Commissioner Of Income Tax Company Circle-3(2) Chennai v. M/S.ucal Fuel Systems Limited Raheja Towers 7Th Floor, Unit 705

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23-11-2015 CORAMTHE HONOURABLE MR.JUSTICE M.JAICHANDRENANDTHE HONOURABLE MRS.JUSTICE S.VIMALATax Case Appeal No.1166 of 2015 Commissioner of Income TaxCompany Circle-3(2)Chennai... Appellant/AppellantVersus M/s.Ucal Fuel Systems LimitedRaheja Towers 7th Floor, Unit 705,No.177, Anna Salai,Chennai 600 002... Respondent/Respondent Prayer: Appeal filed Under Section 260 A of the Income Tax Act1961 presented to the High Court against the order of the IncomeTax Appellate Tribunal Madras `A' Bench, dated 26.6.2015, in ITANo.1107/MDS/2015 and Assessment Year, 2006-2007 and against theOrder of the Commissioner of Income-Tax (Appeals)-III, Chennai-34 made in ITA.NO.380/07-08/A-III, dated 23.06.2010 for theAssessment Year 2005-06 and against the order of the AdditionalCommissioner of Income-Tax, Company Range-III, Madras-34, madein G/R/PAN.NO.AAACU0514k(33002-u), Dated 14.12.2007 for theAssessment year 2005-06. For Respondent : Mr.A.S.SriramanO R D E R This Tax Case Appeal has been filed against the order ofthe Income Tax Appellate Tribunal “A” Bench, Chennai, dated26.6.2015, made in I.T.A.No.1107/Mds./2015. 2. The brief facts of the case, necessary for the disposalof the appeal, are as follows: https://hcservices.ecourts.gov.in/hcservices/ 2.1) The assessee company had been engaged in themanufacturing of carburettor fuel pumps for two wheelers andfour wheelers. It had filed its return, for the assessment year2005-2006, declaring an income of Rs.13,64,09,870/- and arevised return had been filed, declaring an income ofRs.19,47,94,750/-. The case was selected for scrutiny. Noticeunder Section 143(2) of the Income Tax Act, 1961 (hereinafterreferred to as `the Act'), had been issued. The assessees claimof deduction, under Section 80IA, for a sum of Rs.85,35,842/-,had been disallowed on the ground that, as per the provisionscontained in Section 80IA(5), the profit and gains of aneligible business, to which sub section (1) would apply, shall,for the purpose of determining the quantum of deduction, underthe said sub section, for the assessment year immediatelysucceeding the initial assessment year or any subsequent year,be computed, as if such eligible business was the only source ofincome of the assessee company during the previous year relevantto the initial assessment year and to every subsequentassessment year upto, and including the assessment year forwhich the determination is to be made. 2.2) Aggrieved by the assessment order, the assesseecompany had preferred an appeal before the Commissioner ofIncome Tax (Appeals)-III, in I.T.A.No.380/07-08/A.III. TheCommissioner of Income Tax (Appeals)-III, by his order, dated23.6.2010, had allowed the appeal of the assessee regarding thedisallowance, under Section 80IA of the Act, relying on thedecision of the Income Tax Appellate Tribunal, made inVelayudhaswamy Spinning Mills (P) Ltd. Vs. AssistantCommissioner of Income Tax, (231 CTR (Mad.) 368), and M/s.MohanBreweries and Distelleries Limited Vs. ACIT, 2008 (116 ITD 241). 2.3) Aggrieved by the order passed by the Commissioner ofIncome Tax (Appeals)-III, the department had preferred an appealbeforetheIncomeTaxAppellateTribunal,inI.T.A.No.1107/Mds./2015. The Tribunal, by its order, dated26.6.2015, had dismissed the appeal filed by the department,following the decision of this court in the case ofVelayudhaswamy Spinning Mills (P) Ltd. Vs. AssistantCommissioner of Income Tax, (231 CTR (Mad.) 368). 2.4) Challenging the order of the Tribunal, dated26.6.2015, the department has filed the present Appeal, beforethis Court, under Section 260A of the Act, raising the followingsubstantial questions of law. 2.3) Aggrieved by the order passed by the Commissioner ofIncome Tax (Appeals)-III, the department had preferred an appealbeforetheIncomeTaxAppellateTribunal,inI.T.A.No.1107/Mds./2015. The Tribunal, by its order, dated26.6.2015, had dismissed the appeal filed by the department,following the decision of this court in the case ofVelayudhaswamy Spinning Mills (P) Ltd. Vs. AssistantCommissioner of Income Tax, (231 CTR (Mad.) 368). 2.4) Challenging the order of the Tribunal, dated26.6.2015, the department has filed the present Appeal, beforethis Court, under Section 260A of the Act, raising the followingsubstantial questions of law. "1. Whether on the facts and in the circumstancesof the case, the Appellate Tribunal was in right inallowing the deduction under Section 80IA of theIncome Tax Act, when there is no positive income fromthe industrial undertaking during the initialassessment year? 2. Whether on the facts and in the circumstancesof the case, the ITAT is right in holding that theassessee is entitled to deduction under Section 80IAfollowing the decision of the jurisdictional HighCourt in the case of Velayudhaswamy Spinning Mills(340 ITR 477) when the same is pending before theHon'ble Supreme Court in SLP Civil 1136/11? 3. Whether on the facts and in the circumstancesof the case the Income Tax Appellate Tribunal wascorrect in holding that the initial assessment year toSection 80IA(5) would only mean the year of claim ofdeduction under Section 80IA and not the year ofcommencement of eligible business?" 3. The learned counsel appearing on behalf of thedepartment had raised the following grounds:"A. The order of the Appellate Tribunal iserroneous in law and opposed to the facts andcircumstances of the case. B. The Income Tax Appellate Tribunal erred inholding that the assessee is entitled to deductionunder Section 80IA. C. The Income Tax Appellate Tribunal erred inallowing the deduction under Section 80IA of theIncome Tax Act when there is no positive income fromthe industrial undertaking during the financialassessment year. D. The Income Tax Appellate Tribunal ought tohave appreciated that as per section 80IA (5) theundertaking eligible for deduction u/s 80IA should betreated as only source of income for computing thequantum of deduction. E. The Income Tax Appellate Tribunal erred infollowing the decision of Jurisdictional High Court inthe case of M/s.Velayuthasamy Spinning Mills when thesame is in appeal before the Hon'ble Supreme Court. F. The Income Tax Appellate Tribunal ought tohave observed that since sub-section 5 of Section 80IAstarts with a non-obstante clause, the restriction putin sub-section 5 will prevail and deduction under 80IAhas to be restricted accordingly. G. The Income Tax Appellate Tribunal ought tohave appreciated that as per provisions of section80IA(5) the undertaking eligible for deduction shouldbe treated as only source of income for computing thequantum of deduction." 4. Per contra, the learned counsel appearing on behalf ofthe respondent had submitted that the decision rendered inVelayudhaswamy Spinning Mills (P) Ltd. Vs. AssistantCommissioner of Income Tax, (231 CTR (Mad.) 368), squarelyapplies to the facts of the present case. He had furthersubmitted that a Division Bench of this court had rendered asimilar decision, in Commissioner of Income-Tax, Circle-I,Tirupur Vs. R.Yuvaraj, [2015] 57 Taxmann.com 252 (Madras). Inview of the above decisions, the appeal filed by the Revenue isliable to be dismissed, as it is devoid of merits. 5. We have heard the learned the counsels appearing onbehalf of the appellant, as well as the respondent. We have alsoperused the records available before this Court. 4. Per contra, the learned counsel appearing on behalf ofthe respondent had submitted that the decision rendered inVelayudhaswamy Spinning Mills (P) Ltd. Vs. AssistantCommissioner of Income Tax, (231 CTR (Mad.) 368), squarelyapplies to the facts of the present case. He had furthersubmitted that a Division Bench of this court had rendered asimilar decision, in Commissioner of Income-Tax, Circle-I,Tirupur Vs. R.Yuvaraj, [2015] 57 Taxmann.com 252 (Madras). Inview of the above decisions, the appeal filed by the Revenue isliable to be dismissed, as it is devoid of merits. 5. We have heard the learned the counsels appearing onbehalf of the appellant, as well as the respondent. We have alsoperused the records available before this Court. 6. It is noted that the facts and circumstances based onwhich the present Appeal had arisen are similar to those whichhad already been decided by this court in the cases cited supra.Further, in a batch of cases in CIT Vs. Eastman Exports GlobalClothing (P) Ltd. [2015] 229 Taxman 449/54 Taxmann.com 408(Madras), this Court had followed the decision rendered inVelayudhaswamy Spinning Mills (P) Ltd. Vs. AssistantCommissioner of Income Tax, (231 CTR (Mad.) 368), and haddecided the matter in favour of the assessee and against theRevenue. Taking note of the above said decisions, we areconstrained to dismiss the present Appeal filed by the Revenue,confirming the order passed by the Tribunal, dated 26.6.2015.Accordingly, the questions of law raised in the appeal areanswered against the Revenue and in favour of the assessee, forthe reasons stated above. Accordingly, the Tax Case Appealstands dismissed. -s/d- Assistant Registrar True CopySub-Assistant Regsitrar csh To 1.Commissioner of Income TaxCompany Circle-3(2)Chennai. 2.The Income TaxAppellate TribunalChennai Ä"BenchChennai 3.The Commissioner of Income-Tax(Appeals)-III, No.121, Mahatma Gandhi Road,Chennai-34 4.The Additional Commissionerof Income -Tax, No.121,MahatmaGandhi Road, Chennai-34 +1 cc to Mr.M.Swaminathan Advocate sr.63257+1 cc to Mr.A.S.Srinivasan, Advocate sr.63672 Tax Case Appeal No.1166 of 2015 aa21/12/2015