High Court Of Bombay
Titanor Components Ltd. vs. CIT
Section 158A, 254(1),
Asst. Year 1992-93, 1993-94 & 1995-96 to 1997-98
AT GOA B.P. Dharmadhikari & U.D. Salvi, JJ.
Tax Appeal Nos. 47 to 51 of 2006
29th April, 2009
Counsel Appeared :
P.J. Pardiwalla with S.G. Bhobe, for the Appellant : S.R. Rivonkar, for the Respondent
JUDGMENT
B.P. Dharmadhikari, J. :
All these appeals by same assessee raise same question of law which has been formulated while admitting the appeals on 19th Sept., 2006. The said question is as under :
“Whether the Tribunal was justified in law in holding that the appellant was entitled to depreciation on the assets acquired from M/s Western India Match Company Ltd. (WIMCO) based on the value placed in the surveyors report and not on the actual cost incurred by the appellant for acquisition of the assets”.
We have heard senior advocate P.J. Pardiwalla with advocate S.G. Bhobe for the appellant and advocate S.R. Rivonkar for the respondent/Department. The appellant company came to be incorporated on 7th June, 1989 with its registered office in New Delhi. It acquired metal anodes division by name M/s Western India Match Company Ltd. (WIMCO) by agreement dt. 30th Nov., 1989. On 29th Nov., 1996, in the return filed with the AO at New Delhi it claimed depreciation under s. 32 of the IT Act, 1961 (“Act” for short) on WDV of the acquired assets. The said WDV was stated on the basis of actual costs incurred by the appellant for acquisition i.e., of Rs. 6,10,02,641. The AO completed the assessment under s. 143(3) of the Act. But then for the asst. yr. 1990-91 adopted the WDV of those assets to be at Rs. 3,50,37,238 by placing reliance upon the surveyor’s report. The appellants then filed appeals before the CIT(A) and on 31st Dec., 1999, the appellate authority, confirmed the order passed by the AO. The appellants then approached the Income-tax Appellate Tribunal (Tribunal) and the Delhi Bench of Tribunal decided the appeals for two assessment years i.e., 1990-91 and 1991-92 upholding the orders of the AO. The appellants approached Delhi High Court which admitted on 15th Sept., 2003 their appeals on the question of law as mentioned above. IT Appeal No. 191 of 2002 (asst. yr. 1990-91) and IT Appeal No. 190 of 2002 (asst. yr. 1991-92) are still pending in Delhi High Court.
It appears that in the meanwhile, registered office of the appellant company was shifted to Goa and the other appeals came up for consideration from the Tribunal at Goa. In those appeals, the appellants filed declaration under s. 158A for keeping the issue pending till it was decided by the Delhi High Court. The applications were opposed by the AO who, in reply, stated that the IT Act treated each year as self-contained accounting period and its provision is applied in relation to specific assessment year because income-tax was an annual levy and each “previous year” is distinct from any other “previous year”, the doctrine of res judicata was, therefore, not applicable. The Tribunal at Goa, Panaji Bench then delivered the impugned order on 7th April, 2006 and upheld the orders passed by the AO and the appellate authority. It is this order, which is a common order in appeals pertaining to asst. yrs. 1993-94, 1997-98, 1995-96, 1996-97 and 1992-93, which forms subject-matter of the present 5 appeals. The learned senior advocate, after narrating the facts as mentioned above, has contended that there is failure on the part of Tribunal to exercise jurisdiction in accordance with law. He contends that s. 158A has been added to statute book with some design and that design has been frustrated because of the impugned order. According to him, the learned Tribunal did not apply s. 158A because it found that the AO did not agree with the declaration submitted by the appellant company and as the Departmental Representative before it opposed the said declaration, it did not consider it. He points out that the only reason for such opposing and finding was that each assessment year needed to be treated as an independent assessment year and doctrine of res judicata was not applicable. However, while considering the controversy on merits, the Tribunal found that the issue was covered by the decision of its Delhi Bench, and, therefore, it sustained the orders of the assessment along with the reasons mentioned therein. The learned senior advocate, therefore, contended that the approach of Tribunal shows clear dichotomy and the matters need to be sent back to the AO to await adjudication by Delhi High Court. He contends that the reasons for not accepting the actual costs for the purpose of calculating depreciation and for relying upon the surveyor’s report are contained in the order of Delhi Tribunal only.
As against this, advocate Rivonkar, has contended that s. 158A clearly stipulates that declaration made by the assessee can be accepted only if the other side agrees to it. He points out that if there is any opposition, recourse to s. 158A is not possible. He further points out that because of this arrangement only, sub-s. (6) makes the order passed under sub-s. (3) final and no appeal or revision or reference against it is maintainable. He contends that in view of this position, the arguments, as advanced, are liable to be rejected and the appeal deserves to be dismissed. The appellant company wants depreciation to be calculated on the amount of actual costs incurred by it for acquiring assets from WIMCO. The Department has obtained surveyor’s report about valuation of those assets and has granted the benefit of depreciation as per s. 32 on the valuation as worked out in the said valuation report by the surveyor. This exercise for the first assessment years i.e., 1990-91, and 1991-92 is already under consideration of the Delhi High Court. It is to be noted that if the order of Delhi Tribunal is maintained, the appellant company will not be entitled to any benefit for subsequent assessment year in relation to which appeals have been filed before this Court. However, if the said order of Delhi Tribunal is set aside and depreciation under s. 32 is held to be admissible on actual costs for acquisition, the benefit of additional amount of depreciation every year becomes available to the appellant company. It is, therefore, apparent that the subject-matter of appeal is pending before the Delhi High Court. The purpose of s. 158A needs to be looked into in this background. Its bare perusal shows that it has been enacted to avoid necessity of filing fresh challenge, every year, either before the appellate forums prescribed under the Act itself or then before the High Court or the Hon’ble apex Court. The proceedings pending before the Delhi High Court constitute “other case” for the purpose of this provision and the cases pending before the Tribunal Panaji Bench were “relevant case”. The subsection contemplates application of final adjudication in the other case to the question of law in such relevant case. If the AO or the appellate authority agrees to apply in the other case the final adjudication on the question of law in the other case, the assessee need not raise such a question of law in relevant case in appeal before any appellate authority or in appeal before the High Court under s. 260A or in appeal before the Supreme Court under s. 261. As per sub-s. (5), after decision on question of law in “other case” becomes final, it has to be applied to the “relevant case” by the AO or the appellate authority as the case may be and the assessment order can be amended suitably. Sub-s. (2) of s. 158A states that when such a declaration is furnished to the appellate authority, the appellate authority has to call for report from the AO and that report has to be on the correctness of the claim made by the assessee. In other words, the contention of the assessee that the question of law raised in relevant case is pending for consideration in other case needs to be ascertained by calling report from such AO.
The said provision permits the appellate authority to grant opportunity of hearing to the AO. Sub-s. (3) requires the appellate authority to pass an order, in writing, admitting the claim of the assessee or then rejecting his claim if it is not so satisfied. Sub-s. (4) states that when the claim is admitted, the appellate authority may dispose of the relevant case without awaiting the final decision on the question of law in the other case and the assessee is not entitled to raise, in relation to that case, such question of law in appeal before any appellate authority or the High Court or the Supreme Court.
8. Thus, if in the present circumstances the claim of the assessee/present appellant was accepted by the Tribunal, its appeals could have been disposed of in terms of s. 158(4)(a) and he would not have been required to file appeals before this Court as contemplated by cl. (b) of sub-s. (4). The provisions clearly show that the Tribunal is required to pass an order after ascertaining the claim made by the assessee about “other case”. In the facts before this Court, the Tribunal has overlooked the provisions of sub-ss. (2), (3), (4) and (5) of s. 158A totally and has considered only the following portion of s. 158A(1) : “A declaration in the prescribed form and verified in the prescribed manner, that if the AO or the appellate authority, as the case may be, agrees to apply in the relevant case the final decision on the question of law in other case, he shall not raise such question of law in the relevant case in appeal before any appellate authority or in appeal before the High Court under s. 260A or in appeal before the Supreme Court under s. 261”.
9. Thus salutary provisions made by the Parliament to put an end to unnecessary litigation and to reduce number of cases required to be followed in letter and spirit, have been defeated in the present matter. The word “agrees” used in s. 158A(1) does not mean that the AO or the appellate authority has been given any unbridled authority not to agree. The subsequent provisions clearly require the authority to consider the facts and thereafter to either admit the declaration filed by the assessee or then reject it. The appellate authority is therefore required to judicially evaluate the reasons for “not agreeing” given by AO and pass a reasoned order keeping in mind the design in adding s. 158A to the Act. It is because of this application of mind envisaged by s. 158A that an order passed by the appellate authority or the AO has not been made amenable to further challenge either by way of an appeal or revision or reference. The Parliament expects the authorities empowered under the said provisions to act in accordance with the spirit of the provisions made and, therefore, only after an order is made either way with due application of mind, the order has been made “not appealable” or “not revisable”. As already observed above, the Tribunal here has failed to apply its mind as required and therefore, the very purpose of putting s. 158A in the statute book has been frustrated.
10. Mr. Rivonkar has argued that the order passed under s. 158A(3) is not open to challenge in the present appeals. The learned senior advocate has contended that the impugned order is under s. 254(1) of the Act. The scheme of s. 158A clearly shows that after declaration as contemplated by s. 158A(1) is filed either before the AO or the appellate authority, a separate order is required to be passed as contemplated under s. 158A(3) either admitting the claim or rejecting the claim. There is no question of hearing the parties on merits, in appeal, at that stage. If arguments on such a declaration and also arguments on appeal are heard together and ultimately, the declaration is accepted as required by s. 158A(3)(i), the arguments on merits heard by the authority would be an exercise into futility. Even the provisions of s. 158A(6) also show that the legislature contemplated passing a separate order either admitting the claim of the assessee or rejecting his claim. In the present circumstances, there is no order passed as required by s. 158A(3). The order passed is only one and under s. 254(1) on 7th April, 2006. The said order is a common order in all appeals as mentioned above. As the issue was found to be covered by the order of Tribunal, Delhi Bench, the Tribunal, Panaji Bench has not gone into the merits of the controversy and the appeals filed by the assessee were dismissed straightaway. The impugned order, therefore, cannot be read as an order under s. 158A(3) against which no appeal is provided. The Tribunal, Panaji Bench has not recorded any separate reasons of its own while upholding the orders passed by the CIT(A) or the AO. The impugned order, therefore, does not reveal why, as contended by the assessee, the actual costs incurred by it for acquisition of relevant assets could not have been accepted as base for computing depreciation. In view of absence of this material on record, it is apparent that the impugned order cannot be sustained. As the Tribunal here chose to rely upon the order of Delhi Tribunal, it is clear that in view of the scheme of s. 158A, it would have been proper for it to wait till the question of law is adjudicated by the Hon’ble Delhi High Court in the appeals pending before it. In this situation, we find it appropriate to remand the matter to the Tribunal, Panaji Bench, before whom declaration under s. 158A was filed by the appellant with direction to admit the claim of assessee in the said declaration and to proceed further as per s. 158A(5) of the Act after the Hon’ble Delhi High Court adjudicates the appeals pending before it.
The appeals filed before us under s. 260A are, accordingly, allowed. The impugned orders of Tribunal are quashed and set aside and the appeals being ITA No. 4258/Del/1999, ITA No. 4290/Del/2000, ITA No. 2076/Del/2000, ITA No. 2077/Del/2000 and ITA No. 3786/Del/1999 are restored back to its files for further action in terms of ss. 158A(3)(i) and 158A(5) of the Act. However, in the circumstances of the case, there shall be no order as to costs.
[Citation : 323 ITR 266]
