DCIT, Madurai V. Shri Venkatachalapathy Spinning Mills P Ltd., Rajapalayam

ITA 1275/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8776 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: N MUTHU S UBRAMANIAN
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1275 /MDS/201 6 / ASSESSMENT YEAR :20 1 0 - 1 1 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. VS. M/S. SHRI VENKATACHALAPATHY SPINNING MILLS P. LTD., P.B. NO. 150, 454, K OTHANKULAM VILLAGE, SRIVILLIPUTHUR ROAD, RAJAPALAYAM 626 117. [PAN:A A DCS9037R ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SHIVA SRINIVAS, J CIT / RESPONDENT BY : SHRI N. MUTHU S UBRAMANIAN, CA / DATE OF HEARING : 1 3 . 0 7 .201 6 / DATE OF P RONOUNCEMENT : 27 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 1 , MADURAI DATED 1 6 .02.2016 RELEVANT TO THE ASSESSMENT YEAR 201 0 - 1 1 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF .47,12,466/ - MADE ON A CCOUNT OF CLAIM UNDER SECTION 80IA OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] ON THE GROUND THAT THE DECISION I.T.A. NO . 1275 /M/ 16 2 OF HON BLE MADRAS HIGH COURT IN THE CASE OF M/S. VELAYUDHASAMY SPINNING MILLS P. LTD. V. A CIT [2010] 231 CTR 368 AS NOT ATTAINED FINALITY SINCE SLP FILED BY THE DEPARTMENT IS PENDING BEFORE THE HON BLE SUPREME COURT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF COTTON YARN AND GENERATING ELECTRICITY THROUGH WIND MILL. THE ASSESSEE HAS FI LED ITS RETURN DECLARING INCOME OF . 54,67,110 / - . THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 11.01.2013 ACCEPTING THE RETURNED INCOME OF .54,67,110/ - . SUBSEQUENTLY, THE LD. CIT HAS FOUND THAT THE ASSESSING OFFICE R ALLOWED THE DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF INCOME FROM WIND MILLS WITHOUT SETTING OFF OF LOSSES RELATING TO EARLIER YEARS AS LAID DOWN UNDER SECTION 80IA(5) OF THE ACT. THE LD. CIT, THEREFORE, AFTER ISSUING SHOW - CAUSE NOTICE DATED 19.02.2015 SET ASIDE THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 30.03.2015 UNDER SECTION 263 OF THE ACT. THUS, THE ASSESSING OFFICER PASSED THE IMPUGNED ORDER FOR THE PURPOSE OF GIVING EFFECT TO THE DIRECTIONS OF THE LD. CIT IN HIS O RDER UNDER SECTION 263 OF THE ACT ON 27.08.2015. 3. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA OF THE ACT MAINLY ON THE GROUND THAT THE DEPARTMENT HAS FILED SLP BEFORE THE HON B LE SUPREME COURT CHALLENGING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE I.T.A. NO . 1275 /M/ 16 3 CASE OF VELAYUDHASWAMY SPINNING MILLS P. LTD. V. ACIT 231 CTR (MAD) 36 8 ): [2012] 340 ITR 477. 4 . AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED T HE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS). THE LD. CIT(APPEALS), BY FOLLOWING THE DECISION IN THE CASE OF VELAYUDHASAMY SPINNING MILLS LTD. V. A CIT (SUPRA), ALLOWED THE CLAIM OF THE ASSESSEE. 5 . AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBU NAL. 6 . THE LD. DR RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 7 . ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 8 . WE HAVE HEARD THE LD. DR , PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT OR NOT. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE JURISDICTIONAL HIG H COURT IN THE CASE OF VELAYUDHASAMY SPINNING MILLS P. LTD. V. ACIT (SUPRA). THE HON BLE HIGH COURT HAS HELD AS UNDER: - 13. SEC.80 - IA READS AS FOLLOWS: [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTA KING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED I.T.A. NO . 1275 /M/ 16 4 TO IN SUB - SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED 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 ASSESSEE, 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 - SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CL AIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELO PS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (III) OF SUB - SECTION (4)] OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSMI SSION 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 TH E FOLLOWING 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 CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HA S ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY ;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF 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 - SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB - SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING 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 YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE . I.T.A. NO . 1275 /M/ 16 5 FROM READING OF SUB - S (1), IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - S(4) I.E. REFERRED TO AS THE ELIGIBL E BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PERCENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN C ONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB - S (4). SUBS - 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 EXER CISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB - S(5) DEALS WITH QUANTUM OF DEDUCTION 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 NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB - S(5) IS DIFFERENT FROM THE WORDS BEGINNING FRO M 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 FO R 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 BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURI NG THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM READING THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND 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 NO LOSSES OF EARLIER YEARS WHICH 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 DOES 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 WE RE SET OFF 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 BRING IT NOTIONALLY. FICTION CREATED IN SUB - SECTION DOES NOT CONTEMPLATE 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. I.T.A. NO . 1275 /M/ 16 6 9 . BEFORE US, THE REVENUE COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE HON BLE J URISDICTIONAL HIGH COURT OR FILED ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT. JUST BECAUSE THE DEPARTMENT HAS FILED THE SLP BEFORE THE HON BLE SUPREME COURT AGAINST THE ORDER OF THE HON BLE MADRAS HIGH COURT, WE CANNOT TAKE A DIFFERENT VIEW. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT T HE LD. CIT(APPEALS) HAS RIGHTLY FOLLOWED THE ABOVE JUDGEMENT AND WE FI ND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS). ACCORDINGLY, T HE APPEAL FILED BY THE REVENUE IS DISMISSED. 10 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 27 TH JU LY , 2016 AT CHENNAI. SD/ - SD/ - (A . MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 27 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.