Prima Paper Engineering Pvt.Ltd.,, Pune v. ITO, Ward 8(3), Pune, Pune

ITA 1755/PUN/2007 | 2002-2003
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 175524514 RSA 2007
Assessee PAN AABCP1938J
Bench Pune
Appeal Number ITA 1755/PUN/2007
Duration Of Justice 3 year(s) 1 month(s) 5 day(s)
Appellant Prima Paper Engineering Pvt.Ltd.,, Pune
Respondent ITO, Ward 8(3), Pune, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-01-2011
Assessment Year 2002-2003
Appeal Filed On 26-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I C SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO. 1755 &1205//PN/07 (ASSTT YEAR: 2002-03 & 2003-04) PRIMA PAPER ENGG. P.LTD. T-73 MIDC PUNE .. APPELLANT PAN AABCP 1938J VS. INCOME-TAX OFFICER WARD-8(3) PUNE .. RES PONDENT APPELLANT BY : SHRI M R BHAGWAT RESPONDENT BY : SHRI HEMANTKUMAR C LEUVA ORDER PER G.S. PANNU A.M: THESE TWO APPEALS BY ASSESSEE ARE DIRECTED AGAINS T THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III PUNE DATED 14.9.2007 AND 8.6.2007 WHICH IN TURN HAVE ARISEN FROM ORDERS DA TED 8.12.2006 AND 31.1.2006 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) R.W.S.147 OF THE INCOME- TAX ACT 1961 (IN SHORT THE ACT) PERTAINING TO TH E ASSESSMENT YEAR 2002-03 AND 2003-04 RESPECTIVELY.. 2. THE TWO CAPTIONED APPEALS BY THE ASSESSEE INVOLV E CERTAIN COMMON ISSUES AND THEREFORE WE FIND IT EXPEDIENT TO DISP OSE OF THE SAME BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 2 3. IN BOTH THE APPEALS A COMMON ISSUE RELATES TO D ENIAL OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA OF THE A CT IN RELATION TO THE PROFITS OF WIND MILL ACTIVITY. IN ORDER TO APPRECIATE THE FACT S AND THE CONTROVERSY ON THIS ASPECT WE MAY BRIEFLY REFER TO THE FACTS AS RELATI NG TO ASSESSMENT YEAR 2003-04. IN THIS CASE THE ASSESSEE IS A COMPANY INCORPORATE D UNDER THE PROVISIONS OF COMPANIES ACT AND IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF PLASTIC MOULDING PRODUCTS. FOR THE YEAR UNDER CONSIDERATION IT FILED A RETURN OF INCOME ON 28.11.2003 DECLARING INCOME OF R 33 55 810/-. TH E ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA FOR AN AMOUNT OF RS 55 36 169/- ON ACCOUNT OF WIND MILL ACTIVITY OF POWER GENERATION. THE ASSESSE E WAS FOUND NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR THE WIND MILL ACTIVIT Y. ON EXAMINING THE PROFIT & LOSS ACCOUNT IT WAS NOTICED THAT ASSESSEE HAD DECL ARED AN AMOUNT OF RS 56 43 777/- AS INCOME FROM GENERATION OF ELECTRICIT Y THROUGH THE WIND MILL ACTIVITY AND THE NET PROFIT IN THE PROFIT AND LOSS ACCOUNT W AS RS 88 95 355/- WHICH WAS INCLUSIVE OF THE INCOME FROM WIND MILL ACTIVITY. IN THE COMPUTATION OF INCOME ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA O N ACCOUNT OF WIND MILL ACTIVITY AT RS 55 36 169/-. THE TOTAL DEPRECIATION CLAIMED FOR THE YEAR WAS RS 83 74 327/- OUT OF WHICH A SUM OF RS 52 02 010/- PE RTAINED TO THE WIND MILL ACTIVITY. THE ASSESSING OFFICER OBSERVED THAT IN TH E ABSENCE OF ANY SEPARATE BOOKS OF ACCOUNT THE CLAIM OF THE ASSESSEE FOR DED UCTION UNDER SECTION 80IA WAS NOT PROPER INASMUCH AS INCOME GENERATED OUT OF MANUFACTURING ACTIVITY AND THAT OF WIND MILL ACTIVITY WERE TO BE SEPARATELY WO RKED OUT FOR THE PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 80IA OF THE ACT O N THE PROFITS OF WIND MILL ACTIVITY. ON BEING SHOW CAUSED ON THE AFORESAID LIN ES ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT EXPENSES OF EACH WIND MILL AND THE NET PROFIT ARISING THEREOF SHOULD BE SEPARATELY WORKED OUT FOR EVERY YEAR AND THE PROFITABILITY OF EACH WIND MILL SHOULD BE ARRIVED A T SEPARATELY BY TREATING EACH ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 3 WINDMILL AS BUSINESS ENTITY AND THEREFORE THE SAM E BEING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA INDEPENDENTLY. THE ASSESSING OFF ICER NOTED THAT INCOME FROM WIND MILL ACTIVITY WAS INCLUDED IN THE PROFIT AND L OSS ACCOUNT AS OTHER INCOME WHICH SHOWED THAT ASSESSEE ITSELF WAS NOT TREATING THE SAME AS BUSINESS INCOME. THEREFORE NO DEDUCTION UNDER SECTION 80IA WAS ALLOWABLE ON SUCH INCOME BECAUSE ANY DEDUCTION ALLOWABLE UNDER SECTI ON 80IA OF THE ACT IS ONLY OUT OF PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) OF SECTION 80IA OF THE ACT. SINCE INCOME FROM WIND MILL ACTIVITY WAS DISCLOSED AS OTHER INC OME AND NOT AS BUSINESS INCOME AS PER THE ASSESSING OFFICER DEDUCTION UND ER SECTION 80IA WAS PRIMA FACIE INADMISSIBLE. WITHOUT PREJUDICE TO THE ABOVE THE ASSESSING OFFICER OBSERVED THAT EVEN THOUGH THE ASSESSEES INCOME FRO M WIND MILL ACTIVITY WAS TREATED AS BUSINESS INCOME EVEN THEN THE CLAIM WAS NOT IN ORDER BECAUSE SECTION 80IA REQUIRES THAT PROFIT OF THE ELIGIBLE BUSINESS HAVE TO BE SEPARATELY COMPUTED AND DEDUCTION OF SUCH PROFIT AND GAINS ALO NE HAVE TO BE ALLOWED TO THE ASSESSEE. IN THE INSTANT CASE AS PER THE ASSESSING OFFICER THE ASSESSEE HAS INCOME FROM MANUFACTURING ACTIVITY AND ALSO WINDMIL L ACTIVITY AND HENCE PROFIT FROM THE ELIGIBLE WINDMILL ACTIVITY WAS REQUIRED TO BE SEPARATELY COMPUTED AND DEDUCTION ALLOWABLE FROM SUCH PROFITS ALONE. THE AS SESSING OFFICER EXAMINED THE STATEMENT OF INCOME AND EXPENDITURE RELATING TO WIN DMILL ACTIVITY AS ENUMERATED IN ANNEXURE A TO THE ASSESSMENT ORDER AND FOUND T HAT THERE IS A LOSS FOR THE ASSESSMENT YEAR 2002-03 AND ALSO FOR ASSESSMENT YEA R 2003-04. THE ASSESSEE HAD DECLARED INCOME FROM 4 WINDMILLS AT RS 56 43 77 7/- AFTER CONSIDERING EXPENSES OF RS 1 07 608/- AND DEPRECIATION OF RS 52 02 140/- NET INCOME WAS ARRIVED AT RS 3 34 4029/- FROM WINDMILL ACTIVITY. H OWEVER IN THE COMPUTATION OF INCOME ATTACHED TO THE RETURN OF INCOME ASSESSEE H AD CLAIMED DEDUCTION UNDER SECTION 80IA AT RS 55 36 169/- WHICH ACCORDING TO THE ASSESSING OFFICER WAS ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 4 TOTALLY INCORRECT. THE ASSESSING OFFICER ALSO NOTIC ED THAT FROM THE FIRST THREE WINDMILLS THE ASSESSEE HAD SHOWN A NET PROFIT AND NET INCOME OF FOURTH WINDMILL WAS ADJUSTED AGAINST DEPRECIATION AND THE LOSS THER EOF WAS ADJUSTED AGAINST PROFIT DERIVED FROM OTHER MANUFACTURING BUSINESS OF PLASTIC MOULDING WHICH WAS IN CONFLICT WITH THE PROVISIONS OF SECTION 80IA(5) OF THE ACT. AS PER THE ASSESSING OFFICER ASSESSEE COMPANY HAD EARNED INCOME FROM FO UR WINDMILLS AND AFTER CONSIDERING EXPENSES AND YEAR-WISE DEPRECIATION TH ERE WAS NO PROFIT FROM THE ELIGIBLE BUSINESS AND IN FACT THERE WAS A LOSS FROM THE WINDMILL ACTIVITY. IN COMING TO SUCH CONCLUSION THE ASSESSING OFFICER INFERRED THAT THE ASSESSEE MAY INSTALL ANY NUMBER OF WINDMILLS BUT THEY CANNOT BE TREATED AS SEPARATE ENTITIES FOR PURPOSES OF TAXATION AND HENCE ALL THE WINDMILLS C OMPRISED ONLY ONE SINGLE BUSINESS. THEREFORE PROFIT OF SUCH BUSINESS IS TO BE CALCULATED BY TOTALLING THE EXPENDITURE INCURRED INCLUDING DEPRECIATION OF ALL THE WINDMILLS AGAINST THE TOTAL RECEIPTS FROM ALL THE WINDMILLS. AS PER THE ASSESSI NG OFFICER AS THE POWER GENERATION IS ONE SINGLE ACTIVITY THE CONSOLIDATED PROFIT REPRESENTED THE PROFIT OF THE ELIGIBLE BUSINESS IRRESPECTIVE OF NUMBER OF WI NDMILLS COMMISSIONED AND FOR THE PURPOSES OF DEPRECIATION DIFFERENT WINDMILLS C OULD NOT BE TREATED AS SEPARATE ENTITIES. SECTION 80IA(5) OF THE ACT HAS BEEN RELIE D ON BY THE ASSESSING OFFICER FOR THE AFORESAID PROPOSITION. AS A RESULT THEREOF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA OF THE ACT WAS TOTALLY WITHDRAWN BECAUSE THE ASSESSEE ACCORDING TO THE ASSESSING OFFICER HAD W RONGLY CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT BY CLAIMING DEPRECIAT ION PERTAINING TO THE WINDMILL ACTIVITY AGAINST THE PROFITS OF OTHER MANUFACTURING BUSINESS OF PLASTIC MOULDING THEREBY OVERSTATING THE INCOME FROM THE ELIGIBLE BU SINESS OF WINDMILL ACTIVITY. DENIAL OF SUCH DEDUCTION HAS BEEN FURTHER SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 5 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE LOWER AUTHORITIES HAVE WRONGLY DENIED THE CLAIM OF THE ASSESSEE. SO HOWEVER THE LEARNED COUNSEL ALSO QUITE FAIRLY SUB MITTED THAT AT THE PRESENT STAGE THE ACTION OF THE LOWER AUTHORITIES IS IN LI NE WITH THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. GOLDMI NE SHARES & FINANCE (P) LTD. 113 ITD 209 (SB) (AHD). HOWEVER IT IS ALSO POINTED OUT THAT THE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED AND ACCORDING TO TH E LEARNED COUNSEL THE SAME IS IN FURTHER APPEAL BEFORE THE HIGH COURTS. HE THERE FORE CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VI EW OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V. GOL DMINE SHARES & FINANCE (P) LTD. (SUPRA) BUT IT SHOULD NOT BE CONSTRUED AS AN ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE. 5. IN VIEW OF THE AFORESAID DISCUSSION AND THE DECI SION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. GOLDMINE SHA RES & FINANCE (P) LTD. THE ORDERS OF THE AUTHORITIES BELOW ARE UPHELD. AS PER THE SPECIAL BENCH OF THE TRIBUNAL IN VIEW OF THE SPECIFIC PROVISIONS OF SEC TION 80IA OF THE ACT PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DETERMINAT ION OF QUANTUM OF DEDUCTION UNDER SECTION 80IA OF THE ACT HAS TO BE COMPUTED A FTER DEDUCTION OF NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THE SAME MAY HAVE BEEN ACTUALLY SET OFF AGAINST OTHER I NCOMES IN THE PAST. FOLLOWING THE AFORESAID THE CLAIM OF THE ASSESSEE FOR DEDUCT ION UNDER SECTION 80IA ON PROFIT FROM WINDMILL ACTIVITY IS HEREBY DECLINED. T HUS THE ASSESSEE FAILS IN ITS APPEAL FOR ASSESSMENT YEAR 2003-04. 6. IN ASSESSMENT YEAR 2002-03 ALSO THE ASSESSEE HA S TO FAIL ON THE MERITS OF THE CLAIM UNDER SECTION 80IA OF THE ACT. SO HOWEVE R FOR ASSESSMENT YEAR 2002- ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 6 03 ASSESSEE HAS ALSO RAISED ANOTHER GROUND RELATIN G TO VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. 7. IN SUPPORT OF SUCH PLEA THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT REOPENING UNDER SECTION 147/148 OF THE ACT IN THIS YEAR HAS BEEN DONE ON A MERE CHANGE OF OPINION WHICH WAS UNTENABLE. IT I S POINTED OUT THAT RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR WAS ORIGINA LLY FILED ON 31.12.2002 WHEREIN THE CLAIM UNDER SECTION 80IA OF THE ACT WAS MADE. THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 28.3.2 003 AS SUCH. SUBSEQUENTLY NOTICE UNDER SECTION 148 WAS ISSUED TO REOPEN THE A SSESSMENT ON 30.3.2006. THE SAID ACTION IS CHALLENGED BY THE ASSESSEE ON TH E GROUND THAT IT CONSTITUTED A CHANGE OF OPINION BECAUSE THE CLAIM WAS ACCEPTED AS SUCH IN THE RETURN PROCESSED UNDER SECTION 143(1) OF THE ACT ON 28.3.2 003. THOUGH THE LEARNED COUNSEL SUBMITTED THAT PROCESSING UNDER SECTION 143 (1) DOES NOT CONSTRUE EXISTENCE OF AN OPINION BUT IN THE PRESENT CASE I T IS SOUGHT TO BE POINTED OUT THAT AT THE RELEVANT POINT OF TIME THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR AN EARLIER ASSESSMENT YEAR 2001-02 WAS IN PROGRESS WHICH WAS COMPLETED ON 29.4.2003 WHEREIN THE CLAIM OF THE ASSESSEE FOR DE DUCTION UNDER SECTION 80IA WAS ALLOWED IN PRINCIPLE SUBJECT OF-COURSE TO A DI SALLOWANCE OF 5%. THOUGH THE ASSESSMENT FOR ASSESSMENT YEAR 2001-02 WAS SUBSEQUE NTLY REOPENED BY WAY OF ISSUANCE OF NOTICE UNDER SECTION 148 ON 20.1.2005 I N ORDER TO WITHDRAW DEDUCTION UNDER SECTION 80IA OF THE ACT BUT IT IS CONTENDED BY THE LEARNED COUNSEL THAT ON THE DATE OF PROCESSING OF RETURN OF THE IMPUGNED AS SESSMENT YEAR ON 28.3.2003 THE ASSESSING OFFICER HAD FORMULATED AN OPINION THA T SECTION 80IA CLAIM WAS ALLOWABLE TO THE ASSESSEE. AS PER HIM THERE IS AN INITIAL ACCEPTANCE OF THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT MANIFESTED BY THE PROCESSING DONE UNDER SECTION 143(1) OF THE ACT ON 28.3.2003 FOR THE IMPUGNED ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 7 ASSESSMENT YEAR AND THUS THE SUBSEQUENT REOPENING BY WAY OF A NOTICE UNDER SECTION 148 OF THE ACT ON 30.3.2006 IS A CHANGE OF OPINION. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARI NG FOR THE REVENUE HAS DEFENDED THE VALIDITY OF NOTICE UNDER SECTION 1 48 ISSUED ON 30.3.2006 AND IT IS CONTENDED THAT PROCESSING UNDER SECTION 143(1) D OES NOT REFLECT FORMULATION OF AN OPINION. IT IS ALSO POINTED OUT THAT THE REOPENI NG HAS BEEN DONE IN THE PRESENT CASE BASED ON ASSESSMENT OF THE PRECEDING ASSESSME NT YEAR 2001-02 WHEREIN IN AN ASSESSMENT MADE UNDER SECTION 143(3) READ WIT H SECTION 147 OF THE ACT DATED 30.12.2005 THE CLAIM OF THE ASSESSEE UNDER S ECTION 80IA WAS DENIED. IT IS ALSO CONTENDED THAT REOPENING WHICH IS BASED ON ASS ESSMENT OF ANOTHER YEAR IS VALID IN TERMS OF THE FOLLOWING JUDGMENTS: (A) RAYMOND WOOLLEN MILLS LTD. V. ITO 236 ITR 34 (SC) (B) CLAGGETT BRACHI CO. LTD V. CIT 177 ITR 409 (SC) (C) ANUSANDHAN INVESTMENTS LTD. DCIT 287 ITR 4 82 (BOM) 9. HAVING HEARD BOTH THE PARTIES ON THE ISSUE REGAR DING VALIDITY OF THE PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT WE FIND THAT ASSESSEE HAS TO FAIL. NO DOUBT IT IS NOT PERMISSIBLE FOR THE AS SESSING OFFICER TO REOPEN AN ASSESSMENT UNDER SECTION 147/148 OF THE ACT ON A ME RE CHANGE OF OPINION. HOWEVER IN THE PRESENT CASE THE FACTUAL MATRIX DO ES NOT SUPPORT THE PLEA OF THE ASSESSEE THAT NOTICE UNDER SECTION 148 OF THE ACT D ATED 30.3.2006 HAS BEEN ISSUED IN THIS CASE ON A CHANGE OF OPINION. THE P LEA OF THE ASSESSEE THAT THE ASSESSING OFFICER FORMULATED AN OPINION WHILE PROCE SSING THE RETURN UNDER SECTION 143(1) OF THE ACT ON 28.3.2003 IN OUR VIEW IS UNTENABLE. THIS PLEA IS BASED ON THE PROCEEDINGS UNDER SECTION 143(3) FOR A SSESSMENT YEAR 2001-02 WHICH WERE IN PROGRESS AT THE RELEVANT POINT OF TIM E. HOWEVER SUCH PROCEEDINGS CULMINATED ONLY ON 29.2.2003 MUCH AFTER THE PROCES SING UNDER SECTION 143(1) ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 8 FOR THE IMPUGNED ASSESSMENT YEAR. THEREFORE ACCEPT ANCE OF THE CLAIM IN ASSESSMENT YEAR 2001-02 IN A PROCEEDING UNDER SECTI ON 143(3) ON 29.4.2003 CANNOT BE CONSTRUED AS FORMULATION OF AN OPINION BY THE ASSESSING OFFICER IN RELATION TO ASSESSMENT YEAR 2002-03 IN THE PROCESSI NG DONE UNDER SECTION 143(1) OF THE ACT DATED 28.3.2003. THEREFORE FACTUALLY SP EAKING IT IS NOT CASE OF A CHANGE OF OPINION AND THEREFORE INITIATION OF P ROCEEDINGS UNDER SECTION 147/148 OF THE ACT DATED 30.3.2006 CANNOT BE SAID T O BE VITIATED ON THIS COUNT. THEREFORE ON THIS ASPECT ASSESSEE HAS TO FAIL. 10. RESULTANTLY BOTH THE CAPTIONED APPEALS ARE DIS MISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON T HE 31 ST DAY OF JANUARY 2011. SD/- SD/- (I C SUDHIR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 31ST JANUARY 2011 COPY TO:- 1) PRIMA PAPER ENGG. P LTD. PUNE 2) THE ITO WD 8(3) PUNE 3) THE CIT (A)III PUNE 4) THE CIT V PUNE 5) THE DEPARTMENTAL REPRESENTATIVE B BENCH I.T.A.T. PUNE. BY ORDER TRUE COPY ASST. REGISTRAR I.T.A.T. PUNE B ITA NO 1755 & 1205/PN/07 PRIMA PAPER ENGG. P. LTD. PUNE 9