DCIT, Hubli V. Sri. V.S. Koujalagi, Hubli

ITA 213/BANG/2012

• Counselvise Citation: 21321114 RSA 2012
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA CITI
• Keywords: Depreciation; Question of law
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER I.T.A.NO.213(B)/2012 (ASSESSMENT YEAR : 2008-09) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), BANGALORE. APPELLANT VS SRI V.B.KOUJALGI, PROP: M/S LAKSHMI TRADING COMPANY, MANJUNATH NAGAR CROSS, GOKUL ROAD, HUBLI. RESPONDENT REVENUE BY : SHRI S.K.AMBASTHA, CIT-I ASSESSEE BY : SMT. PRATIBHA, R. ADVOCATE DATE OF HEARING : 01 -10-2012 DATE OF PRONOUNCEMENT : 01- 10-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 15-11- 2011 OF CIT(A), HUBLI, RELATING TO ASSESSMENT YEAR 2008-09 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ S AS FOLLOWS; 1. THE ORDER OF CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. ITA NO.213(B)/2012 2 2. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE LO SS ON ACCOUNT OF WIND MILL BUSINESS I.E. ELIGIBLE BUSINESS AS PER SEC.80IA, IS ALLOWABLE FOR SET OFF AGAINST INCOME UNDER OTHER HE ADS. 3. THE CIT(A) HAS FAILED TO APPRECIATE THAT THE WI ND MILL BUSINESS FALLS UNDER CATEGORY OF ELIGIBLE BUSINESS AS PER SEC.80IA AND ALSO THAT SEC.80IA HAS OVERRIDING EFFE CT ON ANY OTHER PROVISIONS UNDER THE ACT INCLUDING SEC.70 AND 71. 4. THE DECISION OF HIGH COURT OF KARNATAKA, CIRCU IT BENCH DHARWAD IN THE CASE OF M/S SWARNAGIRI WIRE INSULATI ONS IN ITA NO.5050/2010 HAS BEEN ACCEPTED BY THE DEPARTMENT ME RELY ON THE GROUND OF MONETARY CEILINGS FIXED BY THE CBDT F OR FILING SLP. 3. THE ASSESSEE IS AN INDIVIDUAL. AMONG THE OTHER B USINESSES, THE ASSESSEE ALSO CARRIED ON THE BUSINESS OF POWER GENE RATION THROUGH WIND MILL. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS E NTITLED TO CLAIM DEDUCTION DEDUCTION U/S 80IA(2) OF THE IT ACT, 1961 IN RESPEC T OF PROFITS DERIVED FROM THE BUSINESS OF GENERATION OF POWER BY WIND MILL. T HE ASSESSEE INCURRED A NET LOSS OF RS.3,89,130/- IN THE BUSINESS OF GENERA TION OF POWER THROUGH WIND MILL. THIS LOSS WAS SOUGHT TO BE SET OFF AGAI NST INCOME FROM OTHER BUSINESSES. THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE AO. THE CIT(A) HOWEVER, ALLOWED THE CLAIM OF THE ASSESSEE BY RELYI NG ON THE DECISION OF THE HONBLE ITAT IN THE CASE OF M/S SWARNAGIRI WIRE INDUSTRIES (P)LTD., VS ITO IN ITA NO.200(B)/2010 FOR THE ASSESSMENT YEAR20 06-07. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL B EFORE THE TRIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE TRIBUNAL, IN THE CASE OF SWARNAGIRI WIRE INSULA TIONS P. LTD. (SUPRA) HAD CONSIDERED AN IDENTICAL ISSUE RELATING TO THE A PPLICABILITY OF SECTION 80IA(5) OF THE ACT. THE RELEVANT FINDING OF THE TRI BUNAL IN THE CASE OF SWARNAGIRI WIRE INSULATIONS P. LTD. (SUPRA) IS AS F OLLOWS: ITA NO.213(B)/2012 3 6.5. THUS, FOR THE PURPOSE OF DETERMINING THE QUAN TUM OF DEDUCTION AS REFERRED IN SUB-SEC.(1) TO S.80IA IN R ESPECT OF AN ELIGIBLE BUSINESS, THE COMPUTATION WILL HAVE TO BE DONE AS IF SUCH ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOME TO THE ASSESSEE IN ALL THE RELEVANT YEARS OF CLAIM COMMENCING FROM THE INITIAL ASSESSMENT YEAR. ON A BROAD READING OF THE ACT, IT MAY APPEAR THAT THE CARRIED FORWARD LOSS OF THE ELIGIBLE BUSINESS W ERE REQUIRED TO BE SET OFF FIRST AGAINST THE INCOME OF THE SUBSEQUENT YEARS OF ELIGIBLE BUSINESS WHILE DETERMINING THE PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT AND SET OFF OF LOSSES FROM OTHER SO URCES UNDER THE SAME HEAD IS NOT PERMISSIBLE. HOWEVER, IT SHOULD NO T BE FORGOTTEN THAT SECTION 80IA OF THE ACT IS A BENEFICIAL SECTIO N PERMITTING CERTAIN DEDUCTIONS IN RESPECT OF CERTAIN INCOME UNDER CHAPT ER VIA OF THE ACT. A PROVISION GRANTING INCENTIVE FOR PROMOTION O F ECONOMIC GROWTH AND DEVELOPMENT IN TAXING STATUTES SHOULD BE LIBERALLY CONSTRUED AND RESTRICTION PLACED ON IT BY WAY OF EX CEPTION, SHOULD BE CONSTRUED IN A REASONABLE AND PURPOSIVE MANNER S O AS TO ADVANCE THE OBJECTS OF THE PROVISION. IT IS A GENER ALLY ACCEPTED PRINCIPLE THAT THE DEEMING PROVISION OF A PARTICULA R SECTION CANNOT BE BREATHED INTO ANOTHER SECTION. THEREFORE, THE DE EMING PROVISION CONTAINED IN SECTION 80IA(5) CANNOT OVERRIDE THE SE CTION 70(1) OF THE ACT.CIT(A)S OBSERVATION ON THIS REGARD THAT THE SP ECIFIC PROVISIONS OF SECTION 80IA(5) HAVE OVERRIDING EFFECT IS NOT AC CEPTABLE. IN THE GIVEN CASE, THE ASSESSEE INCURS LOSS AFTER CLAIMING ELIGIBLE DEPRECIATION. HENCE SECTION 80IA BECOMES INSIGNIFIC ANT, SINCE THERE IS NO PROFIT FROM WHICH THIS DEDUCTION CAN BE CLAIM ED. AT THIS STAGE, SECTION 70(1) COMES TO THE RESCUE OF THE ASSESSEE, WHEREBY HE IS ENTITLED TO SET OFF THE LOSSES FROM ONE SOURCE AGAI NST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD OF INCOME. HOWEV ER, ONCE A SET OFF IS ALLOWED U/S. 70(1) FROM THE INCOME ON ANOTHE R SOURCE UNDER THE SAME HEAD, ANOTHER DEDUCTION ON THE SAME COUNT IS NOT PERMISSIBLE I.E., DURING THE SUBSEQUENT YEARS IF TH E ASSESSEE MAKES SURPLUS PROFITS AFTER CLAIMING ELIGIBLE ALLOWANCES AND IS ENTITLED TO CLAIM DEDUCTION U/S. 80IA, THE EARLIER BENEFIT GIVE N UNDER OTHER SECTIONS OF THE ACT SHOULD BE TAKEN INTO ACCOUNT BE FORE GRANTING DEDUCTION U/S. 80IA. WE HERE BELOW BRING OUT THE FO LLOWING ILLUSTRATION TO EXPLAIN THE APPLICABILITY OF SECTIO N 80IA. 5. WE FIND THAT THE FACTS AND THE ISSUE CONSIDERED BY THE TRIBUNAL IN THE CASE OF SWARNAGIRI WIRE INSULATIONS P. LTD. (SUPRA) ARE IDENTICAL AND WITH ITA NO.213(B)/2012 4 REFERENCE TO THE ISSUE IN THE INSTANT CASE. THE TRI BUNAL ORDER CITED SUPRA HAS BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIG H COURT IN ITA NO.5050/2010 DATED 27-5-2011. THE HONBLE JURISDICT IONAL HIGH COURT HAS FOLLOWED THE JUDGMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER(INCOME TAX) & ANOTHER REPORTED IN (2008) 299 ITR 444(SC). THE RELEVANT FINDING OF THE JURISDICTIONAL HIGH COURT IS REPRODUCED BELOW: 5. THE SUPREME COURT HAD AN OCCASION TO CONSIDER T HE SAME QUESTION IN THE CASE OF SYNCO INDUSTRIES LTD.VS. AS SESSING OFFICER (INCOME TAX) AND ANOTHER REPORTED IN (2008) 299 ITR 444 (SC), AND AT PARA 13 IT HAS BEEN HELD AS UNDER: 13. THE CONTENTION THAT UNDER SECTION 80-I (6) THE PROFITS DERIVED FROM ONE INDUSTRIAL UNDERTAKING CANNOT BE S ET OFF AGAINST LOSS SUFFERED FROM ANOTHER AND THE PROFIT I S REQUIRED TO BE COMPUTED AS IF PROFIT MAKING INDUSTRIAL UNDER TAKING WAS THE ONLY SOURCE OF INCOME, HAS NO MERITS. SECTI ON 80-I (1) LAYS DOWN THAT WHERE THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PROFITS DERIVED FROM THE PRIORITY UNDERTAKING/UNIT/DIVISION, THEN IN COMPUTING THE TO TAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFI TS OF AN AMOUNT EQUAL TO 20% HAS TO BE MADE. SECTION 80-I (1 ) LAYS DOWN THE BROAD PARAMETERS INDICATING CIRCUMSTANCES UNDER WHICH AN ASSESSEE WOULD BE ENTITLED TO CLAIM DEDUCT ION. ON THE OTHER HAND SECTION 80-I (6) DEALS WITH DETERMIN ATION OF THE QUANTUM OF DEDUCTION. SECTION 80-I (6) LAYS DOW N THE MANNER IN WHICH THE QUANTUM OF DEDUCTION HAS TO BE WORKED OUT. AFTER SUCH COMPUTATION OF THE QUANTUM OF DEDUC TION, ONE HAS TO GO BACK TO SECTION 80-I (1) WHICH CATEGO RICALLY STATES THAT WHERE THE GROSS TOTAL INCOME INCLUDES A NY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING TO WHICH SECTION 80-I APPLIES THEN THERE SHALL BE A DEDUCTIO N FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO 20 PER CENT. THE WORDS 'INCLUDES ANY PROFITS'' USED BY THE LEGISLATU RE IN SECTION 80-I(1) ARE VERY IMPORTANT WHICH INDICATE THAT THE GROSS TOTAL INCOME OF AN ASSESSEE SHALL INCLUDE PROFITS FROM A PRIORITY ITA NO.213(B)/2012 5 UNDERTAKING. WHILE COMPUTING THE QUANTUM OF DEDUCTI ON UNDER SECTION 80-I(6) THE ASSESSING OFFICER, NO DOU BT, HAS TO TREAT THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERT AKING AS THE ONLY SOURCE OF INCOME IN ORDER TO ARRIVE AT THE DED UCTION UNDER CHAPTER VI-A. HOWEVER, THIS COURT FINDS THAT THE NON- OBSTANTE CLAUSE APPEARING IN SECTION 80-I(6) OF THE ACT, IS APPLICABLE ONLY TO THE QUANTUM OF DEDUCTION, WHEREA S, THE GROSS TOTAL INCOME UNDER SECTION 80B(5) WHICH IS AL SO REFERRED TO IN SECTION 80I(1) IS REQUIRED TO BE COMPUTED IN THE MANNER PROVIDED UNDER THE ACT WHICH PRESUPPOSES THAT THE G ROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER ADJUSTING TH E LOSSES OF THE OTHER DIVISION AGAINST THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. IF THE INTERPRETATION AS SU GGESTED BY THE APPELLANT IS ACCEPTED IT WOULD ALMOST RENDER TH E PROVISIONS OF SECTION 80A(2) OF THE ACT NUGATORY AN D THEREFORE THE INTERPRETATION CANVASSED ON BEHALF OF THE APPEL LANT CANNOT BE ACCEPTED. IT IS TRUE THAT UNDER SECTION 8 0-I(6) FOR THE PURPOSE OF CALCULATING THE DEDUCTION, THE LOSS SUSTAINED IN ONE OF THE UNITS, CANNOT BE TAKEN INTO ACCOUNT B ECAUSE SUB-SECTION 6 CONTEMPLATES THAT ONLY THE PROFITS SH ALL BE TAKEN INTO ACCOUNT AS IF IT WAS THE ONLY SOURCE OF INCOME. HOWEVER, SECTION 80A(2) AND SECTION 80B (5) ARE DEC LARATORY IN NATURE. THEY APPLY TO ALL THE SECTIONS FALLING I N CHAPTER VI- A. THEY IMPOSE A CEILING ON THE TOTAL AMOUNT OF DED UCTION AND THEREFORE THE NON-OBSTANTE CLAUSE IN SECTION 80-I(6 ) CANNOT RESTRICT THE OPERATION OF SECTIONS 80A(2) AND 80B(5 ) WHICH OPERATE IN DIFFERENT SPHERES. AS OBSERVED EARLIER S ECTION 80- I(6) DEALS WITH ACTUAL COMPUTATION OF DEDUCTION WHE REAS SECTION 80- I(1) DEALS WITH THE TREATMENT TO BE GIV EN TO SUCH DEDUCTIONS IN ORDER TO ARRIVE AT THE TOTAL INCOME O F THE ASSESSEE AND THEREFORE WHILE INTERPRETING SECTION 8 0-I(1), WHICH ALSO REFERS TO GROSS TOTAL INCOME ONE HAS TO READ THE EXPRESSION 'GROSS TOTAL INCOME' AS DEFINED IN SECTI ON 80B(5). THEREFORE, THIS COURT IS OF THE OPINION THAT THE HI GH COURT WAS JUSTIFIED IN HOLDING THAT THE LOSS FROM THE OIL DIVISION WAS REQUIRED TO BE ADJUSTED BEFORE DETERMINING THE GROS S TOTAL INCOME AND AS THE GROSS TOTAL INCOME WAS 'NIL' THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION UNDER CHAPTER V I-A WHICH INCLUDES SECTION 80-I ALSO. 6. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT A S AFORESAID, THERE IS NO ERROR IN THE ORDER PASSED BY THE TRIBUNAL. AS SUCH, NO CASE FOR ITA NO.213(B)/2012 6 INTERFERENCE IS MADE OUT. ACCORDINGLY, THE SUBSTANT IAL QUESTION OF LAW AS FRAMED IS ANSWERED AGAINST REVENUE AND IN FA VOUR OF THE ASSESSEE. . 6. SINCE THE ISSUE IN THE INSTANT CASE IS DIRECTLY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT CITED SUPR A, WE ARE OF THE VIEW THAT THE ORDER OF THE FIRST APPELLATE AUTHORITY DIR ECTING THE AO TO SET OFF LOSS FROM WINDMILL BUSINESS AGAINST OTHER HEADS OF INCOME OF THE ASSESSEE IS JUSTIFIED AND NO INTERFERENCE IS CALLED FOR. WE THEREFORE, CONFIRM THE ORDER OF CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 01-10-20 12. SD/- SD/- (N. BARATHVAJA SANKAR) (N.V.VASUDEVAN) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: 01-10-2012 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A), HUBLI 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE