywood Pvt. Ltd. (supra), after considering decision of the Hon'ble Punjab & Haryana High Court in the case of Kim Pharma Pvt. Ltd. (supra) has held that depreciation under section 32 can be adjusted against the so called deemed income, the amount surrendered in survey without having any nexus of nature and source. It was submitted that facts of the case of the assessee are similar to that of in the case of M/s Liberty Plywood Pvt. Ltd. (supra). The assessee, therefore, claimed that unabsorbed depreciation may be allowed set off against deemed income. The ld. CIT(Appeals), following the decision of Chandigarh Bench in the case of M/s Liberty Plywood Pvt. Ltd. (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Gujrat High Court in the case of Fakir Mohmed Haji Hasan V CIT 247 ITR 290 have been followed and Hon'ble High Court held that the said decision fully apply to the facts of the case. Therefore, unabsorbed depreciation cannot be set off. 7(i). On the other hand, ld. counsel for the assessee reiterated the submissions made before authorities below and submitted that the identical issue was considered by ITAT Chandigarh Bench in the case of M/s Liberty Plywood Pvt. Ltd. (supra) in which the Tribunal considered the decision in the case of M/s Kim Pharma Pvt. Ltd. and held as under : "10. We have heard the rival submissions carefully. The main controversy involved is whether the surrender income amounting to Rs. 70.00 lakhs should be treated as business income so as to set off brought forward losses u/s 70 of the Act as well as the depreciation u/s 32(2). As far as the decision of Hon'ble Supreme Court in case of CIT V. D.P. Sandhu Bros. Chembur, P. Ltd. (supra) is concerned, we find that facts in that case are totally different. In that case the assessee had sold tenancy rights for Rs. 35.00 lakhs which were claimed to be non-taxable. However, the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the computation provided u/s 48, it could still imposed tax under the residuary head as thus unacceptable. If the income cannot be taxed u/s 45, it cannot be taxed at all. (See S.G. Mercantile Corporation P. Ltd. V CIT (1972) 83 ITR 700 (S.C)." 11. Thus it is clear from the above that once the item of receipt is held to be falling under a particular head then the same cannot be charged alternatively under another head particularly under the head "income from other sources". This observation can not lead to the conclusion if income does not belong to a particular head same cannot be charged at all. As far as the decision of Ahmedabad Bench of the Tribunal in case of Fashion Word V ACIT, ITA No. 1634/Ahd/2006 (supra) is concerned interpreting the decision of Hon'ble High Court in case of Fashion Word V ACIT, ITA No. 1 634/Ahd/2006 (supra) has to give a way to interpretation put on the same decision by the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma (P) Ltd. V. CIT, ITA No. 106 of 2011 (O&M), Hon'ble High Court clearly held that surrendered income can be taxed as deemed income without setting off of the losses u/s 70 & 71. We are bound to follow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 69 of the Act. Further it is also not in dispute that the assessee had brought forward unabsorbed depreciation of Rs. 1 0 . 1 3 crores in Assessment year 1993-94 , Rs. 1.59 crores in Assessment year 1994-95 and Rs. 68.14 lakhs in Assessment year 1995-96 which is available for set off against income of the current year. As per provisions of section 32(2) unabsorbed depreciation are deemed as part of current year's depreciation to the extent of available income. Further there is no provisions under the Income Tax Act to prohibit set off of current year's business loss against income of the assessee which is assessable under the head income from other sources. Section 70 does not prohibit such set off. 13. However, this provision has been amended twice w.e.f. 1.41997 by Finance Act (No. 2 of 1996) and against on 1.4.2002 by Finance Act, 2001. Certain restrictions were introduced again set off of by such unabsorbed depreciation. Controversy also arose in this respect. Ultimately the matter traveled to the Special Bench of the Tribunal in case of DCIT V. Times Guaranty Ltd. (2010) 4 ITR (Trib ) 210 (Mum)(SB). In this case it was held as under : "Under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by the Finance Minister, the unadjusted depreciation brought forward up to April 1,1997 became eligible for set off not only against the business income but also against income under other heads in eight assessment years. Two like expressions are used in sub-section (2), viz, firstly, "profits or gains " in the main part of sub-section (2) and then "profits and gain' in clause (i). The expression "profits and gains" as used in clause (i) or (iii)(a) refers only to income under the head "Profits and gains of business or profession". Section 32(2) was again substituted by the Finance Act, 2001 with effect from April 1, 2002 restoring the provision as prevailing prior to the amendment made by the Finance (No. 2) Act, 1996 with effect from April 1,1997. Sub-section (2) of section 32 is a substantive prov ision and not a procedural one. It is settled legal position that the amendment to a substantive provision is normally prospective unless expressly stated otherwise or it appears so by necessary implication. It is nowhere seen either from the Notes on Clauses or Memorandum explaining the provision of the Finance Bill 2001, that substitution of sub- section (2) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the same character as the current depreciation in the following year. In other words the object of the provision is to treat the whole or part of the depreciation allowance under section 32(1), which could not be adjusted in the first year, as the current depreciation under section 32(1) in the second year. In the second year, such depreciation of first year becomes part and parcel of depreciation under section 32(1) of the second year. If again in the second year, the total of depreciation under section 32(1) (including the amount of allowance which came from first year and became depreciation under section 32(1) in the second year) cannot be absorbed, it shall become current depreciation for the third year to be dealt with in the same manner as the amount of depreciation in the third year and so on. Once the unabsorbed depreciation lor the first year is given the character of current depreciation in the second year, the purpose of section 32(2) is fulfilled. The "unabsorbed depreciation allowance" of the period after substitution by the Finance (No. 2) Act, 1996 cannot be given the character of current depreciation in the assessment years after substitution with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst income under any head. The "second unabsorbed depreciation allowance" can be set off only against the income under the head "Profits and gains of business or profession" within a period of eight assessment years succeeding the assessment year for which it was first computed. Current depreciation for the year under section 32(1), for each year separately, starting from assessment year 2002-03 can be set off against income under any head. The amount of depreciation allowance not so set off (the "third unadjusted depreciation allowance") shall be carried forward to the following year. The "third unadjusted depreciation allowance shall be deemed depreciation under section 32(1), that is depreciation for the current year in the following year(s) to be set off against income under any head, like current depreciation, in perpetuity," 14. From the above it is clear that unabsorbed depreciation for the block of Assessment year 1997-98 to 2001-02 which could not have been set off earlier, cannot be allowed to be set off now . Therefore , we set aside the order of the ld . CIT (A ) and remit t he matter back to the file of Assessing Officer with a direction to only allow set off of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of Rs. 4,51,29,000/- offered by the assessee represented the sum found credited in the books of the appellant, the nature and source of which was not satisfactorily explained was rightly treated as income u/s 68 of the Income Tax Act, 1961. We do not find any infirmity in this regard and we uphold such finding of the A.O. which was confirmed by the first appellate authority. 8. Having so held, the next question which arises for our consideration is as to under which head of income, such income is assessable. In other words, whether income covered u/s 68 is beyond the five heads of income as given in section 14 including the head 'income from other sources'. Section 14 of the Income Tax Act, provides that unless otherwise provided by the Act, all incomes shall be classified under five heads of income i.e. 'salary', 'house property', 'profits and gain business or profession', 'capital gains' and 'other sources'. Admittedly. the purported miscellaneous income can neither fall under the head salary, nor under the head house property, nor under the head profit and gains business or profession, nor under the head capital gain. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state that the Income Tax Act, envisages taxing every income under any of the heads specified in section 14. Thus, it is evident that on this issue at least there are divergent views. It has not been brought to our notice that there is any decision on this issue from the jurisdictional High Court i.e. Hon'ble Allahabad High Court. Therefore in such a situation the view favourable to the taxpayer has to be accepted which is a settled proposition of law, as held by Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Vegetable Products Ltd.88 ITR 192. This leads to the third issue involved in the present appeal which is as to whether the loss under the head 'business' can be denied to be set off against the income assessable under the head 'income from other sources'. Section 71 of the Income Tax Act, which provides the set off of loss from one head against income from another does not deny such set off. Even the denial of such set off brought by section 115BBE was brought on the statute by Finance Act, 2012 w.e.f. 01.04.2013 i.e. for and from the A.Y. 2013-14. Therefore, when the specific denial of the set off was brought prospectively b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of D.P. Sindhu 273 ITR 1. Each income is to be assessed under five Heads of income, Otherwise, the same is not taxable at all. Similar provisions for set-off of loss are defined under Sections 70 to 72 of the I.T. Act. As per Section 72, carried forward of business loss is not to be allowed to be set-off against any other head of income other than income from business. Inter Head set-off of business loss is allowed under section 71 against all other income except income from salary. Same head adjustment of business loss against other business income is allowed under section 70 of the Act. As such, provisions of law on unabsorbed deprecation which is allowed as depreciation of current year under section 32(2) fall in Section 71 and not under section 72, as such, allowable as 'business expenditure'. Therefore, findings of the A.O. is not correct that surrendered income cannot be assessed even under the Head "Income from other sources". It may also be noted here that after insertion of Section 115BBE, any income assessed under sections 68 to 69D will be taxed under section 115BBE and not under regular provisions w.e.f. A.Y. 2013-2014. Further, Section 115BBE has got amended w.e.f. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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