DCIT, Tiruppur V. M/s. Eveready Spinning Mills (P) Ltd., Tiruppur

ITA 2150/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7972 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 18-07-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: V DARMESH KUMARC A
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2150/MDS./2016 / ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-1, TIRUPUR. VS. M/S.EVEREADY SPINNING MILLS (P) LTD., 16/23, JOTHI THEATRE ROAD, TIRUPUR 641 601 [PAN AAACF 9159 Q ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : SHRI V.DARMESH KUMAR,C.A ./ I.T.A.NO.2151/MDS./2016 / ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-1, TIRUPUR. VS. M/S.GANGAI GARMENTS, 217/1,GANGAI GARDENS, KAVILIPALAYAM ROAD, SIRUPOOLUVAPATTI PO, TIRUPUR 641 603. [PAN AABFG 9171 H ] ( () / APPELLANT) ( * +() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : SHRI N. VIJAY KUMAR,C.A ITA NO.222/16 :- 2 -: ./ I.T.A.NOS.2155 & 2156/MDS./2016 / ASSESSMENT YEARS : 2012-13 & 2013-14 THE ACIT, CIRCLE-1, TIRUPUR. VS. M/S.SUNRISE KNITTING MILLS, S F NO.117,KULIYAVAL THOTTAM, KULLE GOUNDEN PUDUR, TIRUPUR 641 687. [PAN AALFS 4137 P] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : SHRI V.DARMESH KUMAR,C.A ./ I.T.A.NO.2157/MDS./2016 / ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-2, TIRUPUR. VS. SHRI K R NAGARAJAN, 8,SENGUNTHAPURAM, 1 ST STREET, MANGALAM ROAD, TIRUPUR 641 605. [PAN AAZPN 7287 P] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : SHRI N. VIJAY KUMAR,C.A ./ I.T.A.NO.2158/MDS./2016 / ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-2, TIRUPUR. VS. M/S.S.G.WIND FARMA PVT LTD., 21,21,POLLCHI ROAD, TIRUPUR 641 605. [PAN AARCS 5303 E] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : SHRI R. KUMAR, ADVOCATE ITA NO.222/16 :- 3 -: ./ I.T.A.NO.2159/MDS./2016 / ASSESSMENT YEAR : 2013-14 THE DCIT, CIRCLE-2, TIRUPUR. VS. M/S.PRABATH MILLS, ARUL INDUSTRIAL ESTATE, ARULPURAM,PALLADAM ROAD, TIRUPUR 641 605 [PAN AADFP 7442 E] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT D.R /RESPONDENT BY : NONE / DATE OF HEARING : 29 - 12 - 2016 / DATE OF PRONOUNCEMENT : 06.02 - 2017 , / O R D E R PER BENCH: ALL THESE SEVEN APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX(A) PERTAINING TO THE RESPECTIVE ASSESSMENT YEARS MENTIONED IN THE TITLE . SINCE ISSUES INVOLVED IN ALL THESE REVENUES APPEAL S ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD T OGETHER, DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 2. THE REVENUE HAS RAISED COMMON ISSUE IN ITS APPE ALS IS THAT LD. CIT (A) HAD ERRED IN ALLOWING DEDUCTION U/S 80-IA O F THE ACT FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF ITA NO.222/16 :- 4 -: VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT REPO RTED IN 231 CTR (MAD.) 368, THOUGH THE SLP FILED BY THE REVENUE BEF ORE THE HONBLE APEX COURT IS PENDING. 3. WE HAVE HEARD THE SUBMISSIONS OF THE COUNSEL AN D PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT 340 ITR 477, WHEREIN IT WAS HELD THAT:- FROM READING OF SUB-S (1) OF S. 80IA, IT IS CLEAR T HAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-S (4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTIONS, BE ALLOWED, IN C OMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIV E ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAM E IS DEFINED IN SUB-S. (4). SUB-S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN Y EARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEARS IN WHICH THE UNDER TAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE A CTIVITY ETC SUB-S. (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-S (5) AND THE SAM E IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THAT INITIAL ASSESSM ENT YEAR EMPLOYED IN SUB-S (5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YE AR REFERRED TO IN SUB-S(2). IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S(5) AND T HEY ARE AS UNDER: (1)IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES A LL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; (2) IT IS F OR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT Y EAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR ; (4) IT IS A DEEMING P ROVISION; (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF IN COME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND EVERY SUBSEQUENT ITA NO.222/16 :- 5 -: ASSESSMENT YEAR. FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING TH E PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESS MENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF TH E ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMEN T CONTEMPLATED. IT DOES NOT ALL THE REVENUE TO LOOK BACKWARD AND FIND OUT IF TH ERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NATIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINS T THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT RE WORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S( 5) DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CREATE D ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASS ESSEE WERE ALREADY SET OFF AND ADJUSTED AGAINST THE PROFITS OF THE EARLIER YEA RS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED THE OPTION UNDER S.80-IA(2). IN TAX CASE NO.918 OF 2008 THE ASSESSMENT YEAR WAS 2004-05 . DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRECIATION OR LO SS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING THE RELEVANT YEAR. THEREF ORE, LOSS IN THE YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST TH E PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AG AINST THE PROFIT OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN S. 80-IA(5) CIT VS. TTK PHARMA LTD (TAX CASE (APPEAL ) NO.298 OF 2004, DT. 23RD DEC., 2009) FOLLOWED; CIT VS. MEWAR OIL & GENERAL MILLS LTD (2004) 186 CT R (RAJ) 141; (2004) 271 ITR 311 (RAJ) CONCURRED WITH; MOHAN BREWERIES & DIS TILLERIES LTD VS. ASST. CIT (2008) 114 TTJ (CHENNAI) 532: (2008) 3 DTR (CHENNAI ) (TRIB) 477 AFFIRMED. 4. SINCE LD.CIT(A) IN ALL THESE APPEALS HAS RIG HTLY FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT CITED SUP RA AND HELD THE ISSUE IN FAVOUR OF THE ASSESSEE, WE DO NOT FIND IT NECES SARY TO INTERFERE WITH ITA NO.222/16 :- 6 -: THE ORDER OF THE LD.CIT(A). THEREFORE WE HEREBY CO NFIRM THE ORDER OF THE LD. LD. CIT (A). 5. IN THE RESULT, ALL THE APPEALS RAISED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED ON 06 TH FEBRUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 06 TH FEBRUARY , 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF