Partly allowed

The Commissioner of Income Tax, v. Punalur Paper Mills

Kerala HC7 Feb 2019ITA/1422/2009

Case brief

AI extract

What is this about?

Income tax appeals on taxation of rent arrears received in later years, reassessment under Section 147, depreciation of unused assets, business expenditure and TDS credit. The court held Section 25B not clarificatory, upheld reassessment within limitation, allowed carried forward depreciation and business expenditure, but refused depreciation for years in which the assets were not put to use.

What did the court decide?

Appeals partly allowed; questions of law answered partly in favour of the assessee and partly in favour of the Revenue, parties to bear their respective costs.

The Commissioner of Income Tax, Vs Punalur Paper Mills — Income Tax | Kerala HC (2019)

¶1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶4

¶5

THE HONOURABLE MR.JUSTICE ASHOK MENON

¶6

THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1423 of 2009

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AGAINST THE ORDER IN ITA.467/COCH/2005 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 2001-02]

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APPELLANT/RESPONDENT/REVENUE:

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THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY ADVS.

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SRI.P.K.R.MENON, SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/APPELLANT/ASSESSEE:

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PUNALUR PAPER MILLS LTD., KOLKATA. BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

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THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1384/2009, ITA.1389/2009, ITA.1390/2009, ITA.1415/2009, ITA.1418/2009, ITA.1422/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

¶22

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶23

¶24

THE HONOURABLE MR.JUSTICE ASHOK MENON

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THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1378 of 2009

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AGAINST THE ORDER IN ITA 227/COCH/2005 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 1999-2000]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY ADVS. SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS LTD., KOLKOTA.

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BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

¶36

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1384/2009, ITA.1389/2009, ITA.1390/2009, ITA.1415/2009, ITA.1418/2009, ITA.1422/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶40

PRESENT

¶41

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶42

¶43

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶44

THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1384 of 2009

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AGAINST THE ORDER IN ITA 226/COCH/2005 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 1998-99]

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APPELLANT/RESPONDENT:

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COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS LTD., 13, NELLIE SENGUPTA SARANI, KOLKATA-700087. BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

¶54

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1389/2009, ITA.1390/2009, ITA.1415/2009, ITA.1418/2009, ITA.1422/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

¶57

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶58

PRESENT

¶59

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶60

¶61

THE HONOURABLE MR.JUSTICE ASHOK MENON

¶62

THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

¶63

ITA.No.1389 of 2009

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AGAINST THE ORDER IN ITA 305/COCH/2006 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 2002-03]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME-TAX, TVM. THIRUVANANTHAPURAM.

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BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS, KOLLAM

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BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

¶73

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1384/2009, ITA.1390/2009, ITA.1415/2009, ITA.1418/2009, ITA.1422/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

¶78

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶79

¶80

THE HONOURABLE MR.JUSTICE ASHOK MENON

¶81

THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1390 of 2009

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AGAINST THE ORDER IN ITA 22/COCH/2003 of I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 1985-86]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS LTD., KOLLAM.

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BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

¶92

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1384/2009, ITA.1389/2009, ITA.1415/2009, ITA.1418/2009, ITA.1422/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

¶97

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶98

¶99

THE HONOURABLE MR.JUSTICE ASHOK MENON

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THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1415 of 2009

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AGAINST THE ORDER IN ITA.269/COCH/2003 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 1997-98]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY ADVS. SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS LTD., KOLLAM.

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BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

¶111

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1384/2009, ITA.1389/2009, ITA.1390/2009, ITA.1418/2009, ITA.1422/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

¶116

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶117

¶118

THE HONOURABLE MR.JUSTICE ASHOK MENON

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THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1418 of 2009

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AGAINST THE ORDER IN ITA 225/COCH/2005 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 1996-97]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY ADVS. SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS, KOLKOTA.

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BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE

¶130

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1384/2009, ITA.1389/2009, ITA.1390/2009, ITA.1415/2009, ITA.1422/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶136

¶137

THE HONOURABLE MR.JUSTICE ASHOK MENON

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THURSDAY, THE 07TH DAY OF FEBRUARY 2019 / 18TH MAGHA, 1940

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ITA.No.1422 of 2009

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AGAINST THE ORDER IN ITA 228/COCH/2005 OF I.T.A.TRIBUNAL, COCHIN BENCH, COCHIN DATED 29-08-2008 [ASSESSMENT YEAR 2000-01]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM.

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BY ADV. SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/APPELLANT:

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PUNALUR PAPER MILLS, KOLKOTA.

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BY ADV. SRI.E.K.NANDAKUMAR (SR.)

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OTHER PRESENT:

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ADV.SRI JOSEPH MARKOS [SR.], AMICUS CURIAE.

¶149

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.02.2019, ALONG WITH ITA.1378/2009, ITA.1384/2009, ITA.1389/2009, ITA.1390/2009, ITA.1415/2009, ITA.1418/2009, ITA.1423/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.No.1423 of 2009 & connected cases

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JUDGMENT

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[ ITA 1423/2009, ITA.1378/2009, ITA.1384/2009, ITA.1389/2009, ITA.1390/2009, ITA.1415/2009, ITA.1418/2009, ITA.1422/2009 ]

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Vinod Chandran,J.

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The appeals, arising from a common order of the Tribunal, raise common and different questions in the various assessment years (for brevity A.Ys). We, hence, would go by the issues raised in the various appeals.

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2. For the years 1985-1986 and 1996-1997 to 2000-2001, a total of six A.Ys, one of the questions raised is on the rent arrears of earlier years, received by the assessee in the subsequent years. On facts, suffice it to record that the assessee was the owner of a multi-storeyed building, by name 'Lindsay Towers' in Kolkata, which was purchased in 1971. On the assessee seeking enhancement of rent from the tenants, the tenants refused and the matter

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was referred to an Arbitrator, which was settled much later. The rent so fixed by the Arbitrator along with interest as awarded, for many previous years, was received by the assessee from the various tenants in a far subsequent year. The Assessing Officer [for brevity “AO”] for certain years initiated proceedings under Section 147 for re-assessment. In the A.Y. 2000-01, the AO brought to

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ITA.No.1423 of 2009 & connected cases

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tax the entire arrears, other than that for the relevant previous year, as 'income from other sources', ie: in the year of its receipt and also made protective assessments for the A.Ys in which they actually fell due.

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3. First we refer to I.T.A.No.1422 of 2009 relating to the A.Y.2000-2001. The arrears of rent received of Rs.6,11,18,381/- in the relevant previous year was for housing the offices of the Provident Fund Commissioner, Kolkata. The assessee offered Rs.25,39,971/- as the arrears due between April to August, 1999, ie: the arrears of rent applicable to the relevant previous year. The assessee claimed that income-tax was not leviable on the balance amounts; since it did not comprise the rent arrears accruing or arising in the previous year to the assessment year. The arrears with respect to an year other than the relevant previous year could not be taxed under the Income Tax Act, 1961 (for brevity “the Act”] was the compelling argument. It was specifically contended that though Section 25B would enable such taxation of income received from house property relatable to a prior year in the year of its receipt, the said provision is prospective; with effect from 01.04.2002 alone. It cannot be applied for the earlier years.

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ITA.No.1423 of 2009 & connected cases

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4. The Assessing Authority found that since the income is not exempted from taxation and is not chargeable to tax under the specific heads of items A to E of Section 14, it shall be chargeable under the head 'income from

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other sources' (item F). Reliance was placed on CIT v . G.R.Karthikeyan [ (1993) 201 ITR 866 (SC) ] for the

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proposition that tax incidence arises either on accrual or receipt. The assessee's contention that the receipt of the rent arrears in the previous year relevant to the assessment year would not change the character or nature of the income was negatived. If it cannot be assessed as 'income from house property' for reason of the same being not rent accruing, arising or receivable for the relevant previous year, then it has to be assessed as 'income from other sources'. The rent arrears relating to the assessment years 1996-1997 to 1999-2000 was also included as a protective measure in the total income of the assessee in the respective assessment years. The first appellate authority followed the order in first appeal for the year 1985-1986 which relied on Section 25B, which was introduced later; but found it to be clarificatory and upheld the assessment made. The Tribunal relied on two decisions of the Calcutta High Court in Hamilton & Co. (P)

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ITA.No.1423 of 2009 & connected cases

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Ltd. v . CIT [ (1992) 194 ITR 391 (Cal) ] and Hope (India) Ltd. v . CIT [ (1999) 238 ITR 740 (Cal) ] to find that there

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could be no assessment made in the previous year in which the arrears of rent was received, since it related to a prior year. Section 25B was held to be not clarificatory.

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5. Sri.P.K.R.Menon, learned Senior Counsel,

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Government of India (Taxes) would seek to sustain the order of the AO. assessing it as 'income from other sources'. Alternatively, it is argued that merely because the rent arrears was received in a subsequent year, it would not change the character of the income and it could be assessed as income from house property itself. There is no restriction insofar as assessing the income from house property in the year in which it accrues or arises and the receipt in a subsequent year would also enable such assessment in that year when the amounts are received, since the charge is on the income from house property which is the annual value of the property as seen from Section 22 and determined as per Section 23. Section 25B, according to the learned Senior Counsel, is clarificatory in nature as

¶173

has been held by the High Court of Delhi in B.M.Gupta and Sons v . Asst. CIT [ (2008) 299 ITR 410 (Delhi) ] and CIT v . R.J. Wood P.Ltd . [ (2011) 334 ITR 358 (Delhi) ]. The facts in

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ITA.No.1423 of 2009 & connected cases

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R.J. Wood P.Ltd . are also identical and despite noticing the decisions of the Calcutta High Court, found Section 25B to be applicable holding it to be clarificatory.

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6. The learned Counsel for the assessee would rely

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on P.G.&W. Sawoo (P) Ltd . v. Assistant CIT [ (2017) 13 SCC 284 ]. According to him, the issues stand settled by the decision of the Supreme Court and there could be no re-opening of assessments carried out of the earlier years relating to which rent arrears were received in a subsequent year, even if it is within the limitation period. It is contended that as the provision existed in the relevant years, the annual value of the property is either the sum which can be reasonably expected to be obtained from the letting of the property or the annual rent received or receivable by the owner which is in excess of rent reasonably expected. At that point of time, Explanation I also existed, which defines “annual rent”, which means either the actual rent received or receivable by the owner in respect of such year. Hence, the charge is specific to the year in which the rent is received or receivable and it cannot be brought to tax in a subsequent year. Section 25B, it is asserted, is not clarificatory in nature, the same having been specifically stated to be with

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ITA.No.1423 of 2009 & connected cases

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effect from 01.04.2002.

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7. The following questions of law arise in the year 2000-01; in which alone the Tribunal, if at all could have imported the finding of Section 25B, being

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clarificatory. We say this because in the other years the proceedings were under Section 147, for assessing the rent, after increase, in the A.Ys, relevant to the previous years in which it actually accrued:

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(i) Whether the rent accruing in a prior year, not received in that year, could be assessed in a subsequent year when it is received; as 'income from house property' or otherwise as 'income from other sources' as found by the AO?

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(ii) Whether the Tribunal was correct in holding Section 25B to be clarificatory?

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8. We extract Section 23(1)(a) and (b) and

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Explanation I:

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“23(1) For the purposes of section 22, the annual value of any property shall be deemed to be -

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(a) the sum for which the property might reasonably be expected to let from year to year; or

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(b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so

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ITA.No.1423 of 2009 & connected cases

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received or receivable;

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xxx xxx xxx

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Explanation 1.- For the purposes of this sub-section, “annual rent” means -

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(a) in a case where the property is let throughout the previous year, the actual rent received or receivable by the owner in respect of such year; and

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(b) in any other case, the amount which bears the same proportion to the amount of the actual rent received or receivable by the owner for the period for which the property is let, as the period of twelve months bears to such period”.

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9. Section 22 provides that the annual value of

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the property is the measure on which the charge has been created for 'income from house property'. By Section 23, annual value of a property is deemed to be the reasonable rent expected to be received from year to year, or where the property is let, the annual rent received or receivable; if in excess of the reasonable rent expected, then the amount so received. The annual rent defined in

¶200

Explanation I, in the case of a property let through out the previous year “ is the actual rent received or receivable by the owner in respect of such year” (sic) . Hence, when a property is let, the annual rent received or

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ITA.No.1423 of 2009 & connected cases

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receivable by the owner in respect of such previous year alone can be brought to tax as income from house property. This is the restriction, insofar as taxing rent as 'income from house property', as provided in Section 22; when received in any subsequent year to the previous year relevant to an assessment year. It is then received as arrears for a prior year not relatable to the relevant previous year and there is no charge on such income from house property. The four elements of taxation, as has been specified in Govind Saran Ganga Saran v. Commissioner of Sales Tax [ 1985 (Supp) SCC 205 ], are (i) the taxable event attracting the levy, (ii) the person on whom the levy is imposed, (iii) the rate at which the tax is imposed and (iv) the measure or value to which the rate will be applied. The annual value of property which is defined as the annual rent received or receivable by the owner in respect of a previous year is the measure on which the tax is levied. Its character does not change if the receipt is in a subsequent year; but then in that assessment year, it cannot be charged since it will not be rent accruing or received for that previous year in which the property is let ie: not 'income from house property' for the relevant

¶204

previous year. Section 25B definitely provides for the

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ITA.No.1423 of 2009 & connected cases

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arrears also to be taxed; but the provision was not available in the relevant A.Y.

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10. We now refer to the decisions of the Delhi High Court as relied on by Sri.P.K.R.Menon. B.M.Gupta and Sons was a case in which the lessor and lessee entered into a compromise settlement in a suit filed by the assessee increasing the rent retrospectively from April 1, 1994. The assessee received a sum of more than Rs.38 lakhs during the financial year 1999-2000 on account of the arrears of rent for the period 01.01.1994 to 31.03.1999. The appellant contended that this amount was in fact damages and mesne profits. The terms of the compromise in the suit was specifically noticed to negative the said plea. The Division Bench held that, by virtue of the compromise between the parties, the assessee not only acquired the right to additional income but also received the arrears of rent during the financial year 1999-2000, attracting the provisions of Section 5(1)(a) of the Act.

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11 . R.J.Wood P.Ltd. is in identical circumstances

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of a letting out made by the assessee to five tenants. A dispute arose as to who is to bear maintenance charges, upon which the tenants filed a suit before the Small Causes

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Court for fixation of standard rent. The Court by an

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ITA.No.1423 of 2009 & connected cases

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interim order fixed a rent on a lump sum basis; lesser than that agreed upon between the parties. The assessee paid the maintenance charges during the period of the pendency of the suit and claimed it as expenditure. The AO disallowed the claim finding that the agreement created the liability for maintenance on the tenants. The suit came to be finally decided, in which the contractual rate was affirmed. The income tax returns filed for the years 1996-1997 to 1999-2000 showed only the standard rent received by the appellant as fixed by the Court as an interim measure. After the order of the Small Causes Court, the AO issued notice under Section 148 in respect of the A.Ys 1996-1997

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to 1999-2000 including the annual rental, at the contractual rent for the said assessment years. The arrears being related to those years, the assessee filed its return for the year 2000-2001, in which relevant previous year the assessee received the rent arrears. The AO accepted the position that this would not be taxable for the prior years. The Delhi High Court noticed the decisions of the Calcutta High Court, but eventually found the position having changed by introduction of Section 25B;, which was held to be clarificatory. Finding that Section 25B of the Act enables assessment of the rent in the year in which it

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ITA.No.1423 of 2009 & connected cases

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was received, though related to the previous years, it was held that the same cannot be assessed in the previous years. However, since the AO had not assessed the amounts in the year 2000-2001, there were no directions issued.

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12. The learned Senior Counsel for the Revenue has specifically relied on B.M.Gupta and Sons and R.J. Wood P.Ltd ., which found Section 25B to be clarificatory. We, with all the respect at our command, cannot agree with the said finding as entered into by two Division Benches of the Delhi High Court. We also notice that the specific statement relied on by the learned Senior Counsel, GOI (Taxes) that “the insertion of Section 25B of the Act by the Finance Act, 2000 is more clarificatory in nature”(sic) , from B.M.Gupta and Sons was the argument advanced by the Counsel for the Department before Court. B.M.Gupta and Sons permitted arrears of rent in that case to be brought to tax since it attracts the provision of Section 5(1)(a) of the Act. R.J. Wood P.Ltd . followed B.M.Gupta and Sons to find that the provision is clarificatory in nature without any reasoning thereof.

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13. We are persuaded to accept the proposition as laid down by the Calcutta High Court in Hamilton & Co. (P) Ltd. and Hope (India) Ltd. In Hamilton and Co. Pvt. Ltd. ,

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ITA.No.1423 of 2009 & connected cases

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the learned Judges framed the question as to whether the arrears of rent relating to another previous year is taxable as income from house property of the later year in which the arrears were received. It was held:

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“If the arrears of rent of past years are not part of the annual rent of the year of account in which such arrears are received, then the only rational inference should be that the annual rent or annual rents of the past year or years to which they pertain can be brought to charge only in the assessment years relevant to such past years of account. The receipt of arrears of rent cannot, by any stretch of imagination, be said to have shed their character as rent from property and to have ceased to be liable to tax as income from house property. The simple case is that the rent of a past year increased retrospectively shall be the annual rent of such past year or years but not the annual rent of the year in which it is received consequent upon subsequent increase”.

¶225

14. In this context, we also notice the following from Departmental Circular No.494 dated 9^th August 2000:

¶226

“Introduction.- Section 25B [enacting special provision for arrears of rent received] has newly been inserted (w.e.f. 1.4.2001) by the finance Act, 2000. The scope and effect of such insertion of section 25B by the Finance Act, 2000, have been elaborated in the following portion of the

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departmental circular No.794, dated 9^th August, 2000, as under:-

¶230

'21. Taxation of arrears of rent in the year of receipt.- 21.1 The scheme of taxing the income from house property under the Income-tax Act involves the concept of “annual value”. Annual value has been deemed to be the sum for which the property might reasonably be expected to be let from year to year or annual rent received or receivable in excess of annual value. Arrears of rent received subsequently may or may not fall within the ambit of annual value. Doubts have also been expressed that it may be difficult to include arrears of rent in the relevant years as these were not receivable during those years. Difficulties in taxing such income as income from other sources also came to notice on account of a possible view that such income retains the character of income from house property.

¶231

21.2 With a view to set all such doubts at rest and to clarify the matter, the Finance Act, 2000, inserts a new section 25B in the Income-tax Act to provide that where any arrears of rent, other that what has already been taxed under section 23, are received in a subsequent year, the same will be deemed to be the income from property and charged to tax in the year of receipt whether the property is owned by the assessee in the year of receipt or not. A deduction of a sum equal to one-fourth of such amount of rent shall be given towards repairs and collection of rent.

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ITA.No.1423 of 2009 & connected cases

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21.3 This amendment will take effect from 1^st April, 2001, and will, accordingly, apply in relation to the assessment year 2001-2002 and subsequent years [Section 13]'.”

¶235

The introduction of Section 25B is stated to be clarificatory, but not in the sense of it being applicable always in the prior years; but only in the context of it being introduced to set all doubts at rest. It also is expressly stated that it applies to assessment year 20012002 and subsequent years.

¶236

15. We also have to notice the amendments brought to Section 23. Section 23 as we extracted hereinabove along with the Explanation was available in the Statute book from 1993 till 01.04.2002 when it was amended by the Finance Act, 2001. In the present case, we are only concerned with the financial years prior to 01.04.2000, the last of the assessment years under consideration being 2000-2001. The

¶237

assessment of the arrears of rent arise last in the assessment year 2000-2001, the previous year relevant to which, ends on 31.03.2000. Section 23 as amended by the Finance Act,2001, again spoke of determination of annual

¶238

value and deemed it to be the actual rent received or receivable by the owner in respect thereof, in excess of

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ITA.No.1423 of 2009 & connected cases

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the sum, which is reasonably expected to be received when it is let from year to year. Before the said amendment to Section 23, Section 25B was brought in as a special provision for arrears of rent received subsequently, by Finance Act, 2000 with effect from 01.04.2001. Hence, when Section 25B was first brought into the Statute, Section 23 existed as it did from 1993 onwards, with the annual value deemed to be the annual rent and the definition of “annual rent” found in Explanation I to be the rent accruing for that previous year when the property was let. Section 25B sought to remove the prohibition, insofar as the arrears of rent received in a subsequent year not being charged under Section 22 for reason of the measure of 'annual value' as defined by 'annual rent' not enabling the assessment of any rent, which is not received or receivable for the previous year relevant to the assessment year. Section 25B is a deeming provision, enabling arrears of rent received from a property to be deemed an income chargeable as 'income from house property' and accordingly charged to income tax as the income of that previous year in which such arrears is received.

¶242

16. A substantial change in the levy was brought in by introducing Section 25B, which was also specifically

¶243

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made effective from 01.04.2001 alone. Hence, we cannot find Section 25B to be clarificatory and to that extent, we defer from the findings in B.M.Gupta and Sons and R.J. Wood P.Ltd . We also find that the provision under Section 23,as

¶246

existing for the subject years; deems the 'annual value' to be the 'annual rent'. The definition of 'annual rent' evident from Explanation I restricts the levy of income tax to actual rent received or receivable by the owner in respect of the previous year relevant to an assessment year in which the property was let; which alone can be 'income from house property'.

¶247

17. Now, we examine the orders of the lower authorities. We find that the question under Section 25B arose only for the year 2000-2001. For all the other years, the respective assessments of the said years were reopened under Section 147 by a notice issued under Section 148. The further question insofar as the assessment year 2000-2001 is as to whether there can be a protective assessment for the particular years for which the arrears of rent relate. We are afraid that such a protective assessment is not permitted by the Statute and resort can only be to Section 147, though the time for reopening had underwent changes over the years. The learned Counsel for the assessee

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however objects to the re-assessment under Section 147; which we will deal with later, in the other subject years. As far as 2000-01 is concerned there is no re-assessment and the AO has assessed the arrears of rent as 'income from other sources' and also carried out protective assessment for the relevant assessment years to which the arrears of rent were relatable. In first appeal Section 25B was applied to tax the arrears of prior years received in the relevant previous year. We do not agree with the finding of the AO that even if it cannot be taxed under Sections 22

¶251

and 23 as 'income from house property', the same can be taxed as 'income from other sources'. The rent received being 'income from house property', does not change its character, merely for the reason that it has been received

¶252

in a far later subsequent year to the financial year in which it actually accrued and was payable. But 'income from house property' cannot be assessed in any year other than the assessment year; in which previous year the property was let and the rent received or receivable for that previous year's letting. We also do not agree with the order of the CIT (Appeals) and the Tribunal that Section 25B is clarificatory; which ground has been taken to

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sustain the assessment in the assessment year 2000-01.

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ITA.No.1423 of 2009 & connected cases

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¶256

18. Admittedly the rent arrears received in 2000-01 also related to the various prior years. However, there was no attempt to reopen the assessments of the earlier years by the AO; at least, those in which the limitation period had not expired. Hence for the assessment year 2000-01 reopening of assessment under Section 147 does not arise. All the same, we make it clear that there could be no protective assessment for the earlier years as made by the AO. Hence, for the year 2000-2001, we uphold the order of the Tribunal insofar as setting aside the assessment made on the arrears of rent received in the relevant previous year, which was not the annual rent received or receivable for that previous year's letting of the property. We answer both the questions framed as (i) & (ii) in favour of the assessee and against the revenue.

¶257

19. Then we come to the other appeals where the issue of re-assessment arise. The Tribunal considered the appeals together and in the chronological order of the years for which they were filed. The Tribunal has first considered the year 1985-86 and dilated upon the arguments of both the assessee and the Revenue regarding the clarificatory nature of Section 25B. We find Section 25B

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ITA.No.1423 of 2009 & connected cases

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was raised and considered first before the Commissioner (Appeals), in all the relevant assessment years. The Tribunal too considered it for the year 1985-1986 and followed the reasoning in all the subsequent years. The contention with respect to the maintainability of reassessment under Section 147 was merely brushed aside without considering the issue. We would have normally remanded the matter for consideration before the Tribunal, but for the fact that the appeals have been pending here for the last one decade and the assessments are with respect to years two decades prior. We do not find any factual adjudication necessary insofar as the re-assessment proceedings and the question is only of limitation. True, that is a mixed question of law and facts; which facts relate to the various dates in which proceedings were initiated; more than evident from the records. Hence we proceed to consider the same. The question of law raised is framed as follows:

¶261

(iii) Whether the proceedings initiated under Section 147 was proper, so as to assess the arrears of rent received as 'income from house property' in the previous years of the relevant assessment years, in which the property was let and the rent accrued; and whether it was within the period of limitation as provided under Section 149?

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ITA.No.1423 of 2009 & connected cases

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20. On the law applicable to reassessment we have

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to look at Sections 147, 148 and 149 as it existed in the relevant years. Section 149, speaking of time limit for notice under Section 148, to proceed under Section 147; for the assessment years 1985-1986, 1996-1997, 1997-1998, 1998-1999 and 1999-2000, remained more or less same. If the escaped assessment was in excess of Rs.1 lakh, it was 10 years for the year 1985-86, 1996-97 1997-98 and six years insofar as 1998-99 and 1999-2000. The assessee also had a contention before the Tribunal that the arrears of rent received were in the nature of damages and mesne profits as contented by the assessee in B.M Gupta and Sons , which was rightly negatived by the Delhi High Court. There the

¶266

assessee received the rent by virtue of an agreement entered into in compromise of a suit. The Division Bench of the Delhi High Court specifically looked into the order of the Civil Court and found that the plea of damages and mesne profits is unfounded. In the present case also, admittedly, the assessee purchased a property in which there were tenants. On expiry of the lease period, the assessee claimed enhancement to which the tenants did not accede. The assessee approached the Arbitrator and the

¶267

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ITA.No.1423 of 2009 & connected cases

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arrears of rent obtained by the assessee is by virtue of the award on arbitration. Hence the claim of damages and mesne profits cannot be sustained. The amounts received from the tenants were with respect to the rent of the relevant previous years, as enhanced by the award on arbitration.

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21. Section 147 proceedings were initiated by a notice under Section 148 in all the above years. We find that for the A.Ys 1985-86 and 1996-97 the notices under Section 148 were issued respectively on 03.07.1995 and 25.08.1998. For the A.Y 1997-98, the return filed in response to the notice under Section 148 was dated 09.12.1998. The notice for those A.Ys hence, are within the period of limitation of ten years. Again for the year 1998-99, 1999-2000 and 2000-2001 the notices under Section 148 was issued on 11.02.2003 for all the years, within the six year period provided under Section 149 as amended and applicable for the subject years. We make it clear that with respect to the year 2000-2001 it only led to the assessment of arrears of rent received or receivable for that particular year. We uphold the order of re-assessment for the year 1985-1986, 1996-1997, 1997-1998, 1998-1999, 1999-2000 as also of 2000-2001; wherein the rent relatable

¶271

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ITA.No.1423 of 2009 & connected cases

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to those years were alone assessed as income from house property.

¶274

22. The learned Counsel for the assessee has a contention based on P.G.& W.Sawoo P.Ltd . It is argued that the right to receive the arrears of rent crystallized only by the award, far subsequent to the relevant assessment years. It is pointed out that the Hon'ble Supreme Court in the afore-cited decision was considering the charge to income tax on the arrears of rent with effect from 01.09.1987 which accrued only by virtue of an enhancement made in the year 1994. The Hon'ble Supreme Court held that the rent should accrue or arise at any point of time during the previous year. In the present case also, there was no accrual in the previous year nor was there a reasonable expectation of an enhancement being granted and hence the right to receive the rent as arrears for the previous years, accrued and arose only in the year in which the award was passed which takes it out of the charge of Section 22 and 23 as available in the relevant assessment years. We cannot countenance the argument especially noticing the fact that the assessee had taken legal proceedings for enhancement of rent and was following the mercantile system of accounting. Admittedly on the expiry

¶275

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of lease period, after the assessee acquired the property, the assessee sought for enhancement. There was no claim for eviction of tenants who were continuing in the premises paying rent as per the earlier agreement. The tenants having not acceded to the request of an enhancement, the assessee had taken legal proceedings which culminated in an arbitration and the arbitration concluded with the enhancement sought by the assessee being allowed which resulted in the receipts of arrears in a far later year relatable to various prior years. It cannot be said that the assessee did not have a reasonable expectation of enhancement. The assessee following the mercantile system also should have returned the rent claimed by them before the arbitrator as accruing in the respective previous years

¶278

of the assessment year when the matter was pending arbitration. The argument holds no merit and is rejected. The question raised as (iii) is answered in favour of the revenue and against the assessee.

¶279

23. For the assessment years 1996-1997, 1999-2000 and 2000-2001 the question arises as to:

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(iv) whether there could be a claim of deduction of Municipal tax, for which cheque was issued to the local authority prior to the end of the previous year relevant to the assessment year;

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ITA.No.1423 of 2009 & connected cases

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but, however, the Bank statements show realization only on the commencement of the next assessment year.

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24. The Tribunal has remanded the matter for fresh

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consideration in the years 1996-1997 and 1999-2000. For the year 2002-2003, it was specifically found that the cheque was tendered on 30.03.2002, which was cleared on 08.04.2002. The Tribunal relying on the decision of the Hon'ble Supreme Court in CIT v. Ogale Glass Works Ltd. [ 25 ITR 529 ], held that when a cheque is not dishonoured but encashed, the payment relates back to the date of tendering of cheque. The date of payment would be the date of delivery of the cheque. We do not find any reason to cause interference to the order of the Tribunal. We, hence,

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answer question no: (iv) in favour of the assessee and against the Revenue. For the year 2002-2003, the Tribunal has looked at the dates and allowed the deduction. For the other two years, the AO would verify the dates and consider it in accordance with the cited judgment of the Hon'ble Supreme Court.

¶287

25. Another question arising in the year 1997-98 is as to whether the Tribunal was right in law in holding that the assessee must be given credit for the tax deducted

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ITA.No.1423 of 2009 & connected cases

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at source, on the arrears of rent received. We do not see any question of law arising on that aspect, since it goes without saying that any deduction made and paid over to the Government of India by the tenant as TDS should be given credit to the assessee to the extent, the assessee produces evidence for such deduction by production of proper certificates issued by the deductor. The learned Senior Counsel for Government of India (Taxes) raised a contention that the amounts claimed are very high and it is not probable that the TDS would be to that extent. We find that the Tribunal has only held that the assessee must be given credit of the tax deducted at source. In such circumstances, it is for the AO to verify and give credit to the amounts deducted at source and deposited, evidenced by valid certificates issued by the deductor. The AO would consider the issue and pass appropriate orders.

¶291

26. The revenue has a further contention that if

¶292

tax deducted at source is from an amount, for which no income tax has been charged; being arrears of rent, the same cannot be given credit to. We cannot countenance such an argument, since if the deduction has been erroneously made from the amounts which cannot be categorized as income, necessarily the assessee is entitled to refund of

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such amounts. The assessee only claims credit insofar as the amounts credited to be set off on the tax payable in that particular year and the balance refunded.

¶296

27. Another question arising in the years 1998-1999, 2000-2001 and 2001-2002 is as to:

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(v) Whether the Tribunal was correct in having permitted the assessee to claim vacancy allowance as provided in Section 24(1)(i)(ix)?

¶298

The learned Senior Counsel, Government of India (Taxes) would contend that in all the said years the assessee had filed a return and there was an assessment completed under Section 143(3). Here, the proceedings coming up for consideration is the proceeding under Section 147, for reassessment. The assessee, if at all, had the claim of vacancy allowance, ought to have claimed it in the regular assessment. Reliance is also placed on the decision in Chettinad Corporation P. Ltd. v . CIT [ (1993) 200 ITR 320 (SC) ].

¶299

28. We see from the assessment orders for the respective years that they are all assessments completed under Section 147 read with Section 143(3). We also see a recital as to the regular assessments in which the assessee

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had returned rental income obtained from the very same

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ITA.No.1423 of 2009 & connected cases

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building at Kolkata. We agree with the learned Senior Counsel that if at all a claim had to be made, it had to be made in the regular assessment. It is also pertinent that the Revenue would be disabled insofar as conducting an

¶304

enquiry after long years within the period in which the reassessment is made. The Hon'ble Supreme Court has also held that re-opening is for the benefit of Revenue to bring to tax the escaped income and the assessee cannot agitate matters concluded in the original assessment. A reassessment has to be confined to that found in the notice which is issued by the AO or any other aspect discovered in the course of the proceedings, which appear prejudicial to the revenue. We, hence, answer the question of law raised as (v) against the assessee and in favour of the Revenue.

¶305

We set aside the order of the Tribunal which remanded the consideration of vacancy allowance.

¶306

29. Quite interesting questions arise in the

¶307

appeals for the years 1996-97 to 2002-03; which are reframed as follows:

¶308

(vi) whether the assessee can be allowed set-off of carried forward depreciation as existing in the last year of its operation, in the subsequent years in which the assets of the business were not put to use?

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ITA.No.1423 of 2009 & connected cases

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(vii) Whether the assets can be said to have been kept ready for use and hence a passive use gleaned from the circumstances, so as to permit depreciation in the assessment years in which the assets were not put to use and a deduction permitted of such carried forward depreciation and that arising in the subject years; from the income earned by the assessee not being the profits and gains from the business or profession?

¶312

30. The admitted facts are that the assessee had been carrying on its operations till 1986. From the assessment year 1986-87, the manufacturing activities of the assessee came to a stop for various reasons. The causes of shut-down are attributed to an Administrator being appointed by the Bombay High Court, dearth of rawmaterials, labour unrest and eventually a reference to the Board of Industrial and Financial Reconstruction. The assessee then commenced operations only in the year 2010. Till 1995-96, the assessee had been claiming depreciation; both carried forward and that arising in the respective years. The claim was initially rejected by the AO., but allowed by the Tribunal on the ground of passive use, meaning the assessee having had the intention to revive the

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ITA.No.1423 of 2009 & connected cases

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industry and kept the machinery ready for use for the purpose of commencement of manufacturing activities.

¶316

31. In the year 1996-97, which arises first for our consideration under I.T.A.No.1418/2009, the AO again declined the grant of allowance as also the carried forward of depreciation for the previous year to be set off against the income arising from house property, which alone was the income for the years in which the business of the assessee

¶317

remained closed. The AO found that deduction on depreciation under the Act is not a mere allowance for natural wear and tear on account of the ageing process. A deduction is enabled under the Income Tax Act, only when the assets, on which depreciation is claimed are put to use. The two conditions for claiming depreciation as per Section 32(1) of the Act were found to be (i) ownership in the property and (ii) use it is put to for the purpose of business or profession. It was found that unless these two conditions are satisfied, no allowance in respect of depreciation can be allowed. Mere preparation for the user or keeping the machinery for use cannot amount to actual

¶318

use. A number of decisions of various High Courts as proffered by the assessee and those ferreted out by the AO

¶319

were discussed. Eventually, the claim for depreciation

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ITA.No.1423 of 2009 & connected cases

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allowance of that year was declined; both of the carried forward depreciation as also the depreciation applicable to the relevant previous year. The further carry forward to the next year too, stood declined. The First Appellate Authority affirmed the same. However, the Tribunal found that there is passive use insofar as the assets having been kept ready for use and there was never an intention to close down the unit as such.

¶323

32. We are called upon to answer both these questions; ie: the permissibility of deduction of (i) carry forward depreciation and (ii) that arising in the particular relevant previous year; when for that particular previous year there was absolutely no user of the assets for the purpose of business. We also have to answer it in the context of the assessee's business having been closed down for more than 24 years from 1986 to 2010. It also has to be considered whether the subsequent fact of commencement in the year 2010 has a bearing insofar as the depreciation allowance arising in the years in which the business was closed down for the purpose of setting off, as against the income from any other heads as provided under Section 14 of the Act, other than the 'income from profits and gains of business or profession'. Considering the

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ITA.No.1423 of 2009 & connected cases

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nature of the questions raised, we sought the assistance of Sri.Joseph Markos, learned Senior Counsel.

¶327

33. Sri.Raveendranatha Menon, appearing for the Department, would take us through the findings of the AO, especially the discussions in the decisions of the various High Courts. It is pointed out that the assessee had been closed down for more than 24 years putting to serious doubt the import of principle of passive use on the peculiar facts. The provision under Section 32(1) itself speaks of the two conditions as pointed out by the AO and the absence of one would result in the deduction being dis-entitled for the year both carried forward and that of the subject year.

¶328

34. Sri.Raja Kannan, appearing for the assessee would however point out that the Tribunal in the earlier years from 1986-87 to 1995-96 had consistently granted the depreciation allowance, both carry forward and also the allowance for the respective previous years. There is absolutely nothing on record to take a deviation in the year 1996-97 and decline the claim when the assessee had absolutely no intention to close down the factory and had kept the machinery ready for use. The commencement of the industry got delayed not for reasons attributable to the assessee and eventually the unit was commenced in the year

¶329

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ITA.No.1423 of 2009 & connected cases

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2010. The Tribunal's order finding the passive use insofar as the plant and machinery of the assessee has to be upheld, is the contention raised. The learned Counsel would rely on a Division Bench decision in C.I.T. v. Geo Tech Construction Corporation, [2000] 244 ITR 452 to contend that the user as found in Section 32(1) has to be given a wider meaning and includes a passive use. The decision in C.I.T. v. Vikram Cotton Mills Ltd., [1988] 169 ITR 597 (SC) was relied on to contend that the facts were almost similar and the amounts obtained as lease rent for the machineries; though the assessee having not put it to use for the purpose of the business, was allowed when the lease was effected under a scheme formulated by the High Court.

¶332

35. Sri.Joseph Markos, learned Senior Counsel, assisting us, would, at the outset, submit that the question as to whether there can be a carry forward or not in the identical facts and circumstances of the case is no longer res integra . The same is covered by a decision of the Hon'ble Supreme Court in C.I.T. v. Virmani Industries Pvt.Ltd., (1995) 6 SCC 466 . Therein, the last year on which the assessee had put its assets to use was 1956-57 and the business was revived after a gap of eight years in

¶333

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ITA.No.1423 of 2009 & connected cases

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the previous year relevant to 1965-66. The assessee had claimed carry forward of the depreciation as it existed in 1956-57, which was declined by the AO, but allowed by the Tribunal and the High Court. The Hon'ble Supreme Court found that as far as carry forward, there is no restriction insofar as the assessee being either obliged to carry on the same business in the next year or any other business for that matter. The carry forward hence necessarily has to be allowed and the assessee could claim it under any of the other heads under Section 14 of the Act.

¶336

36. With respect to the depreciation allowance

¶337

for the respective years in which the assessee had not put the assets to use, Sri. Joseph Markos would submit; it is a mixed question of fact and law. There have been conflicting

¶338

decisions of various High Courts, where on facts, the deduction was declined and on certain other facts, the deduction was allowed. The learned Senior Counsel would place reliance on C.I.T. v. Blend Well Bottles P.Ltd., [2010] 323 ITR 18 (Karn), C.I.T. v. Chennai Petroleum Corporation Ltd., [2013] 358 ITR 314 (Mad) and C.I.T. v. Oswal Agro Mills Ltd., [2012] 341 ITR 467 (Delhi) .

¶339

37. Before we consider the issue as such, we have

¶340

to understand what depreciation is. From the cited

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ITA.No.1423 of 2009 & connected cases

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decisions itself, depreciation is an allowance made for wear and tear of tangible assets and the principle factors responsible for reduction in value of a capital asset are:(1) ordinary wear and tear (2) unusual damage (3) inadequacy and (4) obsolescence. Hence even by mere passage of time, there could be reduction of value of the assets. As rightly pointed out by Sri.Joseph Markos, the principle behind deduction allowed for the purpose of Income Tax Act should not be confused with the concept of depreciation as available in accountancy practises. Wear and tear, by passage of time may not be the sole reason for granting a deduction for depreciation of capital assets. The industry when it puts to use the capital assets for its business, enables commerce and trade, generates employment and promotes overall economic growth. Necessarily there occurs wear and tear in respect of the plant and machinery, not particularly due to passage of time, but the use to which it is put to. In course of time the plant and machinery would be rendered useless, and it is expedient for continued business activity and economic growth that there should be a further investment on plant and machinery. Hence, the deduction allowable is also as a recompense insofar as the further investment required after a period

¶344

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ITA.No.1423 of 2009 & connected cases

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of time. As we see from the Income Tax Act, depreciation is calculated based on the accounting standards by determining the written down value of an asset in a particular previous year. Allowance is insofar as granting the deduction to the extent of what is reduced from the written down value, determined in the previous assessment year, which along with carry forward depreciation, can be set off as against the income arising; not only from the profits and gains of business or profession, but also from other heads under Section 14. The carry forward is also permitted till the written down value is brought to “nil” and there is no limitation for the number of years in which it could be carried forward; unlike a business loss.

¶347

38. Pausing here for a moment, we notice that the business loss in the year in which it arises can be set off as against any income under Section 14 of the Act, but on carry forward it can only be set off against the income from profits and gains of business or profession. In this context it also has to be noticed that when there is carry forward of business loss and depreciation; set-off is permitted first of the business loss carried forward, against the income from profits and gains of business or profession; especially since there is a limitation in the

¶348

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ITA.No.1423 of 2009 & connected cases

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number of years in which the business loss can be carried forward; as distinguished from carry forward depreciation.

¶351

39. We notice Virmani Industries Pvt.Ltd. in which the business was closed down for eight years from assessment year 1956-57 to 1965-66. The carried forward depreciation on the last year of its operation was claimed in the year in which operations were revived. The Revenue resisted the claim on the ground of the benefit under Section 32(2) being allowable only on establishment of the assessee carrying on the same business as in the previous year. If the business is not in existence in the following year, the un-absorbed depreciation in the previous year cannot be adjusted in the following year. The Hon'ble Supreme Court held so in paragraphs 20, 21 and 22 as follows:

¶352

"20. The next question is whether for availing the benefit of Section 32(2), it is necessary that the business carried on in "the following previous year" should be the same business as was carried on in the preceding previous year as has been held by the Madras High Court in East Asiatic Company Private Limited [(1986) 161 ITR 135] . We are of the opinion that in the absence of any words to that effect, no such requirement ought to be read into the said sub-section. A look at Section 72 shows that where the Parliament intended to provide such a limitation, it did so expressly. Section 72 deals with carry forward and set off of business loss. The proviso to

¶353

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ITA.No.1423 of 2009 & connected cases

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Clause (1) of Sub-section (1) of Section 72 expressly provides that such a course is permissible only where "the business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year". In the absence of any words to that effect, it must be held that for availing the benefit of Section 32(2), it is not necessary that the business carried on in the following year is the same business as was carried on in the previous year.

¶356

21. The other question is whether the assets which earned the depreciation in the preceding year should exist and should continue to be used for the purpose of business in the following year. In the absence of any words in the said sub-section to that effect, we cannot read this requirement also into the said sub-section. This is evident from the words "or if there is no such allowance for that previous year, be deemed to be the allowance for the previous year" occurring in the sub-section.

¶357

22. Yet another question which has to be answered before we can answer the question concerned in this appeal is whether it is necessary that in the following year the assessee must carry on business, i.e., some or other business, to avail of the benefit of the said sub-section? Two views are possible in this behalf, viz., (I) since the sub-section speaks of unabsorbed depreciation being carried forward to the next year and "added it the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance" the sub-section necessarily contemplates existence of a business in the following year and (2) inasmuch as the sub-section not only speaks of adding the unabsorbed depreciation to the depreciation allowance allowed in the following year but also says that in the absence of such

¶358

- 46 -

¶359

ITA.No.1423 of 2009 & connected cases

¶360

allowance, the carried forward depreciation allowance shall be the allowance for that year it means that in the following year the assessee need not carry on any business or profession for availing the benefit of Sub-section (2) of Section 32. We are inclined to adopt the second of the above two views having regard to the decisions of this Court in Jaipuria China Clay Mines (P) Limited [AIR 1966 SC 1187] and Rajapalayam Mills Limited [(1978) 4 scc 322] . We have extracted the relevant observations from both the judgments hereinabove, which say that the unabsorbed depreciation allowance has not only to be set off against other heads of income in the relevant previous year but where it is carried forward, it "stands on exactly the same footing as the current depreciation"."

¶361

40. Going by the authoritative pronouncement of

¶362

the Hon'ble Supreme Court, it has to be held that there is no restriction in carrying forward the depreciation from the last year of operation or from the year it was allowed; even when the business does not continue as such or it does not at all exist. It also is permitted when there is a finding of existence of passive use of plant and machinery. It is not obligatory that the assessee should be carrying on the very same business or any business for that matter in the following year. Hence, even if there is no income from the profits and gains of business or profession in a particular year where there is carry forward of depreciation from the earlier year, then necessarily it has

¶363

ITA.No.1423 of 2009 & connected cases

¶364

- 47 -

¶365

to be allowed as a depreciation for that year and could also be set off as against any other income under the various heads of income under Section 14. We, hence, answer question number (vi) with respect to carried forward depreciation being permitted set-off in the subsequent years, even when there is no business carried on by the assessee, and as against any head of income under Section 14; in favour of the assessee and against the Revenue.

¶366

41. Now, the question arises as to whether in the relevant previous years in which the assessee did not carry

¶367

on any business operation and did not, obviously earn any income from the profits and gains of business or profession, could there be an allowance by way of deduction of depreciation as against the other heads of income. If the answer is negative, then we have to consider whether such depreciation arising in an assessment year, not permissible of set off, for reason of the use having not existed; could be carried forward. We extract Section 32, as it is relevant for our consideration:

¶368

“32. Depreciation: (1) In respect of depreciation of-

¶369

(i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of

¶370

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¶371

ITA.No.1423 of 2009 & connected cases

¶372

similar nature, being intangible assets acquired on or after the 1^st day of April, 1998,

¶373

owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-

¶374

(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed;

¶375

(ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed:”

¶376

42. As was correctly pin-pointed by the AO, a

¶377

reading of the provision would make it clear that there are two conditions, necessary and essential, for claiming the allowance by way of deduction on depreciation. The tangible assets and the intangible ones; should be (i) owned wholly or partly by the assessee and (ii) used for the purpose of business or profession, upon which alone the deductions shall be allowed. Hence, the very words employed in the provision would comment an interpretation that the allowance of deduction for the relevant year, on account of depreciation, is permissible only if the assessee had put to use the capital assets; both tangible and intangible, for the purposes of business or profession.

¶378

43. Then, the question arises as to what is “passive use”. We first notice Vikram Cotton Mills Ltd. as

¶379

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¶380

ITA.No.1423 of 2009 & connected cases

¶381

placed before us by the learned Counsel for the assessee. Therein, the assessee-company engaged in manufacturing of textiles, eventually closed down from December, 1953 for reason of colossal loss having accumulated. A winding up petition was filed before the jurisdictional High Court by one of the creditors and physical possession was also taken by the winding up petitioner. Thereafter, the High Court approved a scheme by which the assets and entire business of the assessee company were let out to another for a lease rent. The question raised was as to whether the

¶382

use by a lessee of the plant and machinery would be sufficient user for the purpose of Section 32. Whether depreciation could be claimed as a deduction for the respective previous years, when the assets were put to use, not by the assessee, but by the lessee in occupation of the factory premises. The Hon'ble Supreme Court, on facts, found that the same is permissible, especially noticing that the lease rent income of the assessee is not one by way of house property, but from the business or profession; the assessee having let out the factory for the purpose of carrying on the manufacturing activity itself.

¶383

44. We find that the facts in Vikram Cotton Mills

¶384

Ltd. differ substantially and there can be no parallel

¶385

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¶386

ITA.No.1423 of 2009 & connected cases

¶387

drawn insofar as the instant case. Here, admittedly the business had been closed down for long, that too for a period of 24 years. We also notice the following from the decision of the Hon'ble Supreme Court, to find the declaration made therein to be not applicable to the facts of the assessee:

¶388

“In each case, the intention has to be gathered as to whether the commercial asset was intended to be exploited by the assessee or whether it was intended to be used by letting it out for a temporary period. It depends upon the facts and circumstances of each case. The circumstances of the instant case were as follows as appears from the statement of the case: ...".

¶389

45. Geo Tech Construction Corporation was a case in which on March 29^th of the previous year the assessee had

¶390

purchased two tipper lorries. The AO had refused depreciation allowance claimed on the ground that it was never put to use by the company in the relevant previous year. On facts, it was found by the Division Bench that there was a possibility of the assessee having put to use the tipper lorries in the very same previous year in which it was purchased, since it could have been transported from the place of purchase within a day. The fact that the use could have been for only a day, cannot affect the claim,

¶391

ITA.No.1423 of 2009 & connected cases

¶392

- 51 -

¶393

was the finding of the Division Bench. We have to notice that later, an Explanation was added to the provision restricting the claim of depreciation to the extent of the use in the previous year in which the purchase or investment was made. However, that need not detain us in considering the “passive use”, which proposition was dilated upon by the Division Bench in Geo Tech Construction Corporation .

¶394

46. Blend Well Bottles P.Ltd. was also a case in which the “passive use” was found when the closure of the business was due to riots. Chennai Petroleum Corporation Ltd. permitted the claim of depreciation when the machinery was kept ready for use, but not used for extraneous reasons, there the non-availability of raw-materials for the whole of a year. We notice again the extracted paragraphs from Vikram Cotton Mills Ltd. to find that the facts therein were not identical or even similar to that in the present case, where there was a closure for a period of almost 24 years. Whether a passive use of the machineries, based only on the expectation of the management to commence the business by reviving the manufacturing activity and the admitted revival in 2010; after almost two decades and a

¶395

- 52 -

¶396

ITA.No.1423 of 2009 & connected cases

¶397

half, could lead to a passive use gleaned in all the years when the factory remained closed.

¶398

47. We, garner immense support for our finding on Oswal Agro Mills Ltd. A Division Bench of the Delhi High

¶399

Court considered the case of an assessee who had units running in a number of States. One unit in Bombay was closed down and another unit in Bhopal was also on the verge of closure. Bhopal unit remained closed for a period of six years and the question arose as to whether the depreciation could be claimed for the years in which the unit remained closed down and whether such depreciation could be claimed on the basis of the classification of the

¶400

block assets, especially considering the fact that the assessee had other running units and was earning income from profits and gains of business or profession. We are not concerned with the second question since no such facts arise in this case. We are only concerned with the question

¶401

as to whether the assets of the Bhopal unit could be treated as put to 'passive use' for six years in which it remained closed. We extract paragraphs 22, 23 and 24 of the said decision as follows:

¶402

“21. We feel that counsel for the Revenue is right in their submission. In the instant case, the entire Bhopal Unit came to a standstill and there

¶403

- 53 -

¶404

ITA.No.1423 of 2009 & connected cases

¶405

was a complete halt in its functioning from the Assessment Year 1997-98. In that year, the AO still allowed the depreciation treating it to be a "passive user". However, when it was found that even in subsequent year, the Bhopal Unit remained nonfunctional, Assessing Officer(s) disallowed the depreciation. Present appeals relate to the Assessment Years from 1998-99. In the process six years passed till the last assessment year before us, but there was no sign of this unit becoming functional. The "passive user", in these circumstances, cannot be extended to absurd limits. Otherwise, the words "used for the purpose of business" will lose their total sanctity. It cannot be the intention of the Legislature that the words "used" when it is to be interpreted in a wider sense to mean, "ready to use", the same is stretched to the limits of non-user for number of years.

¶406

22. We may point out at this stage that some of the High Courts have taken the view that the expression "used" should mean actual user (see CIT v. J.K. Transport [1998] 231 ITR 798 (MP)], CIT v. Suhrid Geigy Ltd. [1982] 133 ITR 884 (Guj.)], Malabar Agricultural Co. Ltd. v. CIT [1998] 229 ITR 548 (Ker).] and Dineshkumar Gulabchand Agrawal v. CIT [2004] 267 ITR 768 (Bom.)] . Though we are subscribing in view of the judgments of our own High Court, at the same time we would not like to give the expression a meaning which would make the provision superfluous.

¶407

- 54 -

¶408

ITA.No.1423 of 2009 & connected cases

¶409

23. Mr. C.S. Aggarwal, learned Senior counsel appearing for the assessee, had highlighted that the assessee was a 50 year old company and non user of the Bhopal Unit for six years or so should be treated as temporary non-user. It is difficult to accept such a plea. As per Mr.Aggarwal himself, the assessee company had closed its Bombay unit, as it was not viable. If it was striving to make Bhopal unit viable and making efforts in that behalf, that may not provide justification to claim depreciation when actual non-user remained for number of years”.

¶410

48. We respectfully follow the aforesaid

¶411

declaration by the Division Bench of the Delhi High Court noticing that in the present case if depreciation is allowed in the respective previous year in which the assessee's unit remained closed, it would amount to extending the concept of passive user to absurd propositions. We already noticed that the assessee had been permitted depreciation allowance both carry forward and that arising in the respective previous years between 1986-87 to 1995-96. These were the years when there could possibly be a contention taken, of a passive user, when the assessee is alleged to have kept the machinery in readiness for use. We say possibly, since, if we were called upon to decide it for those years, we would have frowned upon the

¶412

- 55 -

¶413

ITA.No.1423 of 2009 & connected cases

¶414

passive use being employed for that long. But we are not considering what was permitted in those earlier years; for which years the decision of the Tribunal permitting such passive use has acquired finality.

¶415

49. A passive use cannot be extended for time immemorial, nor for the 24 years in which the assessee's unit had remained closed. Especially when one of the conditions as found from Section 32(1) is the requirement of user of the tangible or other assets, in the previous year in which the deduction or allowance is claimed. On the question of depreciation being allowed in the very same year in which the assessee had no business and as a consequence no income from profit and gain of business or profession, our answer favours the Revenue and is against the assessee. If the allowance as per Section 32(1) does not arise then there is no question of carry forward under sub-section (2) of Section 32. The question numbered as (vii) in both its hues; of a depreciation allowance not being permissible in the long years when the assets were not put to use for the business of the assessee and the carry forward in those years when the allowance itself was not permitted are answered against the assessee and in favour of the revenue.

¶416

- 56 -

¶417

ITA.No.1423 of 2009 & connected cases

¶418

50. The next issue arising in the year 1996-97 to 2002-03 and 2004-05 is the business expenses claimed by the assessee for that year. The question arising is so reframed:

¶419

(viii) Whether the business expenses claimed by the assessee for that year in which there was no use of assets by the assessee can be permitted?

¶420

As we noticed in the earlier paragraphs the assessee had not carried on any business in 24 years, manufacturing activities having been closed down from 1987. The assessee had claimed business expenditure in the respective years under Section 37 to be set off against income from house

¶421

property and income from other sources. The Assessing Officer had allowed the same which in re-assessment proceedings was sought to be over turned. The justification of the Assessing Officer, in the proceedings under Section 147, was that since the assessee had not been carrying on

¶422

any business for the previous years relevant to the subject assessment years, there could be no claim of business expenses. The learned Senior Counsel appearing for the Department would argue that the very same principle as adopted for depreciation allowance, would apply to business loss under Section 37.

¶423

ITA.No.1423 of 2009 & connected cases

¶424

- 57 -

¶425

51. Sri. Raja Kannan however, would argue that Section 37 is quite distinct from Section 32 insofar as the requirement being the expenditure having been laid out or expended wholly and exclusively for the purpose of business or profession. The distinction is insofar as Section 32, as found by this Court earlier, speaks of specific use to which the plant and machinery is put to. Section 37, does not speak of such a requirement. Reliance is also placed on Commissioner of Income Tax, West Bengal v. Rajendra Prasad Moody [(1978) 115 ITR 519(SC)] to contend that even in the case of Section 57(iii) where the rigor was more; requiring the expenditure to be for the purpose of making or earning profit, the Hon'ble Supreme Court held that applicability will depend upon the purpose of the expenditure and not the fulfilment of the intention behind such expenditure.

¶426

52. We extract Section 37(1) :

¶427

“37. General (1): Any expenditure not being expenditure of the nature described in sections 30 and 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”.

¶428

- 58 -

¶429

ITA.No.1423 of 2009 & connected cases

¶430

53. In Section 32, the essential requirement for allowing a deduction on depreciation is the ownership of the tangible and intangible assets as also the use to which it is put to in the previous year relevant to the assessment year. As far as Section 37 is concerned, it speaks only of laying out expenditure, wholly or

¶431

exclusively for the purpose of business or profession. Pertinent is that the expenditure need not be for the purpose of earning profits or gains arising from business or profession. In this context, as rightly pointed out by the assessee, Rajendra Moody is squarely applicable. That was a case in which the assessee had made investment in shares by borrowing funds. However, the shares did not yield any return during the relevant previous year. The expenditure claimed on interest, on borrowed funds was declined by the Assessing Officer finding that there was no income made or earned, from the said investments and hence there could be no deduction permitted. The Hon'ble Supreme Court found that Section 57(iii) requires that “ the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of section 57(iii) and that

¶432

- 59 -

¶433

ITA.No.1423 of 2009 & connected cases

¶434

purpose must be making or earning of income. S.57(iii) does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction” .(sic). Hence even when the expenditure was substantial and the return was nil, the deduction permissible under Section 57 was allowable. The Hon'ble Supreme Court held that the applicability of Section 57, is to be determined on the basis of the purpose and not necessarily looking at whether the purpose was fulfilled or not. As far as Section 37 is concerned, it is trite that the business loss for a particular year can be set off against any head of income. The restriction is in the carry forward business loss being set off against any income other than income from profits and gains of business or profession.

¶435

54. In the subject assessment years, there is no issue of a carried forward business loss having been claimed by the assessee. The assessee for the relevant previous years had only claimed business expenditure. The contention of the assessee was that they had no intention to close down the business and had been keeping the machinery ready for use. The assessee would have had various expenditures like maintaining skilled staff for keeping machinery intact, minimum amounts to be paid to

¶436

- 60 -

¶437

ITA.No.1423 of 2009 & connected cases

¶438

the KSEB for retaining electricity connection and so on and so forth. These are all expenses wholly and exclusively for the purpose of business, though there is no business carried on by the assessee in the relevant previous years. It is already a matter of record that the assessee after 24 years had also commenced its manufacturing activity in the year 2010. In such circumstance we are inclined to answer the question framed as (viii) in favour of the assessee and against the revenue. The assessee is entitled to the deduction on expenditure laid out wholly and exclusively for the purpose of business in the relevant previous years though there is no income from the profits and gains of business or profession in the said relevant previous years.

¶439

55. There was a contention raised by the learned Senior Counsel that the expenses claimed are excessive especially insofar as a closed down factory. We have to observe that we are looking at the re-assessment proceedings and not necessarily the factual adjudication of whether the expenses claimed are excessive or not. The principle on which the re-assessment has been made is that

¶440

if there is no business income, there could be no expenditure claimed under Section 37. We are only called upon to decide the said question of law, which also arises

¶441

ITA.No.1423 of 2009 & connected cases

¶442

- 61 -

¶443

on reassessment and we do not think that our answering the question of law against the Revenue and in favour of the assessee would commend a remand to re-examine the issue on facts. The facts have already been gone into by the Assessing officer and the allowance granted and we do not attempt re-examination by another incumbent officer which would result in a further challenge on the ground of mere change of opinion. We hence reject the said ground raised by the Revenue.

¶444

56. Three other questions arise in the assessment year 2002-03.

¶445

Whether the -

¶446

(ix) un-absorbed business loss and

¶447

(x) unabsorbed depreciation;

¶448

can be permitted to be set off against the income other than the 'income from profits and gains of business or profession'.

¶449

The other question is on -

¶450

(xi) the sustainability of annual value determination made by the AO merely on the basis of the rent paid by the earlier tenant in the premises.

¶451

57. As far as business loss, it is an accepted position that carry forward can be set off only against business income. The assessee had no business income for

¶452

- 62 -

¶453

ITA.No.1423 of 2009 & connected cases

¶454

the said year. Hence, the said question has to be answered against the assessee and in favour of the Revenue.

¶455

58. On depreciation, though the carried forward depreciation is enabled to be set off against any income other than income from profits and gains of business or profession, the carry forward is occasioned only if there is a depreciation allowable in the previous assessment year to the subject assessment year. Here, we are in the assessment year 2002-03, when the business of the assessee was not functioning and the factory remained closed. In the earlier assessment year of 2000-01 also the factory was remaining closed in the relevant previous year. There was no use to which the plant and machinery were put to and, hence, there could be no deduction of depreciation claimed for the previous year. When such claim could not have been made under Section 32(1), then there is no question of any carry forward of such depreciation for reason of the claim for depreciation having never arisen in that previous year relevant to the previous assessment year. The claim for carry forward depreciation and set off of income, other than income arising from profits and gains of business has to be rejected. The question numbered as (ix) & (x) are also answered in favour of the Revenue and against the

¶456

ITA.No.1423 of 2009 & connected cases

¶457

- 63 -

¶458

assessee. We make it clear that if there is any depreciation allowance, carried forward from the last year in which it was allowed as 'passive use', the same can be set-off in any of the subsequent years in which there was income from any other heads.

¶459

59. The next question is on the annual rental

¶460

value for the building adopted by the AO. The assessee returned Rs.15,18,000/- as gross rental for a premise which was rented out to the Federal Bank Limited. The AO found that the Central Bank of India, which was earlier in occupation of the same premises, had been paying Rs.24,30,000/-. The annual rental value, hence, was assessed on the basis of the rent paid by the previous tenant. The annual value as available under Section 23 can

¶461

definitely be assessed on the normal expectation of the rent receivable or received in the relevant previous year. However, here the specific expectation was on the basis of the rent received in the earlier year from a previous tenant. Before the Tribunal the assessee produced an affidavit of the present tenant, the Federal Bank Limited, specifically indicating the amounts paid by them as rent for the tenanted premises. It was also specifically averred

¶462

that the Federal Bank Limited, the present tenant, is not

¶463

- 64 -

¶464

ITA.No.1423 of 2009 & connected cases

¶465

occupying that much area as the previous tenant. The issue is on facts and we discern no question of law arising from the order of the Tribunal with respect to the deletion of annual value as estimated by the AO. We, hence, refuse to answer the question and uphold the order of the Tribunal.

¶466

The appeals would stand partly allowed; some against the revenue and some in their favour, as indicated above on each of the issues, leaving the parties to suffer their respective costs.

¶467

Sd/K.VINOD CHANDRAN JUDGE

¶468

Sd/ASHOK MENON JUDGE

¶469

Vku/-

¶470

- 65 -

¶471

ITA.No.1423 of 2009 & connected cases

¶472

APPENDIX OF ITA 1423/2009

¶473

APPELLANT'S ANNEXURES:

¶474

ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S 143(3) OF INCOME TAX ACT DATED 20.1.2003. ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 16.12.2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29.8.2008.

¶475

- 66 -

¶476

ITA.No.1423 of 2009 & connected cases

¶477

APPENDIX OF ITA 1378/2009

¶478

APPELLANT'S ANNEXURES:

¶479

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF INCOME TAX ACT DATED 30/1/2004. ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DATED 30/10/2004. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29/8/2008.

¶480

- 67 -

¶481

ITA.No.1423 of 2009 & connected cases

¶482

APPENDIX OF ITA 1384/2009

¶483

APPELLANT'S ANNEXURES:

¶484

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF INCOME TAX ACT DATED 30/01/2004.

¶485

ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 30/10/2004. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29/08/2008.

¶486

- 68 -

¶487

ITA.No.1423 of 2009 & connected cases

¶488

APPENDIX OF ITA 1389/2009

¶489

APPELLANT'S ANNEXURES:

¶490

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF INCOME TAX ACT DATED 24/3/2005. ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DATED 27/2/2006. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29/8/2008.

¶491

- 69 -

¶492

ITA.No.1423 of 2009 & connected cases

¶493

APPENDIX OF ITA 1390/2009

¶494

APPELLANT'S ANNEXURES:

¶495

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3)OF INCOME TAX ACT DATED 16/01/1998. ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX 9APPEALS) DATED 31/10/2002. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29/08/2008.

¶496

- 70 -

¶497

ITA.No.1423 of 2009 & connected cases

¶498

APPENDIX OF ITA 1415/2009

¶499

APPELLANT'S ANNEXURES:

¶500

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF INCOME TAX ACT DATED 30/1/2004. ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX DATED 24/3/2003. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29/8/2008.

¶501

- 71 -

¶502

ITA.No.1423 of 2009 & connected cases

¶503

APPENDIX OF ITA 1418/2009

¶504

APPELLANT'S ANNEXURES:

¶505

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) OF INCOME TAX ACT DATED 30/01/2004.

¶506

ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 30/10/2004. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 29/08/2008.

¶507

- 72 -

¶508

ITA.No.1423 of 2009 & connected cases

¶509

APPENDIX OF ITA 1422/2009

¶510

APPELLANT'S ANNEXURES:

¶511

ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3) OF INCOME TAX ACT DATED 30/01/2004.

¶512

ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 30/10/2004.