Kerala High Court
Alapatt Jewellers, (Represented By ... vs Deputy Commissioner Of Income Tax on 6 September, 2024
Author: P Gopinath
Bench: P Gopinath
2024:KER:68302
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE GOPINATH P.
FRIDAY, THE 6TH DAY OF SEPTEMBER 2024 / 15TH BHADRA, 1946
WP(C) NO. 24927 OF 2024
PETITIONER:
ALAPATT JEWELLERS
(REPRESENTED BY SRI. ANTONY FRANCIS ALAPATT,
PARTNER, AGED 41 YEARS)
ALAPATT HERITAGE., M.G. ROAD NORTH END.,
ERNAKULAM, PIN - 682 035.
BY ADVS.
K.N.SREEKUMARAN
P.J.ANILKUMAR (A-1768)
N.SANTHOSHKUMAR
RESPONDENTS:
1 DEPUTY COMMISSIONER OF INCOME TAX,
NON CORP 1(1), AAYKAR BHAVAN, I.S.PRESS ROAD,
ERNAKULAM, PIN - 682 018.
2 DEPUTY DIRECTOR OF INCOME TAX,
CENTRALIZED PROCESSING CENTER,
INCOME TAX DEPARTMENT, ELECTRONIC CITY,
BANGALORE, PIN - 560 500.
3 CENTRAL BOARD OF DIRECT TAXES
(REPRESENTED BY ITS CHAIRMAN),
NORTH BLOCK, NEW DELHI, PIN - 110 002.
BY ADVS.
SRI. JOSE JOSEPH (SR SC).
SRI. CYRIAC TOM (SC)
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 06.09.2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
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WP(C) 24927/2024 2
JUDGMENT
The petitioner is an assessee under the Income Tax Act,
1961 (hereinafter referred to as the '1961 Act'). For the
assessment year 2023 - 2024, the petitioner filed its return of
income, which was processed under Section 143(1) of the 1961
Act. Ext.P2 is the intimation received by the petitioner.
According to the petitioner, though it had claimed a carry
forward loss of Rs.1,14,60,832/-, only an amount of Rs.21,71,
999/- was allowed, as can be seen from Ext.P2. It is submitted
that the amount of Rs.1,14,60,832/- forms part of unabsorbed
depreciation, as can be seen from the Annexure forming part of
Ext.P2. The petitioner filed an application for rectification
under Section 154 of the 1961 Act, claiming that full set off of
the unabsorbed depreciation had to be granted and the denial
of that benefit to the petitioner is illegal. The petition filed by
the petitioner has been rejected by Ext.P6 finding no ground for
rectification. The petitioner is thus before this Court seeking
the following reliefs:
i. "call for the records leading to Ext-P6 order and
quash the same by issuance of a writ of certiorari
or any other appropriate writ, direction or order
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found fit and proper by this Honorable Court.
ii. direct the 2nd respondent to quash the Ext-P6
order and to reconsider Ext:P3 rectification
petition filed against Ext-P2 intimation by
considering the grounds in Ext-P4 petition after
affording a personnel hearing through VC.
iii. direct the 2nd respondent to quash the Ext-P2
intimation u/s.143(1) and allow the claim of the
petitioner in accordance with law by considering
the documents available on the portal.
iv. Issue any other appropriate writ, direction or
order found fit and proper by this Honourable
Court on the facts and in the circumstances of the
case".
2. The learned counsel appearing for the petitioner refers
to the provisions of Section 32(2) of the 1961 Act to contend
that where in the assessment of an assessee, full effect cannot
be given to any allowance under sub-section (1) (depreciation
allowance) in any previous year, the said depreciation
allowance is permitted to be carried forward to the next year.
It is submitted that a reading of Section 72 of the 1961 Act will
indicate that where such loss in the form of depreciation is
carried forward to the next year, the same can be set off even
against income arising from heads other than 'profits or gains
of business or profession'. It is submitted that the denial of
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such set off cannot be sustained and therefore Ext.P6 order
under Section 154 of the 1961 Act is liable to be set aside and
the matter is to be remitted for fresh consideration of the
Assessing Authority.
3. Sri. Jose Joseph, the learned Senior Standing Counsel
appearing for the Income Tax Department, would submit that
Section 32 of the 1961 Act forms part of the provisions that
deal with the computation of income from profits and gains of
business or profession. It is submitted that though the
provisions of sub-section (2) of Section 32 of the 1961 Act
permit the carry forward of such depreciation allowance where
it cannot be fully set off owing to there being no profit or gains
in any particular year, the provisions of Section 72 of the 1961
Act clearly indicate that even if such depreciation allowance is
to be termed a loss in terms of Section 71 of the 1961 Act, the
same can be set off only against income or gains from business
or profession and not against any other head. It is submitted
that in such circumstances, there is absolutely no mistake in
the order passed under Section 154 of the 1961 Act and the
petitioner has not made out any ground to set aside the said
order.
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4. The learned counsel appearing for the petitioner, in
reply, would refer to the provisions of Section 71(2) and (2A) of
the 1961 Act to contend that where there is any loss arising out
of business or profession including depreciation allowance the
same can be set off against any other head of income and the
provisions of Section 72 of the 1961 Act are always subject to
the provisions of Section 71 of the 1961 Act.
5. Having heard the learned counsel appearing for the
petitioner and the learned Senior Standing Counsel appearing
for the Income Tax Department, I am of the view that the
petitioner has not made out any case for grant of relief.
Section 29 of the 1961 Act reads as follows:
"29. Income from profits and gains of
business or profession, how computed.--The
income referred to in section 28 shall be computed in
accordance with the provisions contained in sections
30 to 43D".
Section 32 of the 1961 Act, which deals with depreciation, thus
forms part of the provisions for computation of income from
profits and gains of business or profession. Sub-section (2) of
Section 32 of the 1961 Act reads thus:
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"32. Depreciation.--
(1) xxxx xxxx xxxx
(2) Where, in the assessment of the assessee, full
effect cannot be given to any allowance under sub-
section (1) in any previous year, owing to there being no
profits or gains chargeable for that previous year, or
owing to the profits or gains chargeable being less than
the allowance, then subject to the provisions of sub-
section (2) of section 72 and sub-section (3) of section
73, the allowance or the part of the allowance to which
effect has not been given, as the case may be, shall be
added to the amount of the allowance for depreciation
for the following previous year and deemed to be part of
that allowance, or if there is no such allowance for that
previous year, be deemed to be the allowance for that
previous year, and so on for the succeeding previous
years".
Thus it is clear that the right under Section 32(2) is specifically
made subject to the provisions of Sections 72(2) and 72(3) of
the 1961 Act. The provisions of Section 72 of the 1961 Act
read thus:
"72.Carry forward and set off of business
losses.--
(1) Where for any assessment year, the net result of
the computation under the head "Profits and gains of
business or profession" is a loss to the assessee, not
being a loss sustained in a speculation business, and
such loss cannot be or is not wholly set off against
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income under any head of income in accordance with
the provisions of section 71, so much of the loss as has
not been so set off or, where he has no income under
any other head, the whole loss shall, subject to the
other provisions of this Chapter, be carried forward to
the following assessment year, and--
(i) it shall be set off against the profits and gains, if
any, of any business or profession carried on by him
and assessable for that assessment year;
(ii) if the loss cannot be wholly so set off, the amount of
loss not so set off shall be carried forward to the
following assessment year and so on:
Provided that where the whole or any part of such
loss is sustained in any such business as is referred to
in section 33B which is discontinued in the
circumstances specified in that section, and,
thereafter, at any time before the expiry of the period
of three years referred to in that section, such business
is re-established, reconstructed or revived by the
assessee, so much of the loss as is attributable to such
business shall be carried forward to the assessment
year relevant to the previous year in which the
business is so re-established, reconstructed or revived,
and--
(a) it shall be set off against the profits and gains, if
any, of that business or any other business carried
on by him and assessable for that assessment year;
and
(b) if the loss cannot be wholly so set off, the amount of
loss not so set off shall, in case the business so re-
established, reconstructed or revived continues to
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be carried on by the assessee, be carried forward
to the following assessment year and so on for
seven assessment years immediately succeeding.
(2) Where any allowance or part thereof is, under
sub-section (2) of section 32 or sub-section (4) of
section 35, to be carried forward, effect shall first be
given to the provisions of this section.
(3) No loss other than the loss referred to in the
proviso to sub-section (1) of this section shall be
carried forward under this section for more than eight
assessment years immediately succeeding the
assessment year for which the loss was first
computed".
It is clear from the reading of the provisions of Section 72 of
the 1961 Act that even if the depreciation allowance under
Section 32 of the 1961 Act, which was carried forward in terms
of sub-section (2) of Section 32, is deemed to be a business loss
for the purposes of Sections 71 and 72, it can be set off only
against profits or gains of any business or profession and it
cannot be set off against income from any other sources.
Though the learned counsel for the petitioner took
considerable efforts to establish that Section 72 is always
subject to the provisions of Section 71 going by the express
provisions in sub-section (2) of Section 32 permitting the carry
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forward of depreciation allowance subject to the provisions of
Section 72 of the 1961 Act, I find no merit in the said
contention taken by the learned counsel for the petitioner. In
that view of the matter, there is absolutely no error in Ext.P6
warranting the exercise of jurisdiction under Article 226 of the
Constitution of India.
Writ petition fails and it is accordingly dismissed.
Sd/-
GOPINATH P.
JUDGE
ats
2024:KER:68302
APPENDIX OF WP(C) 24927/2024
PETITIONER'S EXHIBITS
Exhibit-P 1 TRUE COPY OF THE INCOME TAX RETURN FILED ON
31.10.2023 VIDE E-ACKNOWLEDGEMENT NUMBER-
492720681311023 ALONG WITH COMPUTATION OF
INCOME.
Exhibit-P 2 TRUE COPY OF THE INTIMATION U/S. 143(1)
DATED 30.05.2024 ISSUED BY THE 2ND
RESPONDENT WITH DIN:CPC/2324/A5/42051369.
Exhibit-P3 TRUE COPY OF THE RECTIFICATION REQUEST FILED
BEFORE THE 2ND RESPONDENT ON 03.06.2024 VIDE
REFERENCE NUMBER 389114360030624.
Exhibit -P4 TRUE COPY OF THE GRIEVANCE PETITION FILED
THROUGH INCOME PORTAL ON 10.06.2024 VIDE
REFERENCE NUMBER 17014579.
Exhibit-P 5 TRUE COPY OF THE GRIEVANCE RESOLUTION PASSED
BY THE RESPONDENTS AND ISSUED THROUGH PORTAL
DATED 18.06.2024 AGAINST EXT-P3.
Exhibit-P6 TRUE COPY OF THE RECTIFICATION ORDER PASSED
U/S.154 OF THE INCOME TAX ACT DATED
01.07.2024 WITH DIN:CPC/2324/U5/429621804.
