DCIT, Coimbatore V. Precot Meridian Ltd., Coimbatore

ITA 119/CHNY/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7617 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2016
• Court: TRIBUNAL
• Department Lawyers: SUNDAR RAO
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.119/MDS./2016 ( / ASSESSMENT YEAR :2010-11) DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, 63-A,RACE COURSE ROAD, COIMBTORE. VS. M/S.PRECOT MERIDIAN LTD ., SUPREME, P.B.NO.7161, GREEN FIELDS, PULIAKULAM ROAD, COIMBATORE 641 045. PAN AABCP 3038 K ( () / APPELLANT ) ( *+() / RESPONDENT ) / APPELLANT BY : MR.SUNDAR RAO, CIT, D.R / RESPONDENT BY : NONE / DATE OF HEARING : 14.03.2016 /DATE OF PRONOUNCEMENT : 24.03.2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-I, COI MBATORE DATED 28.10.2015 PERTAINING TO THE ASSESSMENT YEAR 2010- 11. ITA NO.119/MDS/2016 2 2. THE ONLY GROUND RAISED BY THE REVENUE IN THIS APPEA L IS WITH REGARD TO GRANTING OF DEDUCTION U/S.80IA OF THE INCOME TAX ACT, 1961 AT 6,08,91,897/- ON INCOME EARNED FROM WINDMILL POWER GENERATION WITHOUT APPLYING THE PROVISIONS OF SECTION 80IA(5) AS PER W HICH THE ELIGIBLE UNDERTAKING SHOULD BE TREATED AS ONLY SOURCE OF INC OME FOR COMPUTING THE QUANTUM OF DEDUCTION ALLOWABLE U/S.80IA OF THE ACT. 3. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS (P) LTD VS. ACIT 340 ITR 477, WHEREIN IT WAS HELD THAT 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 PROF ITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS R EFERRED 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 SECTIONS, BE ALLOWED, IN C OMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAM E 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 EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BEN EFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEARS IN W HICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRA STRUCTURE ACTIVITY ETC SUB- S. (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGI BLE BUSINESS. 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 THAT INITI AL ASSESSMENT YEAR EMPLOYED IN ITA NO.119/MDS/2016 3 SUB-S (5) IS DIFFERENT FROM THE WORDS BEGINNING F ROM 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 OBSTANTE CLAUSE WHICH MEANS I T 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 BU SINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM RE ADING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOUR CE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR A ND EVERY SUBSEQUENT ASSESSMENT 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 PERIO D OF TEN YEARS FROM THE INITIAL ASSESSMENT CONTEMPLATED. IT DOES NOT ALL T HE 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 OFF AGAINST OTHER INC OME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGI BLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER IN COME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S(5) DOES NOT CONTEMPLATES 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 . THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OF F AND ADJUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, 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 RELEVA NT PERIOD, THERE WERE NO UNABSORBED DEPRECIATION OR LOSS OF THE ELIGIBLE UND ERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING THE RELEVANT YEAR. THEREFORE, LOSS IN THE YEAR EAR LIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINE SS CANNOT BE NOTIONALLY ITA NO.119/MDS/2016 4 BROUGHT FORWARD AND SET OFF AGAINST THE PROFIT OF T HE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN S. 80-IA(5) CIT VS. T TK PHARMA LTD (TAX CASE (APPEAL ) NO.298 OF 2004, DT. 23 RD DEC., 2009) FOLLOWED; CIT VS. MEWAR OIL & GENERAL MILLS LTD (2004) 186 CTR (RAJ) 141; (2004) 271 ITR 311 (RAJ) CONCURRED WITH; MOHAN BREWERIES & DISTILLERIES LTD VS. ASST. CIT (2008) 114 TTJ (CHENNAI) 532: (2008) 3 DTR (CHENNAI) (TRIB) 47 7 AFFIRMED. 4. ACCORDINGLY, WE ARE OF THE OPINION THAT THE COMMISS IONER OF INCOME TAX (APPEALS) IS JUSTIFIED IN DECIDING THE I SSUE IN FAVOUR OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO .119/MDS/2016 IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 24 TH OF MARCH,2016 AT CHENNAI. SD/- SD/- ( ! ' . # $% ) ( DUVVURU RL REDDY ) ) ( ( &' ( ) ) ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 24 TH MARCH,2016 . K S SUNDARAM. *+ ,- .- /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. / ( ) /CIT(A) 4. / /CIT 5. -01 2 /DR 6. 1% 3 /GF