Deputy Commissioner of Income-tax, V. Air Control India Pvt. Ltd., Pune

ITA 1331/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7542 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Earning of tax free income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 1331/PUN/2015 / ASSESSMENT YEAR : 2011-12 DCIT, CIRCLE - 1(1), PUNE . /APPELLANT V/S AIR CONTROL INDIA PRIVATE LIMITED, ADAMS COURT, IST FLOOR, BANER, PUNE 411 037 PAN : AAECA7427J . /RESPONDENT ASSESSEE BY : SHRI B.B. MANE REVENUE BY : SHRI AJAY MODI / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A)-1, PUNE DATED 28-07-2015 FOR THE ASSESSMENT YEAR 2011-12. 2. REVENUE RAISED THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) ERRED IN DECIDING THAT SELECTION OF INITIAL ASSESSMENT YEAR FOR COMPUTING EXEMPTION U/S.80IA IS AT THE OPT ION OF THE ASSESSEE AND NOT THE YEAR IN WHICH YEAR BUSINESS ACTIVITY OF ELI GIBLE UNDERTAKING/UNIT STARTS? 2. THE LD.CIT(A) ERRED IN DECIDING THAT IF BROUGHT FORWARD LOSS OF ELIGIBLE UNIT U/S.80IA, IS ALREADY SET OFF WITH NON ELIGIBLE BUSINESS UNDERTAKING THAN THERE IS NO NEED OF NOTIONALLY BROUGHT FORWARD SUCH LOSS AND SET OFF WITH INCOME OF ELIGIBLE UNIT/UNDERTAKING, BEFORE ARRIVIN G QUANTUM OF EXEMPT INCOME OF SUCH ELIGIBLE UNIT U/S.80IA, AS MANDATED U/S.80IA (5) OF THE ACT. / DATE OF HEARING : 06.09.2017 / DATE OF PRONOUNCEMENT: 06.09.2017 2 ITA NO.1331/PUN/2015 AIR CONTROL INDIA PRIVATE LIMITED 3. BRIEFLY RELEVANT FACTS ARE THAT THE ASSESSEE IS A DOMESTIC COMPANY IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED AND EN GAGED IN THE BUSINESS OF SHIP AIR CONDITIONING (PART OF SHIP BUILDING INDUST RY). ASSESSEE FILED ITS RETURN OF INCOME ELECTRONICALLY ON 12-09-2011 DECLARING TO TAL INCOME AT RS.22,05,574/- AFTER CLAIMING DEDUCTION UNDER CHAPT ER VIA AT RS.1,24,09,521/- AND BOOK PROFIT AT RS.1,40,61,262/ -. AO DENIED THE BENEFIT OF DEDUCTION VIDE HIS ORDER DATED 28-02-2014. HOWE VER, THE CIT(A) RELYING ON THE BINDING JURISDICTIONAL TRIBUNALS ORDER IN THE CASE OF SERUM INTERNATIONAL LTD. VS. ACIT VIDE ITA NOS. 290 TO 292/PN/2010 ORDE R DATED 28-09-2011 GRANTED RELIEF TO THE ASSESSEE. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4. LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE RELIED ON THE ORDER OF THE AO DUTIFULLY. 5. PER CONTRA, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE CIT(A) HAS RIGHTLY GRANTED RELIEF TO THE ASSESSEE AND THEREFOR E REQUESTED TO CONFIRM THE ORDER OF CIT(A). 6. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS O F THE REVENUE. WE FIND THE CIT(A) AS PER THE DISCUSSION GIVEN IN PARA NO.5 AND 6 ALLOWED THE CLAIM OF THE ASSESSEE U/S.80IA. WE PROCEED TO EXTR ACT THE OPERATIONAL PARAS AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AS WELL AS REPLY OF THE APPELLANT. IT IS SEEN THAT THE ISSUE IS COVERE D IN FAVOUR OF THE APPELLANT BY DECISION OF HON. PUNE TRIBUNAL IN ITA NOS. 290 TO 2 92/PN/2010 IN THE CASE OF SERUM INTERNATIONAL LTD. DATED 28-09-2011. THE REL EVANT PORTION OF THE ORDER IS REPRODUCED AS UNDER : 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS, WE FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WHAT WOULD BE TH E INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA(5) OF THE ACT HAS BEEN DEC IDED IN FAVOUR OF THE ASSESSEE BY THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF POONAWALLA STUD AND AGRO FARM PVT. LTD. VS. ACIT (S UPRA). IN THAT 3 ITA NO.1331/PUN/2015 AIR CONTROL INDIA PRIVATE LIMITED CASE AFTER DISCUSSING THE ISSUE IN DETAIL, THE TRIB UNAL HAS COME TO THE CONCLUSION THAT THE INITIAL 'A.Y' FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF 80IA (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A) HAS ERRED IN HOLDING THAT THE INITIAL A.Y FOR THE PURPOS ES OF SECTION 80IA(2) R.W.S. 80IA (5) WAS THE YEAR IN WHICH THE A SSESSEE STARTED GENERATING ELECTRICITY FROM THE WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDING THE ELIGIBIL ITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINISHED BY UNABSORBE D LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME, IS FULLY COVERED BY THE DECISION OF HON'BLE MADRAS HIG H COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT ( SUPRA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80IA, PROFIT S ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTION, O NLY THE LOSSES OF THE YEARS BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THE HON'BLE MAD RAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNO T NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER INCOME OF ASSESSEE AND SET OFF AG AINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED BY SUB-SECTION (5) OF SECTION 80IA DOES NOT CONTEMPLATE SUCH NOTIONAL SET OFF, HELD THE HON'BLE HIGH COURT. THE HON'BLE MADRAS HIGH COURT I N THAT DECISION HAS ALSO REFERRED THE DECISION OF HON'BLE SUPREME C OURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) AND THE DECISION OF S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE (P ) LTD. (SUPRA). THERE IS NO DISPUTE THAT EVEN A DECISION OF NON-JUR ISDICTIONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. IN THIS REGARD, WE FIND STRENGTH FROM THE RECENT DECISION OF HON'BLE JURISD ICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL E XCISE VS. VALSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) WHEREI N THE HON'BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD IN A CAS E OF EXCISE MATTER THAT TRIBUNAL IS BOUND BY THE DECISION OF HI GH COURT , EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DE CISION OF ANY OTHER HIGH COURT. THE HON'BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLL OW THE JUDGMENT OF THE MADRAS HIGH COURT. AN AUTHORITY LIKE AN INCOME TAX TRIBUNAL ACTING ANYWHERE IN THE COUNTRY HAS TO RESPECT THE L AW LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VAKS ON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LT D VS. ACIT (SUPRA). WE THUS RESPECTFULLY FOLLOWING THE DECISIO N TAKEN BY THE HON'BLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTI CAL ISSUE UNDER ALMOST SIMILAR FACTS, HOLD THAT WHEN THE ASSESSEE E XERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YE AR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE OTHER INCOME OF THE ASS ESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME OF TH E ASSESSEE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIG IBLE BUSINESS. WE THUS SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRING ING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS 4 ITA NO.1331/PUN/2015 AIR CONTROL INDIA PRIVATE LIMITED ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE AS SESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.LTD. VS. ITO (SUPRA) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE DECISION O F THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY THE LD. AR FAIRLY AGREED THAT THE ISSUE RA ISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BEN CH IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. THE LD. AR THEREIN THUS CONTENDE D THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW O F THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDM INE SHARES & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS THE LEGAL POSITION ON T HE SUBJECT IS YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSE. 6. SINCE, FACTS BEING INDENTICAL AND CONSIDERING TH E BINDING PRECEDENT OF JURISDICTIONAL TRIBUNALS DECISION, THE ASSESSING O FFICER IS DIRECTED TO ALLOW DEDUCTION CLAIMED U/S. 80IA AND DELETE THE ADDITION OF RS.1,24,09,522/-. ACCORDINGLY, THE GROUND IS ALLOWED. 7. FROM THE ABOVE, WE FIND THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE FROM OUR SIDE. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : SEPTEMBER, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - 1 , PUNE 4. CIT - 1 , PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.