MEPCO Industries Ltd., Madurai v. DCIT, Madurai

ITA 2043/CHNY/2016 | 2010-2011
Pronouncement Date: 21-10-2016 | Result: Dismissed

Appeal Details

RSA Number 204321714 RSA 2016
Assessee PAN AAACM7886M
Bench Chennai
Appeal Number ITA 2043/CHNY/2016
Duration Of Justice 3 month(s) 17 day(s)
Appellant MEPCO Industries Ltd., Madurai
Respondent DCIT, Madurai
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-10-2016
Assessment Year 2010-2011
Appeal Filed On 04-07-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CHENNAI . . . .. ' #$ & '( BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH ACCOUNTANT MEMBER ./ ITA NOS.2042 2043 2044 & 2045/MDS/2016 * +* / ASSESSMENT YEARS : 2009-10 2010-11 2012-13 & 20 13-14 M/S MEPCO INDUSTRIES LIMITED 17-A VALLABHAI ROAD CHOKKIKULAM MADURAI-625 002. PAN : AAACM 7886 M V. THE DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE 2 MADURAI. (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SHRI S. CHANDRASEKARAN FCA /0-. 1 2 / RESPONDENT BY : SHRI SHIVA SRINIVAS JCIT ' 1 3& / DATE OF HEARING : 22.09.2016 45+ 1 3& / DATE OF PRONOUNCEMENT : 21.10.2016 / O R D E R PER N.R.S. GANESAN JUDICIAL MEMBER: ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) 1 MADURAI FOR THE ASSESSMENT YEARS 2009-10 2010- 11 2012-13 & 2013-14. SINCE COMMON ISSUE ARISES FOR CONSIDERATI ON IN ALL THESE APPEALS WE HEARD THESE APPEALS TOGETHER AND DISPOS ING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.2042 TO 2045/MDS/16 2. SHRI S. CHANDRASEKARAN THE LD. REPRESENTATIVE F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED DEDUC TION UNDER SECTION 80-IA OF THE INCOME-TAX ACT 1961 (IN SHORT 'THE ACT') IN RESPECT OF GAS POWER PLANT. ACCORDING TO THE LD. R EPRESENTATIVE THE ASSESSEE HAS ONE NON-ELIGIBLE UNIT AND TWO ELIG IBLE UNITS FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT. THE TWO UNITS ARE INDEPENDENT AND SEPARATE. ACCORDINGLY THE LOSS OF NON-ELIGIBLE UNIT CANNOT BE SET OFF AGAINST PROFIT OF ELIGIBLE UNIT. THE ASSESSING OFFICER BY REPLACING RELIANCE ON THE JUDGEMENT OF APEX COURT IN SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER (INCOME- TAX) (2008)(299 ITR 444) DISALLOWED THE CLAIM OF THE ASSESSEE. AC CORDING TO THE LD. REPRESENTATIVE IN THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA) THERE WAS NO GROSS TOTAL INCOME WHEREAS IN THE CAS E BEFORE US THE ASSESSEE HAS GROSS TOTAL INCOME HENCE ACCORDING T O THE LD. REPRESENTATIVE THE JUDGEMENT OF APEX COURT IN SYNC O INDUSTRIES LTD. (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. THE NON-ELIGIBLE UNIT WAS PRODUCING CHLORATE. ACCORDIN G TO THE LD. REPRESENTATIVE THE LOSS SUFFERED BY NON-ELIGIBLE U NIT CANNOT BE SET OFF AGAINST THE PROFIT OF ELIGIBLE UNIT WHILE COMPU TING DEDUCTION UNDER SECTION 80-IA OF THE ACT. REFERRING TO SECTION 80- IA(5) OF THE ACT 3 I.T.A. NOS.2042 TO 2045/MDS/16 THE LD. REPRESENTATIVE SUBMITTED THAT ELIGIBLE UNIT HAS TO BE TREATED AS THE ONLY SOURCE OF INCOME WHILE COMPUTING DEDUCT ION UNDER SECTION 80-IA OF THE ACT. THEREFORE ACCORDING TO THE LD. REPRESENTATIVE THE CIT(APPEALS) IS NOT JUSTIFIED I N CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 3. ON THE CONTRARY SHRI SHIVA SRINIVAS THE LD. DE PARTMENTAL REPRESENTATIVE SUBMITTED THAT FOR THE PURPOSE OF C OMPUTING ELIGIBLE PROFIT UNDER SECTION 80-IA OF THE ACT THE GROSS PR OFIT OF THE ASSESSEE HAS TO BE COMPUTED BY ALLOWING ALL DEDUCTI ONS IN VIEW OF SECTION 80AB OF THE ACT. MOREOVER IN THE ASSESSEE 'S OWN CASE FOR THE ASSESSMENT YEARS 1998-99 AND 2001-02 THE MADRA S HIGH COURT EXAMINED THE ISSUE AND BY PLACING RELIANCE ON THE J UDGEMENT OF APEX COURT IN SYNCO INDUSTRIES LTD. (SUPRA) FOUND THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80-IA OF THE ACT SINCE THERE WAS NO PROFIT FROM THE BUSINESS. ACCOR DING TO THE LD. D.R. THE PROVISIONS OF SECTION 70 OF THE ACT HAS T O BE APPLIED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE IN VIEW OF SECTION 80AB OF THE ACT. THE APEX COURT IN SYNCO INDUSTRIES LTD . (SUPRA) EXAMINED AN IDENTICAL CASE UNDER THE PROVISIONS OF SECTION 80-I(6) OF THE ACT AND FOUND THAT WHILE COMPUTING THE QUANT UM DEDUCTION 4 I.T.A. NOS.2042 TO 2045/MDS/16 THE ASSESSING OFFICER HAS TO TREAT THE PROFIT DERIV ED FROM INDUSTRIAL UNDERTAKING AS THE ONLY SOURCE OF INCOME IN ORDER T O ARRIVE DEDUCTION UNDER CHAPTER VI-A OF THE ACT. HOWEVER ACCORDING TO THE LD. D.R. THE TOTAL INCOME UNDER SECTION 80B(5) OF THE ACT HAS TO BE COMPUTED IN THE MANNER PROVIDED UNDER THE ACT WHICH PRESUPPOSES THAT THE GROSS TOTAL INCOME SHALL BE ARRIVED AT AFT ER ADJUSTING THE LOSS OF THE OTHER DIVISION AGAINST THE PROFIT DERIVED FR OM AN INDUSTRIAL UNDERTAKING. THIS JUDGEMENT OF APEX COURT WAS RELI ED UPON BY THE MADRAS HIGH COURT IN THE ASSESSEE'S OWN CASE WHILE CONFIRMING AN IDENTICAL ORDER OF THE CIT(APPEALS). ACCORDING TO THE LD. D.R. THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ADMITTEDLY HAS TWO UNITS. THE FIRST UNIT HAS TWO U NDERTAKINGS WHICH GENERATE ELECTRICITY. THE OTHER UNIT IS GENERATING CHLORATE. THE UNIT WHICH GENERATES CHLORATE IS NOT ELIGIBLE FOR DEDUCT ION UNDER SECTION 80-IA OF THE ACT. THE OTHER TWO UNITS WHICH GENERA TE ELECTRICITY I.E. GAS POWER PLANT IS ELIGIBLE FOR DEDUCTION UNDER SEC TION 80-IA OF THE ACT. THE CLAIM OF THE ASSESSEE IS THAT THE LOSS SU FFERED IN CHLORATE 5 I.T.A. NOS.2042 TO 2045/MDS/16 DIVISION CANNOT BE SET OFF AGAINST THE INCOME FROM GAS POWER PLANT. THE ASSESSING OFFICER BY PLACING RELIANCE ON THE J UDGEMENT OF APEX COURT IN SYNCO INDUSTRIES LTD. (SUPRA) FOUND THAT THE GROSS TOTAL INCOME HAS TO BE COMPUTED UNDER THE PROVISION S OF INCOME-TAX ACT IN VIEW OF SECTION 80B(5) OF THE ACT. THE ASSE SSING OFFICER HAS ALSO FOUND THAT THE LOSS SUFFERED IN ONE UNIT HAS T O BE SET OFF AGAINST THE INCOME OF OTHER UNIT UNDER SECTION 70 OF THE AC T. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE LOSS SUFFER ED BY ONE UNIT HAS TO BE SET OFF AGAINST THE PROFIT OF THE ELIGIBLE UN IT? THE ASSESSEE CLAIMS BEFORE THIS TRIBUNAL THAT IN VIEW OF SUB-SEC TION (5) OF SECTION 80-IA OF THE ACT THE ELIGIBLE UNIT HAS TO BE TREAT ED AS THE ONLY SOURCE OF INCOME AND THE OTHER UNIT WHICH HAS LOSS CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING DEDUCTION U NDER SECTION 80-IA OF THE ACT. WE HAVE CAREFULLY GONE THROUGH T HE PROVISIONS OF SECTION 80-IA(5) OF THE ACT WHICH READS AS FOLLOWS: - 80-IA(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 BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL AS SESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND 6 I.T.A. NOS.2042 TO 2045/MDS/16 INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMI NATION IS TO BE MADE. 5. IN VIEW OF THE ABOVE PROVISION IT IS OBVIOUS TH AT WHILE COMPUTING THE QUANTUM DEDUCTION THE ASSESSING OFFI CER HAS TO TREAT THE GAS POWER PLANT AS THE ONLY SOURCE OF INC OME FOR THE PURPOSE OF ARRIVING AT DEDUCTION UNDER SECTION 80-I A OF THE ACT. 6. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 80- I(6) OF THE ACT WHICH READS AS FOLLOWS:- 80-I(6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OT HER PROVISION OF THIS ACT THE PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL OR THE BUSINESS OF REPAIRS TO OCEAN-GOING VESSELS O R OTHER POWERED CRAFT TO WHICH THE PROVISIONS OF SUB-SECTIO N (1) APPLY SHALL FOR THE PURPOSES OF DETERMINING THE QU ANTUM OF DEDUCTION UNDER SUB-SECTION (1) FOR THE ASSESSME NT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR BE COMPUTED AS I F SUCH INDUSTRIAL UNDERTAKING OR SHIP OR THE BUSINESS OF THE HOTEL OR THE BUSINESS OF REPAIRS TO OCEAN-GOING VES SELS OR OTHER POWERED CRAFT WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEARS 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. 7. THE PROVISIONS OF SECTION 80-IA(5) AND SECTION 8 0-I(6) OF THE ACT ARE PARI MATERIA AND THE LANGUAGE EMPLOYED BY THE PARLIAMENT ARE IDENTICAL. THE APEX COURT IN THE CASE OF SYNCO INDUSTRIES LTD. (SUPRA) EXAMINED THE SCOPE OF SECTION 80-I(6) OF TH E ACT AND FOUND 7 I.T.A. NOS.2042 TO 2045/MDS/16 THAT GROSS TOTAL INCOME HAS TO BE ARRIVED AFTER MAK ING DEDUCTIONS UNDER THE APPROPRIATE COMPUTATION PROVISIONS ADJUST ING INTRA-HEAD AND INTER-HEAD LOSSES AND SETTING OFF BROUGHT FORWA RD UNABSORBED LOSSES AND UNABSORBED DEPRECIATION ETC. IN FACT THE APEX COURT OBSERVED AS FOLLOWS AT PAGES 454 AND 455:- 13. THE CONTENTION THAT UNDER SECTION 80-I(6) THE PRO FITS DERIVED FROM ONE INDUSTRIAL UNDERTAKING CANNOT BE S ET OFF AGAINST LOSS SUFFERED FROM ANOTHER AND THE PROFIT I S REQUIRED TO BE COMPUTED AS IF PROFIT MAKING INDUSTR IAL UNDERTAKING WAS THE ONLY SOURCE OF INCOME HAS NO M ERIT. SECTION 80-I(1) LAYS DOWN THAT WHERE THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PROFITS DERIVED FROM T HE PRIORITY UNDERTAKING/UNIT/DIVISION THEN IN COMPUTI NG THE TOTAL INCOME OF THE ASSESSEE A DEDUCTION FROM SUCH PROFITS OF AN AMOUNT EQUAL TO 20 PER CENT. HAS TO BE MADE. SE CTION 80-I(1) LAYS DOWN THE BROAD PARAMETERS INDICATING CIRCUMSTANCES UNDER WHICH AN ASSESSEE WOULD BE ENTI TLED TO CLAIM DEDUCTION. ON THE OTHER HAND SECTION 80-I(6) DEALS WITH DETERMINATION OF THE QUANTUM OF DEDUCTION. SEC TION 80-I(6) LAYS DOWN THE MANNER IN WHICH THE QUANTUM OF DEDUCTION HAS TO BE WORKED OUT. AFTER SUCH COMPUTAT ION OF THE QUANTUM OF DEDUCTION ONE HAS TO GO BACK TO SEC TION 80- I(1) WHICH CATEGORICALLY STATES THAT WHERE THE GROS S TOTAL INCOME INCLUDES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING TO WHICH SECTION 80-I APPLIES THEN THERE SHALL BE A DEDUCTION FROM SUCH PROFITS AND GA INS OF AN AMOUNT EQUAL TO 20 PER CENT. THE WORDS ' INCLUDES AN Y PROFITS' USED BY THE LEGISLATURE IN SECTION 80-I(1) ARE VERY IMPORTANT WHICH INDICATE THAT THE GROSS TOTAL INCOM E OF AN ASSESSEE SHALL INCLUDE PROFITS FROM A PRIORITY UNDE RTAKING. WHILE COMPUTING THE QUANTUM OF DEDUCTION UNDER SECT ION 80-I(6) THE ASSESSING OFFICER NO DOUBT HAS TO TREA T THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS T HE ONLY SOURCE OF INCOME IN ORDER TO ARRIVE AT THE DEDUCTIO NS UNDER 8 I.T.A. NOS.2042 TO 2045/MDS/16 CHAPTER VI-A. HOWEVER THIS COURT FINDS THAT THE NO N OBSTANTE CLAUSE APPEARING IN SECTION 80-I(6) OF THE A CT IS APPLICABLE ONLY TO THE QUANTUM OF DEDUCTION WHEREA S THE GROSS TOTAL INCOME UNDER SECTION 80B(5) WHICH IS ALSO REFERRED TO IN SECTION 80-I(1) IS REQUIRED TO BE COM PUTED IN THE MANNER PROVIDED UNDER THE ACT WHICH PRESUPPOSES THAT THE GROSS TOTAL INCOME SHALL BE ARRIVED AT AFTER AD JUSTING THE LOSSES OF THE OTHER DIVISION AGAINST THE PROFIT S DERIVED FROM AN INDUSTRIAL UNDERTAKING. IF THE INTERPRETATI ON AS SUGGESTED BY THE APPELLANT IS ACCEPTED IT WOULD ALM OST RENDER THE PROVISIONS OF SECTION 80A(2) OF THE ACT N UGATORY AND THEREFORE THE INTERPRETATION CANVASSED ON BEH ALF OF THE APPELLANT CANNOT BE ACCEPTED. IT IS TRUE THAT U NDER SECTION 80-I(6) FOR THE PURPOSE OF CALCULATING THE DEDUCTION THE LOSS SUSTAINED IN ONE OF THE UNITS CANNOT BE TAKEN INTO ACCOUNT BECAUSE SUB-SECTION (6) CONTEMPLA TES THAT ONLY THE PROFITS SHALL BE TAKEN INTO ACCOUNT A S IF IT WAS THE ONLY SOURCE OF INCOME. HOWEVER SECTION 80A(2) AND SECTION 80B(5) ARE DECLARATORY IN NATURE. THEY APPLY TO ALL THE SECTIONS FALLING IN CHAPTER VI-A. THEY IMPOSE A CEILING ON THE TOTAL AMOUNT OF DEDUCTION AND THEREFORE TH E NON OBSTANTE CLAUSE IN SECTION 80-I(6) CANNOT RESTRICT TH E OPERATION OF SECTIONS 80A(2) AND 80B(5) WHICH OPERATE IN DIFFERENT SPHERES. AS OBSERVED EARLIER SECTION 80-I (6) DEALS WITH ACTUAL COMPUTATION OF DEDUCTION WHEREAS SECTION 80-I(1) DEALS WITH THE TREATMENT TO BE GIVEN TO SUCH DEDUCTIONS IN ORDER TO ARRIVE AT THE TOTAL INCOME O F THE ASSESSEE AND THEREFORE WHILE INTERPRETING SECTION 80-I(1) WHICH ALSO REFERS TO GROSS TOTAL INCOME ONE HAS TO READ THE EXPRESSION ' GROSS TOTAL INCOME' AS DEFINED IN SECTI ON 80B(5). 8. IN VIEW OF THE ABOVE JUDGEMENT OF APEX COURT TH E LOSS SUFFERED BY THE ASSESSEE IN ONE UNIT HAS TO BE SET OFF AGAINST THE PROFIT OF THE OTHER UNIT. THE MADRAS HIGH COURT IN THE ASSESSEE'S OWN CASE EXAMINED THIS ISSUE ELABORATELY FOR THE AS SESSMENT YEARS 9 I.T.A. NOS.2042 TO 2045/MDS/16 1998-99 AND 2001-02 AND CONFIRMED SIMILAR ORDER OF THE CIT(APPEALS). SINCE THE SIMILAR ORDER OF THE CIT(A PPEALS) IS CONFIRMED BY THE JURISDICTIONAL HIGH COURT FROM TH E ORDER OF THE CIT(APPEALS) IT APPEARS THAT THE ASSESSEE HAS FILED REVISION PETITION BEFORE THE HIGH COURT AND THE SAME IS SAID TO BE PE NDING THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERELY B ECAUSE A REVISION PETITION IS PENDING BEFORE THE HIGH COURT THAT CAN NOT BE A REASON FOR NOT FOLLOWING THE ORDER OF THE HIGH COURT. SIN CE THE HIGH COURT CONFIRMED SIMILAR ORDER OF THE CIT(APPEALS) THIS T RIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 9. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE A RE DISMISSED. ORDER PRONOUNCED ON 21 ST OCTOBER 2016 AT CHENNAI. SD/- SD/- ( . . ' #$ ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI 7 /DATED THE 21 ST OCTOBER 2016. KRI. 10 I.T.A. NOS.2042 TO 2045/MDS/16 1 /3#8 98+3 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. 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