Ita/74/2008 Of South India Corporation Ltd v. Asst. Commissioner, Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 07TH DAY OF JANUARY 2019 / 17TH POUSHA, 1940 ITA.No. 74 of 2008 AGAINST THE ORDER/JUDGMENT IN ITA 45/2006 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: SOUTH INDIA CORPORATION LTD.RANI MEYYAMMAI BUILDING, KPK MENON, ROAD, WILLINGDON ISLAND, ERNAKULAM,, COCHIN-03. BY ADVS.SMT.LATHA ANANDS.SRIDHAR RESPONDENT/S: ASST. COMMISSIONER, INCOME TAXERNAKULAM, COCHIN. OTHER PRESENT: JOSE JOSEPH,SC THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.01.2019, ALONG WITH ITA.75/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 07.01.2019, ALONG WITH ITA.75/2008, THE COURT ON THE SAME IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 07TH DAY OF JANUARY 2019 / 17TH POUSHA, 1940 ITA.No. 75 of 2008 AGAINST THE ORDER/JUDGMENT IN ITA 455/2006 ofI.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S.SOUTH INDIA CORPORATION LTD.RANI MAYYAMMAI BUILDING, KPK MENON ROAD, WILLINGDON ISLAND, ERNAKULAM, COCHIN-03., BY ADVS.SRI.B.S.KRISHNAN (SR.)SMT.LATHA ANANDSRI.K.ANAND (SR.) RESPONDENT/S: THE COMMISSIONER OF INCOME TAX,ERNAKULAM, COCHIN. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07.01.2019, ALONG WITH ITA.74/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 07.01.2019, ALONG WITH ITA.74/2008, THE COURT ON THE SAME ITA Nos.74/2008 &75/2008 JUDGMENT I.T.A.Nos. 74 of 2008 and 75 of 2008 Vinod Chandran, J A common question arise in both the appealsfor the years 2002-03 and 2003-04 and a separatequestion also arise in each of the said years. Thecommon issue is with respect to the claim under Section80 IA of the Act. The assssee admittedly established awind mill in an earlier year and started claimingdeduction under Section 80 IA from 2002-03 onwards. Itis an admitted fact that the loss incurred by theassessee on installation of wind mill and absorbed bythe other businesses of the assessee has to benotionally carried forward for the purpose of claimingthe deduction under Section 80 IA. There is no disputeon that aspect. But however, the Tribunal found thatsuch carry forward has to be from the date of inception ITA Nos.74/2008 &75/2008 4 of the wind mill, which is the commencement of thebusiness. 2. As of now, the question stands covered infavour of the assessee by virtue of Circular No.1/2016dated 15.02.2016 issued by the Central Board of DirectTaxes (CBDT). The CBDT had extracted sub-section (5)of Section 80 IA and declared so which is binding onthe department and its officers: “The matter has been examined by the Board. It is abundantly clear from sub-section (2)that an assessee who is eligible to claimdeduction under Section 80 IA has the optionto choose the initial/first year from whichit may desire the claim of deduction for tenconsecutive years, out of a slab of fifteen(or twenty) years,as prescribed under thatsub-section. It is hereby clarified thatonce such initial assessment year has beenopted for by the assessee, he shall beentitled to claim deduction under Section 80 IA for ten consecutive years beginning from the year in respect of which he has exercisedsuch option subject to the fulfilment ofconditions prescribed in the section. Hencethe term “initial assessment year” would meanthe first year opted for by the assessee forclaiming deduction under Section 80 IA.However, the total number of years forclaiming deduction should not transgress theprescribed slab of fifteen or twenty years,as the case may be and the period of claimshould be availed in continuity.” IA for ten consecutive years beginning from the year in respect of which he has exercisedsuch option subject to the fulfilment ofconditions prescribed in the section. Hencethe term “initial assessment year” would meanthe first year opted for by the assessee forclaiming deduction under Section 80 IA.However, the total number of years forclaiming deduction should not transgress theprescribed slab of fifteen or twenty years,as the case may be and the period of claimshould be availed in continuity.” 3. Hence the question of law has to beanswered in favour of the assessee and against theDepartment. The initial year for the purpose of Section80 IA, is the initial assessment year from which theclaim of deduction is commenced and the assessee isentitled to the notional carry forward from thatparticular year. The order of the Tribunal is reversedto that extent. ITA Nos.74/2008 &75/2008 6 4. One other question arising in the year2002-03 is as to the claim under Section 41(1) of theIncome Tax Act. The assessee had in an earlier yearpaid up an amount of Rs.88,44,425/- as sales taxliability which was refunded to them in the subjectassessment year by virtue of a decision of thejurisdictional High Court. The assessee claimed thatit has to be kept as a contingent liability since anappeal is pending before the Hon'ble Supreme Court.The Tribunal found that as and when and if the SupremeCourt decides against the assessee, the assessee wouldbe able to claim the amount again as expenditure. Wefind that sufficient safeguards have been made by theTribunal to that end and we find no reason to interferewith the directions of the Tribunal. The questionstands answered against the assessee. 5. In the year 2003-04 the question is as towhether the expenditure incurred insofar as carryingout repairs of the office of the assessee should be arevenue expenditure or a capital expenditure. The ITA Nos.74/2008 &75/2008 expenditure incurred was insofar as making repairs ofthe office building itself, by using Plaster of Paris.The same having an enduring benefit to the business ofthe assessee has to be treated as capital expenditureand hence we find no reason to interfere with the orderof the Tribunal. The question of law raised isanswered in favour of the Revenue and against theassessee. The appeals would stand partly allowed. Noorder as to costs. Sd/- K.VINOD CHANDRANJudge jma Sd/-Judge ASHOK MENON ITA Nos.74/2008 & APPENDIX OF ITA 74/2008 PETITIONER'S/S EXHIBITS: ANNEXURE-1 TRUE COPY OF ASSESSMENT ORDER FOR THE YEAR 2002-2003. ANNEXURE-2TRUE COPY OF APPELLATE ORDER DATED 11/05/2006 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE-3 TRUE COPY OF ORDER DATED 18/01/2008 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ITA Nos.74/2008 & APPENDIX OF ITA 75/2008 PETITIONER'S/S EXHIBITS: ANNEXURE-1 TRUE COPY OF ASSESSMENT ORDER FOR THE YEAR 2003-04. ANNEXURE-2 TRUE COPY OF APPELLATE ORDER DATED 11/5/06 OF THE COMMISSIONER OF INCOME TAX (APPEALS) ANNEXURE-3 TRUE COPY OF ORDER DATED 18/1/2008 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.