Vinay Auto Parts Private Limited, CHENNAI V. ITO, CHENNAI

ITA 1339/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7382 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 13-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Competent authority; Set aside; CHAPTER IV
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 10B; 72; 22

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B/SMC, CHENNAI , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.1339/MDS/2016 # $ %&$ / ASSESSMENT YEAR : 2011-12 VINAY AUTO PARTS PVT. LTD., PLOT NO.2F (NP), SIDCO INDUSTRIAL ESTATE, AMBATTUR, CHENNAI 600 098. [PAN: AABCV 9229N] ( '( /APPELLANT) VS. INCOME TAX OFFICER, CORPORATE WARD-III(1) CHENNAI 600 034. ( )*'( /RESPONDENT) '( + , /APPELLANT BY : SHRI M.NARAYANAN, C.A. )*'( + , /RESPONDENT BY : SHRI N.GOPIKRISHNA, JT. CI T - % + . /DATE OF HEARING : 22.02.2017 /& + . /DATE OF PRONOUNCEMENT : 29.03.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI ( CIT(A) FOR SHORT) DATED 29.02.2016, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 24.03.2014 FOR ASSESSMENT YEAR (AY) 2011-12. 2 ITA NO.1339/MDS/2016 (AY 2011-12) VINAY AUTO PARTS PVT. LTD. V. ITO 2. THE ISSUE ARISING IN THE INSTANT APPEAL IS THE MAINTAINABILITY OF DEDUCTION U/S. 10B OF THE ACT CLAIMED BY THE ASSESSEE. BEFORE ME, THE ASSESSEE PLEADED ITS CASE AS SINCE COVERED BY THE DECISION BY THE APEX C OURT IN CIT & ANR.V. YOKOGAWA INDIA LTD. (IN CIVIL APPEAL NO. 8498 OF 2013 DATED 16.12.2016) , PLACING A COPY THEREOF ON RECORD. IT STANDS CLARIFI ED, THE LD. AR WOULD CONTEND, THAT THE PROFIT OF THE UNDERTAKING SHALL BE SUBJECT TO DEDUCTION U/S. 10B WITHOUT FIRST ADJUSTING THE CARRIED FORWARD LOSS FROM THE E LIGIBLE UNDERTAKING, WHICH SHALL THUS BE CARRY FORWARD FOR SET OFF IN THE SUBSEQUENT YEARS. 3. THE PARTIES WERE HEARD, AND THE MATERIAL ON RECO RD PERUSED. THE RELEVANT PART OF THE JUDGMENT IN YOKOGAWA INDIA LTD . (SUPRA) IS EXTRACTED AS UNDER: IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE FIRS T PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) 22 UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NA TURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDI ATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STA GE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOUL D BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THERE FORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN U NDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSE E FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSI ON TOTAL INCOME OF THE ASSESSEE IN SECTION 10A HAS ALREADY BEEN DEALT WIT H EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECT ION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPR ESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF TH E UNDERTAKING. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THI S ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEA LS SHALL STAND DISPOSED OF ACCORDINGLY . 3 ITA NO.1339/MDS/2016 (AY 2011-12) VINAY AUTO PARTS PVT. LTD. V. ITO IT IS ACCORDINGLY MADE ABUNDANTLY CLEAR BY THE APE X COURT THEREIN THAT THE ALLOWANCE OF DEDUCTION U/S. 10B SHALL BE WHILE COMP UTING THE GROSS TOTAL INCOME UNDER CHAPTER-IV, AND NOT AT THE STAGE OF CO MPUTING THE TOTAL INCOME UNDER CHAPTER-VI OF THE ACT. THE ADJUSTMENT OF THE BROUGHT FORWARD LOSS OF THE ASSESSEES ELIGIBLE UNDERTAKING, IF ANY, SHALL ACCO RDINGLY BE SUBSEQUENT TO THE GRANT OF DEDUCTION U/S. 10A/10B ON ITS PROFIT FOR THE CURRENT YEAR. THE MATTER ACCORDINGLY CAN BE SAID TO HAVE ATTAINED FINALITY. COMING TO THE FACTS OF THE CASE, THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS CLAIMED DEDUCTION U/S. 10A IN PREFERENCE TO S. 10B AS THE SAME WAS CLAIMED TO BEAR A DIRECT NEXUS WITH THE ASSESSEES BUSINESS, W HILE S. 10B WAS GENERIC. THE SAME WAS DENIED BY THE ASSESSING OFFICER (AO) IN VI EW OF S. 10A(7B), DISENTITLING THE ASSESSEE FOR DEDUCTION THERE-UNDER ON FACTS. IN APPEAL, THE ASSESSEE CONTENDED ENTITLEMENT TO DEDUCTION 10B, WH ICH WAS, AS BY THE AO, DENIED IN VIEW OF BROUGHT FORWARD LOSS (FOR AY 2008 -09), WHICH IS FROM THE SAME UNDERTAKING. THIS OBJECTION SURVIVES NO LONGER IN VIEW OF THE DECISION IN YOKOGAWA INDIA LTD . (SUPRA). HOWEVER, NO FINDING AS TO THE ASSESSEES UNDERTAKING SATISFYING THE CONDITIONS OF S. 10B IS OBSERVED IN THE ORDERS BY THE REVENUE AUTHORITIES. ON THE CONTRARY, THE ASSESSME NT ORDER SPEAKS AS UNDER: THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 30,03,618 /- U/S. 10B IN ITR-6 WITHOUT SETTING OFF THE BROUGHT FORWARD LOSSES OF R S. 52,15,409/- PERTAINING TO A.Y. 2008-09. IN THE STATEMENT OF TOTAL INCOME FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS RIGHTLY SET-OFF THE BROU GHT FORWARD LOSSES AND THERE ARE NO BUSINESS PROFITS REMAINING AFTER SUCH SET OFF TO AVAIL DEDUCTION U/S. 10B. THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTI ON ONLY ON THE TOTAL INCOME COMPUTED. IF THE TOTAL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES IS NIL, THEN NO DEDUCTION U/S. 10B CAN BE ALLOWED. EVEN IF THE ASSESSEE HAS ANY ELIGIBLE TOTAL INCOME AFTER SET OFF OF SUCH LOS SES, THE ELIGIBILITY OF THE ASSESSEE FOR SUCH CLAIM OF DEDUCTION U/S. 10B HAS T O BE EXAMINED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 10B . (EMPHASIS, OURS) THE DEDUCTION U/S. 10B IS SUBJECT TO THE FULFILLME NT OF THE CONDITIONS SET OUT IN DIFFERENT SUB-SECTIONS THEREOF, SOME OF WHICH AR E TO BE MET ON A YEAR TO YEAR BASIS, WHILE THE MANNER OF ITS QUANTIFICATION IS P ROVIDED IN S.10B(1) R/W S. 4 ITA NO.1339/MDS/2016 (AY 2011-12) VINAY AUTO PARTS PVT. LTD. V. ITO 10B(4). THE FILING OF THE APPROVAL OF THE COMPETENT AUTHORITY, NOTED BY THE AO, WOULD BE TOWARD EVIDENCING THE ASSESSEES CASE U/S. 10B(1) ONLY. THE MATTER IS ACCORDINGLY SET ASIDE TO THE FILE OF THE AO TO ALLO W THE ASSESSEE AN OPPORTUNITY TO PRESENT ITS CASE WITH REGARD TO THE SATISFACTIO N OF THE CONDITIONS OF S. 10B. THE AO SHALL DECIDE ON MERITS IN ACCORDANCE WITH LA W, ISSUING DEFINITE FINDINGS OF FACT. BEFORE PARTING WITH THIS ORDER, I CANT HE LP NOTE THAT IF ONLY THE REVENUE AUTHORITIES HAD TAKEN CAUTION TO EXAMINE THE ELIGIB ILITY OF THE ASSESSEES UNDERTAKING U/S. 10B, WHERE-UPON ONLY THE QUESTION OF QUANTIFICATION OF PROFITS FOR DEDUCTION WOULD ARISE, THIS SET ASIDE COULD HAV E BEEN AVOIDED. IT MAY WELL BE THAT THE ASSESSEE SATISFIES ALL THE CONDITIONS OF S . 10B, SOME OF WHICH ARE, AS AFORE-STATED, FOR COMPLIANCE ON A YEAR TO YEAR BASI S. THE SAME, HOWEVER, CANNOT BE A MATTER OF PRESUMPTION, AND WOULD REQUIRE A POS ITIVE SATISFACTION BY THE ASSESSING AUTHORITY. I DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISPOSED OF ON THE AFORESAID TERMS. ORDER PRONOUNCED ON MARCH 29, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) ! /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED, MARCH 29, 2017. EDN 1 + )#.23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 3%67 )#.# /DR 6. 78$ 9 /GF