M/s. Tipsons Financial Services Pvt. Ltd., Ahmedabad V. The Dy. CIT, Circle-8, Ahmedabad

ITA 58/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9444 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN KUMAR
• Keywords: Business income; Depreciation; Business expenditure; Unabsorbed depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.58/AHD/2014 ( / ASSESSMENT YEAR :2010-11 ) M/S. TIPSONS FINANCIAL SERVICES PVT. LTD. 401, 4 TH FLOOR, SHERATON HOUSE, OPP: KETAV PETROL PUMP, POLYTECHNIC ROAD, AMBAWADI, AHMEDABAD - 380015 / VS. THE DEPUTY COMMISSIONER OF INCOME-TAX CICLE -8, PRATYAKSHA KAR BHAVAN, B/H PANJARAPOLE, AMBAWADI, AHMEDABAD - 380015 ./ ./ PAN/GIR NO. : AAACW 1883 C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SANJAY R. SHAH, A.R. / RESPONDENT BY : SHRI PRAVIN KUMAR, SR.D.R. / DATE OF HEARING 13/01/2017 / DATE OF PRONOUNCEMENT 17/01/2017 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) - XXI, AHMEDABAD, DATED 13/11/2013 FOR THE ASSESSMENT YEAR (AY) 2010-11 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: (I) THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.29,50,642/- CLAIMED BY THE APPELLANT U/S. 80IA OF THE ACT. IT IS SUBMITTED THAT IT BE SO HELD ITA NO. 58/AHD/2014 TIPSONS FINANCIAL SERVICES PVT. LTD. VS. DY CIT ASST.YEAR 2010-11 - 2 - NOW AND THE DEDUCTION AS CLAIMED BY THE APPELLANT BE GRANTED TO IT. (II) THE LD.CIT(A) ERRED IN HOLDING THAT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80IA, THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF SUCH UNDERTAKING HAVE TO BE DEDUCTED FROM THE PROFIT OF THE YEAR UNDER CONSIDERATION AS PER PROVISIONS OF SECTION 80IA(5). IT IS SUBMITTED THAT IT BE SO HELD NOW. 2. THE FACTS OF THE CASE ARE THE TIPSONS FINANCIAL SERVICES PRIVATE LIMITED IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING AND BROKERAGE IN GOVERNMENT SECURITIES, MUTUAL FUND UNITS AND SHARES AND SECURITIES. THE COMPANY ALSO RUNS ITS WIND MILLS AT TIRUNELVELI IN TAMILNADU AND JAISALMER IN RAJASTHAN. 3. THE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 13.10.2010 DECLARING A NET TAXABLE INCOME OF RS.3,49,94,040. 4. THE LD. ASSESSING OFFICER/DCIT HAS DISALLOWED RS.60,300/- ON THE GROUND THAT AS HELD IN VARIOUS LEGAL JUDGMENTS, EXPENDITURE INCURRED ON INCREASE OF AUTHORIZED CAPITAL IS CAPITAL EXPENDITURE. 5. THE APPELLANTS PLEA WAS THAT THE COMPANY WAS IN EXISTENCE FOR NUMBER OF YEARS AND WAS DOING BUSINESS; THE INCREASE IN AUTHORIZED CAPITAL IS ITS NORMAL ACTIVITY. IT IS NOT STARTING ANY NEW BUSINESS. THEREFORE, THE EXPENDITURE INCURRED IS NORMAL BUSINESS EXPENDITURE AND IT SHOULD HAVE BEEN ALLOWED AS REVENUE EXPENDITURE. 6. WHILE NOT AGREEING WITH THE DECISION OF THE LD. DCIT TO TREAT THIS EXPENDITURE AS CAPITAL EXPENDITURE, ONE PERTINENT QUESTION WHICH WOULD ARISE IS THAT IF IT IS A CAPITAL EXPENDITURE, HOW IT SHALL BE AMORTIZED. SHALL IT BE ADDED TO THE COST OF WIND MILL WHICH HAS BEEN INSTALLED DURING THE ITA NO. 58/AHD/2014 TIPSONS FINANCIAL SERVICES PVT. LTD. VS. DY CIT ASST.YEAR 2010-11 - 3 - YEAR? IF IT SO, THE LD. DCIT OUGHT TO HAVE ALLOWED DEPRECIATION @ 40% (80% FOR LESS THAN 180 DAYS) ON THIS AMOUNT. BUT THE DCIT HAS NOT DONE SO. 7. THE APPELLANT HAD IN THE YEAR 2007-08 INSTALLED A WIND MILL AT AYAN SYRANDAI VILLAGE IN TIRUNELVELI DISTRICT OF TAMILNADU. DURING THE ASSESSMENT YEAR UNDER SCRUTINY, THE COMPANY EARNED A NET PROFIT OF RS.29,50,642/- IN THIS UNIT. THE PROFIT OF THE UNIT IS ENTITLED TO DEDUCTION OF 100% UNDER SECTION 80IA(1) OF THE INCOME-TAX ACT. THE APPELLANT HAD SUBMITTED TO THE LD. DCIT A COPY OF AUDIT REPORT UNDER SECTION 80IA OF THE ACT CERTIFYING THE PROFITS AND GAINS DERIVED BY THE UNDERTAKING FROM ELIGIBLE BUSINESS. 8. BUT DCIT/A.O. WAS NOT CONVINCED WITH THE APPELLANT BY STATING THAT APPARENTLY, SECTION 80-IA(5) IDENTICALLY DEEMS, FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION, THE ELIGIBLE BUSINESS AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE INITIAL ASSESSMENT YEAR AS WELL AS THE SUBSEQUENT YEARS AND HAS AN OVERRIDING EFFECT ON ALL OTHER PROVISIONS OF THE ACT. THE COMPUTATION OF DEDUCTION U/S. 80IA HAS TO BE MADE AS IF THE ELIGIBLE UNIT WERE ONLY SOURCE OF INCOME OF THE ASSESSEE AS CLEARLY LAID DOWN IN THE SECTION 80IA(5). SIMILAR VIEWS HAVE ALSO BEEN TAKEN BY THE JURISDICTION ITAT IN THE CASE OF GOLDMINE SHARES & FINANCE P. LTD. [2008] 113 ITD 209 (AHD.)(SB) FOLLOWING THE SAME, IF THE COMPUTATION OF INCOME OF THE ASSESSEE WERE TO BE MADE, THE LOSS FOR THE A.Y.2007-08 AND 2008-09 AMOUNTING TO RS. (- )1,27,28,556/- AND RS.(-)23,85,497/- WOULD HAVE BEEN CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE A.Y. 2010-11. HOWEVER, THE ASSESSEE HAS NOT WET OFF THE SAID LOSS OF RS. 15114053/- AGAINST ITS INCOME FOR THE A.Y.2010-11. THEREFORE, THE SAID AMOUNT OF LOSS IS SET OFF AGAINST THE PROFIT AND THE DEDUCTION U/S. 80IA IS DISALLOWED. 9. TODAY, LD. A.R. CITED A BUNCH OF JUDGMENT AND STATED THAT HIS CASE IS COVERED BY THE JUDGMENTS. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND HEARD THE A.R., WHEREAS D.R. RELY UPON THE A.O. AND CIT(A). ITA NO. 58/AHD/2014 TIPSONS FINANCIAL SERVICES PVT. LTD. VS. DY CIT ASST.YEAR 2010-11 - 4 - 10. IN THE CASE OF CIT(A) VS. P.S. VELUSAMY, HONBLE HIGH COURT HAS HELD SECTION 80IA OF THE INCOME-TAX ACT, 1961 DEDUCTIONS PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS (COMPUTATION OF DEDUCTION) ASSESSMENT YEAR 2010-11 TRIBUNAL, FOLLOWING DECISION OF MADRAS HIGH COURT RENDERED IN CASE OF VELAYUDHASWAMY SPG. MILLS (P.) LTD. V. ASSTT. CIT [2012] 340 ITR 477/21 TAXMANN.COM 95, HELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80-IA WITHOUT SETTING OFF LOSSES/UNABSORBED DEPRECIATION PERTAINING TO WINDMILL, WHICH WERE SET OFF IN EARLIER YEAR AGAINST OTHER BUSINESS INCOME OF ASSESSEE- IT FURTHER HELD THAT INITIAL ASSESSMENT YEAR IN SECTION 80IA (5) WOULD ONLY MEAN YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IA AND NOT YEAR OF COMMENCEMENT OF ELIGIBLE BUSINESS IT ALSO HELD THAT ASSESSEE HAD OPTION TO CHOOSE FIRST/INITIAL ASSESSMENT YEAR OF CLAIM FOR DEDUCTION UNDER SECTION 80IA AGAINST ORDER OF TRIBUNAL, REVENUE FILED APPEAL BEFORE HIGH COURT RAISING THREE SUBSTANTIAL QUESTIONS OF LAW FOR CONSIDERATION WHETHER QUESTIONS OF LAW RAISED IN INSTANT APPEAL WERE COVERED BY AFORESAID DECISION ON MADRAS HIGH COURT AND CBDT CIRCULAR NO.1/2016, DATED 15/02/2016 HELD, YES WHETHER, THEREFORE, APPEAL OF REVENUE DESERVED TO BE DISMISSED - HELD, YES WHETHER, THEREFORE, APPEAL OF REVENUE DESERVED TO BE DISMISSED HELD, YES [PARA-5] [IN FAVOUR OF ASSESSEE] CIRCULARS AND NOTIFICATIONS: CBDT CIRCULAR NO.1/2016, DATED 15/02/2016. 11. THIS CASE WAS DECIDED IN THE FAVOUR OF THE ASSESSEE. ITA NO. 58/AHD/2014 TIPSONS FINANCIAL SERVICES PVT. LTD. VS. DY CIT ASST.YEAR 2010-11 - 5 - 12. THEREAFTER, IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P.) LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX, HONBLE HIGH COURT HAS HELD SECTION 80IA OF THE INCOME-TAX ACT, 1961 DEDUCTIONS PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS - ASSESSMENT YEAR 2004-05 AND 2005-06 LOSS IN YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFITS OF ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN SECTION 80IA [5] [ASSESSMENT YEAR 2004-05 & 2005-06] [IN FAVOUR OF ASSESSEE] 13. PRINCIPAL COMMISSIONER OF INCOME-TAX VS. CHERAN SPINNING MILLS (P.) LTD, IN THIS RECENT CASE HONBLE SUPREME COURT HAS HELD THAT SECTION 80-IA OF THE INCOME-TAX ACT, 1961 DEDUCTIONS PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS (COMPUTATION OF DEDUCTION) ASSESSMENT YEAR 2011-12 ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IA TRIBUNAL, FOLLOWING DECISION OF MADRAS HIGH COURT IN CASE OF VELAYUDHASWAMY SPG. MILLS (P.) LTD. V. ASSTT. CIT [2012] 340 ITR 477/21 TAXMANN.COM 95, HELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80-IA WITHOUT SETTING OFF LOSSES/UNABSORBED DEPRECIATION PERTAINING TO WINDMILL, WHICH WERE SET OFF IN EARLIER YEAR AGAINST OTHER BUSINESS INCOME OF ASSESSEE IT FURTHER HELD THAT INITIAL ASSESSMENT YEAR IN SECTION 80-IA(5) WOULD ONLY MEAN YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80-IA(5) AND NOT YEAR OF COMMENCEMENT OF ELIGIBLE BUSINESS AGAINST ORDER OF TRIBUNAL, REVENUE FILED APPEAL BEFORE HIGH COURT RAISING TWO SUBSTANTIATE QUESTIONS OF LAW HIGH COURT HELD THAT QUESTIONS OF LAW ITA NO. 58/AHD/2014 TIPSONS FINANCIAL SERVICES PVT. LTD. VS. DY CIT ASST.YEAR 2010-11 - 6 - ARISING FROM ORDER OF TRIBUNAL WERE COVERED BY AFORESAID DECISION OF MADRAS HIGH COURT AND CBDT CIRCULAR NO.1/2016, DATED 15/02/2016 AND ACCORDINGLY DISMISSED APPEAL WHETHER SLP FILED AGAINST ORDER OF HIGH COURT WAS TO BE DISMISSED HELD, YES [PARA 2] [IN FAVOUR OF ASSESSEE] CIRCULAR AND NOTIFICATIONS : CBDT CIRCULAR NO.1/2016, DATED 15/02/2016. 14. FOLLOWING THE ORDER OF HONBLE HIGH COURT AND SUPREME COURT WE ALLOW THE APPEAL OF THE ASSESSEE. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 17/01/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 17/01/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-XXI, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY