Commissioner Of Income Taxno v. M/S.sree Narasimha Textiles Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 8.12.2015 Coram The Honourable Mr.Justice M.JAICHANDREN and The Honourable Mrs.Justice S.VIMALA Tax Case (Appeal) No.1155 of 2015--- Commissioner of Income TaxNo.63, Race Course RoadCoimbatore ... Appellant/ Appellant -vs- M/s.Sree Narasimha Textiles Pvt. Ltd.,No.1, V.P. Naidu StreetAvinash RoadCoimbatore – 641 018 ... Respondent/ Respondent Tax Case (Appeal) filed under Section 260 A of the Income TaxAct, 1961 against the order of the Income Tax Appellate TribunalMadras 'B' Bench, dated 2.6.2015 in ITA No.425/Mds/2015 against theorder of the Commissioner of Income Tax (Appeals)-1 Coimbatoredated 26.12.2014 made in Appeal No.406/13-14 against the assessmentorder of Assistant Commisssioner of Income Tax, Company Circle I(1)Coimbatore dated 31.12.2013 made in PAN/GIR.NO. for theassessment year 2011-12. For appellant : Mr.T.R.Senthil Kumar This Tax Case Appeal has been filed against the order of theIncome Tax Appellate Tribunal “B” Bench, Chennai, dated 2.6.2015,made in I.T.A.No.425/Mds./2015. 2. The brief facts of the case, necessary for the disposal ofthe appeal, are as follows: 2.1) The assessee company had been engaged in the business ofspinning of yarn and generating power through windmills. The https://hcservices.ecourts.gov.in/hcservices/ assessee had filed its return of income, for the assessment year2011-2012, on 30.9.2011, declaring a total income ofRs.19,01,67,560/-. The assessee had claimed a deduction ofRs.8,65,00,469/-, under Section 80IA of the Income Tax Act, 1961,(hereinafter referred to as `the Act') on the income from thewindmill division of the company. The case of the assessee had beenselected for scrutiny assessment and a notice under Section 143(2)of the Act had been issued and served on the assessee. Theassessing officer had disallowed Rs.8,65,00,469/-, being thededuction claimed by the assessee, under Section 80IA of the Act,holding that the initial assessment year is the year from which theassessee commences its eligible business and as no profits wereavailable for deduction in the financial year relevant to theassessment year 2011-12, after notionally bringing forward theunabsorbed depreciation and business loss. 2.2. The assessee had claimed 80IA deduction on the basis ofthe decision of this Court, in Velayudhaswamy Spinning Mills (P)Ltd. Vs. Assistant Commissioner of Income Tax, (231 CTR (Mad.)368). Challenging the said order, the Revenue had filed a specialleave petition, which had been admitted by the Supreme Court, inS.L.P. Civil No.33475 of 2012. 2.3. Aggrieved by the order passed by the assessing officer,the assessee had filed an appeal before the Commissioner of IncomeTax (Appeals). The Commissioner of Income Tax (Appeals) had heldthat the issue is covered by the decision of this Court, inVelayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissionerof Income Tax, (231 CTR (Mad.) 368). As such, the claim of theassessee had been allowed. Aggrieved by the order passed by theCommissioner of Income Tax (Appeals), the Revenue had filed anappeal before the Income Tax Appellate Tribunal “B” Bench, Chennai.The Tribunal, by its impugned order, dated 2.6.2015, had dismissedthe appeal, following the decision of this Court, in VelayudhaswamySpinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax,(231 CTR (Mad.) 368). 3. Challenging the order of the Tribunal, dated 2.6.2015, theDepartment has filed the present appeal, before this Court, underSection 260A of the Act, raising the following substantialquestions of law. "1. Whether under the facts and circumstance of thecase the Hon'ble Income Tax Appellate Tribunal was rightin law in holding that the assessee is entitled todeduction under Section 80IA without setting off thelosses/unabsorbed depreciation pertaining to thewindmill, which were set off in the earlier year against https://hcservices.ecourts.gov.in/hcservices/ 3. Challenging the order of the Tribunal, dated 2.6.2015, theDepartment has filed the present appeal, before this Court, underSection 260A of the Act, raising the following substantialquestions of law. "1. Whether under the facts and circumstance of thecase the Hon'ble Income Tax Appellate Tribunal was rightin law in holding that the assessee is entitled todeduction under Section 80IA without setting off thelosses/unabsorbed depreciation pertaining to thewindmill, which were set off in the earlier year against https://hcservices.ecourts.gov.in/hcservices/ other business income of the assessee, following thedecision of the jurisdiction High Court in the case ofM/s.Velayudhaswamy Spinning Mills (340 ITR 477) when thesame is pending appeal before the Hon'ble Supreme Courtin S.L.P.Civil No.33475 of 2012? 2. Whether under the facts and circumstances of thecase, the Income Tax Appellate Tribunal was correct inholding that the initial assessment year in Section 80IA(5) would only mean the year of claim of deduction underSection 80IA and not the year of commencement of eligiblebusiness? 3. Whether on the facts and in the circumstances ofthe case, the Tribunal was right in holding that theassessee has the option to choose the first/initialassessment year of claim for deduction under Section 80-IA? 4. The learned counsel appearing on behalf of the Departmenthad raised the following grounds, while challenging the impugnedorder of the Tribunal:- "a. The order of the Income Tax Appellate Tribunalis erroneous in law and opposed to the facts andcircumstances of the case. b. The Income Tax Appellate Tribunal erred inholding that losses and unabsorbed depreciation whichalready stood set off against other income in earlieryears could not be carried forward and set off againstprofits or income of initial/subsequent years in respectof windmill in computing the deduction under Section80IA. c. The Income Tax Appellate Tribunal erred inholding that the initial assessment year shall be firstyear in which the assessee opts to make the claim or thesixth year where the assessee had not opted in theearlier years. The Tribunal failed to appreciate that theyear of commencement is to be considered as the initialassessment year for the purpose of determining thededuction under Section 80 IA. d. The Income Tax Appellate Tribunal failed toappreciate the memorandum explaining the provisions inFinance (No 2) Bill 1980 (123 ITR (St.) 154 also explains https://hcservices.ecourts.gov.in/hcservices/ that in computing quantum of tax holiday profits for theunit is to be determined as if such units were anindependent unit owned by the taxpayer. e. The Income Tax Appellate Tribunal ought to haveappreciated that as per provisions of Section 80IA (5)the undertaking eligible for deduction under Section 80IAshould be treated as only source of income for computingthe quantum of deduction. f. The Income Tax Appellate Tribunal erred infollowing the decision of Jurisdictional High Court inthe case of M/s.Vellayuthasamy Spinning Mills when thesame is appeal before the Hon'ble Supreme Court. g. The Income Tax Appellate Tribunal should haveobserved that since sub Section 5 of Section 80IA startswith a non-obstante clause, the restriction put in sub-section 5 will prevail and deduction under 80IA has to berestricted accordingly. h. The Income Tax Appellate Tribunal ought to haveappreciated that as per provisions of Section 80IA (5)the undertaking eligible for deduction should be treatedas only source of income for computing the quantum ofdeduction.” 5. We have heard the learned the counsel appearing on behalfof the appellant. We have also perused the records available beforethis Court. g. The Income Tax Appellate Tribunal should haveobserved that since sub Section 5 of Section 80IA startswith a non-obstante clause, the restriction put in sub-section 5 will prevail and deduction under 80IA has to berestricted accordingly. h. The Income Tax Appellate Tribunal ought to haveappreciated that as per provisions of Section 80IA (5)the undertaking eligible for deduction should be treatedas only source of income for computing the quantum ofdeduction.” 5. We have heard the learned the counsel appearing on behalfof the appellant. We have also perused the records available beforethis Court. 6. It is noted that the facts and circumstances based on whichthe present appeal had arisen are similar to those which hadalready been decided by this court. Further, in a batch of cases,in CIT Vs. Eastman Exports Global Clothing (P) Ltd. [2015] 229Taxman 449/54 Taxmann.com 408 (Madras), this Court had followed thedecision rendered in Velayudhaswamy Spinning Mills (P) Ltd. Vs.Assistant Commissioner 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 2.6.2015.Accordingly, the questions of law raised in the appeal are answered against the Revenue and in favour of the assessee, for the reasonsstated above. Accordingly, the Tax Case Appeal stands dismissed. Sd/- Asst.Registrar (CS V ) /true copy/Sub Asst. RegistrarlanTo1. The Income Tax Appellate Tribunal “B” Bench, Chennai2. The Commissioner of Income Tax (Appeals)1, Coimbatore3. The Assistant Commissioner of Income Tax Company Circle I(1) Coimbatore1 cc to Mr.T.R. Senthilkumar, Advocate, Sr. 66292Tax Case Appeal No.1155 of 2015GJ(CO)kk 23/12