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TMI Blog2008 (2) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... ely for the assessment year 1994-95 in so far as they deny the petitioner's right to set-off unabsorbed depreciation. 3. The facts of the case as set out by the petitioner in his petition are as follows: (a) In respect of the assessment year 1992-93, the petitioner filed a return of income on 20 th January 1993 and a revised return on 31 st December 1994 in which it claimed that it was entitled to a set off of the brought forward losses of Devangere Cotton Mills Limited which was merged with the petitioner w.e.f.1 st July 1992. Respondent no.2 passed an assessment order dated 31 st March 1995 under section 143(3) of the Act in which he determined the petitioner's total income at Rs.54,25,840 after setting off the entirety of the losses (Rs.4,17,02,772) of the erstwhile Devangere Cotton Mills Limited and 2/3 rd of the unabsorbed depreciation and investment allowance as per the then prevailing law Rs.3,59,97,750 of the said erstwhile Devangere Cotton Mills Limited. Respondent No.2 recorded in the order that the balance of unabsorbed depreciation and investment allowance of Rs.1,79,98,975 was allowed to be carried forward to the next year. The amount comprised of unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent No.2 thereafter passed an order dated 2 nd December 1997 under section 154 of the Act by which he reduced the total income to Rs.4,49,39,949. Being aggrieved by the order dated 28 th February 1997 passed by Respondent No.2, the petitioner filed an appeal before the Commissioner of Income-tax (Appeals) which was disposed of vide order dated 17 th March 1999. Respondent No.2 passed an order dated 29 th July 1999 to give effect to the said order of the Commissioner (Appeals) and he determined the petitioner's total income at Rs.2,67,71,123. (d) That on receipt of the order dated 16.9.2003 for the year 1993-94, the petitioner addressed an application dated 20 th October 2003, addressed to the Deputy Commissioner of Income Tax. In this application, the petitioner referred to the order dated 16 th September 2003 giving effect to the order of the Commissioner (Appeals) for the assessment year 1993-94 in which a loss of Rs.1,77,46,293 had been determined. The petitioner pointed out that the said loss was entitled to be carried forward and set off against the income for the assessment year 1994-95. It was also pointed out that the loss of Rs.76,52,499, being the unabsorbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any head. The petitioner pointed out that as per the effect order passed for the assessment year 1994-95, the revised total income was determined at Rs.2,67,71,123 and the unabsorbed depreciation was eligible for set off against the said income. (f) In response to the aforesaid letters addressed by the Petitioner, Respondent No.2 passed an order dated 9 th June 2006 under section 154 of the Act. With respect to the assessment year 1992-93, Respondent No.2 observed that in that year depreciation/investment allowance of Rs.1,79,98,975 was allowed to be carried forward out of which Rs.76,52,499 was set off against the income for assessment year 1993-94 and balance of Rs.1,03,46,476 was set off against the income of the assessment year 1994-95. He recorded that the balance amount of Rs.76,52,499 was carried forward depreciation available for set off. In respect of the assessment year 1993-94, Respondent No.2 noted that as per the assessment order the total income was determined at Nil after setting off the brought forward depreciation/investment allowance aggregating Rs.76,52,499 of the preceding year. He also noted that pursuant to the order dated 16 th September 2003 passed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following three grounds :- (i) Order under section 154 dated 09.06.2006 seeks to rectify assessment order under section 143(3) dated 28.02.1992 which is beyond the statutory period of limitation. (ii) The amounts sought to be rectified under section 154 includes both depreciation/investment allowance, the break up of which has not been given and investment allowance cannot be carried forward. (iii) In view of the debate in respect of allowability of unabsorbed depreciation against income from other sources, the said issue is debatable in nature and cannot be rectified u/s.154. (k) In response to the said notice, the Petitioner addressed a letter dated 24th August 2006 in which it made the following points: (i) It was pointed out that vide effect order dated 16 th September 2003 passed for the assessment year 1993-94, a loss (actually unabsorbed depreciation) of Rs.1,77,46,293 had been determined and Respondent No.2 was duty bound to set off the same against the income for the assessment year 1994-95 which had been determined at Rs.2,67,71,123 vide effect order dated 29 th July 1999. (ii) The Petitioner relied on the section 240 of the Act which states that a refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9th April 2007 under section 264 of the Act by which it requested Respondent No.1 to revise the said impugned order of Respondent No.2. The Petitioner made the following points in its application :- (i) The petitioner pointed out that the unabsorbed depreciation of Rs.1,77,46,293 for the assessment year 1993-94 was determined vide order dated 16th September 2003 and carry forward and set off of the same for the subsequent assessment year 1994-95 was possible only after this date. The Petitioner relied on the analogy of the section 155(4) of the Act and submitted that the period of limitation for the assessment year 1994-95 had to be calculated from the end of the financial year in which the order giving effect to the order of the Commissioner (Appeals) for the assessment year 1993-94 was passed. (ii) On the merits, the Petitioner set out the provisions of section 32(2) of the Act as applicable for the assessment year 1994-95 and pointed out that carried forward unabsorbed depreciation was equivalent to current depreciation and could be set off against income chargeable under any head. It was emphasized that the unreported decision of the Tribunal in the case of E-Merck Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petition was not maintainable in view of the provisions of Section 119 (2)(b) of the Income Tax Act, 1961. Under Section 119 (2)(b) the petitioner had an option to make a petition to the Central Board of Direct Taxes to authorise a subordinate Income Tax Authority (Assessing Officer) to admit its application for allowing its claim of unabsorbed depreciation and investment allowance, refund or any other relief under the Act after the period of limitation had lapsed. It was contended that the order dated 9.6.2006 passed by respondent no.1 rectifying the order dated 29.7.1999 and allowing unabsorbed depreciation of assessment year 1992-93 and 1993-94 to the tune of Rs.2,53,98,782/- was not valid and proper and therefore, this mistake has been rectified by respondent no.1 vide his order dated 7.9.2007. It was contended that the impugned order passed by respondent no.1 on 7.9.2007 was justified and in accordance with law. 5. On behalf of the petitioner, affidavit-in-rejoinder dated 4.1.2008 was filed by Mr. Vinod Joshi and it was contended that the reference to section 119(2)(b) was misconceived. That in the facts of the present case the question of the petitioner's applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation in view of Circular No.73 dated 7.1.1972. 8. We have heard both the parties and perused the entire record. In our view, rule in the petition needs to be made absolute for the following reasons. 9. The first question that has been raised and needs to be answered is whether the order dated 9.6.2006 which was purportedly passed under Section 154 of the Income Tax Act 1961 was indeed passed by virtue of power which could be traced to Section 154 of the Income Tax Act 1961. It was contended by the petitioner that in respect of the assessment year 1993-94 the order of the Assessing Officer had been challenged by them before the Commissioner of Income Tax (Appeals) and this appeal pertaining to the assessment year 1993-94 was disposed off vide an order dated 14.8.2002, granting certain benefits to the petitioner. Consequent to this appellate order, respondent no.2 had passed an order dated 16.9.2003 to give effect to the said appellate order. The net result was that it was determined that there was an unabsorbed depreciation of Rs.177,46,293 for the assessment year 1993-94 and than an amount of Rs.76,52,499 representing absorbed depreciation/investment allowance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate/revisional/ reference/ judicial orders in respect of any assessment year under consideration, can also be logically extended to consequent amendments in respect of any succeeding years. 12. Advocate for the petitioners relied upon a judgment of the Division Bench of the Madras High Court in the case of Kanaka Films Private Ltd., Vs. Income Tax officer reported in [1989] 177 ITR 88. In the case before the Madras High Court, after passing of the order of the Appellate Tribunal, the Income-tax officer passed orders to give effect to such order relating to the assessment year 1962-63 to 1966-67. In the meanwhile, the Income-tax Officer had completed the assessment for the years 1967-68 to 1971-72. The Income-tax Officer determined the loss for the assessment year 1963-64 to be carried forward at Rs.18041 but he did not adjust it against the income of the subsequent years. On these facts, Madras High Court observed as under :- " Held, that once the Income-tax Officer had determined the loss for 1963-64 and held that the assessee was entitled to carry forward the same, he was not justified in his view that this loss could not be set off against business income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub-section (1) 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 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 by him and assessable for that assessment year ; (ii) 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." 17. It appears that Commissioner of Income-tax -VI while passing order dated 7.9.2007 correctly quoted the aforesaid provision but wrongly mentioned that the provision was applicable for assessment year 1997-98 onwards. 18. In the impugned order dated 26.2.2007 it was mentioned that the assessee had submitted that they were not pressing for a set off of the investment allowance Rs.31 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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