DCIT, Madurai V. The Metal Powder Co Ltd., Thirumangalam

ITA 236/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8753 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 06-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 80HHC; 80IB

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2 3 6 /MDS/201 6 / ASSESSMENT YEAR :20 1 1 - 1 2 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2 , MADURAI. VS. M/S. THE METAL POWDER CO. LTD., MARAVANKULAM, THIRUMANGALAM 625 706. [PAN: A A A C T4 262E ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A. V. SREEKANTH , J CIT / RESPONDENT BY : SHRI A.S. SRIRAMAN , ADVOCATE / DATE OF HEARING : 0 6 . 0 6 .201 6 / DATE OF P RONOUNCEMENT : 11 . 0 8 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , MADURAI DATED 27 . 11 .201 5 RELEVAN T TO THE ASSESSMENT YEAR 20 1 1 - 1 2 . THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE CLAIM UNDER SECTION 80IB OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] IS TO BE GRANTED WITHOUT SETTING OFF OF THE LOSSES AGAINST THE PROFITS OF THE ALUMINIUM PASTE UNIT. I.T.A. NO . 23 6 /M/ 1 6 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF METALLIC POWDERS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2011 ADMITTING TOTAL INCOME OF .18,18,61,050/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 10.08.2012. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 31.07.2012. IN RESPONS E THERETO, THE ASSESSEE FILED ALL THE DETAILS . AFTER VERIFYING THE DETAILS FILED BY THE ASSESSEE AND ALSO CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 26.03.2014 BY ASSESSING TOTAL INCOME OF T HE ASSESSEE AT .22,74,09,450/ - AFTER MAKING VARIOUS DISALLOWANCES. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO FACTS OF THE CASE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR HAS SUBMITTED THAT THE GROSS TOTAL INCOME AS DEFINED UNDER SECTION 80B(5) OF THE ACT HAS TO BE COMPUTED IN THE MANNER PROVIDED UNDER THE ACT WHICH PRESUPPOSES THAT THE GROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER ADJUSTING THE LOSSES OF THE OTHER DIVISIONS AGAINST THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THEREFORE, THE LD. CIT(A) WENT IN WRONG IN I.T.A. NO . 23 6 /M/ 1 6 3 HOLDING TO GRANT THE CLAIM OF DEDUCTION UNDER SECTION 80IB WITHOUT SETTING OFF OF THE LOSSES AGAINST THE PROFITS OF THE OTHER UNIT NAMELY ALUMINIUM PASTE UNIT. HE ALSO RELIED ON THE DECISION IN THE CASE OF SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER 299 ITR 444 (SC). 5. ON THE OTHER HAND, THE LD. COUNSEL FOR TH E ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEAR AND SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11 IN I.T.A. NO. 1143/MDS/2014 DATED 31.03.20 16, WHEREIN , BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2002 - 03, 2003 - 04 & 2005 - 06 TO 2008 - 09 IN I.T.A. NOS. 782 TO 787/MDS/2012 DATED 21.02.2013, THE TRIBUNAL HAS SUSTAINED THE ORDER OF THE LD. CIT(A) BY DISM ISSING THE GROUND RAISED BY THE REVENUE. VIDE ORDER DATED 21.02.2013 IN ASSESSEE S OWN CASE, BY CONSIDERING VARIOUS DECISIONS OF THE HON BLE JURISDICTIONAL HIGH COURT, THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 7. WE HAVE PERUSED THE ORDERS AND HEARD T HE RIVAL SUBMISSIONS. FOR ALL THE IMPUGNED YEARS, WHAT WE NOTE SPECIFICALLY FROM THE ORDERS OF LD. CIT(APPEALS) IS THAT GROSS TOTAL INCOME OF THE ASSESSEE WAS POSITIVE. ASSESSEE I.T.A. NO . 23 6 /M/ 1 6 4 HAD NO CARRIED FORWARD LOSS OF EARLIER YEARS AS WELL. THAT GROSS TOTAL INCOME FOR ALL THE IMPUGNED ASSESSMENT YEARS WAS POSITIVE, WAS NOT DISPUTED BY THE LEARNED D.R. FURTHER, ASSESSEE HAD RETURNED POSITIVE TOTAL INCOME FOR ALL THE IMPUGNED ASSESSMENT YEARS, AND THEREFORE, BY NECESSARY IMPLICATION ITS GROSS TOTAL INCOME, BEFORE THE DEDUCTIONS CLAIMED UNDER CHAPTER VIA, WHATEVER BE THAT AMOUNT, WOULD HAVE ONLY BEEN POSITIVE. SO, THE ONLY QUESTION THAT REMAINS IS, WHEN THE GROSS TOTAL INCOME IS POSITIVE, A DEDUCTION UNDER SECTIONS 80 - IA AND 80 - IB CAN BE WORKED OUT INDEPENDENTLY WITHOUT SETTING OFF LOSSES OF UNITS ON WHICH SUCH DEDUCTION WAS NOT BEING CLAIMED. IN OUR OPINION, THIS QUESTION STANDS ALREADY ANSWERED BY HON'BLE JURISDICTIONAL HIGH COURT IN THEIR DECISION IN THE CASE OF CHAMUNDI TEXTILES (SILK MILLS) LTD. V. CIT (341 ITR 488) . THERE THE QUESTION WAS REGARDING CLAIM OF DEDUCTION UNDER SECTION 80HHC AND WHETHER SUCH DEDUCTION COULD BE ALLOWED WITHOUT CONSIDERING THE RESULTS OF A UNIT, WHICH WAS NOT HAVING ANY PROFITS. IT WAS HELD BY THEIR LORDSHIPS THAT BY VIRTUE OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. V. CIT (266 ITR 521), UNDISPUTEDLY ONLY AN ASSESSEE HAVING POSITIVE PROFITS COULD CLAIM SUCH A DEDUCTION. THEIR LORDSHIP ALSO HELD THAT FOR ARRIVING AT SUCH PROFIT, INCOME FROM VARIOUS UNITS HAD TO BE CALCULATED AND IF ONE OF THE UNITS WAS RUNNING AT A LOSS, GROSS TOTAL INCOME HAD TO BE ARRIVED CONSIDERING SUCH LOSS ALSO. ULTIMATELY, IF THE GROSS TOTAL INCOME WAS A LOSS, CLAIM FOR DEDUCTION WAS TO BE REJECTED. SECTIONS 80HHC OR 80 - IA OR 80 - IB FOR THAT MATTER, ARE ALL CONTROLLED BY SECTION 80AB OF THE ACT. GROSS TOTAL INCOME MEANS GROSS TOTAL INCOME COMPUTED AS PER THE PROVISIONS OF THE ACT. THIS WAS CLEARLY REITERATED BY HON'BLE APEX COURT IN THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA). HON'BLE APE X COURT HELD THAT GROSS TOTAL INCOME HAD TO BE ARRIVED AT AFTER MAKING DEDUCTIONS AS PER APPROPRIATE COMPUTATION PROVISIONS, INCLUDING INCOME UNDER SECTIONS 60 TO 64, ADJUSTMENT OF INTER SE LOSSES AND AFTER SETTING OFF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. ONLY IF RESULTANT GROSS TOTAL INCOME WAS POSITIVE, AN ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER CHAPTER VIA OF THE ACT. HOWEVER, WHERE ASSESSEE IS HAVING MORE THAN ONE UNIT, WHERE ONE UNIT IS ELIGIBLE FOR DEDUCTION AND OTHER UNIT OR UNITS AR E NOT ELIGIBLE FOR DEDUCTION AND IF THE GROSS TOTAL INCOME IS POSITIVE, DESPITE THE LOSS IN ONE OF SUCH UNITS, DECISIONS OF HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. (SUPRA) AND SYNCO INDUSTRIES LTD. (SUPRA) WOULD HAVE NOT MUCH APPLICABILITY . IN SUCH CASES, WHERE AN ASSESSEE IS CARRYING ON VARIOUS ACTIVITIES, EVEN IF CENTRALIZED ACCOUNTS ARE MAINTAINED, SO LONG AS INTERLACING, INTERCONNECTIVITY OR INTERDEPENDENCE OF VARIOUS UNITS WAS NOT THERE, VARIOUS ACTIVITIES HAVE TO BE TREATED AS SEPARAT E AND DISTINCT, AS HELD BY HON'BLE APEX COURT IN THE CASE OF WATER FALL ESTATES LTD. V. CIT (219 ITR 563). HON'BLE APEX COURT IN THE CASE OF L.M. CHHABDA & SONS. V. CIT (65 ITR 638) HAS ALSO HELD THAT WHERE AN ASSESSEE CARRIED ON BUSINESS VENTURES AT DIFFE RENT PLACES, THERE WAS NO GENERAL PRINCIPLE THAT THEY SHOULD ALL BE CONSIDERED AS PART OF SINGLE BUSINESS. THUS, IF AN ASSESSEE HAD DIFFERENT UNITS RESULTING IN POSITIVE GROSS TOTAL INCOME, IN VIEW OF DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT V. MACMILLAN INDIA LTD. (295 ITR 67), CIT V. RATHORE BROTHERS I.T.A. NO . 23 6 /M/ 1 6 5 (254 ITR 656), CIT VS. SURESH B. MEHTA (291 ITR 462) AND CIT V. M. GANI AND CO. (301 ITR 381), EACH OF THE UNIT HAD TO BE SEPARATELY CONSIDERED FOR WORKING OUT DEDUCTION UNDER SECTION 80 - IA OR 80 - IB OR 80HHC OF THE ACT, ONCE SEPARATE ACCOUNTS WERE BEING MAINTAINED AND THERE WAS NO INTERLACING AND INTERDEPENDENCE. IN THE GIVEN CASE BEFORE US, ASSESSEE HAD POSITIVE GROSS TOTAL INCOME. THEREFORE, EACH UNDERTAKING HAD TO BE CONSIDERED SEPA RATELY FOR WORKING OUT DEDUCTION UNDER SECTION 80 - IA OF THE ACT, SINCE THE GROSS TOTAL INCOME WAS POSITIVE. WE ARE OF THE OPINION THAT CIT(APPEALS) WAS JUSTIFIED IN GIVING SUCH DIRECTIONS. 7. BEFORE US, THE LD. DR RELIED ON THE DECISION IN THE CASE OF SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER (SUPRA), WHEREIN THE HON BLE SUPREME COURT HAS HELD THAT THE GROSS TOTAL INCOME AS DEFINED UNDER SECTION 80B(5) OF THE ACT HAS TO BE COMPUTED IN THE MANNER PROVIDED UNDER THE ACT WHICH PRESUPPOSES THAT THE GROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER ADJUSTING THE LOSSES OF THE OTHER DIVISIONS AGAINST THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. THE CASE LAW RELIED ON BY THE LD. DR IS DISTINGUISHABLE AND HAS NO APPLICAT ION TO THE FACTS OF THE PRESENT CASE BECAUSE IN THAT CASE, THERE WAS A BROUGHT FORWARD LOSS FROM THE ELIGIBLE UNDERTAKING, WHICH IS NOT SO IN THE PRESENT CASE IN HAND. 8. FROM THE ABOVE ORDER OF THE TRIBUNAL, IT IS CLEAR THAT EACH UNIT HAS TO BE SEPARAT ELY CONSIDERED FOR WORKING OUT DEDUCTION UNDER SECTION 80IA OR 80IB OR 80HHC OF THE ACT ONCE SEPARATE ACCOUNTS WERE BEING MAINTAINED AND THERE WAS NO INTERLACING AND INTERDEPENDENCE. IN THE INSTANT CASE, THE ASSESSEE HAS BEEN MAINTAINING SEPARATE ACCOUNTS FOR ITS DIFFERENT UNITS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE I.T.A. NO . 23 6 /M/ 1 6 6 TRIBUNAL IN ASSESSEE S OWN CASE FOR EARLIER ASSESSMENT YEARS, WE DISMISS THE GROUND RAISED BY THE REVENUE. 9 . IN THE RESULT, THE APPEAL FILED BY THE RE VENUE IS DISMISSED . ORDER PRONOUNCED ON THE 11 TH AUGUST , 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 11 . 0 8 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.