JOCIL Ltd., Guntur V. The Asst. CIT, Guntur

ITA 94/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6721 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V MADHUVANI
• Keywords: Depreciation
• Section: 143(3); 6; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 94 /VIZ/ 201 7 ( / ASSESSMENT YEAR: 20 1 2 - 1 3 ) JOCIL LTD DOKIPARRU NARASARAOPET ROAD - 522 213 GUNTUR [PAN : AAACJ5606L ] ACIT CIRCLE - 1(1 ) GUNTUR ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI C.SUBRAHMANYAM, AR / RESPONDENT BY : S MT. V . MADHU VANI, DR / DATE OF H EARING : 29 .0 8 .2017 / DATE OF P RONOUNCEMENT : 06 . 09. 2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PR. C OMMISSIONER OF INCOME TAX ( APPEALS ), [ PR. CIT], GUNTUR PASSED U/S 263 OF I.T.ACT. 2 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR 2. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 .T HE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.16,80,12,320/ - AND THE ORDER WAS PASSED U/S 143(3). THE ASSESSING OFFICER ALLOWED THE DEDUCTION U/S 80IA TO THE EXTENT OF RS.1,75,25,349 / - . SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR REVISION BY THE LD. CIT FOR ALLOWING THE DEDUCTION U/S 80IA AGAINST THE PROVISIONS OF SECTION 80IA(5) OF I.T.ACT . THE LD.CIT IS OF THE VIEW THAT A S PER THE PROVISIONS OF SEC TION 80 I A (5) , THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB - SECTION (1 ) APP L Y SHA LL , FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF I N COME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATI ON IS TO BE MADE. IN THE ASSESS EE S CASE, THE ASSESSEE COMPANY HAD COMMISSIONED 2 WIND MILLS ON 01.02 . 2006 AND 13.03.2006 I.E, IN A.Y.2006 - 07 WH I CH WAS ELIGIBLE FOR DEDUCTION U/S 8 OIA. THE UNITS SUFFERED LOSSES FOR A.Y.2006 - 07 OF RS . 9,64 , 25 , 673/ - A ND FOR A.Y . 2007 - 08 OF RS.5 , 51 , 45,119/ - (TOTAL LOSS 3 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR RS . 1 5 , 15 , 70 , 792/ - ) WHICH WAS ABSORBED BY THE OTHER INCOME OF THE ASSESSEE I N THE RESPEC TIVE ASSESSMENT YEARS. DURING THE YE A RS 2008 - 09 TO 2010 - 11 THE ASSESSEE DERIVED PROFITS AND BUT NOT CLAIMED THE 80 I A DEDUCTION ON THE PROFITS OF THE UNITS. HOWEVER, FOR THE A.Y.2012 - I 3 , THE ASSESSEE CLAIMED THE DEDUCTION U/S 8 OI A OF RS.1,75 , 25,349/ - , WITHOUT SETTING OFF THE L OSS/DEPRECIATION OF THE UNIT OF EARLIER YEARS AND IT WAS ALLOWED BY THE AO . THE UNABSORBED NOTIONAL CARRY FORWARD OF LOSS FROM A.Y . 2006 - 07 TO 2011 - 12 WAS DETAILED BELOW. UNIT - I 06 - 07 07 - 08 08 - 09 09 - 10 10 - 11 11 - 12 12 - 13 PROFIT/(LOSS) 96425673 55145119 2431119 17530273 21353529 19743834 17525349 96425673 151540792 NOTIONAL C/F LOSS 96425673 151540792 149139673 131609400 110255871 90512037 72986688 2 .1. THUS, THE ASSESSE E COMPANY HAVE LOSSES TO BE NOTIO NALLY CARRIED FORWARD AND SET OFF AGAINST THE FUTURE PROFITS . HENCE, THE LD.PR.CIT WAS OF THE VIEW THAT THE DEDUCTION U/S 80IA(5), HAS TO BE ALLOWED FROM THE PROFITS OF THE WIND MILLS AFTER SETTING OFF OF NOTIONALLY BROUGHT FORWARD LOSSES AND THE DEPRECIATION . SINCE THE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/S 80IA WITHOUT SETTING OFF OF THE BROUGHT FORWARD LOSSES THE LD.PCIT HELD THE ORDER PASSED U/S 143(3) WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY SET 4 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR ASIDE THE ASSESSMEN T ORDER AND DIRECTED THE AO TO EXAMINE THE ISSUE AND TO PASS THE ORDER DISALLOWING THE DEDUCTION CLAIMED U/S 80IA.AGGRIVED BY THE ORDER OF THE LD.PR.CIT THE ASSESS E E IS IN APPEAL BEFORE US. 3 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. SIMILAR ISSUE HAS COME UP BEFORE THIS TRIBUNAL IN THE CASE OF DEVI SEAFOODS LTD. VS. JCIT IN ITA NO.16/VIZ/2013 AND TH IS TRIBUNAL PLACING RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS(P) LTD. VS. ACIT [340 ITR 477] AND CBDT CIRCULAR 01/2016 DATED 15.02.2016 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E AS UNDER : CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPEC TFULLY FOLLOWING THE JUDGEMENT OF HIGH COURT OF MADRAS, WE ARE OF THE OPINION THAT THE CIRCULAR ISSUED BY THE CBDT VIDE CIRCULAR NO.1 OF 2016 HAS SETTLED THE CONTROVERSIES OF INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF SECTION 80IA OF THE ACT. THE INITIAL ASSESSMENT YEAR WOULD MEAN THE FIRST YEAR OPTED BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT AND NOT THE YEAR IN WHICH THE ELIGIBLE BUSINESS WAS COMMENCED. THEREFORE, WE DIRECT THE A.O. TO ALLOW DEDUCTION U/S 80IA OF THE ACT AS CLAIMED BY TH E ASSESSEE. HENCE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE A.O. TO ALLOW DEDUCTION U/S 80IA OF THE ACT. 3 .1. THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE CITED SUPRA. THEREFORE, WE HOLD THAT INITIAL 5 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR ASSESSMENT YEAR AS THE FIRST YEAR OPTED BY THE ASSESS EE FOR CLAIMING THE DEDUCTION U/S 80IA OF THE ACT AND NOT THE YEAR IN WH ICH ORIGINAL BUSINESS WAS COMMENCED. HENCE THE NOTIONAL BUSINESS LOSSES AND THE DEPRECIATION OF EARLIER YEARS CANNOT BE SET OFF AGAINST THE CURRENT YEARS INCOME. ONLY THE LOSSES OF THE YEAR BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FO RWARD AND NOT LOSSES OF EARLIER YEARS WHICH WAS ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. 3 .2. AS PER I . T . ACT, REVISION UNDER SECTION 263 IS INVOKED IF THE ORDER PASSED U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR TAKING UP THE CASE FOR REVISION U/S 263 TWO CONDITIONS REQUIRED TO BE SATISFIED CUMULATIVELY I.E. ASSESSMENT ORDER SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. EVEN IF THE ASSESSMENT ORDER IS ERRONEOUS, BUT NOT PREJ UDICIAL TO THE INTEREST OF THE REVENUE OR IF ASSESSMENT OR DER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE BUT NOT ERRONEOUS THE REVISION U/S 263 IS NOT PERMISSIBLE. IN THE IN STANT CASE, THE ISSUE IS SET OFF OF UNABSORBED NOTIONAL BUSINESS LOSS ES AND T HE DEPRECIATION OF EARLIER YEARS AGAINST THE INCOME OF THE CURRENT ASSESSMENT YEAR BEFORE ALLOWING THE DEDUCTION U/S 80IA . AS PER THE PROVISIONS OF INCOME T AX A CT SECTION 6 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR 80IA, THE ASSESSE IS ENTITLED TO CLAIM T HE DEDUCTION IN ANY 10 CONSE CUTIVE YEARS OUT OF 15 YEARS, BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING COMMENCED ITS ELIGIBLE BUSINESS AT THE OPTION OF THE ASSESSEE . THEREFORE THE SET OFF LOSSES WOULD COMMENCE FROM THE YEAR IN WHICH THE ASSESSE FIRST OPT TO CLAIM THE DEDUCTION AND OUTER LIMIT IS 15 YEARS. THEREFORE THE LOSSES INCURRED PRIOR TO THE INITIAL YEAR CANNOT BE SET OFF AGAINST THE INCOME OF INITIAL AND THE SUBSEQUENT ASSESSMENT YEARS. THE HONBLE MADRAS HIGH COURTS DECISION IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS(P) LTD. VS. A CIT (SUPRA) IS DIRECTLY ON THE ISSUE AND IN FAVOUR OF THE ASSESSEE. HONBLE COORDINATE BENCHS DECISION IN THE CASE OF M/S HYDERABAD CHEMICALS SUPPL IES LTD. VS. ACIT (SUPRA) IS IN FAVOUR OF THE REVENUE AND THE DECISION OF THIS TRIBUNAL IN DEVI SEAFOODS LT D. VS. JCIT (SUPRA) IS ALSO IN FAVOUR OF THE ASSESSEE. THE A SSESSING OFFICER HAS CONSIDERED THIS ISSUE AND ALLOWED THE DEDUCTION . W HEN THERE ARE TWO VIEWS EXPRESSED BY THE COURTS , IF THE DECISION TAKEN BY THE ASSESSING OFFICER IS IN CONSONANCE WITH THE ON E OF THE VIEW S THE SAME CANNOT BE HELD TO BE ERRONEOUS. THIS VIEW IS SUPPORTED BY HONOURABLE SUPREME COURT JUDGEMENT IN THE CASE OF CIT VS. MAX INDIA LTD. [295 ITR 0282]. FURTHER, WHEN THERE IS A 7 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR CONFLICT BETWEE N THE ORDERS OF THE TRIBUNAL AND THE HIGH COURTS, THE ORDER OF THE HONBLE HIGH COURT IS HAVING MORE PERSUASIVE VALUE AND THE ORDER OF THE JURISDICTIONAL T RIBUN A L ORDER IS BINDING ON TH E LOWER AUTHORITIES. IN THE INSTANT CASE THIS TRIBUNAL HELD THE ISSUE IN FAVOUR OF THE ASSESSE E IN THE CASE CITED (SUPRA) AND LD. CIT HAVING REFERRED THE DECISION OF THIS TRIBUNAL IN DEVI SEAFOODS LTD. VS. JCIT SHOULD HAVE FOLLOWED THE DECISION OF THIS TRIBUNAL AS PER THE JUDICIAL HIERARCHY. IN VIEW OF THE FOREGOING DISCUSSION, WE HOLD THAT THE ORDE R OF THE LD.PCIT IS UNSUSTAINABLE ACCORDINGLY , WE SET ASIDE THE ORDER OF THE LD.PCIT AND RESTORE THE ASSESSMENT ORDER. 4 . IN THE RESULT, THE APPEAL S OF THE ASSESSEE IS ALLOWED . T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH S EP 20 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 06 . 0 9 .2017 L. RAMA, SPS 8 ITA NO. 94 /VIZ/201 7 JOCIL LTD. GUNTUR / COPY OF THE ORDER FORWARDED TO : - 1. / THE APPELLANT JOCIL LTD, DOKIPARRU, NARASARAOPET ROAD - 522 213, GUNTUR 2 . / THE RESPONDENT ACIT, CIRCLE - 1(1), GUNTUR 3 . THE PR. COMMISSIONER OF INCOME TAX, VIJAYAWADA 4 . , , / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM