DCIT, Tiruppur V. S.S.Spinning Mills, Tiruppur

ITA 3024/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86350 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 11-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR NISCHAL
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.3024/MDS/2014 ( / ASSESSMENT YEAR : 2011-12) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -2, TIRUPUR -641 602 ( %& /APPELLANT) VS M/S. S.S. SPINNING MILLS, NO.443/4, KAMARAJ ROAD, TIRUPUR 641 604. [PAN: AASFS 8109E] ( !'%& /RESPONDENT) ./ I.T.A. NO.3025/MDS/2014 ( / ASSESSMENT YEAR : 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -2, TIRUPUR -641 602 ( %& /APPELLANT) VS M/S. SULOCHANA COTTON SPINNING MILLS (P) LTD, NO.424 & 426, KAMARAJ ROADM TIRUPUR 641 604. [PAN: AADCS 8189G] ( !'%& /RESPONDENT) ./ I.T.A. NO.3026/MDS/2014 ( / ASSESSMENT YEAR : 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -2, TIRUPUR -641 602 ( %& /APPELLANT) VS M/S. ULTIMATE ALLOYS (P) LTD, NO.18, M R NAGAR, DHARAPURAM ROAD, TIRUPUR 641 608. [PAN: AAACU 3303P] ( !'%& /RESPONDENT) I.T.A.NOS.3024, 3025 & 3026/MDS/14 :- 2 -: / APPELLANT BY : DR. NISCHAL, JCIT. / RESPONDENT BY : SHRI. N. VIJAYKUMAR, C.A., SHRI. S. HARI SHANKAR, C.A., /DATE OF HEARING : 17.03.2015 !' /DATE OF PRONOUNCEMENT : 17.03.02015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE THREE APPEALS BY DEPARTMENT DIRECTED AGAINST DIFFERENT ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-II, COIMBATORE FOR THE ABOVE ASSESSMENT YEARS IN RESPECT OF ABOVE ASSE SSEES. SINCE THE ISSUES IN THESE APPEALS ARE COMMON IN NATURE, HENCE THESE APPEALS ARE DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF C ONVENIENCE. 2. IN THESE APPEALS, THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(APPEALS)-II, COIMBATOR E IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(APPEALS)-II, COIMBATORE HAS ERRED I N HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S-80IA. 3. THE LEARNED CIT(APPEALS)-II, COIMBATORE HAS ERRED I N HOLDING THAT THE ASSESSMENT YEAR 2005-06 IS THE INITIAL ASSESSMENT Y EAR IN WHICH THE ASSESSEE HAD CLAIMED THE DEDUCTION U/S-80IA, AND, T HEREFORE THE DEPRECIATION OF EARLIER YEARS (WHICH ALREADY HAVE B EEN ABSORBED) CANNOT BE NOTIONALLY CARRIED FORWARD AND CONSIDERED IN COMPUTING THE QUANTUM OF DEDUCTION U/S-80IA. 4. THE LEARNED CIT(APPEALS)-II, COIMBATORE SHOULD HAVE OBSERVED THAT AS PER THE PROVISIONS OF SECTION-80IA(2) AN ASSESSEE C AN OPT FOR I.T.A.NOS.3024, 3025 & 3026/MDS/14 :- 3 -: DEDUCTION OF ANY TEN CONSECUTIVE YEARS OUT OF FIFTE EN YEARS, RECKONED FROM THE FIRST YEAR IN WHICH THE UNDERTAKING ENTERP RISE GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTES POWER, ETC . 5. THE LEARNED CIT(APPEALS)-II, COIMBATORE, OUGHT TO H AVE APPRECIATED, THAT AS PER THE PROVISIONS OF SECTION-80IA(5) THE E LIGIBLE UNDERTAKING SHOULD BE TREATED AS ONLY SOURCE OF INCOME FOR COMP UTING THE QUANTUM OF DEDUCTION ALLOWABLE U/S-80IA. 6. THE LEARNED CIT(APPEALS)-II, COIMBATORE, SHOULD HAV E TAKEN NOT OF THE FACT THAT THE SEC-80IA(5) BEGINS WITH A NON-OBSTANT E CLAUSE; AND, THEREFORE, THE RESTRICTION THEREIN, SHALL PREVAIL I N COMPUTING AND ALLOWING THE DEDUCTION U/S-80IA. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(APPEALS)-II, COIMBATORE MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER RESTORE D. 3. THE FACTS AS NARRATED IN ITA NO.3024/MDS/2014 IS CONSIDERED FOR ADJUDICATION. THE ASSESSEE FIRM FILED THE RETURN O F INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 30/09/2011 ADMITTING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT W AS COMPLETED. THE RELEVANT PORTION FROM THE ASSESSMENT ORDER IS R EPRODUCED BELOW: 3.1 SALE OF COTTON WASTE : THE ASSESSING OFFICER IN HIS ORDER HAS STATED AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAS ADMITTED F75,49,704/- AS SALE PROCEEDS OF COTTON WASTE. ON EXAMINATION OF BOOKS IT WAS NOTICED THAT AVERAGE SALE PRICE OF COTTON WASTE WAS TOO LOW COMPARED TO PREVA ILING MARKET PRICE DURING THE FINANCIAL YEAR 2010-11. WHEN THIS ISSUE WAS TAKEN UP WITH THE REPRESENTATIVE, IT WAS SUBMITTED THAT T HE QUALITY OF COTTON WASTE DEPENDS ON SO MANY FACTOR AND IT CANNO T BE COMPARED WITH PRODUCTS OF OTHER SPINNING MILLS. HOWEVER, AF TER DISCUSSION WITH THE AUTHORIZED REPRESENTATIVE AN AMOUNT OF F20,00,0 00/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF S ALE OF COTTON WASTE SOLD . I.T.A.NOS.3024, 3025 & 3026/MDS/14 :- 4 -: 3.2 80IA THE ASSESSING OFFICER IN HIS ORDER HAS STATED AS UNDER: ON EXAMINATION OF BOOKS OF ACCOUNT OF WIND MILL, I T WAS NOTICED THAT THE ASSESSEE DOES NOT HAVE ANY INCOME FROM ELIGIBLE BUSINESS FOR CLAIMING DEDUCTIO N U/S 80IA OF THE ACT. WHEN THE COMPUTATION HAS BEEN DONE BY GIVING NOTIONAL EFFECT FOR VARIOUS EXPENSES INCURRED WHILE RUNNING THE WINDMILL INCLUDING THE DEPRECIATION FOR EARLIER YEARS BY TREATING THE ELIG IBLE UNIT AS AN INDEPENDENT UNIT FOR ALL THE FOUR WIND M ILLS, THE FOLLOWING INCOME HAS BEEN ARRIVED AT: WINDMILL SC NO.662 F72,54,435/- (UNABSORBED DEPRECIATION) SC NO.793 F7468267/- SC NO.794 F86,21,476/- SC NO.796 F73,19,441 /- 3.3 SINCE NONE OF THE ELIGIBLE UNITS IS HAVING PRO FIT ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE INCOME-TAX ACT, 1961, TH E ENTIRE DEDUCTION OF F1,41,87,589/- CLAIMED BY THE ASSESSEE IS BEYOND THE SCOPE OF S. 80-IA OF THE ACT. 3.4 THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AS UNDER: GROSS TOTAL INCOME : F 1,37,96,828/- DEDUCTION CLAIMED U/S 80IA : F 1,37,96,828/- ELIGIBLE DEDUCTION U/S 80IA : F NIL ADD: AS DISCUSSED : F 20,00,000/- INCOME ASSESSED : F 1,57,96,828/- I.T.A.NOS.3024, 3025 & 3026/MDS/14 :- 5 -: 3.5 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. THE LD. CIT(A) OBSERVED THAT THE ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS. VELAYUDHASWAMY SPINNING MILLS (P) LTD RE PORTED IN 231 ITR 368. ACCORDINGLY, HE OBSERVED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80-IA OF THE ACT. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. AFTER HEARING BOTH PARTIES, WE ARE OF THE OPINIO N THAT THE LD. CIT(A) TOOK A CORRECT VIEW ON THE ISSUE AS THE ISS UE IN DISPUTE IS SQUARELY COVERED BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (2012) 340 ITR 477 WHEREIN IT WAS HELD THAT - FROM READING OF SUB-S (1) OF S. 80IA, IT IS CLEAR 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 BUSINES S REFERRED TO IN SUB-S (4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THER E SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTIONS, BE A LLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMO UNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUS INESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE B USINESS AND THE SAME IS DEFINED IN SUB-S. (4). SUB-S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTIO N HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GE TTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEARS IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS T O OPERATE ANY INFRASTRUCTURE ACTIVITY ETC SUB-S. (5) DEALS WITH Q UANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT Y EAR ARE USED IN SUB-S (5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB-S (5) IS DI FFERENT FROM THE WORDS I.T.A.NOS.3024, 3025 & 3026/MDS/14 :- 6 -: BEGINNING FROM THE YEAR REFERRED TO IN SUB-S(2) . IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S(5) AND THEY ARE AS UNDER: (1)IT S TARTS 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 PUR POSE OF DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR ; (4) IT IS A DEEMING P ROVISION; (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF IN COME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING TH E PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASS ESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGH T 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 CONTEMPLATED. IT DOES NOT ALL THE REVEN UE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NATIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INC OME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE E LIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMO UNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S(5) DOES NOT C ONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHIC H IT IS CREATED. THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED THE OPTION UNDER S.80-IA(2). IN TAX CASE NO.918 OF 2008 THE ASSESSMENT YEAR WAS 200 4-05. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRECIAT ION OR LOSS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABS ORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING THE RELEV ANT YEAR. THEREFORE, LOSS IN THE YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORW ARD AND SET OFF AGAINST THE PROFIT OF THE ELIGIBLE BUSINESS AS NO SUCH MAND ATE IS PROVIDED IN S. 80- IA(5) CIT VS. TTK PHARMA LTD (TAX CASE (APPEAL ) NO.298 OF 2004, DT. 23 RD DEC., 2009) FOLLOWED; CIT VS. MEWAR OIL & GENERAL MILLS LTD (2004) 186 CTR (RAJ) 141; (2004) 271 ITR 311 (RAJ) CONCURRED W ITH; MOHAN BREWERIES & DISTILLERIES LTD VS. ASST. CIT (2008) 114 TTJ (CH ENNAI) 532: (2008) 3 DTR (CHENNAI) (TRIB) 477 AFFIRMED. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT T HERE IS NO MERIT IN THE GROUND RAISED BY THE DEPARTMENT. AC CORDINGLY, THE APPEAL IS DISMISSED. I.T.A.NOS.3024, 3025 & 3026/MDS/14 :- 7 -: 6. IN THE RESULT, ALL THE THREE APPEALS OF THE RE VENUE IN ITA NOS. 3024, 3025 AND 3026/MDS/2014 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 17 TH OF MARCH, 2015 AT CHENNAI. SD/- SD/- ( ! ) (CHALLA NAGENDRA PRASAD) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ /CHENNAI. %& /DATED:17.03.2015. KV &' () *) /COPY TO: 1. + APPELLANT 2. / RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. )-. / /DR 6. .0 1 /GF.