BHANSALI DIAMONDS, MUMBAI V. ADDL CIT RG 16(2), MUMBAI

ITA 6767/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3253 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6767/MUM/2014 ASSESSMENT YEAR : 2010-11 BHANSALI DIAMONDS, MUMBAI PAN AABFE8994M VS. ADDL CIT RG 16(2), MUMBAI (APPELLANT) RESPONDENT) APPELLANT BY : SHRI DEEPAK SHAH RESPONDENT BY : SHRI SANJEEV JAIN DATE OF HEARING : 01 .0 6 .201 6 DATE OF PRONOUNCEMENT : 08 .0 6 . 201 6 O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF THE CIT(A) 27, MUMBAI, IN APPEAL NO.CIT(A)-27/ADDL. CIT-16(2)/137/ 13-14 DATED 27.08.2014. THE ASSESSMENT WAS FRAMED BY THE ADDL. CIT 16(2), MUMBA I, FOR A.Y. 2010-11 VIDE HIS ORDER DATED 28.03.2013 U/S. 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE AO DENYING DEDU CTION U/S. 80IA OF THE ACT BY INVOKING THE PROVISIONS OF SECTION 80 IA(5) OF THE ACT. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CLAIMED DEDUCTION U/S. 80IA OF THE ACT ON PROFIT EARNED BY IT IN THE BUSINESS OF GENERATION OF POWER BY SETTING UP WINDM ILLS. THE ASSESSEE IS A REGISTERED PARTNERSHIP FIRM HAVING THREE PARTNERS A ND ENGAGED IN THE BUSINESS OF ITA NO.6767/MUM/2014 M/S. BHANSALI DIAMONDS 2 EXPORT OF CUT AND POLISHED DIAMONDS AND ALSO DERIVI NG INCOME FROM GENERATION OF POWER. THE ASSESSEE STARTED THE BUSINESS OF GENERA TION OF POWER BY SETTING UP WINDMILLS IN MAHARASHTRA AND FIRST YEAR OF COMMENCE MENT OF PRODUCTION OF ELECTRICITY WAS FY 2005-06 RELEVANT TO AY 2006-07. THE ASSESSEE INCURRED HEAVY LOSSES DUE TO HIGH DEPRECIATION ON WINDMILLS AND TH ESE LOSSES WERE SET OFF AGAINST REGULAR BUSINESS OF EXPORT OF CUT AND POLISHED DIAM ONDS. THE ASSESSEE DID NOT OPT FOR CLAIM OF DEDUCTION U/S. 80IA OF THE ACT UNTIL A .Y. 2009-10. THIS FACT IS COMING OUT OF THE RECORD OF THE LOWER AUTHORITIES AND HAS NOT BEEN DISPUTED BY THE LEARNED SENIOR DR. THE ASSESSEE OPTED FOR THE FIRST TIME T O CLAIM DEDUCTION U/S 80IA OF THE ACT FROM A.Y. 2010-11, I.E. THE YEAR UNDER CONSIDER ATION. THE AO WHILE FRAMING ASSESSMENT ADJUSTED THE DEPRECIATION LOSS ALREADY C LAIMED AGAINST REGULAR BUSINESS INCOME, AGAINST THE INCOME OF THIS YEAR AND DISALLO WED THE CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A) THE ASSESSEE CLAIMED THAT THE AO ERRED IN NOT ALLOWING THE CLAIM OF DEDUCTION U/S. 80IA BY TREATING THE INITIA L YEAR AS AY 2006-07 AND NOT AY 2010-11, WHEN THE ASSESSEE OPTED FOR THE CLAIM OF D EDUCTION. THE LEARNED COUNSEL FOR THE ASSESSEE NOW BEFORE US ARGUED THAT THE CIT( A) ALSO ERRED IN NOT FOLLOWING THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF HERCULES HOISTS LTD., MUMBAI VS. ACIT IN ITA NOS. 7944, 7946, 2255 & 7943 /MUM/2011 DATED 13.02.2013. AGGRIEVED AGAINST THE ORDER OF THE CIT (A), THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 4. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE STATED THAT NOW CBDT VIDE CIRCULAR NO.1/2016 [F.NO.200/31/2015-ITA-I] DA TED 15-2-2016, HAS CONSIDERED ITA NO.6767/MUM/2014 M/S. BHANSALI DIAMONDS 3 THE ISSUE OF DEDUCTION U/S. 80IA OF THE ACT AND CLA RIFY THE TERM INITIAL ASSESSMENT YEAR AS PROVIDED IN SECTION 80IA(5) OF THE ACT. ON THE OTHER HAND, LEARNED SENIOR DR FAIRLY AGREED THAT YES THE BOARD HAS ISSUED CI RCULAR AND INITIAL YEAR WILL BE THE YEAR WHEN THE ASSESSEE OPTS FOR CLAIMING DEDUCTION AND THAT WILL BE CONSIDERED AS INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IA OF THE ACT. 5. WE HAVE GONE THROUGH THE ABOVE CIRCULAR, WHICH R EADS AS UNDER: SECTION 80IA OF THE INCOME-TAX ACT, 1961 ('ACT'), AS SUBSTITUTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 01.04.2000, PROVIDES FOR DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISE FROM AN ELIGIBLE BU SINESS (AS REFERRED TO IN SUB-SECTION (4) OF THAT SECTION) IN ACCORDANCE W ITH THE PRESCRIBED PROVISIONS. SUB-SECTION (2) OF SECTION 80IA FURTHER PROVIDES THAT THE AFORESAID DEDUCTION CAN BE CLAIMED BY THE ASSESSEE, AT HIS OPTION, FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS (TWENTY YEARS IN CERTAIN CASES) BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING COMMENCES OPERATION, BEGINS DEVELOPMENT OR STARTS P ROVIDING SERVICES ETC. AS STIPULATED THEREIN. SUB-SECTION (5) OF SECT ION 80IA FURTHER PROVIDES AS UNDER - 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION 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 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 RELEVANT TO THE INITIAL AS SESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLU DING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE'. IN THE ABOVE SUB-SECTION, WHICH PRESCRIBES THE MANN ER OF DETERMINING THE QUANTUM OF DEDUCTION, A REFERENCE HAS BEEN MADE TO THE TERM 'INITIAL ASSESSMENT YEAR'. IT HAS BEEN REPRESENTED THAT SOME ASSESSING OFFICERS ARE INTERPRETING THE TERM 'INITIAL ASSESSMENT YEAR' AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/ MANUFACTURING ACTIVITY HAD COMME NCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATI ON ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLE AR MANDATE PROVIDED UNDER SUB-SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION O UT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS. ITA NO.6767/MUM/2014 M/S. BHANSALI DIAMONDS 4 THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS AB UNDANTLY CLEAR FROM SUB-SECTION (2) THAT ASSESSEE WHO IS ELIGIBLE TO CL AIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE THE INITIAL/FIRST YEAR FRO M WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT O F A SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB-SECTION . IT IS HEREBY CLARIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPT ED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U /S 80IA FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPEC T OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM 'INITIAL ASSESSMENT YE AR' WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING D EDUCTION U/S 80IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DED UCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CON TINUITY. THE ASSESSING OFFICERS ARE, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 80IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFTE R BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTICULA R CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DEDUCTION U S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INTERPRETING 'I NITIAL ASSESSMENT YEAR' AS MENTIONED IN SUB-SECTION (5) OF THAT SECTION FOR WH ICH THE STANDING COUNSELS/D.R.S BE SUITABLY INSTRUCTED. THE ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS CONCERNED. THE ABOVE FACTS ARE NOT DISPUTED THAT ASSESSEES OP ERATION OF POWER GENERATION STARTED IN FY 2005-06 RELEVANT TO A.Y. 2006-07, BUT DUE TO LOSSES AND DEPRECIATION LOSS, THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/ S. 80IA OF THE ACT. THE ASSESSEE HAS CLAIMED THOSE LOSSES AGAINST REGULAR B USINESS INCOME ARISING FROM EXPORT OF CUT AND POLISHED DIAMONDS. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IA AND OPTED THE INITIAL ASSESSMENT YEAR I.E. A.Y. 201 0-11, THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE BOARD CIRCUL AR, WHICH CLARIFIES THE INITIAL ASSESSMENT YEAR, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS RIGHTLY CLAIMED THE DEDUCTION IN A.Y. 2010-11 TREATING THE SAME AS INITIAL ASSESSMENT YEAR ITA NO.6767/MUM/2014 M/S. BHANSALI DIAMONDS 5 AND WE HOLD THE SAME. ACCORDINGLY, THE ORDERS OF T HE LOWER AUTHORITIES THAT AO AND THE CIT(A) ARE REVERSED AND THE APPEAL OF THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 8 TH JUNE 2016. SD/- SD/- (RAJESH KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 8 TH JUNE, 2016. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI