DCIT 10(2)(1), MUMBAI V. JAYANT AGRO ORGANICS LTD, MUMBAI

ITA 4836/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0243 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: NIKUNJ GADA
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -JBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./4836/MUM/2015, /ASSESSMENT YEAR: 2012-13 ACIT-10(2)(1) ROOM NO.216-A, AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. JAYANT AGRO ORGANICS LTD. 701, TOWER A, PENINSULA BUSINESS PARK, SENAPATI BAPAT MARG, LOWER PAREL (W) MUMBAI-400 013. PAN:AAACJ 7581 Q ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: MS. ARJU GARODIA ASSESSEE BY: SHRI NIKUNJ GADA / DATE OF HEARING: 24.05.2017 / DATE OF PRONOUNCEMENT: 18.08.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 03.06.2015,OF THE CIT(A )-17, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSI NESS OF MANUFACTURE AND EXPORT OF CASTOR OIL AND ITS DERIVATIVES,FILED ITS RETURN OF INCOME 29/09/2012,DECLARING INCOME AT RS. 10.77 CRORES.THE ASSESSMENT WAS COMPLETED U/S. 143( 3) OF THE ACT ON 08/05/2014 AT RS.12.15 CRORES. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT ALLOWING THE DEDUCTION OF RS. 1.30 CORRODES UNDER SECTION 80 IA OF THE ACT,WHERE AS THE SECOND EFFECT IVE GROUNDS DEALS WITH ADJUSTMENT OF NOTIONAL BROUGHT FORWARD LOSSES AND UNABSORBED DEPR ECIATION. 2.1. IT WAS BROUGHT OVER NOTICE THAT IDENTICAL ISSUES WE RE DECIDED BY THE TRIBUNAL AGAINST THE AO VIDE ITS ORDER,DATED 30/03/2016(ITA/5621/MUM/201 4-AY.2011-12).WE WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER AND IT READS AS UNDER: 8.SO FAR AS THE SECOND ISSUE IS CONCERNED, THE FAC TS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) OBSERVED THAT THE ASSESSEE HAS BEEN PERMITTED BY THE GUJARAT ENERGY DEVELOPMENT AGENCY TO SET UP A WIND FARM OF CAPACITY 1.6 MW (2 NO. WTG OF 800 KW= 1.6 MW) AT VILLAGE NAVADRA OF TALUKA KALYANPUR, IN DISTRICT OF JAMNAGAR, GUJARAT. ASSESSEE ACQUIRED TWO WINDMILLS IN THE FY 2005-06 FROM M/S. ENERCON INDIA LTD. FOR A SUM OF RS.7.4 CRORES AND ENTERED I NTO AN AGREEMENT WITH GUJARAT ENERGY TRANSMISSION CORPORATION LTD. ON 21.04.2006 FOR SAL E OF POWER. DURING THE FY RELEVANT TO AY 2010-11, THE ASSESSEE GENERATED INCOME OF RS.1,3 3,71,946/- AND AFTER DEDUCTING EXPENSES UNDER VARIOUS HEADS AND DEPRECIATION, PROFIT HAD BE EN ARRIVED AT RS.1,11,14,473/-. THIS PROFIT DERIVED FROM WIND MILL UNIT HAD BEEN CLAIMED EXEMPT U/S. 80IA(4)(IV)(A) BEING 100% OF ITS PROFIT DERIVED FROM THE WIND MILL PROJECT. THE AO N OTED THAT THOUGH THE PROJECT WAS STARTED IN AY 2006-07, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IA(4)(IV)(A) FOR THE FIRST TIME IN AY 4836/M/15 JAYANT AGRO 2 2009-10 AND THE YEAR UNDER CONSIDERATION WAS THE SE COND YEAR OF SUCH CLAIM OF DEDUCTION U/S. 80IA(4)(IV)(A) OF THE ACT. THE AO OBSERVED THAT AS PER THE PROVISION OF SECTION 80IA(5), WHILE QUANTIFYING THE AMOUNT OF DEDUCTION UNDER SECTION 8 0IA, IT HAS TO BE PRESUMED THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME AND HENCE THE LOSSES INCURRED IN EARLIER YEAR HAS TO BE FIRST SET OFF WITH THE PROFITS OF ELIGIBL E BUSINESS AND BALANCE PROFIT, IF ANY IS ONLY ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. HE ALSO FURTHER OBSERVED THAT SINCE THE ASSESSEE HAD INCURRED HUGE LOSSES IN EARLIER YEAR, IF THE SA ME ARE SET-OFF FROM THE INCOME OF THE WINDMILL OF THIS YEAR, DEDUCTION UNDER SECTION 80IA WOULD NOT BE AVAILABLE. HE FURTHER OBSERVED THAT AS PER THE PROVISIONS OF SECTION 80IA (5), A TAXPAYER HAS THE OPTION TO CLAIM DEDUCTION FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS AND ALSO SUCH PROVISIONS MANDATE THAT THE ELIGIBLE BUSINESS SHOUL D BE FICTIONALLY TREATED AS THE ONLY SOURCE OF INCOME OF THE TAXPAYER. THE AO HELD THAT THEREFO RE LOSSES INCURRED IN EARLIER YEAR HAVE TO BE FIRST SET OFF AND BALANCE PROFIT, IF ANY IS ONLY ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. HE FURTHER HELD THAT THE PROFIT FROM THE ELIGIBLE BUSI NESS FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDUCTION UNDER SECTION 80IA OF THE ACT HAS TO BE COMPUTED AFTER DEDUCTION OF NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATIONS O F ELIGIBLE UNITS, EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN EARLIE R YEARS. HE OBSERVED THAT IT IS THE MANDATE OF LAW THAT LOSSES OF EARLIER YEARS THOUGH ALREADY ADJUSTED AGAINST INCOME FROM OTHER SOURCES, THE SAME ARE ONCE AGAIN TO BE NOTIONALLY BROUGHT FO RWARD AND SET OFF AGAINST PROFITS OF THE ELIGIBLE UNIT TO COMPUTE ELIGIBLE DEDUCTION. 9.THE LD. CIT(A) HOWEVER ALLOWED THE CLAIM OF THE A SSESSEE. THE REVENUE IS THUS IN APPEAL BEFORE US. 10.AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE SUBM ITTED THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF THE PROFITS OUT O F THE GENERATION OF ELECTRICITY OUT OF WINDMILL ACTIVITY AND THE UNABSORBED DEPRECIATION AND LOSSES OF THE EARLIER YEARS TO THE INITIAL YEAR IN WHICH THE ASSESSEE STARTED TO CLAIM THE BENEFIT UND ER SECTION 80IA, SINCE ALREADY SET OFF WITH THE INELIGIBLE PROFITS OF THE ASSESSEE FROM OTHER B USINESS, COULD NOT BE REDUCED FROM PROFITS OF ELIGIBLE BUSINESS FOR COMPUTING DEDUCTION U/S 80IA OF THE ACT. THE LD. A.R. OF THE ASSESSEE HAS FURTHER STATED THAT THIS ISSUE IS SQUARELY IN FAVOU R OF THE ASSESSEE BY A SERIES OF DECISIONS AS MENTIONED BELOW: (A) VELAYUDHASWAMY SPINNING MILLS PVT. LTD. VS. ACIT (2010) 231 CTR (MAD) :[2012] 340 ITR 477 (MAD) (HIGH COURT) (AFTER CONSIDERING SPECIAL BENCH DECISION). (B) CIT VS. EMRALD JEWEL INDUSTRY P. LTD. [2011] 53 DTR 263 (MAD) (HIGH COURT) (AFTER CONSIDERING THE ABOVE DECISION) (C)M/S PRASHANT CAT ERERS VS.ITO ITA NO. 4226/M/2011 DECIDED ON 6.02.2013 (MUMBAI TRIBUNAL) 11.FURTHER, THE LD AR HAS MENTIONED THAT IN THE DEC ISIONS OF HON'BLE MADRAS HIGH COURT, THE SPECIAL BENCH DECISION IN THE CASE OF ACIT VS. GOL D MINE SHARES AND FINANCE (P) LTD. 113 ITD 209 (SB), HAS ALSO BEEN CONSIDERED. THE LD. DR ON THE OTHER HAND HAS RELIED UPON THE FINDINGS OF THE AO ON THIS ISSUE. 12.WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE FIN D THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010) 231 CTR (MAD) 368 (BCAJ) HAS HELD THAT THE ASSESSEE IS ENTITLED TO CL AIM DEDUCTION U/S 80IA FOR 10 CONSECUTIVE YEARS OUT OF 15 YEARS AND THAT INITIAL YEAR OF BENE FIT CAN BE OPTED BY THE ASSESSEE. LOSSES AND DEPRECIATION OF THE YEARS EARLIER TO THE INITIAL AS SESSMENT YEAR WHICH HAVE ALREADY BEEN ABSORBED AGAINST PROFITS OF OTHER BUSINESSES CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS FOR CO MPUTING THE DEDUCTION U/S.80IA. SIMILAR VIEW HAS BEEN TAKEN IN THE DECISION OF HON'BLE MADRAS HI GH COURT IN THE CASE OF CIT VS. EMERALD JEWEL INDUSTRY P. LTD. (SUPRA) AND BY THE MUMBAI T RIBUNAL IN THE CASE OF M/S PRASHANT CATERERS VS. ITO (SUPRA). RESPECTFULLY FOLLOWING T HE SAME, THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. THE AO IS DIRECTED TO AL LOW THE CLAIM OF DEDUCTION IN THE LIGHT OF THE ABOVE STATED DECISIONS. 13. IN VIEW OF THE ABOVE, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 2.2. WE FIND THAT THE TRIBUNAL HAS DISCUSSED THE IS SUE IN PARA-8 OF THE ORDER DATED 24/02/2016 AND FOLLOWING VARIOUS DECISIONS INCLUDING FROM HON BLE MADRAS HIGH COURT, WHEREIN, THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ACIT V S GOLDMINE SHARES AND FINANCE PVT. LTD. 4836/M/15 JAYANT AGRO 3 (113 ITD 209)(SB) WAS ALSO CONSIDERED. THE TRIBUNAL ALSO CONSIDERED ANOTHER DECISION IN M/S PRASHAN CATERERS VS ITO (ITA NO.4226/MUM/2011) ORDER DATED 06/02/2013 AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE,DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIMED DEDUCTION U/S 80IA OF THE ACT. FOLLOWING THE AFORES AID DECISION AND IN THE ABSENCE OF ANY CONTRARY DECISION/FACTS, BY THE REVENUE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. CIT(A). THUS, THE APPEAL OF THE REVENUE IS DISM ISSED. 3. RESPECTFULLY,FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL WE DECIDE BOTH THE ISSUES AGAINST THE AO AND CONFIRM THE ORDER OF THE FIRST APPELLATE AUTHORITY(FAA). AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT O N 18 TH, AUGUST, 2017. , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 18 .08 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.