DCIT, Tiruppur V. R.Uma Maheswari, Tiruppur

ITA 1715/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96276 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N VIJAY KUMAR
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.1715/MDS/2015 ( / ASSESSMENT YEAR: 2012-13) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, 121, 60 FEET ROAD, TIRPUR-641 602. VS SMT. R.UMA MAHESWARI, 206/86, MANGALAM ROAD, TIRUPUR-641 604. PAN:AAYPR3851L ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. N.VIJAY KUMAR, C.A. /DATE OF HEARING : 30 TH SEPTEMBER, 2015 /DATE OF PRONOUNCEMENT : 30 TH OCTOBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, COIMBAT ORE DATED 29.05.205 FOR THE ASSESSMENT YEAR 2012-13. T HE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDIT ION MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 80IA OF TH E ACT ON WIND TURBINE GENERATOR. 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN THE APPEAL IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI VELAYU DHASAMY 2 ITA NO.1715/MDS/2015 SPINNING MILLS PVT. LTD. ( 340 ITR 477 ) . COUNSEL SUBMITS THAT BASED ON THE SAID DECISION, THE ASSESSEE CLAIMED DE DUCTION AND THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE FOR THE REASON THAT THE DEPARTMENT FILED SLP BEFORE THE SUPREME COURT AND SLP IS ADMITTED. 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE CASE LAW RELIED ON. THE ASSESSING OFFICER D ENIED THE DEDUCTION UNDER SECTION 80IA TO THE ASSESSEE OBSER VING AS UNDER:- ON A PLAIN READING OF THE PROVISIONS OF SECTION 80IA(S) IT IS MANDATED THAT 'THE PROFITS AND GAINS OF THE ELIGIBLE BUSINESS FOR WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE'. THE PLAIN IMPORT OF THIS SECTION WHICH OVERRIDES EVERY OTHER PROVISIONS OF THE IT ACT 1961 IS THAT T HOUGH LOSSES PERTAINING TO THE ELIGIBLE BUSINESS IS SET O FF AGAINST THE OTHER BUSINESS OF THE ASSESSEE, FOR THE PURPOSE OF SECTION 80IA(S) THE LOSSES OF THE EARLIE R YEARS OF THE ELIGIBLE WILL HAVE TO BE NOTIONALLY BR OUGHT 3 ITA NO.1715/MDS/2015 FORWARD AND SET OFF AGAINST THE INCOME IF ANY OF TH E ELIGIBLE BUSINESS FOR THE SUCCEEDING ASSESSMENT YEA R. WHEN SUCH A COURSE IS ADOPTED, IT IS SEEN THAT IN T HIS CASE THE ASSESSEE WOULD BE LEFT WITH UNABSORBED DEPRECIATION AND BUSINESS LOSS NOTIONALLY BROUGHT FORWARD WHICH WOULD MAKE THE ELIGIBLE BUSINESS UNDERTAKING INELIGIBLE FOR CLAIM U/S 80IA. TO THIS THE ASSESSEE BROUGHT TO. NOTICE THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF M/S SRI VELAYUTHASWAMY SPINNING MILLS (P) LTD V CIT [231 CTR 368 (MAD.)] WHEREIN THE COURT HELD THA T LOSSES ALREADY SET OFF AGAINST OTHER BUSINESS INCOM E NEED NOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF FOR COMPUTING THE DEDUCTION U/S 80IA. THE DEPARTMENT HAS FILED A SPECIAL LEAVE PETITION IN THE HONBLE SUPREME COURT AGAINST THE DECISION OF THE HONORABLE HIGH COURT AND IT HAS BEE N ADMITTED BY THE HONORABLE SUPREME COURT. IN THE EVENTUALITY OF THE SUPREME COURT OVERTURNING THE DECISION OF THE HONORABLE HIGH COURT IN THE CASE OF M/S SRI VELAYUTHASWAMY SPINNING MILLS (P) LTD V CIT , THE DEPARTMENT MAY NOT BE ABLE TO REVISIT THE ASSESSMENT BECAUSE OF THE LIMITATION OF TIME ENSHRINED IN SECTION 153 AND SO THE CLAIM OF DEDUCTION U/S 80IA IS DISALLOWED AND ADDED BACK TO THE INCOME RETURNED. 5. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEA LS) ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UND ER:- 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE MATERIALS AVAILABLE ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER ITSELF INDICATES TH AT THE ISSUE IS COVERED BY THE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. VELAYUTHASAMY SPINNING MILLS 231 ITR 368. THE ASSESSING OFFICER HAS ADDED THIS AMOUNT SINCE THE DEPARTMENT HAS FILED S.L.P. BEFORE THE SUPREME COURT CHALLENGING THE ABOVE DECISIONS. 6.1 IN VIEW OF THE BINDING DECISION OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT VS. VELAYUDHASAMY SPINNING MILLS, 80IA CLAIM OF THE ASSESSEE TO THE E XTENT OF ` 25,54,218/- IS ALLOWED. 4 ITA NO.1715/MDS/2015 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THE ASSESSING OFFICER D ENIED THE CLAIM FOR DEDUCTION UNDER SECTION 80IA OF THE ACT T O THE ASSESSEE HOLDING THAT FOR CLAIMING DEDUCTION UNDER SECTION 80-IA AS PER THE PROVISIONS OF SECTION 80-IA(5), IN ITIAL ASSESSMENT YEAR SHOULD BE THE YEAR IN WHICH THE ASS ESSEE COMMENCES THE ELIGIBLE BUSINESS, BUT NOT THE YEAR I N WHICH ASSESSEE BEGINS TO CLAIM DEDUCTION UNDER SECTION 80 IA OF THE ACT. THE QUESTION AS TO WHETHER INITIAL ASSESSMENT YEAR MEANS THE YEAR OF COMMENCEMENT OR THE YEAR OF INITI AL CLAIM OF DEDUCTION WAS DECIDED BY THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF SRI VELAYUDHASWAMY SPINNING MI LLS LTD. VS. ACIT (SUPRA). THE HONBLE HIGH COURT HELD THAT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IA, INITIAL ASSESSMENT YEAR MEANS THE YEAR IN WHICH THE ASSESS EE BEGINS TO CLAIM DEDUCTION UNDER SECTION 80IA OF TH E ACT. WHILE HOLDING SO, THE HONBLE HIGH COURT OBSERVED A S UNDER:- FROM READING OF SUB-S. (1) OF S. 80-IA, IT IS CLEA R THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-S. (4) I.E. REFERRED TO AS THE E LIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJE CT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN 5 ITA NO.1715/MDS/2015 COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TE N CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-SO (4). SUB-S.(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BEN EFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINN ING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-S. (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INITIAL ASSESSMENT YEAR' ARE USED IN SUB - S.(5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THAT 'INITIAL ASSESSM ENT YEAR' EMPLOYED IN SUB-S. (5) IS DIFFERENT FROM THE WORDS 'BEGINNING FROM THE YEAR' REFERRED TO IN SUB- S. (2). IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S. (5 ) AND THEY ARE AS UNDER: '(1) IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; (2) IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR; (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELI GIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURI NG THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMEN T YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR.' FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR A ND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR-ALONE ARE TO BE BROUGHT FORWARD AND NOT 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 CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIN D OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OF F AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS . ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGA INST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S. (5) DOES NOT 6 ITA NO.1715/MDS/2015 CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE JURISDICTIO NAL HIGH COURT DECISION IN THE CASE OF SRI VELAYUDHASWAMY SP INNING MILLS LTD. VS. ACIT(SUPRA). RESPECTFULLY FOLLOWING THE SAID DECISION, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE G ROUNDS OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH OCTOBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .