DCIT, Coimbatore V. Sri Ranganathar Industries P. Ltd., Coimbatore

ITA 2699/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86272 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-01-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: A S SRIRAMAN
• Section: 6; 2

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. 2699/MDS/2014 ( / ASSESSMENT YEAR: 2011-12) JOINT COMMISSIONER OF INCOME TAX, RANGE-III, COIMBATORE. VS M/S. SRI RANGANATHAR INDUSTRIES PVT .LTD. 12/45, THADAGAM ROD, EDAYARPALAYAM PO COIMBATORE - 641 025. PAN:AADCS0183Q ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.DAS GUPTA, JCIT /RESPONDENT BY : MR. A.S.SRIRAMAN, ADVOCATE /DATE OF HEARING : 14 TH JANUARY, 2015 /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 ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COIMBAT ORE DATED 18.08.2014 FOR THE ASSESSMENT YEAR 2011-12. 2. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 -IA OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT AS PER THE PROVISIONS OF SECT ION 2 ITA NO.2699/MDS/2014 80IA(5) THE ELIGIBLE UNDERTAKING SHOULD BE TREATED AS ONLY SOURCE OF INCOME FOR COMPUTING QUANTUM OF DEDUCTION ALLOWABLE UNDER SECTION 80IA OF THE ACT. 3. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT DENIED CLAIM FOR DEDUCTION UNDER SECTION 80IA ON TH E PROFITS OF WINDMILL OBSERVING AS UNDER:- 4.1 IT IS SEEN THAT THE ASSESSEE HAS CLAIMED 80I A DEDUCTION FOR WINDMILLS TO THE TUNE OF ` 3,26,29,970/-. THE DETAILED WORKING WERE CALLED FOR AND VERIFIED. ON VERIFICATION, IT IS FOUND THAT ONE WINDMILL SUZLON (IX1250W SC NO.506) IS ELIGIBLE FOR DEDUCTION U/S.80IA AS PE R WORKING U/S.80IA (5) AMOUNTING TO ` 38,52,309/- AND THE BALANCE OF ` 2,87,77,661/- IS CLAIMED ON THE BASIS OF M/S. SRI VELAYUDHASAMY SPINNING MILLS PVT.LTD. CASE. SIN CE THE DEPARTMENT HAS PREFERRED A SPECIAL LEAVE PETITI ON BEFORE THE HONBLE SUPREME COURT WHICH IS PENDING FOR DECISION, THE DEPARTMENT IS COMPELLED TO MAKE THE NECESSARY ADDITION ON ACCOUNT OF THIS ISSUE. HENCE, AN AMOUNT OF ` 2,87,77,661/- CLAIMED AS DEDUCTION U/S.80IA IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. HOWEVER, IT IS NOTED THAT WITH ABUNDANT CAUTION, TH E DEMAND RAISED IN RESPECT OF THIS ISSUE SHALL BE ENFORCEABLE ONLY WHEN THE STAND OF THE DEPARTMENT I S UPHELD BY THE HONBLE SUPREME COURT, TILL SUCH TIME THE DEMAND RAISED ON ACCOUNT OF THIS ISSUE IS HELD TO B E STAYED. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. VS. ACIT ( 231 3 ITA NO.2699/MDS/2014 CTR 368 ) ALLOWED THE CLAIM OF THE ASSESSEE OBSERV ING AS UNDER:- 3. THE MAIN ISSUE IN THE GROUNDS OF APPEAL IS REGARDING DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80 IA AMOUNTING TO ` 2,87,77,661/-. IN RESPONSE TO ISSUE OF STATUTORY NOTICES, SRI P.S.SITARAM, CA APPEARED DUL Y AUTHORIZED AND SUBMITTED THAT THE ASSESSEE IS ELIGI BLE FOR DEDUCTION U/S.80IA OF THE I.T. ACT, 1961 FOLLOWING THE DECISION OF HONBLE HIGH COURT OF MADRAS IN THE CAS E OF CIT VS. VELAYUDHASWAMY SPINNING MILLS PVT. LTD., ( 231 CTR 368 ) (MAD). 4. ON GOING THROUGH THE FACTS OF THE CASE, THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION CLAI MED U/S.80IA OF THE I.T.ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VELAYUDHASWAMY SPINNING MILLS PVT. LTD., ( 231 CTR 368 ) THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE D EDUCTION U/S.80-IA OF THE INCOME TAX ACT, 1961. THE GROUNDS OF APPEAL ARE ALLOWED. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER DENIED THE CLAIM FOR DEDUCTIO N UNDER SECTION 80IA OF THE ACT TO THE ASSESSEE HOLDING THA T 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 4 ITA NO.2699/MDS/2014 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SR I 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 CLEA R THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME 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 E LIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJE CT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION 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 EFIT. 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 DEDUCTION 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 'INITIAL ASSESSM ENT 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 5 ITA NO.2699/MDS/2014 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 ELI GIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURI NG THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMEN T YEAR AND EVERY SUBSEQUENT 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 YEAR-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 INITIAL 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 INST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF 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. 6. 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 6 ITA NO.2699/MDS/2014 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. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, T HE 30 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 .