Assistant Commissioner of Income-tax, V. M/s. Preetam Enterprises, Kolhapur

ITA 928/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0993 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 928 /PN/201 4 / ASSESSMENT YEAR : 20 1 0 - 1 1 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1, KOLHAPUR . / APPELLANT VS. M/S. PREETAM ENTERPRISES, 1325/31, SHIVAJI UDYAM NAGAR, DIST. KOLHAPUR . / RESPONDENT PAN: AA CFP 2436P / APPELLANT BY : SHRI B.C. MALAKAR / RESPOND ENT BY : NONE / RESPOND ENT BY : NONE / DATE OF HEARING : 08 . 1 0.2015 / DATE OF PRONOUNCEMENT: 16 .1 0.2015 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) , KOLHAPUR DATED 1 3 . 0 1 .20 1 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. TH E REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT IN COMPUTATION OF DEDUCTION U/S 80IA(4)(A), THE UNABSORBED DEPRECIATION AND BROUGHT ITA NO. 928 /PN/20 1 4 M/S. PREETAM ENTERPRISES 2 FORWARD LOSSES OF EARLIER YEARS ARE NOT REQUIRED TO BE SET OFF BEFORE DETERMINING THE ELIGIBLE PROFITS? 2. WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT IN TERMS OF SE CTION 80IA(5) OF THE I. T. ACT 1961 THE 'INITIAL YEAR' WOULD BE THE YEAR FROM WHICH THE ASSESSEE CHOOSE THE CLAIM OF DEDUCTION ALLOWABLE U/S 80IA(4)(IV)(A)? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN IGNORING THAT ON PARTING OF POSSESSION OF THE MACHINERY COUPLED WITH FREEDOM TO THE VENDOR OF USAGE OF THE MACHINERY IN HIS BUSINESS, THE ASSESSEE CEASED TO HAVE BENEFICIAL OWNERSHIP OF THE MACHINERY IN TERM OF SECTION 32 OF THE I. T. ACT 1961. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING THE ASSESSEE'S APPEAL ON THE CLAIM OF DEPRECIATION OF MACHINERY GIVEN TO VENDORS? 3. THE ASSESSEE HAS MOVED AN APPLICATION SEEKING A DJOURNMENT. HOWEVER, ON THE PERUSAL OF RECORD, WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO EARLIER YEARS. THE ADJOURNMENT APPLICATION WAS THUS, REFUSED AND WE PROCEED TO DEC IDE THE APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. THE REVENUE. 4. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT ON INCOME FROM WINDMILL UNIT. THE ASSESSEE HAD SHOWN NE T PROFIT OF RS.13,62,398/ - FOR THE WINDMILL DIVISION AT SATARA AND RS.32,46,498/ - FOR WINDMILL AT SANGLI. THE ASSESSEE HAD CLAIMED THE SAID INCOME AS EXEMPT UNDER SECTION 80IA(4)(IV)(A) OF THE ACT. THE ASSESSING OFFICER NOTED THAT WHILE COMPUTING THE SAI D DEDUCTION, THE ASSESSEE HAD IGNORED THE BROUGHT FORWARD DEPRECIATION AND BUSINESS LOSSES INCURRED IN THE WINDMILL AT SATARA DIVISION IN THE EARLIER YEARS. SIMILARLY, THE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF WINDMILL DIVISION AT SANGLI FOR THE FI RST TIME IN THE CAPTIONED ASSESSMENT YEAR AND HAD IGNORED THE DEPRECIATION AND BUSINESS LOSSES INCURRED IN THE SAID D I VISION IN THE EARLIER YEARS. THE ASSESSING OFFICER ITA NO. 928 /PN/20 1 4 M/S. PREETAM ENTERPRISES 3 FURTHER NOTED THAT IN CASE BROUGHT FORWARD UNABSORBED DEPRECIATION AND BUSINESS LOSSES WA S ADJUSTED AGAINST THE PROFITS FOR THE YEAR UNDER CONSIDERATION, THEN THERE W OULD NOT BE ANY PROFIT, ON WHICH THE SAID DEDUCTION UNDER SECTION 80IA (4) OF THE ACT WA S ALLOWABLE TO THE ASSESSEE. IN VIEW OF THE PROVISIONS OF SECTION 80IA(5) OF THE ACT AND THE RATIO LAID DOWN BY THE SPECIAL BENCH OF AHMEDABAD TRIBUNAL IN ACIT VS. GOLDMINE SHARES AND FINANCE PVT. LTD. REPORTED IN 116 TTJ (AHD) 705, THE ASSESSING OFFICER HELD THAT THE EARLIER YEARS UNABSORBED DEPRECIATION WA S TO BE ADJUSTED AGAINST THE CURRE NT YEARS PROFITS FOR SATARA WINDMILL AND ALSO FOR SANGLI WINDMILL AND IN THE ABSENCE OF ANY POSITIVE INCOME FROM WINDMILL IN THE CURRENT YEAR, NO DEDUCTION UNDER SECTION 80IA(4)(IV)(A) OF THE ACT WAS ALLOWABLE TO THE ASSESSEE. 5. IN APPEAL, THE CIT(A) NO TED THE CONTENTION OF THE ASSESSEE THAT IT HAD OPTED FOR CLAIMING DEDUCTION FOR THE FIRST TIME IN ASSESSMENT YEAR 2004 - 05 AND TH AT SECTION 80IA(2) OF THE ACT DOES NOT MANDATE THAT THE FIRST YEAR OF TEN TH AT SECTION 80IA(2) OF THE ACT DOES NOT MANDATE THAT THE FIRST YEAR OF TEN CONSECUTIVE ASSESSMENT YEARS SHOULD ALSO BE THE FIRST YEAR OF SET UP OF THE ENTERPRISE. IT WAS FURTHER EXPLAINED BY THE ASSESSEE THAT THE PROVISIONS OF SECTION 80IA (5) OF THE ACT WERE APPLICABLE WHEN THE ASSESSEE CHOOSES TO CLAIM DEDUCTION FOR THE FIRST TIME I.E. IN ASSESSMENT YEAR 2004 - 05. HENCE, SETTING O FF OF NOTIONAL CARRIED FORWARD LOSSES OR UNABSORBED LOSSES PRIOR TO INITIAL ASSESSMENT YEAR DOES NOT ARISE. THE CIT(A) NOTED THAT SIMILAR ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE ITSELF IN ASSESSMENT YEARS 2007 - 08, 2008 - 09 AND 2009 - 10 AND THE CIT(A), KOLHAPUR IN HIS COMBINED ORDER DATED 18.09.2012 HAD DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE, IN TURN FOLLOWING THE RATIO LAID DOWN BY PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.544, 545 AND 613/PN/2009, RELATING TO ASSESSMENT YEARS 20 04 - 05, 2005 - 06 AND 2006 - 07 , ORDER DATED 29.04.2011 AND THE DECISION OF HONBLE MADRAS HIGH ITA NO. 928 /PN/20 1 4 M/S. PREETAM ENTERPRISES 4 COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010) 38 DTR (MAD) 57. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. ON THE PERUSAL OF ORDE RS PASSED BY THE TRIBUNAL RELATING TO ASSESSMENT YEARS 2004 - 05, 2005 - 06 AND 2006 - 07, WE FIND THAT THE ISSUE WAS DECIDED HOLDING THAT THE LOSSES AND UNABSORBED DEPRECIATION OF THE YEARS EARLIER TO THE INITIAL ASSESSMENT YEAR, WHICH HAD ALREADY BEEN ABSORBED AGAINST THE PROFITS OF OTHER BUSINESSES, COULD NOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF ELIGIBLE BUSINESS OF SATARA WINDMILL , FOR COMPUTING DEDUCTION UNDER SECTION 80IA OF THE ACT. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: - 2. FIRST ISSUE IN THE ASSESSES APPEAL IS REGARDING REJECTION OF CLAIM OF DEDUCTION U/S 80 - IA(IV)(A) ON INCOME GENERATED FROM THE WINDMILL. THE ASSESSEES CLAIM WAS BASED ON THE PROVISIONS OF THE SECTION 80 - IA AS AMENDED BY THE FINANCE ACT 1999 W .E.F. 1 - 4 - 2000. AS PER THE AMENDED PROVISION THE BY THE FINANCE ACT 1999 W .E.F. 1 - 4 - 2000. AS PER THE AMENDED PROVISION THE DEDUCTION IS AVAILABLE FOR A PERIOD OF TEN CONSECUTIVE YEARS DURING A PERIOD OF FIRST FIFTEEN YEARS STARTING WITH THE COMMENCEMENT OF BUSINESS. HOWEVER, THE ASSESSEE IS GIVEN THE OPTION TO CHOOSE THE FIRST Y EAR OF DEDUCTION. IN THE CASE OF THE ASSESSEE, SUCH OPTION WAS EXERCISED DURING A.Y. 2004 - 05 RELEVANT TO F INANCIAL YEAR 2003 - 04. IN THIS REGARD, THE LEARNED AR RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN ITA NO. 92/PN/2008 AND SUBMITTED THAT DE PRECIATION AND LOSSES OF EARLIER YEARS WERE ALREADY ABSORBED AGAINST THE OTHER BUSINESS INCOME OF A.Y. 2002 - 03 AND 2003 - 04 AND ACCORDINGLY, THERE WAS NO QUESTION OF AGAIN NOTIONALLY CARRYING FORWARD AND SETTING OFF THE SAID DEPRECIATION AND LOSSES AGAINST THE INCOME FOR A.Y. 2004 - 05. THE ASSESSEES CLAIM IS SUPPORTED BY THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ASSTT. CIT (231 CTR 368) AND OF THE DECISION OF THE B BENCH OF ITAT CHENNAI IN THE CASE OF M OHAN BREWERIES AND DISTILLERIES LTD. VS. ACIT (114 TTJ 532). THE ASSESSEE ALSO TAKES SUPPORT OF ITA NO. 780, 613, 544 AND 545/PN/2009 PREETAM ENTERPRISES A.Y. 2004 - 05. 2005 - 06 AND 2006 - 07, 3 THE UNREPORTED DECISION OF THE MADRAS HIGH COURT IN TAX CASE (APP EAL) NO. 715 OF 201 IN THE CASE OF CIT VS. M/S. EMERALD JEWEL INDUSTRY P. LTD. IT WAS ALSO SUBMITTED THAT PUNE BENCH OF THE TRIBUNAL HAS TAKEN A SIMILAR VIEW IN ITA NO. 92/PN/2008. 2.1 WE ALSO FIND THAT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LT D., VS ACIT (2010) 231 CTR (MAD) 368 HONBLE MADRAS HIGH COURT HAS HELD THAT LOSSES AND DEPRECIATION OF THE YEARS EARLIER TO THE INITIAL ASSESSMENT YEAR WHICH HAVE ALREADY BEEN ABSORBED AGAINST THE PROFITS OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FOR WARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS ITA NO. 928 /PN/20 1 4 M/S. PREETAM ENTERPRISES 5 FOR COMPUTING THE DEDUCTION UNDER SECTION 80 - IA. FOLLOWING THIS JUDGMENT OF HONBLE MADRAS HIGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. THE ASSESSEE IS ENTITLED TO CLAIM FOR DEDU CTION U/S 80IA(4)(IV)(A) OF THE ACT. 8 . SIMILAR RATIO HAS BEEN LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN ACIT VS. M/S. PREETAM ENTERPRISES IN ITA NOS.2293 TO 2295/PN/2012 , RELATING TO ASSESSMENT YEARS 2007 - 08 TO 2009 - 10 , VIDE ORDE R DATED 29.11.2013 AND CLAIM OF DEDUCTION UNDER SECTION 80IA(4)(IV)(A) OF THE ACT HAS BEEN ALLOWED TO THE ASSESSEE. 9. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE AND FOLLOWING THE SAME PA RITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4)(IV)(A) OF THE ACT IN RESPECT OF WINDMILL AT SATARA . FURTHER, THE ASSESSEE HAD CLAIMED THE DEDUCTION IN RESPECT OF WINDMILL DIVISION AT SANGLI FOR THE FIRST TIME IN THE CAPTIONED ASSESSMENT YEAR . AS PER AMENDED PROVISIONS OF SECTION 80IA(4)(IV)(A) OF THE ACT, THE ASSESSEE HAS THE OPTION TO CHOOSE THE FIRST SECTION 80IA(4)(IV)(A) OF THE ACT, THE ASSESSEE HAS THE OPTION TO CHOOSE THE FIRST YEAR OF DEDUCTION AND WHERE SUCH OPTION IS EXERCISED BY THE ASSESSEE THEN , THE PERIOD OF 10 YEARS FALLING WITHIN PERIOD OF 15 YEARS WOULD START FROM THAT YEAR. FURTHER, THE DEPRECIATION AND LOSSES OF THE EARLIER YEARS WHICH HAVE ALREADY BEEN ABSORBED AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE IN THE RESPECTIVE YEARS, THERE WAS NO QUESTION OF AGAIN NOTIONALLY CARRYING FORWARD AND SETTING OFF OF THE SAID DEPRECIATION AND LOSSES OF EARLIER YEARS AGAINST THE INCOME FOR THE CAPTIONED ASSESSMENT YEAR. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN HOLDING THAT THE LOSSES AND DEPRECIATION OF THE EARLIER YE ARS TO THE INITIAL ASSESSMENT YEAR, WHICH HAVE ALREADY BEEN ABSORBED AGAINST THE PROFITS OF ELIGIBLE BUSINESS, ARE TO BE IGNORED FOR COMPUTING DEDUCTION UNDER SECTION ITA NO. 928 /PN/20 1 4 M/S. PREETAM ENTERPRISES 6 80IA(4)(IV)(A) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISS ED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON THIS 16 TH DAY OF OCTOBER , 2015. SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH OCTOBER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE AP PELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), KOLHAPUR ; 4. / THE CIT - I/II, KOLHAPUR / CIT 4. (CENTRAL) , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE