K.S.P.S.Natarajan & Co., Tuticorin V. ACIT, Tuticorin

ITA 211/CHNY/2005

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8112 (ITAT-CHENNAI)
• Duration Of Justice: 11 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 28-01-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.211/MDS/2005 ( / ASSESSMENT YEAR:1999-2000) M/S. KSPS NATARAJAN & CO., 13A/1, MEENAKSHIPURAM WEST, TUTICORIN. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I(1), TUTICORIN. PAN: AAAFK9908R ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : MR. P.RADHAKRISHNAN, JCIT /DATE OF HEARING : 8 TH DECEMBER, 2015 /DATE OF PRONOUNCEMENT : 9 TH FEBRUARY, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE HONBLE HIGH COURT OF MADRAS HAS REMITTED THE MATTER BACK TO THE FILE OF TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1998-99 SIC 1999-2000 WHERE IN THE LEARNED ASSESSING OFFICER IN THE REASSESSMENT ORDER DATED 16.02.2004 HAD DISALLOWED THE CLAIM OF DEDUCTION UN DER SECTION 80IA OF THE ACT TO THE EXTENT OF RS.8,28,44 7/-. 2. THE QUESTION OF LAW WHICH IS TO BE ADDRESSED BY THE TRIBUNAL IS FRAMED BY THE HONBLE HIGH COURT IS AS FOLLOWS:- 2 ITA NO.211/MDS/2005 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S.80IA OF THE ACT OF THE PROFITS FROM THE GENERATION OF ELECTRICITY THROUGH WIND ELECTRICITY GENERATORS FOR THE ASSESSMENT YEAR 1999-00? 2 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT THE GENERATION OF ELECTRICITY WOULD NO T AMOUNT TO PRODUCTION OF GOODS AND ARTICLE AND HENCE NOT ENTITLED TO DEDUCTION U/S.80IA OF THE ACT? 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G IN SALT AND GYPSUM. THE ASSESSEE HAD ALSO SET UP A WINDMILL FOR GENERATING ELECTRICITY. DURING THE RELEVANT PREVIO US YEAR THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80IA OF THE ACT FOR RS.8,28,447/- WITH RESPECT TO THE INCOME EARNED FR OM GENERATION OF ELECTRICITY FROM WIND MILL. THE LEARN ED ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE CITING SECTION 80IA(2)(V) OF THE ACT WHEREIN IT IS PROVIDE D THAT THE BENEFIT OF THE SAID SECTION WILL BE AVAILABLE ONLY IF THE UNDERTAKING EMPLOYS TEN OR MORE WORKERS WHEN MANUFACTURING PROCESS IS CARRIED ON WITH THE AID OF POWER AND IN THE CASE OF THE ASSESSEE THERE WAS ONLY ONE EMPL OYEE. 3 ITA NO.211/MDS/2005 THE LEARNED ASSESSING OFFICER FURTHER WAS OF THE OP INION THAT EVEN IF THE CLAIM UNDER SECTION 80IA IS ALLOWABLE, IN THE CASE OF THE ASSESSEE THERE WERE CARRY FORWARD LOSS FROM THE EARLIER YEARS AND WHEN SET OFF DURING THE RELEVANT PREVIOUS YEAR THERE IS NO POSITIVE INCOME AND HENCE THE DEDUCTION IS NOT ALLOWABLE. 4. ON APPEAL, THOUGH, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) INFERRING FROM THE DECISION OF HONBLE APEX COURT HELD THAT GENERATION OF ELECTRICITY IS T O BE CONSIDERED AS MANUFACTURE/PRODUCTION OF ARTICLE OR THING, HOWEVER CONFIRMED THE ORDER OF THE LEARNED ASSESSIN G OFFICER BECAUSE THE ASSESSEE HAS NOT COMPLIED WITH THE PROV ISIONS OF SECTION 80IA(2)(V) OF THE ACT I.E. WITH RESPECT TO EMPLOYMENT OF TEN OR MORE PERSONS AND ALSO FOR THE REASON THAT IN THE RELEVANT PREVIOUS YEAR AFTER SET OFF OF CARRY FORWARD OF LOSSES THE ASSESSEE DID NOT HAVE POSI TIVE INCOME. SUBSEQUENTLY, THE TRIBUNAL VIDE ORDER DATE D 17.05.2006 FOLLOWING THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN ITA 307/MDS/2007 VIDE ORDER DATED 6 TH SEPTEMBER, 2005 HELD THAT GENERATION OF ELECTRICIT Y WOULD NOT 4 ITA NO.211/MDS/2005 AMOUNT TO PRODUCTION OF GOODS AND ARTICLES AND THER EFORE DISALLOWED THE DEDUCTION UNDER SECTION 80IA OF THE ACT. ON FURTHER APPEAL BY THE ASSESSEE, THE HONBLE HIGH CO URT REMITTED THE MATTER BACK TO THE FILE OF TRIBUNAL FO R FRESH CONSIDERATION, WHICH IS NOW BEFORE US. ALLOWABILITY OF THE CLAIM OF DEDUCTION UNDER SECTIO N 80IA OF THE ACT:- 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. BEFORE ADDRESSIN G THE ISSUE, WE HEREIN BELOW EXTRACT THE PROVISIONS OF SE CTION 80IA OF THE ACT RELEVANT FOR THE ASSESSMENT YEAR 1999-20 00 FOR REFERENCE:- 80IA: DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS, ETC., IN CERTAIN CASE S.- 1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING OR A HOTEL OR OPERATION OF A SHIP OR DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY OR SCIENTIFIC AND INDUSTRIAL RESEARCH AND DEVELOPMENT OR PROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULAR INCLUDING RADIO PAGING, DOMESTIC SATELLITE SERVICE OR NETWORK OF TRUNKING AND ELECTRONIC DATA INTERCHANGE SERVICES OR CONSTRUCTIO N AND DEVELOPMENT OF HOUSING PROJECTS OR OPERATING AN INDUSTRIAL PARK OR COMMERCIAL PRODUCTION OR REFINING OF MINERAL OIL IN THE NORTH-EASTERN REGION OR IN ANY PART OF INDIA ON OR AFTER THE 1ST DAY OF APR IL, 5 ITA NO.211/MDS/2005 1997 (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), TO WHICH THIS SECTION APPLIES THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO THE PERCENTAGE SPECIFIED IN SUB-SECTION (5 ) AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS IS SPECIFIED IN SUB-SECTION (6). (2) THIS SECTION APPLIES TO ANY INDUSTRIAL UNDERTAK ING WHICH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY : - (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: (II) XXXXX (III) XXXXX (IV)XXXXX (V) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MANUFACTURES OR PRODUCES ARTICLES OR THINGS, THE UNDERTAKING EMPLOYS TEN OR MORE WORKERS IN A MANUFACTURING CARRIED ON WITH THE AID OF POWER, OR EMPLOYS TWENTY OR MORE MANUFACTURING PROCESS CARRIED ON WITHOUT THE AID OF POWER. 6. ON PERUSING THE PROVISIONS OF THE ACT, IT IS EVI DENT THAT FOR THE RELEVANT ASSESSMENT YEAR SECTION 80IA PROVI DES THAT, WHERE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES A NY PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIA L 6 ITA NO.211/MDS/2005 UNDERTAKING WHICH IS ENGAGED IN DEVELOPING, MAINTAI NING AND OPERATING ANY INFRASTRUCTURE FACILITY THE DEDUCTI ON IS ALLOWABLE. THE WORDS INFRASTRUCTURE FACILITY IS NOT DEFINED ANYWHERE IN THE ACT. HOWEVER, THE WORD INFRASTRUCT URE AS EXPLAINED IN THE CONCISE OXFORD ENGLISH DICTIONARY MEANS, BASIC PHYSICAL AND ORGANIZATIONAL STRUCTURES (E.G. BUILDINGS, ROADS, POWER SUPPLIES) NEEDED FOR OPERATION OF A SO CIETY OR ENTERPRISE . THEREFORE, IT CAN BE SAID THAT INSTALLING AND OPERATING WINDMILL COMES WITHIN THE AMBIT OF SECTIO N 80IA OF THE ACT BECAUSE IT IS FOR THE PURPOSE OF GENERATING AND SUPPLY OF POWER. MOREOVER, SECTION 80IA(2)(V) OF THE ACT MANDATES SPECIFIC NUMBER OF EMPLOYEES TO BE EMPLOYED IN THE INDUSTRIAL UNDERTAKING WHERE THE UNDERTAKING MANUFA CTURES OR PRODUCES ARTICLE OR THING. HOWEVER, IN THE CASE OF THE ASSESSEE IT IS ENGAGED IN THE ACTIVITY OF GENERATIN G ELECTRICITY BY INSTALLING AND MAINTAINING WINDMILL AND NOT FOR THE ACTIVITY OF MANUFACTURING ANY PRODUCE OR ARTICLE OR THING. T HEREFORE, THIS PROVISION OF THE ACT WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THERE CANNOT BE ANY DOUBT IN THE CASE OF THE ASSESSEE WITH RESPECT TO T HE ENTITLEMENT OF THE BENEFIT OF 80IA OF THE ACT. FURT HER, THE 7 ITA NO.211/MDS/2005 FINANCE ACT, 2001 WITH EFFECT FROM 01.04.2002 HAS CLARIFIED THE ISSUE IN SECTION 80IA(1) / (4)(IV)(A) BY SPECIF ICALLY INCLUDING AN UNDERTAKING WHICH IS SET UP IN ANY PAR T OF INDIA FOR GENERATION OR GENERATION AND DISTRIBUTION OF PO WER, FOR THE BENEFIT OF DEDUCTION UNDER SECTION 80IA OF THE ACT. HENCE BOTH THE QUESTIONS FRAMED BY THE HONBLE HIGH COUR T ARE DECIDED IN FAVOUR OF THE ASSESSEE WITH THE FINDING THAT SINCE THE ASSESSEE HAS INSTALLED AND MAINTAINING/OPERATIN G WINDMILL, BY VIRTUE OF SECTION 80IA(1) OF THE ACT IT WOULD BE ELIGIBLE TO CLAIM THE BENEFIT OF SECTION 80IA OF TH E ACT TOWARDS ITS INCOME EARNED BY GENERATING ELECTRICITY FROM WI ND MILL AND FURTHER IN THE CASE OF THE ASSESSEE THE PROVISIONS OF SECTION 80IA(2)(V) WILL NOT BE APPLICABLE BECAUSE THE ASSES SEE IS NOT ENGAGED IN THE ACTIVITY OF MANUFACTURING OR PRODUCI NG ARTICLES OR THINGS. FURTHER, SECTION 80IA OF THE ACT IS A BE NEFICIAL PROVISION WITH A FICTION AND ANY OTHER PROVISION HA VING A FICTION CANNOT BE SUPERIMPOSED ON THE PROVISION OF SECTION 80IA OF THE ACT. SINCE THE PROVISIONS OF THE ACT WH ICH ALLOWS TO CARRY FORWARD AND SET OFF OF LOSSES IS ALSO A P ROVISION WITH FICTION THE SAME CANNOT BE SUPERIMPOSED ON SECTION 80IA OF THE ACT FOR THE PURPOSE OF GRANTING DEDUCTION TO TH E ASSESSEE. 8 ITA NO.211/MDS/2005 THIS BEING THE BASIC PRINCIPLES OF INTERPRETATION O F FISCAL STATUTES AS LAID DOWN BY THE HIGHER JUDICIARY, THE CONTENTION OF THE REVENUE THAT THE ASSESSEE CANNOT CLAIM THE BENE FIT OF THE SECTION 80IA OF THE ACT BECAUSE BY CARRY FORWAR D AND SET OFF OF LOSSES IN THE RELEVANT ASSESSMENT YEAR WOULD RESULT IN NEGATIVE INCOME TO THE ASSESSEE IS NOT TENABLE. TH EREFORE, IN THE CASE OF THE ASSESSEE BENEFIT UNDER SECTION 80IA OF THE ACT CANNOT BE DENIED UNDER THESE CIRCUMSTANCES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH FEBRUARY, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 9 TH FEBRUARY, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF.