M/s. East Coast Acetylene (P) Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1145/CHNY/2003

• Counselvise Citation: 114521714 RSA 2003
• Duration Of Justice: 8 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-01-2012
• Assessment Year: 1992-1993
• Appeal Filed On: 26-05-2003
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RANGAR AJAN JR
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3); 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.1145/MDS/2003 (ASSESSMENT YEAR: 1992-93) M/S EAST COAST ACETYLENE (P)LTD., 141, GREAMS ROAD, CHENNAI-600 006. PAN: AAACE0695E VS. DEPUTY COMMISSIONER OF INCOME TAX, COM.CIRCLE-11(1), CHENNAI-6. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI K. E.B.RANGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 11 TH JANUARY, 2012 DATE OF PRONOUNCEMENT : 11 TH JANUARY, 2012 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FIXED FOR HEARING AS DIRECTED BY THE HONBLE HIGH COURT, WHO HAS SET ASIDE THE TRIBU NALS ORDER AND REMANDED THE MATTER BACK TO DECIDE THE IS SUE IN THE LIGHT OF THE DECISION OF THE HONBLE APEX COURT RENDERED IN THE CASE OF MOTILAL PESTICIDES (I) PVT. LTD., VS. C IT, REPORTED IN 243 ITR 226. THE QUESTION BEFORE THE HONBLE HI GH COURT WAS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITA NO. 1145/MDS/2003 2 TRIBUNAL WAS RIGHT IN ALLOWING THE ASSESSEES APPEA L HOLDING THAT THE RELIEF UNDER SECTION 80HH AND 80I ARE TO BE ALLOWED BEFORE DEPRECIATION AND INVESTMENT ALLOWANCE? 2. THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURE OF ACETYLENE AND IS LOCATED IN A BACKWARD AREA IN POND ICHERRY. FOR THE ASSESSMENT YEAR 1992-93, THE ASSESSMENT WAS COMPLETED ON 26.10.1994 UNDER SECTION 143(3) OF THE ACT. SUBSEQUENTLY, ORDER UNDER SECTION 154 WAS PASSED ON 28.12.1998 WHEREBY THE CLAIM UNDER SECTIONS 80HH AN D 80I WERE RESTRICTED. AGAINST THIS ORDER, FIRST APPEAL W AS FILED AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CAN CELLED THIS ORDER THROUGH HIS ORDER DATED 8.4.1999. THEREA FTER THE ASSESSING OFFICER TOOK RECOURSE TO REASSESSMENT PRO CEEDINGS UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT ON 12.5.2000 AND PASSED ASSESSMENT ORDER UNDER SECTIO N 143(3)/147 AND AGAIN RESTRICTED THE RELIEF UNDER SE CTION 80HH AND 80 I BY FIRST DEDUCTING DEPRECIATION / INVESTME NT ALLOWANCE FROM THE PROFIT. THIS ACTION WAS ALSO CON FIRMED BY THE COMMISSIONER OF INCOME TAX(APPEALS) AGAINST WHI CH THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL. THE AS SESSEE ITA NO. 1145/MDS/2003 3 CHALLENGED THE ASSUMPTION OF JURISDICTION AND PASSI NG OF REASSESSMENT ORDER UNDER SECTION 147/148 OF THE ACT . THE TRIBUNAL FOLLOWED THE DECISION OF THE HONBLE APEX COURT RENDERED IN THE CASE OF MOTILAL PESTICIDES (I) PVT. LTD. REPORTED IN 243 ITR 26(SC). THE REVENUE WENT BEFOR E THE HONBLE HIGH COURT PRAYING THAT THE TRIBUNAL HAS IN CORRECTLY APPLIED THE RATIO OF THE ABOVE CITED JUDGEMENT BY T AKING IT IN FAVOUR OF THE ASSESSEE, WHEREAS, IN FACT, THE DECIS ION IS AGAINST THE ASSESSEE. THE HONBLE HIGH COURT WAS S ATISFIED THAT THE DECISION IN MOTILAL PESTICIDES (I) PVT.LTD . (SUPRA) WAS IN FAVOUR OF THE REVENUE AND NOT IN FAVOUR OF THE A SSESSEE. 3. WE HAVE CONSIDERED THE RATIO OF THE ABOVE DECISI ON, WHICH WAS ALSO INCORPORATED IN THE ORDER BY THE TRI BUNAL IN ITS FIRST ROUND, WHEREIN THE HONBLE APEX COURT HAS HEL D AS UNDER:- TWO SECTIONS 80AA AND 80AB OF THE ACT WERE INTRODUCED BY THE FINANCE (NO. 2) ACT, 1980. WHILE SECTION 80AA WAS TO HAVE RETROSPECTIVE EFFECT W.E.F. 1ST APRIL, 1968, SECTION 80AB WAS TO HAVE OPERATION W.E.F. 1ST APRIL, 1981. SEC. 80AA HAD THE EFFECT OF EFFACING THE DECISION OF THE SUPREME COU RT IN CLOTH TRADERS (P) LTD.S CASE, 118 TR 243 WHICH ITA NO. 1145/MDS/2003 4 HAD INTERPRETED SECTION 80M. SECTION 80AB WAS MADE APPLICABLE TO ALL THE SECTIONS IN CHAPTER VI-A EXCEPT SECTION 80M. IN DISTRIBUTORS (BARODA) (P) LTD.S CASE, (1985) 155 ITR 120(SC), HOWEVER, THE SUPREME COURT SPECIFICALLY OVERTURNED ITS EARLIER DECISION IN CLOTH TRADERS (P) LTD.S CASE (SUPRA) AND HELD THAT DEDUCTION IS TO BE ALLOWED ONLY ON TH E NET INCOME AND NOT ON THE GROSS INCOME. WITH REFERENCE TO SECTION 80AB, THE SUPREME COURT SAID IT WAS MERELY OF A CLARIFICATORY NATURE. IN H.H. S IR RAMA VARMA VS. CIT (1994) 116 CTR (SC) 55 : (1994) 205 ITR 433 (SC) THE SUPREME COURT OBSERVED THAT ON A PARITY OF REASONING WITH SECTION 80AA AS GIVEN IN DISTRIBUTORS (BARODA) (P) LTD.S CASE (SUPRA), IT MUST BE HELD THAT SECTION 80AB WAS ENACTED TO DECLARE THE LAW AS IT ALWAYS STOOD IN RELATION TO THE DEDUCTIONS TO BE MADE IN RESPECT OF THE INCOME SPECIFIED UNDER THE HEAD 'C' OF CHAPTER VI-A OF THE ACT. THE SPECIAL DEDUCTION U/S.80HH IS ALLOWABLE ON THE NET INCOME AND NOT THE GROSS INCOME. 4. THERE IS NO DISPUTE WITH REGARD TO APPLICABILIT Y OF THIS DECISION TO THE FACTS OF THE GIVEN CASE AND NO OTHE R CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE AT THE TIM E OF HEARING. WE MAY MENTION THAT AT THE TIME OF HEARING NOBODY CAME TO REPRESENT THE CASE OF THE ASSESSEE, DESPITE NOTICE BEING DULY SERVED, THEREFORE, THE APPEAL WAS HEARD EX-PARTE IN THE WAY AS DIRECTED BY THE HONBLE HIGH COURT. W E HAVE INCORPORATED THE HELD PORTION OF THE HONBLE APEX C OURTS DECISION (SUPRA) AND WE DIRECT THE ASSESSING OFFICE R TO ITA NO. 1145/MDS/2003 5 COMPUTE THE DEDUCTION AFRESH UNDER SECTIONS 80HH AN D 80I OF THE ACT BY FOLLOWING THE ABOVE FINDING. 5. THE APPEAL IS DISPOSED OF ACCORDINGLY. THE APPE AL IS LIABLE TO BE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 11 TH JANUARY, 2012 AT CHENNAI. SD/- SD/- (DR. O.K.NARAYANAN) (HARI OM MARATHA) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 11 TH JANUARY, 2012. SOMU COPY TO: (1) APPELLANT ( 4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.