Alpha Hi-Tech Fuel Ltd., Mumbai V. The Deputy Commissioner of Income Tax, Snr Circle, Surendranagar

ITA 68/RJT/2009

AI Insights

The case involves Alpha Hi-Tech Fuel Limited appealing against the order of the Commissioner of Income Tax (Appeals) which upheld the Assessing Officer's decision denying the claim for deduction under section 80IA(4) of the Income Tax Act, 1961 for the assessment year 2005-06. The company argued that it was eligible for the deduction as it had upgraded its infrastructure for solid waste management, which commenced in the financial year 2003-04. The Assessing Officer had denied the deduction on the grounds that the company had been in business since 1994-95 and the period for claiming the benefit had expired. The Tribunal, referencing several judicial precedents, concluded that the conditions for claiming the deduction under section 80IA(4) should be verified in the initial year of claim and not in subsequent years, provided the initial claim was allowed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135999 (ITAT-RAJKOT)
• Duration Of Justice: 14 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2023
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2009
• Other Referred Cases: Saurashtra Cement & Chemical Industries Ltd. vs. CIT, Janak Dehydration (P.) Ltd vs. ACIT, DCIT vs. ACE Multi Axes System Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEETOCLAIM; FORTHEASSESSEETOCLAIMTHE
• Assessee Lawyers: FILINGCHARTNARRATING
• Keywords: Depreciation; TDS

Judgement Text

आयकरअपीलीयअधिकरण,राजकोटनयायपीी,राजकोट। INTHEINCOMETAXAPPELLATETRIBUNAL RAJKOTBENCH,RAJKOT (THROUGHE-COURT) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.R.SENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं./I.T.A.No.68/Rjt/2009 (धििाधरणणवध/AssessmentYear2005-06) AlphaHi-TechFuelLimited, StationRoad, Lakhtar, Dist.Surendranagar, Gujarat-382775 बिाम/ Vs. D.C.I.T, Surendranagar स्ायीलेखासं./जीआइआरसं./PAN/GIRNo.:AAACA4258P (अपीला््/Appellant) (प्य््/Respondent) अपीला््थरसे/ Appellantby : ShriKalpeshDoshi,A.R प्य््करथरसे/ Respondentby : ShriB.DGupta,Sr.D.R. सुिणाईकरतारीख/ DateofHearing 08/06/2023 घोवणाकरतारीख/ DateofPronouncement 05/09/2023 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceofAssesseeagainstthe orderoftheLearnedCommissionerofIncomeTax(Appeals),[Ld.CIT(A)inshort], dated08/12/2008arisinginthematterofassessmentorderpassedunders. 143(3)oftheIncomeTaxAct,1961(hereinafterreferredtoas"theAct")relevant totheAssessmentYear(A.Y.)2005-06. ITANo.68/RJT/2009 A.Y.2005-06 -2- 2.Theassesseehasraisedthefollowinggroundsofappeal: 1.ThelearnedCIT(A),haserredinrejectingappellant’sclaimfordeduction u/s.80IA(4);AND 2.Withoutprejudicetogroundno.1,thelearnedCIT(A)haserredinupholdingthe AO’sactionofdisallowanceu/s.40(a)(ia)ofadvertisementexpensesofRs.5lacswithout appreciatingthefactthattheappellanthasnotevenclaimeddeductionforthesame. Theappellantcravesleavetoamend,modify,addorsubstitutetheabovegroundsof appeal. 3.The1 st issueraisedbytheassesseeingroundnumber1isthatthelearned CIT-Aerredindenyingtheclaimofdeductionmadebyitundertheprovisionsof section80IA(4)oftheAct. 4.Thenecessaryfactsarethattheassesseeinthepresentcaseisapublic limitedcompanyandclaimedtobeengagedintheactivityofmaintenanceof infrastructurefacilitybeingsolidwastemanagement.Aspertheassessee,the profitfromtheimpugnedactivitywaseligiblefordeductionundersection80IA(4) oftheActeffectivefromassessmentyear2004-05beingmaintenanceof infrastructurefacilities.Theassesseecompanywasestablisheddated20January 1993whichhastakenovertherunningbusinessofpartnershipfirmnamelyM/s NemiBriquettesIndustriesfromApril1993.Theassesseerightfromtheinception hasbeeneitherclaiming,inmostoftheassessmentyears,hundredpercent depreciationorthebenefitundersection80Ior80JJAoftheActindifferent assessmentyearssubjecttotheavailabilityofprofit. 4.1Aspertheassessee,itacquiredplantsandmachineryintheearlieryears butthesamewereundertheprocessofupgradation.Butfinally,theseplantsand machinerywereputtouseeffectivefrom1January2004andthustheinitialyear isthefinancialyear2003-04,correspondingtotheassessmentyear2004-05. Accordingly,theassesseecontendedthatithasstartednewinfrastructure facilitiesbyupgradingitsbusinesswithnewplantsandmachinery.Thus,the ITANo.68/RJT/2009 A.Y.2005-06 -3- assesseeshouldbeeligiblefordeductionundersection80IA(4)oftheAct. Accordingly,theassesseeclaimeddeductionofRs.44,68,606.00underthe provisionsofsection80-IAoftheAct 5.However,theAOfoundthattheassesseehasbeencarriedoutitsbusiness activitiesfromtheassessmentyear1994-95asevidentfromthedepreciation claimedbytheassesseeindifferentyearaswellasthedeductionsclaimedunder section80Iand80JJAtheoftheActintheearlierassessmentyears.Thus,the periodof10yearsforclaimingthebenefitofdeductionundersection80-IA(4)of theActhasalreadyexpiredfromtheinitialassessmentyear. 5.1TheAOalsoobservedthattheassesseeisengagedinthebusinessof manufacturingofenergy-savingdevicesbeingbriquetteswhichcannotbe consideredasinfrastructurefacilities. 5.2ItwasalsoadmittedbytheAOthatthebenefitofdeductionundersection 80-IA(4)oftheActwithrespecttomodernizationandupgradationofplantand machinerywasinsertedinthestatuteeffectivefrom1April2004butitwas limitedtotheindustrialundertakingengagedinthebusinessofgenerationand distributionofpowerwhereastheassesseeisengagedinthemanufacturing activityofenergy-savingdevicesbeingbriquettes. 6.Inviewoftheabove,theAOdeniedthebenefittotheassesseeforthe deductionclaimedbyitundersection80-IA(4)oftheActforRs.44,68,606.00and addedtothetotalincomeoftheassessee. 7.AggrievedassesseepreferredanappealtothelearnedCIT-Awhohas confirmedtheorderoftheAO. ITANo.68/RJT/2009 A.Y.2005-06 -4- 8.BeingaggrievedbytheorderofthelearnedCIT-A,theassesseeisin appealbeforeus. 9.ThelearnedARbeforeusfiledapaperbookrunningfrompages1to36 andthelearnedARalsofiledwrittensubmissionsdated4-2-2023/27-2-2023 alongwithsynopsisofargumentsatthetimeofhearing.Amongothercontentions, thelearnedARsubmittedthattheassesseehasclaimeddeductionundersection 80-IAoftheActforfirst-timeintheassessmentyear2004-05whichwasallowed intheassessmentframedundersection143(3)r.w.s.147oftheAct.Thus,asper thelearnedARthevalidityofthedeductionundersection80-IA(4)oftheActin thesubsequentyearcannotbedisputed.Insupportofhiscontention,thelearned ARhasvehementlyreliedontheseveraljudicialpronouncementswhicharepart ofrecord. 10.Ontheotherhand,thelearnedARhasfiledwrittensubmissionsdated27- 02-2023,runningfrompages1to12whereinitwasinteraliacontendedasunder: 6.Row,beforetheHon'bleITATtheassesseehasraisedatotallynewclaimofi.e.settingup ofanewindustrialundertakingintheFY:2003-04i.e.AY2004-05.Thoughnoclaimfor deductionU/s80IA(4)wasmadeintherelevantAY;2004-05,butfromthesubsequentAYi.e 2005-06.Duringthecourseofhearingon21.02.2023theLd.ARofthefassesseeclaimed beforetheHon'bleTribunalthatdeductionU/s801A(4)wasallowedby,thedepartmentfor AY:2004-05istotallyfalseandmisplaced.TheLdARhadthussubmittedthatsinceitsclaim fordeductionu/s80IAwasacceptedandallowedforAY2004-05,theclaimforthisyear shouldalsobeallowed.Pursuanttotheaboveclaimtherelevantrecord^forAY2004-05 wereexamined.Acopyofthereturnofincomealongwiththecomputation;isenclosedfor yourkindperusal(Annexures-B&c).OnperusalofthereturnofincomeinFormNo.1filed on20.10.2004itisseenthattheassesseehasnotclaimedanydeductionunderChapterVIA andneitherithadfiledtherequiredauditreportinformNo10CCB[Para3.1ofAOfor2004- 05][AnnexD].Thisisalsoverifiablefromthecomputationofincome(Annexures-C). Therefore,theassessee'sassertionthattheclaimofdeductionu/s80IAforAY2004-05was claimedandallowedbytheDepartmentistotallymisplaced. 11.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe orderspassedbytheauthoritiesbelowhavebeenchallengedbythelearnedAR onvariouscountswhichwasalsorebuttedbythelearnedDRappearingonbehalf ITANo.68/RJT/2009 A.Y.2005-06 -5- oftherevenue.BoththelearnedARandtheDRhavefiledbeforeus,thewritten submissionsonvariousdateswhichareavailableonrecord.Thegistofthe revenuefordenyingthebenefitoftaxholidayundersection80-IAoftheActis thatnonewindustrialundertakingaspertheprovisionofsection80IA(3)&(4)of theActcameintoexistence.Aspertherevenuethenewplantinmachinery havinglatesttechnologybroughtinbytheassesseeisonlyanexpansionof existingbusiness.Ontheotherhand,oneofthecontentionsofthelearnedARof theassesseeisthatallthesepre-conditionscanonlybeverifiedintheinitialyear ofclaimoftaxholiday.Assuchthepre-conditiontoavailthebenefitoftax holidayscannotbeexaminedanddisturbinsubsequentyearofclaim.Beforewe proceedtoadjudicatetheissueraisedbytheassessee,wefinditpertinenttofind outwhethertheassessmentyearindisputeinwhichtheassesseehasclaimed deductionundersection80IAoftheActintheyearunderconsiderationisthe2 nd assessmentyear. 11.1Itisthesettledpositionoflawthattheconditionsattachedforclaimingthe deductionundersection80-IAoftheActhastobeverifiedbytherevenueinthe 1 st yearitselfi.e.intheinitialassessmentyear.Inotherwords,therevenueis debarredfromdenyingthebenefitofthedeductiontotheassesseeclaimedbyit undersection80-IAoftheActaftertheinitialassessmentyearonaccountof examinationofpreconditions.Inholdingso,wedrawsupportandguidancefrom thejudgementofGujaratHighCourtinofSaurashtraCement&Chemical IndustriesLtd.Vs.CITreportedin123ITR669whereinitwasheldasunder: 7.ThistakesustothequestionsreferredtousintheIncome-taxReferenceNo.239of 1975attheinstanceoftheRevenue.Wedonotfindanyjustifyingreasonstointerfere withtheorderoftheTribunalsofarasboththesequestionsareconcerned.TheTribunal wasperfectlyjustifiedintakingtheviewthatifthereliefoftaxholidaywasgrantedtothe assessee-companyfortheassessmentyear1968-69,theasseesseewas,therefore, entitledtocontinuanceofthatreliefforthesubsequentfouryearsandtheITOwouldnot bejustifiedinrefusingtocontinuetheallowancefortheassessmentyearunder reference,i.e.,1969-70withoutdisturbingtherelieffortheinitialyear.Atthisstage,it shouldbenotedthatforpurposesofentitlementtothereliefundersection80Jwhichis correspondingtosection15(c)ofthe1922Act,anindustrialunitclaimingsuchreliefmust benew,inthesense,thatnewplantsandmachineriesareerectedforproducingeither thesamecommoditiesorsomedistinctcommodities—TextileMachineryCorporation ITANo.68/RJT/2009 A.Y.2005-06 -6- Ltd.v.CIT[1977]107ITR195andCITv.IndianAluminiumCo.Ltd[1977]108ITR367. Itshouldbeemphasisedthatitwascommongroundbetweenthepartiesthatthe assessee-companyhasincreasedthecapacityofitscementmanufacturingplantfrom600 tonnesperdayto1,600tonnesperdaybysettingupnewmachineryandplantnecessary forthatpurpose.Inouropinion,theTribunalwasrightwhenitexpresseditsviewthatthe questioninvolvedwasnotaquestionwhethertherewouldbenobartotheviewwhichthe ITOhastakenonprincipleofresjudicata.TheneatquestiontowhichtheTribunal addresseditself,andinouropinionrightly,waswhethertheITOwasjustifiedinrefusing tocontinuethereliefoftaxholidaygrantedtotheassessee-companyfortheassessment year1968-69intheassessmentyearunderreference,i.e.,1969-70withoutdisturbingthe reliefgrantedfortheinitialyear.Itshouldbestatedthatthereisnoprovisioninthe schemeofsection80Jsimilartoonewhichwefindincaseofdevelopmentrebatewhich couldbewithdrawninsubsequentyearsforbreachofcertainconditions.Nodoubt,the reliefoftaxholidayundersection80Jcanbewithheldordiscontinuedprovidedtherelief grantedintheinitialyearoftheassessmentisdisturbedorchangedonvalidgrounds.But withoutdisturbingthereliefgrantedintheinitialyear,theITOcannotexaminethe questionagainanddecidetowithholdorwithdrawthereliefwhichhasbeenalreadyonce granted. 11.2Wealsofindsupportandguidancefromtheorderofcoordinatebenchof thistribunalincaseofJanakDehydration(P.)Ltdvs.ACITreportedin44SOT93 whereinitwasheldasunder: 5.Wehaveheardtherivalcontentionsandgonethroughfactsandcircumstancesofthe case.Wehavealsoperusedtheordersofthelowerauthoritiesandthematerialavailable onrecord.IntheinstantcaseitisobservedthattheAssessingOfficerwhileframingthe assessmenthadrestrictedthedeductionundersection80-IBoftheActtotheassessee afterdeductingfromtheeligibleamountthedeductionclaimedandallowedtothe assesseeundersection80HHCoftheAct.Aggrievedagainstthisaction,assessee preferredappealbeforeCIT(A)andCIT(A)enhancedtheassessmentoftheassesseeby withdrawingthedeductionundersection80-IBoftheActallowedtotheassesseebythe AssessingOfficeronthegroundthatthemanufactureandsaleofdehydratedonionflakers andpotatochipsisnotmanufactureorproductionofarticleorthingtobeeligibleto incentivedeductionundersection80-IBoftheAct.Theassesseebyfilingchartnarrating factthatallthroughassessmentyears1993-94to2002-03assesseehadbeenallowed deductionundersection80-IBoftheActandthereforeinthepresentyearbeing assessmentyear2003-04,theclaimoftheassesseeisthatitiseligiblefordeduction undersection80-IBoftheActandthattheconditionstobeeligiblefordeductionunder section80-IBhavetobeconsideredanddecidedinthefirstyearofdeductionandnotin thesubsequentyears.WefindthatundertheITAct,eachyearisseparateunitof assessmentandtaxableincomeaswellastaxliabilityaretobedeterminedkeepingin viewthefactsprevailinginthatyearandthelawasapplicable.Further,resjudicataisnot applicableinanincome-taxassessmentisalsoanestablishedpositionoflawbutthe principleofconsistencyistobefollowed.Insection80-IBoftheAct,thereareseveral conditionsliketheindustrialunitsshouldnotbeformedbyreconstructionorsplittingupof anexistingunit.Theseconditionsaretobeexaminedintheinitialyearoftheclaimand whenfoundsatisfiedintheassessmentoftheinitialyeartheAssessingOfficerinthe assessmentofsubsequentyearcannotignorethatandtakeadifferentview. ITANo.68/RJT/2009 A.Y.2005-06 -7- 11.3WealsodrawsupportandguidancefromthejudgmentofHon’bleSupreme courtincaseofDCITvs.ACEMultiAxesSystemLtdreportedin88taxmann.com 69whereitwasobserved,theissueregardingallowancesofdeductionunder section80IBofActtosmallscaleindustrialundertaking,thatcertainprecondition toallowtaxholidayunderimpugnedsectioncanbeonlyexaminedintheinitial assessmentyearonly.TherelevantobservationofHon’bleSupremeCourtis extractedasunder: 12.Theschemeofthestatutedoesnotinanymannerindicatethattheincentiveprovided hastocontinuefor10consecutiveyearsirrespectiveofcontinuationofeligibility conditions.Applicabilityofincentiveisdirectlyrelatedtotheeligibilityandnotdehorsthe same.Ifanindustrialundertakingdoesnotremainsmallscaleundertakingorifitdoesnot earnprofits,itcannotclaimtheincentive.Nodoubt,certainqualificationsare requiredonlyintheinitialassessmentyear,e.g.requirementsofinitial constitutionoftheundertaking.Clause2limitseligibilityonlytothoseundertakingsas arenotformedbysplittingupofexistingbusiness,transfertoanewbusinessof machineryorplantpreviouslyused.Certainotherqualificationshavetocontinuetoexist forclaimingtheincentivesuchasemploymentofparticularnumberofworkersaspersub- clause4(i)ofClause2inanassessmentyear.Forindustrialundertakingsotherthansmall scaleindustrialundertakings,notmanufacturingorproducinganarticleorthingsspecified in8thScheduleisarequirementofcontinuingnature. 11.4Inthelightoftheabovediscussion,weproceedtoverifywhetherthe assesseehasclaimeddeductionfirst-timeundersection80IAoftheActinthe assessmentyear2004-05.Inthisregard,wenotethattheassesseehasfiledits returnofincomefortheassessmentyear2004-05dated20-10-2004whichwas processedundersection143(1)(a)oftheAct.Thereafter,thecaseoftheassessee wasselectedunderincomeescapingassessmentundersection147oftheActfor calculatingthetaxliabilityundertheprovisionsofsection115JBoftheAct. However,theassesseeduringtheassessmentproceedingshasalsomade submissionsregardingtheadmissibilityofhisclaimundertheprovisionsofsection 80IAoftheAct.Therelevantfactfromtheassessmentorderisextractedbelow: Theassesseehasnosubmittedanyreplyonthepointofassessmentofincometobe taxedu/s.115JBoftheAct,ithassubmittedthereplyonthepointsofadmissibilityof deductionu/s.80IA/80IBandu/s.80JJAoftheAct.Itmeanstheassesseehasacceptedthe taxabilityofincomeproposedu/s.115JBoftheAct.Therefore,incomeoftheassesse assessableinthebooksprofitofRs.31,52,571/-isworkedoutfromtheaccounts submittedalongwiththereturnofincome. ITANo.68/RJT/2009 A.Y.2005-06 -8- 11.5BesidestheabovewehaveperusedthepaperbookfiledbythelearnedAR andfindthattheassesseehasfurnishedform10CCB,areportofthechartered accountantforclaimingthedeductionundersection80IAoftheActforthe assessmentyear2004-05andtheyeartheassessmentyearindisputei.e.2005- 06whichareplacedonpages22to29ofthepaperbook. 11.6Wehavealsoperusedthestatementofincomefiledbytheassessee pertainingtotheassessmentyear2004-05andnotethattheassesseehasclearly madereferencestothesections80IA/80JJAoftheActwhichcanbeverifiedfrom page13oftheWSfiledbytheRevenue.Atthisjuncture,itisalsonotoutofthe placetomentionthattherewasnoprofitshownbytheassesseeunderthe normalcomputationofincometoclaimthebenefitofdeductionundersection 80IAoftheAct.Insimplewords,therewasnooccasionfortheassesseetoclaim thedeductionundersection80IAoftheActbeingnilprofiti.e.Profitofthe assessmentyear2004-05wassetoffagainsttheunabsorbeddepreciationwhich isevidentfromthecomputationofincomefiledbytheassesseewhichisavailable onpage13oftheWSfiledbytheRevenue.Thus,aquestionmayariseifthere wasnopositiveincomethenwhatwasthereasonfortheassesseetoclaimthe deductionundersection80IAoftheAct.However,itisthechoiceoftheassessee toselecttheinitialassessmentyearandthereforethesamecannotbequestioned. Furthermore,thereisapossibilitythattheAOduringtheassessmentproceedings mightdisallowtheexpenseswhichmayturnthelossoftheassesseeintopositive income,theninthateventualitytheassesseecanclaimthebenefitofdeduction undersection80IAoftheAct. 11.7Inthelightoftheabovediscussionsandthedocumentsavailableonrecord, weareinclinedtoholdthatthedeductionundersection80IAoftheActwasfirst- timeclaimedbytheassesseeintheimmediatelyprecedingassessmentyear. Therefore,thedeductionundersection80IAclaimedbytheassesseeinthe subsequentyearcannotbequestioneduntilandunlessthedeductionclaimedby ITANo.68/RJT/2009 A.Y.2005-06 -9- theassesseeintheinitialassessmentyearisdisturbed.Thus,weareinclinedto setasidetheorderofthelearnedCIT-AanddirecttheAOtodeletetheaddition madebyhim.Hence,thegroundofappealoftheassesseeisherebyallowed. 12.The2 nd issueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingtheorderoftheAObysustainingthedisallowanceof₹5lakhson accountofnon-deductionofTDSundertheprovisionsofsection40(a)(ia)ofthe Act. 13.TheAOduringtheassessmentproceedingsbasedontheauditreport foundthattheassesseehasgivenanadvanceof₹5lakhstothepartynamely GarimaCommunicationtowardstheadvertisementexpenseswithoutdeducting theTDS.Therefore,theAOdisallowedthesameandaddedtothetotalincomeof theassessee. 14.OnappealthelearnedCIT(A)alsoconfirmedtheorderoftheAO. 15.BeingaggrievedbytheorderofthelearnedCIT(A)theassesseeisin appealbeforeus. 16.ThelearnedARbeforeuscontendedthattheassesseehasneverclaimed thesumof₹5lakhsasanexpenseandthereforethequestionofmakingthe disallowancedoesnotariseonaccountofnon-deductionofTDS. 17.Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe authoritiesbelow. 18.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Atthethreshold,wenotethattheassesseehasnot claimedthedeductionof₹5lakhsshownasanadvancetothepartynamely ITANo.68/RJT/2009 A.Y.2005-06 -10- GarimaCommunication.Thus,insuchasituationweareoftheviewthatthereis noquestionofmakingthedisallowanceof₹5lakhsbyaddingtothetotalincome oftheassessee.Accordingly,wesetasidethefindingofthelearnedCIT(A)and directtheAOtodeletetheadditionmadebyhim.Hencethegroundofappealof theassesseeareallowed. 19.Intheresulttheappealfiledbytheassesseeisallowed. ThisOrderpronouncedinOpenCourton05/09/2023 Sd/-Sd/- (T.R.SENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER TRUECOPY Ahmedabad,Dated05/09/2023 Manish