HERCULES HOISTS LTD, MUMBAI V. ADDL CIT RG 10(3), MUMBAI

ITA 2342/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5056 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 03-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRY; M A GOHEL
• Keywords: Depreciation; Revised return; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 2342/MUM/2012 ASSESSMENT YEAR: 2009-10 HERCULES HOISTS LTD BAJAJ BHAWAN, 2 ND FLOOR 226, JAMNALAL BAJAJ MARG, NARIMAN POINT, MUMBAI-. 400 021 PAN :AAACH 2706 D VS. ADDL CIT RG 10(3) AAYAKAR BHAVAN, 5 TH FLOOR MUMBAI. 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.D. MISTRY & M.A. GOHEL RESPONDENT BY : SHRI SANJEEV JAIN DATE OF HEARING : 03.09.2013 DATE OF PRONOUNCEMENT : 13.09.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) - 22, MUMBAI DATED 06.03.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF DEDU CTION OF RS.96,74,434/- MADE BY THE AO UNDER SECTION 80-IA OF THE INCOME TAX ACT AN D THE SAME CONFIRMED BY THE LD.CIT(A). 2.1 BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF MATERIAL HANDLING EQUIPMENTS AND GENERATION OF P OWER, IN THE SECOND REVISED RETURN OF INCOME HAD CORRECTED THE INCOME FROM MANUFACTURI NG ACTIVITIES AND CLAIMED A DEDUCTION U/S 80-IA OF THE ACT IN RESPECT OF THE BU SINESS OF GENERATION OF POWER FROM WINDMILL I, II, III & IV. ACCORDING TO THE ASSESSEE , IN TERMS OF THE PROVISIONS OF SECTION 80-IA (4) (IV) (A) READ WITH SECTION 80-IA (1) OF T HE ACT, AN UNDERTAKING WHICH IS SET UP IN ANY PART OF INDIA FOR THE GENERATION OR GENERATI ON AND DISTRIBUTION OF POWER IS ENTITLED ITA NO. 2342/MUM/2012 HERCULES HOISTS LTD ASSESSMENT YEAR: 2009-10 2 TO THE DEDUCTION OF AN AMOUNT EQUAL TO 100% OF PROF ITS AND GAINS DERIVED FROM SUCH BUSINESS FOR 10 CONSECUTIVE ASSESSMENT YEARS. HHL H AVING SET UP THE WIND-MILL PLANTS FOR GENERATION OF ELECTRICITY/POWER IS ENTITLED TO THE DEDUCTION UNDER SECTION 80-IA OF THE ACT. IN TERMS OF THE PROVISIONS OF SECTION 80-IA (2 ) OF THE ACT, DEDUCTION MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY THE ASSESSEE FOR ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WH ICH THE UNDERTAKING GENERATES POWER. HHL HAD COMMENCED GENERATION OF POWER THROUG H WIND-MILL PLANTS ON 25.03.2005, 27.02.2005, 27.03.2006 AND 28.07.2006, IT HAS CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT FOR THE FIRST TIME FOR ASS ESSMENT YEAR 2009-10, BEING THE INITIAL YEAR FOR SUCH DEDUCTION. 2.2 HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3), T HE AO HAD DISALLOWED THE CLAIM OF DEDUCTION AND THE RELEVANT PORTION OF THE FINDIN GS IS EXTRACTED HEREUNDER: NOWHERE IN THE ACT, IT IS PROVIDED THAT FOR COMPUTI NG THE PROFITS OF ELIGIBLE BUSINESS IN INITIAL ASSESSMENT YEAR, A DIFFERENT WO RKING IS TO BE ADOPTED BY IGNORING THE EARLIER YEARS UNABSORBED DEPRECIATION . ACCORDINGLY, THE ASSESSEES CLAIM THAT THE DEDUCTION UNDER SECTION 80-IA OF THE ACT IS TO BE ALLOWED WITHOUT SETTING OFF THE BUSINESS LOSS/DEPRECIATION OF EARLI ER YEARS IS NOT ACCEPTABLE AND THE NET INCOME RELATING TO BUSINESS OF GENERATION OF PO WER FOR THE ABOVE YEAR IS RS.96,74,434/-. HOWEVER, AS EXPLAINED ABOVE, THE UN ABSORBED DEPRECIATION RELATING TO EARLIER YEARS WORKS OUT TO RS.20,56,58, 636/-. SINCE; SUCH DEPRECIATION IS FAR IN EXCESS OF THE INCOME OF RS.96,74,434/-, T HE AMOUNT AVAILABLE FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT, AFTER SET OFF OF SUCH DEPRECIATION, IS RS. NIL. HENCE, THE ASSESSEE IS NOT ALLOWED DEDUCTION U NDER SECTION 80-IA OF THE ACT. 2.3 ON APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF T HE AO AND THE RELEVANT FINDINGS ARE EXTRACTED HEREUNDER: 2.