Appeal details
Counselvise Citation
47124514 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-08-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2006-2007
Appeal Filed On
29-03-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTAN T MEMBER ITA NO. 471/PN/2010 (ASSESSMENT YEAR: 2006-07) M/S MALPANI SALES CORPORATION 4/1, GANESH PETH,BURUD LANE PUNE-411004 .. APPE LLANT PAN AACFM4993J VS. ADDL.CIT,R-3, PUNE .. RESPONDENT APPELLANT BY: SHRI NIKHIL PATHAK, AR RESPONDENT BY: ANN KAPTHUAMA, DR ORDER PER D.KARUNAKARA RAO, A.M .: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) II, PUNE D ATED 15-01- 2010 FOR THE ASSESSMENT YEAR 2006-07. 2. FOLLOWING ARE THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL. 1. THE LD.CIT(A) ERRED IN CONFIRMING THE DENIAL OF DEDUCTION U/S 80IA OF RS.27,26,580/- BY APPLYING THE PROVISIONS O F SECTION 80IA(5). 2. THE LD.CIT(A) ERRED IN HOLDING THAT THE INITIAL ASSESSMENT YEAR FOR THE PURPOSES OF SECTION 80IA(20 R.W.S.80IA (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING T HE ELECTRICITY WITHOUT APPRECIATING THAT THE TERM INI TIAL ASSESSMENT YEAR FOR THE ABOVE PURPOSES WAS THE FIR ST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S 80IA(1 ). 3. THE LD.CIT(A) ERRED IN HOLDING THAT THE PAST LOS SES OF THE UNDERTAKING ENTITLED TO CLAIM DEDUCTION U/S 80IA WH ICH HAVE BEEN SET OFF IN THE EARLIER YEARS SHOULD HAVE BEEN SET OFF AGAINST THE PROFIT OF THE AID UNDERTAKING FOR THE C URRENT YEAR AND ONLY ON THE BALANCE INCOME, THE DEDUCTION U/S 8 0IA WAS TO BE ALLOWED TO THE ASSESSEE. 4. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE PROV ISIONS OF SECTION 80IA(5) WERE APPLICABLE ONLY FROM THE INITI AL ASST.YEAR I.E. THE ASST.YEAR IN WHICH DEDUCTION U/S 80IA WAS FIRST CLAIMED BY THE ASSESSEE AND ONLY FOR THE YEARS STARTING FRO M THE INITIAL ASST.YEAR AND THEREAFTER, THE PROVISIONS OF SEC.80I A(5) WERE APPLICABLE AND HENCE, IN THE PRESENT CASE, THERE WA S NO ITA NO. 471/PN/2010 (ASSESSMENT YEAR: 2006-07) M/S MALPANI SALES CORPORATION REASON TO SET OFF THE NOTIONAL BROUGHT FORWARD LOSSES/DEPRECIATION WHILE COMPUTING THE DEDUCTION U /S 80IA FOR THE PRESENT ASST.YEAR. 5. THE LD.CIT(A) ERRED IN HOLDING THAT THE APPELLAN T HAD CONCEDED THAT THE DECISION OF SPECIAL BENCH IN THE CASE OF GOLDMINE SHARES AND FINANCE PVT.LTD. (116 TTJ 705) HAD HELD THAT THE YEAR OF SETTING UP OF WINDMILL WAS TO BE C ONSIDERED AS THE INITIAL ASST.YEAR WITHOUT APPRECIATING THAT NO SUCH ADMISSION WAS MADE BY THE APPELLANT AND IN FACT, TH E APPELLANT HAD CLARIFIED THAT THE SAID DECISION OF S PECIAL BENCH WAS NOT APPLICABLE SINCE THE FACTS OF THAT CASE WER E DISTINGUISHABLE AND THE CASE OF THE ASSESSEE WAS CO VERED BY THE ITAT, CHENNAI DECISION IN THE CASE OF MOHAN BRE WERIES AND DISTILLERIES LTD. ( 114 TTJ 532). 3. AT THE VERY OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE MENTIONED THAT DENIAL OF DEDUCTION U/S 80IA HAS RES ULTED IN THE ADDITION OF RS.27,26,580/-. THE ASSESSING OFFICER DISALLOWED THE SAID CLAIM OF DEDUCTION BY THRUSTING THE INITIAL ASSESSMENT YEAR ON THE ASSESSEE IN CONTRAVENTION OF THE PROVISIONS OF ACT. IN THIS REGARD, HE HAS ARGUED THAT ASSESSEE HAS AN OPTION T O CHOOSE THE INITIAL ASSESSMENT YEAR AND SUCH AN OPTION CANNOT B E TAKEN AWAY BY THE REVENUE. IN THIS REGARD, HE RELIED ON A REPORT ED DECISION OF THIS BENCH IN THE CASE OF POONAWALLA ESTATE STUD AND AGR O FARM PVT.LTD. V. ACIT(2011) 136 TTJ (PUNE) 236 AND READ OUT PARAG RAPHS 13 TO 15 OF THE SAID ORDER, WHICH ARE REPRODUCED HEREUNDE R FOR THE SAKE OF COMPLETENESS OF THIS ORDER. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE FACTUAL MATRIX OF THE CASE AND ORDERS OF THE REVENUE AND TH E PAPER BOOK. WE HAVE ALSO EXAMINED THE LEGAL POSITION ON THE MATTER. BEFORE ADJUDICATING THE ISSUE IN QUESTION, IT IS NECESSARY TO EXAMINE THE SCOPE OF THE PROVISIONS RE LATING TO THE INITIAL ASSESSMENT YEAR. 80IA. DEDUCTIONS IN RESPECT OF PROFITS AND GAINS F ROM INDUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT, ETC (1) WHERE THE GRO SS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING OR A N ENTERPRISE REFERRED TO IN SUB-S.(4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS O F AN AMOUNT EQUAL TO HUNDRED PER CENT OF PROFITS AND GAI NS DERIVED FROM SUCH BUSINESS FOR THE FIRST FIVE ASSES SMENT YEARS COMMENCING AT ANY TIME DURING THE PERIODS AS SPECIFIED IN SUB-S.(2) AND THEREAFTER, TWENTY-FIVE PER CENT OF THE PROFITS AND GAINS FOR FURTHER FIVE ASSESSMENT Y EARS. ITA NO. 471/PN/2010 (ASSESSMENT YEAR: 2006-07) M/S MALPANI SALES CORPORATION PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, THE PROVISIONS OF THIS SUB-SECTION SHALL HAVE EFFECT AS IF FOR THE WORDS TWENTY-FIVE PER CENT; THE WORDS THIRTY PER CENT HAD BEEN SUBSTITUTED. (2) THE DEDUCTION SPECIFIED IN SUB-S.(1) MAY, AT TH E OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECU TIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FRO M THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR ST ARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRI BUTION OF POWER. PROVIDED THAT WHERE THE ASSESSEE BEGINS OPERATING A ND MAINTAINING ANY INFRASTRUCTURE FACILITY REFERRED TO IN CL.(B) OF EXPLANATION TO CL.(I) OF SUB-S.(4), THE PROVISIONS OF THIS SUB- SECTION SHALL HAVE EFFECT AS IF FOR THE WORDS FIFT EEN YEARS, THE WORDS TWENTY YEARS HAD BEEN SUBSTITUTED. 14. FROM THE ABOVE PROVISIONS OF SUB-S.(2) OF S.80 IA OF THE ACT, IT IS EVIDENT THAT THE ASSESSEE IS GRANTED THE OPTION TO SELECT INITIAL ASSESSMENT YEAR I.E. FIRST ASSESSM ENT YEAR OF THE ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEE N YEARS. STARTING ASSESSMENT YEAR FOR COUNTING THE DURATION OF FIFTEEN YEARS IS ALSO PROVIDED IN THE AID SUB-SECTION. AS PER THEE PROVISIONS, THE ASSESSEE IS NOT ALLOWED TO JUMP THE ASSESSMENT YEAR ONCE AN INITIAL ASSESSMENT YEAR IS OPTED. THEREFORE, WE FIND NO FAULT WITH THE ASSESSEE IN SE LECTING THE ASST.YEAR 2004-05 AS THE INITIAL ASSESSMENT YEAR. IN THIS REGARD, I.E. ON THE ISSUE OF ASSESSEES OPTION TO S ELECT THE INITIAL ASSESSMENT YEAR, WE HAVE PERUSED THE CITA TIONS RELIED UPON BY THE ASSESSEES COUNSEL. THE CONCLUSION BY THE TRIBUNAL MUMBAI BENCH DECISION IN ITA NO.4620/MUM/2 007 (ASST.YR.2004-05) IN THE CASE OF DCIT V. USHDEV INT ERNATIONAL LTD. IS STRAIGHT ON THIS ISSUE OF INITIAL ASSESSMEN T YEAR AND THE OPTION TO THE ASSESSEE AND THE HELD PORTION OF THE DECISION READS AS UNDER: IN VIEW OF THE ABOVE LEARNED CIT(A)S ORDER TO THE EXTENT OF HOLDING THAT INITIAL ASSESSMENT YEAR AND SUBSEQUENT SUCCEEDING ASSESSMENT YEARS CAN ONLY BE CONSIDERED FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IA. COMING TO THE FACTS OF THE CASE, HOWEVER, AS SEEN FROM THE SCHEDU LE OF DETAILS AVAILABLE IN THE LEARNED CIT(A)S ORDER THE ASSESSEE HAS INCURRED LOSSES IN THE ASST.YEARS 197-98 AND 19 98-99 ONLY. SUBSEQUENTLY IN ALL THE YEARS THERE WERE PRO FITS TILL ASST.YAR 204-05. IT IS NOT CLEAR WHETHER THE ASSES SEE HAS CLAIMED ANY DEDUCTION IN EARLIER YEARS UNDER SEC.80 IA. THIS BEING THE 8 TH YEAR OF STARTING THE PROJECT, ASSESSEE WOULD BE LEFT WITH ONLY ANTHER 7 YEARS OF CLAIM OUT OF THE 1 0 YEARS AVAILABLE TO THE ASSESSEE. CONSIDERING THIS WE ARE OF THE OPINION THAT THE INITIAL ASSESSMENT YEAR IS TO BE DETERMINED ON THE BASIS OF THE YEAR THE ASSESSEE CHOSE TO CLAI M THE DEDUCTION FOR THE FIRST TIME. 15. WHEN THE STATUTE HAVE GRANTED THE OPTION TO CHO OSE THE INITIAL ASSESSMENT YEAR AND WHEN THE ASSESSEE HAS S O CHOSEN THE CURRENT ASSESSMENT YEAR AS THE INITIAL ASSESSME NT YEAR ITA NO. 471/PN/2010 (ASSESSMENT YEAR: 2006-07) M/S MALPANI SALES CORPORATION AND WHEN THE ASSESSEE ACCORDINGLY PAID THE TAXES O THE PROFITS OF THE WINDMILL ACTIVITY IN THE EARLIER YEARS AS PE R THE STATUTE, THE ASSESSING OFFICERS DECISION TO THRUST THE INIT IAL ASSESSMENT YEAR ON THE ASSESSEE IS NOT IN TUNE WITH THE PROVIS IONS OF S.80IA(2) OF THE ACT. ACCORDINGLY, WE ARE OF THE O PINION, THE LD.CIT(A) ERRED IN HOLDING THAT THE INITIAL ASSESSM ENT YEAR FOR THE PURPOSES OF S.80IA(2) R.W.S.80IA(5) WAS THE YEA R IN WHICH THE ASSESSEE STARTED GENERATING THE ELECTRICITY. T HEREFORE, THE ORDER OF THE CIT(A) HAS TO BE REVERSED ON THIS ISSU E. IT IS CLEAR THAT THE INITIAL ASSESSMENT YEAR FOR THE AB OVE PURPOSES WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED TH E DEDUCTION U/S 80IA(1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF S.80IA(2) OF THE ACT. CONSEQUENTLY, THE ASSESSEE I S ENTITLED TO CLAIM THE DEDUCTION OF RS.25,44,326 U/S 80IA IN RES PECT OF THE PROFITS FROM THE WINDMILL ACTIVITY. ACCORDINGLY, T HE CLARIFICATORY GROUND RAISED IS ALLOWED. IN THE RESULT, ADJUDICAT ION OF THE GROUNDS 3 AND 4 RAISED IN THE APPEAL IS MERE ACADEM IC AND HENCE THEY ARE DISMISSED AS INFRUCTUOUS. 4. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THA T THE ORDER OF THE CIT(A) HAS TO BE REVERSED . IT IS ALSO TO BE NOTED THAT THE ABOVE RATIO IS UPHELD BY THE HIGH COURT OF CHENNAI IN THE CASE OF 231 ITR 368. ACCORDINGLY, THE APPEAL OF THE ASSESS EE IS ALLOWED . 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 26-8-2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 26-8-2011 COPY TO:- 1) ASSESSEE 2) ADDL.CIT, RANGE 3, PUNE 3) THE CIT (A) II, PUNE 4) THE CIT CONCERNED 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T.A.T., PUNE. ITA NO. 471/PN/2010 (ASSESSMENT YEAR: 2006-07) M/S MALPANI SALES CORPORATION BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., PUNE
