Deputy Commissioner of Income-tax, V. General Industrial Controls Pvt. Ltd., Pune

ITA 2100/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0401 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 21-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTHAM BATHAM
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 2100 /PN/20 1 4 / ASSESSMENT YEAR: 20 11 - 12 THE JOINT COMMISSIONER OF INCOME TAX, THE JOINT COMMISSIONER OF INCOME TAX, RANGE 9, PUNE . / APPELLANT VS. M/S. GENERAL INDUSTRIAL CONTROLS PVT. LTD., T - 107 & 106, MIDC, BHOSARI, PUNE 411026 . / RESPONDENT PAN: AAACG6241J / APPELLANT BY : SHRI GAUTHAM BATHAM, ADDL. CIT / RESPOND ENT BY : SHRI KISHORE PHADKE / DATE OF HEARING : 21 . 1 1 .201 6 / DATE OF PRO NOUNCEMENT: 30 . 1 1 .201 6 / ORDER / ORDER PER SUSHMA CHOWLA, JM: T HIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT( A ) - V , PUNE , DATED 19 . 08 .201 4 RELATING TO ASSESSMENT YEAR 20 11 - 12 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INC OME TAX ACT, 1961 (IN SHORT THE ACT) . ITA NO . 2100 / PN /201 4 M/S. GENERAL INDUSTRIAL CONTROLS PVT. LTD. 2 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT TO INTERPRETE THE OPERATION OF SECTION 80I A (5) ONLY FORM THE YEAR OF FIRST CLAIM OF DEDUCTION U/S 80IA(1) EVEN WHEN THE ELIGIBLE BUSINESS HAD COMMENCED IN EARLIER YEARS? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) AND HON'BLE ITAT, PUNE, ON WHICH THE LD.CIT(A) PLACED RELIAN CE WAS CORRECT TO TREAT THE JUDGEMENT OF NON JURISDICTIONAL HIGH COURT AS A BINDING PRECEDENT THAT MUST BE FOLL O WED IN DISREGARD TO THE PRINCIPLE LAID ON THIS ISSUE BY THE DIVISION BENCH OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. THANE ELECTRICITY SUP PLY LTD. REPORTED IN 206 ITR 727? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U / S.80IA(4) BY CONSIDERING THE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U / S.80IA(4) OF THE ACT, IS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED DEDUCTION U / S.80IA(IV)(4) FOR IGNORING THE OPERATION OF SEC 80 IA(5)? 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDERS OF TRIBUNAL. 4. THE ONLY ISSUE WHICH ARISES IN THE APPEAL FILED BY THE REVENUE IS AGAINST 4. THE ONLY ISSUE WHICH ARISES IN THE APPEAL FILED BY THE REVENUE IS AGAINST THE ELIGIBLE PROFITS TO BE COMPUTED FOR CLAIMING THE DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN MANUFACTURE OF SEVERAL ITEMS AND WAS ALSO ENGAGED IN GENERATION OF POWER. THE ASSESSEE CLAIMED DEPRECIATION UNDER SECTION 80IA OF THE ACT. THE ASSESSING OFFICER NOTED THAT AFTER SETTING OFF OF DEPRECIATION ON WINDMILLS O N STANDALONE BASIS, THERE WAS NO POSITIVE INCOME FROM THE WINDMILLS, HENCE, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. THE ASSESSEE WAS SHOW CAUSED IN THIS REGARD AND IN REPLY, THE ASSESSEE POINTED OUT THAT IT H AD OPTED TO CLAIM THE DEDUCTION BY TAKING THE INITIAL ASSESSMENT YEAR AS ASSESSMENT YEAR 2011 - 12 AS PER SECTION 80IA(2) OF THE ACT. IT WAS FURTHER POINTED OUT THAT WHERE THE INITIAL ITA NO . 2100 / PN /201 4 M/S. GENERAL INDUSTRIAL CONTROLS PVT. LTD. 3 ASSESSMENT YEAR WAS 2011 - 12 , THEN ANY NOTIONAL UNABSORBED LOSSES PERTAINI NG TO THE EARLIER YEARS SHOULD NOT BE ADJUSTED AGAINST THE INCOME FROM ASSESSMENT YEAR 2011 - 12 . THE ASSESSING OFFICER REJECTING THE CLAIM OF ASSESSEE WAS OF THE VIEW THAT THE UNABSORBED LOSSES ON ACCOUNT OF DEPRECIATION HAD TO BE ADJUSTED AGAINST THE INCO ME FROM WINDMILL EVEN THOUGH THE SAID LOSSES IN THE RESPECTIVE YEARS WERE ADJUSTED AGAINST THE PROFIT ARISING IN THOSE YEARS. THE ASSESSING OFFICER WAS OF THE VIEW THAT NOTIONAL SET OFF OF DEPRECIATION LOSSES IS TO BE ADOPTED FOR COMPUTING THE PROFITS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. CONSEQUENTLY, THE ASSESSING OFFICER DENIED THE DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. 6. THE CIT(A) ON THE OTHER HAND, ALLOWED THE CLAIM OF ASSESSEE IN TURN, RELYING ON THE RATIO LAID DOWN BY THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. IN ITA NOS.290 TO 292/PN/2010, ORDER DATED 28.09.2011. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE REPRODUCED BY THE CIT(A) AT PAGES 8 TO 10 OF THE APPELLATE ORDER. 7. THE REVENUE IS IN APPEAL AGAINST THE F INDINGS OF CIT(A). 8. WE FIND THAT SIMILAR ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SECTION 80IA(5) OF THE ACT AROSE BEFORE THE TRIBUNAL IN SERIES OF DECISIONS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS RELIED ON THE DECISION OF TRIBUNAL IN DCIT VS. JAGDAMBA AUTO COMPONENTS LTD. IN ITA NO.1738/PN/2014, RELATING TO ASSESSMENT YEAR 2010 - 11, ORDER DATED 08.06.2016 . FURTHER, THE TRIBUNAL IN ITA NOS.874 TO 879/PN/2016, RELATING TO ASSESSMENT YEARS 2004 - 05 TO 2008 - 09 & 2012 - 13 IN THE CASE OF M /S G. B. RUBBER PRODUCTS VS. DCIT , VIDE ORDER DATED 31.08.2016 HAS ALLOWED THE CLAIM OF ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: - 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APP EAL IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF POWER GENERATION THROUGH WINDMILLS ESTABLISHED BY THE ITA NO . 2100 / PN /201 4 M/S. GENERAL INDUSTRIAL CONTROLS PVT. LTD. 4 ASSESSEE. THE FIRST YEAR OF CLAIM OF DEDUCTION BY THE ELIGIBLE UNIT WAS ASSESSMENT YEAR 2003 - 04, WHICH IS THE INITIAL Y EAR AND THE ASSESSEE HAS CLAIMED THE SAID DEDUCTION THEREAFTER. IN THE EARLIER YEARS, THE LOSSES ARISING ON ACCOUNT OF THE WINDMILL UNIT HAVE ALREADY BEEN SET - OFF AGAINST OTHER INCOME AND THE ASSESSEE CLAIMS THAT THE SAME COULD NOT BE NOTIONALLY CARRIED F ORWARD TO THE LATER YEARS I.E. THE YEAR IN WHICH THE ASSESSEE HAD CLAIMED THE DEDUCTION UNDER SECTION 80IA OF THE ACT. WE FIND THAT THE SAID ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SECTION 80IA OF THE ACT AND NON SETTING - OFF OF BROUGHT FORWARD LOSSES FRO M THE EARLIER YEARS IS NOW SETTLED BY THE LATEST DECISION OF THE HONBLE MADRAS HIGH COURT IN CIT VS. P. V. CHANDRAN (SUPRA) WHEREIN IT HAS BEEN HELD THAT : - FROM A READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INC OME, DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FOR - WARD A ND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS AN Y LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CUR - RENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST T HE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. A FICTION CREATED IN SUB - SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. THE FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 20. SIMILAR RATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN 20. SIMILAR RATIO LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) WHICH HAS BEEN FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN SERU M INTERNATIONAL LTD. VIDE ITA NOS.290 TO 292/PN/2010, ORDER DATED 28.09.2011, WHICH HAS BEEN APPLIED IN ACIT VS. JAYSHREE POLYMERS PVT. LTD. (SUPRA). 21. FOLLOWING THE SAID LEGAL PRECEDENTS, WE HOLD THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION ON ACCOU NT OF ITS INCOME ARISING FROM WINDMILL POWER GENERATION WITHOUT ADJUSTING THE NOTIONALLY BROUGHT FORWARD LOSSES OF EARLIER YEARS, WHICH HAD ALREADY BEEN ADJUSTED AGAINST THE OTHER INCOME OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF THE ASSESSEE WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 9. ANOTHER ASPECT TO BE KEPT IN MIND IS THE CLARIFICATION GIVEN BY CBDT IN THIS REGARD DATED 15 .02.2016 WITH REGARD TO THE TERM INITIAL ASSESSMENT YEAR IN SECTION 80IA(5) OF THE ACT. WE HAVE ALREADY MADE REFERENCE TO THE CBDT IN OUR EARLIER DECISION AND FOLLOWING THE SAID PRECEDENT, WE HOLD THAT THE ASSESSEE IS JUSTIFIED IN CONSIDERING THE INITIA L ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80IA(4) OF THE ACT AS THE FIRST YEAR IN WHICH THE ASSESSEE HAD CLAIMED THE SAID DEDUCTION. FURTHER, THE ASSESSEE IS ENTITLED TO CLAIM THE ITA NO . 2100 / PN /201 4 M/S. GENERAL INDUSTRIAL CONTROLS PVT. LTD. 5 DEDUCTION UNDER SECTION 80IA(5) OF THE ACT ON T HE PROFITS ARISING FROM WINDMILLS WITHOUT SETTING OFF OF BROUGHT FORWARD DEPRECIATION LOSSES, WHICH IN ANY CASE HAS BEEN ADJUSTED AGAINST INCOME FROM OTHER SOURCES IN THE RESPECTIVE YEARS. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) AND DISMISS THE GROUND S OF APPEAL RAISED BY THE REVENUE. 10 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF NOVEMBER , 201 6 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 30 TH NOVEMBER , 201 6 . GCVSR GCVSR / COPY OF THE ORDER IS FORWARDED T O : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - V , PUNE ; 4. / THE C I T - V , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE