ACIT, CHENNAI V. Easun Reyrolle Limited, CHENNAI

ITA 1179/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8952 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: M VISWANATHAN
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , . , # $ BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1179/MDS/2016 ( / ASSESSMENT YEAR: 2006-07) ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(1), CHENNAI-600 034. VS M/S. EASUN REYROLLE LTD., 672, ANNA SALAI, 6 TH FLOOR, TEMPLE TOWER, CHENNAI-600 035. PAN:AAACM2032P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SHIVA SRINIVAS, JCIT /RESPONDENT BY : MR. M.VISWANATHAN, C.A. /DATE OF HEARING : 5 TH JULY, 2016 /DATE OF PRONOUNCEMENT : 11 TH JULY, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 6, CHENNAI DATED 03.02.2016 IN ITA NO.129/CIT(A)- 6/2008- 09 PASSED UNDER SECTION 143(3) R.W.S.250(6) OF THE ACT. 2. THOUGH THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, THE CRUX OF THE ISSUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 46,67,470/- MADE BY THE LEARNED ASSESSING OFFICER BY GRANTING THE BENEFIT UNDER SECTION 80IA OF THE ACT, 2 ITA NO.1179/MDS/2016 WHICH IS CLAIMED BY THE ASSESSEE TOWARDS ITS PROFIT S AND GAINS DERIVED FROM GENERATING POWER THROUGH WINDMIL L. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY AND ONE OF ITS BUSINESS IS POWER GE NERATION THROUGH WINDMILLS, FILED ITS RETURN OF INCOME ON 21 .11.2006 FOR THE ASSESSMENT YEAR 2006-07 DECLARING INCOME O F ` 20,92,90,012/-. IN THE SCRUTINY ASSESSMENT PROCEED INGS, THE LEARNED ASSESSING OFFICER DISALLOWED THE CLAIM OF D EDUCTION OF ` 46,67,470/- UNDER SECTION 80IA (5)OF THE ACT BY OBS ERVING AS FOLLOWS:- 3.7 THE PROVISIONS OF SECTION 80 IA(5) ARE VERY C LEAR AS TO THE TREATMENT OF THE ELIGIBLE BUSINESS AS THE ON LY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOU S YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION OF DEDUCTION IS TO BE MADE. SUCH BEING THE CASE, RESORTING TO AN INTERPRE TATION THAT IT WOULD BE APPLICABLE ONLY WHEN LOSSES ARE MA DE BY THE OTHER UNIT AND NOT WHEN LOSSES ARE MADE BY THE ELIGIBLE UNIT WILL DEFEAT THE WHOLE INTENTION OF TH E LEGISLATURE. THE INTENTION OF THE LEGISLATURE COULD ONLY BE TO ALLOW DEDUCTION ON THE NET PROFITS MADE BY THE E LIGIBLE UNDERTAKING RIGHT FROM DAY ONE OF THE COMMENCEMENT OF THE OPERATION TILL THE DATE OF DETERMINATION. DURIN G THE INITIAL YEARS, THERE COULD BE LOSSES. AN INDUSTRIAL UNDERTAKING CAN BE SAID TO HAVE MADE ANY PROFITS ON LY IF IT HAD REACHED THE BREAK-EVEN POINT AFTER SET OFF O F ALL THE INITIAL LOSSES INCURRED. TILL SUCH TIME, NO DEDUCTI ON U/S 80 IA COULD BE ALLOWED. THIS POSITION OF LAW HAS BEEN AMPLY CLARIFIED BY THE CHENNAI BENCH OF THE ITAT IN THE C ASE OF CHETTINAD CEMENT CORPORATION LIMITED FOR THE ASSESSMENT YEAR 2001-02 IN ITA NO.1 029(MDS)/2005. ALSO IN THE CASE OF EAGLE PRESS PRIVATE LIMITED IN ITA NO.1967/MDS/2004 (AY 01-02), THE ITAT, CHENNAI 3 ITA NO.1179/MDS/2016 BENCH, AFTER CONSIDERING THE DECISION OF THE SUPREM E COURT IN THE CASE OF PATIALA FLOOR MILLS CO. PRIVAT E LIMITED (115 ITR 650), HAS OBSERVED THAT: 'TO MEET THE SITUATION ENVISAGED BY THE HON'BLE SUPREME COURT, LEGISLATURE HAS SPECIFICALLY INSERTED A DEEMING LEGAL FICTION BY WAY OF SUB- SECTION (5) IN SECTION 80-IA WHICH PROVIDES HOW THE PROFITS AND GAINS OF THE ELIGIBLE BUSINESS ARE TO BE COMPUTED. THIS DEEMING FICTION MAKES IT VERY CLEAR THAT PROFITS OF ELIGIBLE BUSINESS SHOULD BE COMPUTED FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB-SECTION (1) OF SECTION 80-IA AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR WHICH MEANS PROFITS AND GAINS OF SUCH BUSINESS RIGHT FROM BEGINNING HAVE TO BE COMPUTED SEPARATELY AND THEN AFTER REDUCING THE PAST LOSSES OR UNABSORBED AND UNABSORBED INVESTMENT ALLOWANCE ONLY DEDUCTION CAN BE ALLOWED IN VIEW OF SECTION 80AB. HERE, IS IT ALSO SIGNIFICANT TO NO TE THAT THIS SUB-SECTION IS STARTING WITH NON OBSTANTE CLAUSE WHICH MEANS IT WILL PREVAIL EVEN IF THERE IS ANY CONTRADICTION. ' 3.8 SIMILAR VIEW WAS TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF PRASAD PRODUCTIONS (P) LTD V DCIT (98 ITD 212). THIS, BEING AN ISSUE WHICH IS CO VERED IN FAVOUR OF THE REVENUE BY DECISIONS OF THE JURISD ICTIONAL TRIBUNAL, REQUIRES NO FURTHER DISCUSSION. THEREFORE , THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80-IA TO THE TUNE OF RS.46,67,470 IS DISALLOWED. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) FOLLOWING THE DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF SRI VELAYUTHASAMY SPINNING MIL LS REPORTED IN 231 CTR 368 AND THE DECISION OF CHEN NAI BENCH OF THE TRIBUNAL IN ITA NO.657 & 658/MDS/2013 DATED 08.01.2014, WHEREIN, THE ISSUE WAS HELD IN FAVOUR OF THE ASSESSEE, DELETED THE ADDITION MADE BY THE LEARNED 4 ITA NO.1179/MDS/2016 ASSESSING OFFICER BY GRANTING THE BENEFIT UNDER SE CTION 80IA OF THE ACT, AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED ASSES SING OFFICER WHILE AS THE LEARNED AUTHORIZED REPRESENTAT IVE RELIED IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE MATERIAL ON RECORD. SINCE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD ONLY FOLLO WED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF SRI VELAYUDHASWAMY SPINNING MILLS PVT.LTD. (SUPRA), AND THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN ITA NO .657 & 658/MDS/2013 DATED 08.01.2014, AND DELETED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AFTER NECESSARY VERIFICATION, WE DO NOT HAVE ANY HESITATI ON TO CONFIRM THE ORDERS OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS), AS THE DECISION OF THE HONBLE JURIS DICTIONAL HIGH COURT IS BINDING ON ALL THE LOWER AUTHORITIES UNDER ITS 5 ITA NO.1179/MDS/2016 JURISDICTION. ACCORDINGLY, WE HEREBY CONFIRM THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH JULY, 2016 SD/- SD/- ( . ) ( . ) (G.PAVAN KUMAR) ( A.MOHAN ALANKAM ONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 11 TH JULY, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF