ACIT, CHENNAI V. MSK Construction Pvt Ltd., CHENNAI

ITA 526/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9313 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 07-03-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.526/MDS./2016 / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-4(1), CHENNAI. VS. M/S.MSK CONSTRUCTION PVT. LTD ., A-2,75, UMA SHANTHI RESIDENCY, HABIBULLAH ROAD, T.NAGAR, CHENNAI 600 017. [PAN AAACM 2608 R ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.P.RADHAKRISHNAN, JCIT D.R /RESPONDENT BY : MR.A.S.SRIRAMAN,ADVOCATE / DATE OF HEARING : 10 - 05 - 201 6 !' / DATE OF PRONOUNCEMENT : 12 - 05 - 2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-8, CHE NNAI DATED 11.12.2015 PERTAINING TO THE ASSESSMENT YEAR 2010- 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1 . THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LA W AND FACTS OF THE CASE. ITA NO.526/MDS./2016 :- 2 -: 2.1. THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF CLAIM ON DEDUCTION U/S.801A OF RS.39,62,582/-. 2.2. THE CIT(A) FAILED TO APPRECIATE THAT THE INITI AL ASSESSMENT YEAR PURPOSE OF SEC.801A(5) WOULD BE YEAR IN WHICH THE ASSESSEE SET UP THE WIND MILLS. 2.3. THE CIT(A) HAS ERRED IN HOLDING THAT THE LOSSE S PRIOR TO ASSESSMENT YEAR 2008-09 WOULD NOT ENTER INTO THE COMPUTATION OF ELIGIBLE PROFITS. 2.4. THE CIT(A) OUGHT TO HAVE SEEN THAT AFTER SET O FF OF UNABSORBED DEPRECIATION AND BUSINESS LOSSES OF EARL IER YEARS, THERE WOULD BE NO PROFITS ON WHICH THE ASSESSEE MAY BE ENTITLED TO CLAIM DEDUCTION U/S.801A. 2.5. IT IS SUBMITTED THAT THE CIT(A)S RELIED UPON ORDER OF HONBLE HIGH COURT IN THE CASE OF M/S.VELAYUDHASAMY SPINNING MILLS P. LTD.( 231 CTR 368) HAS NOT BECOME FINAL AND AGAINST WHICH DEPARTMENT HAS FILED SLP BEFORE T HE HONBLE SUPREME COURT. 3. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VEL AYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT 340 ITR 477, WHEREI N IT WAS HELD THAT:- FROM READING OF SUB-S (1) OF S. 80IA, IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-S (4) I.E. REF ERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE W ITH AND SUBJECT TO THE PROVISIONS OF THE SECTIONS, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAI NS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT Y EARS. ITA NO.526/MDS./2016 :- 3 -: DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAM E IS DEFINED IN SUB-S. (4). SUB-S(2) PROVIDES OPTION TO THE ASS ESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YE ARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED , THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS O UTER LIMIT AND THE SAME IS BEGINNING FROM THE YEARS IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS T O OPERATE ANY INFRASTRUCTURE ACTIVITY ETC SUB-S. (5) DEALS WI TH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-S (5) AND THE SAM E IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED TH AT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB-S (5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YEAR REFERRED TO IN SU B-S(2). IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S(5) AND T HEY ARE AS UNDER: (1)IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER P ROVISIONS ARE TO BE IGNORED; (2) IT IS FOR THE PURPOSE OF DETERMI NING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR ; (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELI GIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DUR ING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM READING OF THE AB OVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOUR CE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITI AL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEA RS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LO SSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF EARLIER YEARS WHI CH WERE ITA NO.526/MDS./2016 :- 4 -: ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL A SSESSMENT CONTEMPLATED. IT DOES NOT ALL THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NATIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINS T THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOM E OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMO UNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-S(5) D OES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. F ICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME C ANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED . THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WER E ALREADY SET OFF AND ADJUSTED AGAINST THE PROFITS OF THE EAR LIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE E XERCISED THE OPTION UNDER S.80-IA(2). IN TAX CASE NO.918 OF 2008 THE ASSESSMENT YEAR WAS 2004-05. DURING THE RELEVANT P ERIOD, THERE WERE NO UNABSORBED DEPRECIATION OR LOSS OF TH E ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING T HE RELEVANT YEAR. THEREFORE, LOSS IN THE YEAR EARLIER TO INITI AL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER B USINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AG AINST THE PROFIT OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN S. 80-IA(5) CIT VS. TTK PHARMA LTD (TAX CASE ( APPEAL ) NO.298 OF 2004, DT. 23RD DEC., 2009) FOLLOWED; CIT VS. MEWAR OIL & GENERAL MILLS LTD (2004) 186 CTR (RAJ) 141; ( 2004) 271 ITR 311 (RAJ) CONCURRED WITH; MOHAN BREWERIES & DIS TILLERIES ITA NO.526/MDS./2016 :- 5 -: LTD VS. ASST. CIT (2008) 114 TTJ (CHENNAI) 532: (20 08) 3 DTR (CHENNAI) (TRIB) 477 AFFIRMED. 4. ACCORDINGLY, WE ARE OF THE OPINION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED IN DECIDING THE I SSUE IN FAVOUR OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MAY, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 12 TH MAY, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 4. ( , / CIT 2. / RESPONDENT 5. *-. (/ / DR 3. ( ,(0 1 / CIT(A) 6. .2(3 / GF