The ACIT, Circle-2, JAMNAGAR V. M/s. Ambica Recycling, JAMNAGAR

ITA 477/RJT/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1278 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80HHC; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BEN CH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S. S. GOD ARA, J.M.) ( , .. , ) ITA NO. 477/RJT/2014 (ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, JAMNAGAR VS. M/S. AMBICA RECYCLING, PLOT NO.621/622, GIDC, PHASE-II, DARED, JAMNAGAR PAN: AAJFA7019E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRASOON KABRA, D.R. RESPONDENT BY : SHRI VIMAL DESAI, C.A. DATE OF HEARING : 06 -04-2 016 DATE OF PRONOUNCEMENT : 26 -04-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A), JAMNAGAR, DATED 20.05.2014 FOR A.Y. 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. ASSESSEE IS A PARTNERSHIP FIRM REGISTERED AS 100 % EOU STATED TO BE ENGAGED IN THE BUSINESS OF EXPORT OF MANUFACTURED AND PROCE SSED FERROUS AND NON FERROUS METAL SCRAP. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 22.07.2010 DECLARING TOTAL INCOME OF RS.20,17,990/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER, ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED ITA NO 477/RJT/2014 A.Y. 2010-11 . ( ACIT V S. M/S. AMBICA RECYCLING) 2 01.03.2013 AND THE TOTAL INCOME WAS DETERMINED AT R S.67,62,040/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO VIDE ORDER DATED 20.05.2014 (IN APPEAL NO. CIT(A)/JAM/154/13-1 4/281) DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY ALLOWING THE DEDUCTION U/S 10B BEFORE SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . NOTICED THAT ASSESSEE AFTER CLAIMING EXEMPTION U/S.10B OF THE ACT HAD SET OFF BROUGHT FORWARD LOSSES AND DEPRECIATION. THE A.O. WAS OF THE VIEW THAT ASSESS EE SHOULD HAVE SET OFF THE CARRY FORWARD BUSINESS LOSSES AGAINST THE GROSS INCOME AN D ONLY THE RESULTANT BALANCE AMOUNT, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTIO N U/S.10B OF THE ACT. HE ACCORDINGLY REWORKED THE DEDUCTION U/S.10B OF THE A CT. 5. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE BY HOLDING AS UNDER: 6. I HAVE GONE THROUGH THE COPIES OF TWO DECISIONS (SUPRA) SUBMITTED BY THE AR OF THE APPELLANT ALONG WITH HIS SUBMISSIONS. THE RATIO LAI D DOWN IN BOTH THE DECISIONS CLEARLY SUPPORTS THE VIEW THAT DEDUCTION U/S.10B HAS TO BE ALLOWED BEFORE SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION I N SO MUCH AS TOTAL INCOME AS REFERRED TO IN SECTION 10B WOULD MEAN THE TOTAL INC OME OF THE UNDERTAKING AND NOT TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE LAW. THERE IS ABSOLUTE CLARITY IN THE SCHEME OF THE ACT IN ALLOWING DIFFERENT EXEMPTIONS AND DEDUCT IONS TO THE ASSESSEE. 6.1 THE RELIEF U/S. 10B INTENDED TO BE GIVEN BY THE LEGISLATURE HAS BEEN PRESCRIBED UNDER CHAPTER III OF THE ACT WHICH REFERS TO 'INCOMES WHI CH DO NOT FORM PART OF TOTAL INCOME'. HENCE, THE INCOME WHICH IS ELIGIBLE FOR EXEMPTION U /S. 10B, BY ITS VERY NATURE AS ENVISAGED IN CHAPTER III OF THE ACT, WOULD NOT ENTE R INTO THE COMPUTATION OF INCOME AT ALL AND IT HAS TO BE DEDUCTED AT SOURCE OR THRESHOLD LE VEL ITSELF. THE EFFECT OF PROVISIONS OF CHAPTER IV WHICH DEALS WITH 'COMPUTATION OF TOTAL I NCOME' & CHAPTER VI WHICH DEALS WITH 'AGGREGATION OF INCOME AND SET OFF OR CARY FOR WARD OF LOSS' (WHICH INTER ALIA PROVIDES FOR SET OFF OF BROUGHT FORWARD BUSINESS LO SS OR UNABSORBED DEPRECIATION) HAS TO BE GIVEN THEREAFTER. IT IS ALSO PERTINENT TO NOTE T HAT THERE ARE CERTAIN PROVISIONS LIKE ITA NO 477/RJT/2014 A.Y. 2010-11 . ( ACIT V S. M/S. AMBICA RECYCLING) 3 SECTION 80A, 80IA, 80HHC ALLOWING DEDUCTION FROM TH E COMPUTATION OF INCOME HAVE BEEN PLACED IN CHAPTER VI-A WHICH ARE GIVEN EFFECT OUT O F GROSS TOTAL INCOME AFTER CONSIDERING THE PROVISIONS OF CHAPTER III AND IV OF THE ACT. THIS ALSO CLEARLY DEMONSTRATES THE INTENTIONAL REQUIREMENT OF THE LAW TO EXCLUDE CERTAIN INCOME (HAVING PRESCRIBED UNDER CHAPTER III) AT THE THRESHOLD STAG E ITSELF BEFORE ANY ADJUSTMENT OF LOSS (HAVING PRESCRIBED UNDER CHAPTER IV & VI) VIS-A-VIS TO ALLOW CERTAIN DEDUCTIONS (HAVING PRESCRIBED UNDER CHAPTER VI-A) OUT OF GROSS TOTAL I NCOME WHICH SHALL BE ARRIVED AT AFTER 'CONSIDERING THE PROVISIONS OF CHAPTER III & IV OF THE ACT. HAD THE EXEMPTION U/S.10B BEEN INTENDED TO BE ALLOWED FROM SUCH TOTAL INCOME WHICH IS ARRIVED AT AFTER SET OFF OF LOSSES IN TERMS OF PROVISIONS OF CHAPTER IV &. VI, THE LEGISLATURE WOULD HAVE PLACED THE PROVISIONS RELATING TO SECTION 10B IN CHAPTER VI-A AND N CHAPTER III. 6.2 THEREFORE, THE INCOME ELIGIBLE FOR EXEMPTION U/ S. 10B IS NOT TO BE INCLUDED IN THE INCOME OF THE ASSESSEE AT ALL, THE QUESTION OF SETT ING OFF THE LOSSES (BUSINESS LOSS OR UNABSORBED DEPRECIATION) AGAINST SUCH EXEMPTED INCO ME WOULD NOT ARISE. THIS VIEW HAS BEEN FULLY ENDORSED BY THE HON'BLE HIGH COURT OF KA RNATAKA IN CASE OF CIT VS. YOKOGAMA INDIA LTD. &. ORS. (341 ITR 385) & HON'BLE ITAT MUM BAI BENCH IN CASE OF VALUEPROCESS TECHNOLOGIES (I) P. LTD. VS. ITO - 141 ITD 447, WHI CH ARE DIRECTED TO BE CONSIDERED BY THE HON'BLE IT AT, RAJKOT. THE LD. AR OF THE APPELL ANT HAS FURTHER RELIED UPON DECISION OF HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. GANESH POLYCHEM LTD. (35 TAXMANN.COM 446) AND ITAT, CHENNAI A BENCH IN CASE OF ACIT VS . CHARON TEC (P) LTD. WHICH ALSO SUPPORTS THE AFORESAID VIEW. 6.3 IN VIEW OF ABOVE DISCUSSION & LEGAL POSITION AN D IN MY CONSIDERED VIEW, IT IS ONLY AFTER ALLOWING EXEMPTION U/S.10B, THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED IN ACCORDANCE WITH CHAPTER IV AND ONWARDS. ACCORDINGLY , THE APPELLANT IS ELIGIBLE TO CLAIM EXEMPTION U/S. 10B FIRST WITHOUT DEDUCTING BUSINESS LOSS AND UNABSORBED DEPRECIATION AND THEREAFTER TO GIVE EFFECT OF BROUGHT FORWARD BUSINE SS LOSS AND UNABSORBED DEPRECIATION AGAINST INCOME REMAINS, IF ANY. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. AND FURTHER SUBMITTED THAT REVENUE HAS PREFERRED APPEAL BEFORE THE HONBLE GUJ ARAT HIGH COURT IN THE CASE OF CIT VS. VIRAT INDUSTRIES PVT. LTD. IN TAX APPEAL NO .1754 OF 2009 AND THE HONBLE HIGH COURT HAS ADMITTED THE APPEAL. LD. A.R. ON TH E OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O. AND LD. CIT(A) AND SUP PORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. ITA NO 477/RJT/2014 A.Y. 2010-11 . ( ACIT V S. M/S. AMBICA RECYCLING) 4 THE ISSUE IN THE PRESENT CASE IS WHETHER THE BROUGH T FORWARD BUSINESS LOSS OR UNABSORBED DEPRECIATION IS TO BE SET OFF AGAINST GR OSS TOTAL INCOME BEFORE THE DEDUCTION U/S.10B OF THE ACT OR IT HAS TO BE SET OF F FROM THE RESULTANT POFITS AFER THE CLAIM OF DEDUCTION U/S.10B OF THE ACT. WE FIND TH AT LD. CIT(A), AFTER RELYING ON THE DECISION RENDERED IN CASE OF CIT VS. YOKOGAMA I NDIA LTD. &. ORS. (341 ITR 385) & HON'BLE ITAT MUMBAI BENCH IN CASE OF VALUEPR OCESS TECHNOLOGIES (I) P. LTD. VS. ITO - 141 ITD 447 HAS HELD THAT ASSESSEE I S ELIGIBLE FOR CLAIMING EXEMPTION U/S.10B OF THE ACT FIRST WITHOUT DEDUCTING BUSINESS LOSS AND UNABSORBE D DEPRECIATION AND THEREAFTER THE EFFECT OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION HAS TO BE GIVEN AGAINST INC OME THAT REMAINS, IF ANY. BEFORE US, REVENUE HAS NOT PLACED ANY CONTRARY BIND ING DECISION IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE O RDER OF LD. CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 26/04/2016 SD/- SD/- (S. S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED. 26/04/2016 S K SINHA COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) JAMNAGAR 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER //TRUE COPY// DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT ITA NO 477/RJT/2014 A.Y. 2010-11 . ( ACIT V S. M/S. AMBICA RECYCLING) 5 1.DATE OF DICTATION 07.04.2016 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E OTHER MEMBER 12-04-2016 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER