Nirma Limited, Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 2171/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94350 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-08-2015
• Assessment Year: 1991-1992
• Appeal Filed On: 01-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Question of law
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , BEFORE SHRI G. D. AG RAWAL, VICE PRESIDEN T, AND SHRI S. S. GODAR A, JUDICIAL MEMBER . ITA. NO. 2 171 /AHD/201 1 [ ASSESSMENT YEAR : 1991 - 92] NIRMA LIMITED, NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD - 380009 APPELLANT VS. DY. COMMISSIONER OF I NCOME - TAX , C IRCLE - 5, AHMEDABAD . RESPONDENT PAN: AAACN5350K / BY ASSESSEE : SHRI S. N . SOPARKAR , A.R. / BY REVENUE : SHRI DINESH SINGH , SR . D.R. / DATE OF HEARING : 1 1 .0 8 .2015 / DATE OF PRONOUNCEMENT : 04 . 0 9 .2015 I TA NO. 2 171 /AHD/201 1 , ( NIRMA LIMITED VS. ACIT) 2 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR A.Y. 1991 - 92 ARISE S FROM ORDER OF THE CIT(APPEALS) - X I, AHMEDABAD, DATED 12 / 0 7 /201 1 PASSED IN APPEAL N O. CIT(A) - X I/ 1113 / 09 - 1 0 , IN PROCEEDINGS U/S.143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961, HEREAFTER THE ACT . 2. THE SOLE SUBSTANTIVE GROUN D RAISED IN THE APPEAL READS AS UNDER: 2) IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING APPEAL HOLDING THAT THERE IS NO INFIRMITY IN THE ORDER OF ASSESSING OFFICER. HE OUGHT TO HAVE HELD THAT DEDUCTION U/SS.80HH & 80I SHOULD BE ALLOWED BEFORE SETTING OFF OF LOSS OF ANOTHER DIVISION. 3. FACTS OF THE CASE ARE IN A NARROW CAMPUS. THIS APPEARS TO BE THIRD ROUND OF LITIGATION BETWEEN THE PARTIES UP TO THE TRIBUNAL. THE ASSESSEE CLAIM S SECTION 80HHC AND 80I DEDUCTIONS WITHOUT ADJUSTING LOSSES OF ITS OTHER DIVISIONS . THE ASSESSING OFFICER QUOTED CASE LAW OF HONBLE APEX COURT IN SYNCO INDUSTRIES VS. ASSESSING OFFICER [2008] 299 ITR 444 (SC) AND AMENDMENT IN SECTION 80A BY THE FINANCE AC T, 2009 FOR OBSERVING THAT ITS GROSS INCOME IS TO BE COMPUTED AFTER ADJUSTING LOSSES OF OTHER DIVISIONS AGAINST PROFIT DERIVED FROM THE ELIGIBLE UNDERTAKING. 4. THE CIT(A) UPHOLDS ASSESSING OFFICERS ACTION AS UNDER: 3. IN THE SECOND GROUND, IT IS SUB MITTED BY THE APPELLANT THAT IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. A.O. HAS GROSSLY I TA NO. 2 171 /AHD/201 1 , ( NIRMA LIMITED VS. ACIT) 3 ERRED IN HOLDING THAT DEDUCTION U/S. 80I AND 80HH SHOULD BE ALLOWED AFTER ADJUSTING LOSSES OF ANOTHER DIVISION. 3.1. WITH REGARD TO THE ABOVE, THE REL EVANT PARAS OF THE WRITTEN SUBMISSIONS FILED BY THE A. R. OF THE APPELLANT ARE REPRODUCED HEREUNDER : - '1. APPELLANT CLAIMED DEDUCTION U/SS. 80I AND 80HH OF I. T. ACT IN RESPECT OF PROFITS DERIVED FROM MANDALI UNDERTAKING. APPELLANT COMPANY INCURRED LOSS IN RESPECT OF TOILET SOAP DIVISION AND EARNED PROFIT IN RESPECT OF OTHER DIVISION. 2. HON'BLE TRIBUNAL SET ASIDE THE ISSUE AFTER OBSERVING AT PARA 12 WHICH IS REPRODUCED HEREUNDER : - 'ACCORDINGLY, IN THE GIVEN FACTS AND CIRCUMSTANCES, WE SET ASIDE THE IS SUE TO THE FILE OF THE A.O. TO RECOMPUTED THE DEDUCTION U/S. 80HH AND 80I OF THE ACT IN TERMS OF PARAMETERS INDICATED IN THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA) AND ANOTHER (SUPRA) BY THE HON'BLE APEX COURT.' 3. THE ID. A.O. PASSED ORDER U/S. 143(3) R.W .S. 254 OF THE I. T. ACT AND ALLOWED DEDUCTION U/S. 80HH AND 80I OF I. T. ACT AFTER SETTING OF LOSS OF TOILET SOAP DIVISION. THE ID. A.O. REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD. (2008) 299 ITR 444 (SC) AND ALS O REFERRED TO THE AMENDMENT U/S.80A OF I. T. ACT WHICH IS AMENDED BY FINANCE ACT, 2009. IN THIS RESPECT, OUR HUMBLE SUBMISSIONS IS AS UNDER : - A). DEDUCTION U/SS. 80HH AND 80I IN RESPECT OF PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING SHOULD BE ALLOWED BEFO RE SETTING OFF OF THE LOSS OF TOILET SOAP DIVISION. DEDUCTION U/SS. 80HH AND 80I REFERS TO THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING. RELEVANT PORTION OF SECTION 80HH AND 80I IS AS UNDER : - 80HH. '(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUD ES ANY PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING, OR THE BUSINESS OF A HOTEL, 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 ASS ESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO TWENTY PER CENT THEREOF . 80I (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING OR A I TA NO. 2 171 /AHD/201 1 , ( NIRMA LIMITED VS. ACIT) 4 SHIP OR THE BUSINESS OF A HOTEL [O R THE BUSINESS OF REPAIDS TO OCEAN - GOING VESSELS OR OTHER POWERED CRAFT], 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 F ROM SUCH PROFITS AND PAINS OF AN AMOUNT EQUAL TO TWENTY PER CENT THEREOF: B) BOTH SECTIONS REFERRED TO THE DEDUCTION IN RESPECT OF PROFITS DERIVED THE INDUSTRIAL UNDERTAKING. NOWHERE IT REFERS TO THE INCOME AFTER SETTING OFF OF LOSS. HON'BLE SUPREME COURT IN THE CASE OF CANARA WORKSHOPS P. LTD. 161 ITR 320 HAS CATEGORICALL Y OBSERVED THAT DEDUCTION U/SS.80 HH AND 80 I SHOULD BE ALLOWED WITHOUT SETTING OFF OF LOSS OF ANOTHER UNDERTAKING. THE GIST OF THE SAID DECISION REPRODUCED HEREUNDER: - 'HELD ACCORDINGLY, IN COMPUTING THE PROFITS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 E OF THE INCOME - TAX ACT, 1961, THE LOSS INCURRED BY THE ASSESSEE IN THE MANUFACTUR OF ALLOY STEELS (A PRIORITY INDUSTRY) COULD NOT BE SET OFF AGAINST THE PROFITS OF THE MANUFACTURE OF AU TOMOBILE ANCILLIARIES (ANOTHER PRIORITY INDUSTRY). THE ASSESSE WAS ENTITLED TO A DEDUCTION AT 8 PER CENT ON THE ENTIRE PROFITS OF THE AUTOMOBILE PARTS INDUSTRY INCLUDED IN THE TOTAL INCOME WITHOUT DEDUCTING THEREFROM THE LOSSES IN THE ALLOY STEEL MANUFACTU RE.' C) DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD (SUPRA) DOES NOT OVERRULE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CANARA WORKSHOP P. LTD. IN FACT, HON'BLE AHMEDABAD TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FIN ANCE (P) LTD. REPORTED IN 113 ITD 209 HAS INTERPRETED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CANARA WORKSHO P . LTD. AND AFTER DETAILED DISCUSSION HON'BLE TRIBUNAL HELD THAT DEDUCTION U/S.80L SHOULD BE ALLOWED ON THE PROFITS OF THE UNDERTAKING WITHOUT SETTING OFF OF LOSS OF ANOTHER UNDERTAKING. THE GIST OF THE SAID DECISION IS ENCLOSED ANNEXURE 'H' HENCE, IN THE CIRCUMSTANCES, IT IS SUBMITTED THAT LOSS OF ANOTHER DIVISION SHOULD NOT BE SET OFF AGAINST PROFITS OF THE UNDERTAKING ELIGIBLE FOR DE DUCTION U/SS. 80HH AND 80 I OF I. T. ACT. D) WITH REGARD TO THE AMENDMENT U/S. 80A BY THE FINANCE ACT, 2003 IS OF NO CONSEQUENCE. I TA NO. 2 171 /AHD/201 1 , ( NIRMA LIMITED VS. ACIT) 5 I) FIRSTLY, IT IS SUBMITTED THAT THERE IS DOUBLE DEDUCTION IS NOT ALLOWED. DEDUCTION U/SS. 80HH AND 80I IS ALLOWED HIGHER ON THE BASIS OF PROFIT OF THE ELIGIBLE UNDERTAKING WHICH IS EARNING POSITIVE INCOME. THE LOSS OF DIFFERENT DIVISION SHOULD NOT BE SET OFF. HENCE, AMENDMENT TO SECTION 80A HAS NO IMPLICATION TO THE PRESENT CONTROVERSY. II) SECONDLY, IT IS SUBMITTED THAT THE ID. A.O. PASSED ORDER U/S. 143(3) R.W.S. 254 OF I. T. ACT GIVING EFFECT TO THE TRIBUNAL'S ORDER. THE ID. A.O. HAS NO JURISDICTION TO RAISE OTHER ASPECTS BUT TO FOLLOW CLEAR CUT AND UNAMBIGUOUS DIRECTIONS GIVEN BY HON'BLE TRIBUNAL. HON'BLE TRIBUNAL HAS NOT REFERRED TO AMENDMENT U/S.80A AND HENCE ID. A. O. CANNOT REFER TO THE AMENDMENT. III) THIRDLY, IT IS SUBMITTED THAT AMENDMENT EFFECTIVE FROM 1 - 4 - 2003 CANNOT BE APPLIED TO THE PRESENT A. Y. 1991 - 92. HENCE, IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT DIRECT ION MAY BE GIVEN TO THE ID. A.O. TO GRANT DEDUCTION U/SS. 80HH AND 80I WITHOUT SETTING OFF OF LOSS OF ANOTHER DIVISION.' 3.2. I HAVE CONSIDERED THE FACTS OF THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA). IN THIS CASE THE OPINION OF BOMBAY HIGH COURT THAT GROS S TOTAL INCOME MUST BE DETERMINED, BY SETTING OFF AGAINST THE INCOME, THE BUSINESS LOSSES OF EARLIER YEARS, BEFORE ALLOWING DEDUCTION UNDER CHAPTER VI - A AND IF THE RESULTANT INCOME IS NIL, THEN THE ASSESSEE CAN NOT CLAIM DEDUCTION U/S. VI - A OF THE INCOME - T AX ACT. FOR THE SAKE OF BREVITY THE CONCLUDING PARA IS REPRODUCED AS UNDER : - 'THE PROPOSITION OF LAW, EMERGING FROM THE ABOVE DISCUSSION IS THAT THE GROSS TOTAL INCOME OF THE ASSESSEE HAS FIRST GOT TO BE DETERMINED AFTER ADJUSTING LOSSES ETC., AND IF THE GROSS TOTAL INCOME OF THE ASSESSEE IS 'NIL' THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTIONS UNDER CHAPTER VI - A OF THE ACT.' THE HONBLE SUPREME COURT HAS DISCUSSED PROVISIONS OF SECTION 80I(6) AND 80IA ALSO BUT THOSE DISCUSSIONS WERE MADE IN REFERENCE TO THE SCOPE OF SECTION 80IA VIS - A - VIS SECTIONS 80A(2) AND 80B(5). THE CONCLUDING PARA OF THE ORDER OF HON'BLE SUPREME COURT AS REPRODUCED ABOVE MAKES IT CLEAR. THUS THE HON'BLE SUPREME COURT MADE CERTAIN OBSERVATIONS WITH REFERENCE TO SECTION 80IA AND 80I( 6) BUT THE SAME IS INTERPRETING THESE SECTIONS IN A VERY LIMITED MANNER AND IN A DIFFERENT CONTEXT IN VIEW OF THIS, I FIND NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER VIS - - VIS THE RATIO OF SYNCO INDUSTRIES LTD. (SUPRA) AND NO INTERFERENCE IS CALLE D FOR IN THE ASSESSMENT ORDER. THUS, THIS GROUND OF APPEAL IS DISMISSED. I TA NO. 2 171 /AHD/201 1 , ( NIRMA LIMITED VS. ACIT) 6 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THERE IS NO ISSUE BETWEEN THE PARTIES SO FAR AS FACTS OF THE CASE ARE CONCERNED. THE ASSESSEE CLAIMS SECTION 80HH C AND 80I DEDUCTION QUA ITS PROFIT S DERIVED FROM MANDALI UNDERTAKING WHEREAS IT HAS INCURRED LOSSES FROM TOILET SOAP DIVISION. IT QUOTES CASE LAW OF (2013) 33 TAXMANN.COM 637 (ALLAHABAD) CIT VS. MODI XEROX RELATING TO A.Y. 1991 - 92 (IMPUGNED ASSESSMENT YEA R), (2014) 45 TAXMANN.COM 294 (HIMACHAL PRADESH) CIT VS. EMMBROS METAL (P) LTD. AND (2014) 52 TAXMANN. COM 237 (AP), CIT VS. PREMIER EXPLOSIVES LTD. , TO PRAY FOR ACCEPTANCE OF ITS APPEAL. THE REVENUE ARGUES THAT THE CIT(A) HAS RIGHTLY UPHELD THE ASSESSING OFFICERS ACTION. WE PUT A SPECIFIC QUERY TO THE PARTIES AS TO WHETHER OR NOT THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THIS SUBSTANTIAL QUESTION OF LAW. THE REPLY RECEIVED IS IN NEGATIVE. WE PROCEED FURTHER AND NOTICE THAT HONBLE ALLAHABAD HI GH COURT HEREINABOVE HAS CONSIDERED CASE LAW OF SYNCO (SUPRA) AND OBSERVES THAT TWO PRINCIPLES OF LAW EMERGED THEREFROM. THE FIRST ONE IS THAT FOR THE PURPOSE OF COMPUTING GROSS INCOME, LOSSES OF OTHER UNITS ARE TO BE TAKEN INTO CONSIDERATION. THE SECOND ONE IS THAT THE VERY COURSE IS NOT TO BE ADOPTED WHILST COMPUTING SECTION 80HHC/80I DEDUCTIONS AND THE PROFITS ARE TO BE CONSIDERED AS IF THE SAME ARE THE ONLY SOURCE OF INCOME OF THAT UNIT. THE REVENUE FAILS TO QUOTE ANY DISTINCTION ON FACTS OR LAW. TH EREFORE, WE ACCEPT THE ASSESSEES LEGAL SUBMISSION ON FIRST ASPECT OF THE MATTER. WE COME TO OBJECTION OF THE LOWER AUTHORITIES ON APPLICABILITY OF SECTION 80A AMENDMENT (SUPRA) AND FIND THAT THE SAME IS ONLY INTRODUCED I TA NO. 2 171 /AHD/201 1 , ( NIRMA LIMITED VS. ACIT) 7 BY THE FINANCE ACT, 2009 WITH RETRO SPECTIVE EFFECT FROM 1.4.2003 AND DOES NOT DEAL WITH THE RELEVANT ISSUE OF ADJUSTMENT OF LOSSES. WE FURTHER REITERATE THAT THE IMPUGNED ASSESSMENT YEAR IS 1991 - 92. THE ASSESSEES SOLE SUBSTANTIVE GROUND ACCORDINGLY SUCCEEDS. 6. THIS ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 04 TH DAY OF SEPTEMBER , 201 5 . SD/ - SD/ - ( G. D. AGRAWAL ) ( S. S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD: DATED 04 /0 9 /2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER / , / ,