DCIT, Ooty V. M/s. Sri Janarthana Spinning Mills, Coimbatore

ITA 2198/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8229 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-07-2016
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.2198/MDS./2016 / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-(1), OOTY. VS. M/S.SRI JANARTHANA SPINNING MILLS, 187-1,K N P ROAD, KARAMADAI,COIMBATORE-104. [PAN AAMFS 4005 M ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.CLEMENT RAMESH KUMAR, ADDITIONAL CIT D.R /RESPONDENT BY : MR.S.SRIDHAR,ADVOCATE / DATE OF HEARING : 17 - 10 - 201 6 !' / DATE OF PRONOUNCEMENT : 17 - 10 - 2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-3, COI MBATORE DATED 08.04.2016 PERTAINING TO THE ASSESSMENT YEAR 2009- 10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. ITA NO.2198/MDS./2016 :- 2 -: 1. THE ORDER OF THE LD.CIT(A)-3 IS AGAINST THE FAC TS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -3 IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.25,69,958/ WHICH WAS ADDED TO THE RETURNED INCOME ON ACCOUNT OF DISALLOWANCE O F EXEMPTION U/S 801A TO THE NET PROFIT AFTER DEPRECIATION OF TH E COMPANY WHICH IS DIRECTLY DECLARED IN THE PROFIT AND LOSS ACCOUNT OF THE COMPANY. THESE CLAIMS OF EXEMPTION U/S 801A WERE MADE TO CIR CUMVENT LAW. 3. THE LEARNED CIT (A)-3 OUGHT TO HAVE OBSERVED THA T UNDER SECTION 801A (5), THE ASSESSEES PROFITS AND GAINS OF AN EL IGIBLE BUSINESS HAS TO BE WORKED OUT AS IF SUCH ELIGIBLE BUSINESS W ERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE RIGHT FROM THE COM MENCEMENT OF THE BUSINESS AND IN SUBSEQUENT YEARS UP TO THE COMP UTATION IS MADE AND BUSINESS LOSSES, DEPRECIATION AND INVESTME NT ALLOWANCE OF EARLIER YEARS SHOULD BE TAKEN INTO ACCOUNT IN DE TERMINING THE QUANTUM OF DEDUCTION ADMISSIBLE UNDER THE NEW SECTI ON 801A. 4. THE LEARNED CIT A)-3 OUGHT TO HAVE ASCERTAINED T HE FACT THAT ASSESSEE NEEDS TO PROVE THAT CLAIM OF EXEMPTION U/S 801A WAS MADE ONLY FROM THE ELIGIBLE BUSINESS. 5. THE LEARNED CIT (A) COULD HAVE ASCERTAINED THE F ACT THAT THE DOCTRINE OF JUDICIAL PRECEDENTS, JUDICIAL DISCIPLIN E, CONTEMPT AND RES JUDICATA HAVE BEEN EVOLVED TO ENSURE STABILITY AND CERTAINTY IN LAW AND DETERRENT ACTION IN CASE OF ITS VIOLATION BY SU BORDINATE COURTS AND TRIBUNALS. JUDGMENTS OF SUPREME COURT I.E. RATI O DECIDENDI AND EVEN OBITER DICTA ARE BINDING ON ALL COURTS AND TRI BUNALS WITHIN THE TERRITORY OF INDIA AS LAID DOWN IN ARTICLE 141 OF T HE CONSTITUTION OF INDIA. THE BOMBAY HC QUOTED THE FOLLOWING OBSERVATI ONS OF EARL OF HALSBURY IN THE CASE OF QUMIN VS. LEATHEM ( 1901) A C 495 (HL) IN BLUE STAR LTD. VS. CIT (1996) 217 ITR 514 520. EVE RY JUDGMENT MUST BE READ AS APPLICABLE TO THE PARTICULAR FACTS PROVED OR ASSUMED TO BE PROVED, SINCE THE GENERALITY OF THE E XPRESSIONS WHICH MAY BE FOUND THERE, ARE NOT INTENDED TO BE EX POSITIONS OF ITA NO.2198/MDS./2016 :- 3 -: THE WHOLE LAW, BUT GOVERNED AND QUALIFIED BY THE PA RTICULAR FACTS OF THE CASE IN WHICH SUCH EXPRESSIONS ARE FOUND AND A CASE IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES. 3. THERE IS A DELAY OF 3 DAYS IN FILING THE APPEAL BEFORE THIS TRIBUNAL AND THE REVENUE HAS EXPLAINED THE REASONS FOR DELAY IN ITS PETITION FOR CONDONATION. IN OUR OPINION, THE REASO NS EXPLAINED BY THE REVENUE FOR FILING THE APPEAL BELATEDLY IS BONAFIDE . ACCORDINGLY, THE DELAY IS CONDONED. 3.1 IN OUR OPINION, THIS ISSUE IS SQUARELY COVERE D BY THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYU DHASWAMY 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 ITA NO.2198/MDS./2016 :- 4 -: 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 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. ITA NO.2198/MDS./2016 :- 5 -: 4. SINCE THE LD.CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT CITED SUPRA AND HELD THE ISSUE IN FAVOUR OF THE ASSESSEE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THEREFORE WE HEREBY CONFIRM THE ORDER O F THE LD. LD. CIT (A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 17 TH OCTOBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 17 TH OCTOBER, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 4. ( , / CIT 2. / RESPONDENT 5. *-. (/ / DR 3. ( ,(0 1 / CIT(A) 6. .2(3 / GF