ACIT, CHENNAI v. G.R.Padmanabhan (Indl), CHENNAI

ITA 598/CHNY/2010 | 2001-2002
Pronouncement Date: 30-09-2010 | Result: Dismissed

Appeal Details

RSA Number 59821714 RSA 2010
Assessee PAN AALPP9367N
Bench Chennai
Appeal Number ITA 598/CHNY/2010
Duration Of Justice 5 month(s)
Appellant ACIT, CHENNAI
Respondent G.R.Padmanabhan (Indl), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-09-2010
Date Of Final Hearing 27-09-2010
Next Hearing Date 27-09-2010
Assessment Year 2001-2002
Appeal Filed On 30-04-2010
Judgment Text
IN THE INCOMETAX APPELLATE TRIBUNAL: D- BENCH:CHENN AI (BEFORE SHRI HARI OM MARATHA JUDICI AL MEMBER AND SHRI ABRAHAM P. GEORGE. ACCOUNTANT MEMBER) ITA NOS.592 TO 596/ MDS/10 ASST. YEARS 2001-02 TO 2004-05 & 2006-07 THE ACIT VS. M.THANGAMALIGAI TRUST CENTRAL CIR.III(3) CHENNAI. 136 USMAN RD. T.N AGAR CHENNAI-600017 PAN AAATMO655R (APPELLANT) (RESPONDENT) ITA NOS.597 TO 602/MDS/10 ASST. YEARS 2001-01 TO 2006- 07 THE ACIT VS. SHRI G.R.PADMANABHAN CENTRAL CIR.III(3) CHENNAI 136 USMAN RD. T.N AGAR CHENNAI-600017 (APPELLANT) (RESPONDENT) PAN AALPP9367N ITA NOS.603 TO 607/MDS/10 ASST. YEARS 2000-01 TO 2004-05 THE ACIT VS. SHRI G.RAJENDRAN (HUF). CENTRAL CIR.III(3) CHENNAI 136 USMAN ROAD T.N AGAR CHENNAI 600017 PAN AAAHG0559C (APPELLANT) (RESPONDENT) ITA NOS.592 -610/MDS/10 2 ITA NOS.608 AND 609/MDS/10 ASST. YEARS 2003-04 & 2004-05 THE ACIT VS. SHRI G. RAJENDRAN (INDL.)_ CENTRAL CIR.III(3) CHENNAI 136 USMAN ROAD. T. NAGAR CHENNAI 600017 PAN AAEPG7361L (APPELLANT) (RESPONDENT) & ITA NO.610/MDS/10 ASST. YEAR 2006-07 THE ACIT VS. M/S GRT HOTELS & RESORTS P.LTD. CENTRAL CIR.III(3) CHENNAI 136 USMAN RD. T.NA GAR CHENNAI PAN AAACG3608B (APPELLANT) (RESPONDENT) APPELLANT BY: RESPONDENTS BY: SRI SHAJI P.JACOB SRI PHILIP GEORGE ORDER PER BENCH THE GROUNDS TAKEN BY THE REVENUE IN ALL THESE APPE ALS ARE SIMILAR AND ARE RECITED HEREUNDER: ITA NOS.592 -610/MDS/10 3 1. THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A O TO IGNORE ALL DEPRECIATION LOSS FROM WINDMILL BUSINESS PRIOR TO THE ASST. YEAR 2000-01. 2. THE LD. CIT(A) ERRED IN NOT FOLLOWING THE DECISI ON RENDERED BY THE A BENCH OF THE CHENNAI ITAT IN ITA NO.1125 TO 1127/MDS/2009 DATED 8-1-2010 WHEREIN IT IS HELD BY THE ITAT THAT THE UNABSORBED DEPRECIATION LOSS PRIOR TO INIT IAL ASST. YEAR SHALL BE NOTIONALLY CARRIED FORWARD AND TAKEN INTO CONSID ERATION FOR COMPUTATION U/S 80IA. 3. THE LD. CIT(A) HAS GROSSLY ERRED IN NOT FOLLOW ING THE JURISDICTIONAL ITAT CHENNAI DECISIONS IN THE CASE OF M/S VXL SYSTEMS VS. ACIT IN ITA NO.349/MDS/09 AS WELL AS IN THE CASE OF ACIT VS. SUDAN SPINNING MILLS LTD IN ITA NOS.1505 &1507/MDS/2008. 2. SHORT FACTS GIVING RISE TO THESE APPEALS EMA NATES FROM CLAIMS OF THE RESPECTIVE ASSESSEES FOR DEDUCTION UNDER SEC .80IA OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT). THE CLA IMS FOR THE RESPECTIVE ASST. YEARS MADE BY THE ASSESSEES WERE B ASED ON ASST. YEAR 2000-01 BEING CONSIDERED AS THE INITIAL ASST. YEAR. ALL THE CLAIMS WERE ON WINDMILLS. AO HAD REFUSED TO GIVE THE DEDUC TION CLAIMED UNDER SEC. 80IA OF THE ACT ON ACCOUNT OF TWO REASON S: (I) THE WINDMILL BUSINESS OF THE ASSESSEES WERE STARTED IN ASST. YEAR 1996- 97 AND THEREFORE ASST. YEAR 2000-01 COULD NOT BE CONSIDERED AS THE INITIAL ASSESSMENT YEAR (II) IF THE WINDMILL W AS CONSIDERED AS A SEPARATE UNDERTAKING FROM YEAR ENDED 31-3-1996 ONWA RDS THEN THERE WERE NOTIONAL UNABSORBED DEPRECIATION WHICH W AS REQUIRED TO ITA NOS.592 -610/MDS/10 4 BE SET OFF AGAINST THE INCOME FOR THE IMPUGNED ASSE SSMENT YEARS AND IF SUCH NOTIONAL BROUGHT FORWARD DEPRECIATION W AS CONSIDERED THERE WAS NO BALANCE OF PROFITS LEFT FOR GIVING ANY DEDUCTION UNDER SEC. 80IA. 3. IN ITS APPEAL BEFORE THE CIT(A) THE ASSESSEES T OOK THE CONTENTION THAT AFTER THE AMENDMENT OF SEC.80IA BY FINANCE ACT 1999 WITH EFFECT FROM 1-4-2000 IT COULD EXERCISE T HE OPTION FOR ADOPTION OF 2000-01 AS THE INITIAL ASSESSMENT YEAR AND THE NOTIONAL DEPRECIATION OF THE EARLIER YEARS COULD NOT BE SET OFF WITH THE INCOME OF THE INITIAL ASSESSMENT YEAR OR SUBSEQUENT ASST. YEARS. AS PER ASSESSEES THE DEPRECIATION CARRIED FORWARD WOR KED OUT BY THE AO WAS PURELY NOTIONAL SINCE IN THE EARLIER YEARS S UCH UNABSORBED DEPRECIATION WERE SET OFF AGAINST INCOME FROM OTHER SOURCES. IN A NUTSHELL IT WAS ARGUED THAT SET OFF OF THE UNABSOR BED DEPRECIATION COULD NOT BE MADE AND THAT ASSESSEE HAD A CHOICE TO OPT FOR THE INITIAL ASSESSMENT YEAR AS ASST. YEAR 2000-01. LD. CIT(A) WAS APPRECIATIVE OF THESE CONTENTIONS. ACCORDING TO HIM THE TRIBUNAL IN ITS DECISION IN ITA NOS.1798 AND 1799/MDS/02 DATED 23-1-2008 IN THE CASE OF MANORANJITHAM THANGAMALIGAI TRUST G . RAJENDRAN (HUF) AND OTHERS HAD HELD THAT THE INITIAL ASST. Y EAR COULD BE ITA NOS.592 -610/MDS/10 5 CHOSEN BY THE ASSESSEE AT ITS OPTION FOR COMPUTATI ON OF CLAIM FOR DEDUCTION UNDER SEC. 80IA OF THE ACT. VIS A VIS TH E SET OFF OF NOTIONAL UNABSORBED DEPRECIATION OF THE EARLIER YEA RS VIEW OF THE CIT(A) WAS THAT SUCH SET OFF COULD NOT BE FORCED UP ON AN ASSESSEE BASED ON THE INTERPRETATION HE GAVE TO SEC.80IA(5) OF THE ACT. THEREFORE HE ALLOWED THE CLAIM OF THE ASSESSEE. 4. NOW BEFORE US THE LD. DR STRONGLY ASSAILED THE ORDER OF THE CIT(A) ON THE ASPECT OF CONSIDERATION OF INITIAL AS ST. YEAR AND SET OFF OF CARRY FORWARD NOTIONAL UNABSORBED DEPRECIATI ON AND LOSS. 5. PER CONTRA THE LD. AR SUBMITTED THAT THE ISSUE HAS BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S VELAYUDHASWAMY SPG. M ILLS P. LTD. V. ACIT (231 CTR 368). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. VIS A VIS THE FIRST ISSUE OF ELECTION OF INITIAL A SSESSMENT YEAR IN OUR OPINION THE CIT(A) HAD RIGHTLY RELIED ON A DECISIO N OF COORDINATE BENCH IN THE CASE OF MANORANJITHAM THANGAMALIGAI TR UST G.RAJENDRAN HUF & ORS. IN ITA NO.1798 AND 1799/MDS /02 DATED 23-1-08. BOTH THE ASPECTS OF ELECTION OF INIT IAL ASSESSMENT YEAR AS WELL AS THE QUESTION OF SET OFF OF EARLIER YEAR NOTIONAL ITA NOS.592 -610/MDS/10 6 DEPRECIATION AND BUSINESS LOSS HAS ALSO BEEN CONSI DERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN M/S VELAYUDHAS WAMY SPG. MILLS (P) LTD. (SUPRA). IT WAS HELD AT PARA 13 BY T HEIR LORDSHIPS AS UNDER: 80-IA: READS AS FOLLOWS: 80IA: WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSIN ESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT. OF PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT Y EARS. 80IA (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY AT THE OPTION OF THE ASSESSEE BE CLAIMED BY HIM FOR ANY T EN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FRO M THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AN D BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVI DING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLA USE (III) OF SUB- SECTION (4) OR GENERATES POWER OR COMMENCES TRANSMI SSION OR DISTRIBUTION OF POWER ( OR UNDERTAKES SUBSTANTIAL R ENOVATION AND MODERNIZATION OF THE EXISTING TRANSMISSION OR DISTR IBUTION LINES): .. (4) THIS SECTION APPLIES TO--- (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPI NG OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY WHICH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY:--- (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES( OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLIS HED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;) ITA NOS.592 -610/MDS/10 7 (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (II I) DEVELOPING OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY; (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL 1995: (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT THE PROFITS AND GAINS OF AN ELIGIBLE BUSI NESS 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 I F SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. FROM READING OF SUB-SEC. (1) IT IS CLEAR THAT IT P ROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SEC.(4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS THERE SHALL IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION BE ALLOWED IN COMPUTING THE TOTAL INCOMER OF THE ASSESSEE A DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFI TS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASST . YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAM E IS DEFINED IN SUB-SEC. (4) SUB-SEC.(2) PROVIDES OPTION TO THE AS SESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OP TION HAS TO BE EXERCISE. IF IT IS NOT EXERCISED THE ASSESSEE WILL NOT BE GETTING THE BEN3EFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-SEC. (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASST. YEAR ARE USED IN SUB-SEC. (5) AND THE SAME I S NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THAT INITI AL ASST. YEAR EMPLOYED IN SUB-SEC.(5) IS DIFFERENT FROM THE WORDS BEGINNI NG FROM THE YEAR REFERRED TO IN SUB-SEC. (2). IMPORTANT FACTORS ARE TO BE NOTED IN SUB- SEC. (5) AND THEY ARE AS UNDER: ITA NOS.592 -610/MDS/10 8 (1) IT STARTS WITH NON-OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER P ROVISION ARE TO BE IGNORED; (2) IT IS FOR THE PURPOSE OF DETERMINING THE QUANTU M OF DEDUCTION; (3) FOR THE ASST. YEAR IMMEDIATELY SUCCEEDING THE I NITIAL ASST. YEAR (4) IT IS DEEMING PROVISION (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS T HE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIA L ASST. YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM READING OF THE ABOVE IT IS CLEAR THAT THE ELI GIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASST. YEAR AND EVERY SUBSEQUENT ASST. YEARS . WHEN THE ASSESSEE EXERCISES THE OPTION THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASST. YEAR ALONE ARE TO BE BROUGHT FOR WARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE R EVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLI ER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PL ACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE THE REVEN UE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-SEC. DOES NOT CONTEMPLATE TO BRING SET OFF AMOUNT NOTION ALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME C ANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREAT ED. THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HI GH COURT IN VELAYUDHASWAMY SPG. MILLS CASE HAD ALSO REVERSED T HE DECISION OF THIS TRIBUNAL IN ACIT VS.SUDAN SPINNING MILLS P. LTD. (I TA NOS.1505 AND 1507/MDS/08) STRONGLY RELIED ON BY THE REVENUE. ASS ESSEES WERE ITA NOS.592 -610/MDS/10 9 THEREFORE WELL ELIGIBLE FOR CLAIM OF DEDUCTION UNDE R SEC. 80IA AND THE LD. CIT(A) HAD RIGHTLY ALLOWED IT. THUS WE FIND NO MERI T IN THESE APPEALS OF THE REVENUE. 7. IN THE RESULT ALL THE APPEALS STAND DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 -0 9-2010 SD/- SD/- ( HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 30TH SEPTEMBER 2010 NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.