Deputy Commissioner of Income-tax, V. Aesseal India Pvt. Ltd., Pune

ITA 2236/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0389 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 27-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 10B

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.2236/PUN/2016 / ASSESSMENT YEAR : 2011-12 THE DY.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), PUNE. . / APPELLANT V/S AESSEAL INDIA PVT. LIMITED, GATE NO.85, A/P VARVE, TAL-BHOR, PUNE 411 028. PAN :AAECA1690F. . / RESPONDENT ASSESSEE BY : SHRI KISHORE PHADKE REVENUE BY : SHRI SANJEEV GHEI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE OR DER OF COMMISSIONER OF INCOME TAX (A), PUNE DT.11.07.2016 FOR THE ASSESS MENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUS INESS OF DESIGNING AND DEVELOPMENT OF MECHANICAL SEALS, SEALING SYSTEM AND MANUFACTURING OF MECHANICAL SEALS. ASSESSEE FILED ITS RETURN O F INCOME FOR A.Y. 2011-12 ON 15.10.2010 DECLARING TOTAL LOSS OF RS.5,21 ,46,451/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSES SMENT WAS / DATE OF HEARING : 01.11.2018 / DATE OF PRONOUNCEMENT: 26.11.2018 2 ITA NO.2236/PUN/2016 FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.05.03.2014 AND T HE TOTAL LOSS WAS DETERMINED AT RS.4,47,48,478/-. AGGRIEVED BY THE ORD ER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.11.07.2016 (IN APPEAL NO.CIT(A), PUNE-1/10031/2014-15) GR ANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDE R OF LD.CIT(A), REVENUE IS NOW IN APPEAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. TH E LD . COMMI SS IONER OF INCOM E -TAX( A PPEAL) HAS E R R E D ON THE FACTS A ND CIRCUMSTANCES OF THE CASE, IN ALLOWING THE DEDUC TION U/S 10A OF THE ACT WITHOUT SETTING OF BROUGHT FORWARD BUSINESS LOS S AND UNABSORBED DEPRECIATION OF EARLIER YEARS IN TOTAL DISREGARD TO THE CBDT CIRCULAR NO.7/DV/2013 DATED 16/07/2013 . 2. THE LD. COMMISSIONER OF INCOME-TAX(APPEAL) HAS E RRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, BY NOT FOLLOWING THE DEC ISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF 'HIMATASINGIKES EIDE LTD. V S CIT (286 ITR 255)' WHEREIN IT HAS BEEN HELD THAT THE BR OUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION HAVE TO BE ADJUSTED BEF ORE ALLOWING THE DEDUCTION UNDER SECTION 10A AND THE SAME HAS BEEN U PHELD BY HON ' BLE SUPREME COURT IN THE CASE OF VIDE CIVIL APPEAL NO.1 501 OF 2008 [2013- TIOL-53-SC-IT-LB] AND DISMISSED THE APPEAL OF THE A SSESSEE. 3. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOG ETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS N OTICED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS.73,97,973/- U/S 10A OF THE ACT. AO NOTICED THAT ASSESSEE WAS HAVING LOSS OF RS.4,48,93,961 /- BEFORE CLAIMING DEDUCTION U/S 10A OF THE ACT AND THE DEDUCTION W AS CLAIMED BEFORE SETTING OFF OF THE AFORESAID LOSSES. AO WAS OF THE VIEW THAT WHILE COMPUTING TOTAL INCOME, LOSS HAS TO BE SET OFF OF BEFORE C LAIMING DEDUCTION U/S 10A OF THE ACT. THE SUBMISSIONS MADE BY THE ASSESSE E IN SUPPORT OF HIS CONTENTIONS WERE NOT FOUND ACCEPTABLE TO THE AO. AO HELD THAT SINCE ASSESSEE WAS HAVING LOSS OF RS.4,48,93,961/ - BEFORE CLAIMING DEDUCTION U/S 10A OF THE ACT, ASSESSEE WAS HELD T O BE NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 10A OF THE ACT. ACCORDIN GLY, THE 3 ITA NO.2236/PUN/2016 DEDUCTION OF RS.73,97,973/- CLAIMED U/S 10A OF THE ACT WAS DENIED TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER : 6. I HAVE CA R EFULLY CO NSID ERED THE F AC TS OF THE CA S E AS W E LL AS REP L Y O F TH E APP E LLANT. IT IS SEEN THAT IN IDENTI C AL CASE O F C A R OTINO IN D IA P VT . L T D. FOR- A . Y . 2 01 1 - 12, TH E I SSUE WAS DECID E D IN FA VO UR OF T HE APPELLANT . F OR THE SAKE OF C L ARI TY RELE V ANT PORTION OF THE ORDER IS REPRODUCED AS UND E R : 7. I HAVE CO N S I DE R ED TH E FA C TS O F TH E CASE A S WE LL A S RE P L Y O F TH E AP P EL L AN T . IN T HI S C ASE, TH E I S S U E T O BE D EC IDED I S W H ET H ER L OS S O F A TR ADING DIV I S I ON I S R EQ UI R E D T O BE AD JU S T ED A GA IN ST PRO F IT O F 10B UNIT BEFORE GRANTING DEDUCTION U/S 10B OF THE I.T. ACT, 1961. I FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE APPELLANT BY THE FOLLOWING DECISIONS OF HON.BOMBAY HIGH COURT. THOUGH GIVEN I N THE CONTEXT OF SEC.10A OF THE I.T. ACT, 1961, THE SAME WILL APPLY IN RESPECT OF SEC.10B ALSO AS BOTH THE SECTIONS ARE PARIMATERIA : I) CIT VS. BLACK AND VEATH CONSULTING PVT. LTD., TAXMA NN.COM 727 II) CIT VS. SCHEMETZ INDIA PVT. LTD., ITA NO.4508 OF 20 10 DATED 4.09.2012. IN THE CASE O F BL A C K A N D VEAT H CO N SU L TING P . LTD , TH E H O N . C O UR T HE L D THAT BROUGH T F O R W A R D L OSS ES AND U NA B SORB E D DEPREC I A TI O N O F UN I T , I N C OME OF W HI C H I S NOT E L I GIB L E F O R DED U C T I O N U /S 1 0 A , C ANN O T BE SET O FF AGA I N S T C UR RE NT PR O F I T O F EL I G I B L E UNI T FOR COMPUTING DEDUCTION U/S 10A. WHILE DOING SO, THE HONBLE COU RT HELD THAT DEDUCTION U/S 10A HAS TO BE GIVEN AT THE STAGE WHEN PROFIT AND GAINS OF BUSINESS ARE COMPUTED IN THE FIRST INSTANC E. IN THE CASE OF CIT VS. SCHEMETZ INDIA PVT. LTD. (SUPRA), HONBLE BOMBAY HIGH COURT HELD THAT THE LOSSES SUFFERED BY MUMBAI DIVIS ION (TRADING DIVISION) SHOULD NOT BE SET OFF AGAINST THE PROFITS OF KANDLA DIVISION BEFORE CLAIMING DEDUCTION U/S 10A OF THE IT ACT, 19 61. 8. THIS BEING SO, I DO NOT FIND ANY MERIT IN ACTION OF THE ASSESSING OFFICER IN SETTING OFF LOSS OF RS. 42,99,390/- PERT AINING TO TRADING DIVISION AGAINST PROFIT OF 10B UNIT BEFORE ALLOWING DEDUCTION U/S 10B OF THE IT ACT, 1961 ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.42,99,390/-. THUS, THE GROUND IS ALLOWED. SINCE THE FACTS OF THE BEING IDENTICAL, I DO NOT FI ND ANY NECESSITY TO DIFFER WITH THE VIEW TAKEN AS ABOVE. ACCORDINGLY, FOLLOWING THE ABOVE ORDER IN THE CASE OF M/S CAROTINO INDIA PVT. LTD., THE AO IS DIRECTED TO ALLOW DEDUCTION U/S 10A OF THE I.T ACT, 1961 WITHOUT SETTING OFF LOSSES OF OTHER UNITS. ACCORDINGLY, HE IS DIRECTED TO DELETE THE ADDITION OF RS.73,97,973/-. THUS, THE G ROUND NO.1 AND 2 ARE ALLOWED. 4 ITA NO.2236/PUN/2016 AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 5. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO AND LD.CI T(A). LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND PLACED A CHART OF SUMMARY OF PREVIOUS ITAT ORDERS AND FROM THAT CHART HE POINTED THAT IN ALL THE EARLIER YEA RS ON IDENTICAL ISSUE, THE DEPARTMENT APPEALS HAVE BEEN DISMISSED BY THE HONBLE ITAT. HE FURTHER PLACED ON RECORD THE COPY OF LATEST ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008-09 IN ITA NO.2477/PUN/2016 ORDER DT.16.03.2018 WHEREIN ON SIMILAR FAC TS, THE CLAIM OF THE ASSESSEE WAS ALLOWED. HE POINTED TO THE RELEV ANT FINDINGS OF THE ORDER. HE THEREFORE SUBMITTED THAT IN VIEW OF THE AFORESAID FACTS, THE GROUND OF REVENUE NEEDS TO BE DISMISSED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DENIAL OF CLAIM OF DEDUCTION U/S 10A OF THE ACT. THE CLAIM OF DEDUCTIO N U/S 10A OF THE ACT WAS DENIED BY THE AO MAINLY FOR THE REASON THAT ASSESSEE WAS HAVING LOSSES AND HE WAS OF THE VIEW THAT LOSSES HAV E TO BE FIRST SET OFF OF BEFORE CLAIMING DEDUCTION U/S 10A OF THE ACT. WE FIND THAT IDENTICAL ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF TH E TRIBUNAL IN A.Y. 2008-09 IN ASSESSEES OWN CASE IN ASSESSEES FAVOUR BY OBS ERVING AS UNDER : 10. I HEARD BOTH THE PARTIES ON THIS LIMITED ISSUE OF CORRECTNESS OF THE STAGE OF SET OFF OF THE CLAIM OF LOSSES OF NON-STPI UNIT AGAINST THE PROFITS OF STPI UNIT QUA THE DETERMINATION OF ALLOWABLE DEDUCT ION U/S.10A OF THE ACT. IT IS NOW SETTLED LEGAL PROPOSITION THAT DEDUC TION U/S.10A IS TO BE COMPUTED AND ALLOWED ANTERIOR TO THE ALLOWING THE S ET OFF OF THE CURRENT 5 ITA NO.2236/PUN/2016 YEAR LOSSES EARNED BY THE NON-STPI UNIT OF THE ASSE SSEE IS SET OFF. AFTER THE AMENDMENT BY THE FINANCE ACT, 2000, THE CLAIM U /S.10A/10B OF THE ACT CONSTITUTES DEDUCTIONS. THE DEDUCTION OUT OF THE PROFITS AND GAINS OF BUSINESS OF AN ELIGIBLE BUSINESS UNDERTAKING HAS TO BE MADE INDEPENDENTLY BEFORE GIVING EFFECT TO THE STATUTORY PROVISIONS FOR SET OFF AND CARRY FORWARD OF LOSSES CONTAINED IN SECTIONS 7 0, 72 AND 74 OF THE ACT. FURTHER, THIS ISSUE STANDS COVERED BY THE ORDE R OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.156/PN/2014, ORDER DA TED 05-05-2016 FOR THE A.Y. 2007-08. FOR THE SAKE OF COMPLETENESS OF T HIS ORDER, I PROCEED TO EXTRACT THE RELEVANT PARA (PARA NO.9) OF THE TRIBUN AL AS UNDER : THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE IS SUE BEFORE THE TRIBUNAL IN M/S. KPIT CUMMINS INFOSYSTEMS LTD. VS. DCIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION UNDER S ECTION 10A OF THE ACT IN RESPECT OF ITS STPI UNIT AND THE LOSSES FROM NON-STPI UNIT ARE TO BE CARRIED FORWARD TO THE SUCCEEDING YEARS. REVE RSING THE ORDER OF CIT(A), WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. CONSIDERING THE SAME, I AM OF THE OPINION THAT THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR INTERF ERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. THE AFORESAID DECISION OF THE TRIBUNAL HAS NOT BEEN SE T ASIDE, STAYED OR OVER-RULED BY HIGHER JUDICIAL AUTHORITIES. BEFOR E US, REVENUE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION AND THAT OF EARLIER YEAR NOR HAS PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS , WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 26 TH DAY OF NOVEMBER, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 26 TH NOVEMBER, 2018. YAMINI 6 ITA NO.2236/PUN/2016 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A), PUNE-1, PUNE. PR. CIT-1, PUNE. '#$ %%&',) &', / DR, ITAT, A PUNE; $,-./ GUARD FILE. / BY ORDER // TRUE COPY // /01%2&3 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.