ACIT, Bangalore V. M/s Khivraj Motors, Bangalore

ITA 894/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5320 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H N KHINCHA
• Keywords: Depreciation

Judgement Text

ITA.894/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T.A NOS.894/BANG/2016 (ASSESSMENT YEAR : 2012-13) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE -1(2)(1), BENGALURU .. APPELLANT V. M/S. KHIVRAJ MOTORS, NO.10/2, 4 TH FLOOR, KASTURBA ROAD, BENGALURU 560 001 .. RESPONDENT PAN : AAAFK6627K ASSESSEE BY : SHRI. H. N. KHINCHA, CA REVENUE BY : SHRI. M. K. BIJU, JCIT HEARD ON : 01.06.2017 PRONOUNCED ON : 02.06.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A) -1, BENGALURU, DT.11.01.2016, FOR THE ASSES SMENT YEAR 2012-13. ITA.894/BANG/2016 PAGE - 2 02. BRIEF FACTS ARE THAT THE ASSESSEE IS A FIRM AND HAS FILED THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR, DECLARING TOTAL INCOME OF RS.3,33,03,214/-, ON 30.09.2012. THE CASE WAS SELE CTED FOR SCRUTINY AND A NOTICE U/S.143(2) OF THE ACT WAS ISSUED TO THE ASSE SSEE. 03. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80IA OF THE ACT, TO THE EXTENT OF RS.1,30,82,75 3/-. THIS DEDUCTION WAS CLAIMED ON THE WIND-MILL POWER GENERATION RECEIPT O F RS.1,45,38,490/-, CLAIMING DEPRECIATION OF RS.2,61,647/- AND MAINTENA NCE OF RS.11,94,089/-. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS PURC HASED THE WIND-MILL DURING THE AYS 2005-06 AND 2006-07 AND THE DEPRECIA TION ON THE COST OF WIND-MILLS WAS CLAIMED IN EARLIER YEARS AT THE RATE OF 80%. AS PER THE AO, THESE LOSSES NEED TO BE NOTIONALLY CARRIED FORWARD IN VIEW OF THE PROVISIONS OF SECTION 80IA(5) OF THE ACT, AND THEREFORE, THE A O CALLED UPON THE ASSESSEE TO EXPLAIN THE DEDUCTIONS MADE. IN RESPON SE THERETO THE ASSESSEE HAS SUBMITTED A REPLY. HOWEVER, THE AO WAS NOT CON VINCED WITH THE REPLY AND THEREFORE, THE AO HAS MADE THE ADDITION. HE HE LD THAT THE NOTIONAL LOSS CARRIED FORWARD TO THE AMOUNT OF RS.5,57,52,581/- W AS REQUIRED TO BE ADJUSTED AND THEREAFTER THE ASSESSEE WOULD BE ELIGI BLE TO CLAIM THE ITA.894/BANG/2016 PAGE - 3 DEDUCTION FROM THE POSITIVE INCOME EARNED IN FUTURE YEARS. THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER APPROACHED THE CIT (A). 04. THE CIT (A), IN HIS ORDER HAS ALLOWED THE APPEA L OF THE ASSESSEE. IN PARA.4 OF THE ORDER IT WAS HELD AS UNDER : 4.THE APPELLANT SUBMITTED IN SUPPORT OF ITS CONTENT ION THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. ANIL H. LAD 45 TAXMANN. COM 98 (KARNATAKA), WHEREIN IT WAS OBSERVE D THAT 'FOR PURPOSE OF DETERMINING QUANTUM OF SECTION 80--IA DEDUCTION IN YEAR IN WHICH ASSESSEE PUT FORTH CLAIM, REVENUE CANNOT TAKE INTO CONSIDERATION LOSS AND DEPRECIATION FROM ELIGIBLE BUSINESS OF EARLIER YEAR WHICH WAS ALREADY SET-OFF AGAINST INCOME OF ASSESSEE FROM OTHER SOURCE'. THE APPELLANT ALSO REFERRED THE DECISION OF THE CIT(A)-V IN THEIR OWN CASE, WHEREIN FOLLOWING THE ABOVE MENTIONED DECISION OF THE HON' BLE KARNATAKA, HE HE LD THAT THE APPELLANT'S CLAIM FOR DEDUCTION U/S 801A IS IN ACCO RDANCE WITH THE PROVISIONS OF LAW, AND HENCE ALLOWABLE TO THE ASSESSEE APPELLA NT. IT IS FURTHER HELD THAT AY 2 010 - 11 IS THE 'INITIAL ASSESSMENT YEAR , ' OF THE CLAIM OF DEDUCTION U/S 80IA FOR THE WINDMILL DIVISION OR' UN DERTAKING OF THE APPELLANT, CONSISTING OF FOUR WINDMILLS, AS PER THE OPTION EXERCISED BY THE APPELLANT. THE PROFITS OF THE UNDERTAKING SH ALL BE ACCORDINGLY ELIGIBLE FOR THE SAID DEDUCTION FOR NINE MORE SUCCE EDING ASSESSMENT YEARS. IT IS ONLY IN THE CASE OF LOSS IN BUSINESS O F THE ELIGIBLE UNDERTAKING DURING THE TAX HOLIDAY PERIOD OF TEN YE ARS BEGINNING AY 2010-11, THAT THE SAME CAN BE CARRIED FORWARD AND S ET OFF AGAINST THE PROFITS OF THE UNDERTAKING, NOTIONALLY OR OTHERWISE . IN VIEW OF THE ABOVE DECISION, THE SUBMISSION OF THE APPELLANT REGARDING DEDUCTION U/S 8011\ IS UPHELD. HOWEVER, AS MENTIONE D BY THE AO IN THE ASSESSMENT ORDER , IT WOULD BE WORKED OUT AS RS.1,30,82,753 - RS.5,00,00- = RS.1,25,82,753/-. ITA.894/BANG/2016 PAGE - 4 05. FEELING AGGRIEVED BY THE ORDER OF THE CIT (A), REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL : ITA.894/BANG/2016 PAGE - 5 06. THE LD. DR HAS SUBMITTED THAT THE ORDER PASSED BY THE CIT (A) ALLOWING THE CLAIM OF THE ASSESSEE, BASED ON THE FI NDING GIVEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE MATTER OF ANIL H. LAD (SUPRA), IS NOT SUSTAINABLE AND THEREFORE IS REQUIRED TO BE ANN ULLED AND THEREFORE THE APPEAL IS REQUIRED TO BE ALLOWED. 07. ON THE OTHER HAND, THE LD. AR HAS DRAWN OUR ATT ENTION TO THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT AND ALSO THE BOARD CIRCULAR NO.1 OF 2016, DT.15.02.2016. 08. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD, AS ALSO THE JUDGMENT IN ANIL H. LAD (SUPRA) AND CIRCULAR OF THE CBDT (SUPRA). IN OUR VIEW, THE ISSUE IS SQUARELY C OVERED BY THE JURISDICTIONAL HIGH COURT DECISION AS MENTIONED IN THE IMPUGNED ORDER. PARA 8 AND 9 OF THE SAID JUDGMENT IS REPRODUCED HER EUNDER : 8. FROM THE AFORESAID PROVISIONS, IT IS CLEAR THAT INCENTIVE IS GIVEN TO THE ASSESSEE WHICH HAS INVESTED IN INFRASTRUCTURE. THE SAID BENEFIT HAS TO BE CLAIMED FRORN THE ELIGIBLE BUSINESS FOR A PERIOD OF TEN CONSECUTIVE YEARS. THIS TEN CONSECUTIVE YEARS IS TO BE DECIDED BY THE ASSESSEE OUT OF 15 YEARS. THAT 15 YEARS IS TO BE COMPUTED FROM THE DAY THE BU SINESS WAS SET UP. CLAIMING OF DEDUCTION WOULD ARISE ONLY WHEN THERE I S A PROFIT EARNED BY THE ELIGIBLE BUSINESS. BEFORE ANY PROFIT IS EARNED, THE QUESTION OF DETERMINING THE QUANTUM OF DEDUCTION WOULD NOT ARISE. BEFORE THE ASSESSEE STARTS EARNING PROFIT, FROM THIS ELIGIBLE BUSINESS, AS HE HAS ALREADY MADE INVESTMENT AND THE DEPRECIATION OF THAT INVESTMENT AND LOSSES SUSTAINED IN THE SAID ELIGIBLE BUSINESS COULD BE SE TOFF AGAINST THE PROFITS EARNED BY THE ASSESSEE, IF THE ASSESSEE HAS OTHER B USINESS. THERE FORE , THE 'PREVIOUS YEAR' AS DEFINED UNDER SECTION 3 OF THE A CT MAKES IT CLEAR FOR THE ITA.894/BANG/2016 PAGE - 6 PURPOSE OF THIS ACT, 'PREVIOUS YEAR THE FINANCIAL Y EAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR. PROVISO TO THAT PROV ISIONS, STATES THAT IN THE CASE OF A BUSINESS OR PROFESSION NEWLY SET UP, OR A SOURCE OF INCOME NEWLY COMING INTO EXISTENCE, IN THE SAID FINANCIAL YEAR, THE PREVIOUS YEAR SHALL BE THE PERIOD BEGINNING 'WITH THE DATE OF SETTING UI) OF THE BUSINESS OR PROFESSION OR, AS THE EASE MAY BE, THE (LATE ON WHI CH THE SOURCE OF INCOME NEWLY COMES INTO EXISTENCE AND ENDING 'WITH THE SAI D FINANCIAL YEAR. THEREFORE, THE PREVIOUS YEAR SHALL BE THE PERIOD BE GINNING WITH THE DATE OF SETTING UP OF THE BUSINESS OR PROFESSION . BUT, SUBSECTION 80IA COMES INTO PICTURE ONLY WHEN A CLAIM, IS PUTFORTH FOR DEDUCTIO N. IT IS ONLY THEN THE PROFITS EARNED IN THE ELIGIBLE BUSINESS IS TO BE SE TOFF AGAINST THE DEPRECIATION AND LOSSES OF THE ELIGIBLE BUSINESS. IF NO CLAIM IS PUTFORTH, THERE IS NO QUESTION OF' SETTING OFF THE PROFITS AGAINST THE LO SSES. IF THE ASSESSEE IS CARRYING ON OTHER BUSINESS, THAT LOSS AND DEPRECIAT ION INCURRED BY MM UNDER THE PROVISIONS OF THE ACT CAN BE SET OFF AGAI NST OTHER SOURCES.. THERE IS NO PROHIBITION. THEREFORE, ONCE THE ASSESS EE SETS OFF HIS PROFITS EARNED FROM OTHER SOURCE AGAINST THE DEPRECIATION A ND LOSS SUFFERED IN THE ELIGIBLE BUSINESS, AGAIN THE SAME CANNOT BE SET OFF AGAINST THE PROFITS DERIVED FROM THE ELIGIBLE BUSINESS IF AND WHEN A CL AIM FOR DEDUCTION IS MADE. 9 . THE MADRAS HIGH COURT IN THE AFORESAID VELAYUDHASW AMY'S CASE INTERPRETING THE VERY PROVISION HELD, FROM. A READI NG OF SUB-SECTION (1) SECTION 8O-IA, IT IS CLEAR THAT IT PROVIDES THAT WH ERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIV ED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB- SECTION (4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPU TING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAM E IS DEFINED IN SUB- SECTION (4). SUB-SECTION (2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OP TION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WIL L NOT HE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT ARID THE SAME IS BEGIN NING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AN D BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB- SECTI ON (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INITIAL ASSESSMENT YEAR' ARE USED IN SUB-SECTION (5) AND TH E SAME IS NOT DEFINED ITA.894/BANG/2016 PAGE - 7 UNDER THE PROVISIONS. IT IS TO BE NOTED THAT 'INITI AL ASSESSMENT YEAR' EMPLOYED IN SUB-- SECTION (5) IS DIFFERENT FROM TIL E WORDS 'BEGINNING FROM THE YEAR' REFERRED TO IN SUB-SECTION (2). SUB- SECTION (5) STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL TH E PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION; FOR THE ASSESSMENT YEAR I MMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR, THEREBY A F ICTION IS CREATED BY INTRODUCING A DEEMING PROVISION AND THEREFORE, IT I S CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, D URING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSE QUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LO SSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE A L R E A D Y O F F A G A I N S T T H E I N C O M E O F T H E A S S E S S E E . L O O K I N G F O R W A R D T O A P E R I O D O F T E N YE A R S F R O M T H E I N I T I A L A S S E S S M E N T I S CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS A NY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OF F AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF I S TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB- SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIO NALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME C ANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 09. IN OUR VIEW IT IS THE OPTION GIVEN BY THE ACT T O THE ASSESSEE TO OPT FOR THE INITIAL YEAR FOR AVAILING THE BENEFIT OF SECTIO N 80IA. IT IS NOT FOR THE AO TO DECIDE WHICH YEAR WOULD BE THE INITIAL YEAR FOR CLAIMING THE BENEFIT U/S.80IA. THEREFORE, ONCE THE ASSESSEE EXERCISES H IS RIGHT AND OPTED THE INITIAL YEAR, THEN THE BENEFIT FLOWING U/S.80IA IS AVAILABLE TO THE ASSESSEE. ITA.894/BANG/2016 PAGE - 8 IN VIEW THEREOF AND ALSO IN VIEW OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER THE ORDER OF THE CIT (A). 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 2 ND DAY OF JUNE, 2017. SD/- SD/- (A. K. GARODIA) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR