Subhash Babulal Mutha, V. Deputy Commissioner of Income-tax,

ITA 1402/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0494 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANERJI
• Keywords: Depreciation; Unabsorbed depreciation
• 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; 92; 43D; 80IA; 201; 80HH

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 1 402 /PN/201 6 / ASSESS MENT YEAR : 20 0 8 - 09 SHRI SUBHASH BABULAL MUTHA, 123, NANA PETH, PUNE - 411002 . / APPELLANT PAN: A ESPM7019K VS. THE DY. COMMISSIONER OF INCOME TAX , CIRCLE - 2 , PUNE . / RESPONDENT / APPELLANT BY : S MT. DEEPA KHARE / RESPONDENT BY : SMT. SUMITRA BANERJI / DATE OF HEARING : 1 9 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 11 . 1 1 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY T HE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 4 , PUNE , DATED 2 9 . 0 4 .20 1 6 RELATING TO ASSESSMENT YEAR 20 0 8 - 09 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL : - 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF DEDUCTION U/S 80(IA) ON WINDMILL BUSINESS LOCATED AT SATARA OF RS.35,86,668/ - . ITA NO. 1 402 /PN/20 1 6 SHRI SUBHASH B. MUTHA 2 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSU E RAISED IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 80 IA OF THE ACT, WHEREIN AFTER ADJUSTMENT OF UNABSORBED DEPRECIATION ON WINDMILL AT TIRUNELVELLI AGAINST THE PROFITS OF ANOTHER WINDMILL AT SATARA, THE RESULTANT WAS LOSS, THEN NO DEDUCTION UNDER SECTION 80IA OF THE ACT IS ALLOWABLE. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. AO (IT) AND ANR. (2008) 299 ITR 444 (SC) AND THE HONBLE BOMBAY HIGH COURT IN PLASTIBLENDS INDIA LTD. VS. ADDL. CIT & ANR. (2009) 318 ITR 352 (BOM) BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND POINTED OUT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACING RELIANCE ON THE ORDER OF ASSESSING OFFICER ALSO PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. AO (IT) AND ANR. (SUPRA). 5. ON PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES , THE ISSUE AR ISING IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY FROM WINDMILL. THE ASSESSEE WAS OWNER OF TWO WINDMILLS; ONE LOCATED AT TIRUNELVELLI, TAMIL NADU AND ANOTHER AT SATARA, MAHARASHTRA. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN PROFIT S FROM THE WINDMILL AT SATARA. HOWEVER , THE PROFIT FROM WINDMILL AT TIRUNELVELLI AFTER ADJUSTMENT WITH BROUGHT FORWARD BUSINESS LOSSES WERE NIL. T HE ASSESSEE CLAIMED THAT IT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4)(IV) OF THE ACT ON THE PROFITS OF WINDMILL AT SATARA. THE ASSESSING OFFICER ON THE OTHER HAND, NOTED THAT THERE WERE CARRIED FORWARD UNABSORBED DEPRECIATION LOSSES FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 . ONCE THESE ITA NO. 1 402 /PN/20 1 6 SHRI SUBHASH B. MUTHA 3 LOSSES ARE ADJUSTED, THEN THERE IS NO POSITIVE INCOME AVAILABLE TO THE ASSESSEE FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSING OFFICER IN THIS REGARD OBSERVED THAT THOUGH THE ASSESSEE WAS HAVING TWO WINDMILLS WHICH WERE LOCATED AT DIFFERENT PLACES BUT FOR ALL PRACTICAL PURPOSES, THE BUSINESS WAS THAT OF GENERATION OF ELECTRICITY AND OPERATION OF MORE THAN ONE UNIT DOES NOT MAKE THE BUSINESS SEPARATE AND FOR ARRIVING AT PROFIT OR LOSS OF BUSINESS A S A WHOLE, THE ENTIRE BUSINESS HAD TO BE CONSIDERED. THE ASSESSING OFFICER THUS, DENIED THE DEDUCTION CLAIMED UNDER SECTION 80IA OF THE ACT. 6. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER OBSERVING THAT THE PROVISIONS OF SECTION 80IA OF THE ACT HAD TO BE READ WITH THE PROVISIONS OF SECTION 80A AND 80AB OF THE ACT , WHERE SECTION 80AB OF THE STARTS WITH NON - OBSTACLE CL AUSE. FURTHER, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN PLASTIBLENDS INDIA LTD. VS. ADDL. CIT & A NR. (SUPRA) AND THE HONBLE SUPREME COURT IN CIT VS. IPCA LABORATORIES REPORTED IN 266 ITR 521 (SC). 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) AND THE ONLY ISSUE RAISED IS AGAINST THE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80IA O F THE ACT ON WINDMILL BUSINESS LOCATED AT SATARA AT RS. 35,86,668/ - . 8. ADMITTEDLY, THE ASSESSEE WAS CARRYING ON THE BUSINESS OF GENERATION OF ELECTRICITY BY INSTALLING TWO WINDMILLS AT TWO SEPARATE PLACES. IN RESPECT OF WINDMILL AT SATARA, THE ASSESSEE H AD EARNED PROFITS . I N RESPECT OF WINDMILL AT TIRUNELVELLI , THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD EARNED PROFITS WHICH WERE ADJUSTED AGAINST BROUGHT FORWARD BUSINESS LOSSES. HOWEVER, THE ASSESSEE ALSO HAD UNABSORBED DEPRECIATION LOSSES IN RESP ECT OF WINDMILL AT TIRUNELVELLI, WHICH WAS IN THE COMPUTATION OF INCOME NOT ADJUSTED AGAINST THE PROFITS FROM SATARA WINDMILL AND THE DEDUCTION UNDER SECTION 80IA(4)(IV) OF THE ITA NO. 1 402 /PN/20 1 6 SHRI SUBHASH B. MUTHA 4 ACT WAS CLAIMED ON THE POSITIVE INCOME OF WINDMILL AT SATARA. WHEN THE ASSESSE E IS CARRYING ON ONE BUSINESS AT DIFFERENT PLACES, THEN THE ACTIVITY HAD TO BE CONSIDERED AS A WHOLE AND THE PROFITS AND LOSSES, IF ANY, OF DIFFERENT UNITS OPERATED BY THE ASSESSEE HAVE TO BE MERGED UNDER THE HEAD INCOME FROM BUSINESS AND THE NET BUSINES S INCOME HAS TO BE COMPUTED IN THE HANDS OF ASSESSEE. THE SAID IS THE PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT IN SYNCO INDUSTRIES LTD. VS. AO (IT) AND ANR. (SUPRA), WHEREIN THE ASSESSEE WAS HAVING TWO INDUSTRIAL UNITS; ONE IN OIL AND THE OTHER IN CHEMICALS. THE ASSESSEE HAD SHOWN PROFITS IN CHEMICALS UNIT AND HAD INCURRED LOSSES IN OIL UNIT. THE HONBLE SUPREME COURT HELD THAT THE LOSSES FROM OIL DIVISION WAS TO BE ADJUSTED AGAINST THE PROFITS FROM CHEMICAL DIVISION FOR DETERMINING THE GROSS T OTAL INCOME AND IN CASE GROSS TOTAL INCOME IS NIL AFTER SUCH ADJUSTMENT, THE ASSESSEE WOULD NOT BE ENTITLED TO CLAIM THE DEDUCTION UNDER CHAPTER VI - A, WHICH INCLUDED SECTIONS 80HH AND 80I OF THE ACT. THE HONBLE SUPREME COURT FURTHER HELD THAT BROUGHT FOR WARD UNABSORBED LOSSES AND UNABSORBED DEPRECIATION HAD TO BE ADJUSTED WHILE COMPUTING THE GROSS TOTAL INCOME. 9. THE THE HONBLE BOMBAY HIGH COURT IN PLASTIBLENDS INDIA LTD. VS. ADDL. CIT & ANR. (SUPRA) WHILE CONSIDERING THE CLAIM OF ASSESSEE VIS - - VIS DE DUCTION UNDER SECTION 80IA OF THE ACT OBSERVED THAT THE DEDUCTION FOR UNCLAIMED DEPRECIATION IS TO BE CONSIDERED FOR DETERMINING THE PROFITS OF BUSINESS. THE FULL BENCH OF HONBLE BOMBAY HIGH COURT FURTHER HELD THAT THE GROSS TOTAL INCOME HAD TO BE COMPUT ED BY DEDUCTING DEDUCTIONS ALLOWABLE UNDER SECTIONS 30 TO 43D OF THE ACT, INCLUDING DEPRECIATION ALLOWABLE UNDER SECTION 32 OF THE ACT, EVEN THOUGH THE ASSESSEE HAD COMPUTED THE TOTAL INCOME BY DIS CLAIMING CURRENT DEPRECIATION. THE FINDINGS OF HONBLE BOM BAY HIGH COURT IN THIS REGARD WERE THAT WHETHER THE ASSESSEE HAD CLAIMED CURRENT DEPRECIATION OR NOT HAD NO BEARING IN DETERMINING THE QUANTUM OF DEDUCTION ALLOWABLE UNDER SECTION 80IA ITA NO. 1 402 /PN/20 1 6 SHRI SUBHASH B. MUTHA 5 OF THE ACT AND ONCE SUCH PROFITS ARE DETERMINED, THEN DEDUCTION UNDER S ECTION 80IA OF THE ACT HAD TO BE COMPUTED ON SUCH PROFITS. APPLYING THE ABOVE SAID PROPOSITION TO THE FACTS OF THE PRESENT CASE AND AS ADMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE PROFITS FROM SATARA WINDMILL ARE TO BE ADJUSTED AGAINST UNABSORBED DEPRECIATION LOSSES OF WINDMILL AT TIRUNVELLI AND SINCE AFTER SUCH ADJUSTMENT, THE ASSESSEE HAD EARNED NIL GROSS TOTAL INCOME, THEN IN VIEW OF PROVISIONS OF SECTION 80A AND 80AB OF THE ACT, NO DEDUCTION UNDER SECTION 80IA OF THE ACT IS A LLOWABLE ON SUCH NIL PROFITS. UPHOLDING THE ORDER OF CIT(A), THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. 1 0 . IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 11 TH DAY OF NOVEMBER , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 11 TH NOVEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 4 , PUNE ; 4. / THE PR. CIT - 3 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE