CALIBRE CHEMICALS P.LTD, MUMBAI V. DCIT CIR 3(1), MUMBAI

ITA 4220/MUM/2013

• Counselvise Citation: 422019914 RSA 2013
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 24-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARMINDER KAUR; PREMANAND J
• Keywords: Business income; Depreciation
• Section: 143(3); 263

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ./ I.T.A. NOS. 4219 & 4220 /MUM/2013 ( / ASSESSMENT YEARS : 2008-09 & 2009-10 M/S CALIBRE CHEMICALS PVT. LTD., 703, DALAMAL HOUSE, 206 NARIMAN POINT, MUMBAI 400 021. / VS. COMMISSIONER OF INCOME TAX 3, ROOM NO. 612, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. ./ PAN : AAACC1952G ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI HIRO RAI R E SPONDENT BY : SHRI PREMANAND J & MS. PARMINDER KAUR / DATE OF HEARING : 15-04-2015 / DATE OF PRONOUNCEMENT : 03-06-2015 [ !' / O R D E R PER R.C. SHARMA, A.M . : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD. CIT-3, MUMBAI DATED 21-03-2013 FOR THE ASSE SSMENT YEAR 2008-09 IN THE MATTER OF ORDER PASSED U/S 263 AND ALSO APPEAL AGAINST THE ORDER OF LD. CIT(A) -6, MUMBAI DATED 20-03-2013 FOR ASSESSMENT Y EAR 2009-10 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GRIEVANCE OF THE ASSESSEE PRESSED BEFO RE US RELATES TO DISALLOWANCE OF DEDUCTION CLAIMED U/S 80IA OF THE A CT BY SETTING OF LOSSESS AND DEPRECIATION OF WINDMILL UNIT ELIGIBLE FOR DEDU CTIONS U/S 80IA OF THE ACT. ITA 4219 & 4220/M/13 2 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FROM THE RECORD WE FOUND THAT IN A.Y. 2008-09 THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IA AMOUNTING TO RS. 38,30,569/- WAS ALLOWED IN RE SPECT OF WIND FARM DIVISION WHILE FRAMING ASSESSMENT U/S 143(3) OF THE ACT. THEREAFTER, THE CIT INITIATED ACTION U/S 263 OF THE ACT WHEREIN A.O. WA S DIRECTED TO EXAMINE THE ASSESSEES CLAIM OF ELIGIBILITY FOR DEDUCTION U/S 8 0IA(5) OF THE ACT AFTER REDUCING LOSSES IN THE FORM OF UNABSORBED DEPRECIAT ION WHICH HAVE ALREADY BEEN SET OFF IN EARLIER YEARS AGAINST PROFIT OF INE LIGIBLE UNITS OF ASSESSEE. 5. IN A.Y. 2009-10, THE A.O. HELD THAT AFTER SET OF F OF BROUGHT FORWARD LOSSES AND DEPRECIATION IN ACCORDANCE WITH SECTION 80IA(5), THE ELIGIBLE DEDUCTION WORKS OUT TO BE NIL. AS PER THE A.O., T HE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80IA(5) OF THE ACT TILL SUCH TIME THE UNABSORBED LOSSES & DEPRECIATION TO THE EXTENT OF RS. 4,16,91,347/- IS FULLY SET OFF AGAINST THE INCOME OF THE ELIGIBLE UNIT. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY CONTROVER SY RELATES TO ALLOWING OF CLAIM OF DEDUCTION U/S 80IA OF THE ACT WITHOUT REDU CING THE LOSSES OF DEPRECIATION PERTAINING TO THE YEAR PRIOR TO THE IN ITIAL ASSESSMENT YEAR. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS PUT UP A WIND MILL UNIT QUALIFYING FOR DEDUCTION U/S 80IA OF INCOME-TAX ACT, 1961. THE SAID UNIT COMMENCED PRODUCTION IN AY 2006-07. AS PER OPTION PROVIDED BY SECTION 80IA (2) OF INCOME-TAX ACT, 1961 THE ASSESSEE OPTED TO CLAIM DE DUCTION U/S 80IA (2) IN RELATION TO WIND MILL UNIT FOR TEN CONSECUTIVE ASSE SSMENT YEARS STARTING FROM AY 2008-09 AND ACCORDINGLY THE ASSESSEE OBTAINED AN D FILED AUDIT REPORT FOR FIRST TIME IN AY 2008-09 IN SUPPORT OF DEDUCTION U/ S 80IA CLAIMED IN THE RETURN OF INCOME. SECTION 80IA(5) PROVIDES THAT PRO FIT OF ELIGIBLE UNIT SHALL BE COMPUTED AS IF IT IS ONLY SOURCE OF INCOME DURING P REVIOUS YEAR RELEVANT TO THE ITA 4219 & 4220/M/13 3 INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASS ESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMI NATION IS TO BE MADE. SECTION 80IA (2) GRANTS OPTION TO THE ASSESSEE TO C LAIM DEDUCTION FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS B EGINNING FROM THE YEAR IN WHICH THE UNIT GENERATES POWER. EXERCISING OPTION G RANTED U/S 80IA(2), THE ASSESSEE CHOSE TO CLAIM DEDUCTION U/S 80IA FROM AY 2008-09. ONCE THE OPTION IS EXERCISED, THE WIND MILL UNIT WILL BE TRE ATED AS IF IT IS ONLY SOURCE OF INCOME FROM YEAR OF EXERCISE OF OPTION. HENCE THERE DOES NOT ARISE ANY QUESTION OF NOTIONALLY BRINGING FORWARD LOSSES FROM EARLIER ASSESSMENT YEAR FROM OF PUTTING UP OF WIND MILL WHICH HAS ALREADY B EEN SET OFF AGAINST BUSINESS INCOME. IN SUPPORT OF THE PROPOSITION THA T LOSS FROM THE ELIGIBLE BUSINESS IN THE YEAR PRIOR TO THE INITIAL ASSESSMEN T YEAR ABSORBED AGAINST THE PROFITS OF OTHER BUSINESS NEED NOT BE NOTIONALLY BR OUGHT FORWARD AND HAS NO EFFECT ON THE DEDUCTION CLAIMED, RELIANCE CAN BE PL ACED ON THE FOLLOWING DECISIONS:- (I) VELAYUDHASWAMY SPINNING MILLIS (P)LTD. VS. ACIT(201 2 340 ITR 477) (MAD.), (II) (II) MOHAN BREWERIES V. ACIT, 116 ITD 241 (CHENNAI) , (III) SHRI ANIL LAD V. DCIT (ITA NO.1262/BANG. 2010), (IV) M PALLONJI V. JCIT(2006) (105 TTJ 136)(MUM.), (V) RANGAMMA STEELS & MALLEABLES [2010] 6 TAXMANN. COM 47 (CHENNAI-ITAT), (VI) POONAWALA ESTATE STUD & AGRO FARM (P) LTD. V. ACIT [2012](20 TAXMANN. COM 309)(PUNE)], (VII) ACIT V. EVEREADY SPINNING MILLS LTD. [2012] 014 ITR (TRIB) 0491- [CHENNAI ITAT-B BENCH], PONDICHERY CHLORATE, GRT HO TEL & DOLLAR APPAREL, (IX) SERUM INTERNATIONAL V. ADD. CIT [2011](ITA NO . 290 TO 292/ PN/2010) (PUNE ITAT), (X) ACIT V. GOLDMINE SHARES AND FINANCE P. LTD. 11 3 ITD 209 (HAD.)(SB):] ITA 4219 & 4220/M/13 4 THEREFORE, SECTION 80IA(5) WILL OPERATE ONLY DURIN G THE PERIOD OF TEN YEARS OF CLAIM AND ONLY FROM THE SECOND YEAR OF THE CLAIM. THE FICTION IN SECTION 80IA(5) IS LIMITED TO ASSUMING THAT DURING THE PREV IOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR, THE ELIGIBLE BUSINESS IS T HE ONLY SOURCE OF INCOME. THE PROVISION LOOKS FORWARD TO A PERIOD OF TEN YEARS FR OM THE INITIAL ASSESSMENT YEAR (YEAR OF OPTION). THE FICTION DOES NOT LOOK BA CKWARDS TO THE YEAR BEGINNING REFERRED TO IN SUB-SECTION (2). SUB-SECTI ON (2) OF SECTION 80IA AS SUBSTITUTED W.E.F. IST APRIL, 2000, GIVES AN OPTION TO THE ASSESSEE FOR CHOOSING ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OF THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE FOR CLAIMING THE DEDUCTION. AS PER SUB-SO (5) OF S. 80- IA, THE QUANTUM OF DEDUCTION UNDER S. 80-IA FOR THE ASSESSMENT YEAR IM MEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMEN T YEAR IS TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF I NCOME. SINCE THE ASSESSEE HAS EXERCISED THE OPTION OF CHOOSING THE ASST. YR. 2008 -09 AS INITIAL ASSESSMENT YEAR AS PER SUB-SECTION (2) OF S. 80-IA, ONLY THE L OSSES OF THE YEARS STARTING FROM THAT INITIAL ASSESSMENT YEAR ALONE ARE TO BE B ROUGHT FORWARD AS STIPULATED IN S. 80-IA(5). LOSS PRIOR TO THE INITIA L ASSESSMENT YEAR WHICH HAS ALREADY BEEN SET OFF CANNOT BE BROUGHT FORWARD AND ADJUSTED IN THE INITIAL ASSESSMENT YEAR AS CHOSEN BY THE ASSESSEE. IT IS ON LY WHEN THE LOSS HAS BEEN INCURRED IN ANY YEAR BEGINNING FROM THE INITIAL ASS ESSMENT YEAR, THAT THE ASSESSEE HAS TO ADJUST SUCH LOSS IN THE SUBSEQUENT ASSESSMENT YEARS AND THE PROFITS HAVE TO BE COMPUTED AS IF THE ELIGIBLE BUSI NESS IS THE ONLY SOURCE OF INCOME AND THE DEDUCTION U/S. 80-IA IS TO BE DETERM INED ACCORDINGLY. THIS IS THE TRUE IMPORT OF SECTION 80-IA(5). THEREFORE THE LOSSES OF ASSESSMENT YEAR PRIOR TO THE A.Y. 2008-09 WHICH HAS ALREADY BEEN SE T OFF AGAINST INCOME OF NON-ELIGIBLE UNIT COULD NOT BE NOTIONALLY CARRIED F ORWARD IN ACCORDANCE WITH SECTION 80IA FOR SETTING OFF AGAINST THE INCOME OF ELIGIBLE UNIT FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 UNDER CONSIDERAT ION. ITA 4219 & 4220/M/13 5 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT I N THE ACTION OF THE LOWER AUTHORITIES FOR ALLOWING THE CLAIM OF DEDUCTION U/S 80IA BY REDUCING THE ELIGIBLE PROFIT BY THE AMOUNT OF LOSSES AND DEPRECI ATION PERTAINING TO EARLIER YEAR WHICH HAS ALREADY BEEN SET OFF AGAINST THE PRO FIT OF NON-ELIGIBLE UNIT. 8. AS WE HAVE ALREADY DECIDED THE ISSUE ON MERIT IN THE A.Y. 2009-10, FOLLOWING THE SAME REASONING, WE DO NOT FIND ANY ME RIT IN THE ACTION OF LD. CIT U/S 263 FOR DIRECTING THE A.O. IN THE A.Y. 2008-09 TO ALLOW DEDUCTION U/S 80IA OF THE ACT AFTER REDUCING THE LOSS AND DEPRECI ATION OF EARLIER YEAR WHICH HAVE ALREADY BEEN SET OFF AGAINST THE PROFIT OF NON -ELIGIBLE UNIT. 9. THE OTHER GROUNDS RAISED IN THE APPEALS ARE NOT PRESSED BEFORE US, THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, JUNE, 2015. !' # $% &! ' 30-06-2016 ( ) SD/- SD/- (D. MANMOHAN) (R.C. SHARMA) VICE PRESIDENT ACCOUNTANT MEMBER $ 4 MUMBAI ; &! DATED 3 RD JUNE2015 [ .5../ RK RKRK RK , SR. PS ITA 4219 & 4220/M/13 6 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 6 () / THE CIT(A) CONCERNED, MUMBAI 4. 6 / CIT -CONCERNED, MUMBAI 5. 9:( 55;< , ;< , $ 4 / DR, ITAT, MUMBAI J BENCH 6. (>? @ / GUARD FILE. ' / BY ORDER, 9 5 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 4 / ITAT, MUMBAI