DCIT, Coimbatore V. Emerald Jewel Industry (India) Ltd., Coimbatore

ITA 2440/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86264 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2440/MDS/2014 ( / ASSESSMENT YEAR: 2010-11) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), 63-A, RACE COURSE ROAD, COIMBATORE. VS M/S. EMERALD JEWEL INDUSTRY (INDIA) LTD., 230, T.V.SAMY ROAD(EAST) R.S.PURAM, COIMBATORE-641 002. PAN:AABCE3430A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. P.RADHAKRISHNAN, JCIT /RESPONDENTBY : MR. A.S. SRIRAMAN, ADVOCATE /DATE OF HEARING : 23 RD DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / 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)-I, COIMBAT ORE DATED 24.07.2014 FOR THE ASSESSMENT YEAR 2010-11. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTIO N 80IA OF THE ACT. 2 ITA NO.2440/MDS/2014 2. BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT RESTRICTED THE DEDUCTION CLAIMED UNDER SECTION 80IA OF ` 16,49,579/- AS AGAINST ` 85,45,089/- OBSERVING AS UNDER:- AS PER SECTION 80IA(5) PROFITS AND GAINS OF AN ELIGIBLE BUSINESS HAS TO BE WORKED OUT AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE RIGHT FROM THE COMMENCEMENT OF THE BUSINESS AND IN SUBSEQUENT YEARS UPTO THE COMPUTATION IS MADE AND BUSINESS LOSSES, DEPRECIATION AND INVESTMENT ALLOWANCE OF EARLIER YEARS SHOULD BE TAKEN INTO ACCOUNT IN DETERMINING THE QUANTUM OF DEDUCTION ADMISSIBLE UNDER THE NEW SECTION 80-IA EVEN THOUGH THEY MAY HAVE BEEN SET OFF AGAINST THE PROFITS OF THE TAX PAYER FROM OTHER SOURCES. THERE IS NO CHANGE IN THE WORDINGS WITH REGARD TO COMPUTATION OF PROFITS AND GAINS OF THE ELIGIBLE BUSINESS RIGHT FROM THE IMPORT AND UNTIL N OW. IN LIGHT OF THE ABOVE DISCUSSIONS THE ASSESSEE DOES NOT HAVE ELIGIBLE PROFITS TO CLAIM DEDUCTION UNDER SECTION 80IA. HOWEVER, THE ASSESSEE HAS CLAIMED 80IA DEDUCTION ON THE BASIS OF THE HONBLE JURISDICTIONA L HIGH COURT DECISION IN THE CASE OF SRI VELAYUDHASAMY SPINNING MILLS PVT.LTD. VS. ACIT REPORTED IN 231 CTR 368 (MAD) ON SIMILAR ISSUE. NONETHELESS, THIS ISSUE HAS NOT BECOME FINAL AS THE DEPARTMENT HAS PREFERRED SLP BEFORE THE HONBLE SUPREME COURT WHICH IS PENDING FOR DECISION. CONSIDERING THE FACT THAT THE ISSUE HAS NOT BECOME FINAL, THE AO IS COMPELLED TO MAKE NECESSARY ADDITION ON ACCOUNT OF THIS ISSUE. HOWEVER, IT IS T O BE 3 ITA NO.2440/MDS/2014 NOTED THAT WITH ABUNDANT CAUTION THE DEMAND RAISED ON ACCOUNT OF THIS DEPARTMENTAL STAND SHALL BE ENFORCEABLE ONLY WHEN THE STAND OF THE DEPARTMENT IS UPHELD BY THE HONBLE SUPREME COURT, TILL SUCH TIME THE DEMAND RAISED ON ACCOUNT OF THIS ISSUE IS HELD TO BE STAYED. ACCORDINGLY THE ELIGIBLE DEDUCTI ON OF THE ASSESSEE COMPANY U/S.80IA(5) WORKS OUT TO ` 16,49,579/-. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) , FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF SRI VELAYUDHASAMY SPINNING MILLS PVT. LTD. VS. ACIT DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IA OF THE ACT AS CLAIMED BY THE ASSESSEE. THE REVENUE IS IN APPEAL BEFORE US. 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER AND THE GROUNDS OF A PPEAL. 4. 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 4 ITA NO.2440/MDS/2014 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 UNDER SECTION 80IA OF THE ACT. WHILE HOLDING SO, T HE 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 PROVISIONS. 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 5 ITA NO.2440/MDS/2014 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 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. 5. 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. 6 ITA NO.2440/MDS/2014 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 3 0 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .