PERFO CHEM INDIA P.LTD, MUMBAI V. PR CIT 7, MUMBAI

ITA 3800/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9608 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 24-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: V G GINDE
• Section: 143(3); 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 3800 / MUM/20 1 7 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. PERFO CHEM INDIA PVT. LTD., 101 A NEELAM CENTRE HIND CYCLE ROAD, WORLI, MUMBAI 400030 VS. PR CIT 7 6 TH FLOOR, R.NO.626 AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020 PAN/GIR NO. AAACN4949A APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI V.G. GINDE REVENUE BY SHRI H.N. SINGH DATE OF HEARING 11 / 09 /201 7 DATE OF PRO NOUNCEME NT 13 / 09 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT, MUMBAI PASSED U/S.263 DATED 29/03/2017 FOR THE A.Y.2012 - 13. IN THIS APPEAL, ASSESSEE IS AGGRIEVED BY THE DECISIO N OF CIT HOLDING THAT ORDER PASSED BY AO WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. AFTER COMP LE TION OF ASSESSMENT U/S. 143(3), THE CIT CALLED FOR RECORDS OF AO. DURING THE COURSE OF PROCEEDINGS U/S.263, THE CIT OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION, TRANSMISSION, DIS TRIBUTION OF ENERGY THROUGH W IND BESIDES THE BUSINESS OF ITA NO. 3800/MUM/2017 M/S. PERFO CHEM INDIA PVT. LTD., 2 REPACKING, RELABELING, TRADING, IMPORT & EXPORT OF CHEMICALS . IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.69,27,690/ - U/S.80 I A OF THE ACT AND THE SAME WAS ALLOWED I N THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT . O N PERUSAL OF FORM NO 10CCB DATED 29.09.2012 SUBMITTED BY THE ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS ALSO FOUND THAT THE ASSESSEE COMPANY IS HAVING AN UNDERTAKING / ENTERPRISES ELIGIBLE FOR THE DEDUCTION AT K 298. RS NO 169, VALVE, SAKRI, DISTRICT DHULE. MAHARASTRA - 424001. AS PER POINT NO 8 OF THE FORM, DATE OF COMMENCEMENT OF OPERATION / ACTIVITY BY THE UNDERTAKING OR ENTERPRISE IS 30 / 03 / 2006 WHICH FALLS IN PREVIOUS YEAR RELEVANT FOR AY 2006 - 07. FURTHER IN THE NEXT POINT NO.9 OF THE FORM, THE ASSESSEE CHOSE INITIAL ASSESSMENT YEAR FROM WHEN DED UCTION IS BEING CLAIMED IS A Y 2006 - 07. FROM THE CHOSEN INITIAL A Y 2006 - 07 TO A. Y. 2008 - 09, THE SAID DEDUCTION ELIGIBLE BUSINESS I.E. WIND MILL INCURRED LOSS TOTALING TO RS.5,75,54,350/ - . THE ASSESSEE HAS ALSO CLAIMED DEDUCTION U/S 80IA OF THE ACT ON THE PROFITS OF THE ELIGIBLE WIND MILL OF RS.54,72,934/ - , RS.50,80,676/ - AND RS.69,27,690/ - FOR AY 2010 - 11, 2011 - 12 AND 2012 - 13 RESPECTIVELY WITHOUT CONSIDERING THE TOTAL LOSS OF RS.5,75,54,350/ - INCURRED SINCE THE INITIAL ASSESSMENT YEAR. THEREFORE, IN VIEW O F THE PROVISIONS OF SECTION 80IA(5) OF THE ACT, THE BROUGHT FORWARD LOSS PERTAINING TO EARLIER ASSESSMENT YEARS IN THIS CASE ARE AY 2006 - 07 TO 2008 - 09 SHOULD HAVE BEEN SET OFF AGAINST PROFITS OF THE ELIGIBLE BUSINESS BEFORE ALLOWING DEDUCTION U/S 80IA OF T HE ACT. IN VIEW OF THESE FACTS, DEDUCTION ALLOWED OF ITA NO. 3800/MUM/2017 M/S. PERFO CHEM INDIA PVT. LTD., 3 RS.69,27,690/ - U/S 80IA OF THE ACT WA S HELD TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IT WAS ARGUED BY LEARNED AR THAT DURING THE YEAR ASSESSEE COMPANY EARNED INCOME FRO M WINDMILL FOR RS.69,27,690/ - AND IN RESPECT OF WHICH THE COMPANY CLAIMED DEDUCTION UNDER SECTION 80IA OF EQUAL AMOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LEARNED AO RAISED A QUESTION AS TO WHY THE LOSSES OF THIS WINDMILL PERTAINING TO EARLIE R YEARS SHOULD NOT BE SET OFF ON NOTIONAL BASIS BEFORE ALLOWING DEDUCTION UNDER SECTION 80IA OF THE ACT, AND FOR WHICH SPECIFIC REFERENCE WAS MADE BY THE AO TO PROVISIONS OF SECTION 80IA(5) OF THE ACT. 5. OUR ATTENTION WAS ALSO INVITED BY LEARNED AR TO LET TER DATED 16/12/2014 FILED BY ASSESSEE BEFORE THE AO INDICATING THAT THOUGH THE WINDMILL COMMENCED ITS OPERATIONS IN A.Y 2006 - 07, ASSESSEE COMPANY STARTED CLAIMING DEDUCTION UNDER SECTION 80IA(5) FROM THE A.Y.2010 - 11, AND THEREFORE, A.Y.2010 - 11 WOULD BE TH E INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF SECTION 80IA(5) AND NOT THE A.Y. 2006 - 07. LEARNED AR ALSO PLACED ON RECORD CBDT CIRCULAR DATED 15/12/2016 IN SUPPORT OF THE PROPOSITION THAT THE ASSESSEE CAN CLAIM DEDUCTION OF TEN YEARS OUT OF FIFTEEN ASSESSMEN T YEARS BY CHOOSING INITIAL ASSESSMENT YEAR. 6. LEARNED AR HAS DRAWN OUR ATTENTION TO THE LETTER FILED BY THE AUDITOR IN THE SUBSEQUENT ASSESSMENT YEAR ADDRESSING TO THE AO WHEREIN IT HAS BEEN MENTIONED THAT INITIAL ASSESSMENT YEAR IS AY 2010 - 11 AND THAT A SSESSEE HAS STARTED CLAIMING DEDUCTION ONLY FROM THE A.Y.2010 - 11 EVEN THOUGH IN FORM NO.10CCB, THE ASSESSMENT YEAR MENTIONED IN THE ROW ITA NO. 3800/MUM/2017 M/S. PERFO CHEM INDIA PVT. LTD., 4 NO.9 (INITIAL ASSESSMENT YEAR FORM WHEN DEDUCTION IS BEING CLAIMED) IS A.Y.2006 - 07. HE HAS ALSO DRAWN OUR ATTENTION TO T HE SUBSEQUENT ASSESSMENT YEAR WHEREIN SIMILAR CLAIM WAS ALLOW ED BY THE AO AND THERE WAS NO A CTION U/S. 263 OR SECTION 147 IN RESPECT OF THOSE ASSESSMENTS BEING FRAMED BY THE AO ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S.80IB. 7. ON THE OTHER HAND, LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF CIT PASSED U/S.263 AND CONTENDED THAT IN THE RETURN OF INCOME ITSELF AS PER THE AUDIT REPORT, THE INITIAL ASSESSMENT YEAR WAS 2006 - 07, HOWEVER, THE ASSESSEE HAS NOT REDUCED THE ACCUMULATED LOSSES FROM A.Y.2006 - 07 WHILE COMPUTING ELIGIBLE AMOUNT OF DEDUCTION U/S.80IB FOR THE A.Y.2012 - 13 UNDER CONSIDERATION, WHICH RE NDERED THE ORDER PASSED BY THE AO AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FA CTUAL MATRIX OF THE CASE. FROM THE RECORD WE FOUND THAT DURING THE YEAR ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF THE WIND MILL U/S.80IA WHICH WAS ALLOWED BY AO WHILE FRAMING ASSESSMENT U/S.143(3). T HE CIT OBSERVED THAT AS PER F ORM NO.10CCB DATED 29/09/ 2012, SUBMITTED BY ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT ASSESSEE COMPANY IS HAVING AN UNDERTAKING ELIGIBLE FOR DEDUCTION AND THE COMMENCEMENT OF UNDERTAKING WAS 30/03/2006 WHICH FALLS IN THE PREVIOUS YEAR RELEVANT TO ITA NO. 3800/MUM/2017 M/S. PERFO CHEM INDIA PVT. LTD., 5 THE A.Y.2006 - 07. AS PER THE CERTIFICATE, THE ASSESSEE CHOOSE INITIAL ASSESSMENT YEAR FROM WHEN DEDUCTION SO CLAIM ED I S A.Y.2006 - 07. HOWEVER, THE ASSESSEE HAS NOT EXPLAINED BEFORE THE CIT REGARDING INADVERTENT MISTAKE OF THE AUDITOR AND THE SUBSEQUENT C ORRECTED CERTIFICATE HAVING BEEN FILED BEFORE THE AO FOR THE SUBSEQUENT ASSESSMENT YEAR. HOWEVER THE ASSESSMENT ORDER SO PASSED BY AO U/S.143(3) DATED 26/02/2015, NOT EVEN A SINGLE WORD WAS UTTERED BY AO WITH REGARD TO ASSESSEES ELIGIBILITY TO CLAIM DEDUC TION U/S.80IA. AO HAS ALSO NOT INQUIRED INTO THE CERTIFICATE FILED BY AUDITOR OF ASSESSEES COMPANY ACCORDING TO WHICH IN I TIAL ASSESSMENT YEAR WAS A.Y.2006 - 07. NOR W AS THERE ANY COMMENT OF AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH REGARD TO INCOR RECT CERTIFICATE FI L LED IN FORM 10CCB. UNDER THESE FACTS AND CIRCUMSTANCES, WHEN THE ASSESSEE HAS NOT REDUCED CARRY FORWARD LOSSES DURING THE A.Y.2006 - 07 FROM THE PROFIT EARNED DURING THE YEAR FROM ELIGIBLE UNIT, THE CLAIM OF DEDUCTION U/S.80IA(5) CANNOT B E SAID TO BE CORRECT ONE. SINCE , AO HAD NOT MADE ANY INQUIRY THE ORDER PASSED BY CIT U/S. 263 CANNOT BE FAULTED WITH. 9. HOWEVER, ON MERIT OF THE CASE, WE FOUND THAT AS PER CBDT CIRCULAR NO.1/16, DATED 15/02/2016, THE ASSESSEE HAS BEEN GIVEN CHOICE TO CLAI M DEDUCTION FOR TEN YEARS WITHIN 15 ASSESSMENT YEARS BY CHOOSING THE INITIAL ASSESSMENT YEAR. THUS, AS PER CBDT CIRCULAR, THE DATE OF SETTING AND START OF PRODUCTION CANNOT NECESSARILY BE INITIAL ASSESSMENT YEAR AND THAT ASSESSEE CAN CHOSE AT I TS OWN, THE INITIAL ASSESSMENT Y EAR FROM WHEN HE CLAIMS DEDUCTION. ONCE SUCH INITIAL ASSESSMENT YEAR IS CHOSEN THE ITA NO. 3800/MUM/2017 M/S. PERFO CHEM INDIA PVT. LTD., 6 ASSESSEE IS NOT AT LIBERTY TO CHANGE THE SAME. AS PER PROVISIONS OF SECTION 80IA (5), THE BRO UGHT FORWARD LOSSES FROM THE INITIAL ASSESSMENT YEAR TILL TH E YEAR OF CLAIM SHOULD BE REDUCED FROM THE ELIGIBLE PROFIT FOR THE YEAR UNDER CONSIDERATION SO AS TO ARRIVE AT A CORRECT AMOUNT OF PROFIT ELIGIBLE FOR DEDUCTION. HOWEVER, IN THE SUBSEQUENT ASSESSMENT YEAR, THE AO HAS ALREADY ACCEPTED ASSESSEES CONTENTION WITH REGARD TO THE MISTAKE IN THE AUDITOR CERTIFICATE POINTED OUT VIDE LETTER DATED 23/02/2016 ADDRESSED TO DCIT - 7(1), THE AUDITOR MR. PRAKKASH MUNI HAS ALREADY CONFIRMED TO THE AO THAT CORRECT INITIAL ASSESSMENT FROM WHEN DEDUCTION IS CLAIMED IS FROM A.Y. 2010 - 11. UNDER THESE FACTS AND CIRCUMSTANCES, WE MODIFY THE DIRECTIONS OF CIT AND DIRECT THE AO TO VERIFY ALL THESE FACTS WHILE DECIDING THE MATTER AS SET ASIDE BY CIT U/S.263. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTI CAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 09 /2017 S D/ - ( RAVISH SOOD ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 09 /2 01 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//