Sree Rubber Latex Industries, Trivandrum V. ITO, Trivandrum

ITA 295/COCH/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7566 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 21-05-2009
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPHSR
• Assessee Lawyers: N KRISHNAMOORTHY
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80IA; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.295/COCH/2009 ASSESSMENT YEAR:2004-05 M/S. SREE RUBBER LATEX INDUSTRIES, TRIVANDRUM. PA NO.AAJFS 9806M VS. THE INCOME - TAX OFFICER, WARD-1(3), TRIVANDRUM. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI N. KRISHNAMOORTHY RESPONDENT BY DR.BABU JOSEPH,SR.DR O R D E R PER N.VIJAYAKUMARAN,J.M: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER OF INCOME-TAX PASSED UNDER SECTION 263 OF THE I.T.ACT,1961. THE IMPUGNED ORDER IS DATED 25-03-20 09. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ALL OWED THE CLAIM OF DEDUCTION U/S. 80IA VIDE HIS ORDER DATED 0 3-10- 2006. THE LD. CIT WAS OF THE VIEW THAT AS PER SECT ION 80IA RESTRICTION, THE EARLIER YEAR LOSS HAS TO BE ADJUS TED FIRST AND IN THIS CASE THE BROUGHT FORWARD LOSS RELATING TO T HE EARLIER YEARS SHOULD BE FAR MORE THAN THE SUM WHICH WILL BE THE ORIGINAL COST OF THE WINDMILL. HENCE, THE LD. CIT WAS OF THE ITA NO. 295/COCH/2009 M/S. SREE RUBBER LATEX INDUSTRIES. 2 VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTIO N U/S.80IA OF THE ACT. 2. TAKING OBJECTION TO THIS, THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE HAS STARTED TO CLAIM DEDUCTION FROM THE ASSESSMENT YEAR 2003-04 ONWARDS. THEREFORE, PROVISIONS OF SECTION 80IA(1) AND 80IA(5) COULD NOT BE APPLIED FOR EARLIER YEARS. T HE ASSESSEE IS HAVING THE OPTION TO CLAIM DEDUCTION U/ S.80IA FOR A PERIOD OF 10 YEARS COMPRISED IN THE BLOCK OF 15 Y EARS. THEREFORE, THE LOSS OF THE EARLIER YEARS ARE NOT RE QUIRED TO BE NOTIONALLY SET OFF AGAINST THE PROFITS EARNED IN THE FIRST YEAR OF CLAIM FOR THE DEDUCTION. TO THIS PROPOSITI ON, THE LD. COUNSEL RELIED ON THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF MOHAN BREWERIES AND DISTILLERIES VS. ACIT (2009) 116 ITD 241 (CHENNAI). THE LD. COUNSEL FURTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. MEWAR OIL AND GENERAL MILLS LTD. (NO.1) 271 ITR 311 TO SUPPORT THE PROPOSITION. YET ANOTHER DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT 231 CTR 368 ALSO RELIED. THE LD. COUNSEL FILED ADDITIONAL SUBMISSION IN SUPPORT OF HIS ARGUMENTS. IN THE ITA NO. 295/COCH/2009 M/S. SREE RUBBER LATEX INDUSTRIES. 3 ADDITIONAL SUBMISSION, THE SAME DECISION REPORTED I N 231 CTR 368 HAS BEEN REITERATED. 3. ON THE OTHER HAND, THE LD. SR.DR WOULD SUBMIT TH AT SECTION 80IA IS A NON-OBSTENTI CLAUSE. THEREFORE, IT HAS AN OVERRIDING EFFECT OVER OTHER PROVISIONS OF THE ACT. THE COMPUTATION OF DEDUCTION U/S.80IA WILL BE OVER RIDI NG GUIDED BY THE SAID NON-OBSTENTI CLAUSE. IT IS NOT DISPUT ED THAT THE UNIT HAD BEEN RUNNING AT LOSS EARLIER AND THE ASSES SEE HAS CLAIMED 80IA DEDUCTION FOR THE FIRST TIME ONLY IN T HE ASSESSMENT YEAR 2003-04. THIS CLEARLY SHOWS THAT B EFORE THAT PERIOD, THE UNIT HAD BEEN RUNNING AT LOSS. TH EREFORE, AFTER SET OFF AGAINST THE ASSESSEES COMPOSITE BUSI NESS PROFIT, THE UNABSORBED DEPRECIATION RIGHT FROM THE ASSESSMENT YEAR 1997-98 WHICH WAS BROUGHT UPTO THE ASSESSMENT YEAR 2003-04, THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S.80IA AS THE BROUGHT FORWARD LOSS OF EARLIER YEARS SHOULD BE MORE THAN THIS SUM INCLUDING THE OR IGINAL COST OF THE WINDMILL. THEREFORE, THE LD. SR.DR SU PPORTED THE FINDINGS OF THE LD. CIT AND ADVANCED THE ARGUMENT I N SUPPORT OF THAT. ITA NO. 295/COCH/2009 M/S. SREE RUBBER LATEX INDUSTRIES. 4 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. SECTION 80IA(2) WH ICH WAS AMENDED BY THE FINANCE ACT 1999 GIVES OPTION TO THE ASSESSEE WITH EFFECT FROM 01-04-2000 TO CLAIM DEDUC TION UNDER THIS SECTION IN ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS FROM THE YEAR ENDING IN WHICH THE UNDERTAKING OR ENTERPRISE DEVELOPS OR BEGIN TO OPER ATE ANY INFRASTRUCTURE FACILITIES. IT IS LEFT TO THE ASSES SEE AT ITS WILL TO CLAIM THIS RELIEF FROM THE FIRST ASSESSMENT YEAR FROM THE SECOND OR FROM THE THIRD OR SO AS IT MIGHT THINK FI T. ONCE THE ASSESSEE HAS OPTED THE FIRST YEAR OF RELIEF, THEN I T CONTINUES FOR THE FURTHER NINE CONSECUTIVE YEARS. SECTION 8 0IA (2) NORMALLY STATES THAT ASSESSEE CAN OPT YEAR FOR DEDU CTION FOR ANY 10 CONSECUTIVE YEARS OUT OF 15 YEARS TAKEN FROM THE FIRST YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE D EVELOPS OR BRINGS TO OPERATE ANY INFRA STRUCTURE ACTIVITY. I T DOES NOT MEAN THAT THE FIRST YEAR OF 10 CONSECUTIVE ASSESSME NT YEARS SHOULD BE ALWAYS THE FIRST YEAR OF SET UP OF AN ENT ERPRISE. THE OPTION GIVEN TO THE ASSESSEE TO CLAIM THE DEDUC TION WITHIN 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YE ARS AND THE ASSESSEE OPTS TO EXERCISE THE CLAIM, IT SHOULD BE A CONTINUOUS CLAIM OF DEDUCTION FOR ANOTHER NINE YEAR S. THEREFORE, SECTION ITSELF VERY CLEAR THAT THE OPTIO N IS WELL ITA NO. 295/COCH/2009 M/S. SREE RUBBER LATEX INDUSTRIES. 5 WITHIN THE PLEASURE OF THE ASSESSEE WITH A RIDER CL AUSE THAT IT SHOULD BE CONSECUTIVE ONCE OPTED FOR CLAIMING DEDUC TION. THEREFORE, THE ORDER OF THE LD. CIT IS AGAINST THE SPIRIT OF THE PROVISIONS OF THE I.T.ACT PARTICULARLY SECTION 80IA COULD NOT APPLY. HENCE, WE QUASH THE ORDER OF THE LD. CIT P ASSED U/S.263 OF THE I.T.ACT. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 23 RD NOVEMBER,2010. PM. COPY FORWARDED TO: 1. M/S. SREE RUBBER LATEX INDUSTRIES, GEETHA VIHAR, CH ALAKUZHI ROAD, PATTOM PALACE P,O, TRIVANDRUM. 2. THE INCOME-TAX OFFICER, WARD-1(3), TRIVANDRUM. 3. CIT, TRIVANDRUM. 4. D.R.