ACIT, Tiruppur V. M/s. Dollar Apparels, Tiruppur

ITA 1730/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58012 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C JOSEPH JT
• Assessee Lawyers: T BANUSEKAR; N VIJAY KUMAR
• Keywords: Depreciation; Source of fund; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER] I.T.A.NOS.1730 & 1731/MDS/2011 ASSESSMENT YEARS : 2007-08 AND 2008-09 THE ACIT CIRCLE I TIRUPUR VS M/S DOLLAR APPARELS 13, 60 FEET ROAD KUMARANANDAPURAM TIRUPUR 2 [PAN AABFD8592K] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.C.JOSEPH, JT. CIT RESPONDENT BY : SHRI T. BANUSEKAR AND SHRI N. VIJAY KUMAR DATE OF HEARING : 07-03-2012 DATE OF PRONOUNCEMENT : 07-03-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE REVENUE, F OR ASSESSMENT YEARS 2007-08 AND 2008-09, AGAINST SEPARATE ORDERS OF THE LD. CIT-II, COIMBATORE, DATED 10.7.2011. AS COMMON ISSUE IS INVOLVED IN THESE APPEALS, WE PROCEED TO DECIDE THEM BY A COMMON ORDE R FOR THE SAKE OF CONVENIENCE AND BREVITY. I.T.A.NOS. 1730 & 1731/MDS/11 :- 2 -: 2. IN THESE APPEALS, THE REVENUE HAS RAISED THE FOLLO WING COMMON GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT T HE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA OF THE A CT ON WINDMILLS. 3. THE LEARNED CIT(A) OUGHT TO HAVE OBSERVED THAT T HE INITIAL YEAR SHOULD BE TAKEN AS THE YEAR OF COMMENCEMENT OF BUSINESS AND NOT THE YEAR OF CLAIM OF DEDUCTION. 4. THE LEARNED CIT(A) OUGHT TO HAVE OBSERVED THAT T HE PLAIN MEANING OF THE WORD INITIAL YEAR MEANS THE YEAR IN WHICH THE MANUFACTURE OR PRODUCTION OR OTHER ACTIVITY BEGINS. 5. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE UNABSORBED DEPRECIATION OF THE EARLIER YEARS WHICH HAD ALREADY BEEN ABSORBED CANNOT BE NOTIONALLY CARRIED FORWARD AND TAKEN INTO CONSIDERATION FOR COMPUTING DEDUCTION U/S 80IA OF THE ACT. 6. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T AS PER PROVISIONS OF SECTION 80IA(5) THE UNDERTAKING ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT SHOULD B E TREATED AS ONLY SOURCE OF INCOME FOR COMPUTING THE QUANTUM OF DEDUCTION. 7. THE LEARNED CIT(A) SHOULD HAVE OBSERVED THAT SIN CE SUB SECTION 5 OF SECTION 80IA OF THE ACT STARTS WIT H AN NON OBSTANTE CLAUSE, THE RESTRICTION PUT IN SUB-SEC TION 5 WILL PREVAIL AND DEDUCTION U/S 80IA OF THE ACT HA S TO BE RESTRICTED ACCORDINGLY. 8. IT IS SUBMITTED THAT SLP HAS BEEN FILED AGAINST THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF M/S SRI VELAYUDHASAMY SPINNING MILLS [P ] LTD AND OTHERS AND IS YET TO BE DISPOSED OF BY THE HON'BLE SUPREME COURT. 9. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE CIT (APEPALS) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER RESTORED. I.T.A.NOS. 1730 & 1731/MDS/11 :- 3 -: 3. THE ONLY ISSUE INVOLVED IN THESE APPEALS IS THAT TH E LD.CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA OF THE ACT ON WINDMILL. 4. THE LD. D.R. RELIED ON THE GROUNDS OF APPEALS TA KEN BY THE REVENUE IN THESE APPEALS. 5. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE FILED BEFORE US COPY OF THE HON'BLE JURISDICTIONAL HIGH COURT ORDER IN THE CASE OF M/S SRI VELAYUDHASAMY SPINNING MILLS [P] LTD VS. ACIT R EPORTED IN [2010] 231 CTR [MAD] 368 AND SUBMITTED THAT THE ISSUE AT H AND WAS SQUARELY COVERED BY THE DECISION OF THE HIGH COURT IN FAVOUR OF THE ASSESSEE. FURTHER, THE SAME IS ALSO EVIDENT FROM THE GROUNDS OF APPEALS OF THE REVENUE WHEREIN THE REVENUE HAS TAKEN A GROUND THAT THE SLP WHICH HAS BEEN FILED AGAINST THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SRI VELAYUDHASAMY SPINNING MILLS [P] LTD AND OTHERS [SUPRA] IS YET TO BE DISPOSED OF BY THE HON 'BLE SUPREME COURT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS RUNNING A SPINNING MILL AND ALSO INSTALLED TWO WIND MILLS, FI RST IN ASSESSMENT YEAR 2005-06 AND SECOND IN ASSESSMENT YEAR 2006-07. ALTH OUGH THE YEAR OF I.T.A.NOS. 1730 & 1731/MDS/11 :- 4 -: COMMENCEMENT WAS ASSESSMENT YEAR 2005-06, THE ASSES SEE OPTED ASSESSMENT YEAR 2007-08 AS INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA OF THE ACT IN RESPECT O F WINDMILLS. INITIAL LOSS FROM WINDMILLS WAS SET OFF AGAINST PROFIT OF S PINNING MILLS DIVISION. THE ASSESSEE DID NOT CLAIM DEDUCTION U/S 80IA OF TH E ACT DURING THE YEARS WHERE THE ASSESSEE SUFFERED LOSS. THE ASSESSI NG OFFICER HELD THAT THE INITIAL YEAR SHOULD BE TAKEN AS THE YEAR O F COMMENCEMENT OF BUSINESS AND NOT THE YEAR OF CLAIM OF DEDUCTION AND THAT UNABSORBED DEPRECIATION OF THE EARLIER YEARS WHICH HAD ALREADY BEEN ABSORBED CAN BE NOTIONALLY CARRIED FORWARD AND TAKEN INTO CO NSIDERATION FOR COMPUTING DEDUCTION U/S 80IA OF THE ACT. 7. IN APPEAL, THE LD.CIT(A) HELD AS UNDER: I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE A SSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE AS SESSING OFFICER IN HIS ORDER OPINED THAT THE ALLOWABLE QUAN TUM OF DEDUCTION U/S 80IA IS TO BE WORKED OUT IN ACCORDAN CE WITH THE PROVISIONS OF SUB-SECTION (5) TREATING THE ELIGIBLE BUSINESS IN THE WINDMILL I AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE RIGHT FROM THE INITIAL YEAR OF COMMENCEMENT OF THE BUSINESS. AS SEEN FROM THE FACTS, THE ASSESSEE RUNS A SPINNI NG MILL AND HAS ALSO INSTALLED TWO WINDMILLS VIZ. FIRST ONE IN THE ASSESSMENT YEAR 2005-06, SECOND ONE IN THE YEAR 2006-07. THOU GH THE YEAR OF COMMENCEMENT WAS THE ASSESSMENT YEAR 2005 -06, THE ASSESSEE HAS OPTED ASSESSMENT YEAR 2007-08 AS I NITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTI ON U/S 80IA IN RESPECT OF WINDMILLS DIVISION I. INITIALL Y THE LOSS FROM I.T.A.NOS. 1730 & 1731/MDS/11 :- 5 -: WINDMILLS WAS SET OFF AGAINST PROFIT OF SPINNING MI LL DIVISION. THE ASSESSEE HAD NOT CLAIMED DEDUCTION U/S 80IA DUR ING THOSE YEARS WHEN IT RESULTED IN LOSS. THE ASSESSEE HAS OPTED TO CHOOSE THE ASSESSMENT YEAR 2007-08 AS INITIAL AS SESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA . THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF M/S VELAYUDHASWAMY SPINNING MI LLS VS ACIT, 231 ITR 368. RESPECTFULLY, FOLLOWING THE SAM E, THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE PROFIT S U/S 80IA(5) AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCES OF INCOME OF THE ASSESSEE AND ONLY THE LOSSES OF THE YEARS BEGINNING FROM THE INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD A ND NOT LOSSES OF EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THIS GROUND OF APPEAL I S ALLOWED. 8. NO SPECIFIC ERROR IN THE ORDER OF THE LD. CIT(A) C OULD BE POINTED OUT BY THE LD. DR. THE LD. D.R. ALSO COULD NOT FIL E ANY MATERIAL BEFORE US TO SHOW THAT THE ORDER OF THE HON'BLE HIGH COURT RELYING ON WHICH THE LD. CIT(A) GRANTED RELIEF TO THE ASSESSEE WAS V ARIED IN APPEAL BY THE HON'BLE SUPREME COURT. WE, THEREFORE, DO NOT FI ND ANY GOOD REASONS TO INTERFERE WITH THE ORDERS OF THE LD. CIT (A), WHICH STAND CONFIRMED AND THE GROUNDS OF APPEALS TAKEN BY THE R EVENUE ARE DISMISSED. I.T.A.NOS. 1730 & 1731/MDS/11 :- 6 -: 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2012. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 7 TH MARCH, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR