DCIT, Coimbatore V. M/s. Sri Ranganathar Industries P Ltd., Coimbatore

ITA 1207/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64193 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-08-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: A S SRIRAM
• Keywords: Depreciation; Source of fund; Unabsorbed depreciation
• Section: 80C; 6

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1207/MDS/2012 ASSESSMENT YEAR: 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), 63-A, RACE COURSE ROAD, COIMBATORE. VS. M/S. SRI RANGANATHAR INDUSTRIES P. LTD., 12/45, THADAGAM ROAD, EDAYARPALAYAM, COIMBATORE -641025. [PAN: AADCS0183Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, CIT RESPONDENT BY : SHRI A.S. SRIRAM, ADVOCATE DATE OF HEARING : 2 7 . 0 8 .201 2 DATE OF PRONOUNCEMENT : 27.08.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, COIMBATORE DATED 21.03.2012 IN APPEAL NO. 20/11-12 FOR THE ASSESSMENT YEAR 2009-10 . SHRI ANIRUDH RAI, CIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI A .S. SRIRAM, ADVOCATE, REPRESENTED ON BEHALF OF THE ASSESSEE. 2. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE A SSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IA OF THE ACT ON WINDMILL S. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 2 3. AT THE TIME OF HEARING, BOTH THE COUNSELS FOR T HE ASSESSEE AND REVENUE SUBMITTED THAT THIS ISSUE IS SQUARELY COVER ED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VE LAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT [340 ITR 477]. A COPY OF TH E ORDER IS PLACED ON RECORD. 4. WE SEE THAT THE HONBLE JURISDICTIONAL HIGH COU RT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE, WHEREIN THEIR LORD SHIPS HELD AS UNDER: 10. IT IS PERTINENT TO NOTE THAT THE LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE INVITED THE ATTENTION OF THIS COURT TO AN UNREPORTED JUDGMENT OF THIS COURT DT. 23RD DEC., 2009 IN TAX CASE (APPEAL) NO. 298 OF 2004 WHEREIN, THIS COURT CONSIDERED THE SIMILAR SUBSTANTIAL QUESTION O F LAW, WHICH READS AS FOLLOWS : 'WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER S. 80-I, THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ETC., OF THE NEW INDUSTRIAL UNDERTAKIN G NEED NOT BE TAKEN INTO CONSIDERATION, ONCE THEY HAVE BEEN SET OFF AGAINST OTHER SOURCES OF INCOME, ESPECIALLY IN VIEW OF THE CLEAR PROVISIONS OF SUB-S . 6 OF S. 80-I, THE APPLICATION OF WHICH IS MANDATORY ?' 11. BY FOLLOWING THE VARIOUS DECISIONS OF THE APEX COURT, THIS COURT, IN PARA 15 OF THE SAID JUDGMENT, HAS HELD AS FOLLOWS : 'THE CUMULATIVE CONSIDERATION OF THE PRINCIPLES SET OUT IN THE ABOVE REFERRED TO DEC ISIONS AND THE OTHER FACTORS INVOLVED IN THIS CASE, WHEREIN ADMITTEDLY THE ENTIR E DEPRECIATION ALLOWANCE AND DEVELOPMENT REBATE FOR THE PAST ASSESSMENT YEARS WE RE FULLY SET OFF AGAINST THE TOTAL INCOME OF THE ASSESSEE FOR THOSE ASSESSMENT Y EARS AND NO FURTHER DEPRECIATION ALLOWANCE OR DEVELOPMENT REBATE REMAIN UNABSORBED AND NOTHING COULD BE DEDUCTED IN RESPECT OF THE SET OFF WHILE D ETERMINING THE DEDUCTION UNDER S. 80-I OF THE ACT.' 12. THE ABOVE UNREPORTED JUDGMENT CONSIDERED S. 80 -I AND HAD TAKEN THE VIEW THAT ENTIRE DEPRECIATION ALLOWANCE AND DEVELOP MENT REBATE FOR THE PAST ASSESSMENT YEARS WERE FULLY SET OFF AGAINST THE TOT AL INCOME OF THE ASSESSEE FOR THOSE ASSESSMENT YEARS AND NO FURTHER DEPRECIATION ALLOWANCE OR DEVELOPMENT REBATE REMAINED UNABSORBED AND THEREFORE, NOTHING C OULD BE DEDUCTED IN RESPECT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 3 OF THE SET OFF WHILE DETERMINING THE DEDUCTION UNDE R S. 80-I OF THE ACT. SEC. 80-I WAS INTRODUCED BY FINANCE (NO. 2) ACT, 1980 W.E.F. 1ST APRIL, 1981. THE SAID SUB-SECTION DEALS WITH DEDUCTION IN RESPECT OF PROF ITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS AFTER A CERTAIN DATE. SEC. 80-I READS AS FOLLOWS : '80-I. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSES SEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL (OR THE BUSINESS OF REPAIRS TO OCEANGOING VES SELS OR OTHER POWERED CRAFT), TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCO RDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS O F AN AMOUNT EQUAL TO TWENTY PER CENT THEREOF : (2)..... (5) THE DEDUCTION SPECIFIED IN SUB-S. (1) SHALL BE ALLOWED IN COMPUTING THE TOTAL INCOME IN RESPECT OF THE ASSESSMENT YEAR RELEVANT T O THE PREVIOUS YEAR IN WHICH THE INDUSTRIAL UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR TO OPERATE ITS COLD STORAGE PLANT OR PLANTS OR T HE SHIP IS FIRST BROUGHT INTO USE OR THE BUSINESS OF THE HOTEL STARTS FUNCTIONING (OR THE COMPANY COMMENCES WORK BY WAY OF REPAIRS TO OCEANGOING VESSELS OR OTHER PO WERED CRAFT) (SUCH ASSESSMENT YEAR BEING HEREAFTER IN THIS SECTION REF ERRED TO AS THE INITIAL ASSESSMENT YEAR) AND EACH OF THE SEVEN ASSESSMENT Y EARS IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR : (6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL (OR THE BUSINESS OF REPAIRS TO OCEANGOING VESSELS O R OTHER POWERED CRAFT) TO WHICH THE PROVISIONS OF SUB-S. (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB-S. (1) FOR THE A SSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH INDUSTRIAL UNDERTAKING OR SHIP OR THE BUSINESS OF THE HOTEL (OR THE BUSINESS OF REPAIRS TO OCEAN-GOING VESSELS OR OTHER POWERED CRAFT) WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING TH E PREVIOUS YEARS RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMI NATION IS TO BE MADE.' FROM A READING OF THE ABOVE, IT IS CLEAR THAT THE B ENEFIT IS GIVEN TO THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF THE HOTEL OR BUS INESS OF REPAIRS TO OCEAN- GOING VESSELS OR OTHER POWERED CRAFT. THE DEDUCTION IS ALLOWED TO THE EXTENT OF 20 PER CENT FROM THE PROFITS AND GAINS OF THE ASSES SEE. SUB-S. (5) GIVES DEDUCTION FOR THE PERIOD OF SEVEN ASSESSMENT YEARS IMMEDIATEL Y SUCCEEDING THE INITIAL ASSESSMENT YEAR. SUB-S. (6) DEALS WITH COMPUTING TH E DEDUCTION UNDER SUB-S. (1) AND IT STARTS WITH NON OBSTANTE CLAUSE AND ALSO IT IS A DEEMING PROVISION. THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 4 FICTION CREATED BY THE UNDERTAKING WAS THE ONLY SOU RCE OF INCOME DURING THE PREVIOUS YEAR INITIALLY AND SUBSEQUENT ASSESSMENT Y EARS. SUB-S. (6) WAS THE SUBJECT-MATTER BEFORE THIS COURT IN THE ABOVEMENTIO NED UNREPORTED JUDGMENT, WHEREIN THIS COURT HAD HELD THAT WHILE INTERPRETING THE ABOVE PROVISION, FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER S. 80-I BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF THE NEW INDUSTRY NEED NO T BE TAKEN INTO CONSIDERATION ONCE THEY HAVE BEEN SET OFF FROM OTHE R SOURCES OF INCOME EARLIER. IN THE PRESENT CASE, WE ARE CONCERNED WITH THE PROV ISION OF S. 80-IA. THE SAID PROVISION WAS INTRODUCED BY FINANCE ACT, 1999 W.E.F . 1ST APRIL, 2000. PROVISIONS OF SS. 80-I AND 80-IA ARE ALSO MORE OR LESS IDENTIC ALLY WORDED. SECS. 80-I AND 80- IA COME IN CHAPTER VI-A OF THE IT ACT. CHAPTER VI-A DEALS WITH DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME. THERE ARE TWO TAX I NCENTIVES CONTEMPLATED IN CHAPTER VIA. ONE IS INVESTMENT INCENTIVE AND THE OT HER ONE IS PROFIT-LINKED INVESTMENT. CHAPTER VI-A WAS INTRODUCED BY THE FINA NCE ACT, 1965 W.E.F. 1ST APRIL, 1965 AND IT CONSISTS OF FOUR HEADINGS. THEY ARE A, B, C AND D. HEADING 'A' IS GENERAL AND IT ALSO CONTAINS DEFINITION. IT CONS ISTS OF SS. 80A, 80AA, 80AB, 80AC AND 80B. SEC. 80AB DEALS WITH 'DEDUCTIONS TO B E MADE WITH REFERENCE TO THE INCOME INCLUDED IN THE GROSS TOTAL INCOME', WHI CH READS AS FOLLOWS : 'WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOWED UND ER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING 'C-DEDUCTIONS IN RES PECT OF CERTAIN INCOMES' IN RESPECT OF ANY INCOME OF THE NATURE SPECIFIED IN TH AT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWI THSTANDING ANYTHING CONTAINED IN THAT SECTION, FOR THE PURPOSE OF COMPUTING THE D EDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN H IS GROSS TOTAL INCOME.' A MERE READING OF THE ABOVE PROVISION MAKES IT CLEA R THAT ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION, WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCO RDANCE WITH THE PROVISION OF THIS ACT SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WH ICH IS INCLUDED IN THE GROSS TOTAL INCOME. SEC. 80AB DEFINES 'GROSS TOTAL INCOME ' WHICH MEANS THE TOTAL INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE AC T BEFORE MAKING DEDUCTION UNDER THIS CHAPTER. HEADING 'B' DEALS WITH 'DEDUCTI ONS IN RESPECT OF CERTAIN PAYMENTS' WHICH CONSISTS OF SS. 80C TO 80GGC. HEAD ING 'C' DEALS WITH 'DEDUCTIONS IN RESPECT OF CERTAIN INCOMES', WHICH C ONSISTS OF SS. 80H TO 80TT. THE LAST HEADING 'D' DEALS WITH 'OTHER DEDUCTIONS' WHICH CONSISTS OF SS. 80U TO 80VV. HEADING C IS RELEVANT FOR CONSIDERING THE I SSUE IN THESE APPEALS. THE RELEVANT PROVISIONS THAT ARE TO BE CONSIDERED ARE S S. 80-I, 80-IA AND 80-IB. IN THE CASE OF LIBERTY INDIA VS. CIT (2009) 225 CTR (S C) 233 : (2009) 28 DTR (SC) 73 : (2009) 317 ITR 218 (SC), THE APEX COURT CONSID ERED THE SCOPE OF SS. 80-I, 80-IA AND ALSO S. 80-IB OF THE ACT, WHEREIN, IT HAS BEEN HELD THAT CHAPTER VIA I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 5 PROVIDES FOR INCENTIVES IN THE FORM OF TAX DEDUCTIO NS ESSENTIALLY BELONG TO THE CATEGORY OF 'PROFIT-LINKED INCENTIVES'. THEREFORE, WHEN S. 80-IA/80-IB REFERS TO PROFITS DERIVED FROM ELIGIBLE BUSINESS, IT IS NOT T HE OWNERSHIP OF THAT BUSINESS WHICH ATTRACTS THE INCENTIVES. FURTHER, IT HAS BEEN HELD THAT SS. 80IB/80-IA ARE THE CODE BY THEMSELVES AS THEY CONTAIN BOTH SUBSTAN TIVE AS WELL AS PROCEDURAL PROVISIONS. THE SUPREME COURT FURTHER OBSERVED IN T HE SAID JUDGMENT THAT SUB-S. (5) OF S. 80-IA PROVIDES FOR MANNER OF COMPUTATION OF PROFITS OF AN ELIGIBLE BUSINESS. ACCORDINGLY SUCH PROFITS ARE TO BE COMPUT ED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. 13. SEC. 80-IA READS AS FOLLOWS : '80-IA : (1) WHERE THE GROSS TOTAL INCOME OF AN ASS ESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-S. (4) (SUCH BUSINESS BEING HEREINAFTER REFE RRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESS EE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.' (2) THE DEDUCTION SPECIFIED IN SUB-S. (1) MAY, AT T HE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT Y EARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR ST ARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CL. (III) OF SUB-S. (4 ) OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OR POWER] OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSM ISSION OR DISTRIBUTION LINES) : (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLO WING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES (OR BY AN AUTHORITY OR A BOARD OR A CORPO RATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STA TE ACT); (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUT ORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOP ING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY; I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 6 (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST APRIL, 1995. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-S. (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QU ANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUC CEEDING 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 YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO AND INCLUDING THE ASSESSMENT Y EAR FOR WHICH THE DETERMINATION IS TO BE MADE.' FROM READING OF SUB-S. (1), IT IS CLEAR THAT IT PRO VIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAIN S DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN S UB-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 THE AS SESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAI NS DERIVED 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) PROVI DES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YE ARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WIL L NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINN ING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS T O OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-S. (5) DEALS WITH QUANTUM OF DEDU CTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INITIAL ASSESSMENT YEAR' ARE USED IN SUB S. (5) AND 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 ARE TO BE NOTED IN SUB-S. (5) AND THEY ARE AS UNDER : '(1) IT STARTS WITH NON OBSTANTE 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 QUANTU M 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 T HE ONLY SOURCE OF INCOME; AND I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 7 (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIA L ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR.' FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELI GIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASS ESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIA L ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS W HICH 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 DOE S NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY 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 CANNOT REWORK THE SET OFF AMOUNT AND BR ING IT NOTIONALLY. FICTION CREATED IN SUB-SECTION DOES NOT CONTEMPLATES TO BRI NG 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. 14. IN THE PRESENT CASES, THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASS ESSEE EXERCISED THE OPTION UNDER S. 80-IA(2). IN TAX CASE NOS. 909 OF 2009 AS WELL AS 940 OF 2009, THE ASSESSMENT YEAR WAS 2005-06 AND IN THE 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. THERE IS A P OSITIVE PROFIT DURING THE YEAR. THE UNREPORTED JUDGMENT OF THIS COURT CITED SUPRA C ONSIDERED THE SCOPE OF SUB-S. (6) OF S. 80-I, WHICH IS THE CORRESPONDING PROVISIO N OF SUB-S. (5) OF S. 80-IA. BOTH ARE SIMILARLY WORDED AND THEREFORE WE AGREE ENTIREL Y WITH THE DIVISION BENCH JUDGMENT OF THIS COURT CITED SUPRA. IN THE CASE OF CIT VS. MEWAR OIL & GENERAL MILLS LTD. (2004) 186 CTR (RAJ) 141 : (2004) 271 IT R 311 (RAJ), THE RAJASTHAN HIGH COURT ALSO CONSIDERED THE SCOPE OF S. 80-I AND HELD AS FOLLOWS HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLL OW ON THE LINE NOTICED ABOVE, WE ARE OF THE OPINION THAT ON FINDING THE FA CT THAT THERE WAS NO CARRY FORWARD LOSSES OF 1983-84, WHICH COULD BE SET OFF A GAINST THE INCOME OF THE CURRENT ASST. YR. 1984-85, THE RECOMPUTATION OF INC OME FROM THE NEW INDUSTRIAL UNDERTAKING BY SETTING OFF THE CARRY FORWARD OF UNA BSORBED DEPRECIATION OR DEPRECIATION ALLOWANCE FROM PREVIOUS YEAR DID NOT S IMPLY ARISE AND ON THE FINDING OF FACT NOTICED BY THE CIT(A), WHICH HAS NO T BEEN DISTURBED BY THE TRIBUNAL AND CHALLENGED BEFORE US, THERE WAS NO ERR OR MUCH LESS ANY ERROR APPARENT ON THE FACE OF THE RECORD WHICH COULD BE R ECTIFIED. THAT QUESTION WOULD HAVE BEEN GERMANE ONLY IF THERE WOULD HAVE BEEN CAR RY FORWARD OF UNABSORBED DEPRECIATION AND UNABSORBED DEVELOPMENT REBATE OR A NY OTHER UNABSORBED I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 8 LOSSES OF THE PREVIOUS YEAR ARISING OUT OF THE PRIO RITY INDUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE INCOME OF THE CU RRENT YEAR. IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COM PUTING ADMISSIBLE DEDUCTIONS THEREUNDER. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRI BUNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFICATION POSSIBLE UNDER S. 8 0-I IN THE PRESENT CASE, ALBEIT, FOR REASONS SOMEWHAT DIFFERENT FROM THOSE WHICH PRE VAILED WITH THE TRIBUNAL. THERE BEING NO CARRY FORWARD OF ALLOWABLE DEDUCTION S UNDER THE HEAD DEPRECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAINST THE INCOME OF THE CURRENT YEAR AND, THEREFORE, RECOMPUT ATION OF INCOME FOR THE PURPOSE OF COMPUTING PERMISSIBLE DEDUCTION UNDER S. 80-I FOR THE NEW INDUSTRIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. ACCORDINGLY, THIS APPEAL FAILS AND IS HEREBY DISMIS SED WITH NO ORDER AS TO COSTS. FROM READING OF THE ABOVE, THE RAJASTHAN HIGH COURT HELD THAT IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COM PUTING ADMISSIBLE DEDUCTIONS THEREUNDER. WE ALSO AGREE WITH THE SAME. WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 15. THE STANDING COUNSEL APPEARING FOR THE REVENUE IS UNABLE TO BRING TO OUR NOTICE ANY RELEVANT MATERIAL OR ANY COMPELLING REAS ON OR ANY CONTRA JUDGMENT OF OTHER COURTS TO TAKE A DIFFERENT VIEW. HE ONLY R ELIED HEAVILY ON MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO. 2) BI LL, 1980, [123 ITR (ST) 154] TO SUPPORT THIS CASE AND THE SAME READS AS FOLLOWS: CLAUSE 30(III) IN COMPUTING THE QUANTUM OF TAX HO LIDAY PROFITS IN ALL CASES, TAXABLE INCOME DERIVED FROM THE NEW INDUSTRIAL UNIT S, ETC., WILL BE DETERMINED AS IF SUCH UNITS WERE AN INDEPENDENT UNIT OWNED BY A T AXPAYER WHO DOES NOT HAVE ANY OTHER SOURCE OF INCOME. IN THE RESULT, THE LOSS ES, DEPRECIATION AND INVESTMENT ALLOWANCE OF EARLIER YEARS IN RESPECT OF THE NEW IN DUSTRIAL UNDERTAKING, SHIP OR APPROVED HOTEL WILL BE TAKEN INTO ACCOUNT IN DETERM INING THE QUANTUM OF DEDUCTION ADMISSIBLE UNDER THE NEW S. 80-I EVEN THO UGH THEY MAY HAVE BEEN SET OFF AGAINST THE PROFITS OF THE TAXPAYER FROM OTHER SOURCES. WE ARE NOT AGREEING WITH THE COUNSEL FOR THE REVENU E. WE ARE, THEREFORE, OF THE VIEW THAT LOSS IN THE YEAR EARLIER TO INITIAL ASSES SMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NOTI ONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN THE S. 80-IA(5). I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. . . . 1207 1207 1207 1207/M/12 /M/12 /M/12 /M/12 9 16. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE OR DER OF THE TRIBUNAL AND ANSWER ALL THE QUESTIONS IN FAVOUR OF THE APPELLANT /ASSESSEE AND AGAINST THE REVENUE IN TAX CASE NOS. 909 AND 940 OF 2009 RESPEC TIVELY. ACCORDINGLY, TAX CASES ARE ALLOWED. 5. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. VS. ACIT (SUPRA), WE DISMISS THE APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT AT THE TIME OF HEARI NG ON MONDAY, THE 27 TH AUGUST, 2012 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 27.08.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.