ACIT, Tiruppur V. M/s. Viking Textiles (P) Ltd., Tiruppur

ITA 1777/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57782 (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. NO. 1777/MDS/2011 A.Y. 2007-08 THE ASSTT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE TIRUPUR. (APPELLANT) VS. M/S VIKING TEXTILES [P] LTD NO. 505, AVANASHI ROAD TIRUPUR PAN : AAACV 7564 P (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 :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER DATED 21.07.2011 OF COMMISSIONER OF INCOME TAX (APP EALS)-II, COIMBATORE, FOR THE ASSESSMENT YEAR 2007-08. ITA NOS. 1777/MDS/2011 2 2. THE APPEAL FILED BY THE DEPARTMENT IS BARRED BY LIMITATION BY 19 DAYS IN THE ASSESSMENT YEAR 2007-08. THE REVENUE HAS FILED CONDONATION PETITIONS AND THE LD. A.R. DID NOT HAVE ANY OBJECTION TO THE CONDONATION OF DELAY IN FILING THE APPEAL BY TH E REVENUE AND THE HEARING OF THE APPEAL ON MERITS. WE ARE SATISF IED THAT THERE WAS REASONABLE CAUSE FOR NOT FILING THE APPEAL IN T IME BY THE DEPARTMENT. HENCE WE CONDONE THE DELAY AND ADMIT T HE APPEAL FOR HEARING. 3. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING COMMON GROUNDS OF APPEAL: 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. ITA NOS. 1777/MDS/2011 3 4 THE LEARNED CIT(A) OUGHT TO HAVE OBSERVED THAT TH E PLAIN MEANING OF THE 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 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 ITA NOS. 1777/MDS/2011 4 HON'BLE SUPREME COURT. 4. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT T HE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTIT LED TO DEDUCTION U/S 80IA OF THE ACT ON WINDMILL. 5. THE LD. D.R. SHRI R.B. NAIK RELIED ON THE GROUND S OF APPEAL TAKEN BY THE REVENUE IN THE APPEAL. 6. 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 ITA NOS. 1777/MDS/2011 5 [P] LTD AND OTHERS [SUPRA] IS YET TO BE DISPOSED OFF BY THE HON'BLE SUPREME COURT. 7. 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 AND SECOND IN ASSESSMENT YEAR 2004-05. ALTHOUGH THE YEAR OF COMMENCEMENT WAS ASSESSMENT YEAR 2003-04, T HE ASSESSEE OPTED ASSESSMENT YEAR 2007-08 AS INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA OF THE ACT I N RESPECT OF WINDMILLS. INITIAL LOSS FROM WINDMILLS WAS SET OFF AGAINST PROFIT OF SPINNING MILLS DIVISION. THE ASSESSEE DID NOT CLAI M DEDUCTION U/S 80IA OF THE ACT DURING THE YEARS WHERE THE ASSESSEE SUFFERED LOSS. THE AO 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 CARR IED ITA NOS. 1777/MDS/2011 6 FORWARD AND TAKEN INTO CONSIDERATION FOR COMPUTING DE DUCTION U/S 80IA OF THE ACT. 8. 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 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 ITA NOS. 1777/MDS/2011 7 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. 9. 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 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. ITA NOS. 1777/MDS/2011 8 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 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