Dr.S.Thilagavathy, Kancheepuram V. ACIT, Kancheepuram

ITA 1501/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8835 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1501/MDS/2016 / ASSESSMENT YEAR : 2010-11 DR.S. THILAGAVATHY NO.33-C, HOSPITAL ROAD KANCHIPURAM VS. THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE I VELLORE [PAN ACAPT 0645 A] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI VS JAYAKUMAR, ADVOCATE /RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT / DATE OF HEARING : 02 - 0 8 - 2016 ! / DATE OF PRONOUNCEMENT : 10 - 0 8 - 2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-13, CHENN AI, DATED 2.3.2016 FOR ASSESSMENT YEAR 2010-11. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS THAT THE CIT(A) CONFIRMED THE DISALLOWANCE OF DEDUCTION U/S 80IA(1) FOR THE WINDMILL RUN BY THE ASSESSEE. ITA NO. 1501/16 :- 2 -: 3. FACTS APROPOS ARE THAT THE ASSESSEE, A MEDICAL PRA CTITIONER, HAD FILED HER RETURN DECLARING TOTAL INCOME OF ` .35,80,698/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED B Y THE ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA(1) OF THE ACT FOR AN INCOME OF ` 8,32,070/- FROM THE WINDMILL OWNED BY HER. THE ASSESSING OFFICER WAS OF THE OPINION THAT BY VI RTUE OF SUB-SECTION (5) OF SEC. 80IA, THE INCOME OF THE ELIGIBLE BUSINE SS HAD TO BE COMPUTED CONSIDERING THE FIRST YEAR OF THE OPERATIO N OF THE WINDMILL AS THE INITIAL ASSESSMENT YEAR. AS PER THE ASSESSING OFFICER, THE WINDMILL WAS SET UP BY THE ASSESSEE DURING THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR 2007-08 AND IF EXPENSES INCURRED BY THE ASSESSEE ALONGWITH DEPRECIATION FOR THE WINDMILL WAS CONSIDE RED THEN THE ASSESSEE WOULD HAVE HAD A LOSS OF ` 41,98,785/- FOR ASSESSMENT YEAR 2007-08, ` 41,73,949 FOR ASSESSMENT YEAR 2008-09 AND ` 3,71,509/- FOR ASSESSMENT YEAR 2009-10. THE ACCUMULATED LOSSE S WOULD BE ` 87,44,243/- FOR THESE THREE YEARS. THE ASSESSING O FFICER NOTED THAT OUT OF THE SAID AMOUNT, THE DEPRECIATION LOSS ALONE CAME TO ` 79,12,173/-. ASSESSING OFFICER WAS OF THE OPINION T HAT THERE WOULD BE NO PROFIT FOR THE WINDMILL IN THE IMPUGNED ASSESSME NT YEAR IF THE ABOVE LOSS WAS SET OFF. ITA NO. 1501/16 :- 3 -: 4. WHEN PUT ON NOTICE, THE ASSESSEE SUBMITTED THAT TH E IMPUGNED ASSESSMENT YEAR ALONE COULD BE CONSIDERED AS THE INITIAL YEAR SINCE IT HAD CLAIMED DEDUCTION U/S 80IA FOR T HE FIRST TIME. AS PER THE ASSESSEE, IT HAD AN OPTION TO CLAIM DEDUCTION FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF THE FIRST 15 AS SESSMENT YEARS. CONTENTION OF THE ASSESSEE WAS THAT INITIAL ASSES SMENT YEAR DID NOT MEAN ASSESSMENT YEAR IN WHICH THE WINDMILL BECAME O PERATIONAL BUT THE YEAR IN WHICH THE ASSESSEE MADE THE CLAIM FOR THE FIRST TIME. HOWEVER, THE ASSESSING OFFICER WAS NOT APPRECIATIVE OF THIS CONTENTION. HE HELD THAT THE INITIAL ASSESSMENT YEAR WOULD HAVE TO BE CONSIDERED THE FIRST YEAR OF COMMENCEMENT OF THE WINDMILL AND NOT THE FIRST YEAR OF MAKING THE CLAIM. TAKING THIS VIEW, THE ASSESSI NG OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE U/S 80IA. ASSESSMENT W AS ACCORDINGLY COMPLETED. 5. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). ARGUMENT OF THE ASSESSEE ONCE AGAIN WAS THAT IT CO ULD EXERCISE OPTION FOR CLAIMING DEDUCTION U/S 80IA FOR ANY TEN YEARS OUT OF THE FIRST 15 YEARS. AS PER THE ASSESSEE, THIS WAS THE FIRST YE AR IN WHICH IT HAD CLAIMED DEDUCTION U/S 80IA FOR THE WINDMILL. RELY ING ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VEL AYUDHAWAMY SPINNING MILLS PVT. LTD VAS CIT, 231 CTR 368, ASSESSEE ARGU ED THAT THERE WAS ITA NO. 1501/16 :- 4 -: AN OPTION FOR THE ASSESSEE TO DECIDE FROM WHICH YE AR IT WAS TO CLAIM DEDUCTION AVAILABLE U/S 80IA. THE CIT(A) WAS NOT APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, BY VIRTUE OF SUB-SE C. (5) OF SEC. 80IA, THE PROFIT OF THE ELIGIBLE BUSINESS HAD TO BE WORKE D OUT ON A STANDALONE BASIS AND IF IT WAS WORKED OUT, THE PRIO R YEARS LOSSES AND DEPRECIATION PERTAINING TO SUCH BUSINESS HAD TO BE SET OFF BEFORE CONSIDERING THE CLAIM FOR DEDUCTION. ON THIS VIEW, HE DISMISSED THE APPEAL. 6. NOW BEFORE US, THE LD.AR RELIED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS PVT. LTD.(SUPRA). ACCORDING TO HIM, THE ASSESSEE HAVING ELECTED THE IMPUGNED ASSESSMENT YEAR AS THE FIRST YEAR FOR CLAI MING DEDUCTION U/S 80IA, THE EARLIER YEAR LOSSES AND DEPRECIATION WHIC H IT HAD NEVER CLAIMED COULD NOT BE FORCIBLY SET OFF AGAINST THE P ROFITS. 7. PER CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. SUB-SECTION (5) O F SEC. 80IA OF THE ACT READS AS UNDER: \ ITA NO. 1501/16 :- 5 -: (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R 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 OF ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS I F SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 9. THE ELIGIBLE BUSINESS HAS TO BE CONSIDERED AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE FROM THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AS PER THE ABOVE SECTION. THE J URISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD.(SUPRA) HAS CLEARLY HELD THAT AFTER THE AMENDMENT TO SEC. 8 0IA BY FINANCE ACT, 1999, THERE WAS AN OPTION TO THE ASSESSEE FOR SELE CTING THE YEAR OF CLAIMING RELIEF U/S 80IA UNDER SUB-SECTION(5). IT WAS ALSO HELD THAT THERE IS NO QUESTION OF NOTIONALLY CARRY FORWARD UN ABSORBED DEPRECIATION OR LOSS FROM EARLIER YEARS AGAINST THE PROFITS OF SUCH ELIGIBLE BUSINESS. ONCE THE ASSESSEE IS GIVEN AN OPTION TO SELECT THE PERIOD OF 10 YEARS OUT OF THE TOTAL 15 YEARS AND TH E ASSESSEE HAD SELECTED ONE PARTICULAR YEAR AS THE FIRST YEAR OF THE CLAIM THEN ONLY SUCH YEAR CAN BE CONSIDERED AS THE INITIAL ASSESSME NT YEAR. HENCE, IN OUR OPINION, THE INTERPRETATION GIVEN TO SEC. 80IA( 5) BY THE LOWER AUTHORITIES IS MISPLACED. NOTIONAL LOSS OR DEPRECI ATION COULD NOT HAVE BEEN FORCIBLY SET OFF AGAINST THE INCOME OF THE AS SESSEE FROM THE ELIGIBLE BUSINESS. WE ARE OF THE OPINION THAT AUTH ORITIES BELOW WERE ITA NO. 1501/16 :- 6 -: NOT JUSTIFIED IN DENYING DEDUCTION CLAIMED U/S 80I A(5) ON THE INCOME FROM WINDMILL. WE THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE DISALLOWANCE MADE U/S 80IA(5) OF THE ACT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 10 TH AUGUST, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF