Commissioner of Income Tax, Cochin v Premier Tyres Ltd.

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: S. V. Bhatti
Bechu Kurian Thomas
Judgment Date: 2021-07-23
Court Decision / Holding: ITA No.1358 of 2009 is dismissed; ITA No.1359 of 2009 is allowed. No order as to costs.
Final Disposition: ITA No.1358/2009 dismissed; ITA No.1359/2009 allowed; No costs.

Parties to the Case

Appellants / Petitioners

The Commissioner of Income Tax, Cochin

Respondents

Premier Tyres Ltd., Kalamassery, Ernakulam

Legal Representation & Advocates

Counsels for Petitioners

• Sri. Jose Joseph, SC

Counsels for Respondents

• Sri. K. P. Abdul Azees
• Sri. V. Abraham Markos
• Sri. Binu Mathew
• Sri. Joseph Markose
• Sri. B. J. John Prakash
• Sri. Mathews K. Uthuppachan
• Sri. Terry V. James
• Sri. Tom Thomas Kakkuzhiyil

Case Synopsis & Summary

These connected appeals arise from ITAT Cochin Bench orders dated 21 July 2006, relating to the carry forward and set-off of unabsorbed depreciation. The Commissioner of Income Tax, Cochin, appeals against relief granted to Premier Tyres Ltd. for the assessment years 1998-99 and 2001-02, following adjustments to the revised total income under Annexures A-C. The core issue is whether unabsorbed depreciation from earlier years can be carried forward and set off against income earned in subsequent years as permitted by Section 32(2) of the Income Tax Act, as interpreted by courts. The Tribunal's order was to disallow such set-off, and the CIT (Appeals) allowed it, which led to these ITA appeals. The Kerala High Court, on hearing, notes that Peerless General Finance and Investment Co. Ltd. v C.I.T. (SC) and a Kerala High Court decision in Cochin Shipyard Ltd. have held that unabsorbed depreciation can be set off against current-year income; following these precedents, the court holds that the assessee is entitled to carry forward and set off unabsorbed depreciation against 1998-99 and 2001-02 income. The court answers the questions of law accordingly: ITA 1358/2009 against the revenue and in favour of the assessee; ITA 1359/2009 in favour of the assessee. Final orders: ITA 1358/2009 dismissed; ITA 1359/2009 allowed. No costs. The judgment is delivered by a Division Bench comprising S. V. Bhatti and Bechu Kurian Thomas.

Provisions of Law Cited

Section 32(2) of the Income Tax Act

Legal Doctrines & Maxims

Unabsorbed depreciation set-off against current year income
Carry forward of unabsorbed depreciation under Section 32(2)

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant contends that unabsorbed depreciation carried forward from earlier years cannot be set off against the current-year income; they argue that Section 32(2) as it stood at the material time does not permit such carry-forward/adjustment and that the ITAT/CIT(A) order should stand, maintaining the proper interpretation of the statute.

Contentions of Respondents

Premier Tyres Ltd. contends that unabsorbed depreciation can be set off against income in the subsequent year, citing settled precedents (Peerless General Finance and Investment Co. Ltd. v. C.I.T. and subsequent Kerala High Court rulings) to support the right to carry forward and set off unabsorbed depreciation against the 1998-99 and 2001-02 incomes.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
Peerless General Finance and Investment Co. Ltd. v Commissioner of Income Tax	[2016] 380 ITR 165 (SC)	Positive	Cited and applied to support the entitlement to set off unabsorbed depreciation against current-year income.
CIT, Cochin v Cochin Shipyard Ltd	[2019] 101 taxmann.com 174 (Kerala)	Positive	Cited and applied to support the same principle at the Kerala High Court level.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE S.V.BHATTI** ## **&** ## **THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS** FRIDAY, THE 23RD DAY OF JULY 2021 / 1ST SRAVANA, 1943 ## **ITA NO. 1358 OF 2009** AGAINST THE ORDER IN ITA 1150/Coch/2005 dated 21.7.2006 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM ## **APPELLANT/Appellant** : THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX ## **RESPONDENT/Respondent** : M/S.PREMIER TYRES LTD., KALAMASSERRY ERNAKULAM. BY ADVS. SRI.K.P.ABDUL AZEES SRI.V.ABRAHAM MARKOS SRI.BINU MATHEW SRI.JOSEPH MARKOSE SR. SRI.B.J.JOHN PRAKASH SRI.MATHEWS K.UTHUPPACHAN SRI.TERRY V.JAMES SRI.TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23.07.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 ITA Nos.1358 and 1359 of 2009 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE S.V.BHATTI** ## **&** ## **THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS** FRIDAY, THE 23RD DAY OF JULY 2021 / 1ST SRAVANA, 1943 ## **ITA NO. 1359 OF 2009** AGAINST THE ORDER IN ITA 1151/2005 DATED 21.7.2006 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM ## **APPELLANT/Appellant:** THE COMMISSIONER OF INCOME TAX COCHIN. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX ## **RESPONDENT/Respondent** : M/s PREMIER TYRES LTD. KALAMASSERY, ERNAKULAM. BY ADVS. SRI.K.P.ABDUL AZEES SRI.V.ABRAHAM MARKOS SRI.BINU MATHEW SRI.JOSEPH MARKOSE SR. SRI.B.J.JOHN PRAKASH SRI.MATHEWS K.UTHUPPACHAN SRI.TERRY V.JAMES SRI.TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 23.07.2021, ALONG WITH ITA.1358/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 3 ITA Nos.1358 and 1359 of 2009 ## **JUDGMENT** [ITA Nos.1358/2009, 1359/2009] ## _**S.V.Bhatti, J.**_ Heard learned Standing Counsel Mr.Jose Joseph for the appellant and learned Senior Counsel Mr.Joseph Markose for the respondent. 2. The Commissioner of Income Tax, Cochin/Revenue is the appellant. Premier Tyres Ltd., Kalamassery/Assessee is the respondent. These two appeals are directed against the common order dated 21.7.2006 in ITA No.1150/Coch/2005 and ITA No.1151/Coch/2005 of the Income Tax Appellate Tribunal, Cochin Bench. 3. The circumstances relevant for disposing of the appeals are stated thus: The Assessing Officer, through Annexure-A effect order dated 31.1.2005, had given effect to the order of Income Tax Appellate Tribunal's order dated 14.12.2004. For appreciating the details of respective matters, the following Tabular statement is given. |Sl.No.|Effect order for the Assessment Year|Appeal before CIT|Appeal before ITAT|IT Appeal in High Court| |---|---|---|---|---| |1|1998-1999|Appeal Nos.47 &48/R- 2/E/CITII/04-05 dt.16.8.2005|ITA No.1150(Coch)/ 2005|ITA No.1358 of 2009| |2|2001-02|Appeal Nos.47&48/R2/E/CIT- II/04-05 dt.16.8.2005|ITA No.1151(Coch)/ 2005|ITA No.1359 of 2009| 4 ITA Nos.1358 and 1359 of 2009 4. Assessing Officer disallowed the claim of assessee for set off of unabsorbed depreciation for the assessment years 1998-1999 and 2001-02. The assessee filed appeals against the order in Annexure A dated 31.1.2005 before the CIT (Appeals) and CIT (Appeals) through order in Annexure-B dated 16.8.2005 allowed the appeal of assessee and directed AO to allow carry forward of the unabsorbed depreciation as claimed by the assessee against the income of assessment years 1998-99 and 2001-02. The revenue filed, as noted above, ITA Nos.1150 and 1151 of 2005 before the ITAT Cochin Bench. The appeals came to be dismissed through order in Annexure-C. Hence the subject appeals. The following substantial questions of law are framed for the consideration of this Court. 1. Whether on the facts and in the circumstances of the case, the carried forward unabsorbed depreciation relating to the assessment years 1979-80 to 1995-96 can be set off against the income of the assessment years 1998-99 and 2001-02? 2. Whether on the facts and in the circumstances of the case and on an interpretation of Section 32(2) of the Income Tax Act as it stood at the relevant time, the Tribunal is right in law in allowing the carry forward and set off of the unabsorbed depreciation and is not the same against law and the intendment of the legislature? 5. The issue relates to the entitlement of assessee to claim set off of unabsorbed depreciation in the assessment years in which the assessee has earned ITA Nos.1358 and 1359 of 2009 5 income and filed the return. The 5 ITA Nos.1358 and 1359 of 2009 issue is considered by the Apex Court in **Peerless General Finance and Investment Co.Ltd.** v **Commissioner of Income Tax** [2016] 380 ITR 165(SC) and this Court in **CIT, Cochin** v **Cochin Shipyard Ltd.** [2019] 101 taxmann.com 174 (Kerala) and it has been held that the assessee can claim set off of unabsorbed depreciation against the income earned in the assesment year 1998-99 under the head of business income. 6. By following the judgments referred to above, the questions framed in ITA No.1358 of 2009 are answered against the revenue and in favour of the assessee. The questions framed in ITA No.1359 of 2009 are answered in favour of assessee and against the revenue. Consequently ITA No.1358 of 2009 is dismissed. ITA No.1359 of 2009 is allowed as indicated above. No order as to costs. **sd/- S.V.BHATTI** **Judge** **Judge** css/ ………..contd/- 6 ITA Nos.1358 and 1359 of 2009 ## _**ITA No.1359 of 2009**_ The last sentence in paragraph 5 of the judgment dated 23/07/2021 is corrected as “The issue is considered by the Apex Court in Peerless General Finance and Investment Co.Ltd. v Commissioner of Income Tax [2016] 380 ITR 165(SC) and this Court in CIT, Cochin v Cochin Shipyard Ltd. [2019] 101 taxmann.com 174 (Kerala) and it has been held that the assessee can claim set off of unabsorbed depreciation against the income earned in the assessment year 1998-99 under any head of income”, and the second sentence of the last paragraph is corrected as “The questions framed in ITA No.1359 of 2009 are answered in the favour of the revenue and against the assessee”, vide order dated 31/03/2022 in I.A.No.1/2021 in ITA 1359/2009. Sd/- Joint Registrar 7 ITA Nos.1358 and 1359 of 2009 ## **APPENDIX OF ITA 1358/2009** ## **PETITIONER ANNEXURE** ANNEXURE-A COPY OF ORDER DATED 31.1.2005 GIVING EFFECT TO ITAT'S ORDER DETERMINING REVISED TOTAL INCOME AT RS. 5.59,84,220/- (AY 1998-99) ANNEXURE-B COPY OF ORDER DATED 16.8.2005 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ANNEXURE-C COPY OF THE ORDER DATED 21.07.2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.1150/COCH/2005 8 ITA Nos.1358 and 1359 of 2009 ## **APPENDIX OF ITA 1359/2009** ## **PETITIONER'S ANNEXURE** ANNEXURE A COPY OF ORDER DATED 31.1.2005 GIVING EFFECT TO ITAT'S ORDER DETERMINING REVISED TOTAL INCOME AT RS.87,69,270/- FOR THE ASSESSMENT YEAR 2001-02. ANNEXURE B COPY OF ORDER DATED 16.8.2005 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE C COPY OF THE ORDER DATED 21.7.2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN IN ITA NO.1151/COCH/2005.