ACIT, Coimbatore V. Priyalakshmi Spinners (P) Ltd., Udamalpet

ITA 2359/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7219 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-12-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2359/MDS/2014 ( / ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX, SALARY CIRCLE-I, COIMBATORE. VS M/S. PRIYALAKSHMI SPINNERS P.LTD. S.F. NO.119/4, MYVADI VILLAGE, MYVADI POST, UDUMALPET PAN:AAFCS0700H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.DAS GUPTA , JCIT /RESPONDENT BY : NONE / DATE OF HEARING : 22 ND DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 26 TH DECEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, COIMBA TORE DATED 30.06.2014 FOR THE ASSESSMENT YEAR 2010-11. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THAT THE ASSESSEE CLAIMED DEDUCTION UNDE R SECTION 80IA OF THE ACT FROM THE INITIAL ASSESSMENT YEAR TAKEN AS THE YEAR IN WHICH IT HAS CLAIMED DEDUCTION UNDE R SECTION 80IA AND NOT THE YEAR OF COMMENCEMENT OF ELIGIBLE B USINESS. 2 ITA NO.2359/MDS/2014 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AND SIN CE THE ISSUE IN APPEAL IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF M/S. VELAYUDHASWAMY SPINNING MILLS LTD. VS. ACIT (231 CTR 368), WE PROCEED TO DISPOSE OFF THE APPEA L ON MERITS AFTER HEARING THE DEPARTMENTAL REPRESENTATIV E. 3. THE ASSESSING OFFICER DENIED THE CLAIM FOR DEDUC TION UNDER SECTION 80IA OF THE ACT TO THE ASSESSEE HOLDI NG THAT FOR CLAIMING DEDUCTION UNDER SECTION 80-IA AS PER THE P ROVISIONS OF SECTION 80-IA(5), INITIAL ASSESSMENT YEAR SHOULD BE THE YEAR IN WHICH THE ASSESSEE COMMENCES THE ELIGIBLE B USINESS, BUT NOT THE YEAR IN WHICH ASSESSEE BEGINS TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT. THE QUESTION AS TO WHETHER INITIAL ASSESSMENT YEAR MEANS THE YEAR OF COMMENCEM ENT OR THE YEAR OF INITIAL CLAIM OF DEDUCTION WAS DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS LTD. VS. ACIT (SUPRA) . THE HONBLE HIGH COURT HELD THAT FOR THE PURPOSE OF COM PUTING DEDUCTION UNDER SECTION 80IA, INITIAL ASSESSMENT YE AR MEANS THE YEAR IN WHICH THE ASSESSEE BEGINS TO CLAIM DEDU CTION 3 ITA NO.2359/MDS/2014 UNDER SECTION 80IA OF THE ACT. WHILE HOLDING SO, THE HONBLE HIGH COURT OBSERVED AS UNDER:- FROM READING OF SUB - S. (1) OF S . 80-IA, IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL I NCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-S. (4) I . E. REFERRED TO AS THE EL I GIBLE BUS I NESS, THERE SHAL L , IN ACCORDANCE W I TH AND SUBJECT TO THE PROV I S I ONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL I NCOME OF THE ASSESSEE, A DEDUCT I ON OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TE N CONSECUTIVE ASSESSMENT YEARS . DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-SO (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 BEN EF I T. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINN ING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-S. (5) DEALS WITH QUANTUM OF D EDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INITIAL ASSESSMENT YEAR' ARE USED IN SUB -S. (5) AND THE SAME IS NOT DEFINED UNDER THE PROVISION S. IT IS TO BE NOTED THAT ' IN I TIAL ASSESSMENT YEAR' EMPLOYED IN SUB-S. (5) IS DIFFERENT FROM THE WORDS 'BEGINNING FROM THE YEAR ' REFERRED TO IN SUB-S. (2). IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S. (5) AND THEY ARE AS UNDER : '(1) IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; (2) IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR; (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE E LI GIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURI NG THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMEN T YEAR AND EVERY S U BSEQUENT ASSESSMENT YEAR.' FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR A ND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEA R - ALONE ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE . LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE IN I TIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIN D OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F 4 ITA NO.2359/MDS/2014 AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OF F AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS . ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGA I NST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OF F AMOUNT AND BRING IT NOTIONALLY . FICTION CREATED IN SUB-S. (5) DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY . FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE JURISDICTIO NAL HIGH COURT DECISION IN THE CASE OF VELAYUDHASWAMY SPINNI NG MILLS LTD. VS. ACIT(SUPRA). RESPECTFULLY FOLLOWING THE SA ID DECISION WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS OF A PPEAL RAISED BY THE REVENUE. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 26 TH DAY OF DECEMBER, 2014 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 26 TH DECEMBER, 2014 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .