ACIT, Tiruppur V. M/s. Everady Spinning Mills Ltd., Tiruppur

ITA 1774/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57783 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Source of fund; Reasonable cause; Condonation of delay; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMB ER I.T.A. NOS. 1774 & 1775/MDS/2011 A.YS. 2007-08 TO 2008-09 THE ASSTT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE TIRUPUR. (APPELLANT) VS. M/S EVER E ADY SPINNING MILLS LTD NO. 16/23, JYOTHI THEATRE ROAD TIRUPUR PAN : AAACE 4788 J (RESPONDENT) APPELLANT BY : SHRI R.B. NAIK, CIT, DR RESPONDENT BY : SHRI T. B ANUSEKAR, C.A DATE OF HEARING : 05.01.2012 DATE OF PRONOUNCEMENT : 05 .01.2012 O R D E R PER N.S. SAINI, A.M :- THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE SEPARATE ORDERS DATED 21.07.2011 AND 10.07.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-II, COIMBATORE , FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. ITA NOS. 1774 & 1775/MDS/2011 2 2. THE APPEALS FILED BY THE DEPARTMENT ARE BARRED B Y LIMITATION BY 10 DAYS IN THE ASSESSMENT YEAR 2007-08 AND BY 19 DAYS IN THE ASSESSMENT YEAR 2008-09. THE REVENUE HAS FILED COND ONATION PETITIONS AND THE LD. A.R. DID NOT HAVE ANY OBJECTI ON TO THE CONDONATION OF DELAY IN FILING THE APPEALS BY THE R EVENUE AND THE HEARING OF THE APPEALS ON MERITS. WE ARE SATISFIED THAT THERE WAS REASONABLE CAUSE FOR NOT FILING THE APPEALS IN TIME BY THE DEPARTMENT. HENCE WE CONDONE THE DELAY AND ADMIT T HE APPEALS FOR HEARING. 3. AT THE VERY OUTSET OF THE HEARING OF THE APPEALS , THE LD. D.R. SUBMITTED THAT THE FACTS AND ISSUE INVOLVED IN BOTH THE APPEALS ARE IDENTICAL. BOTH THE CASES WERE ARGUED TOGETHER BEFO RE US. THEREFORE, FOR THE SAKE OF CONVENIENCE, BOTH THE AP PEALS ARE DISPOSED OF BY THIS COMMON ORDER. 4. IN BOTH THE APPEALS, THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL: ITA NOS. 1774 & 1775/MDS/2011 3 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE 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 TH E PLAIN MEANING OF TH WORD INITIAL YEAR MEANS THE YEAR IN WHICH THE MANUFACTURE OR PRODUCTION OR OTHE R ACTIVITY BEGINS. 5. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E 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 ITA NOS. 1774 & 1775/MDS/2011 4 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 WI TH AN NON OBSTANTE CLAUSE, THE RESTRICTION PUT IN SUB- SECTION 5 WILL PREVAIL AND DEDUCTION U/S 80IA OF TH E ACT HAS 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 OFF BY THE HON'BLE SUPREME COURT. 5. THE ONLY ISSUE INVOLVED IN BOTH THE APPEALS IS T HAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESS EE IS ENTITLED TO DEDUCTION U/S 80IA OF THE ACT ON WIND MILL. 6. THE LD. D.R. SHRI R.B. NAIK RELIED ON THE GROUND S OF APPEAL TAKEN BY THE REVENUE IN THE APPEALS. ITA NOS. 1774 & 1775/MDS/2011 5 7. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE SHRI T. BANUSEKAR FILED BEFORE US COPY OF THE HON'BLE JURIS DICTIONAL HIGH COURT ORDER IN THE CASE OF M/S SRI VELAYUDHASAMY SPINNING MILLS [P] LTD VS. ACIT REPORTED IN [2010] 231 CTR [MAD] 3 68 AND SUBMITTED THAT THE ISSUE AT HAND WAS SQUARELY COVER ED BY THE DECISION OF THE HIGH COURT IN FAVOUR OF THE ASSESSE E. FURTHER, THE SAME IS ALSO EVIDENT FROM THE GROUNDS OF APPEAL OF THE REVENUE WHEREIN THE REVENUE HAS TAKEN A GROUND THAT THE S LP WHICH HAS BEEN FILED AGAINST THE JUDGMENT OF THE HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF M/S SRI VELAYUDHASAMY SPINN ING MILLS [P] LTD AND OTHERS [SUPRA] IS YET TO BE DISPOSED OFF BY THE HON'BLE SUPREME COURT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS RUNNING SPINNING MILL AND ALSO INSTALLED THREE WIND MILLS, FIRST IN ASSESSMENT YEAR 2003-04, SECOND IN ASSESSMENT YEAR 2005-06 AND THE THIRD IN ASSESSMENT YEAR 2006-07. ALTHOUGH THE YEAR OF COMM ENCEMENT WAS ITA NOS. 1774 & 1775/MDS/2011 6 ASSESSMENT YEAR 2003-04, THE ASSESSEE OPTED ASSESSM ENT YEAR 2007- 08 AS INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CL AIMING DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF WINDMILLS. INITI AL LOSS FROM WINDMILLS WAS SET OFF AGAINST PROFIT OF SPINNING MI LLS DIVISION. THE ASSESSEE DID NOT CLAIM DEDUCTION U/S 80IA OF THE AC T DURING THE YEARS WHERE THE ASSESSEE SUFFERED LOSS. THE ASSESSING OFFICER HELD THAT THE INITIAL YEAR SHOULD BE TAKEN AS THE YEAR OF COMMENCEMENT OF BUSINESS AND NOT THE YEAR OF CLAIM O F DEDUCTION AND THAT UNABSORBED DEPRECIATION OF THE EA RLIER YEARS WHICH HAD ALREADY BEEN ABSORBED CANNOT BE NOTIONALLY CAR RIED FORWARD AND TAKEN INTO CONSIDERATION FOR COMPUTING DE DUCTION U/S 80IA OF THE ACT. 9. IN APPEAL, THE LD. CIT(A) HELD AS UNDER: I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE ASS ESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE ASSES SEE RUNS A SPINNING MILL AND HAS ALSO INSTALLED THREE WIND MIL LS VIZ. FIRST IN ASSESSMENT YEAR 2003-04, SECOND IN ASSESSMENT YE AR 2005- 06 AND THE THIRD IN ASSESSMENT YEAR 2006-07. THOUG H THE ITA NOS. 1774 & 1775/MDS/2011 7 YEAR OF COMMENCEMENT WAS THE ASSESSMENT YEAR 2003-0 4, THE ASSESSEE HAS OPTED ASSESSMENT YEAR 2007-08 AS INITI AL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTI ON U/S 80IA OF THE ACT IN RESPECT OF WINDMILLS I AND II. INITIALLY THE LOSS FROM WINDMILLS WAS SET OFF AGAINST PROFIT OF S PINNING MILL DIVISION. THE ASSESSEE HAD NOT CLAIMED DEDUCTION U /S 80IA OF THE ACT DURING THOSE YEARS WHEN IT RESULTED IN LOSS . THE ASSESSEE HAS OPTED ASSESSMENT YEAR 2007-08 AS INITI AL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTI ON U/S 80IA. RESPECTFULLY, FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SRI VELAYUDHASAMY SPINNING MILLS [P] LTD AND OTHERS [SU PRA], THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE PR OFITS U/S 80IA(5) OF THE ACT AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCES OF INCOME OF THE ASSESSEE AND ONLY THE LOSS ES OF THE YEARS BEGINNING FROM THE INITIAL ASSESSMENT YEA R ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF EARLIER YEA RS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THIS GROUND OF APPEAL IS ALLOWED. 10. NO SPECIFIC ERROR IN THE ORDER OF THE LD. CIT(A ) COULD BE POINTED OUT BY THE DEPARTMENTAL REPRESENTATIVE. TH E LD. D.R. ALSO COULD NOT FILE 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 ITA NOS. 1774 & 1775/MDS/2011 8 THE ASSESSEE WAS VARIED IN APPEAL BY THE HON'BLE SU PREME COURT. WE, THEREFORE, DO NOT FIND ANY GOOD REASONS TO INTE RFERE WITH THE ORDER OF THE LD. CIT(A), WHICH STANDS CONFIRMED AND THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 5 TH JANUARY, 2012. SD/- SD/- (HARI OM MARATHA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH JANUARY, 2012. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE