The ACIT, Kheda Circle, Kheda V. M/s. Chhotabhai Jethabhai Patel & Co., Kheda

ITA 1849/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0946 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-11-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 08-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 80IA; 201; 143(2); 13; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER THE ACIT, KHEDA CIRCLE, NADIAD, DIST: K HE D A - 387002 (APPELLANT) VS M/S. CHHOTABHAI JETHABHAI PATEL & CO., MOTA PORE NADIAD, DIST. KHEDA - 387001 PAN: AADFLP1222A (RESPONDENT) REVENUE BY : S H RI RAJDEEP SINGH , SR. D . R. ASSESSEE BY: SHRI BANDISH SOPARKAR , A.R. DATE OF HEARING : 20 - 11 - 2 019 DATE OF PRONOUNCEMENT : 05 - 12 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEM BER : - THIS REVENUE S APPEAL FOR A.Y. 2013 - 14 , ARI SES FROM ORDER OF THE CIT(A) - 2, VADODARA DATED 04 - 05 - 2 017 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. BOTH THE GROUNDS OF APPEAL OF THE REVENUE ARE PERTAINED TO THE SOLITARY ISSUE OF ALLOWING DEDUCTION U/S. 80IA(4) TO THE EXTENT OF INCOME OF ELIGIBLE I T A NO . 1849 / A HD/20 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 1849 /AHD/20 17 A.Y. 2013 - 14 PAGE NO ACIT VS . M/S. CHHOTABHAI JETHABHAI PATEL & CO. 2 BUSINESS I.E. RS. 435 , 59 , 637/ - IN THE YEAR UNDER CONSIDERATION WITHOUT ADJUSTING THE LOSSES/DEPRECIA TION OF EARLIER YEARS BROUGHT FORWARD NOTIONAL LOSSES SINCE TH E ASSESSEE HAS CHOSEN THE ASSESSMENT YEAR 2012 - 13 AS THE INITIAL ASSESSMENT YEAR. 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLARING INCOME AT RS. 16 , 06 , 36 , 998/ - WAS FILED ON 5TH SEP, 2013. THE CASE OF THE ASSESSEE WAS SUBJECT TO SCRUTINY ASSESSME NT AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 2 ND SEP, 2014. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF BIDI. DURING THE COURSE OF AS SESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUC TION U/S. 80IA IN RESPECT OF WIND MILL SET UP BY THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT DEDUCTION CLAIMED BY THE ASSESSEE WAS SUBJECT TO THE PROVISIONS OF SECTION 80IA(5) OF THE ACT AND STATED THAT NOTIONAL BROUGHT FORWARD LOSSES OF EARL IER YEARS AMOUNTING TO RS. 15 , 53 , 78 , 166/ - TREATING THE BUSINESS OF WIND MILL AS THE ONLY SOURCE OF INCOME NEEDS TO BE ADJUSTED AGAINST TH E PROFIT OF R S. 435 , 59 , 637/ - FOR THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS EE IN ITS SUBMISSION REPRODUCED AT PAGE NO S . 6 TO 24 OF THE ASSESSMENT ORDER H AS SUBMITTED THAT DEDUCTION U/S. 80IA HAS BEEN CLAIMED CORRECTLY AND PLACED RELIANCE ON A NUMBER OF JUDICIAL PRONOUNCE MENTS. THE ASSESSEE HAS ALSO REFERRED CIRCULAR NO. 1 OF 201 6 DATED 15 TH FEB, 2016 ISSUED BY CBDT WHICH CLARIFIES OPTION AVAILABLE TO THE ASSESSEE FOR OPTING INITIAL ASSESSMENT YEAR TO CLAIM DEDUCTION U/S. 80IA. THE ASSESSING OFFICER HAS NOT AGREED WITH T H E CON T ENTI O N OF THE ASSESSE E AND STATED THAT PROFIT FOR TH E YEAR UNDER CONSIDERATION FROM WIND MILL HAS TO BE ADJUSTED AGAINST THE NOTIONAL B ROUGHT FORWARD LOSSES AS PER PROVISIONS OF I.T.A NO. 1849 /AHD/20 17 A.Y. 2013 - 14 PAGE NO ACIT VS . M/S. CHHOTABHAI JETHABHAI PATEL & CO. 3 SECTION 80IA(5) OF THE ACT. CONSEQUENTLY , THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. 