ACIT, CHENNAI V. M/s. Tamil Nadu Newsprints and Papers Limited, CHENNAI

ITA 553/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4871 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. ITA NO.552/MDS./2011 ASSESSMEN T YEAR:2003-04 ITA NO.553/MDS./2011 ASSESSMEN T YEAR:2004-05 THE ASSISTANT COMMISSIONER OF INCOME TAX, 121, MAHATMA GANDHI ROAD, CHENNAI 600 034. VS. M/S.TAMIL NADU NEWSPRINTS AND PAPERS LTD., 87,ANNA SALAI, CHENNAI 600 032. PAN AAACT 2935 J (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI K E B RENGARAJAN ASSESSEE BY : SHRI SAROJ KUMAR PARIDA O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER : IN THESE TWO APPEALS FILED BY THE REVENUE, ITS G RIEVANCE IS THAT THE COMMISSIONER OF INCOME TAX(A) HELD THE ASSESSEE TO BE ELIGIBLE FOR DEDUCTION U/S.80-IA OF THE INCOM E TAX ACT, 1961 (IN SHORT THE ACT ) WITHOUT SETTING OFF LOSS ES ON NOTIONAL BASIS. AS PER THE REVENUE, THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHA SWAMY SPINNING MILLS LTD. VS. ACIT REPORTED IN 251 CTR 36 8 HAD NOT BECOME FINAL. PAGE OF 7 ITA.552/553 /MDS/11 2 2. SHORT FACTS, APROPOS ARE THAT ASSESSING OFFICER FOR THE TWO YEARS CONCERNED HAD REWORKED ASSESSEES CLAIM F OR DEDUCTION U/S.80-IA OF THE ACT BY SETTING OFF THE N OTIONAL LOSSES PRIOR TO THE INITIAL YEAR OF ITS CLAIM FOR D EDUCTION OF PROFITS ON ITS WIND MILLS FARM AT DEVARKULAM, PERU NGUDI AND FROM T.G.3 & T.G.4 UNITS. ASSESSEE HAD CONTENDED THAT DEDUCTION U/S.80-IA WAS AVAILABLE TO IT AT ITS OPTI ON FROM THE INITIAL ASSESSMENT YEAR, SINCE IT COULD CLAIM SUCH DEDUCTION IN ANY TEN YEARS OUT OF FIFTEEN ASSESSMENT YEARS. AS PER THE ASSESSEE, UNABSORBED DEPRECIATION AND LOSSES OF THE ELIGIBLE BUSINESS, WHICH HAD BEEN FULLY SET OFF AGAINST NON- ELIGIBLE BUSINESS IN THE EARLIER YEARS COULD NOT BE NOTIONAL LY BROUGHT FORWARD FOR THE PURPOSE OF COMPUTING THE RELIEF U/S .80-IA OF THE ACT. ASSESSING OFFICER WAS NOT HOWEVER, NOT AP PRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM SUCH NOTIONAL DEPRECIATION AND BUSINESS LOSS HAD TO BE SET OFF AG AINST THE PROFITS OF THE UNITS ON WHICH DEDUCTION U/S.80-IA W AS BEING CLAIMED, BEFORE SUCH DEDUCTION WAS WORKED OUT. 3. HOWEVER, THE LD. COMMISSIONER OF INCOME TAX(A) ON ASSESSEES APPEAL HELD IN ITS FAVOUR RELYING ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS LTD.(SUPRA). 4. BEFORE US, LD. DR STRONGLY ASSAILING THE ORDER OF THE COMMISSIONER OF INCOME TAX(A) SUBMITTED THAT A CO-O RDIANTE BENCH OF TRIBUNAL DECISION IN THE CASE OF PRASAD PR ODUCTION PVT LTD. VS. ITO 98 ITD 212 HAD HELD IN ITS FAVOU R. PER CONTRA PAGE OF 7 ITA.552/553 /MDS/11 3 LD. AR SUPPORTED THE ORDERS OF THE COMMISSIONER OF INCOME TAX(A). 5. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND HEARD THE RIVAL CONTENTIONS. HONBLE JURISDICTIONA HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS LTD.(SUPR A) HAS CLEARLY HELD THAT DEPRECIATION OF ELIGIBLE UNIT, WH ICH HAS BEEN SET OFF AGAINST OTHER INCOME IN YEARS PRIOR TO THE INITIAL ASSESSMENT YEARS OF THE CLAIM COULD NOT BE NOTIONA LLY CARRIED FORWARD AND SET OFF AGAINST INCOME OF ELIGIBLE UNIT IN THE INITIAL ASSESSMENT YEAR BEFORE ALLOWING DEDUCTION U/S.80-IA OF THE ACT. HONBLE JURISDICTIONAL HIGH COURT, IN THE ABOV E CASE HELD AT PARA-13 OF ITS ORDER AS UNDER:- 13. SEC.80-IA READS AS FOLLOWS: 33 [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER RE FERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJ ECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.] (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMEN T YEARS OUT OF FIFTEEN YEARS BEGINNING FROM 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 34 [OR DEVELOPS 35 [***] A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE ( III ) OF SUB-SECTION (4)] OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OF POWER 36 [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXI STING TRANSMISSION OR DISTRIBUTION LINES ): (4) THIS SECTION APPLIES TO ( I ) ANY ENTERPRISE CARRYING ON THE BUSINESS 47 [OF ( I ) DEVELOPING OR ( II ) OPERATING AND MAINTAINING OR ( III ) DEVELOPING, OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE F OLLOWING CONDITIONS, NAMELY : ( A ) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR B Y A CONSORTIUM OF SUCH COMPANIES 48 [OR BY AN AUTHORITY OR A BOARD OR A CORPORA-TION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] PAGE OF 7 ITA.552/553 /MDS/11 4 49 [( B ) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR ( I ) DEVELOPING OR ( II ) OPERATING AND MAINTAINING OR ( III ) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRAST RUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: 5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB -SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF S UCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. FROM READING OF SUB-S (1), IT IS CLEAR THAT IT PROV IDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE FROM ANY BUSINE SS REFERRED TO IN SUB-S(4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PERCENT OF THE PROFITS AND G AINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-S (4). SUBS- S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 C ONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BEGETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE Y EAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS T O OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-S(5) DEALS WITH Q UANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESS MENT YEAR ARE USED IN SUB-S(5) AND THE SAME IS NOT DEFINED UNDER THE PROV ISIONS. IT IS TO NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB-S(5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YEAR REFERRED TO IN SUB- S(2) IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S(5) AND THEY ARE AS UNDER:- (1) IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEAN S IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO B E IGNORED. (2)N IT IS FOR THE PURPOSE OF DETERMINING THE QUAN TUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INTIAL ASSESSMENT YEAR; (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS T HE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIA L ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. PAGE OF 7 ITA.552/553 /MDS/11 5 FROM READING THE ABOVE, IT IS CLEAR THAT THE ELIGIB LE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELE VANT TO INITIAL ASSESSMENT YEAR ANDEVERY SUBSEQUENT ASSESSMENT YEAR S. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONEARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN Y EARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLI ER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS, ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CAN N OT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-SECTION DOES NOT CONTEMPLATE TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CAN NOT B E EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. WE ARE THEREFORE, OF THE OPINION THAT CIT(A) WAS JU STIFIED IN DIRECTING THE ASSESSING OFFICER TO REWORK THE DEDU CTION CLAIMED BY THE ASSESSEE U/S.80-IA OF THE ACT WITHOU T SETTING OFF LOSSES ON NOTIONAL BASIS. 5. IN RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 21 ST JUNE, 2011. ( GEORGE MATHAN ) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST JUNE, 2011. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE PAGE OF 7 ITA.552/553 /MDS/11 6 PAGE OF 7 ITA.552/553 /MDS/11 7 DATE INITIALS 1. DRAFT DICTATED ON 21.06.20 11 2. DRAFT PLACED BEFORE AUTHORITY 21.06.2011 3. DRAFT PLACED BEFORE THE 22.06.2011 SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S. 6. KEEP FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE 9. DATE OF DISPATCH OF ORDER