The Jt.CIT.,(OSD), Central Circle-2(3), Ahmedabad V. Ratnamani Metals & Tubes Ltd., Ahmedabad

ITA 274/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94893 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PANDAY
• Assessee Lawyers: P D SHAH
• Keywords: Capital asset; Depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 274/AHD/2012 / ASSESSMENT YEAR: 2009-10 THE JCIT (OSD) CENTRAL CIRCLE AHMEDABAD .. APPELLANT VS M/S. RATNAMANI METALS & TUBES 17, RAJMUGA SOCIETY, NARANPURA CHAR RASTA, AHMEDABAD .. RESPONDENT PAN : AABCR 1742 E REVENUE BY : SHRI A.K. PANDAY , S R - DR ASSESSEE(S) BY : SHRI P.D. SHAH, AR / DATE OF HEARING 09/12/2015 /DATE OF PRONOUNCEMENT 11/12/2015 / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XI, AHMEDA BAD DATED 28.11.2011 FOR ASSESSMENT YEAR 2009-10, ON TH E FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST OF RS.46,73,553 MADE B Y THE AO UNDER PROVISO TO SECTION 36(1)(III) OF THE ACT. ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 2 - 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW DEDUCTION OF RS.84,07,787/- U/S 80IA(4)(IV) OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER ON BOTH THE ISSUES. 2. THE FIRST ISSUE IS WITH REGARD TO DISALLOWANCE O F INTEREST OF RS.46,73,553/- MADE BY THE ASSESSING OFFICER UNDER PROVISO TO SECTION 36(1)(III) OF THE ACT. THE ASSESSING OFFIC ER NOTICED THAT THE ASSESSEE HAS CREATED CAPITAL WORK IN PROGRESS O F RS.19,97,62,000/- DURING THE YEAR UNDER CONSIDERATI ON, BUT NO INTEREST ATTRIBUTABLE TO THE FUNDS INVESTED IN C APITAL WORK IN PROGRESS HAD BEEN CAPITALIZED. ACCORDING TO THE AS SESSING OFFICER, THE ASSESSEE HAS NOT FURNISHED FUND FLOW S TATEMENT TO SUBSTANTIATE ITS CLAIM OF INTEREST BEARING FUNDS WE RE NOT INVESTED IN CAPITAL WORK IN PROGRESS. THEREFORE, T HE ASSESSING OFFICER HAS WORKED OUT INTEREST ATTRIBUTABLE TO THE FUNDS UTILIZED FOR CAPITAL WORK IN PROGRESS IN REFERENCE TO THE TOTAL INTEREST EXPENDITURE OF RS.16,72,47,000/-. THE PRO PORTIONATE DISALLOWABLE INTEREST HAS BEEN WORKED OUT BY THE AS SESSING OFFICER AT RS.46,73,553/-. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 3 - AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRAN TED RELIEF TO THE ASSESSEE WHICH HAS BEEN OPPOSED BY THE REVEN UE BEFORE US, INTER ALIA , SUBMITTING THAT THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF RS.46,73,553/- MADE BY THE ASSESSING OFFICER UNDER PROVISO TO SECTION 36(1)(II I) OF THE ACT. THE LD. DEPARTMENTAL REPRESENTATIVE ACCORDINGLY PLE ADED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF AS SESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD. AUTHOR IZED REPRESENTATIVE SUPPORTED THE ORDER OF THE CIT(A). 4 AFTER GOING THROUGH THE RIVAL CONTENTIONS AND MAT ERIAL AVAILABLE ON RECORD, WE FIND THAT FOR MAKING DISAL LOWANCE AS PER PROVISO TO SECTION 36(1)(III), FOLLOWING CONDIT IONS ARE REQUIRED TO BE SATISFIED:- I) CAPITAL IS BORROWED FOR ACQUIRING CAPITAL ASSET; II) INTEREST IS PAID IN RESPECT OF CAPITAL BORROWED; III) THE ACQUISITION OF ASSETS SHOULD BE FOR THE PURPOSE OF EXPANSION OF AN EXISTING BUSINESS OR PROFESSION; IV) INTEREST LIABILITY MAY OR MAY NOT BE CAPITALIZED. DISALLOWANCE AS PER THE PROVISIONS OF PROVISO TO SE CTION 36(1)(III) HAS TO FULFILL THE ABOVE SAID CONDITIONS FOR SUSTAINABLE DISALLOWANCE. THE ASSESSING OFFICER HAS NOT BROUGHT ANY ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 4 - MATERIAL ON RECORD TO SUGGEST THAT CAPITAL WAS BORR OWED FOR INVESTMENT IN CAPITAL WORK IN PROGRESS. THEREFORE, THE FIRST CONDITION AS MENTIONED ABOVE IS NOT FULFILLED. ACCO RDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS UNTEN ABLE. THE ASSESSING OFFICER HAS MADE PROPORTIONATE DISALLOWAN CE OF INTEREST. THIS DISALLOWANCE WAS NOT MANDATED BY PRO VISIONS OF PROVISO TO SECTION 36(1)(III). ACCORDINGLY, THE SA ME WAS RIGHTLY DELETED BY THE CIT(A). THIS REASONED FINDING OF TH E CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. NEXT ISSUE IS WITH REGARD TO DEDUCTION OF RS.84, 05,787/- U/S 80IA(4)(IV) OF THE ACT. IN THE ASSESSMENT ORDE R, THE ASSESSING OFFICER STATED THAT AS PER PROVISIONS OF SECTION 80IA(5) DEDUCTION U/S.80IA(4)(IV) NEEDS TO BE ALLOW ED AS IF ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF T HE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESS MENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. THE ASSESSING OFFICER FURTHER OBSERVED THAT ELIGIBLE INDUSTRIAL UNDERTAKI NG STARTED MANUFACTURING SINCE ASSESSMENT YEAR 2004-05. IN THE INITIAL YEARS, ELIGIBLE INDUSTRIAL UNDERTAKING WAS MAKING L OSSES AND THOSE LOSSES WERE SET OFF AGAINST PROFITS OF OTHER UNITS OF THE ASSESSEE. HE FURTHER OBSERVED THAT SIMILARLY THE A SSESSEE HAS ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 5 - TAKEN UNDUE BENEFIT IN THE EARLIER YEARS AND THUS, HE DISALLOWED DEDUCTION U/S. 80IA(4)(IV) OF RS.85,05,7 87/-. 6. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRAN TED RELIEF TO THE ASSESSEE AND THE SAME HAS BEEN OPPOSED ON BE HALF OF REVENUE, INTER ALIA , SUBMITTING THAT THE CIT(A) HAS ERRED IN DIRECTING TO ALLOW DEDUCTION OF RS.84,05,787/- U/S 84,05,787 U/S 80IA(4)(IV) OF THE ACT. ON THE OTHER HAND, LD . AUTHORIZED REPRESENTATIVE HAS RELIED UPON THE ORDER OF THE CIT (A). 7. AFTER GOING THROUGH THE RIVAL CONTENTIONS AND MA TERIAL AVAILABLE ON RECORD, WE FIND THAT IN THE CASE OF D EDUCTION U/S 80IA, PROVISIONS OF SECTION 80IA(5) WHICH STARTS WI TH NON- OBSTINATE CLAUSE THAT PROFITS FOR THE PURPOSE OF SE CTION 80IA IS TO BE WORKED OUT AS IF ELIGIBLE INDUSTRIAL UNDERTAK ING IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOU S YEAR. THIS PROVISION OF THE ACT MAKES IT CLEAR THAT ELIGIBLE P ROFITS FOR DEDUCTION U/S. 80IA IS TO BE COMPUTED FOR THE ELIGI BLE INDUSTRIAL UNDERTAKING INDIVIDUALLY. IT SIMPLY MEA NS THAT IF SUCH INDUSTRIAL UNDERTAKING HAD SUFFERED LOSSES IN THE EARLIER YEARS, THESE LOSSES HAS TO BE SET OFF AGAINST INCOM E OF THE CURRENT YEAR. AFTER THIS SET OFF, IF THERE ARE SOME PROFITS, THE ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 6 - SAME IS ELIGIBLE FOR DEDUCTION U/S. 80IA(IV). IN TH IS REGARD, WE FIND THAT IN THE CASE OF ACIT VS. GOLDMINE SHARES A ND FINANCE PVT LTD, (2008) 302 ITR 208 (AHD), IT WAS HELD AS U NDER:- 'TO CONCLUDE WE ANSWER THE QUESTION REFERRED IN THE AFFIRMATIVE, IN THE FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE, IN THE TERMS THAT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 80IA(5) OF THE INCOME-TAX ACT , 1961 THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPO SE OF DETERMINATION OF THE QUANTUM OF DEDUCTION U/S.80IA OF THE ACT HAS TO BE COMPUTED AFTER DEDUCTION OF NOTIO NAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN EARLIER YEARS.' THE ABOVE FACTS MAKES IT CLEAR THAT NOTIONAL BROUGH T FORWARD LOSS & DEPRECIATION OF THE EARLIER YEARS, I F ANY, PERTAINING TO THE ELIGIBLE BUSINESS NEEDS TO BE SET OFF AGAINST PROFITS OF CURRENT YEAR TO REACH TO CORRECT FIGURE OF ELIGIBLE PROFITS FOR DEDUCTION U/S. 80IA(IV). IN THIS CASE, THE ASSESSING OFFICER HAD ANNEXED DETAILS OF PROFIT AND LOSS ACCO UNT SINCE A.Y. 2004-05 ALONGWITH ASSESSMENT ORDER. PERUSAL OF THESE DETAILS REVEALED THAT THE ASSESSEE HAD SUFFERED LOS S OF RS.3,56,17,980/- (2,13,15,196 + 1,43,02,784) FOR TH E AYS 2004-05 & 2005-06. PERUSAL OF THIS CHART FURTHER RE VEALED THAT FOR AYS 2006-07, 2007-08 & 2008-09, THE ASSESSEE HA D EARNED A PROFIT OF RS.3,09,96,800/- (68,90,448 + 1,21,53,3 74 + 1,19,52,978). THIS WAY, AT THE END OF ASSESSMENT Y EAR 2008- ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 7 - 09, THE ASSESSEE WAS HAVING A BROUGHT FORWARD BUSIN ESS LOSS OF ELIGIBLE UNIT AT RS.46,21,180 (3,56,17,980-3,09,96, 800). DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS D ECLARED PROFIT FROM WIND MILLS AT RS.1,30,26,967/-. AS PER THE ABOVE DISCUSSIONS, ELIGIBLE PROFITS FOR DEDUCTION U/S 80I A(IV) CAN BE COMPUTED AFTER SET OFF OF NOTIONAL BROUGHT FORWARD LOSS OF RS.46,21,180 AGAINST THIS PROFIT. LIKEWISE, THE EL IGIBLE PROFIT U/S. 80IA(IV) WAS WORKED OUT AT RS.84,05,787/-, (1, 30,26,967- 46,21,180). ASSESSEE HAS CLAIMED DEDUCTION U/S.80I A(IV) ON A PROFIT OF RS.84,05,787/- ONLY. THUS, THE ASSESSEE S COMPUTATION FOR ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U/S.80IA(IV) WAS WELL WITHIN THE PURVIEW OF INCOME- TAX ACT. THUS, IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETE D THE ADDITION OF RS.84,05,787/- MADE BY THE ASSESSING OF FICER U/S 80IA(IV) OF THE ACT. ACCORDINGLY, WE UPHOLD THE OR DER OF THE CIT(A) IN THIS REGARD. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 11TH OF DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- ( RAJESH KUMAR ) ACCOUNTANT MEMBER ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER AHMEDABAD; DATED 11/12/2015 *BT ITA NO. 274/AHD/2012 JCIT VS. RATNAMANI METALS & TUBES AY 2009-10 - 8 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A), 5. !'# $$ , , / DR, ITAT, AHMEDABAD 6. #() / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD