Marudhamalai Sri Dhandapani Spinning Mills, Coimbatore V. ACIT, Ootacamund

CO 46/CHNY/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1177 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 03-08-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: T VASUDEVAN

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, J UDICIAL MEMBER I.T.A.NO. 342 /MDS/201 5 ASSESSMENT YEAR :201 1 - 1 2 & C.O. NO. 4 6/MDS/2015 [IN I.T.A. NO. 342 /MDS/201 5 ] THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I , CHRISTO BUILDING, 2 ND FLOOR, BANK ROAD, OOTACAMUND 643 001. VS. M/S. MARUDHAMALAI SR I DHANDAPANI SPINNING MILLS, 142 - B, BETTATHAPURAM PUDUR, KARAMADAI, COIMBATORE 641 104. [PAN: AA GFM4590F ] ( APPELLANT ) ( R ESPONDENT /CROSS OBJECTOR ) DEPARTMENT BY : SHRI A.B. K O LI , JCIT ASSESSEE BY : SHRI T. VASUDEVAN, ADVOCATE / DATE OF HEARING : 0 3 . 0 8 .201 5 / DATE OF P RONOUNCEMENT : 19 .08 .201 5 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : TH I S APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I I, C OIMBATORE , DATED 13 . 11 .201 4 RELEVANT TO THE ASSESSMENT YEAR 20 1 1 - 1 2 . 2. THE GROUND RAISED IN THE APPEAL OF THE REVENUE IS WITH REGARD TO DEDUCTION UNDER SECTION 80IA OF THE INCOME T AX ACT. THE ASSESSING OFFICER I.T.A. NO . 342 /M/ 1 5 & C.O. NO. 4 6/M/15 2 HAS DISALLOWED THE CLAIM ON THE GROUND THAT AGAINST THE DECISION OF THE HON BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OTHERS V. ACIT 231 CTR 368, THE DEPARTMENT HAS PREFERRED SLP BEFORE THE H ON BLE SUPREME COURT. IN APPEAL, THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OTHERS V. ACIT (SUPRA), DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. 3. WHEN THE APPEAL WAS TAKEN UP FOR HEARING, THE LD. DR HAS FAIRLY ACCEPTED THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OTHERS V. ACIT (SUPRA), HOWEVER, HE HAS SUBMITTED THAT THE SLP PREFERR ED BY THE DEPARTMENT IS PENDING BEFORE THE HON BLE SUPREME COURT. 4. AFTER HEARING BOTH SIDES, WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OTHERS V. ACIT (SUPRA) HAS HELD AS UNDER: 13. SEC.80 - IA R EADS AS FOLLOWS: [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSIN ESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN C ONSECUTIVE ASSESSMENT YEARS.] (2) THE DEDUCTION SPECIFIED IN SUB - SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF I.T.A. NO . 342 /M/ 1 5 & C.O. NO. 4 6/M/15 3 FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERP RISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (III) OF SUB - SECTION (4)] OR GENERATES POWER OR COMMENCE S TRANSMISSION OR DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSMISSION OR DISTRIBUTION LINES ): (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I) DEVELOPING OR (II) OPE RATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORI TY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DE VELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: 5) NOTWIT HSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB - SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB - SECTION FOR THE A SSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AN D TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. FROM READING OF SUB - S (1), IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAIN S DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - S(4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF TH E ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PERCENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB - I.T.A. NO . 342 /M/ 1 5 & C.O. NO. 4 6/M/15 4 S (4). SUBS - S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UN DERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB - S(5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB - S(5) AND THE SAME IS NOT DEFINED UNDER THE PR OVISIONS. IT IS TO NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB - S(5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YEAR REFERRED TO IN SUB - S(2) IMPORTANT FACTORS ARE TO BE NOTED IN SUB - S(5) AND THEY ARE AS UNDER: - (1) IT STARTS WITH NON OBSTA NTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED. (2) IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR; (4 ) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM READING THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSES SMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE T O LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS, ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB - SECTION DOES NOT CONTEMPLATE TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 5 . IN VIEW OF THE ABOVE FINDINGS OF THE HON BLE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE AP PEAL FILED BY THE REVENUE IS DISMISSED. 6. T HE CROSS OBJECTION FILED BY THE ASSESSEE IS ONLY IN SUPPORT OF THE I.T.A. NO . 342 /M/ 1 5 & C.O. NO. 4 6/M/15 5 ORDER PASSED BY THE LD. CIT(A) AND SINCE WE HAVE DISMISSED THE APPEAL FILED BY THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOME I NFRUCTUOUS AND ACCORDINGLY THE SAME IS DISMISSED. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED ON WEDNESDAY, THE 19 TH OF AUGUST, 2015 AT CHENNAI. SD/ - SD/ - ( A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( V. DURGA RAO ) JUDICIAL MEMBER CHENNAI, DATED, THE 19 . 0 8 .201 5 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / C IT(A) , 4. / CIT , 5. / DR & 6. / GF.