Ita/55/2009 Of The Commissioner Of Income Tax v. Apollo Tyres Ltd., Cochin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR THURSDAY ,THE 14TH DAY OF MARCH 2019 / 23RD PHALGUNA, 1940 ITA.No. 55 of 2009 AGAINST THE ORDER IN ITA 251/2007 of I.T.A.TRIBUNAL,COCHINBENCH DATED 22-08-2008 APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAXCOCHIN. BY ADVS.SRI.CHRISTOPHER ABRAHAM, SC,INCOME TAX DEPARTMENT RESPONDENT/RESPONDENT: APOLLO TYRES LTD., COCHINCHERUPUZHPAM BUILDING, SHANKUGHAM ROAD, KOCHI. BY ADV. SRI JOSEPH MARKOS (SR.)SRI.BINU MATHEWSRI.B.J.JOHN PRAKASHSRI.JOSEPH KODIANTHARA (SR.)SRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS (KAKKUZHIYIL)SRI.V.ABRAHAM MARKOS THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 05.02.2019, THE COURT ON 14.03.2019 DELIVERED THE FOLLOWING: I.T.APPEAL No. 55 of 2009 J U D G M E N T P.R.Ramachandra Menon, J. This appeal is at the instance of the Revenue.Grievance is against Annexure D verdict passed by theIncome Tax Appellate Tribunal whereby, Annexure C orderpassed by the Commissioner of Income Tax (Appeals) cameto be affirmed and the appeal preferred by the Revenuecame to be dismissed. 2. The sequence of events reveals that theassessment in the case of the respondent AssesseeCompany, who is engaged in the business of manufactureand sale of automobile tyres and tubes for the year1995-96 was completed under Section 143 (3) of theIncome Tax Act on 31.03.1998, fixing the total incomeat Rs.24,28,66,234/- and the tax was assessedaccordingly.The commissioner of Income Tax(Appeals),on challenge, made some interference. Later, theassessment came to be re-opened in terms of Section 143(3) r/w. Sec.147 of the Income Tax Act and the totalincome was fixed as Rs.2,99,82,910/-, as per Annexure-Are-assessment order. 3. While so, the Assessing Officer observed thatwhile completing the re-opened assessement, deductionwas allowed under Section 80IA in respect of the BarodaUnit reckoning Rs.2,65,41,498/- as 30% of the profit ofRs.8,84,71,659/- without limiting the profit in termsof Section 80AB of the Income Tax Act. It wasaccordingly, that a notice was issued to the Assesseefor rectification under Section 154 of the Act, finallyleading toAnnexure B order dated 16.05.2001,restricting the deduction to Rs.1,93,96,648/-. Thiswas taken up in appeal by the Assessee and inspite ofthe observations inAnnexure Border that theAssessee's representative had agreed to therectification, as mentioned therein, the appellateauthority finalised the matter, allowing the appeal asper Annexure C Order, directing the deduction underSection 80IA on the total of Rs.7,16,68,439/- insteadof working out the deduction on Rs.6,46,55,496/-. This made the Revenue to feel aggrieved, who approached theTribunal by filing I.T.Appeal No.251/Coch./2007. Thesaid matter was considered along with three otherappeals(two filed by the Assessee and one filed by theRevenue) in respect of the very same assessment yearand they were finalised as per a common verdict videAnnexure D. 4. After taking note of the facts and figures andthe rival submissions, the Tribunal held in paragraph30 and 31 of Annexure D order as follows: made the Revenue to feel aggrieved, who approached theTribunal by filing I.T.Appeal No.251/Coch./2007. Thesaid matter was considered along with three otherappeals(two filed by the Assessee and one filed by theRevenue) in respect of the very same assessment yearand they were finalised as per a common verdict videAnnexure D. 4. After taking note of the facts and figures andthe rival submissions, the Tribunal held in paragraph30 and 31 of Annexure D order as follows: “30. We have heard rival submissions and considered thefacts and materials on record. Sub-section (5) to section80IA mandates that notwithstanding anything containedin any other provision of this Act, the profits and gains ofan eligible business to which the provisions of sub-section(1) apply shall, for the purposes of determining thequantum of deduction under that sub-section for theassessment year immediately succeeding the initialassessment year or any subsequent assessment year, becomputed as if such eligible business were the onlysource of income of the Assessee during the previous yearrelevant to the initial assessment year and to everysubsequent assessment year upto and including theassessment year for which the determination is to bemade. It is clear from the section that for the purpose of allowing deduction under Section 80IA, we have toconsider the profits of eligible business undertaking aloneas if it was the only business of the Assessee. 31. In this case, the Assessee's profits from the eligiblebusiness, viz. Baroda unit is Rs.7,16,68,439/-. Henceaccording to Section 80IA, deduction at 30% of thisamount is allowable to the Assessee. The only conditionis that such deduction should not exceed the gross totalincome of the Assessee. In this case, the gross businessincome of the Assessee is Rs.64655496/- whereas 30%profits of the Baroda Unit will be far below ofRs.64655496/-. Hence, we do not find any infirmity inthe order of the first appellate authority and as such weconfirm the same by rejecting the appeal of the revenue.” Annexure D order is put to challenge in this appealfiled under Section 260A of the Income Tax Act. 5. Though notice was ordered in the appeal adecade back on 20.03.2009, no substantial question oflaw is seen framed in the proceedings. The learnedStanding Counsel for the appellant submits that thecourse followed by the Appellate Authority whilepassing Annexure C order and the order passed by theTribunal vide Annexure D, are not liable to besustained, it being contrary to the statutory prescriptions; particularly with reference to Section80IA, r/w. Section 80AB of the Income Tax Act.Reliance is also sought to be placed on two verdictspassed by the Apex Court reported in (2004)266 ITR 521 (SC)[IPCA Laboratory Ltd. vs. Deputy Commissioner ofIncome Tax] and (2007)291 ITR 380(SC) [Commissioner ofIncome Tax vs. Shirke Construction Equipment Ltd.]. 6. Heard Mr. Christopher Abraham, the learnedStanding Counsel for the Revenue and Shri JosephMarkose, the learned Sr. Counsel appearing for therespondent Assessee as well. 7. The only dispute is with regard to thecalculation effected by the authorities concerned. Toput it more clear, whether the extent of deduction(workable at 30%) is to be made with reference toRs.6,46,55,496/-, as done by the Assessing Officerwhile passing Annexure A or should it be on the sum ofRs.7,16,68,439/-. The course followed by the AssessingOfficer, while passing Annexure B rectification order,restricting the deduction underSection 80IAtoRs.1,93,96,648/-, (being 30% of Rs.6,46,55,496/-), as 6. Heard Mr. Christopher Abraham, the learnedStanding Counsel for the Revenue and Shri JosephMarkose, the learned Sr. Counsel appearing for therespondent Assessee as well. 7. The only dispute is with regard to thecalculation effected by the authorities concerned. Toput it more clear, whether the extent of deduction(workable at 30%) is to be made with reference toRs.6,46,55,496/-, as done by the Assessing Officerwhile passing Annexure A or should it be on the sum ofRs.7,16,68,439/-. The course followed by the AssessingOfficer, while passing Annexure B rectification order,restricting the deduction underSection 80IAtoRs.1,93,96,648/-, (being 30% of Rs.6,46,55,496/-), as against 30% of Rs.7,16,68,439/-(as claimed by theAssessee) has been interdicted and corrected by theappellate authority while passing Annexure C order,directing the Assessing Officer to allow deductionunder Section 80IA of the Act on Rs.7,16,68,439/-. Thishas been sustained by the Tribunal after a detailedscrutiny of the facts and figures and the relevantprovisions of law. The challenge raised against thesaid calculation can never be termed as a pointinvolving any substantial question of law envisagedunder Section 260A of the Income Tax Act. 8. The decisions cited by the Learned GovernmentPleader for the Revenue are not applicable as such, tothe case in hand. It is true that there is a non-obstante clause in Section 80AB, the effect of whichhas been highlighted in the decision (2007)291 ITR380(SC)(cited supra). However, coming to sub-Section (5)of Section 80IA, there is another non-obstante clause,which is with reference to any other provisionscontained in the Act and it is with reference to thesaid provision, that the Tribunal has made specific observations in paragraph 30 of Annexure D order. 9. The thrust of the submissions made by thelearned Standing counsel for the Revenue is that,though the Assessee is entitled to get deduction to anextent of 30% of the profit derived from the BarodaUnit (total of Rs.71668439/-), since the income fromall sources as finally accounted for, reflects only alower figure of Rs.6,46,55,496/-, 30% has to be workedout with reference to the aforesaid total income ofRs.64655496/-, which is stated as the mandate ofSection 80AB of the Act. We find it difficult to acceptthe above proposition for the reasons noted below.10. For easy understanding and ready reference,Sections 80IA and 80AB of the Income Tax Act areextracted below: Section 80IA “ (1)Where the gross total income of an Assesseeincludes any profits and gains derived from any businessof an industrial undertaking or an enterprise referred to insub-section (4) (such business being hereinafter referredto as the eligible business) there shall, in accordance with and subject to the provisions of this section, be allowed, incomputing the total income of the Assessee, a deductionfrom such profits and gains of an amount equal tohundred percent of profits and gains derived from suchbusiness for the first five assessment years commencingat any time during the periods as specified in sub-section(2) and thereafter, twenty-five per cent of the profitsand gains for further five assessment years. Provided that where the Assessee is a company, theprovisions of this sub-section shall have effect as if for thewords “twenty-five per cent”, the words “thirty per cent”had been substituted. Section 80AB: and subject to the provisions of this section, be allowed, incomputing the total income of the Assessee, a deductionfrom such profits and gains of an amount equal tohundred percent of profits and gains derived from suchbusiness for the first five assessment years commencingat any time during the periods as specified in sub-section(2) and thereafter, twenty-five per cent of the profitsand gains for further five assessment years. Provided that where the Assessee is a company, theprovisions of this sub-section shall have effect as if for thewords “twenty-five per cent”, the words “thirty per cent”had been substituted. Section 80AB: “Where any deduction is required to be made or allowedunder any section[included in this chapter under theheading 'C-Deductions in respect of certain incomes inrespect of any income of the nature specified in thatsection which is included in the gross total income of theAssessee, then, notwithstanding anything contained inthat section, for the purpose of computing the deductionunder that section, the amount of income of that nature ascomputed in accordance with the provisions of this Act(before making any deduction under this Chapter] shallalone be deemed to be the amount of income of thatnature which is derived or received by the Assessee andwhich is included in his gross total income.” I.T.APPEAL No. 55 of 2009 11. What is spoken to by Section 80IA is theclear cut eligibility of the Assessee to get 30% of theincome as profit derived by the Assessee from theeligible business. It does not say that 30% has to becalculated with reference to the total income of theUnit from all other sources; nor does it say, 30% ofthe profit from the eligible business or 30% of thetotal income,whichever is lower. 12. Similarly, Section 80AB only says the mode ofcomputation with regard to the deduction required to bemade or allowed under any of the Sections of Chapter--VIA under the HeadCDeductions in respect of certainpayments. The terminology in the said provision clearlygives an idea that computation has to be made inaccordance with the provisions of the Income Tax Actbefore making any deduction under Chapter VIA. Thismeans, the Assessee will not be eligible to claimdeduction first and then set off, if at all there isany carry forward loss and thus to reduce the taxliability. The said provision also does not say thatthe extent of deduction to be made under Section 80IA -or such other provision under the Head C-'Deductionsin respect of certain payments' of Chapter VIA is to bemade with reference to the total income from all othersources or confining it to the lower extent, if it isless than the profit from the eligible business. 13. The precedents sought to be relied on by theRevenue (judgments of the Apex Court cited supra) areonly to the effect that, if the total income shown bythe Assessee (as available from all sources) is lessthan the extent of deduction available, no benefit canbe aspired or will be accrued to the Assessee. 14. In the instant case, 30% of the profit fromthe Baroda Unit is Rs.71668439 x 30/100 =Rs.2,15,00,531.70/-; whereas the total income from allsources revealed by the Assessee is only Rs.64655496/-.As it stands so, 30% of deduction under Section 80IAwould be deducted from the total income,which is much more than the said amount and theAssessee is eligible to have the deduction as allowedby the Commissioner and upheld by the Tribunal. 15. The idea and understanding of the Revenue, 12 with regard to the scope of Section 80AB, to enablethem to reckon the figure of 30%, confining it to thelower extent of total income from all sources, insteadof reckoning it as 30% of the business profit from theeligible business, is thoroughly wrong andmisconceived. 15. The idea and understanding of the Revenue, 12 with regard to the scope of Section 80AB, to enablethem to reckon the figure of 30%, confining it to thelower extent of total income from all sources, insteadof reckoning it as 30% of the business profit from theeligible business, is thoroughly wrong andmisconceived. 16. The crucial question to be considered in thisappeal is whether the stipulation under Section 80AB ofthe Income Tax Act would govern the deduction of 30% ofthe profit under Section 80IA of the Act derived by theAssessee from the eligible business to the extent ofreducing the benefit with regard to the total incomedeclared from all sources]. The stand of the Assesseeis supported by ruling of the Division Bench of thiscourt in Commissioner of Income Tax vs. Jose Thomas[(2002) 253 ITR 553 (Ker.)]with regard to deductionunder Section 80HHC of the Income Tax Act where theratio of the dictum is same. 17. Since there is no ambiguity in the provisionsof Section 80IA, the statute has to be read andunderstood as it is and cannot be sought to be re- I.T.APPEAL No. 55 of 2009 written or supplemented in any manner. This is more sowhen Section 80AB stipulating the manner of computationunder the Income Tax Act in respect of the deductionsto be made under the Income Tax Act, does not come tothe rescue of Revenue. This alone has been projectedand highlighted by the Tribunal in the order underchallenge. As it stand so, there is no substantialquestion of law to call for interference to decide theissue in favour of the Revenue. The appeal fails and itis dismissed accordingly. Sd/- P.R. RAMACHANDRA MENON, JUDGE Sd/- N. ANIL KUMAR, JUDGE lk