KARNATAKA CO-OPERATIVE MILK PRODUCERS FEDERATION LTD. Vs. DY. COMMISSIONER OF INCOME TAX AND OTHERS

JUDGEMENT

(1.) PETITIONER is permitted to amend the prayer.

(2.) PETITIONER is a co -operative society registered under the Co -operative Societies Act, engaged in the business of marketing milk and milk products and manufacturing of cattle feeds and allied activities. Petitioner filed the return of income for the assessment year 1993 -94 on 29th Oct., 1993 but, had failed to enclose the audited balance sheet along with the return of income since the statutory auditors who were to audit the books of the petitioner under s. 63 of the Karnataka Co -operative Societies Act, 1959 had not completed the audit work. The 1st respondent issued the notice dt. 29th Oct., 1993 calling upon the petitioner to rectify the defects. Explaining the details, regarding not securing the audit report, stating that it is not a willful non -compliance, petitioner moved the 1st respondent. The 1st respondent rejected the claim of the petitioner and issued an endorsement dt. 18th Nov., 1993 -Annex. A invalidating the return filed by the petitioner. Against the said order, petitioner filed revised return on 31st March, 1995 along with the audited balance sheet wherein a claim for set off for depreciation as per section 32 of the IT Act over the fixed assets is claimed. The 1st respondent rejected the revised return filed once again, by order dt. 19th July, 1995 Annex. B stating it has become infructuous. Against the said order, during July, 1995. appeal was preferred before the CIT(A) contending that the order at Annex. B by the 1st respondent, is erroneous. The appeal filed also came to be rejected on the ground of delay. Second appeal was preferred before the Tribunal seeking condonation of delay. However, the Tribunal allowed the appeal and remanded the matter to the first appellate authority viz., CIT(A) for disposal on merits. After hearing the petitioner, on the correctness of lodging the revised returns before the 1st respondent, the CIT dismissed the appeal filed by the petitioner, on 20th Jan., 2004 - -Annex. C. Once again, second appeal was preferred before the Tribunal. The Tribunal allowed the appeal filed and directed the AO to assess the petitioner in accordance with law by accepting the revised return filed. According to the petitioner, against the order of the Tribunal the respondents have not filed any appeal as such, the order of the Tribunal having become final, the 1st respondent issued a notice calling upon the petitioner to substantiate the claim of depreciation on 24th July, 2006 - -Annex. E, Petitioner filed a representation against the said order on 7th Aug., 2006 along with the revised statement of computation of total income. Further, it had also enclosed the statement of recalculation of depreciation in terms of the provisions of the Act. The 1st respondent - -Dy. CIT having considered the representation filed by the petitioner, passed a quasi judicial order giving effect to the decision of the Tribunal. According to the petitioner, for the assessment year 1993 -94, the unabsorbed depreciation was allowed to be carried forward since there was no positive income for the said year and effect was sought to be given to the consequential order based on the decision of the Tribunal. It is the petitioners case, the unabsorbed depreciation to the tune of Rs. 3,33,01,745 was eligible to be carried forward. However, the depreciation sought for by the petitioner has not been considered by the 1st respondent on the ground that business loss cannot be carried forward since eight years period has lapsed, did not oblige for carrying forward of the unabsorbed depreciation. The petitioner sought for adjustment of unabsorbed depreciation to be adjusted for the assessment year 2006 -07 stating that the Tribunals decision was served on the petitioner only on 31st Aug., 2006. According to the petitioner, as per s. 32(2) of the IT Act, the unabsorbed depreciation carried forward from the previous year shall be added to the current years depreciation and can be deducted from the income of the relevant previous year without any time -limit. Thus, according to the petitioner for carrying forward the unabsorbed depreciation, there is no limitation and the opinion of the 1st respondent that carrying forward of depreciation is sought only after a lapse of eight years and that it should have been done within eight years and accordingly, disallowing the claim of the petitioner, is bad in law. Hence, this petition on various grounds.

(3.) ACCORDING to the petitioners counsel, despite several orders by the revisional authority i.e., the Tribunal, the 1st respondent has declined to extend the benefit of carrying forward the depreciation which is permissible as per s. 32(2) of the Act and also according to the petitioner, the depreciation for the assessment year 1993 -94, could be carried forward upto 1994 -95, 1995 -96 and 1997 -98. Once again the limitation under s. 32(2)(iii)(b) of the Act which was introduced has been repealed and by virtue of the same, the unabsorbed depreciation by carrying forward is for limitless assessment years. Thus, eight years period which was introduced during 1996 -97 was done away with and it was permitted to carry forward the unabsorbed depreciation, by amendment during 2001 -02. Petitioner contends, the unabsorbed depreciation for the year 1993 -94 is thus, according to s. 32(2) of the Act and had been carried forward while filing assessment for the subsequent years. Except that, in the beginning they did not make a mention by furnishing the detailed audit report; subsequently they have explained this fact and they are entitled for carrying forward all the unabsorbed depreciation from 1993 -94 till 1996 -97, as per law. This eight years period commenced from 1996 -97 and not exactly during 1993 -94. As is permissible, the unabsorbed depreciations has been carried forward from 1993 -94 and as per the amendment, eight years limit commences from 1996 -97 till then, by virtue of law, when it is carried forward, then definitely eight years has to be calculated from 1996 -97 and not from 1993 -94.