TAXAP/262/2017 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 262 of 2017 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder ? COMMISSIONER OF INCOME TAX-VADODARA-2....Appellant(s) Versus SHREE BENZOPHEN INDUSTRIES LTD....Opponent(s) Appearance: MR KM PARIKH, ADVOCATE for Appellant(s) No. 1 CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA Date : 28/04/2017 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) Page 1 of 6 HC-NIC Page 1 of 6 Created On Tue May 02 11:39:14 IST 2017 O/TAXAP/262/2017 JUDGMENT [1.0] Feeling aggrieved and dissatisfied with impugned judgment and order passed by learned Income Tax Appellate Tribunal, Ahemdabad Bench in ITA No.1384/AHD/2012 for Assessment Year 2008-09, revenue has preferred present Tax Appeal with following substantial questions of law; (a) Whether on facts and circumstances of case and in law, ITAT erred in directing AO to delete addition of Rs.3,00,544/- being excess payment of interest expenditure, without appreciating that assessee did not establish commercial expediency of making payment of interest at @ 15% instead of 12.50%? (b) Whether on facts and circumstances of case and in law ITAT erred in directing AO to allow set off /carry forward of unabsorbed depreciation as claimed by assessee, without appreciating that nowhere in provision of Section 32(2) of Act as amended by Finance Act, 2001 w.e.f. 01/04/2002 or in Board s Circular No.14 of 2001, it is mentioned that carry forward of unabsorbed depreciation of A.Y. 1997-98 up to A.Y. 2001-02, which could not be set off against profit and gain of business of A.Yrs preceding A.Y. 2002- 03, can be set off against profit and gain of business of A.Y. 2002-03 & onwards in accordance with provision of Section 32(2) of Act as amended by Finance Act, 2001 w.e.f. 01/04/2002? Page 2 of 6 HC-NIC Page 2 of 6 Created On Tue May 02 11:39:14 IST 2017 O/TAXAP/262/2017 JUDGMENT (c) Whether on facts and circumstances of case and in law, ITAT erred in directing AO to allow set off /carry forward of unabsorbed depreciation as claimed by assessee, without appreciating that unabsorbed depreciation of A.Yrs 1997-98 up to 2001-02, could be set off against profit and gain of business of A.Y.rs 2002-03 & onwards subject to maximum of 08 years in accordance with provision of Section 32(2) of Act as amended by Finance Act No.02 of 1996 w.e.f. 01/04/1997 and not in accordance with provision of Section 32(2) of Act, 2001 w.e.f. 01/04/2002? (d) Whether on facts and circumstances of case and in law, ITAT erred in directing A.O. to allow set off /carry forward of unabsorbed depreciation as claimed by assessee, without appreciating that assessee s claim of unabsorbed depreciation of A.Y. 1997-98 to 1999- 2000 against profit and gain of business of A.Y. 2008-09 under provision of Section 32(2) of Act as amended by Finance Act, 2001 w.e.f. 01/04/2002 was not in accordance with said amendment. (e) Whether on facts and circumstances of case and in law, ITAT erred in directing A.O. to allow set off /carry forward of unabsorbed depreciation as claimed by assessee, without Page 3 of 6 HC-NIC Page 3 of 6 Created On Tue May 02 11:39:14 IST 2017 O/TAXAP/262/2017 JUDGMENT appreciating that as on 01/04/2008, there remained no unabsorbed depreciation of A.Y. 1997-98 to 1999-2000 to be set off against profit and gains of business of assessee for A.Y. 2008-09, in accordance with provision of Section 32(2) of Act as amended by Finance Act No.02 of 1996 w.e.f. 01/04/1997, since as on 01/04/2008, period of 08 years for carry forward of unabsorbed depreciation of A.Y. 1997-98 to 1999-2000 ceased to exist? [2.0] We have heard Shri K.M. Parikh, learned advocate appearing on behalf of revenue. At outset, it is required to be noted that so far as proposed questions of law nos. (b) to (e) are concerned, same are covered against revenue in light of decision of Division Bench of this Court in case of Commissioner of Income Tax I Vs. Integra Engineering India Ltd. rendered in Tax Appeal No.380/2013. Similar questions are held against revenue by aforesaid decisions. [3.0] Shri K.M. Parikh, learned advocate appearing on behalf of revenue is not in position to dispute above. [4.0] In view of above, present Tax Appeal qua proposed questions nos.(b) to (e) deserve to be dismissed and is according dismissed. [5.0] Now so far as proposed question no.(a) is concerned, at outset, it is required to be noted that respondent assessee paid interest at rate of 15% and Page 4 of 6 HC-NIC Page 4 of 6 Created On Tue May 02 11:39:14 IST 2017 O/TAXAP/262/2017 JUDGMENT claimed deduction towards interest expenditure. However, Assessing Officer was of opinion that considering bank interest prevailing at relevant time respondent assessee ought to have paid interest at rate of 12.5%, and therefore, Assessing Officer made addition of Rs.3,00,544/- for excess payment of interest expenditure. aforesaid addition came to be confirmed by learned CIT(A). However, learned tribunal by impugned judgment and order has directed to delete addition of Rs.3,00,544/- being excess amount of interest expenditure observing that it was commercial expediency of respondent assessee, which is required to be considered and even interest paid by respondent assessee at 15% against 12.5% as claimed by Assessing Officer cannot be said to be on higher side, and therefore, learned tribunal deleted addition of Rs.3,00,544/-. [6.0] Having heard Shri K.M. Parikh, learned advocate appearing on behalf of revenue and reasoning given by learned tribunal and more particularly considering fact that respondent assessee paid interest at rate of 15% and Assessing Officer was of opinion that assessee ought to have paid interest at rate of 12.5% and as observed by learned tribunal respondent assessee paid interest at rate of 15% looking to commercial expediency, it cannot be said that learned tribunal had committed any error in deleting addition of Rs.3,00,554/-. We are complete agreement with view taken by learned tribunal. No substantial question of law arises as sought to be proposed by revenue. In view of above and for reasons stated hereinabove, present Page 5 of 6 HC-NIC Page 5 of 6 Created On Tue May 02 11:39:14 IST 2017 O/TAXAP/262/2017 JUDGMENT Tax Appeal deserves to be dismissed and is accordingly dismissed. (M.R. SHAH, J.) (B.N. KARIA, J.) Siji Page 6 of 6 HC-NIC Page 6 of 6 Commissioner of Income-tax, Vadodara-2 v. Shree Benzophen Industries Ltd