The Cottanad Plantations Ltd. vs Inspecting Asstt. Commnr.

C.N. Ramachandran Nair, J.—These connected cases are filed by the same assessee against me common order of the Agricultural Income Tax Appellate Tribunal confirming the assessments for the assessment years 2001-02 & 2002-03. Assessee has been paying agricultural income tax under they system of compounding provided u/s 13(1) of the Agricultural Income Tax Act, 1991 up to the assessment year 2000-01. However, for the assessment year 2001-02, the assessee re-opted for regular assessment u/s 3 of the Act. While completing the assessment, the Assessing Officer declined depreciation on old machinery by applying Section 13(6) of the Act. However, depreciation was granted for both the years on new assets purchased in the relevant previous years. There was no occasion to disallow carried forward loss as assessee had not made any claims in terms of Section 13(6) of the Act. Challenge against the order of the Tribunal confirming the assessment is limited to disallowance of depreciation on old machinery, building, etc.

We have heard learned Counsel appearing for petitioner and learned Government Pleader.

In order to appreciate the contention raised by the petitioner, Section 13(6), which is the provision under which disallowance is made is extracted hereunder for easy reference.

Section 13: Composition of Agricultural Income Tax

------- ------- ------- (6) When any person who has been permitted to pay under Sub-section (1) reopts to pay tax in accordance with Section 3 notwithstanding anything contained in any other provisions of this Act, shall be assessed as if it were a new assessment and shall not be eligible to carry forward any loss incurred in any of the previous years or any depreciation.

It is clear from the above provision that once an assessee, who has been paying tax under system of compounding under Sub-section (1) of Section 13, reopts to pay tax in accordance with Section 3, such assessee shall not be entitled to the benefit of carry forward of loss or any depreciation notwithstanding the other provisions of the Act otherwise providing for it. Learned Counsel for the assessee contended that disability is only for carry forward loss and depreciation. Learned Government Pleader contended that there is an absolute ban under the provision from granting carry forward loss or depreciation. It is seen that similar disallowance on depreciation is made for old machinery, building etc. for both the assessment years. We are of the view that Section 13(6) applies to the first year, in which the assessee reopts for conversion from payment of tax under the compounding scheme, as provided u/s 13(1), to payment of tax u/s 3 of the Act. In other words, once option is exercised for one year and assessee suffers disability u/s 13(6), the assessee will be entitled to carry forward loss and depreciation from that year onwards for succeeding assessment years as provided u/s 12 of the Act. For the next year onwards, i.e. 2002-03 onwards, if assessee continues to pay tax u/s 3, assessee is not subject to any disability u/s 13(6) of the Act. In other words, assessee will be entitled to carry forward of loss and depreciation to the immediately succeeding year i.e. the year following the year in which option is exercised for payment of tax u/s 3 of the Act. Even though learned Government Pleader pointed out that option for payment of tax at compounding scheme u/s 13(1) is for three years, we do not think any such question arised here because the Tribunal has approved switching over from compounding to payment of tax on regular basis u/s 3 of the Act. We, therefore, dismiss the tax revision case for the assessment year 2001-02 but allow the revision for the year 2002-03 by holding that assessee will be entitled to carry forward of loss computed and unabsorbed depreciation, if any, from 2001-02 to that year. We make it clear that depreciation will be available only on new assets acquired during the previous year relevant for the assessment year 2001-02 onwards. In other words, no depreciation will be available on assets acquired prior to the previous year in which assessee switched over from compounding to payment of tax u/s 3 of the Act.