DCIT, Coimbatore V. M/s. Bannari Amman Sugars Ltd., Coimbatore

ITA 160/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51834 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI J

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A.NO. 160/MDS/2011 (ASSESSMENT YEAR : 2007-08) THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(2), COIMBATORE. VS. M/S. BANNARI AMMAN SUGARS LTD., 1212, TRICHY ROAD, COIMBATORE-641 018. PAN AAACB 8933 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.BETGIRI, JCIT-DR RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCATE DATE OF HEARING : 24 TH AUGUST, 2011 DATE OF PRONOUNCEMENT : 26 TH AUGUST, 2011 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2007-08. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I , AT COIMBATORE DATED 3.11.2010 AND ARISES OUT OF THE AS SESSMENT COMPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1 961. ITA 160/11 :- 2 -: 2. THE GRIEVANCE OF THE REVENUE IN THE PRESENT APPE AL IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) GRANTING THE ASSESSEE RELIEF UNDER SEC.80IA OF THE INCOME-TAX ACT, 1961. THE ASSESSEE-COMPANY HAD MADE A CLAIM OF DE DUCTION UNDER SEC.80IA IN RESPECT OF THREE DIFFERENT CO-GEN ERATION UNITS AFTER COMPLYING WITH ALL PROCEDURAL FORMALITIES OF AUDIT AND CERTIFICATION. THE ASSESSING AUTHORITY, IN THE COU RSE OF ASSESSMENT HELD THAT THE UNITS CANNOT BE CONSIDERED INDEPENDENTLY AND ACCORDINGLY CLUBBED THE WORKING R ESULTS OF THE SAID THREE CO-GENERATION UNITS ALONG WITH THE WORKI NG RESULTS OF THE WINDMILL DIVISION OF THE ASSESSEE-COMPANY AND U LTIMATELY REDUCED THE QUANTUM OF RELIEF AVAILABLE TO THE ASSE SSEE UNDER SEC.80IA. THE COMMISSIONER OF INCOME-TAX (APPEALS) FOUND THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON THE PROFITS O F THREE POWER GENERATING PLANTS AS INDEPENDENT UNITS WHEREAS THE ASSESSING AUTHORITY HAS SET OFF THE LOSS FROM THE WINDMILL DI VISION OF THE ASSESSEE-COMPANY AND THEREBY RESTRICTED THE CLAIM O F DEDUCTION UNDER SEC.80IA. THE COMMISSIONER OF INCOME-TAX (AP PEALS) FURTHER OBSERVED THAT THE VERY SAME ISSUE WAS CONSI DERED FOR THE EARLIER ASSESSMENT YEARS 2004-05, 2005-06 AND 2006 -07 BY THE ITA 160/11 :- 3 -: INCOME-TAX APPELLATE TRIBUNAL AT CHENNAI IN ITA NOS . 1162/MDS/2008, 423/MDS/2009 AND 1196/MDS/2009 RESPE CTIVELY WHEREIN THE TRIBUNAL HAS HELD THAT THE PROFITS OF T HE UNITS HAVE TO BE SEPARATELY CONSIDERED AND THE LOSS OF THE WINDMI LL UNIT CANNOT BE SET OFF. ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS ALLOWED. THE COMMISSIONER OF INCOME-TAX (APPEALS), FOLLOWING THE ABOVE ORDERS OF THE TRIBUNAL HELD THE MATTER IN FAVOUR OF THE ASSESSEE. THE REVENUE IS AGGRIEVED AND THEREFORE, THIS APPEAL BEFORE THE TRIBUNAL. 3. THE GROUNDS RAISED BY THE REVENUE IN THE PRESENT APPEAL IN THE LIGHT OF THE ISSUE DISCUSSED ABOVE ARE EXTRACTE D BELOW : 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IA IN RESPECT OF THE THRE E UNITS SEPARATELY. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE OBSERVED THAT S.80-IA STATES WHERE T HE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDE ANY PROFI TS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRIS E FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4). ITA 160/11 :- 4 -: 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE OBSERVED THAT THE WORD ANY BUSINESS MEAN WHOLE OF THE ANY ONE OF THE BUSINESS REFERRED TO IN SUB-SECTION (4). THAT IS, IF ASSESSEE HAS 3 IND USTRIAL PARKS THEN COMBINED NET INCOME OF ALLTHE 3 PARKS TO BE TAKEN AS INCOME FOR THE CONSIDERATION OF DEDUCTION UNDER THIS SECTION. SIMILARLY, IF ASSESSEE HAS 3 P OWER GENERATION UNITS, THEN THE COMBINED NET INCOME OF A LL THE WIND MILL UNITS ONLY TO BE CONSIDERED FOR THE CALCULATION OF DEDUCTION UNDER THIS SECTION. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT AS PER PROVISIONS OF SECTION 80IA(5) THE UNDERTAKING ELIGIBLE FOR DEDUCT ION U/S. 80IA SHOULD BE TREATED AS ONLY SOURCE OF INCOM E FOR COMPUTING THE QUANTUM OF DEDUCTION. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE NOTED THAT WHEN THE UNDERTAKINGS ELIGIBLE FOR DEDUCTION U/S.80-IA IS TREATED AS THE ONLY SOURCE OF INCOME, THEN THE LOSS INCURRED IN ONE UNI T SHOULD BE SET OFF AGAINST THE PROFITS OF OTHER UNIT S FOR THE PURPOSE OF COMPUTING DEDUCTION. ITA 160/11 :- 5 -: 7. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) SHOULD HAVE OBSERVED THAT SINCE SUB-SECTION 5 OF SECTION 80IA STARTS WITH A NON OBSTANTE CLAUSE, THE RESTRICTION PUT IN SUB-SECTION 5 WILL PREVAIL AND DEDUCTION U/S.80IA HAS TO BE RESTRICTED ACCORDINGLY . 8. IT IS TO BE SUBMITTED THAT THE DECISION OF THE M ADRAS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE RELIED UPON BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN ADJUDICATING THE ABOVE ISSUE HAS NOT BECOME FINAL AND TAX CASE APPEAL HAS BEEN FILED BY THE HONBLE MADRAS HIGH COURT. 4. AS RIGHTLY POINTED OUT BY THE COUNSEL APPEARING FOR THE ASSESSEE-COMPANY, THE VERY SAME ISSUE HAD CROPPED U P FOR THE EARLIER ASSESSMENT YEARS 2004-05, 2005-06 AND 2006- 07. THE TRIBUNAL AFTER CONSIDERING THE FACTS AND LAW GOVERN ING THE ISSUE HELD IN A CONSISTENT MANNER THAT THE ASSESSEE IS EN TITLED FOR DEDUCTION UNDER SEC.80IA WITHOUT THE PROFITS OF POW ER GENERATING UNITS, DILUTED BY THE LOSS ARISING IN THE WINDMILL DIVISION. AS OF NOW, THE ISSUE STANDS CONCLUDED IN ASSESSEES OWN C ASE. THE COMMISSIONER OF INCOME-TAX (APPEALS) IS BOUND TO FO LLOW THE ITA 160/11 :- 6 -: ORDERS PASSED BY THE JURISDICTIONAL TRIBUNAL. THER EFORE, THE DECISION AND THE COURSE OF ACTION TAKEN BY THE COMM ISSIONER OF INCOME-TAX (APPEALS) IS IN ORDER. ULTIMATELY, THE MAIN GRIEVANCE OF THE REVENUE IS THAT THE DECISIONS OF THE TRIBUNA L, CHENNAI HAVE NOT BECOME FINAL AS THE REVENUE HAS TAKEN UP THE CA SES BEFORE THE HONBLE MADRAS HIGH COURT. BUT IT IS TO BE SEE N THAT UNLESS AND UNTIL THE ORDERS OF THE TRIBUNAL ARE REVERSED O R MODIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT, THE ORDER OF THE TRIBUNAL SERVES GOOD. THE COMMISSIONER OF INCOME-TAX (APPEA LS) IS BOUND BY THAT DECISION. 5. NOW, APART FROM THE ORDERS OF THE TRIBUNAL PASSE D IN ASSESSEES OWN CASE, ON THE VERY SAME ISSUE, IT IS USEFUL TO REFER TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. V. ACIT (231 CTR (MAD) 368). IN THE SAID CASE ALSO THE ISSUE PLACED BEFOR E THEIR LORDSHIPS WAS THE QUESTION OF DEDUCTION UNDER SEC.8 0IA. AS A LEGAL PROPOSITION, THE HONBLE HIGH COURT HELD THAT PROFITS ARE TO BE COMPUTED AS IF THOSE ELIGIBLE BUSINESS ARE THE O NLY SOURCE OF INCOME OF AN ASSESSEE. IT SUPPORTS THE CONSISTENT DECISION TAKEN ITA 160/11 :- 7 -: BY THE APPELLATE TRIBUNAL IN ASSES SE ES OWN CASE FOR THE EARLIER ASSESSMENT YEARS. 6. THE HONBLE DELHI HIGH COURT ALSO HAD AN OCCASIO N TO CONSIDER THIS ISSUE IN CIT V. DEWAN KRAFT SYSTEM P. LTD. (297 ITR 305). THE HONBLE DELHI HIGH COURT HELD THAT AN UND ERTAKING ENTITLED TO A SPECIAL DEDUCTION UNDER SEC.80IA HAS TO BE TREATED AS AN INDEPENDENT UNIT AND NOT TO BE FETTERED BY TH E WORKING RESULTS OF OTHER BUSINESS UNITS OWNED AND OPERATED BY THE ASSESSEE. THE BASIS OF THIS LEGAL INTERPRETATION I S THAT THE BENEFIT OF DEDUCTION AVAILABLE UNDER SEC.80IA IS TARGETTED ON ELIGIBLE BUSINESS AND NOT ON THE ASSESSEE, PER SE. IF THE UNIT IS ENTITLED FOR DEDUCTION AND IF THE UNIT IS FUNCTIONING INDEPE NDENTLY WITH SEPARATE IDENTITY OF OPERATION, THE SAID BUSINESS U NIT NEEDS TO BE TREATED AS AN INDEPENDENT UNIT FOR THE PURPOSE OF D EDUCTION UNDER SEC.80IA. 7. IN VIEW OF THE ABOVE JUDGMENTS OF THE HONBLE HI GH COURTS AND ALSO IN THE LIGHT OF THE DECISIONS OF THE INCOM E-TAX APPELLATE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASS ESSMENT YEARS, WE HOLD THAT THE COMMISSIONER OF INCOME-TAX (APPEAL S) IS JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE BY HOL DING THAT THE LOSS ITA 160/11 :- 8 -: ARISING FROM THE WINDMILL DIVISION OF THE ASSESSEE- COMPANY SHOULD NOT BE SET OFF AGAINST THE PROFITS OF THE TH REE POWER GENERATING UNITS OF THE ASSESSEE-COMPANY. 8. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 26 TH OF AUGUST, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 26 TH AUGUST, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR