Income Tax Officer, Ward-1(1), Pune V. Air Contral India Pvt. Ltd, Pune

ITA 1459/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2396 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Earning of tax free income; Unabsorbed depreciation
• Section: 143(3); 250; 80IA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO S . 1459 TO 1461 /P U N/201 7 / ASSESSMENT YEAR S : 20 12 - 13 TO 2014 - 15 THE INCOME TAX OFFICER, WARD 1(1), PUNE . / APPELLANT VS. AIR CONTROL INDIA PVT. LTD., ADAMS COURT FIRST FLOOR, BANER ROAD, BANER, PUNE 411045 . / RESPONDENT PAN: AAECA7427J / APPELLANT BY : SHRI PANKAJ GARG / RESPONDENT BY : SHRI B.B. MANE / DATE OF HEARING : 13 . 0 6 .201 9 / DATE OF PRONOUNCEME NT: 21 . 0 6 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH IS BUNCH OF APPEAL S FILED BY REVENUE ARE AGAINST SEPARATE ORDER S OF CIT (A) , PUNE - 1, PUNE , DATED 30 . 03 .201 7 & 31.03.2017 RELATING TO ASSESSMENT YEAR S 20 12 - 13 TO 2014 - 15 AGAINST RESPECTIVE ORDERS PASSE D UNDER SECTION 250 / 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . ITA NO S . 1459 TO 1461 /P U N/20 1 7 AIR CONTROL INDIA PVT. LTD. 2 2. THIS BUNCH OF APPEALS FILED BY REVENUE RELATING TO SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEV ER, IN ORDER TO ADJUDICATE THE ISSUE, REFERENCE IS BEING MADE TO THE FACTS AND ISSUE IN ITA NO.1459/PUN/2017, RELATING TO ASSESSMENT YEAR 2012 - 13. 3. THE REVENUE IN ITA NO.1459/PUN/2017, RELATING TO ASSESSMENT YEAR 2012 - 13 HAS RAISED THE FOLLOWING GROUND S OF APPEAL: - 1. THE LD. CIT(A) ERRED IN DIRECTING THAT IF BROUGHT FORWARD LOSS OF ELIGIBLE UNIT U/S 80IA, IS ALREADY SET OFF WITH NON - ELIGIBLE BUSINESS UNDERTAKING THEN THERE IS NO NEED OF NOTIONALLY BROUGHT FORWARD SUCH LOSS AND SET OFF WITH INCOME OF EL IGIBLE UNIT / UNDERTAKING, BEFORE ARRIVING QUANTUM OF EXEMPT INCOME OF SUCH ELIGIBLE UNIT U/S 80IA, AS MANDATED U/S 80IA(5) OF THE ACT. 2. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE REVENUE IS IN APPEAL AGAINST ORDER OF CIT(A) AND HAS RAISED THE ISSUE OF ADJUSTMENT OF BROUGHT FORWARD LOSS AGAINST INCOME FROM WINDMILL. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT AGAINST PROFITS ARISING FROM THE ACTIVITY OF RUNNING THE WINDMILL. THE ASSESSEE HAD OPTION TO SELECT INITIAL ASSESSMENT YEAR WHICH HAS BEEN SO EXERCISED BY ASSESSEE. THE CASE OF REVENUE IN THE PRESENT CASE WAS THA T IN EARLIER YEARS, THERE WERE LOSSES, WHICH HAD TO BE SET OFF AGAINST PROFITS ARISING FROM WINDMILL ACTIVITY BEFORE DEDUCTION IS COMPUTED UNDER SECTION 80IA OF THE ACT. THE ASSESSEE ON THE OTHER HAND, CLAIMS THAT LOSSES, IF ANY, AFTER INITIAL ASSESSMENT YEAR NEED TO BE ADJU S TED AGAINST INCOME FROM BUSINESS ACTIVITY OF WINDMILL AND EARLIER YEARS LOSSES WHICH HAVE BEEN ADJUSTED ITA NO S . 1459 TO 1461 /P U N/20 1 7 AIR CONTROL INDIA PVT. LTD. 3 AGAINST OTHER INCOME ARE NOT DEEMED TO BE CARRIED FORWARD AGAINST INCOME ARISING FROM WINDMILL ACTIVITY. 6. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE IN TURN, RELYING ON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. WE FIND THAT THE ISSUE STANDS COVERED AGAINST REVENUE BY THE ORDER OF TRIBUNAL IN ASSESS EES OWN CASE IN ITA NO.1331/PUN/2015, RELATING TO ASSESSMENT YEAR 2011 - 12, ORDER DATED 06.09.2017. 9. FURTHER, WE FIND THAT THE ISSUE NOW STANDS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. HERCULES HOISTS LTD. (2017) TAXCORP (DT) 6933 4 (HC - BOM) , WHICH IN TURN, HAD RELIED ON EARLIER DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS. P. LTD. AND SUDAN SPINNING MILLS (P) LTD. VS. ACIT (2012) 340 ITR 477 (MAD) , WHEREIN IT WAS HELD AS UNDER: - 8. THE SAID ISS UE IS NOW NO LONGER RESINTEGRA IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH COURT IN A CASE OF VELAYUDHASWAMY SPINNING MILLS P. LTD. & SUDAN SPINNING MILLS (P). LTD. (SUPRA), THE COURT OBSERVED AS UNDER : FROM A READYING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO THE 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 CONTEMPLATE D. 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 WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELI GIBLE 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. A FICTION CREATED IN SUBSECTION DOES NOT CONTEMPLATES TO BRING SET OFF ITA NO S . 1459 TO 1461 /P U N/20 1 7 AIR CONTROL INDIA PVT. LTD. 4 AMOUNT NOTIONALLY. THE FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 9. THE SAID JUDGMENT OF THE MADRAS HIGH COURT HAS BEEN CONFIRMED BY THE A PEX COURT, AS SUCH HAS ATTAINED FINALITY. EVEN IN THE ASSESSEE'S OWN CASE FOR THE PREVIOUS YEAR, THE LOSSES WERE SET OFF IN THE RELEVANT YEARS. THE REVENUE HAD CHALLENGED THE SAID ACTION BEFORE THIS COURT IN INCOME TAX APPEAL NO.2485 OF 2013 AND IT WAS HELD THAT THE SAID ACTION IS LEGAL AND PROPER. THE SAID JUDGMENT IS ALSO UPHELD BY THE APEX COURT. 10. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL. FURTHER, THE HON'BLE SUPREME COURT DISMISSED THE SPECIAL LEA VE PETITION FILED IN THE CASE OF CIT VS. BEST CORPORATION LTD. (2017) 244 TAXMAN 151 (SC), WHEREIN THE HIGH COURT HELD THAT SINCE IT HAD CONSISTENTLY FOLLOWED DECISION IN CASE OF VELAYUDHASWAMY SPINNING MILLS (P.) LTD. VS. ACIT (2012) 340 ITR 477 (MAD) AND ON THE BASIS OF SAID DECISION CBDT HAD ISSUED CIRCULAR NO.1 OF 2016, DATED 15.02.2016 CLARIFYING TERM INITIAL ASSESSMENT YEAR IN SECTION 80IA(5) OF THE ACT, ORDER OF TRIBUNAL HOLDING THAT ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80IA OF THE ACT WITHOUT SETTING OFF LOSSES/UNABSORBED DEPRECIATION PERTAINING TO WINDMILL, WHICH WERE SET OFF IN EARLIER YEAR AGAINST OTHER BUSINESS INCOME WAS DESERVED TO BE UPHELD. 11. THE CBDT VIDE CIRCULAR NO.1/2016, DATED 15.02.2016 HAS ALSO CLARIFIED SITUATION OF C LAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT BY ANY CONCERN BY ADOPTING INITIAL ASSESSMENT YEAR AS THE FIRST YEAR OF CLAIM, IRRESPECTIVE OF THE FACT THAT THE WINDMILL WAS INSTALLED AND STARTED FUNCTIONING IN ANY OF THE EARLIER YEARS. WE UPHOLD THE O RDER OF CIT(A). HOWEVER, IN CASE LOSSES OF EARLIER YEARS HAVE NOT BEEN ADJUSTED AGAINST OTHER INCOME IF ANY, IN THOSE YEARS, THEN SUCH LOSSES ARE TO BE CARRIED FORWARD BUT HAVE TO BE ADJUSTED AGAINST RESULTANT BUSINESS INCOME IN THE HANDS OF ASSESSEE I.E. AFTER CLAIM OF DEDUCTION UNDER ITA NO S . 1459 TO 1461 /P U N/20 1 7 AIR CONTROL INDIA PVT. LTD. 5 SECTION 80IA (4)(IV)(A) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY REVENUE ARE THUS, DISMISSED. 1 2 . THE FACTS AND ISSUE IN ITA NOS.1460/PUN/2017 AND 1461/PUN/2017 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.1459/PUN/201 7 AND OUR DECISION IN ITA NO.1459/PUN/2017 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.1460/PUN/2017 AND 1461/PUN/2017 . 1 3 . IN THE RESULT, ALL THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 21 ST DAY OF JUNE , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 21 ST JUNE , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , PUNE - 1 ; 4. THE PR. CIT - 1 , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE