ACIT, CHENNAI V. M/s. MSK Constructions P Ltd., CHENNAI

ITA 563/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4846 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: A SRIRAMAN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. ITA NO.563/MDS./11 ASSESSMENT YEAR:2007-08 ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(3), AAYAKAR BHAVAN, MAIN BUILDING, IV FLOOR, 121 M.G.ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S.MSK CONSTRUCTIONS P LTD., A-2,UMA SHANTHI RESIDENCY, HABIBULLAH ROAD, T.NAGAR, CHENNAI 600 017. PAN AAACM 2608 R (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI P.B.SEKARAN ASSESSEE BY : SHRI A.SRIRAMAN O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEV ANCE IS THAT COMMISSIONER OF INCOME TAX(A) ALLOWED DEDUCTION TO THE ASSESSEE U/S.80-IA OF THE ACT, THOUGH THE ASSESSING OFFICER HAD DENIED IT FOR A REASON THAT AFTER SETTING OFF U NABSORBED DEPRECIATION AND BUSINESS LOSSES CARRIED FORWARD FR OM EARLIER YEARS, THERE WOULD BE NO PROFITS ON WHICH SUCH DEDU CTION COULD BE CLAIMED. PAGE 2 OF 6 ITA. 563/MDS/11 M/S.MSK CONSTRUCTIONS P LTD. 2. REVENUE IS ALSO AGGRIEVED THAT COMMISSIONER OF INCOME TAX(A) ERRED IN HOLDING ASSESSMENT YEAR 2007-08 TO BE THE INITIAL ASSESSMENT YEAR FOR CLAIMING DEDUCTION. 3. ASSESSEE HAD PUT UP WIND MILL FOR POWER GENERAT ION IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1996- 97. HOWEVER, ASSESSEE OPTED FOR CLAIMING DEDUCTION U/S. 80-IA FOR THE FIRST TIME IN ASSESSMENT YEAR 2007-08 I.E. IM PUGNED ASSESSMENT YEAR. ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR TWO REASONS. FIRST WAS THAT ASSESS EE COULD NOT OPT FOR AN INITIAL ASSESSMENT YEAR OTHER THAN T HE FIRST YEAR OF ITS WORKING. SECOND WAS THAT ASSESSING OFFICER E NFORCED SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPREC IATION OF EARLIER YEARS, EVEN THOUGH THEY WERE SET OFF AGAINS T PROFITS OF SUCH EARLIER YEARS FOR NON-ELIGIBLE UNIT. 4. ASSESSEE WAS SUCCESSFUL IN ITS APPEAL BEFORE T HE COMMISSIONER OF INCOME TAX(A), WHO RELYING ON THE D ECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT 231 CTR 368 HELD THAT THE CLAIM OF ASSESSEE WAS TO BE ALLOW ED. 5. NOW BEFORE US, LD. DR SUBMITTED THAT THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT HAS BEEN ASSAILED BY REVENUE THROUGH AN SLP FILE BEFORE HONBLE APEX CO URT. 6. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AND HEARD RIVAL CONTENTIONS. HONBLE JURISDICTIONAL HI GH COURT IN THE PAGE 3 OF 6 ITA. 563/MDS/11 M/S.MSK CONSTRUCTIONS P LTD. CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) HELD 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 E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSIN ESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQ UAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUS INESS 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 ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHI CH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY I NFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVEL OPS 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 TR ANSMISSION OR DISTRIBUTION OF POWER 36 [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSMISSION OR DISTR IBUTION 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 FOLLOWING 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 ESTABLISH ED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] 49 [( B ) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR ( I ) DEVELOPING OR ( II ) OPERATING AND MAINTAINING OR ( III ) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE 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 BUSI NESS 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 INIT IAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR REL EVANT TO THE PAGE 4 OF 6 ITA. 563/MDS/11 M/S.MSK CONSTRUCTIONS P LTD. INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASS ESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WH ICH 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 PROFITS AND GAINS DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE F ROM ANY BUSINESS REFERRED TO IN SUB-S(4) I.E. REFERRED TO A S THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJE CT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQ UAL TO 100 PERCENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIV EN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-S (4). SUBS-S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSEC UTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BEGE TTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINN ING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEV ELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-S(5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-S(5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO NOTED TH AT 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 BE 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. FROM READING THE ABOVE, IT IS CLEAR THAT THE ELIGIB LE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR ANDEVERY SUBSEQUENT ASSE SSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONEARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS W HICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL A SSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOO K BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD PAGE 5 OF 6 ITA. 563/MDS/11 M/S.MSK CONSTRUCTIONS P LTD. NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINS T OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS, ONCE THE SET OFF I S TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESS EE, THE REVENUE CAN NOT 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 CRE ATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CAN NOT BE EXTENDED BE YOND THE PURPOSE FOR WHICH IT IS CREATED. NOTHING WAS SHOWN BY THE LD. DR TO WARRANT A VIEW T HAT THE ABOVE DECISION HAS BEEN OVER RULED BY ANY HIGHER AU THORITIES. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY MERI T IN THE APPEAL FILED BY THE REVENUE. 7. IN RESULT, APPEAL OF REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE TIME OF HEAR ING ON 23 RD JUNE, 2011. SD/- SD/- ( GEORGE MATHAN ) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 23 RD JUNE, 2011. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE PAGE 6 OF 6 ITA. 563/MDS/11 M/S.MSK CONSTRUCTIONS P LTD. DATE INITIALS 1. DRAFT DICTATED ON 2. DRAFT PLACED BEFORE AUTHORITY 3. DRAFT PLACED BEFORE THE 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