DCIT, Tiruppur V. Balu exports, Tiruppur

ITA 690/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77322 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Question of law

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . , . !' !' !' !' , # # # # $ $ $ $ BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.690/MDS/2014 # ' %' / ASSESSMENT YEAR :2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I, 121, 60 FEET ROAD, TIRUPUR 641 602. VS. M/S. BALU EXPORTS, 60, A-5, PALLADAM ROAD, ARULPURAM, TIRUPUR 641 605. [PAN : AACFB2805L] ( &' &' &' &' /APPELLANT ) ( ()&' ()&' ()&' ()&' / RESPONDENT ) &' * + / APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT ()&' * + / RESPONDENT BY : SHRI T. BANUSEKAR, C.A. * , / DATE OF HEARING : 26.05.2014 -% * , /DATE OF PRONOUNCEMENT : 28.05.2014 . . . . / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) II, COIMBATORE , DATED 23.12.2013 RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MANUFACTURING HOSIERY GARMENTS AND WIND MILL POWER GENERATION. THE ASSESSEE HAD FILED ITS RETURN DECLARING TOTAL I NCOME OF ` .6,35,39,148/-. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBS ERVED AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.69 6969 690 00 0 /M/ /M/ /M/ /M/1 11 14 44 4 2 DISALLOWANCE OF DEDUCTION U/S 80IA THE ASSESSEE HAVE CLAIMED DEDUCTION U/S 80LA TO THE TUNE OF RS.96,79,629/-. THE CLAIM OF THE ASSESSEE IS DISALL OWED AS EXPLAINED BELOW: A) ISSUE OF INITIAL ASSESSMENT YEAR: AS PER THE PRO VISIONS OF SECTION 80IA(5) OF IT ACT, ASSESSEE IS REQUIRED TO COMPUTE THE PROFITS OF THE ELIGIBLE BUSINESS AS IF SUCH ELIGIBLE BUSINESS IS T HE ONLY SOURCE OF INCOME OF THE ASSESSEE FROM THE INITIAL ASSESSMENT YEAR ONWARDS. SUCH INITIAL ASSESSMENT YEAR BEING THE YEAR IN WHICH ASS ESSEE COMMENCES THE ELIGIBLE BUSINESS. HOWEVER, ASSESSEE TOOK THE VIEW THAT INITIAL ASSESSMENT YEAR MEANS THE YEAR IN WHICH ASSESSEE BE GINS TO CLAIM DEDUCTION U/S.80IA OF THE IT ACT. THIS QUESTION OF LAW AS TO WHETHER INITIAL ASSESSMENT YEAR MEANS THE YEAR OF COMMENCEM ENT OR THE YEAR OF INITIAL CLAIM OF DEDUCTION WAS DECIDED BY THE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS VELAYUDHASAMY SPINNING MILLS LTD. THE HONORABLE HIGH COURT OF MADRAS DECIDED IN THE SAID CASE THAT THE INITIAL ASSESSMENT YEAR MEANS THE YEAR IN WHICH ASS ESSEE BEGINS TO CLAIM DEDUCTION U/S.80IA OF THE IT ACT AND ACCORDIN GLY LOSSES OF ELIGIBLE BUSINESS WHICH WERE SET OFF EARLIER CANNOT BE NOTIONALLY CARRIED FORWARD TO SET OFF AGAINST INCOME AGAINST WHICH DED UCTION U/S. 80LA IS COMPUTED. REVENUE CONTESTED THE SAID DECISION OF TH E HON'BLE HIGH COURT BY WAY OF FILLING SLP BEFORE THE HON'BLE SUPR EME COURT OF INDIA. IN LINE WITH THE CONTENTION OF THE REVENUE, I HOLD THAT THE INITIAL ASSESSMENT YEAR MEANS THE YEAR IN WHICH ASSESSEE CO MMENCES THE ELIGIBLE BUSINESS FOR THE REASONS STATED THERE IN T HE SAID SLP. 3. AGAINST THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS). THE L D. CIT(APPEALS), BY FOLLOWING THE DECISION IN THE CASE OF CIT V. VELAYU DHASAMY SPINNING MILLS LTD. 231 CTR 368 (MAD), ALLOWED THE CLAIM OF THE AS SESSEE. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. DR RELIED ON THE ORDER PASSED BY THE AS SESSING OFFICER. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE STRONGLY I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.69 6969 690 00 0 /M/ /M/ /M/ /M/1 11 14 44 4 3 SUPPORTED THE ORDER PASSED BY THE LD. CIT(APPEALS) AND RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. VELAYUDHASAMY SPINNING MILLS LTD. (SUPRA). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY I SSUE INVOLVED IN THIS APPEAL IS AS TO CLAIM DEDUCTION UNDER SECTION 80IA, WHETHER THE INITIAL YEAR IN WHICH THE ASSESSEE COMMENCES ELIGIBLE OR THE YEAR I N WHICH THE ASSESSEE BEGINS TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT. WE FIND THAT THIS ISSUE IS ALREADY DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASAMY SPINNING MILLS LTD., ( 231 CTR 368). THEIR LORDSHIP HELD AT PARA-13 OF THE ORDER AS UNDER:- 13. SEC.80-IA READS AS FOLLOWS: [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES 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 AMO UNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED F ROM SUCH BUSINESS 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 DE VELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (III) OF SUB-SECTION (4)] OR GENERATES POWER OR COMMENCES TR ANSMISSION OR DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RE NOVATION AND MODERNISATION OF THE EXISTING TRANSMISSION OR DISTR IBUTION LINES ): I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.69 6969 690 00 0 /M/ /M/ /M/ /M/1 11 14 44 4 4 (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I ) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPI NG, OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULF ILS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA O R BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTI TUTED UNDER ANY CENTRAL OR STATE ACT;] [(B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CEN TRAL 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 I NFRASTRUCTURE FACILITY;] 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 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 INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BU SINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOU S YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH 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 PROF ITS AND GAINS DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE FROM AN Y BUSINESS REFERRED TO IN SUB-S(4) I.E. REFERRED TO AS THE ELIGIBLE BUS INESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PERCENT OF THE PROFITS AND G AINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN 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, I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.69 6969 690 00 0 /M/ /M/ /M/ /M/1 11 14 44 4 5 THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTE EN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH TH E UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY I NFRASTRUCTURE ACTIVITY ETC. SUB-S(5) DEALS WITH QUANTUM OF DEDUCT ION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE U SED IN SUB-S(5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB-S(5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YEAR REFERRED TO IN SUB-S(2) I MPORTANT 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 B E IGNORED. (2)N IT IS FOR THE PURPOSE OF DETERMINING THE QUAN TUM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL 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 RELE VANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEA RS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGH T FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN Y EARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLI ER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS, ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNO T REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-SECTION DOES NOT CONTEMPLATE TO BRING SET OFF AMOUNT NOTIONALLY. FI CTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTE NDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 8. BEFORE US, THE REVENUE HAS NOT FILED ANY MATERIAL T O CONTROVERT THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE REFERRED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.69 6969 690 00 0 /M/ /M/ /M/ /M/1 11 14 44 4 6 CASE, THE LD. CIT(APPEALS) HAS RIGHTLY FOLLOWED THE ABOVE JUDGEMENT AND WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS). THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 28 TH OF MAY, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 28.05.2014 VM/- . * (#,/0 10%, /COPY TO: 1. &' / APPELLANT, 2. ()&' / RESPONDENT, 3. 2 ( ) /CIT(A), 4. 2 /CIT, 5. 03! (#,# /DR & 6. !4' 5 /GF.