DCIT, Cochin V. Hotel & Allied Trades Pvt. Ltd, Ernakulam

ITA 666/COCH/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64895 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 04-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-07-2007
• Court: TRIBUNAL
• Assessee Lawyers: G SARANGAN; P K SASIDHARAN
• Keywords: Reopening of assessment; Depreciation; Unabsorbed depreciation; Reassessment proceedings
• Section: 80C; 143(3); 80HHC; 115JB; 80IB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 378/COCH/2005, 552/COCH/2006 & 379/CO CH/2005 & 598/COCH/2007 ASSESSMENT YEARS: 1999-2000, 200 0-01, 2001-02 & 2002-03 M/S. HOTEL & ALLIED TRADES (P) LTD., CASINO HOTEL, W/ISLAND, KOCHI-682 003. [PAN : AAACH 8770P] VS. 1. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), ERNAKULAM 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), RANGE-1, ERNAKULAM. (ASSESSEE APPELLANT) (REVENUE-R ESPONDENT) I.T.A. NOS. 663-666 /COCH/200 7 ASSESSMENT YEARS 2002-03, 2003-04, 2004-05 & 2005- 06 THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE- 1(1), , ERNAKULAM VS. M/S. HOTEL & ALLIED TRADES (P) LTD., CASINO HOTEL, W/ISLAND, KOCHI-682 003. [PAN : AAACH 8770P] (REVENUE-APPELLANT) (ASSESSEE -RE SPONDENT) REVENUE BY SHRI PRATAP NARAYAN SHARMA, JR. DR ASSESSEE BY SHRI G. SARANGAN & SHRI P.K. SASIDHARAN, FCA DATE OF HEARING 04/09/2012 DATE OF PRONOUNCEMENT 25/10/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE ASSESSEE OR THE REVENUE, AS THE CASE MAY BE, ARE DIRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A )-II, KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS MENTIONED AGAINST THE RESPECTIVE A PPEALS IN THE CAPTION STATED HOTEL AND ALLIED TRADERS P. LTD. 2 ABOVE. ALL THESE APPEALS WERE HEARD TOGETHER, SIN CE COMMON ISSUES ARE INVOLVED IN THEM. ACCORDINGLY, THESE APPEALS ARE BEING DISPOSE D OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. HOWEVER, WE PREFER TO DISPOSE OF THE APPEALS ASSESSMENT YEAR WISE. 2. WE SHALL TAKE UP THE APPEAL FILED BY THE ASSE SSEE FOR THE ASSESSMENT YEAR 1999- 2000. IN THIS APPEAL, THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT. IT IS NOTICED THAT THE RETURN OF INCOM E FILED BY THE ASSESSEE WAS INITIALLY PROCESSED U/S. 143(1) OF THE ACT ON 04-02-2002. SU BSEQUENTLY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S. 14 8 OF THE ACT ON 25-06-2002 AFTER DULY RECORDING THE REASONS FOR THE SAME. THUS, IT IS ALSO NOTICED THAT THE ASSESSMENT HAS BEEN RE-OPENED WITHIN FOUR YEARS FROM THE END O F THE ASSESSMENT YEAR AND FURTHER THE RETURN FILED BY THE ASSESSEE HAD BEEN PROCESSED EARLIER ONLY U/S. 143(1) OF THE ACT. AN IDENTICAL QUESTION UNDER IDENTICAL SET OF FACTS WAS CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS PVT. LTD. 291 ITR 500 AND THE HONBLE APEX COURT UPHELD THE REOPENING OF THE ASSESSMENT IN THAT CASE. HENCE, BY FOLLOWING THE SAID DECISION OF THE HONBLE SUPRE ME COURT, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LD. CIT(A) IN UPHO LDING THE RE-OPENING OF THE ASSESSMENT. 3. THE NEXT ISSUE IN THIS YEAR RELATES TO THE DEDUC TION CLAIMED U/S. 80HHD OF THE ACT. THE FACTS BORNE OUT OF THE RECORD ARE THAT TH E ASSESSEE WAS OPERATING TWO HOTEL UNITS, VIZ., HOTEL NAMED AT BANGARAM ISLAND AND ANO THER HOTEL NAMED COCONUT LAGOON. THERE IS NO DISPUTE THAT BOTH THE UNITS ARE ELIGIBL E FOR DEDUCTION U/S 80HHD OF THE ACT. IT APPEARS THAT THE ASSESSEE CLAIMED DEDUCTION U/S. 80 HHD OF THE ACT IN RESPECT OF EACH OF THE UNIT SEPARATELY. HOWEVER, THE ASSESSIN G OFFICER AGGREGATED THE RESULTS OF BOTH THE UNITS AND ALLOWED DEDUCTION U/S. 80HHD OF THE ACT ON THE COMBINED PROFIT. THE LD. CIT(A) ALSO UPHELD THE METHOD FOLLOWED BY T HE ASSESSING OFFICER. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. HOTEL AND ALLIED TRADERS P. LTD. 3 4. BOTH THE PARTIES HAS AGREED THAT THE IMPUGNE D ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT O F KERALA IN THE ASSESSEES OWN CASE REPORTED IN (2007) 294 ITR 67. WE HAVE GONE THROUG H THE SAID DECISION AND NOTICE THAT THE VERY SAME ISSUE WAS CONSIDERED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE RELATING TO THE ASSESSMENT YEAR S 1992-93 AND 1993-94, WHEREIN THE HIGH COURT HAS HELD THAT DEDUCTION U/S. 80HHD H AS TO BE COMPUTED WITH REFERENCE TO THE PROFITS AND GAINS OF THE BUSINESS AS A WHOL E. THUS THE CONTENTION OF THE ASSESSEE THAT THE DEDUCTION U/S 80HHD IS REQUIRED T O BE COMPUTED FOR EACH ELIGIBLE BUSINESS SEPARATELY HAS ALREADY BEEN REJECTED BY TH E JURISDICTIONAL HIGH COURT. WE NOTICE THAT THE DECISION RENDERED BY THE LD. CIT(A) IS IN ACCORDANCE WITH THE BINDING DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O F KERALA AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS DECISION. 5. THE NEXT ISSUE IN THIS YEAR RELATES TO THE DEDUC TION U/S. 80IA OF THE ACT. THE HOTEL UNIT NAMED COCONUT LAGOON WAS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT DURING THIS YEAR. THE AO COMPUTED THE PROFIT FROM THIS UNI T, AFTER MAKING CERTAIN DISALLOWANCES, AT RS.1,69,55,436/-. THE ASSESSING OFFICER NOTICED THAT THE GROSS TOTAL INCOME OF THE ASSESSEE AFTER AGGREGATION OF INCOME FROM ALL HEADS STOOD AT RS.1,28,45,976/-. ACCORDINGLY, THE AO TOOK THE VIE W THAT THE DEDUCTION U/S 80IA SHOULD BE COMPUTED ON THE GROSS TOTAL INCOME OF RS.1.28 CR ORES AND NOT ON RS.1.69 CRORES, AS THE GROSS TOTAL INCOME WAS LESS THAN THE ACTUAL PRO FIT FROM THE ABOVE SAID UNIT. ACCORDINGLY, THE AO COMPUTED THE DEDUCTION U/S 80IA AT RS.48,87,518/- AS GIVEN BELOW:- PROFIT FROM COCONUT LAGOON AFTER DISALLOWANCES 1 ,69,55,436/- ======== RESTRICTED TO GROSS TOTAL INCOME 1,28,45,976 LESS:- PROFIT ALLOWED AS DEDUCTION U/S 80HHD 28,70,940 ---------------- PROFIT ELIGIBLE FOR COMPUTATION OF DEDUCTION 99,75,036 ========= DEDUCTION AT 50% 49,87,518 THE LD CIT(A) ALSO CONFIRMED THE ORDER OF THE AO ON THIS ISSUE. HOTEL AND ALLIED TRADERS P. LTD. 4 6. BY ADVERTING OUR ATTENTION TO THE PROVISIONS OF SUB SEC.7 OF SEC. 80IA (SUB. SEC. 5 IN NEW SECTION 80IA INTRODUCED WITH EFFECT FROM 200 0-2001 AND THE SAID SEC. 80IA(5) IS MADE APPLICABLE TO SEC. 80IB ALSO AS PER THE SUB SE C. 13 OF SEC. 80IB), THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT DEDUCTION U /S. 80IA HAS TO BE COMPUTED ON THE PROFITS OF THE ELIGIBLE UNIT, BY TREATING THE S AME AS THE ONLY SOURCE OF INCOME. HE FURTHER SUBMITTED THAT SEC. 80IA/80IB IS A SELF CON TAINED REGULATION AND IT HAS OVERRIDING EFFECT OVER ALL OTHER PROVISIONS OF THE ACT. HENCE THE AMOUNT OF DEDUCTION COMPUTED THERE UNDER IS ELIGIBLE FOR DEDUCTION EVEN IF THE G ROSS TOTAL INCOME RESULTS IN A LESSER FIGURE OR LOSS, SINCE SUB SECTION 5 OF SEC. 80IA OV ERRIDES ANY OTHER PROVISIONS OF THE ACT INCLUDING SEC. 80A(2) AND SEC. 80AB OF THE ACT. TH US, ACCORDING TO THE ASSESSEE, THE AMOUNT OF DEDUCTION COMPUTED U/S 80IA IS ELIGIBLE F OR DEDUCTION EVEN IF THERE IS NO GROSS TOTAL INCOME OR THE GROSS TOTAL INCOME RESULT S IN A MINUS FIGURE. ON THE CONTRARY, THE LD D.R STRONGLY SUPPORTED THE ORDER O F LD CIT(A) ON THIS ISSUE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE PROVISIONS OF SEC. 80A(2) AND SEC. 80AB AND SUB SEC. 7 OF SEC. 80IA ARE RELEV ANT HERE. HENCE, WE EXTRACT THE RELEVANT PROVISIONS FOR THE SAKE OF CONVENIENCE. 80A(2) : THE AGGREGATE AMOUNT OF THE DEDUCTIONS UNDER THI S CHAPTER* SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL INCOME OF THE A SSESSEE. (* CHAPTER VI-A, WHICH INCLUDES DEDUCTIONS SPECIFIE D IN SEC. 80C TO 80VV, INCLUDING DEDUCTION U/S 80IA). 80AB :- WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR A LLOWED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING C DEDUCTIONS IN RESPECT OF CERTAIN INCOMES ** IN RESPECT OF ANY INCOME OF THE NATURE SPECIFI ED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION , FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF TH IS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SH ALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DERIVE D OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL I NCOME. HOTEL AND ALLIED TRADERS P. LTD. 5 (** DEDUCTION U/S 80IA FALLS IN THIS CATEG ORY) 80IA(7):- NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISIONS OF THIS ACT , THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB-SECTION (5) FOR THE ASSESSMENT YEAR IMME DIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE I NITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDIN G THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 8. A CAREFUL READING OF SECTION 80IA(7), REFERR ED SUPRA, SUGGESTS THAT THE SAID SUB SECTION OVERRIDES ANY OTHER PROVISIONS OF THE ACT O NLY FOR THE LIMITED PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB SEC. 5 OF SEC. 80IA. HOWEVER, IT CAN BE SEEN THAT THE PROVISIONS OF SEC. 80AB OVERRIDES THE PROVISIONS OF SEC. 80IA, SINCE THE DEDUCTION U/S 80IA FALLS IN UNDER THE HEADING C DEDUCTIONS IN RESPECT OF CERTAIN INCOME. THE LEGAL POSITION IN THIS REGARD WAS EXP LAINED BY THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORY LTD VS. DCIT (266 IT R 521) AS UNDER:- SECTION 80AB IS ALSO IN CHAPTER VI-A. IT STARTS W ITH THE WORDS WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOWED UNDER A NY SECTION OF THIS CHAPTER. THIS WOULD INCLUDE SECTION 80HHC. SECTION 80AB FUR THER PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION . THUS SECTION 80AB HAS BEEN GIVEN OVERRIDING EFFECT OVER ALL OTHER SECTION S IN CHAPTER VI-A. SECTION 80HHC DOES NOT PROVIDE THAT ITS PROVISIONS ARE TO P REVAIL OVER SECTION 80AB OR OVER ANY OTHER PROVISIONS OF THIS ACT. SECTION 80H HC WOULD THUS BE GOVERNED BY SECTION 80AB. ACCORDING TO SEC. 80AB, THE AMOUNT OF INCOME OF THE NATURE SPECIFIED IN SEC. 80IA, WHICH IS INCLUDED IN THE GROSS TOTAL INCOME, SHALL BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE DERIVED OR RECEIVED BY THE AS SESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80IA OF THE ACT, I.E., THE AMOUNT OF DEDUCTION U/S 80IA SHALL BE COMPUTED ONLY WITH REFERENCE TO THE AMOUNT OF INCOME FROM EL IGIBLE BUSINESS, WHICH IS INCLUDED IN THE GROSS TOTAL INCOME. THIS PROVISION SHALL HAV E APPLICATION IF THE PROFITS AND GAINS HOTEL AND ALLIED TRADERS P. LTD. 6 OF ELIGIBLE BUSINESS COMPUTED UNDER SEC. 80IA GET R EDUCED WHILE INCLUDING THE SAME IN THE GROSS TOTAL INCOME. 9. ACCORDINGLY, IN OUR VIEW, A COMBINED READING OF THE PROVISIONS OF SUB SEC. 7 OF SEC. 80IA AND SEC. 80AB WOULD SUGGEST THAT (A) THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS , TO WHICH THE PROVISIONS OF SEC. 80IA(1) SHALL APPLY, SHALL BE RESTRICTED TO THE AMO UNT OF INCOME OF THAT NATURE THAT IS INCLUDED IN THE GROSS TOTAL INCOME AND (B) THE QUANTUM OF DEDUCTION SHALL BE COMPUTED ON S UCH PROFIT, AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THE QUESTION WHETHER THE QUANTUM OF DEDUCTION SO CO MPUTED IS FULLY ELIGIBLE FOR DEDUCTION OR NOT HAS TO BE DETERMINED BY CONSIDERIN G THE PROVISIONS OF SUB SEC. 2 OF 80A, WHICH PROVIDES THAT THE AGGREGATE AMOUNT OF DE DUCTIONS UNDER CHAPTER VIA SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL INCOME. IN OUR VIEW, THE W ORDS IN ANY CASE HAVE GREATER SIGNIFICANCE IN THIS SUB SECTION. THE WORDS SHALL NOT, BY THEMSELVES INDICATE THE MANDATORY NATURE OF THIS SECTION. THE WORDS IN ANY CASE ATTACHED TO THE WORDS SHALL NOT WOULD INDICATE THAT THE STATUTE I NTENDS TO MAKE DOUBLE SURE ITS INTENTION THAT THE AGGREGATE AMOUNT OF DEDUCTIONS S HOULD NOT EXCEED THE GROSS TOTAL INCOME. WE MAY HERE MENTION THAT THE DETERMINATION OF AMOUNT OF DEDUCTION U/S 80IA IS ONE THING AND THE QUANTUM OF AMOUNT ACTUALLY ALL OWABLE IS ANOTHER THING. IN OUR VIEW; SUB. SEC. 7 OF 80IA PROVIDES FOR DETERMINATIO N OF AMOUNT OF DEDUCTION AND SEC. 80AB & SUB. SEC. 2 OF SEC. 80A PROVIDE FOR THE AMOU NT ACTUALLY ALLOWABLE WHILE COMPUTING THE TOTAL INCOME. HENCE WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT THE PROVISIONS OF SEC. 80IA IS CODE B Y ITSELF TO WHICH THE PROVISIONS OF SEC. 80A(2) AND 80AB SHALL NOT APPLY. 10. IN THE INSTANT CASE, IT IS SEEN THAT THE AO HAS COMPUTED DEDUCTION U/S 80IA ON THE AMOUNT OF GROSS TOTAL INCOME AS REDUCED BY THE DEDUCTION GIVEN U/S 80HHD OF THE ACT. ACCORDING TO THE DISCUSSIONS MADE IN THE PREC EDING PARAGRAPHS, THE COMPUTATION OF DEDUCTION U/S 80IA MADE BY THE AO WOULD BE CORRE CT ONLY IF THE GROSS TOTAL INCOME CONSISTED OF, ONLY INCOME OF THAT NATURE WHICH IS E LIGIBLE FOR DEDUCTION U/S 80IA OF THE HOTEL AND ALLIED TRADERS P. LTD. 7 ACT. OTHERWISE, THE DEDUCTION U/S 80IA IS REQUIRE D TO BE COMPUTED WITH REFERENCE TO THE AMOUNT OF INCOME OF THAT NATURE, WHICH IS INCLU DED IN THE GROSS TOTAL INCOME. THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPTER VIA SH ALL BE RESTRICTED TO THE AMOUNT OF GROSS TOTAL INCOME. IN THE INSTANT CASE, THE BREAK UP DETAILS OF THE GROSS TOTAL INCOME IS NOT BORNE OUT OF RECORD. HENCE, THE ISSUE OF COM PUTATION OF DEDUCTION U/S 80IA REQUIRES FRESH EXAMINATION IN THE LIGHT OF DISCUSSI ONS MADE SUPRA. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND REST ORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF DISCUSSIONS MADE SUPRA. 11. THE NEXT ISSUE IN THE ASSESSMENT YEAR 1999-2000 RELATES TO THE COMPUTATION OF INTEREST U/S. 234C OF THE ACT ON THE TAX PAYABLE U/ S. 115JA OF THE ACT. THIS ISSUE IS NOW DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ROLTA INDIA LTD., 330 ITR 470, IN WHICH IT HAS BEEN HELD THAT THE ASSESSEE IS LIABLE TO PAY INTEREST FOR SHORT PAYMENT OF ADVANCE TAX EVEN ON THE INCOME COMPUTED U/S 115JB OF THE ACT. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT(A) O N THIS ISSUE. 12. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2000-2001. THE ASSESSEE IS ASSAILING THE DECISION OF THE LD CIT(A) IN CONFIRMING THE COMPUTATION OF DEDUCTION MADE U/S 80HHD AND SEC. 80 IB OF THE ACT. WE NOTICE THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT IN THIS YEAR, WHERE AS IN THE IMMEDIATELY PRECEDING YEAR, IT HAD CLAIMED DEDUCTIO N U/S 80IA OF THE ACT FOR THE VERY SAME SOURCE OF INCOME FROM HOTEL BUSINESS. NO EXPL ANATION IS AVAILABLE ON RECORD IN RESPECT OF THIS SHIFT FROM SEC. 80IA TO SEC. 80IB. BE THAT AS IT MAY, IT IS AN ADMITTED FACT THAT THE GROSS TOTAL INCOME RETURNED BY THE AS SESSEE RESULTED IN NEGATIVE FIGURE AND THE AO HAS ALSO COMPUTED THE GROSS TOTAL INCOME , AFTER MAKING CERTAIN DISALLOWANCES AND ADJUSTMENTS, AT (-) RS.2.15 CRORE S. IN VIEW OF THE SAID LOSS, THE AO DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80 HHD AS WELL AS U/S 80IB OF THE ACT. THE SAID ORDER OF THE AO WAS ALSO CONFIRMED BY THE LD CIT(A). 13. WE HAVE ALREADY NOTICED THAT THE PROVISION S OF SEC. 80A(2) MANDATES THAT THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPTER VI-A S HALL NOT, IN ANY CASE, EXCEED THE HOTEL AND ALLIED TRADERS P. LTD. 8 GROSS TOTAL INCOME OF THE ASSESSEE. IN VIEW OF THE DISCUSSIONS MADE IN THE PRECEDING PARAGRAPHS, WE ARE OF THE VIEW THAT THE LD CIT(A) W AS RIGHT IN LAW UPHOLDING THE DENIAL OF DEDUCTION U/S 80HHD AND 80IB OF THE ACT. ACCORD INGLY, WE UPHOLD HIS ORDER. 14. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02. IN THIS YEAR ALSO, THE ASSESSEE HAS DECLA RED LOSS IN ITS RETURN OF INCOME. THE GROSS TOTAL INCOME COMPUTED BY THE AO HAS ALSO RESU LTED IN A LOSS OF RS.9,49,711/-. IN VIEW OF THE SPECIFIC PROVISIONS OF SEC. 80A(2), IN OUR VIEW, THE ASSESSEE IS NOT ELIGIBLE FOR ANY DEDUCTION UNDER CHAPTER VI-A OF THE ACT. A CCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) IN CONFIRMING THE DENIAL OF DEDUCTION U/S 80HHD AND 80IB OF THE ACT. THE ASSESSEE HAS RAISED ONE MORE ISSUE IN THIS YEAR, I. E., THE DETERMINATION OF LOSS TO BE CARRIED FORWARD TO THE SUCCEEDING YEAR. IN OUR VIE W, THE DETERMINATION OF AMOUNT OF LOSS ELIGIBLE FOR CARRY FORWARD IS REQUIRED TO BE W ORKED OUT AFRESH IN ACCORDANCE WITH OUR DECISION ON VARIOUS ISSUES AND HENCE IT IS CONS EQUENTIAL IN NATURE. ACCORDINGLY THIS ISSUE DOES NOT REQUIRE ANY ADJUDICATION. 15. NOW WE SHALL TAKE UP THE APPEALS FILED BY B OTH THE PARTIES FOR THE ASSESSMENT YEAR 2002-03. IN THIS YEAR, THE AO COMPLETED THE A SSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT. IT IS SEEN THAT THE RETURN OF INCOME FILE D BY THE ASSESSEE WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, THE A SSESSING OFFICER ISSUED NOTICE U/S 154/155 OF THE ACT IN ORDER TO RECTIFY CERTAIN MIST AKES. HOWEVER, SUBSEQUENTLY, THE AO NOTICED ESCAPEMENT OF INCOME AND HENCE REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT BY RECORDING THE REASONS. IN TH E ASSESSMENT ORDER, THE AO HAS SPECIFICALLY STATED THAT THE PROCEEDINGS INITIATED U/S 154/155 GETS MERGED WITH THAT OF SECTION 147/148 OF THE IT ACT, 1961. BEFORE THE LD CIT(A), THE ASSESSEE CONTENDED THAT, AS PER THE KELVINATOR INDIA DECISION OF HONB LE DELHI HIGH COURT (256 ITR 1), WHICH TAKES INTO CONSIDERATION A NUMEROUS OTHER COURTS DE CISION, NO REOPENING U/S 147 CAN BE MADE AFTER THE DUE DATE OF COMPLETING SCRUTINY ASSE SSMENT U/S 143(3) HAS BEEN ALLOWED TO BE LAPSED BY THE AO. IT WAS ALSO CONTEN DED THAT THERE SHOULD NOT BE SIMULTANEOUS ACTION BY THE AO UNDER SEC. 154 AND 14 7 BY PLACING RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE REPORTED IN 245 ITR 775. THE LD HOTEL AND ALLIED TRADERS P. LTD. 9 CIT(A) WAS CONVINCED WITH THE SAID CONTENTIONS AND ACCORDINGLY HELD THAT THE REOPENING OF ASSESSMENT IS VOID AB INITIO. HENCE, THE LD CIT (A) DID NOT ADJUDICATE THE GROUNDS RAISED ON MERITS. AGGRIEVED, THE REVENUE HAS FILE D APPEAL BEFORE US. ON AN ABUNDANT CAUTION, THE ASSESSEE HAS ALSO FILED APPEAL ON MERI TS OF THE CASE, WHICH WERE NOT ADJUDICATED BY THE LD CIT(A). 16. WE HAVE HEARD THE PARTIES AND ALSO PERUSED THE RECORD. FIRST OF ALL, WE NOTICE THAT THERE IS NO SIMULTANEOUS ACTION U/S 154 AND AL SO U/S 147 OF THE ACT, AS CONTENDED BY THE ASSESSEE. WE HAVE ALREADY NOTICED THAT THE AO HAS SPECIFICALLY STATED IN THE ASSESSMENT ORDER THAT THE PROCEEDINGS INITIATED U/S 154/155 HAS GOT MERGED WITH THE REASSESSMENT PROCEEDINGS. SECONDLY, THE RETURN OF FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) AND SUBSEQUENTLY THE AO HAS ISSUED NOTIC E U/S 148 OF THE ACT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. HENCE, AS PER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS PVT. LTD. 291 ITR 500, THE REOPENING OF ASSESSMENT IS PERFECTLY IN ACCORDANCE WITH THE LAW. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS LEGAL I SSUE. WE HAVE ALREADY NOTICED THAT THE FIRST APPELLATE AUTHORITY HAS NOT ADJUDICATED T HE GROUNDS RAISED BY THE ASSESSEE ON MERITS. HENCE, WE FEEL IT APPROPRIATE TO SET ASIDE ALL MATTERS TO THE FILE OF LD CIT(A) IN ORDER TO ENABLE HIM TO ADJUDICATE THE GROUNDS RAISE D ON MERITS AND WE ORDER ACCORDINGLY. ACCORDINGLY THE APPEALS FILED BY BOTH THE PARTIES ARE DISPOSED OF. 17. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2003-04. FOLLOWING TWO ISSUES ARE CONTESTED IN THI S APPEAL. (A) ELIGIBILITY OF DEDUCTION U/S 80HHD AND 80IB OF THE ACT. (B) VALIDITY OF DECISION OF LD CIT(A) IN ALLOWING DEDUCTION OF CARRY FORWARD DEPRECIATION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 18. THE GROSS TOTAL INCOME COMPUTED BY THE AO I N THIS YEAR, AFTER MAKING CERTAIN DISALLOWANCES AND ADJUSTMENTS, RESULTED INTO NIL FIGURE. WE HAVE ALREADY HELD THAT THE PROVISIONS OF SEC.80A(2) HAVE MANDATORY APPLICA TION, ACCORDING TO WHICH THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPTER VI-A S HALL NOT, IN ANY CASE, EXCEED THE HOTEL AND ALLIED TRADERS P. LTD. 10 GROSS TOTAL INCOME. ACCORDINGLY, WE ARE OF THE VIE W THAT THE AO WAS RIGHT IN LAW IN DENYING DEDUCTION U/S 80HHD OF THE ACT, WHICH FALLS UNDER CHAPTER VI-A OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. 19. THE NEXT ISSUE IN THE APPEAL FILED BY THE REV ENUE FOR THE ASSESSMENT YEAR 2003-04 RELATES TO THE DEDUCTION OF CARRY FORWARD DEPRECIAT ION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THE AO NOTICED THAT THE ASSESSEE HAS DEDUCTED THE CARRY FORWARD DEPRECIATION AMOUNTING TO RS.73,54,058/-, WHICH WAS COMPUTED UNDER THE INCOME TAX ACT, WHERE AS THE CLAUSE (III) OF EXPLANATION 1 TO S ECTION 115JB PROVIDES FOR DEDUCTION AS UNDER:- (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSO RBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT . EXPLANATION:- FOR THE PURPOSES OF THIS CLAUSE,- - (A) THE LOSS SHALL NOT INCLUDE DEPRECIATION; (B) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY I F THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL. ACCORDINGLY THE AO HELD THAT THE ASSESSEE IS NOT EN TITLED TO DEDUCT THE CARRY FORWARD DEPRECIATION COMPUTED UNDER THE INCOME TAX PROVISIO NS FROM THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THE AO FURTHER NOTICED THAT THE BOOKS OF ACCOUNT DID NOT SHOW ANY BROUGHT FORWARD LOSS. SINCE THE BROUGHT FORWAR D LOSS AS PER BOOKS OF ACCOUNT WAS NIL, THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OF ANY AMOUNT AS PER CLAUSE (III) OF EXPLANATION 1 TO SEC. 115JB OF THE A CT. HOWEVER, THE LD CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION OF CARRY FORWARD DEPRECIA TION AS CLAIMED BY THE ASSESSEE WITH THE OBSERVATION THAT THE AO HAS DISALLOWED THE CLAI M WITHOUT ASSIGNING ANY REASON. WE NOTICE THAT THE LD CIT(A) DID NOT GIVE ANY REASON O R FINDING IN SUPPORT OF HIS DECISION. 20. HOWEVER, WE FIND MERIT IN THE OBSERVATIONS MADE BY THE AO. FIRST OF ALL, CLAUSE (III) OF EXPLANATION 1 TO SEC. 115JB, WHICH IS EXTRA CTED ABOVE MANDATES THAT THE DEDUCTION OF AMOUNT OF LOSS BROUGHT FORWARD OR UNAB SORBED DEPRECIATION WHICHEVER IS LESS SHOULD BE AS PER BOOKS OF ACCOUNT. HENCE THE ASSESSEE WAS WRONG IN LAW IN HOTEL AND ALLIED TRADERS P. LTD. 11 CLAIMING DEDUCTION OF CARRY FORWARD DEPRECIATION, W HICH WAS DETERMINED UNDER THE INCOME TAX ACT. SECONDLY, THE AO HAS GIVEN A SPECI FIC FINDING THAT THERE IS NO CARRY FORWARD LOSS AS PER THE BOOKS OF ACCOUNT, IN WHICH CASE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM ANY DEDUCTION UNDER CLAUSE (III) IN VIEW OF S PECIFIC PROVISIONS CONTAINED IN CLAUSE (B) OF THE EXPLANATION GIVEN UNDER THE ABOVE SAID CL AUSE (III). ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH AT OF THE AO. 21. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE R EVENUE FOR THE ASSESSMENT YEAR 2004-05. FOLLOWING TWO ISSUES ARE CONTESTED IN THI S APPEAL. (A) ELIGIBILITY OF DEDUCTION U/S 80HHD (B) VALIDITY OF CHARGING INTEREST U/S 234C OF THE ACT ON THE TAX PAYABLE U/S 115JB OF THE ACT. 22. THE GROSS TOTAL INCOME COMPUTED BY THE AO I N THIS YEAR, AFTER MAKING CERTAIN DISALLOWANCES AND ADJUSTMENTS, RESULTED INTO NIL FIGURE. WE HAVE ALREADY HELD THAT THE PROVISIONS OF SEC.80A(2) HAVE MANDATORY APPLICA TION, ACCORDING TO WHICH THE AGGREGATE AMOUNT OF DEDUCTIONS UNDER CHAPTER VI-A S HALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL INCOME. ACCORDINGLY, WE ARE OF THE VIE W THAT THE AO WAS RIGHT IN LAW IN DENYING DEDUCTION U/S 80HHD OF THE ACT, WHICH FALLS UNDER CHAPTER VI-A OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. 23. THE ISSUE REGARDING CHARGING OF INTEREST U/S 234C ON THE TAX PAYABLE U/S 115JB OF THE ACT HAS SINCE BEEN SETTLED BY THE HONBLE SUPRE ME COURT IN THE CASE OF ROLTA INDIA LIMITED (330 ITR 470), IN WHICH IT HAS BEEN HELD TH AT THE ASSESSEE IS LIABLE TO PAY INTEREST FOR SHORT PAYMENT OF ADVANCE TAX EVEN ON T HE INCOME COMPUTED U/S 115JB OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. HOTEL AND ALLIED TRADERS P. LTD. 12 24. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE R EVENUE FOR THE ASSESSMENT YEAR 2005-06. FOLLOWING TWO ISSUES ARE CONTESTED IN THI S APPEAL. (A) ELIGIBILITY OF DEDUCTION U/S 80HHD OF THE ACT. (B) VALIDITY OF DECISION OF LD CIT(A) IN ALLOWING DEDUCTION OF CARRY FORWARD DEPRECIATION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 25. WE NOTICE THAT THE AO HAS COMPUTED THE GROSS TOTAL INCOME FOR THIS YEAR AT RS.2,32,46,035/-, BUT DID NOT DISCUSS/CONSIDER THE ELIGIBILITY OF DEDUCTION U/S 80HHD OF THE ACT. IT IS ALSO NOT KNOWN WHETHER THE ASSESSEE HAS CLAIMED THE SAID DEDUCTION IN ITS RETURN OF INCOME. THE LD CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION U/S 80HHD OF THE ACT. THE REVENUE IS AGGRIEVED BY THE SAID DECI SION OF LD CIT(A). 26. THE MATTER OF ELIGIBILITY OF DEDUCTION U/S 80HHD OF THE ACT HAS SINCE BEEN SETTLED BY THE HONBLE HIGH COURT OF KERALA IN THE ASSESSEE ES OWN CASE REPORTED IN 294 ITR 67. WE HAVE ALSO DISCUSSED ABOUT THIS ISSUE IN THE PRECEDING PARAGRAPHS. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO CONSIDER THE ELIGIBILITY OF DEDUCTION IN ACCORDANCE WITH LAW AND ALSO BY FOLLOWING THE BINDING DECISION OF JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE REFERRED SUPRA. 27. THE NEXT ISSUE RELATES TO THE VALIDITY OF A LLOWING DEDUCTION OF CARRY FORWARD DEPRECIATION WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. WE NOTICE THAT THE AO HAS COMPUTED THE INCOME UNDER NORMAL PROVISIONS OF THE ACT, SINCE IT EXCEEDED THE BOOK PROFIT. HENCE THE ISSUE RAISED BY THE REVENUE IS ACADEMIC IN NATURE. IN ANY CASE, WE HAVE DEALT WITH THIS ISSUE WHILE ADJUDICATING TH E APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2003-04 IN THE PRECEDING PARAGRAPHS , WHICH SHALL APPLY IN THIS YEAR ALSO. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1999- 2000 IS TREATED AS PARTLY ALLOWED. THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 ARE DISMISSED. THE APPEA L OF THE ASSESSEE AND THE APPEAL HOTEL AND ALLIED TRADERS P. LTD. 13 OF THE REVENUE FOR THE ASSESSMENT YEAR 2002-03 ARE TREATED AS PARTLY ALLOWED. THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 200 3-04 TO 2005-06 ARE ALLOWED. PRONOUNCED ACCORDINGLY ON 25-10-2 012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25TH OCTOBER, 2012 GJ COPY TO: 1. M/S. HOTEL & ALLIED TRADERS (P) LTD., CASINO HOT EL, W/ISLAND, KOCHI-682 003. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-1(1 ), RANGE-1, ERNAKULAM. 3. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE -1(1),RANGE-1, ERNAKULAM. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOC HI. 5.THE COMMISSIONER OF INCOME-TAX, KOCHI 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN