Assistant Commissioner of Income tax, V. Parshuram Shankar Jadhav, Kolhapur

ITA 2734/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7866 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E BEFORE SHRI R.S. SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO.2734/PUN/2016 / ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, KOLHAPUR. ....... / APPELLANT / V/S. LATE SHRI PARSHURAM SHANKAR JADHAV, L/H DEEPAK PARSHURAM JADHAV, PLOT NO. C-25, SAROJ IRON INDUSTRIES, MIDC, SHIROLI, KOLHAPUR. PIN-416 122 PAN : AAYPJ0990L / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI PANKAJ GARG / DATE OF HEARING : 03.01.2019 / DATE OF PRONOUNCEMENT : 07.01.2019 / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF CIT(APPEAL)-2, KOLHAPUR DATED 28.09.2016 FOR THE ASSESSMEN T YEAR 2012-13 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, WAS THE CIT(A) CORRECT IN HOLDING THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IA(4)(IV) ON HIS BUSINESS PROFIT WITHOUT SETT ING OFF HIS EARLIER YEARS BUSINESS LOSSES/UNABSORBED DEPRECIATION WHICH HAVE ALREADY BEEN SET 2 ITA NO. 2734/PUN/2016 A.Y.2012-13 OFF AGAINST INCOME FROM OTHER BUSINESS/SOURCES AND PROVISIONS OF SECTION 80IA(5) ARE APPLICABLE ONLY FOR INITIAL ASSESSMENT YEAR? 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF GENERATION OF SCRAP OUT OF REPAIRS AND MAINTENANCE EXPENSES OF RS.2,00,000/- AS THE ASSESSEE HAS NOT MAINTAINED SE PARATE DETAILS OF SUCH EXPENSES. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE VACATED AND THAT ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS AT THE TIME OF PROCEEDINGS BEFORE THE TRIBUNAL WHICH MAY KINDLY BE GRANTED. 2. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF C.I. CASTINGS, MACHINERY SPARES AND ENGINEERING GOODS ALONG WITH SAND RECLAMATION PLANT. IT ALSO DERIVES INCOME FROM A WINDMILL. THIS CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND CONSEQUENTLY AN ORDER UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS PASSED WHEREB Y CERTAIN ADDITIONS/ DISALLOWANCES WERE MADE TO APPELLANTS TOTAL INCOME. THE AS SESSING OFFICER DENIED THE CLAIM OF THE ASSESSEE U/S.80IA(4) ON HIS WINDMILL INCOME BY HOLDING THAT THE INITIAL ASSESSMENT YEAR AS FAR AS THE WIN DMILL WAS CONCERNED IS THE A.Y. 2007-08. WHILE DOING SO, THE ASSESSING OFFICER INV OKED THE PROVISIONS OF SECTION 80IA(5) OF THE ACT. THE ASSESSING OFFICE R ALSO MADE AN ADDITION OF RS.2,00,000/- TOWARDS SCRAP GENERATED OUT OF R EPAIRS OF MACHINERY BY HOLDING THAT THE ASSESSEE HAD INCURRED MOR E THAN RS.35 LAKHS IN REPAIRS OF MACHINERY AND THEREFORE THE GENERATION OF SC RAP FROM THE SAME CANNOT BE RULED OUT. THE ASSESSING OFFICER THEN NOTED TH AT THE ASSESSEE HAD NOT SHOWN ANY INCOME FROM SALE OF SCRAP AND THEREFORE MA DE AN AD-HOC ADDITIONS OF RS.2,00,000/- TOWARDS THE SAME. 3 ITA NO. 2734/PUN/2016 A.Y.2012-13 3. THE ASSESSEE, BEING AGGRIEVED, PREFERRED APPEAL BEFO RE THE LD. CIT(APPEAL) AND FILED WRITTEN SUBMISSIONS ON THE ISSUE OF DENIA L OF DEDUCTION U/S.80IA OF THE ACT WHICH IS AS FOLLOWS : 4. THE LD. CIT(APPEAL) RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL WHICH IS RULED IN FAVOUR OF THE ASSESSEE IN ITA NO S.377 TO 383/PN/2013 IN THE CASE OF M/S. RDS CONSTRUCTION COMPAN Y, KOLHAPUR AND PROVIDED RELIEF TO THE ASSESSEE AS PER FOLLOWING OBSERVATIONS: 5.1 GROUND NO.1 IN APPEAL IS AGAINST THE DISALLOWAN CE OF CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. THE APPELL ANT FILED ITS ORIGINAL RETURN OF INCOME ON 29.09.2012 DECLARING TOTAL INCO ME AT RS.21,78,05,193/- AFTER CLAIMING DEDUCTION UNDER SEC TION 80IA(4)(IV) OF RS.66,68,523/- IN RESPECT OF ITS WINDMILL INCOME. T HE ASSESSING OFFICER EXAMINED THE CLAIM OF THE APPELLANT UNDER SECTION 8 0IA AND NOTED THAT THE FIRST YEAR OF OPERATION OF THE WINDMILL WAS IN THE FINANCIAL YEAR 2006- 07 PERTAINING TO ASSESSMENT YEAR 2007-08. THE ASSES SING OFFICER FURTHER NOTED THAT FOR THE ASSESSMENT YEARS 2007-08 AND 200 8-09 THE NET INCOME FROM THE WIND MILL BUSINESS WAS A LOSS ON AC COUNT OF UNABSORBED DEPRECIATION WHICH THE APPELLANT SET OFF ITS REGULA R PROFITS FROM OTHER VERTICALS. THE ASSESSING OFFICER THEN INVOKED THE P ROVISIONS OF SECTION 80IA(5) AND HELD THAT THE UNABSORBED DEPRECIATION H AS TO BE CARRIED FORWARD IN THE WINDMILL BUSINESS ITSELF AND SET OFF AGAINST SUBSEQUENT YEARS PROFITS. WITH THIS REASONING, THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 80IA(4). I FIND THA T AN IDENTICAL ISSUE HAD COME UP IN APPEAL BEFORE THE HONORABLE ITAT IN THE CASE OF M/S.RDS CONSTRUCTION COMPANY, KOLHAPUR WHEREIN THE TRIBUNAL , VIDE ITS CONSOLIDATED ORDERS DATED 06/11/2015 FOR THE ASSESS MENT YEARS 2004- 05 TO 2010-11 IN ITA NOS. 377 TO 383/PN/2013 HAS RU LED CLEARLY IN FAVOR OF THE APPELLANT. MORE PARTICULARLY, IN PARAGRAPHS 135 AND 136 OF THE CONSOLIDATED ORDER PERTAINING TO ITA NO. 383/PN/201 3 FOR ASSESSMENT YEAR 2010-11, THE HON'BLE TRIBUNAL HAS HELD AS UNDE R: 135. AFTER HEARING BOTH THE SIDES, WE FIND THE ISSU E AS TO WHETHER INITIAL ASSESSMENT YEAR U/S.80IA(5) MEANS YEAR OF I NSTALLATION OF WINDMILL OR YEAR IN WHICH THE CLAIM OF DEDUCTION U/ S.80IA IS FIRST MADE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PO ONAWAL ESTATE STUD. & AGRO FARM PVT. LTD. (SUPRA.) WHEREIN IT HAS BEEN HELD AS UNDER: .. 136. RESPECTFULLY FOLLOWING THE DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL CITED (SUPRA.) AND IN ABSENCE OF AN Y CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE HOLD THAT THE PRO VISIONS OF SECTION 80IA(5) ARE APPLICABLE ONLY FROM THE INITIA L ASSESSMENT YEAR I.E. THE ASSESSMENT YEAR IN WHICH DEDUCTION U/ S.80IA (4) WAS FIRST CLAIMED BY THE ASSESSEE AFTER EXERCISING ITS OPTION AS PER THE PROVISIONS OF SECTION 80IA(2) OF THE ACT. THE O RDER OF THE LD. 4 ITA NO. 2734/PUN/2016 A.Y.2012-13 CIT(A) IS ACCORDINGLY UPHELD AND THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 5.1.1 SIMILARLY, I HAVE ALSO PERUSED THE CLARIFICATI ON REGARDING THE TERM INITIAL ASSESSMENT YEAR IN SECTION 80IA(5) ISSUED BY THE CBDT IN CIRCULAR NO.1/2016 DATED 15/02/2016. QUOTING FROM T HE SAME THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS AB UNDANTLY CLEAR FROM SUB SECTION (2) THAT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S.80IA HAS THE OPTION TO CHOOSE THE INI TIAL / FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT OF A SLAB OF FIFTEEN ( OR TW ENTY) YEARS, AS PRESCRIBED UNDER THAT SUB SECTION. IT IS HEREBY CLA RIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPTED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U/S.80IA FO R TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPEC T OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMEN T OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM INITIAL ASSESSMENT YEAR WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S.80IA. HOWEVER, THE TOTAL NUMBER OF YE ARS FOR CLAIMING DEDUCTION SHOULD NOT TRANSGRESS THE PRESCR IBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. 5.1.2 FROM THE ABOVE, IT IS EVIDENT THAT THE MATTER REGARDING INITIAL ASSESSMENT YEAR HAS NOW BEEN CLEARLY SETTLED IN FAV OR OF THE APPELLANT. AS PER BOTH, THE HONOURABLE ITAT AS WELL AS THE CBD T, THE APPELLANT HAS AN OPTION TO CHOOSE THE INITIAL ASSESSMENT YEAR FOR THE PURPOSES OF DEDUCTION U/S.80IA. IN THE PRESENT CASE, THE APPELL ANT HAS CHOSEN THE INITIAL ASSESSMENT YEAR TO BE ASSESSMENT YEAR 2009- 10 AND THE PRESENT ASSESSMENT YEAR IS THE FOURTH YEAR OF THE CLAIM UND ER SECTION 80IA.IN THE LIGHT OF THE ABOVE DISCUSSION AND RESPECTFULLY FOL LOWING THE DECISION OF HONORABLE ITAT IN THE APPELLANTS OWN CASE AS WELL AS THE CIRCULAR OF THE CBDT CITED SUPRA, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80IA(4)(IV) AS CLAIMED. IN THE CIRCUMSTANCES, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELET ED. 5. WE HAVE PERUSED THE CASE RECORD AND HEARD RIVAL CO NTENTIONS. WE FIND THAT THE LD. CIT(APPEAL) ON THIS ISSUE HAS GIVEN RELIEF TO TH E ASSESSEE BASED ON THE TRIBUNALS DECISION IN ITA NOS.377 TO 383/PN/2013 AND IN THIS CASE ALSO, THE TRIBUNAL HAS REFERRED TO ITS EARLIER DECISION IN TH E CASE OF POONAWAL ESTATE STUD. & AGRO FARM PVT. LTD. WHEREIN IT HAS BEEN H ELD THAT THE PROVISIONS OF SECTION 80IA(5) ARE APPLICABLE ONLY FROM THE I NITIAL ASSESSMENT YEAR I.E. THE ASSESSMENT YEAR IN WHICH DEDUCTION U/S.80IA(4 ) WAS FIRST CLAIMED BY THE ASSESSEE AFTER EXERCISING ITS OPTION AS PER THE PROVISIONS OF SECTION 80IA(2) OF THE ACT. THE LD. CIT(APPEAL) HAD ALSO REFER RED TO THE CBDT CIRCULAR NO.1/2016 DATED 15.02.2016 WHICH PROVIDES THAT TH E TERM INITIAL 5 ITA NO. 2734/PUN/2016 A.Y.2012-13 ASSESSMENT YEAR WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S.80IA. AS PER SECTION 80IA(5) OF THE ACT, IT IS EVIDENT THAT THE MATTER REGARDING INITIAL ASSESSMENT YEAR HAS NO W BEEN CLEARLY SETTLED IN FAVOR OF THE ASSESSEE. AS PER BOTH, THE ITAT CO-ORDINA TE BENCH DECISIONS, AS WELL AS THE CBDT CIRCULAR, THE ASSESSEE HAS AN OPTION TO CHOOSE THE INITIAL ASSESSMENT YEAR FOR THE PURPOSES OF DEDUCTION U/S.80IA. IN THE PRESENT CASE, THE APPELLANT HAS CHOSEN THE INITIAL ASSESSMENT YEAR TO B E ASSESSMENT YEAR 2009-10 AND THE PRESENT ASSESSMENT YEAR IS THE FOURTH YEAR OF THE CLAIM UNDER SECTION 80IA. 6. IN VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(APPEAL) WHICH IS, THEREFORE, UPHELD AND THE RELIEF GRANTED TO THE ASSESSEE IS SUSTAINED. HENCE, GROUND NO.1 RAISED IN APPEAL BY REVENUE IS DISMISSED. 7. THE GROUND NO. 2 OF THE APPEAL IS WITH REGARD TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF GENERATION O F SCRAP OUT OF REPAIRS AND MAINTENANCE EXPENSES OF RS.2,00,000/- SINCE THE ASSE SSEE HAS NOT MAINTAINED SEPARATE DETAILS OF SUCH EXPENSES. 8. ON THIS ISSUE, LD. CIT(APPEAL) WAS OF THE VIEW THAT IN THE ASSESSMENT ORDER ITSELF, THERE APPEARS TO BE NO SPECIFIC REASON FOR MA KING THE ADDITION. THE ONLY REASON STATED BY THE AO IS THAT HE DOES NOT RULE OUT ANY SCRAP BEING GENERATED OUT OF MACHINERY REPAIRS. THIS OBSERVATION IS NO T SUPPORTED BY SPECIFIC ENQUIRY AND ALSO THAT THE ASSESSING OFFICER HAD NOT EVEN EXAMINED THE NATURE OF REPAIRS UNDERTAKEN TO THE MACHINERY AND WHETHER IN FACT SUCH NATURE OF REPAIRS HAS THE CAPACITY TO GENERATE SCRAP, A LSO DOES NOT COME OUT 6 ITA NO. 2734/PUN/2016 A.Y.2012-13 FROM HIS ORDER. THERE IS ABSOLUTELY NO SHRED OF EVIDENCE T O SHOW THAT SCRAP HAS INDEED BEEN GENERATED AND SOLD. IT IS ABSOLUTELY ON SUSPICION AND GUESS WORK, ADDITION HAS BEEN MADE WHICH IS NOT PERMISSIBLE WITHIN THE PURVIEW OF TAXATION STATUTES AND THEREFORE, LD. CIT(APPEAL) DELETED THE SAID ADD ITION. 9. WE ARE IN CONFORMITY WITH THE FINDINGS OF LD. CIT(APPEA L) ON THE ISSUE SINCE IN THE REALM OF WELFARE LEGISLATION SPECIFICALLY, THE INCOME TAX ACT, 1961, THE QUASI-JUDICIAL AUTHORITY I.E. ASSESSING OFFICER HAS TO PASS AN ORDER AFTER PROPER REASONS AND VERIFICATION. FROM THE ABOVE, IT IS ABSO LUTELY CLEAR THAT THERE IS NEITHER VERIFICATION NOR ANY EVIDENCE BROUGHT ON RECORD TO JUSTIFY THE SAID ADDITIONS WHICH THEREFORE, CAN BE SAFELY TERMED AS AD -HOC ADDITIONS MADE ON GUESS WORK AND SURMISES WHICH CANNOT BE SUST AINED. ACCORDINGLY, WE FIND NO INFIRMITY IN THE FINDINGS OF THE LD. CIT(APPEAL) AND TH E SAME IS, THEREBY, UPHELD. HENCE, GROUND NO.2 RAISED IN APPEAL BY REVENUE IS DISMISSED. 10. THE GROUND NOS. 3 AND 4 RAISED IN APPEAL BY REVEN UE ARE GENERAL IN NATURE, HENCE, REQUIRE NO ADJUDICATION. 11. IN THE COMBINED RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 07 TH DAY OF JANUARY, 2019. SD/- SD/- R.S. SYAL PARTHA SARAT HI CHAUDHURY VICE-PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 07 TH JANUARY, 2019. SB 7 ITA NO. 2734/PUN/2016 A.Y.2012-13 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEAL)-2, KOLHAPUR. 4. THE PR. CIT-2, KOLHAPUR. 5. '#$ %%&' , ( &' , )*+ , / DR, ITAT, B BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 8 ITA NO. 2734/PUN/2016 A.Y.2012-13 DATE 1 DRAFT DICTATED ON 0 4 .01.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 07 .01 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER