DCIT, Circle-3(1), Hyd, Hyderabad V. Rain Calcining Ltd., Hyd, Hyderabad

ITA 1237/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3094 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: NIKHIL KANODIA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 10B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1237/HYD/2015 ASSESSMENT YEAR 2007-2008 DCIT, CIRCLE - 3(1) HYDERABAD. VS. M/S. RAIN CALCINING LTD., (PRESENTLY KNOWN AS RAIN INDUSTRIES LTD.,) HYDERABAD-073. PAN AABCP2276K (APPELLANT) (RESPONDENT) FOR REVENUE : MR. B. KURMI NAIDU FOR ASSESSEE : MR. NIKHIL KANODIA DATE OF HEARING : 04.12.2015 DATE OF PRONOUNCEMENT : 19 .02.2016 ORDER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y. 2007-08. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORD ER OF THE LD. CIT(A) IN ALLOWING DEDUCTION UNDER SECTION 10B OF THE I.T. ACT ON THE PROFIT BEFORE SET OFF OF BROUGH T FORWARD LOSSES/UNABSORBED DEPRECIATION. 2. AT THE OUTSET, IT IS NOTICED THAT THE REVENUE APPEAL IS BARRED BY LIMITATION BY A PERIOD OF 04 DA YS. THE REVENUE HAS FILED AN APPLICATION SEEKING CONDONATIO N OF DELAY OF 04 DAYS AND IT IS STATED IN THE ACCOMPANYI NG AFFIDAVIT THAT THE CONCERNED A.O. WAS SICK DUE TO H IGH FEVER AND WAS ON CASUAL LEAVE FROM 19.10.2015 ONWAR DS 2 ITA.NO.1237/HYD/2015 M/S. RAIN CALCINING LTD., HYDERABAD. AFTER RECEIPT OF THE COPY OF THE ORDER OF THE CIT O N 16.10.2015 AND THEREFORE, THE APPEAL COULD NOT BE F ILED WITHIN TIME. 2.1. HAVING REGARD TO THE ABOVE CONTENTIONS OF THE REVENUE, WE ARE SATISFIED THAT THE DELAY IN FILING OF THE APPEAL BY THE REVENUE IS REASONABLE AND ACCORDINGLY , WE CONDONE THE DELAY IN FILING OF THE APPEAL AND PROCE ED TO DISPOSE OF THE APPEAL ON MERITS. 3. AS REGARDS THE ISSUE IN THE APPEAL IS CONCERNED, WE FIND THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CALCINE PETROLEUM COKE AND GENERATION OF POWER, FILED ITS R ETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 29.12 .2009 COMPUTING TOTAL LOSS OF RS.22,77,66,760 AFTER ALLOW ING EXEMPTION OF RS.80,44,50,801 UNDER SECTION 10B OF T HE ACT. THE ASSESSMENT WAS REOPENED UNDER SECTION 147 BY ISSUANCE OF A NOTICE UNDER SECTION 148 OF THE ACT O N THE GROUND THAT THE ASSESSEE WAS HAVING DEPRECIATION LO SS TO THE TUNE OF RS.72,24,39,329 BROUGHT FORWARD FROM PREVIOUS ASSESSMENT YEARS AND AS PER THE PROVISIONS OF THE ACT, THE LOSSES HAVE TO BE SET OFF AGAINST THE PROFITS AND THEREAFTER, IF ANY PROFIT IS AVAILABLE, THE EXE MPTION UNDER SECTION 10B IS TO BE CLAIMED. THEREFORE, THE ASSESSMENT WAS REOPENED AND THE EXEMPTION UNDER SECTION 10B OF THE ACT WAS DISALLOWED AND BROUGHT T O TAX. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE SAME BY FOLLOWING TH E 3 ITA.NO.1237/HYD/2015 M/S. RAIN CALCINING LTD., HYDERABAD. DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD., AND ORS. REPORTED I N (2012) 341 ITR 385 WHEREIN IT WAS HELD THAT THE REL IEF UNDER SECTION 10A IS IN THE NATURE OF EXEMPTION ALT HOUGH TERMED AS DEDUCTION AND THEREFORE, SUCH INCOME FROM 10A UNIT IS NEITHER CHARGEABLE TO INCOME TAX NOR INCLUD ABLE IN THE TOTAL INCOME AND FOR THIS REASON, THE DEDUCTION UNDER SECTION 10A IS TO BE ALLOWED BEFORE ADJUSTING THE B ROUGHT FORWARD BUSINESS LOSSES OR UNABSORBED DEPRECIATION OF NON STP UNIT. 5. AGGRIEVED BY THE RELIEF GIVEN BY THE LD. CIT(A) , THE REVENUE IS IN APPEAL BEFORE US. THE LD. D.R. SUPPORTED THE ORDERS OF THE A.O. WHILE THE LD. COUN SEL FOR THE ASSESSEE, SUPPORTED THE ORDER OF THE LD. CIT(A) AS WELL AS THE HONBLE KARNTAKA HIGH COURT AND HAS ALSO FIL ED COPY OF THE DECISION OF B BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS. 2004-05 TO 2006-0 7 WHEREIN FOLLOWING THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT (CITED SUPRA) FOR THE EARLIER ASSESSMENT YEAR ALSO, THE TRIBUNAL HAS ALLOWED THE RELIEF TO THE AS SESSEE. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ONLY DISPUTE I S WHETHER THE CLAIM OF DEDUCTION/EXEMPTION UNDER SECT ION 10A IS TO BE ALLOWED PRIOR TO OR AFTER THE SET OFF OF BROUGHT FORWARD LOSSES/DEPRECIATION OF NON STP UNITS. WE FI ND THAT THE TRIBUNAL, FOR THE EARLIER ASSESSMENT YEAR, BY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIG H 4 ITA.NO.1237/HYD/2015 M/S. RAIN CALCINING LTD., HYDERABAD. COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD. & ORS. (CITED SUPRA), HAS HELD AS UNDER : 26. SINCE THE CIT(A) HAS FAILED TO CONSIDER THIS GROUND OF APPEAL, THE NORMAL COURSE OF ACTION WOULD BE TO REMIT THE MATTER TO THE FILE OF CIT(A). BUT S INCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISIONS OF THE HONBLE DELHI AND KARNATAKA HIGH COURTS IN THE CASES CITED WHEREIN IT HAS BEEN HELD THAT PROFITS AND GAINS ELIGIBLE FOR DEDUCTION U/S. 10B WERE NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL AND THEREFORE, DEDUCTION U/S.10B SHALL BE ALLOWED BEFORE SET-OFF OF BROUGHT FORWARD DEPRECIATION AND BUSINESS LOSS, NO USEFUL PURPOSE WOULD BE SERVED BY SUCH REMAND. THE HON'BLE KARRIATAKA HIGH COURT IN THE CASE OF YOKOGAWA (CITE D SUPRA) HAS HELD AS UNDER : 'HELD, THAT AS THE PROFITS AND GAINS U/S.10A WERE NOT TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETTING OFF THE LOSS OF THE ASSESSEE FROM ANY BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY, AS PER SECTION 72(2); UNABSORBED BUSINESS LOSS IS TO BE FIRST SET OFF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRENT YEAR'S DEPRECIATION U/S. 32(2) IS TO BE SET OFF. AS THE DEDUCTION U/S. 10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE, THE QUESTION OF UNABSORBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. 6.1. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT (CITED SUPRA), WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE C IT(A). 5 ITA.NO.1237/HYD/2015 M/S. RAIN CALCINING LTD., HYDERABAD. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 19 TH FEBRUARY, 2016 VBP/- COPY TO : 1. THE DCIT, CIRCLE - 3(1), 7 TH FLOOR, B BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2. M/S. RAIN CALCINING LTD., (PRESENTLY KNOWN AS RAIN INDUSTRIES LTD., ) RAIN CENTRE, NO.34, SRINAGAR COL ONY, HYDERABAD 500 073. 3. CIT(A) - 3, HYDERABAD. 4 . PR. CIT - 3, HYDERABAD. 5 . D.R. ITAT B BENCH, HYDERABAD. 6 . GUARD FILE