4 . AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE TH E LD. CIT(A). T HE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AFTER FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2012 - 13 DECIDED BY HIS PREDECESSOR IN THE CASE OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 4.1.2 IN ORDER TO SETTLE THE CONTROVERSY AND ALSO TO AVOID LITIGATION, CBDT HAS ALSO ISSUED A CIRCULAR CLARIFYING THE MEANING OF TERM 'INITIAL ASSESSMENT YEAR' VIDE CIRCULAR NO. 1 OF 2016 DATED 15.0 2.2016 WHICH IS REPRODUCED AS UNDER: - 'SECTION 80 - IA OF THE INCOME - TAX ACT, 1961 ('ACT'), AS SUBSTITUTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 1 - 4 - 2000, PROVIDES FOR DEDUCTION OF AN AMOUNT EQUAL TO 100 % OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKI NG OR ENTERPRISE FROM AN ELIGIBLE BUSINESS (AS REFERRED TO IN SUB - SECTION (4) OF - THAT -- SECTION) IN ACCORDANCE WITH THE PRESCRIBED PROVISIONS. SUB SECTION (2) OF SECTION 80 - IA FURTHER PROVIDES THAT THE AFORESAID DEDUCTION CAN BE CLAIMED BY THE ASSESSEE, AT HIS OPTION, FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS (TWENTY YEARS IN CERTAIN CASES) BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING COMMENCES OPERATION, BEGINS DEVELOPMENT OR STARTS PROVIDING SERVICES ETC. AS STIPULATED THEREIN. S UB - SECTION (5) OF SECTION 80 - IA FURTHER PROVIDES AS UNDER 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION N OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB - SECTION (1) APPLY SHALL, FOR THE PURPOSES OF D ETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB - SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT 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 UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE'. IN THE ABOVE SUB - SECTION, WHICH PRESCRIBES THE MANNER OF DETERMINI NG THE QUANTUM OF DEDUCTION, A REFERENCE HAS BEEN MADE TO THE TERM 'INITIAL ASSESSMENT YEAR'. IT HAS BEEN REPRESENTED THAT SOME ASSESSING OFFICERS ARE INTERPRETING THE TERM 'INITIAL ASSESSMENT YEAR' AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/ MANUFACTURING ACTIVITY HAD COMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATION ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLEAR MANDATE PROVIDED UNDR SUB - SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEA R FROM WHICH IT DESIRES TO CLAIM DEDUCTION OUT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS. THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS ABUNDANTLY CLEAR FROM SUB - SECTION (2) THAT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S 80 - IA HAS THE OPTION TO CHOOSE THE INITIAL/ FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT OF A SLAB OF FIFTEEN ( OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB - SECTION. IT IS HEREBY CLARIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPTED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM I.T.A NO. 1849 /AHD/20 17 A.Y. 2013 - 14 PAGE NO ACIT VS . M/S. CHHOTABHAI JETHABHAI PATEL & CO. 4 DEDUCTION U/S 80 - IA FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM 'INITIAL ASSESSMENT YEAR 1 WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 80 - IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DEDUCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. THE ASSESSING OFFICERS ARE, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 80 - IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFTER BEING SATISFIED THAT AIL THE PRESCRIBED CONDITIONS APPLICAB LE IN A PARTICULAR CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DEDUCTION U/S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INTERPRETING 'INITIAL ASSESSMENT YEAR' AS MENTIONED IN SUB - SECTION (5) OF THAT SECTION FOR WHICH TH E STANDING COUNSELS/D.R.S BE SUITABLY INSTRUCTED. THE ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS CONCERNED.' AFTER CONSIDERING THE ABOVE MENTIONED CIRCULAR, HON'BLE MADRAS HIGH COURT VIDE ORDER DATED 01.03.2016 IN THE CASE OF CIT VS. M/S. G.R .T. JEWELLERS (INDIA) PVT. LTD. CONTAINED IN TCA NO. 176 OF 2016 HAVE HELD THAT LOSSES/UNABSORBED DEPRECIATION PERTAINING TO WIND MILL, WHICH WERE SET OFF IN THE EARLIER YEAR AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE, CANNOT BE NOTIONALLY BROUGHT FORWA RD AND AGAIN SET OFF AGAINST THE INCOME OF ELIGIBLE BUSINESS OF THE YEAR WHICH WAS CHOSEN AS 'INITIAL ASSESSMENT YEAR' FOR CLAIM OF DEDUCTION U/S. 80IA. I ALSO FIND THAT SLP FILED BY THE DEPARTMENT AGAINST THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE L EAD CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) HAS ALSO BEEN DISMISSED AND THE SAME IS REPORTED AS ACIT VS. VELAYUDHASWAMY SPINNING MILLS (P) LTD. (2016) 76 TAXMANN.COM 176 (SC). 4.1.3. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AND LEGAL POSIT ION, IT IS CRYSTAL CLEAR THAT LOSSES/DEPRECIATION OF THE WIND MILL BUSINESS FOR THE YEARS PRIOR TO THE 'INITIAL ASSESSMENT YEAR' WHICH HAD BEEN ALREADY SET OFF AGAINST THE INCOME OF OTHER BUSINESS, CANNOT BE BROUGHT FORWARD NOTIONALLY AND AGAIN SET OFF AGA INST THE INCOME OF ELIGIBLE BUSINESS WHICH IS WIND MILL BUSINESS OF GENERATING ELECTRICITY IN THE CASE OF APPELLANT. ACCORDINGLY, I HOLD THAT ACTION OF THE ASSESSING OFFICER IS NOT AS PER THE PROVISIONS OF LAW AND HENCE HE IS DIRECTED TO ALLOW THE DEDUCTIO N U/S. 80IA(4) TO THE EXTENT OF INCOME OF ELIGIBLE BUSINESS I.E. RS.3,61,15,115/ - IN THE YEAR UNDER CONSIDERATION WITHOUT ADJUSTING THE LOSSES/DEPRECIATION OF EARLIER YEARS BROUGHT FORWARD NOTIONALLY SINCE THE APPELLANT HAS CHOSEN THE YEAR UNDER CONSIDERAT ION AS THE 'INITIAL ASSESSMENT YEAR'. THUS, APPELLANT SUCCEEDS IN RESPECT OF GROUND NOS. 1 TO 4.' 4.1.1. SINCE THE FACTS ARE IDENTICAL IN THIS YEAR ALSO, I FOLLOWING THE APPELLATE ORDER OF A.Y. 2012 - 13 AS MENTIONED ABOVE, HOLD THAT THE LOSSES/UNABSORBED DE PRECIATION OF WIND MILLS BUSINESS FOR THE YEARS PRIOR TO THE 'INITIAL ASSESSMENT YEAR' WHICH HAD BEEN ALREADY SET OFF AGAINST THE INCOME OF OTHER BUSINESS, CANNOT BE BROUGHT FORWARD NOTIONALLY AND AGAIN SET OFF AGAINST THE INCOME OF ELIGIBLE BUSINESS WHICH IS WIND MILL BUSINESS OF GENERATING ELECTRICITY IN THE CASE OF APPELLANT. ACCORDINGLY, I HOLD THAT ACTION OF THE ASSESSING OFFICER IS NOT AS PER THE PROVISIONS OF LAW AND HENCE HE IS DIRECTED TO ALLOW THE DEDUCTION U/S. 80IA(4) TO THE EXTENT OF INCOME OF ELIGIBLE BUSINESS I.E. RS.4,35,59,637/ - IN THE YEAR UNDER CONSIDERATION WITHOUT ADJUSTING THE LOSSES/DEPRECIATION OF EARLIER YEARS BROUGHT FORWARD NOTIONALLY SINCE THE APPELLANT HAS CHOSEN THE A.Y. 2012 - 13 AS THE 'INITIAL ASSESSMENT YEAR'. THUS, APPELLANT SUCCEEDS IN RESPECT OF GROUND NOS. 1 TO 5. 5. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS SUBMITTED COPY OF CBDT CIRCULAR NO. 1 OF 2016 (F.NO. 200/31/2015 - ITA - I) DATE D 15 - 02 - 2016. WE HAVE GONE THROUGH T H E ABOVE REFERRED CIRCULAR SUBMITTED BY THE LD. I.T.A NO. 1849 /AHD/20 17 A.Y. 2013 - 14 PAGE NO ACIT VS . M/S. CHHOTABHAI JETHABHAI PATEL & CO. 5 COUNSEL WHICH IS ALSO ELABORATED IN THE FINDINGS OF LD. CIT(A) AS CITED ABOVE IN THIS ORDER. IT IS CATEGORICALLY EXPLAINED IN THE CIRCULAR THAT TO CLAIM DEDUCTION U/S. 80 IA , THE ASSESSEE HAS OPTION TO CHOOSE THE INITIAL YEAR FROM WHICH IT INTENDS TO CLAIM DEDUCTION FOR 10 CONSECUTIVE YEARS OUT OF PERIOD OF 15 YEARS. 15 YEARS IS THE OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE DEVELOP AND BEGIN TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. THE CO - ORDINATE B ENCH OF THE ITAT IN THE CASE OF THE JIVRAJ TEA & INDUSTRIES LTD. VS. ACIT (2014) 42 TAXMAN.COM 462 (AHD. TRIB.) HAS ALREADY ADJUDICATED SUCH ISSUE IN FAVOUR OF THE ASSESSEE. TH E RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - JIVRAI TEA & INDUSTRIES LTD, V/S ACIT F20141 42 TAXMANN.COM 462 (AHD - TRIB.) SECTION 80 - IA OF THE INCOME - TAX ACT, 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKING S (COMPUTATION OF DEDUCTION) - WHETHER WHEN AN ASSESSEE EXERCISES OPTION OF CHOOSING INITIAL ASSESSMENT YEAR AS CULLED OUT IN SUB - SECTION (2) OF SECTION 80 - IA FROM WHICH IT CHOOSES ITS 10 /EARS OF DEDUCTION OUT OF 15 YEARS/ THEN ONLY LOSSES OF YEARS STARTI NG FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD; LOSS PRIOR TO INITIAL ASSESSMENT YEAR WHICH HAS ALREADY BEEN SET - OFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO PERIOD OF TEN YEARS FROM INITIAL ASSESSMENT YEAR - HELD, YES - WHETHER WHERE AS SESSEE HAD NOT SUFFERED ANY LOSS IN RELEVANT YEARS AND BROUGHT FORWARD LOSS OR DEPRECIATION DID NOT RELATE TO INITIAL YEARS, SAME COULD NOT BE REDUCED FOR DETERMINING AMOUNT FOR WHICH DEDUCTION IS TO BE ALLOWED UNDER SECTION 80 - IA - HELD, YES [PARA 28] TIN FAVOUR OF ASSESSEE] AFTER CONSIDERING THE CONTENTS OF THE CIRCULAR AND THE FINDING OF CO - ORDINATE BENCH AS ABOVE, IT IS CLEAR THAT ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80IA FOR 10 CONSECUTIVE ASSESSMENT YEARS BEGINNING FROM THE YEAR IN RESPECT O F WHICH IT HAS EXERCISED SUCH OPTION SUBJECT TO FULFILLMENT OF CONDITION PRESCRIBED IN THE SECTION. FURTHER , IT IS CLEAR BEFORE THE DECISION OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. G.R.T. JEWELER INDIA PVT. LTD. AS REFERRED IN THE DECISION OF LD. CIT(A) AFTER REFERRING BOARD S CIRCULAR HELD THAT LOSSES/UNABSORBED DEPRECIATION PERTAINING TO WIND MILL WHICH WERE SET OFF IN THE EARLIER ASSESSMENT YEARS AGAINST OTHER BUSINESS INCOME OF THE I.T.A NO. 1849 /AHD/20 17 A.Y. 2013 - 14 PAGE NO ACIT VS . M/S. CHHOTABHAI JETHABHAI PATEL & CO. 6 ASSESSEE , CANNOT BE NOTION ALLY BROUGHT FORWARD AND AGAIN SET O F F AGAINST THE INCOME OF ELIGIBLE BUSINESS OF THE YEAR WHICH WAS CHOSEN AS INITIAL ASSESSMENT YEAR FOR CLAIM OF DEPRECIA TION U/S. 80IA. IN THE LIGHT OF THE ABOVE FACTS AND FINDING, WE DO NOT FIND ANY SUBSTANCE IN THE APPEAL OF THE REVENUE, THEREFORE , BOTH THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 05 - 12 - 201 9 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JU DICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 05 /12 /2019 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,