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

ITA 2040/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8136 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 04-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: T BANUSEKAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . !' , # $% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2040/MDS/2016 & '& /ASSESSMENT YEAR : 2013-14 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUPUR. V. M/S.DOLLAR APPARELS, NO.13, SIXTY FEET ROAD, KUMARANANDAPURAM, TIRUPUR 641 602. PAN: AABFD 8592 K ( () /APPELLANT) ( *+() /RESPONDENT) () , - /APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT *+(),- /RESPONDENT BY : SHRI T.BANUSEKAR, C.A. ,.# /DATE OF HEARING : 22.09.2016 /0' ,.# /DATE OF PRONOUNCEMENT : 21.10.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) -3, COIMBATORE DATED 28.03.2016 AND PERTAINS TO ASS ESSMENT YEAR 2013-14. 2 I.T.A. NO.2040/MDS/2016 2. SHRI SHIVA SRINIVAS, THE LEARNED DEPARTMENT REPR ESENTATIVE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED INTEREST FROM THE BANK ON THE FIXED DEPOSI TS TO THE EXTENT OF RS.6,51,70,090/-. HOWEVER, THE ASSESSEE OFFERED THI S INCOME UNDER THE HEAD BUSINESS. THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE DEPOSITS ON THE FIXED DEPOSITS WAS MADE OU T OF THE BUSINESS INCOME AND THE DEPOSITS WERE DISCLOSED AS CAPITAL A SSET IN THE BALANCE SHEET. THEREFORE, THE INTEREST INCOME WAS SHOWN AS BUSINESS INCOME IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER AFTER CONSIDERING THE CLAIM OF THE ASSESSEE FOUND THAT THE INTEREST FROM THE FIXED DEPOSIT HAS TO BE CLASSIFIED AS INCOME FROM OTHER SOURCES. HENC E, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF TH E ACT IN RESPECT OF THE INTEREST INCOME. HOWEVER, ON APPEAL BY THE ASSESSEE , THE CIT(A) FOUND THAT THE INCOME FROM WIND MILL HAS TO BE INCLUDED I N THE GROSS TOTAL INCOME OF THE ASSESSEE AND ELIGIBLE FOR DEDUCTION U NDER SECTION 80IA. ACCORDING TO THE LEARNED REPRESENTATIVE, THE ELIGIB LE INCOME HAS TO BE COMPUTED AS PROVIDED UNDER SECTION 80AB OF THE INCO ME TAX ACT BY ALLOWING ALL DEDUCTIONS. IF THE INTEREST INCOME WHI CH IS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES IS EXCLUDE D FROM THE TOTAL INCOME, THEN, THERE WILL BE A LOSS. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE 3 I.T.A. NO.2040/MDS/2016 FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. THEREF ORE, THE CIT(A) IS NOT JUSTIFIED IN OBSERVING THAT THERE WAS A POSITIV E INCOME. THE ASSESSEE IGNORED THE LOSS SUFFERED IN EXPORT OF MAN UFACTURING GOODS. ACCORDING TO THE LEARNED REPRESENTATIVE, THE LOSS S UFFERED CANNOT BE IGNORED IN VIEW OF SECTION 80AB OF THE ACT. 3. ON THE CONTRARY, SHRI T.BANUSEKAR, THE LEARNED R EPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS POSITI VE INCOME FROM WIND MILL. THE WIND MILL UNIT OF THE ASSESSEE WHICH GENERATES ELECTRICITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. REFERRING TO SECTION 80IA (5) OF THE ACT, THE LEARNED REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT THE WIND MILL UNIT HAS TO BE TAKEN A S THE ONLY SOURCE OF THE INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPU TING THE ELIGIBLE PROFIT. REFERRING TO THE JUDGMENT OF THE APEX COURT IN CIT VS. CANARA WORKSHOPS (P) LTD. [1986] 161 ITR 320 (SC), THE LEA RNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHIL E CONSIDERING THE PROVISIONS OF SECTION 80E OF THE ACT, THE APEX COUR T FOUND THAT IT WAS NEVER INTENDED THAT THE INCOME EARNED BY AN INDUSTR Y SHOULD BE LOST OR DIMINISHED BECAUSE OF A LOSS SUFFERED BY SOME OTHER INDUSTRY. THE SUPREME COURT FURTHER OBSERVED THAT IT MAKES NO DIF FERENCE THAT THE OTHER INDUSTRY IS ALSO A PRIORITY INDUSTRY. THE CO- EXISTENCE OF TWO 4 I.T.A. NO.2040/MDS/2016 INDUSTRIES IN COMMON OWNERSHIP WAS NOT INTENDED BY PARLIAMENT TO RESULT IN THE MISFORTUNE OF ONE BEING VISITED ON TH E OTHER. REFERRING TO PARAGRAPH 7 OF THE APEX COURT JUDGMENT, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE SUPREME COURT FURTH ER OBSERVED THAT IT WAS SUFFICIENT TO INDICATE THAT A DISTINCTION MUST BE DRAWN BETWEEN A CASE WHERE THE LOSS OR UNABSORBED DEPRECIATION PERT AINS TO THE SAME INDUSTRY WHOSE PROFITS AND GAINS ARE THE SUBJECT OF RELIEF UNDER SECTION 80E AND A CASE WHERE THE LOSS OR UNABSORBED DEPRECI ATION RELATES TO INDUSTRIES OTHER THAN THE ONE WHOSE PROFITS AND GAI NS CONSTITUTE THE SUBJECT OF RELIEF. IN VIEW OF THIS OBSERVATION OF T HE APEX COURT, ACCORDING TO THE LEARNED REPRESENTATIVE, IT CANNOT BE THE INTENTION OF THE PARLIAMENT TO SET OFF THE LOSS SUFFERED BY ONE UNIT OF THE ASSESSEE AGAINST THE PROFIT OF THE WIND MILL UNIT. 4. REFERRING TO THE JUDGMENT OF THE DELHI HIGH COUR T IN CIT VS. DEWAN KRAFT SYSTEM (P) LTD. [2008] 297 ITR 305 (DEL .), THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADJUSTMENT IN THE CASE BEFORE THE DELHI HIGH C OURT, THE PROFIT OF THE ELIGIBLE UNIT AGAINST THE LOSSES OF THE OTHER U NIT. THE DELHI HIGH COURT FOUND THAT IN VIEW OF THE OVERRIDING PROVISIO NS OF SECTION 80IA (7) DEDUCTION UNDER SECTION 80IA CANNOT BE RESTRICTED B Y ADJUSTING THE 5 I.T.A. NO.2040/MDS/2016 PROFIT OF THE ELIGIBLE UNIT AGAINST THE LOSS OF THE OTHER UNIT OF THE ASSESSEE. REFERRING TO ANOTHER JUDGMENT OF THE HIGH COURT IN THE CASE OF CIT VS. SONA KOYO STEERING SYSTEMS LTD. [2010] 3 21 ITR 463 (DEL.), THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITT ED THAT THE DELHI HIGH COURT AFTER CONSIDERING THE JUDGMENT OF ITS EA RLIER JUDGMENT IN DEWAN KRAFT SYSTEM (P) LTD. (SUPRA) FOUND THAT WHIL E COMPUTING THE ELIGIBLE PROFIT UNDER SECTION 80IA(6), THE LOSS OF ONE UNIT OF THE INDUSTRIAL UNDERTAKING CANNOT BE SET OFF AGAINST TH E PROFIT OF ANOTHER INDUSTRIAL UNDERTAKING. THE DELHI HIGH COURT FURTHE R FOUND THAT IN VIEW OF THE JUDGMENT OF THE APEX COURT, THE GROSS TOTAL INCOME OF THE ASSESSEE HAS TO BE DETERMINED WITHOUT ADJUSTING THE LOSSES AND THAT IF THE GROSS TOTAL INCOME OF THE ASSESSEE SO DETERMINE D TURNS OUT TO BE NIL, THEN THE ASSESSEE WOULD NOT BE ENTITLED TO DED UCTION UNDER CHAPTER 6A OF THE INCOME TAX ACT. A SIMILAR VIEW WA S ALSO TAKEN BY ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. MODI XE ROX LTD. [2012] 344 ITR 411 (ALL). REFERRING TO UNREPORTED JUDGMENT OF THE APEX COURT IN DEWAN KRAFT SYSTEM (P) LTD., THE LEARNED REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF DEWAN KRAFT SYSTEM (P) LTD. (SUPRA) WAS DISMISSED. ONCE THE LOS S SUFFERED BY THE ASSESSEE IN ANOTHER UNIT WAS NOT SET OFF AGAINST TH E PROFIT OF THE 6 I.T.A. NO.2040/MDS/2016 WINDMILL UNIT, THEN THE ASSESSEE IS HAVING PROFIT O N THE WIND MILL DIVISION. HENCE, THE ASSESSEE IS ELIGIBLE FOR DEDUC TION UNDER SECTION 80IA OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSES SING OFFICER FOUND THAT THE LOSS SUFFERED IN ANOTHER UNIT HAS TO BE SE T OFF AGAINST THE PROFIT OF THE WIND MILL UNIT. THE TOTAL INCOME TURNED TO B E POSITIVE AFTER INCLUSION OF THE INTEREST INCOME ON THE FIXED DEPOS ITS TO THE EXTENT OF RS.6,51,70,090/-. THE CIT(A) FOUND THAT THE LOSS SU FFERED BY THE ASSESSEE IN ANOTHER UNIT CANNOT BE SET OFF AGAINST THE PROFIT OF THE WIND MILL UNIT SINCE THE WIND MILL UNIT HAS PROFIT. THE CIT(A) FURTHER FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IA OF THE ACT. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER TH E ASSESSEE COULD IGNORE THE LOSS SUFFERED IN ONE UNIT WHILE CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSEE CLAIMED BEFOR E THIS TRIBUNAL THAT IN VIEW OF SECTION 80IA (5) OF THE ACT, THE ELIGIBL E BUSINESS NAMELY WIND MILL UNIT HAS TO BE CONSTRUED AS ONLY SOURCE OF INC OME OF THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80IA. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE PLACED HIS RELIANCE ON THE JUDGMEN T OF THE DELHI HIGH 7 I.T.A. NO.2040/MDS/2016 COURT IN DEWAN KRAFT SYSTEM (P) LTD. (SUPRA) AND SO NA KOYO STEERING SYSTEMS LTD.(SUPRA). 6. WE FIND THAT THE MADRAS HIGH COURT IN MEPCO INDU STRIES LTD. IN ITA NOS. 657 & 658/2007 DATED 20.11.2012 EXAMINED T HIS ISSUE AND AFTER PLACING RELIANCE ON THE JUDGMENT OF THE APEX COURT IN SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER [2008] 299 ITR 444 (SC) FOUND THAT THE LOSS SUFFERED BY THE ASSESSEE IN ONE UNIT HAS T O BE SET OFF AGAINST THE PROFIT OF THE ASSESSEE FOR THE PURPOSE OF ELIGI BLE DEDUCTION UNDER SECTION 80IA. 7. IN VIEW OF THE JUDGMENT OF THE JURISDICTIONAL HI GH COURT IN MEPCO INDUSTRIES LTD. (SUPRA), THE JUDGMENT OF DELHI HIG H COURT IN DEWAN KRAFT SYSTEM (P) LTD. (SUPRA) AND SONA KOYO STEERIN G SYSTEMS LTD.(SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF T HIS CASE. BY FOLLOWING THE JUDGMENT OF THE MADRAS HIGH COURT IN MEPCO INDU STRIES LTD. (SUPRA) AND THE JUDGMENT OF THE APEX COURT IN SYNCO INDUSTR IES LTD. (SUPRA), THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE CIT(A). ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THAT OF TH E ASSESSING OFFICER IS RESTORED. 8 I.T.A. NO.2040/MDS/2016 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED ON 21 ST OCTOBER, 2016 AT CHENNAI. SD/- SD/- ( . . !' ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) # /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 1 /DATED, THE 21 ST OCTOBER, 2016. SP. , *.!2 32'. /COPY TO: 1. () /APPELLANT 2. *+() /RESPONDENT 3. 4. ( )/CIT(A) 4. 4. /CIT, 5. 25 *. /DR 6. & 6 /GF.