ACIT, Coimbatore V. M/s. Elgi Rubber Company Limited, Coimbatore

ITA 1568/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1169 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-02-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: C - BENCH:CHEN NAI (BEFORE SHRI ABRAHAM P. GEORGE. ACCOUNTANT M EMBER AND SHRI GEORGE MATHAN, JUDICIAL MEM BER) ITA NO.1567/MDS/10 ASSESSMENT YEAR 2007-08 AND ITA NO.1568/MDS/10 ASSESSMENT YEAR 2007-08 THE ACIT, CO. CIR.1(2), COIMBATORE (APPELLANT) VS. M/S ELGI RUBBER PRODUCTS LTD, 2000 TRICHY RD, SINGANALLUR, COIMBATORE 641005 (PAN AAACE6812B) (APPELLANT) THE ACIT, CO. CIR.1(2), COIMBATORE (APPELLANT) VS. 2) M/S ELGI RUBBER CO. LTD., (FORMERLY KNOWN AS ELGI TREAD INDIA LTD.) 2000 TRICHY RD, SINGANALLUR, COIMBATORE 641005 (PAN AAACE 4565F) (RESPONDENT) APPELLANT BY RESPONDENTS BY: SHRI TAPAS KUMAR DUTTA,CIT(DR) SHRI PHILIP GEORGE ITA NO. 1567-8/MDS /10 2 ORDER PER SHRI ABRAHAM P.GEORGE, A.M: THESE TWO ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS DATED 14-07-2010 OF THE CIT(A). THOUGH THE ASSESSES ARE DIFFERENT, ONE OF THE ISSUES RAISED BY THE REVENUE IS COMMON AND ASSE SSEES BELONG TO THE SAME GROUP. HENCE THE APPEALS ARE DISPOSED BY A COM MON ORDER. 2. APPEAL NUMBERED AS ITA NO.1567/MDS/2010 IS TAKEN UP FIRST FOR DISPOSAL. ONLY GRIEVANCE RAISED BY THE REVENUE IS T HAT THE CIT(A) DIRECTED ALLOWANCE OF DEPRECIATION ON WINDMILL AT A HIGHER R ATE BASED ON RULE 5(1A) OF THE INCOME-TAX RULES, 1962. ACCORDING TO THE REV ENUE, NO OPTION WAS EXERCISED BY ASSESSEE FOR CLAIMING DEPRECIATION AT A HIGHER RATE AND THE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN THE CAS E OF JINDAL STEEL & POWER LTD. V. ACIT (2007) 106 TTJ 943 RELIED ON BY THE CI T(A) HAS NOT BEEN ACCEPTED BY THE REVENUE. 3. AS IS CLEAR FROM THE GROUND ITSELF THE QUESTION RELATED TO CLAIM OF DEPRECIATION IN WINDMILLS. ASSESSEE HAD CLAIMED DEP RECIATION AT 80% PER ANNUM ( RESTRICTING ITSELF TO 40% WHERE THE USE WAS LESS THAN 180 DAYS) AS PER THE RATES SPECIFIED IN APPENDIX I. HOWEVER, THE AO WAS OF THE OPINION THAT ASSESSEE COULD BE ALLOWED DEPRECIATION ONLY AT THE RATE MENTIONED IN ITA NO. 1567-8/MDS /10 3 APPENDIX IA IN VIEW OF CL.(I) OF SUB-SEC.(1) TO SEC ,.32 OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT), SINCE IT WAS ENGAG ED IN GENERATION OF POWER. ACCORDING TO THE AO, ASSESSEE HAD NOT EXERCISED THE OPTION AS SPECIFIED IN SECOND PROVISO TO SUB-RULE (1A) OF RULE 5 OF THE I. T. RULES. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A), WHO RELYING ON T HE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL THE CASE OF JINDAL STE EL & POWER LTD. AS ALSO THE DECISION OF COORDINATE BENCH IN THE CASE OF K.K .S.K.LEATHER PROCESSORS (P) LTD. (126 ITD 215) HELD THAT THERE B EING NO SPECIFIED FORM FOR EXERCISING THE OPTION MENTIONED UNDER RULE 5(1A ), RETURN FILED BY THE ASSESSEE ITSELF COULD BE ACCEPTED AS A DECLARATION . HE, THEREFORE, ALLOWED THE APPEAL OF THE ASSESSEE. 4. NOW BEFORE US, LD. DR VEHEMENTLY SUPPORTED THE O RDER OF THE AO. PER CONTRA, LD. AR SUBMITTED THAT THERE WAS NO DECI SION OF ANY HIGHER AUTHORITY WHICH WOULD WARRANT A DIFFERENT VIEW. 5. WE FIND THAT ASSESSEE HAD MADE CLAIM OF DEPRECIA TION AT RATES SPECIFIED IN APPENDIX I TO I. T. RULES THROUGH ITS RETURN OF INCOME. THERE IS NO CASE FOR REVENUE THAT THE RETURN WAS NOT FILED O N OR BEFORE THE DUE DATE. THAT IS BEING SO, WE ARE OF THE OPINION THAT THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF K.K.S.K.LEATH ER PROCESSORS (P) LTD. ITA NO. 1567-8/MDS /10 4 CITED SUPRA SQUARELY APPLIED. IT WAS HELD IN PARA- 8 OF THIS ORDER BY THE TRIBUNAL AS UNDER: ITA NO. 1567-8/MDS /10 5 SINCE THE LD. DR HAS NOT BEEN ABLE TO BRING ANY DE CISION OF ANY HIGHER AUTHORITY TO WARRANT A DIFFERENT VIEW, WE DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 6. APPEAL OF THE REVENUE IS DISMISSED. 7. NOW WE TAKE UP APPEAL OF THE REVENUE IN ITA NO.1 568/MDS/10. REVENUE HAS RAISED 4 GROUNDS IN TOTO OUT OF WHICH G ROUND NOS. 1 AND 4 ARE GENERAL IN NATURE NEEDING NO ADJUDICATION. ITA NO. 1567-8/MDS /10 6 8. IN ITS GROUND NO.2 GRIEVANCE OF THE REVENUE IS T HAT THE CIT(A) HELD ASSESSEE TO BE ENTITLED FOR DEDUCTION UNDER SEC.80- IA OF THE ACT IN RESPECT OF THREE UNITS, SEPARATELY. ACCORDING TO THE REVENU E THE WHOLE OF THE BUSINESS SHOULD HAVE BEEN CONSIDERED AND ASSESSEE W HICH HAD THREE POWER GENERATION UNITS, SHOULD HAVE BEEN ALLOWED DE DUCTION UNDER SEC. 80IA OF THE ACT ON THE COMBINED INCOME OF ALL THE WIND MILLS CONSIDERED TOGETHER. 9. THE CLAIM OF ASSESSEE FOR DEDUCTION UNDER SEC. 8 0IA OF THE ACT IN RESPECT OF THE POWER GENERATED THROUGH WIND MILLS U SED FOR ITS CAPTIVE PURPOSES FOR MEETING ITS OWN IN HOUSE REQUIREMENT W AS NOT ALLOWED BY AO FOR TWO REASONS. FIRST WAS THAT THE WIND MILLS WERE NOT SEPARATE UNDERTAKING AND ASSESSEE BEING ENGAGED IN BUSINESS OF MANUFACTURE AND SALE OF RUBBER, SUCH CLAIM COULD NOT BE ALLOWED. OR IN OTHER WORDS, AS PER AO FOR DEDUCTION UNDER SEC. 80IA COULD NOT BE GIVEN FOR CAPTIVE POWER GENERATION USED FOR MEETING IN HOUSE POWER REQUIREM ENT OF AN ASSESSEE. THE SECOND REASON FOR THE DISALLOWANCE WAS THAT BEF ORE ALLOWING DEDUCTION C.80IA BROUGHT FORWARD LOSS AND DEPRECIAT ION CLAIMED HAD TO BE ADJUSTED AND THIS WOULD RESULT IN NEGATIVE PROFITS IN ASSESSEES CASE. 10. BEFORE CIT(A) ASSESSEE RELIED ON A DECISION OF THIS TRIBUNAL IN THE CASE OF M/S.BANNARI AMMAN SUGARS LTD. DECIDED BY TH E COORDINATE BENCH ON16-03-2009 IN ITA NO.1162/MDS/08. ACCORDING TO TH E ASSESSEE, EVEN IN ITA NO. 1567-8/MDS /10 7 CASE OF AN UNDERTAKING WHICH WAS GENERATING POWER W HICH WAS CAPTIVELY CONSUMED BY OTHER UNITS, CLAIM UNDER SEC.80-IA COUL D BE ALLOWED. CIT(A) WAS APPRECIATIVE OF THIS CONTENTION AND ALLOWED TH E CLAIM OF THE ASSESSEE. IN SO FAR AS ADJUSTMENT OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION WAS CONCERNED, ARGUMENT OF THE ASSESSE E WAS THAT ASSESSEE ITSELF HAD ADJUSTED SUCH LOSS AND DEPRECIATION WH ILE WORKING OUT QUANTUM OF CLAIM UNDER SEC.80IA OF THE ACT. LD.CIT(A) ACCEP TED THIS CONTENTION AND ALLOWED APPEAL OF THE ASSESSEE. 11. NOW BEFORE US, LD. DR RELYING ON THE GROUNDS ST RONGLY ASSAILED THE ORDER OF CIT(A). PER CONTRA, LD. AR SUPPORTED THE O RDER OF LD.CIT(A) AND ORDER OF THE TRIBUNAL IN M/S BANNARI AMMAN SUGARS L TD.S CASE CITED SUPRA, 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. INSOFAR AS ADJUSTMENT OF CARRY FORWARD BUSINESS LOSS AND UN ABSORBED DEPRECIATION ARE CONCERNED, SUBMISSION OF THE ASSESSEE BEFORE TH E CIT(A) WAS THAT THESE WERE ADJUSTED BEFORE ARRIVING AT THE QUANTUM OF DEDUCTION UNDER SEC.80IA OF THE ACT. THIS HAS NOT BEEN EFFECTIVELY REBUTTED BY THE LD. DR. INSOFAR AS THE CLAIM OF THE ASSESSEE THAT DEDUCTION UNDER SEC.80IA OF THE ACT WOULD BE AVAILABLE EVEN FOR A CAPTIVE UNIT, WE FIND THAT THIS ISSUE IS NO MORE RES-INTEGRA AND CLAIM OF THE ASSESSEE WAS RIGH TFULLY ACCEPTED BY THE CIT(A). AS FOR THE INTERSE ADJUSTMENT BETWEEN VARIO US UNITS FOR CLAIM OF ITA NO. 1567-8/MDS /10 8 DEDUCTION UNDER SEC. 80-IA OF THE ACT, IS COVERED B Y THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S BANNARI AMMAN SUGARS LTD. (SUPRA). AFTER CONSIDERING A HOST OF DE CISIONS OF VARIOUS COORDINATE BENCHES AND HIGHER AUTHORITIES, IT WAS H ELD AT PARA 24 BY THIS TRIBUNAL IN ITS ORDER DATED 16-03-2009 AS FOLLOWS: 24. IN VIEW OF THE ABOVE DISCUSSIONS, VARIOUS JUDG MENTS OF HONBLE SUPREME COURT, HONBLE HIGH COURTS AND THIS TRIBUNA L, IT IS CLEAR THAT WHILE COMPUTING THE DEDUCTION U/S 80-IA OF THE ACT, THE PROFITS AND GAINS OF A PARTICULAR UNIT IN RESPECT OF WHICH THE ASSESSEE HAS CLAIMED THE DEDUCTION SHALL BE COMPUTED IF SUCH ELI GIBLE BUSINESS OF THE SAID UNIT IS THE ONLY SOURCE OF INCOME OF THE A SSESSEE AS PROVIDED IN SUB-SEC.(5) OF SEC. 80-IA. RESPECTRFULL Y FOLLOWING THE DECISION RELIED UPON BY THE ASSESSEE AND PARTICULAR LY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DEWAN KRAFT SYSTEM (P) LTD., REPORTED IN 297 ITR 305 (DEL.), WE HOLD THAT THE LOWER AUTHORITIES HAS COMMITTED GROSS ERROR AND ILL EGALITY BY CLUBBING THE RESULTS OF ALL THE THREE UINTIS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80-IA. HENCE, THE ASSE SSEE IS ENTITLED FOR DEDUCTION ON THE INCOME OF THE 16 MV UNIT SITUA TED AT ALAGANCHI, M6SOFRE DISTRICT WITHOUT CLUBBING THE RESULTS OF OT HER UNITS OF THE ASSESSEE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTH ORITIES ARE SET ASIDE. NO DECISION OF ANY HIGHER AUTHORITY WAS PRODUCED BE FORE US BY THE LD. DR WARRANTING A DIFFERENT VIEW. THEREFORE, GROUND NO.2 OF THE REVENUE STANDS DISMISSED. 13. VIDE ITS GROUND NO.3 GRIEVANCE OF THE REVENUE I S THAT CIT(A) DIRECTED HIGHER DEPRECIATION ON WIND MILL TO BE ALL OWED TO THE ASSESSEE UNDER RULE 5(A) OF THE I.T. RULES. IN ITA NO.1567/M DS/10 ALSO REVENUE HAS RAISED SIMILAR GROUND. WE HAVE, FOR REASONS DIS CUSSED AT PARA-5 ITA NO. 1567-8/MDS /10 9 ABOVE, DISMISSED THIS GROUND OF THE REVENUE. FOLLOW ING THE SAME, HERE ALSO WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 14. IN THE RESULT APPEAL OF THE REVENUE IN ITA NO.1 568/MDS/10 IS DISMISSED. 15. TO SUMMARISE THE RESULT, BOTH APPEALS OF THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 02-2011. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (ABRAHAM P.GEOPRGE) ACCOUNTANT MEMBER CHENNAI: 11TH FEBRUARY, 2011. NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.