M/s South India Corporation Ltd, Cochin V. ACIT, Ernakulam

ITA 127/COCH/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4359 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 11-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2009
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPHSR
• Assessee Lawyers: V JAYARAMAN
• Keywords: Depreciation; Unabsorbed depreciation; Set aside
• Section: 80IA; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.127/COCH/2009 ASSESSMENT YEAR:2005-06 SOUTH INDIA CORPORATION LTD., KOCHI. PA NO.AADCS 3193C VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRICLE- 2(1),RANGE-2, KOCHI. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI V. JAYARAMAN, CA RESPONDENT BY DR. BABU JOSEPH,SR.DR O R D E R PER N.VIJAYAKUMARAN,J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME-TAX PASSED U/S.263, DATED 02-02-2009, RELATING TO THE ASSESSMENT YEAR 2 005-06. 2. THE ASSESSMENT WAS COMPLETED U/S.143(3) ON 28-12 - 2007. HOWEVER, ON PERUSAL OF THE RECORDS, THE LD. COMMISSIONER NOTICED THAT IN COMPUTING THE TOTAL IN COME, THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80IA IN RESP ECT OF WIND MILL AND THE ASSESSING OFFICER HAS ALLOWED THE SAME, WHICH ACCORDING TO THE LD. COMMISSIONER IS NOT IN A CCORDANCE WITH THE PROVISIONS OF SECTION 80IA OF THE ACT. F OR THAT, THE ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 2 LD. COMMISSIONER WAS OF THE VIEW THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE AND HE ASSUMED JURISDICTION U/S.263. 3. IN REPLY TO THE NOTICE U/S. 263, THE ASSESSEE SU BMITTED AS UNDER: YOUR NOTICE TO REVISE THE ASSESSMENT ORDER FOR WITHDRAWING THE DEDUCTION UNDER SECTION80-IA OF THE I.T.ACT 1961 IS WITHOUT JURISDICTION. SECTION 263 OF THE IT ACT CONTEMPLATES THAT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN S O FAR AS IT IS PREJUDICIAL TO THE REVENUE THEN COMMISSIONER OF INCOME-TAX CAN REVIEW THE ORDER OF THE ASSESSING OFFICER. IN THIS CASE, DEDUCTION U/S.80IA WAS CLAIMED ON THE INCOME FROM GENERATION OF ENERGY THROUGH WIND MILLS. YOU HAD MENTIONED THAT UNABSORBED DEPRECIATION BROUGHT FORWARD FROM THE PRECEDING YEARS RELATED TO THE ELIGIBLE BUSINES S HAS TO BE SET OFF BEFORE CALCULATING THE DEDUCTION AS PROVIDED UNDER SUB SECTION 5 OF SECTION 80-IA. THERE ARE NO CARRY FORWARD DEPRECIATION AT ALL RELATING TO ANY OF THE BUSINESS CARRIED ON BY THE ASSESSEE AS THE ENTIRE DEPRECIATION RELATING TO WIN D MILLS HAVE BEEN SET OFF AGAINST THE BUSINESS AND OT HER PROFITS. FACTUALLY THEREFORE, NOTHING IS AVAILABL E FOR SET OFF. THEREFORE, THE COMPUTATION MADE FOR DEDUCTION UNDER SECTION 80IA HAS BEEN DONE PROPERLY . ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 3 WE ALSO WISH TO POINT OUT THAT SEC.80IA OVERRIDES THE OTHER PROVISIONS OF CHAPTER VIA OF THE IT ACT AND I N VIEW OF THE DEPRECIATION RELATING TO WIND MILLS HAV ING BEEN SET OFF AGAINST OTHER BUSINESS PROFITS IN EARL IER ASSESSMENTS, THE DEDUCTION UNDER SECTION 80IA HAS T O BE ALLOWED ON THE AMOUNT OF INCOME DERIVED FROM WIN D MILLS DURING THE FINANCIAL YEAR 20044-05. THE DECI SION OF THE SUPREME COURT OF INDIA IN 291 ITR 380 [CIT VS. SHIRKEY CONSTRUCTION EQUIPMENT LTD.] SQUARELY APPLIES TO THIS CASE WHEREIN IT IS CLEARLY HELD THA T SECTION 80AB MAKES IT CLEAR THAT THE COMPUTATION HA S TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THEREFORE, HAVING SET OFF THE DEPRECIATION OF WIND MILLS AGAINST BUSINESS PROFITS OF EARLIER YEARS AS PER TH E PROVISIONS OF INCOME-TAX ACT, NOTHING IS AVAILABLE FOR SET OFF AND THE INCOME OF WIND MILL FOR THE ASSESSM ENT YEAR 2005-06 FOR WHICH DEDUCTION IS CLAIMED IS TO B E CONSTRUED AS CORRECTLY ALLOWED AS PER SECTION 80IA OF THE IT ACT 1961. WITHOUT PREJUDICE TO THE ABOVE, WE WISH TO POINT OUT THAT SECTION 263 CAN BE RESORTED TO ONLY OF THE RE IS ANY ERROR IN THE ORDER PASSED BY THE ASSESSING OFFICER. WHERE TWO LEGAL VIEWS ARE POSSIBLE ON INTERPRETATION OF SECTION, THEN JURISDICTION UNDER SECTION 263 FAILS [294 ITR 121 - CIT VS. MEPCO INDUSTRIES LTD.(MAD).] THE ORDER PASSED BY THE ASSESSING AUTHORITY IS NOT AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE A ND THEREFORE, THE JURISDICTION UNDER SECTION 263 FAILS FOR REVISING THE ORDER. FACTUALLY AND LEGALLY, THE DEDUCTION ALLOWED UNDER SECTION 80IA HAS BEEN DONE ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 4 PROPERLY AS THERE WAS NO CARRY FORWARD DEPRECIATION FOR SET OFF. 4. HOWEVER, THIS EXPLANATION BY THE ASSESSEE WAS NO T FOUND SATISFIED TO THE LD. COMMISSIONER OF INCOME-T AX. THEREFORE, HE SET ASIDE THE ORDER OF THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 263 AND HOLDING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IA. THEREFORE, THAT PART OF THE ASSESSMENT ORDER, WHICH ALLOWED 80IA DEDUCTION WAS SET ASIDE. AGAINST THIS ORDER, T HE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NTS. THE LD. COUNSEL WOULD SUBMIT THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX IN ASSUMING JURISDICTION U/S.263 IS NOT AT ALL JUSTIFIED, AS THE VIEW TAKEN BY THE A SSESSING OFFICER HAS ALREADY BEEN UPHELD BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. M/S. MOHAN BREWRIES AND DISTILLERIES LTD. VIDE THEIR ORDER DATED 11 TH MARCH,2010 SINCE THEN REPORTED AS (2010) 231 CTR 368(MAD). RELYING ON THE ABOVE DECISION THE LD. COUNSEL FOR THE ASSESSEE WOULD SUBMIT THAT THE ASSESSMENT HAS A LREADY BEEN SUBJECTED TO THE SCRUTINY BY THE JURISDICTIONA L HIGH ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 5 COURT IN THE ABOVE CASE AND THE FACTS BEING THE SAM E, SINCE THE ASSESSEE HAD OPTED TO CLAIM THIS DEDUCTION ONLY IN THIS ASSESSMENT YEAR, THE INITIAL ASSESSMENT YEAR CANNOT BE THE YEAR IN WHICH THE UNDERTAKING COMMENCED ITS OPERATI ON AND IN THE PRESENT CASE ALSO THE INITIAL ASSESSMENT YEA R IS THE ASSESSMENT YEAR IN WHICH THE ASSESSEE HAS CHOSEN TO CLAIM DEDUCTION U/S.80IA. HENCE, THE PROVISIONS OF SECT ION 80IA(5) TREATING THE UNDERTAKING AS A SEPARATE CONC ERN CANNOT BE APPLIED TO A YEAR PRIOR TO THE YEAR IN WH ICH THE ASSESSEE OPTED TO CLAIM RELIEF U/S.80IA FOR THE FIR ST TIME. 6. ON THE SAME ANALOGY, DEPRECIATION AND CARRY FORW ARD OF LOSS, RELIEF TO THE UNIT WHICH CLAIMS RELIEF U/S.80 IA CANNOT BE NOTIONALLY CARRIED FORWARD AND SET OFF AGAINST T HE INCOME FROM THE YEAR IN WHICH THE ASSESSEE STARTED CLAIMIN G DEDUCTION U/S.80IA. WHILE RENDERING THE DECISION, THE HONBLE HIGH COURT HELD THAT THE CASE LAWS RELIED O N BY THE DEPARTMENTAL REPRESENTATIVE ARE DELIVERED BEFORE TH E AMENDMENT TO SECTION BY FINANCE ACT, 1999. BEFORE THE AMENDMENT, THE INITIAL ASSESSMENT YEAR WAS DEFINED IN THE ACT BUT AFTER THE AMENDMENT, THERE IS NO DEFINITION FOR THE INITIAL ASSESSMENT YEAR IN THE ACT AND THERE IS OPT ION TO THE ASSESSEE IN SELECTING THE YEAR CLAIMING RELIEF U/S. 80IA. THE ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 6 RATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT WI LL SUPPORT THE FINDINGS OF THE ASSESSING OFFICER, IN T HE PRESENT CASE BEFORE US, IS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. THE LD. COUNSEL THEREFORE SUBMITTED THA T THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE CIT V. MAX INDIA LTD. 295 ITR 282 AND IN THE CASE OF MALABAR INDUSTRIAL CORPORATION 243 ITR 83 AND THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. MEPCO INDUSTRIES LTD. 294 ITR 121 WHEREIN IT HAS BEEN HELD THAT JURISDICTION U/S.263 CAN BE INVOKED BY THE COMMISSIONER ONLY UND ER THE CIRCUMSTANCES WHEN THE ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE L D. COUNSEL FOR THE ASSESSEE THEREFORE, CONTENDED THAT AS FAR A S THE PROVISIONS OF SECTION 80IA IS CONCERNED, THE DECISI ON OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF M/S. VELAYUDHASWAMY SPINNING MILLS (P) LTD. AND M/S. MO HAN BREWRIES AND DISTELLERIES LTD., CITED SUPRA, IS DIR ECTLY APPLICABLE AND IT SUPPORTS THE FINDING OF THE ASSES SING OFFICER. 7. WHEN THE ORDER OF THE ASSESSING OFFICER IS SUPPO RTED BY THE DECISION OF THE HONBLE MADRAS HIGH COURT, THEN THE ORDER CANNOT BE SAID AS ERRONEOUS OR PREJUDICIAL TO THE ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 7 INTEREST OF THE REVENUE. THEREFORE, POWER U/S. 263 CANNOT BE INVOKED BY THE LD. COMMISSIONER, UNDER THE GIVEN SET OF FACTS AND CIRCUMSTANCES AS THE RELIEF GRANTED BY TH E ASSESSING OFFICER IS WITHIN THE PERMISSIBLE PROVISI ONS OF LAW APPLICABLE AT THAT TIME. HENCE, THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX PASSED U/S.263 IS TO BE QUASHED AND WE AGREE WITH THE CONTENTIONS OF THE LD . COUNSEL IN TOTO THAT THE ASSESSING OFFICER HAS GIVE N DEDUCTION ON THIS WIND MILL BY DETERMINING THE TOT AL INCOME AND HE ALLOWED THE DEDUCTION AS CLAIMED BY THE ASSE SSEE U/S.80IA, WHICH IS IN ACCORDANCE WITH THE PROVISION S OF SECTION 80IA PARTICULARLY AFTER THE AMENDMENT WHERE THE OPTION IS GIVEN TO THE ASSESSEE TO CHOOSE THE INITI AL YEAR FOR THE PURPOSE OF AVAILING 80IA DEDUCTION. THEREFORE , THE ERRONEOUS ASSUMPTION OF POWER BY THE LD. COMMISSION ER OF INCOME-TAX IS TO BE QUASHED IN VIEW OF THE ABOVE FA CTS AND CIRCUMSTANCES AND WE REJECT THE ARGUMENT OF THE LD. SR.DR, WHO SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCOME- TAX PASSED U/S.263. HENCE, IN VIEW OF THE DECISIO NS OF THE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. - 295 ITR 282 AND IN THE CASE OF MALABAR INDUSTRIAL CORPORATION 243 ITR 83, WHEN THE ASSESSMENT ORDER IS NOT AT ALL ERRONEOUS, THE TWIN CONDITIONS AS REQUIRED FOR ASSU MING ITA NO. 127/COCH/2009 SOUTH INDIA CORPORATION LTD. 8 POWER U/S.263 IS NOT SATISFIED, WE HAVE NO HESITATI ON IN SETTING ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME- TAX PASSED U/S.263 AND ALLOW THE APPEAL OF THE ASSE SSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 18 TH JUNE,2010. PM. COPY FORWARDED TO: 1. SOUTH INDIA CORPORATION LTD., W/ISLAND, ERNAKULAM,K OCHI-03. 2. THE CIT., CIRICLE-2(1),RANGE-2, KOCHI. 3. CIT, KOCHI. 4. D.R.