DCIT, Tiruppur V. S R G Apparels Private ltd., Tiruppur

ITA 106/CHNY/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7765 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNANJCIT
• Assessee Lawyers: R KUMAR
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.100 /MDS./2016 ( / ASSESSMENT YEAR :2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUPUR. VS. M/S.BEST CORPORATION (P) LTD ., NO.89/2,PADMAVATHIPURAM, AVINASHI ROAD, TIRUPUR 641 603. PAN AACCR 6828 G ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.P.RADHAKRISHNAN,JCIT DR / RESPONDENT BY : MR.R.KUMAR,ADVOCATE ./ I.T.A.NOS.106 & 107 /MDS./2016 ( / ASSESSMENT YEAR :2011-12 & 2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUPUR. VS. M/S.SRG APPARELS PRIVATE LTD ., 10B,PADMAVATHIPURAM, GANDHINAGAR PO,TIRUPUR 641 603. PAN AADCS 8162 K ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) ITA NOS.100,106,107,108,109/MDS/2016 2 / APPELLANT BY : MR.P.RADHAKRISHNAN,JCIT DR / RESPONDENT BY : NONE ./ I.T.A.NO.108 /MDS./2016 ( / ASSESSMENT YEAR :2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUPUR. VS. MR.RAMASWAMY GOVINDARAAJU, PROP.PRIME TEX, 10-B, PADMAVATHIPURAM, GANDHINAGAR PO,TIRUPUR 641 603 PAN ADRPG 7193 A ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.P.RADHAKRISHNAN,JCIT DR / RESPONDENT BY : NONE ./ I.T.A.NO.109 /MDS./2016 ( / ASSESSMENT YEAR :2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUPUR. VS. M/S.INDIA DYEING PVT. LTD., NO.10-12,2 ND STREET, KUMAR NAGAR SOUTH, TIRUPUR 641 603. PAN AACCI 4602 B ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.P.RADHAKRISHNAN,JCIT DR / RESPONDENT BY : MR.N.VIJAY KUMAR,C.A ITA NOS.100,106,107,108,109/MDS/2016 3 / DATE OF HEARING : 07.03.2016 ! /DATE OF PRONOUNCEMENT : 18.03.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INC OME TAX(A)-3, COIMBATORE PERTAINING TO THE RELEVANT ASSESSMENT YE ARS. SINCE ISSUES INVOLVED IN ALL THESE REVENUES APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD T OGETHER, DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 2. THE ISSUE IN THIS APPEAL IS WITH REGARD TO DISA LLOWANCE OF DEDUCTION U/S.80-IA OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN ALL THE SE APPEALS, ASSESSEE CLAIMED DEDUCTION U/S.80-IA OF THE ACT. A CCORDING TO THE LD. ASSESSING OFFICER, AS PER THE PROVISIONS OF THE SEC TION 80-IA(5) OF THE ACT, IT IS MANDATED THAT THE PROFIT AND GAINS OF EL IGIBLE BUSINESS FOR WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL FOR THE PURPOSE OF ITA NOS.100,106,107,108,109/MDS/2016 4 DETERMINING THE QUANTUM OF DEDUCTION FOR ASSESSMENT YEAR IMMEDIATELY THE IMMEDIATE SUCCEEDING THE INITIAL ASSESSMENT YEAR BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE O NLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS RELEVAN T TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO INCLUDING THE ASSESSMENT YEAR FOR WHICH DETERMINATI ON IS TO BE MADE. ACCORDING TO THE AO, THE PROVISIONS OF THE SECTION 80-IA(5) OVERRIDES EVERY OTHER PROVISIONS OF THE INCOME-TAX ACT AND T HAT THOUGH LOSSES PERTAINING TO THE ELIGIBLE BUSINESS IS SET OFF AGAI NST OTHER BUSINESS OF THE ASSESSEE, FOR THE PURPOSE OF SEC.80-IA(5) LOSS ES OF THE EARLIER YEARS OF THE ELIGIBLE BUSINESS WILL HAVE TO BE NOTI ONALLY BROUGHT FORWARD AND SET OFF AGAINST THE INCOME, IF ANY OF T HE ELIGIBLE BUSINESS FOR THE SUCCEEDING ASSESSMENT YEAR. ACCORDINGLY, T HE LD. ASSESSING OFFICER APPLIED THE ABOVE PROVISIONS AND RE-WORKED U/S.80-IA OF THE ACT. ON APPEAL, THE LD.CIT(A) OBSERVED THAT THE IS SUE WAS ALREADY DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CAS E OF M/S.SRI VELAYUTHASWAMY SPINNING MILLS PRIVATE LIMITED VS. C IT REPORTED IN 231 CTR 368(MAD.) WHEREIN HELD THAT: ITA NOS.100,106,107,108,109/MDS/2016 5 FROM READING OF SUB-S (1) OF S. 80IA, IT IS CLEAR THAT IT PROVIDES THAT 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-S (4) I.E. REFERRED TO AS THE ELIGIBLE BUSIN ESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E SECTIONS, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DE DUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERI VED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-S. (4). SUB -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 EXE RCISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEARS IN WHICH THE UNDERTAKING O R THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE A CTIVITY ETC SUB-S. (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUS INESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-S (5) A ND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THA T 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 A RE TO BE NOTED IN SUB-S(5) AND THEY ARE AS UNDER: (1)IT STARTS WITH NON OBSTAN TE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHE R PROVISIONS ARE TO BE IGNORED; (2) IT IS FOR THE PURPOSE OF DETERMINING T HE 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 EV ERY SUBSEQUENT ASSESSMENT YEAR. FROM READING OF THE ABOVE, IT IS C LEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSE QUENT ASSESSMENT ITA NOS.100,106,107,108,109/MDS/2016 6 YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PE RIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT CONTEMPLATED. IT DOES N OT ALL THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NATIONALLY EVEN THOUGH THE SAME WERE SET OF F 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 CANNO T REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S(5) DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. FI CTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. THERE IS NO DISPUT E THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED A GAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT Y EAR, THE ASSESSEE EXERCISED THE OPTION UNDER S.80-IA(2). IN TAX CASE NO.918 OF 2008 THE ASSESSMENT YEAR WAS 2004-05. DURING THE RELEVANT PE RIOD, THERE WERE NO UNABSORBED DEPRECIATION OR LOSS OF THE ELIGIBLE UND ERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. TH ERE IS A POSITIVE PROFIT DURING THE RELEVANT YEAR. THEREFORE, LOSS IN THE YE AR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AG AINST THE PROFIT OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN S. 80- IA(5) CIT VS. TTK PHARMA LTD (TAX CASE (APPEAL ) NO.298 OF 2004, DT. 23RD DEC., 2009) FOLLOWED; CIT VS. MEWAR OIL & GENERAL MILLS L TD (2004) 186 CTR (RAJ) 141; (2004) 271 ITR 311 (RAJ) CONCURRED WITH; MOHAN BREWERIES & DISTILLERIES LTD VS. ASST. CIT (2008) 114 TTJ (CHEN NAI) 532: (2008) 3 DTR (CHENNAI) (TRIB) 477 AFFIRMED. ITA NOS.100,106,107,108,109/MDS/2016 7 IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH ERE IS NO MERIT IN THE GROUND RAISED BY THE DEPARTMENT. ACCORDINGLY, THE A PPEAL IS DISMISSED. 4. IN THE RESULT, ALL THESE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY , THE 18 TH OF MARCH,2016 AT CHENNAI. SD/- SD/- ' # $ . %& ' ( DUVVURU RL REDDY ) ) ( ( ( ) * + ) ) ' CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 18 TH MARCH,2016 . K S SUNDARAM. -.,, /0,10 /COPY TO: , 1. /APPELLANT 2. /RESPONDENT 3. , 2,'' /CIT(A) 4. , 2 /CIT 5. 034, 5 /DR 6. 4&,6 /GF