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER, PERUS ED THE SUBMISSION MADE BY THE APPELLANTS AND ALSO DISCUSSED THE CASE WITH A.R . OF THE APPELLANT. HOWEVER, I DO NOT AGREE WITH THE CONTENTION OF THE APPELLANT. IDENTICAL ISSUE HAD COME UP IN APPELLANTS OWN CASE IN A.Y.S 2007-08 AND 2008-09, WHEREIN AFTER ELABORATE DISCUSSION VIDE MY ORDERS DATED 21.12.2010 AND 30.0 9.2011 RESPECTIVELY, THE ISSUE WAS DECIDED AGAINST THE APPELLANT. IN MY ORD ER FOR A.Y. 2008-09, I HAVE DISCUSSED THE APPLICABILITY OF JUDGMENT OF HON. MAD RAS HIGH COURT IN CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (20 10) 38 DTR (MAD) 57. THE APPELLANT HAS REITERATED THE SUBMISSIONS AS MADE IN EARLIER YEARS. IT WAS STATED THAT SINCE IT HAS CLAIMED SET OFF OF BUSINESS LOSS AGAINST OTHER INCOME DURING THE PREVIOUS YEAR IN EARLIER YEARS SAME CANNOT BE SET O FF IN THE YEAR UNDER CONSIDERATION. HOWEVER, THE FACT REMAINS THAT AO HA S NOT ALLOWED SET OFF IN EARLIER YEARS AND HENCE LOSS ON ACCOUNT OF UNABSORBED DEPRE CIATION HAS RIGHTLY BEEN SET ITA NO. 2342/MUM/2012 HERCULES HOISTS LTD ASSESSMENT YEAR: 2009-10 3 OFF BY THE AO IN THE YEAR UNDER CONSIDERATION. FOLL OWING MY EARLIER ORDERS IN THIS REGARD, THE DISALLOWANCE MADE BY THE AO IS UPHELD. 2.4 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT IS OBSERVED THAT THE ITAT IN ITA NOS. 7944, 7946, 2255 & 7943/M UM/2011 FOR THE AYS. 2005-06 TO 2008-09 IN THE ASSESSEES OWN CASE WHILE DECIDING A N ISSUE, I.E., SECTION 80-IA (5) BEING APPLICABLE FOR THE CURRENT YEAR, WHETHER THE ASSESS EES CLAIM FOR SET OFF OF LOSS/ALLOWANCE U/S 32(2) 70 AND 71 IS AGAINST OTHER INCOME, ADMITT EDLY FROM A NOT ELIGIBLE BUSINESS SOURCE, SUSTAINABLE IN LAW, HAS HELD THE SAME IN A FFIRMATIVE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IT HAS FURTHER BEEN HELD T HAT THE REVENUE IS NOT CORRECT IN LAW IN DENYING THE SET OFF OF THE UNABSORBED DEPRECIATI ON ALLOWANCE/LOSS OF THE ASSESSEES ELIGIBLE UNITS AGAINST IT INCOME FROM OTHER SOURCES IN TERMS OF U/S 32(2) 70 & 71 OF THE ACT. IN THE CASE OF M/S PRASHANT CATERERS IN ITA NO . 4093/MUM/2012 FOR THE ASSESSMENT YEAR 2007-08, THE ITAT WHILE DECIDING A SIMILAR ISS UE HAS DECIDED AS FOLLOWS: WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVE OF THE PARTIES AND ALSO PERUSED THE ORDERS OF THE AUTHORIT IES BELOW. WE HAVE ALSO GONE THROUGH THE EARLIER ORDERS OF THE TRIBUNAL DATED 6. 2.2013, COPY OF WHICH ARE PLACED AT PAGES 28 TO 31 OF THE PAPER BOOK AND THE ORDER DATED 8.2.2013, COPY OF WHICH IS PLACED AT PAGES 32 TO 44 PAPER BOOK (SUPRA ). WE OBSERVE THAT THE TRIBUNAL HAS STATED THAT THE ABOVE ISSUE IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE HONBLE MADRAS HIG H COURT, WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE COMPANY IS ELIGIBLE FOR DEDU CTION U/S 80-IA IN RESPECT OF THE INCOME FROM WINDMILL INSTALLED BY IT AND THE UN ABSORBED DEPRECIATION SET OFF IN EARLIER YEARS CANNOT BE REDUCED FROM THE PROFITS FOR COMPUTING THE DEDUCTION U/S 80IA OF THE ACT. HOWEVER, THE TRIBUNAL STATED T HAT THE MATTER BE RESTORED TO FIND OUT THE CLAIM OF THE ASSESSEE THAT THE LOSSES WERE ALREADY ADJUSTED AGAINST THE PROFITS OF INELIGIBLE UNITS OF THE ASSESSEE IN EARLIER YEARS AND DIRECTED THE LD.CIT(A) FOR ADJUDICATING THE ISSUE AFRESH ACCORDI NGLY. RESPECTFULLY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CA SE (SUPRA), WE SET ASIDE THE IMPUGNED ORDER OF THE LD.CIT(A) AND RESTORE THE ISS UE TO THE LD.CIT(A) TO ADJUDICATE THE SAME BY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE PARTIES. HENCE GR OUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. IN VIEW THE AFOREMENTIONED DECISIONS OF THE ITAT, W E ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE COMPANY IS ELIGIBLE FOR DEDUCTION U/S 80IA. HOWEVER, IT WOULD BE JUST AND FAIR THAT THE MATTER IS RESTORED TO FIND OUT THE CL AIM OF THE ASSESSEE THAT THE LOSSES HAVE ALREADY BEEN ADJUSTED AGAINST THE PROFITS OF INELIG IBLE UNITS OF THE ASSESSEE IN EARLIER YEARS WITH A DIRECTION TO THE LD.CIT(A) FOR ADJUDI CATING THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE PARTIES. WE ORDER AN D DIRECT ACCORDINGLY. ITA NO. 2342/MUM/2012 HERCULES HOISTS LTD ASSESSMENT YEAR: 2009-10 4 3. GROUND NO. 2 RELATES TO THE COMPUTATION OF INCOM E FROM HOUSE PROPERTY AT RS.13,00,681/- MADE BY THE AO RESULTING INTO AN ADD ITION AND THE SAME CONFIRMED BY THE LD.CIT(A). 3.1 AT THE OUTSET, IT HAS BEEN POINTED OUT THAT AN IDENTICAL ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE ITAT IN ITA NOS. 7944, 7946, 2255 & 7943/MUM/2011 FOR THE AYS. 2005-06 TO 2008-09 IN THE ASSESSEES OWN A ND THE RELEVANT FINDINGS OF THE TRIBUNAL IS AS UNDER: IN THE INSTANT CASE, THE PROPERTY WAS LET AT A MONT HLY RENT OF RS.1,54,843/- (ANNUAL RENT: RS.18,58,116/-) CONTINUOUSLY FROM THE YEAR 1997 TO 2004. WHAT BETTER PROOF OF THE SAME REPRESENTING ITS AV COULD POSSIBLY BE? THERE IS NOTHING ON RECORD TO SHOW OR INFER THAT THE PROPERTY, WHICH , AS LATE AS APRIL, 2004, YIELDED A RENT TO THE TUNE OF RS.18 LAKHS P.A., BECAME INCA PABLE OF FETCHING AS MUCH AND, RATHER, PLUMMETED TO ABOUT 1% THEREOF. THAT IS, AN EROSION IN RENTAL CAPACITY BY NEARLY 99%, AND ALMOST OVERNIGHT. THE AO IN THE INS TANT CASE HAS KEPT THE AV (AT RS.13,00,681/-), I.E., NET OF STANDARD DEDUCTION A T 30%, CONSTANT FRO ALL THE YEARS, I.E., UP TO A.Y. 2008-09, AND WHICH WE CONSI DER AS REASONABLE, SATISFYING THE ONLY CONDITION PLACED BY LAW ON AN OTHERWISE TO TALLY FACTUAL MATTER. WE DECIDE ACCORDINGLY, UPHOLDING THE REVENUES ACTION. WE, THEREFORE FOLLOWING THE SAID ORDER, DECIDE THIS GROUND AGAINST THE ASSESSEE AND IN FAVOUR OF THE ASSESSEE. 3.2 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY SEPTEMBER, 2013. SD/- SD/- (B. RAMAKOTAIAH) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.09.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR H BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.