ACIT Corporate Circle 3(1), CHENNAI V. Tenneco Automative India Private Limited, CHENNAI

ITA 3226/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5076 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: R KUMAR
• Keywords: Depreciation; Revised return; Unabsorbed depreciation
• Section: 143(3); 80HHC; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.3226/CHNY/2017 ( / ASSESSMENT YEAR: 2010-11) THE ACIT, CORPORATE CIRCLE 3(1), CHENNAI 34. VS M/S. TENNECO AUTOMOTIVE INDIA PVT. LTD., TIDEL PARK, DI SOUTH, 9 TH FLOOR, 4, CANAL ROAD, TARAMANI, CHENNAI 600 113. PAN: AABCT3125D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI V. NANDAKUMAR, JCIT / RESPONDENT BY : SHRI R. KUMAR, ADVOCATE /DATE OF HEARING : 17.05.2018 /DATE OF PRONOUNCEMENT : 28.06.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI, DATED 29.08.2017 IN ITA NO.134/CIT(A)-11/2016-17 FOR THE ASSESSMENT YEAR 2010-11 PASSED U/S.250(6) R.W.S. 143(3) & 147 OF THE ACT. 2 ITA NO.3226/CHNY/201 7 2. THE REVENUE HAS RAISED THREE GROUNDS IN ITS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.2,02,47,592/- TOWARDS DISALLOWANCE OF DEDUCTION U/S.10A OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROVIDING IT ENABLED SERVICES AND CONSULTANCY SERVICES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 15.10.2010, ADMITTING LOSS OF RS.20,46,03,121/-. INITIALLY THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND SUBSEQUENTLY THE ASSESSEE FILED REVISED RETURN ON 15.03.2012 ADMITTING LOSS OF RS.20,46,61,439/-. THEREAFTER ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 21.05.2014 DETERMINING LOSS OF RS.16,09,53,973/-. SUBSEQUENTLY ONCE AGAIN ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S.148 OF THE ACT ON 17.02.2015. FINALLY ASSESSMENT ORDER WAS PASSED U/S.143(3) R.W.S. 147 OF THE ACT ON 22.03.2016 WHEREIN THE LD.AO MADE ADDITION OF RS.2,02,47,592/- BY DISALLOWING DEDUCTION U/S.10A OF THE ACT. 3 ITA NO.3226/CHNY/201 7 4. THE LD.AO DISALLOWED DEDUCTION U/S.10A OF THE ACT BECAUSE HE WAS OF THE VIEW THAT CBDT CIRCULAR DATED 16.07.2013 HAD DIRECTED THE REVENUE AUTHORITIES THAT DEDUCTION U/S.10A WILL BE ALLOWABLE TO THE ELIGIBLE UNITS ONLY AFTER SETTING OFF OF THE LOSS OF OTHER NON-ELIGIBLE UNITS. 5. HOWEVER, ON APPEAL, THE LD.CIT RELYING ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT & OTHRS. VS. YOKOGAWA INDIA LTD., REPORTED IN 391 ITR 274 VIDE ORDER DATED 16.12.2016 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 10. IN THESE CIRCUMSTANCES, I AM OF THE VIEW THAT THE LATER JUDGEMENT BY THE SUPREME COURT IN THE CASE OF YOKOGAWA INDIA LTD., DECLARED A CLEAR PRONUNCIATION OF LAW AS AGAINST THE DISMISSAL OF THE SLP IN THE CASE OF HIMATASINGIKE SEIDE LTD. THOUGH THE SUPREME COURT IN THE CASE OF HIMATASINGIKE SEIDE LTD., HAS COME TO THE DECISION TO DISMISS THE SLP BASED ON PERUSAL OF RECORDS, STILL THE SAME MAY HAVE TO BE VIEWED AS DISMISSAL OF SLP IN LIMINE AND NOT A DECLARATION OF LAW. SO AS PER THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF YOKOGAWA INDIA LTD., IT IS CLEARLY LAID DOWN THAT THE LOSSES SUFFERED FROM OTHER NON-ELIGIBLE UNITS MUST BE ADJUSTED ONLY AT CHAPTER VI STAGE AND THE DEDUCTION U/S 10A MUST BE GIVEN AT CHAPTER IV STAGE. 11. IN VIEW OF THE ABOVE, I HEREBY HOLD THAT THE APPELLANT IS ENTITLED TO CLAIM THE ENTIRE PROFIT DERIVED FROM ELIGIBLE UNDERTAKING AS DEDUCTION U/S.10A BEFORE ALLOWING THE SET OFF OF LOSSES OF OTHER NON-ELIGIBLE UNITS. 6. BEFORE US, THE LD.DR RELIED ON THE ORDERS OF THE LD.AO WHILE AS THE LD.AR ARGUED IN SUPPORT OF THE LD.CIT(A) AND ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT, CITED SUPRA. 4 ITA NO.3226/CHNY/201 7 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL PLACED ON RECORD. ON EXAMINING THE FACTS OF THE CASE AND THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF YOKOGAWA INDIA LTD., WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE APEX COURT. THE GIST OF THE DECISION IS EXTRACTED HEREIN BELOW FOR REFERENCE: SECTION 10A OF THE INCOME TAX ACT, 1961 AS ORIGINALLY INTRODUCED, PROVIDED THAT ANY PROFITS AND GAINS DERIVED BY AN ASSESSEE FROM AN INDUSTRIAL UNDERTAKING TO WHICH THE SECTION APPLIED SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THE AMENDMENT OF THE SECTION BY THE FINANCE ACT, 2000 WITH EFFECT FROM APRIL 1, 2001, SPECIFICALLY USES THE WORDS DEDUCTION OF PROFITS AND GAINS DERIVED BY AN ELIGIBLE UNIT.. . FROM THE TOTAL INCOME OF THE ASSESSEE. THE RETENTION OF SECTION 10A IN CHAPTER III OF THE ACT AFTER THE AMENDMENT MADE BY THE FINANCE ACT, 2000 WOULD BE MERELY SUGGESTIVE AND NOT DETERMINATIVE OF WHAT IS PROVIDED BY THE SECTION AS AMENDED, IN CONTRAST TO WHAT WAS PROVIDED BY THE UNAMENDED SECTION. THE TRUE AND CORRECT PURPORT AND EFFECT OF THE AMENDED SECTION WILL HAVE TO BE CONSTRUED FROM THE LANGUAGE USED AND NOT MERELY FROM THE FACT THAT IT HAS BEEN RETAINED IN CHAPTER III. THE INTRODUCTION OF THE WORD DEDUCTION IN SECTION 10A BY THE AMENDMENT, IN THE ABSENCE OF ANY CONTRARY MATERIAL, AND IN VIEW OF THE SCOPE OF THE DEDUCTIONS CONTEMPLATED BY SECTION 10A HAS TO BE UNDERSTOOD AS EMBODYING A CLEAR ENUNCIATION OF THE LEGISLATIVE DECISION TO ALTER THE NATURE OF THE SECTION FROM ONE PROVIDING FOR EXEMPTION TO ONE PROVIDING FOR DEDUCTIONS. THOUGH THE DIFFERENCE BETWEEN THE TWO EXPRESSIONS EXEMPTION AND DEDUCTION, BROADLY MAY APPEAR TO BE THE SAME, I.E., IMMUNITY FROM TAXATION, THE PRACTICAL EFFECT OF IT IN THE LIGHT OF THE SPECIFIC PROVISIONS CONTAINED IN DIFFERENT PARTS OF THE ACT WOULD BE WHOLLY DIFFERENT. THE ABOVE IMPLICATIONS WOULD BE OBVIOUS WHERE LOSS MAKING ELIGIBLE UNITS OR NON-ELIGIBLE ASSESSEES SEEK THE BENEFIT OF ADJUSTMENT OF LOSSES AGAINST PROFITS MADE BY ELIGIBLE UNITS. SUB-SECTION (4) OF SECTION 10A WHICH PROVIDES FOR PRO RATA EXEMPTION, NECESSARILY INVOLVING DEDUCTION OF THE PROFITS ARISING OUT OF DOMESTIC SALES, IS ONE INSTANCE OF DEDUCTION PROVIDED BY THE, AMENDMENT. PROFITS OF AN ELIGIBLE UNIT PERTAINING TO DOMESTIC SALES WOULD HAVE TO ENTER INTO THE COMPUTATION UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS IN CHAPTER IV AND BE DENIED THE BENEFIT OF DEDUCTION. THE PROVISIONS OF SUB-SECTION (6) OF SECTION 10A, AS AMENDED BY THE FINANCE ACT, 2003, GRANTING THE BENEFIT OF ADJUSTMENT OF LOSSES AND UNABSORBED DEPRECIATION, ETC., COMMENCING FROM THE YEAR 2001-02 ON COMPLETION OF THE PERIOD OF TAX HOLIDAY ALSO VIRTUALLY WORK AS A DEDUCTION WHICH HAS TO BE WORKED OUT AT A FUTURE POINT OF TIME, NAMELY, AFTER THE EXPIRY OF THE PERIOD OF TAX HOLIDAY. THE ABSENCE OF ANY REFERENCE IN CHAPTER VI OF THE ACT TO DEDUCTION UNDER SECTION 10A CAN BE UNDERSTOOD BY ACKNOWLEDGING THAT ANY SUCH REFERENCE OR MENTION WOULD HAVE BEEN A REPETITION OF WHAT HAS ALREADY BEEN PROVIDED IN SECTION 10A. THE PROVISIONS OF SECTIONS 80HHC AND 8OHHE OF THE ACT PROVIDING FOR SOMEWHAT SIMILAR DEDUCTIONS WOULD BE WHOLLY IRRELEVANT AND REDUNDANT IF DEDUCTIONS UNDER SECTION 10A WERE TO BE MADE AT THE STAGE OF OPERATION OF CHAPTER VI OF THE ACT. THE RETENTION OF THE PROVISIONS OF THE ACT, I.E.., SECTIONS 80HHC AND 80HHE, DESPITE THE AMENDMENT OF SECTION 10A INDICATES THAT SOME ADDITIONAL BENEFIT TO ELIGIBLE 5 ITA NO.3226/CHNY/201 7 SECTION 10A UNITS, NOT CONTEMPLATED BY SECTIONS 8OHHC AND 8OHHE, WAS INTENDED BY THE LEGISLATURE. SUCH A BENEFIT CAN ONLY BE UNDERSTOOD BY A LEGISLATIVE MANDATE TO UNDERSTAND THAT THE STAGES FOR WORKING OUT THE DEDUCTIONS UNDER SECTIONS 10A AND 80HHC AND 80HHE ARE SUBSTANTIALLY DIFFERENT. FROM A READING OF THE RELEVANT PROVISIONS OF SECTION 10A, IT IS MORE THAN CLEAR THAT THE DEDUCTION CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. CIRCULAR NO. 794, DATED AUGUST 9, 2000 STATES IN PARAGRAPH 15.6 THAT THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100 PER CENT EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF THIS PROVISION. IF THE SPECIFIC PROVISIONS OF THE ACT (THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 10A AND SUB-SECTIONS (1A) AND (4) OF SECTION 10A) PROVIDE THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT UNDERSTOOD THE SITUATION, IT IS LOGICAL AND NATURAL THAT THE DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTION UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF THE UNDERTAKING THEREFORE, THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. DECISION OF THE KARNATAKA HIGH COURT IN CIT V. YOKOGAWA INDIA LTD. [2012] 341 ITR 385 (KARN) AFFIRMED ON THIS POINT. THE PRINCIPLES GOVERNING THE PROVISIONS OF SECTION 10A OF THE ACT WOULD EQUALLY BE APPLICABLE TO CASES GOVERNED BY THE PROVISIONS OF SECTION 10B IN VIEW OF THE LATTER PROVISION BEING PARI MATERIA WITH SECTION 10A OF THE ACT THOUGH GOVERNING A DIFFERENT SITUATION. IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. CAPE BRANDY SYNDICATE V. INLAND REVENUE COMMISSIONER [1921] 1 KB 64 RELIED ON. 8. THEREFORE, FOLLOWING THE DECISION OF THE HONBLE APEX COURT, WE HEREBY UPHOLD THE ORDER OF THE LD.CIT(A) WHO HAS ONLY 6 ITA NO.3226/CHNY/201 7 FOLLOWED THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF YOKOGAWA INDIA LTD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 28 TH JUNE, 2018 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 28 TH JUNE, 2018 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF