DCIT, Hubli V. M/s Mahalingshetty & Co, Hubli

ITA 295/BANG/2011

• Counselvise Citation: 29521114 RSA 2011
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARAHAT HUSSAIN QURESHI
• Keywords: Depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.295/B ANG/2011 (ASST. YEAR - 2007-08) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), HUBLI. . APPELLANT VS. M/S MAHALINGSHETTY & CO., 64, VISHWESHWARNAGAR, HUBLI. . RESPONDENT PAN NO.AABCM2531L. APPELLANT BY : SHRI FARAHAT HUSSAIN QURESHI RESPONDENT BY : SHRI BALRAM R RAO DATE OF HEARING : 30-01-2012 DATE OF PRONOUNCEMENT : 30-01-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AT ITA NO.295/B/11 2 HUBLI DATED 21.12.2010. THE APPEAL ARISES OUT OF T HE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN HOLDING THAT THE AO WAS INCORRECT IN NOT GIVING SET OFF OF THE LOSS OF THE INDUSTRIAL UNDERTAKING ON THE PRETE XT THAT THE PROFIT OF THE INDUSTRIAL UNDERTAKING WAS ELIGIBLE FOR DEDUCTI ON U/S 80-IA(5) OF THE ACT BUT LOSS WAS REQUIRED TO BE CARRIED FORWARD AND WAS NOT ELIGIBLE TO BE SET OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, IS A CIVIL CONTACTOR, FILED ITS RETURN OF INCOME ON 30/10/2011 SHOWING A NET LOSS OF RS.15,45,354/-. THE ASSESSEE HOWEVER ADMITTED 1 0% OF THE BOOK PROFIT I.E RS.11,95,046/- AS INCOME U/S 115JB OF TH E ACT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE AO OBSERVED THAT IN ADDITION TO WORK OF THE CIVIL CONT RACT, THE ASSESSEE HAD ALSO INSTALLED A WIND TURBINE GENERATOR (WTG IN SHORT) WHICH WAS COMMISSIONED ON 28.3.2007 IN TAMIL NADU. HE OB SERVED THAT THE ASSESSEE HAS GENERATED AN INCOME OF RS. 437 FROM PO WER GENERATION WHILE A SUM OF RS.1,01,961/- REPRESENTING INTEREST ON LOAN IS DEBITED TO PROFIT AND LOSS ACCOUNT. HE OBSERVED THAT THE A SSESSEE HAS ALSO ITA NO.295/B/11 3 CLAIMED DEPRECIATION AT 40% AMOUNTING TO RS.44,61,1 26/-, THUS RESULTING IN THE NET LOSS OF RS.1,45,62,650/-. HE OBSERVED THAT THE ASSESSEE HAS CLAIMED A SET OFF OF THIS NET LOSS AGA INST THE INCOME FROM CONTRACTS AND THE ASSESSEE HAS NOT MADE ANY CLAIM U /S 80IA OF THE INCOME-TAX ACT. THE CIT(A) OBSERVED THAT THE ASSES SEE IS ENTITLED TO CLAIM DEDUCTION U/S 80IA AT THE RATE OF 100% PROFIT FROM THE ACTIVITY OF POWER GENERATION FOR 10 YEARS BEGINNING FROM THE YEAR IN WHICH THE ACTIVITY OF POWER GENERATION IS COMMENCED OR FOR 10 CONSECUTIVE YEAR OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH TH E ACTIVITY OF POWER GENERATION IS COMMENCED. AS THE ASSESSEE COMMENCED POWER GENERATION DURING THE YEAR, THE AO WAS OF THE OPINI ON THAT THE DEDUCTION U/S 80IA WOULD COMMENCE FROM THIS YEAR IT SELF. THEREFORE, A LETTER WAS ISSUED TO THE ASSESSEE ON 27.10.2009 I NDICATING THE PROPOSAL TO EXCLUDE THE LOSS ARISING OUT OF THE WTG AMOUNTING TO RS.1,45,62,650/- FROM THE COMPUTATION OF BUSINESS I NCOME OF THE ASSESSEE AS FOR COMPUTING DEDUCTION U/S 80IA, THE I NCOME OF THE ELIGIBLE UNIT HAS TO BE CONSIDERED ON A STANDALONE BASIS. THE ASSESSEE FILED ITS OBJECTIONS VIDE LETTER DATED 14.11.2009 S TATING THAT THE DEDUCTION OF INTEREST AND DEPRECIATION IS CLAIMED A S PER THE PROVISION OF THE INCOME-TAX ACT WITHOUT CLAIMING THE DEDUCTIO N U/S 80IA OF THE ACT. THE AO WAS HOWEVER NOT CONVINCED BY CONTENTI ON OF THE ITA NO.295/B/11 4 ASSESSEE, HE HELD THAT THE INCOME/LOSS FROM THE ELI GIBLE BUSINESS WINDMILL HAS TO BE SEPARATELY COMPUTED AND HAS TO B E ALLOWED TO BE CARRIED FORWARD FOR SET OFF OF FROM FUTURE INCOME O F THE WIND MILL OF THE ASSESSEE IN ORDER TO CLAIM TAX HOLIDAY BENEFIT FOR 10YARS AND, THEREFORE, BEFORE CLAIMING DEDUCTION U/S 80IA(5), I T IS TO BE ENSURED THAT THE DEPRECIATION FROM WIND MILL IS ABSORBED BY THE PROFIT DERIVED FROM THE GENERATION OF ELECTRICITY AND FOR THIS PUR POSE, IT SHALL BE PRESUMED THAT THE GENERATION OF POWER BY WIND MILL IS THE ONLY BUSINESS OF THE ASSESSEE. 4. AGGRIEVED BY THIS FINDING OF THE AO AND THE DIR ECTION TO CARRY FORWARD THE NET LOSS TO BE SET OFF AGAINST THE INCO ME OF THE WIND MILL IN THE SUBSEQUENT YEARS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE ISSUE AT LENGTH AND BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CAS E OF SWARNAGIRI WIRE INSULATIONS PVT. LTD., HUBLI VS. ITO IN ITA NO.200/ BANG/2010 HAS HELD THAT THE ASSESSEE IS ENTITLED TO HAVE THE SET OFF OF WIND MILL LOSS INCLUDING DEPRECIATION THEREON AGAINST OTHER BUSINE SS INCOME IN LINE WITH THE PROVISIONS OF LAW AND JUDICIAL PRECEDENCE. ITA NO.295/B/11 5 5. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT(A), TH E REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR WHILE SUPPORTING THE ORDER OF TH E AO SUBMITTED THAT THE DECISION OF THE TRIBUNAL ON WHICH THE CIT( A) HAS PLACED RELIANCE UPON HAS BEEN CHALLENGED BY THE REVENUE IN THE HONBLE HIGH COURT AND, THEREFORE, IT HAS NOT BECOME FINAL. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUPPORTE D THE ORDERS OF THE CIT(A) AND HAS PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF SWARNAGIRI WIRE INSULATIONS PVT. LTD., HUBLI (CITED SUPRA) TO WHICH ONE OF US I.E JUDICIAL MEMBER IS A PARTY. 7. HAVING HEARD BOTH THE AUTHORITIES AND HAVING CO NSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FI ND THAT THE ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 80IA OF THE ACT AND T HIS IS THE FIRST YEAR IN WHICH THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDU CTION U/S 80IA. AS PER SUB SEC. 2 OF 80IA OF THE ACT, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT FOR A PERIOD OF 10 CONSECUTIVE YEARS WITHIN A PERIOD OF 15 YEARS FROM THE DATE OF COMMENCING OF B USINESS. IT IS UNDISPUTED THAT THIS IS FIRST YEAR OF GENERATION OF POWER BY THE ASSESSEE AND THE ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 80IA OF THE ACT. IN ITA NO.295/B/11 6 THIS CIRCUMSTANCES, THE ASSESSEE IS ENTITLED TO CLA IM SET OFF OF LOSS FROM ONE SOURCE OR BUSINESS FROM THE INCOME OF OTHER SOU RCE OR BUSINESS, WHICH ARE BOTH TAXABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. WE FIND THAT THE CIT(A) HAS ONLY FOLL OWED THE JUDICIAL PRECEDENT ON THE ISSUE IN ALLOWING THE ASSESSEES C LAIM. MERELY BECAUSE THE REVENUE HAS FILED AN APPEAL BEFORE THE HONBLE HIGH COURT OF KARNATAKA, THE ORDER DOES NOT LOOSE ITS JU DICIAL PRECEDENCE. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A) AND THE REVENUES APPEAL IS ACCORDINGLY REJECTED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JAN, 2012. SD/- SD/- (N.K SAINI) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 30/01/2012 ITA NO.295/B/11 7 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.