The Commissioner of Income-tax-IV v. Ballarpur Industries Ltd
[Citation -2017-LL-0726-13]

Citation 2017-LL-0726-13
Appellant Name The Commissioner of Income-tax-IV
Respondent Name Ballarpur Industries Ltd.
Court HIGH COURT OF BOMBAY AT NAGPUR
Relevant Act Income-tax
Date of Order 26/07/2017
Assessment Year 1993-94
Judgment View Judgment
Keyword Tags profits and gains of business • unabsorbed depreciation • amalgamating company • written down value • foreign company • actual cost • plant
Bot Summary: The impugned order relates to assessment year 1993-1994. 4): The impugned order of the Tribunal has upheld the order of the CIT which directed the Assessing Officer to allow the depreciation on increased value of assets being unabsorbed depreciation of the amalgamating company JG Glass Ltd. which had amalgamated into the respondent- assessee. The impugned order while upholding the order of the CIT placed reliance upon its order dated 29.03.1996 passed in respect of the same respondent- assessee for the assessment year 1989-90 in ITA No.397- Nag/94. The order dated 29.03.1996 passed by the Tribunal related to assessment year 1989-90 upheld the stand of the respondent-assessee on merits by holding unabsorbed depreciation of the amalgamating company M/s JG Glass Ltd. was to be included in the written down value of its assets at the time of amalgamation. In the above circumstances, the order of the Assessing Officer for the assessment year 1989-90 stood undisturbed. In the above view, for the subject assessment year the written down value of the block of assets which includes the assets belonging to the amalgamating company on which depreciation was first taken in the assessment year 1989-90 cannot be disturbed for the subject year unless the written down value of the earlier assessment years is modified. So far as the written down value of the block of assets for assessment year 1989-90 is concerned the inclusion of unabsorbed depreciation into the assets of amalgamating company is now final in favour of respondent- assessee by virtue of our dated 10.07.2017 in ITR No.39/1998.


IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR Income Tax Appeal No.137/2003 Commissioner of Income Tax-IV, Aaykar Bhavan, Telangkhedi Road, Civil Lines, Nagpur. .. APPELLANT .. Versus .. M/s Ballarpur Industries Ltd. New Delhi .. RESPONDENT Mr. S.N. Bhattad, Advocate for Appellant. Mr. K.P. Dewani, Advocate for Respondent. . CORAM : M.S. Sanklecha & Manish Pitale, JJ. DATED : July 26, 2017. P.C. This appeal under Section 260A of Income Tax Act, 1961 challenges order dated 30.06.2003 passed by Income Tax Appellate Tribunal ( Tribunal). impugned order relates to assessment year 1993-1994. ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 2 ITL137 03.odt 2. This appeal was admitted on 25.06.2007 on following substantial questions of law:- "(1) Whether on facts and in circumstances of case Income Tax Appellate Tribunal was legally justified in upholding deletion of addition of Rs.1,19,81,900/- on account of interest on loan given to M/s A.P. Rayons Ltd.? (2) Whether on facts and in circumstances of case Income Tax Appellate Tribunal was legally justified in upholding deletion of addition of Rs.56,75,046/- on account of withholding of tax in respect of technical services rendered to foreign Company ? (3) Whether on facts and in circumstances of case Income Tax Appellate Tribunal was legally justified in upholding deletion of addition of Rs.6,93,176/- on account of payment made to various Institutions/Schools? (4) Whether on facts and in circumstances of case Income Tax Appellate Tribunal was legally justified in upholding deletion of addition of Rs.60,69,769/- on account of depreciation in respect of assets of erstwhile J.G. Glass Limited?" 3. Regarding question no.(1) : (a) It is agreed position between parties that issue arising herein stands concluded against revenue and in favour of assessee by our order dated 13.07.2017 passed in respect of same respondent-assessee in ITR ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 3 ITL137 03.odt No.3/1995. (b) Therefore, for reasons indicated in our order dated 13.07.2017 in ITR No.3/1995, this substantial question of law is answered in affirmative i.e. in favour of respondent-assessee and against appellant-revenue. 4. Regarding question no.(2): (a) It is agreed position between parties that issue arising herein stands concluded against revenue and in favour of assessee by our order dated 17.07.2017 in ITR No. 12/2002 in respect of same respondent-assessee. (b) Therefore, for reason indicated in our order dated 17.07.2017 in ITR No. 12/2002, this substantial question of law is answered in affirmative i.e. in favour of respondent- assessee and against appellant- revenue. 5. Regarding question no.(3): (a) It is agreed position between parties that issue arising herein is concluded against revenue and in favour of assessee by our order dated 13.07.2017 in ITR No. 4/1996 in respect of same respondent-assessee. (b) Therefore, for reasons indicated in our order dated 13.07.2017 in ITR No.4/1996, this substantial question of ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 4 ITL137 03.odt law is answered in affirmative i.e. in favour of respondent-assessee and against appellant-revenue. 6. Regarding question no.(4): (a) impugned order of Tribunal has upheld order of CIT (Appeals) which directed Assessing Officer to allow depreciation on increased value of assets being unabsorbed depreciation of amalgamating company JG Glass Ltd. which had amalgamated into respondent- assessee. impugned order while upholding order of CIT (Appeals) placed reliance upon its order dated 29.03.1996 passed in respect of same respondent- assessee for assessment year 1989-90 in ITA No.397- Nag/94. (b) order dated 29.03.1996 passed by Tribunal related to assessment year 1989-90 upheld stand of respondent-assessee on merits by holding unabsorbed depreciation of amalgamating company M/s JG Glass Ltd. was to be included in written down value of its assets at time of amalgamation. Besides it also set aside order of Commissioner of Income Tax dated 21.03.1994 passed in exercise of his powers under Section 263 of Income Tax Act. Thus restoring order of Assessing Officer for ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 5 ITL137 03.odt assessment year 1989-90. (c) Tribunal had at instance of revenue in respect of order dated 29.03.1996 preferred Income Tax Reference being ITR No. 39/1998 to this Court. In that reference questions which were pressed by revenue for our consideration at time of hearing were as under:- "(1) Whether in facts and circumstances of present case and in law ITAT was justified in holding that order u/s 263 of Act was bad in law and on facts as well? (2) Whether in facts and circumstances of present case and in law ITAT was justified in law in holding that inclusion of unabsorbed depreciation in WDV of assets of JG Glass Ltd. with within purview of Explanation 2 and 3 to Section 43(6) of I.T. Act? (5) Whether in facts and circumstances of present case and in law Tribunal was justified in holding that decision rendered by Bombay High Court in case reported in 187 ITR 1 holds good even after insertion of clause (c) and substitution of explanation (2) below section 43(6) by Taxation Law (Amendment Act, 1986?" (d) This Court by its order dated 10.07.2017 disposed of ITR No. 39/1998 by answering question No.(1) in ITR No. 39/98 as reproduced hereinabove in affirmative i.e. in favour of respondent-assessee and against appellant-revenue i.e. exercise of power under Section 263 of Act by Commissioner was not called for. In above view, other ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 6 ITL137 03.odt questions which were on merits of claim for inclusion of unabsorbed depreciation in value assets belonging to amalgamating company at time of amalgamation was not considered. In above circumstances, order of Assessing Officer for assessment year 1989-90 stood undisturbed. (e) In this appeal revenue's grievance is allowing of depreciation on increased value of rrespondent- assessee's block of assets which includes unabsorbed depreciation of assets of amalgamating company at time of amalgamation in previous year relevant for assessment year 1989-90. This depreciation was allowed on written down value of block of assets in terms of Section 32 of Act at such percentage of written down value of its block of assets as prescribed. meaning/definition of written down value in Section 32 of Act is as provided in Section 43(6) of Act. For proper appreciation of controversy, we reproduce relevant extract of Sections 32 and 43(6) of Act as under:- " Depreciation 32 (1) In respect of depreciation of-- (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 7 ITL137 03.odt marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after 1st day of April, 1998, owned, wholly or partly, by assessee, and used for purposes of business or profession, following deductions shall be allowed (i) .... (ii) in case of any block of assets, such percentage on written down value thereof as may be prescribed. Provided ........" "Definitions of certain terms relevant to income from profits and gains of business or profession: 43. In sections 28 to 41 and in this section, unless context otherwise requires- (1) to (5) ........ (6) "Written down value means- (a) .... (b) .... (c) in case of any block of assets- (i) In respect of any previous year relevant to assessment year commencing on 1st day of April, 1988, aggregate of written down value of assets falling within that block of assets at beginning of previous yar and adjusted- (A) by increase by ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 8 ITL137 03.odt actual cost of any asset falling within that block, acquired during previous year; (B) by reduction of moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with amount of scrap value, if any, so, however, that amount of such reduction does not exceed written down value as so increased; and (C) ...... (ii) in respect of any previous year relevant to assessment year commencing on or after 1st day of April, 1989, written down value of that block of assets in immediately preceding previous year as reduced by depreciation actually allowed in respect of that block of assets in relation to said preceding previous year and as further adjusted by increase or reduction referred to in item (I) Explanation 1..............." (f) It is self evident from reading of Section 32 and Section 43(6)(c)(ii) of Act that depreciation would be allowed on written down value of block of assets in immediately preceding previous year as reduced by depreciation actually allowed on the block of assets in preceding previous year as further adjusted in terms of ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 9 ITL137 03.odt Section 43(6)(c)(i) of Act. In above view, for subject assessment year written down value of block of assets which includes assets belonging to amalgamating company on which depreciation was first taken in assessment year 1989-90 cannot be disturbed for subject year unless written down value of earlier assessment years is modified. This modification of written down value would go back to assessment year 1989-90 when amalgamation took place and unabsorbed depreciation was added to assets of amalgamating company to determine written down value of block of assets. (g) However, so far as written down value of block of assets for assessment year 1989-90 is concerned inclusion of unabsorbed depreciation into assets of amalgamating company is now final in favour of respondent- assessee by virtue of our dated 10.07.2017 in ITR No.39/1998. Therefore, for all subsequent years after assessment year 1989-90 depreciation is actually allowed in respect of written down value of block of assets in accord with Section 32 read with Section 43(6) of Act. Thus question No.(4) in present facts do not give any rise to any substantial question of law as position is self evident on reading of definition of "written down value" under Section 43(6) of Act for ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: 10 ITL137 03.odt purposes of depreciation to be allowed on block of assets as provided under Section 32 of Act. (h) Accordingly question No.(4) is answered in affirmative i.e. in favour of respondent-assessee and against appellant revenue. 7. Accordingly appeal is dismissed. No order as to costs. (Manish Pitale, J. ) (M.S. Sanklecha, J.) halwai/p.s. ::: Uploaded on - 31/07/2017 ::: Downloaded on - 01/08/2017 09:44:52 ::: Commissioner of Income-tax-IV v. Ballarpur Industries Ltd
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