ACIT, CHENNAI V. Chettinad Quartz Products Limited, Kancheepuram

ITA 430/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81200 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: K B MURALIDHARAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , ! ' , % & BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 430/MDS/2014 ( / ASSESSMENT YEAR : 2008-09) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), CHENNAI-600 034 VS M/S.CHETTINAD QUARTZ PRODUCTS LTD. (NOW MERGED WITH M/S. CHETTINAD MORIMURA SEMI CONDUCTOR MATERIAL P.LTD.) 37, OLD MAHABALIPURAM ROAD KHAZHIPATTUR VILLAR, PADUR PO KANCHEEPURAM DIST-603103. PAN: AAACC2461Q ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. GURU BHASHYAM, JCIT /RESPONDENT BY : MR. K.B.MURALIDHARAN, C.A / DATE OF HEARING : 28 TH AUGUST, 2014 /DATE OF PRONOUNCEMENT : 16 TH OCTOBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD , JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- I, CHENNA I DATED 21.11.2013 FOR THE ASSESSMENT YEAR 2008-09 ARISING OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT UNABSORBED DEPRECIATION MUST NOT BE SET OFF AGAINST THE 2 ITA NO.430/MDS/2014 INCOME OF UNDERTAKING BEFORE GIVING DEDUCTION UNDER SECTION 10B OF THE ACT. 2. BRIEF FACTS ARE THAT ASSESSEE FILED RETURN OF IN COME ON 30.9.2008 ADMITTING NIL INCOME AFTER SET OFF OF UNA BSORBED DEPRECIATION WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS OF THE ACT. THE ASSESSING OFFICER COMP LETED ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 30.12.2010 AND WHILE COMPLETING ASSESSMENT HE COMPU TED INCOME FOR THE PURPOSE OF DEDUCTION UNDER SECTION 1 0B AFTER SETTING OFF OF UNABSORBED DEPRECIATION FOR THE ASSE SSMENT YEARS 2003-04 TO 2005-06 FROM OUT OF THE PROFITS OF THE UNDERTAKING OF THE ASSESSMENT YEAR 2008-09. AGGRIEV ED BY THE ACTION OF THE ASSESSING OFFICER IN SETTING OFF OF UNABSORBED DEPRECIATION FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 10B OF THE ACT, ASSESSEE PR EFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS) AND THE COMMISSIONER FOLLOWING THE ORDER OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CHETTINAD MOR IMURA SEMI-CONDUCTOR MATERIALS PVT. LTD. WITH WHICH ASSE SSEE COMPANY MERGED WITH FOR THE ASSESSMENT YEAR 2007-08 3 ITA NO.430/MDS/2014 ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT DED UCTION UNDER SECTION 10B SHOULD BE COMPUTED BEFORE SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS,. THE REVE NUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING DEPARTMENTAL REPRESENTATI VE SUBMITS THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN REVENUES FAVOUR BY THE CO-ORDINATE BENCH OF THIS T RIBUNAL IN S.R.A.SYSTEMS LTD. VS. ACIT IN ITA NO.1547/MDS/2012 DATED 21.02.2014. DEPARTMENTAL REPRESENTATIVE SUBMI TS THAT CO-ORDINATE BENCH OF THIS TRIBUNAL FOLLOWING THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. HIMA TSINGKA SEIDE LTD. VS. CIT IN CIVIL APPEAL NO.1501 OF 2008 DATED 19.9.2013 HELD THAT UNABSORBED DEPRECIATION HAS TO BE SET OFF BEFORE COMPUTING EXEMPTION ALLOWABLE UNDER SECTION 10A OF THE ACT. A COPY OF THE ORDER IS PLACED ON RECORD AN D THE DEPARTMENTAL REPRESENTATIVE RELIES ON THE ORDER OF HONBLE SUPREME COURT AS WELL AS THE CO-ORDINATE BENCH DECI SION. 4. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF M/S. HIMATSING KA 4 ITA NO.430/MDS/2014 SEIDE LTD. (SUPRA) IS NOT APPLICABLE TO THE ASSESSE ES CASE. COUNSEL TRIES TO DISTINGUISH THE ABOVE DECISION OF THE SUPREME COURT SAYING THAT DECISION PERTAINING TO AS SESSMENT YEARS 1994-95 AND 1996-97 WHEREAS ASSESSMENT YEAR INVOLVED IN THE CASE UNDER CONSIDERATION IS 2008-09 AND HENCE IT CANNOT BE APPLIED. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON. WE FIND THAT THE ISSUE IN APPEAL HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF S.R.A.SYSTEMS LTD.(SUPRA) FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. HIMATSINGKA SEIDE LTD. (SUPRA) . THE CO-ORDINATE BE NCH WHILE DECIDING THE ISSUE HELD THAT UNABSORBED DEPRECIATI ON HAS TO BE SET OFF BEFORE COMPUTING EXEMPTION ALLOWABLE UND ER SECTION 10A OF THE ACT OBSERVING AS UNDER:- 7. THE THIRD ISSUE IN APPEAL RELATES TO THE METHOD OF COMPUTATION OF DEDUCTION U/S.10A OF THE ACT. THE ASSESSEE HAS CLAIMED DEDUCTION U/S.10A BEFORE SETTING OFF OF UNABSORBED DEPRECIATION AND BROUGHT FORWARD LOSSES. THE LD.AR OF THE ASSESSEE IN ORDER TO FORTIFY THE STAND 5 ITA NO.430/MDS/2014 OF ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN ASSESSEES APPEAL FOR THE AY.2005-06 AND AY.2007-08 (SUPRA). THE LD.AR HAS ALSO DRAWN SUPPORT FROM THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD.(SUPRA). ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE LATEST DECISION OF THE HONBLE APEX COURT IN THE CASE OF M/S.HIMATSINGKA SEIDE LTD., VS.CIT (SUPRA). THE HONBLE SUPREME COURT OF INDIA DISMISSED THE APPEAL OF THE ASSESSEE AND HAS UPHELD THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT. THE HONBLE HIGH COURT HAS HELD THAT THE BROUGHT FORWARD DEPRECIATION HAS TO BE ADJUSTED AGAINST THE PROFITS OF THE EOU BEFORE COMPUTING THE EXEMPTION ALLOWABLE U/S.10B. THE PROVISIONS OF SECTION 10A ARE PARI MATERIA WITH THE PROVISIONS OF SECTION 10B OF THE ACT.WE FIND THAT AS FAR AS UN- ABSORBED DEPRECIATION IS CONCERNED, THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF M/S.HIMATSINGKA SEIDE LTD., VS. CIT (SUPRA), HAS UP-HELD THE FINDINGS OF THE HONBLE KARNATAKA HIGH COURT AND AS SUCH, UN-ABSORBED DEPRECIATION HAS TO BE SET-OFF BEFORE COMPUTING THE EXEMPTION ALLOWABLE U/S.10A. IN RESPECT OF SETTING-OFF OF THE BROUGHT FORWARD LOSSES, THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD.(SUPRA) STILL HOLDS GOOD. ACCORDINGLY, THE ASSESSEE CAN CLAIM DEDUCTION U/S.10A BEFORE SETTING OFF OF BROUGHT FORWARD LOSSES. IN VIEW OF THE ABOVE, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6 ITA NO.430/MDS/2014 6. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THI S TRIBUNAL, WE ALLOW THE GROUNDS RAISED BY THE REVENU E. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 16 TH DAY OF OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( & () ) ( DR. O.K. NARAYANAN ) ( CHALLA NAGE NDRA PRASAD ) ,- /VICE-PRESIDENT ( . / JUDICIAL MEMBER ( /CHENNAI, / /DATED, 16 TH OCTOBER, 2014 SOMU 12 32 /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .