Principal Commissioner Of Income Tax-3, Coimbatore v. M/S.prabhu Spinning Mills Pvt.ltd., Tirupur

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.3.2016 CORAM : THE HONOURABLE MR.JUSTICE V.RAMASUBRAMANIANANDTHE HONOURABLE MR.JUSTICE N.KIRUBAKARAN TCA.Nos.240 to 249 of 2016 and 4739 to 4747 of 2016 Principal Commissioner of Income Tax-3, Coimbatore. ... Appellant in all the TCAsVs M/s.Prabhu Spinning Mills Pvt.Ltd.,Tirupur.... Respondent in TCA.240/2016 M/s.Matha Spinning Mills Pvt.Ltd.,Tirupur. ... Respondent in TCA.241/2016 M/s.Velayudhasamy Spinning MillsPvt.Ltd., Tirupur.M/s.Chola Textiles Pvt.Ltd., Tirupur. ... Respondent in TCA.242/2016 ... Respondent in TCA.243/2016 M/s.Cheran Spinning Mills Pvt.Ltd., Tirupur.... Respondent in TCA.244/2016 M/s.Meera Textiles Pvt. Ltd.,Tirupur. ... Respondent in TCA.245/2016 M/s.Gomuki Spinning Mills Pvt.Ltd., Tirupur.... Respondent in TCA.246/2016M/s.Sri Shanmugavel Mills Pvt.Ltd., Tirupur.... Respondent in TCA.247/2016 M/s.Pandian Textile Mills Pvt. Ltd., Tirupur.... Respondent in TCA.248/2016Smt.K.Indira... Respondent in TCA.249/2016 ... Respondent in TCA.249/2016 https://hcservices.ecourts.gov.in/hcservices/ APPEALS under Section 260A of the Income Tax Act, 1961against the order dated 9.10.2015 respectively made inI.T.A.Nos.1605, 1607, 1608, 1609, 1610, 1613, 1615, 1616, 1617and 1621/Mds/2015 respectively on the file of the Income TaxAppellate Tribunal 'B' Bench, Chennai for the assessment year2011-12 against the Order of the Commissioner of Income Tax(A)-3, Coimbatore, dated 24.04.2015 made in ITA Nos.442/2014-15 (inTCA.240/2016), 448/2014-15 (in TCA.241/2016), 445/2014-15 (inTCA.242/2016), 452/2014-15 (in TCA.243/2016), 451/2014-15 (inTCA.244/2016), 454/2014-15 (in TCA.245/2016), 450/2014-15 (inTCA.246/2016), 444/2014-15 (in TCA.247/2016), 455/2014-15 (inTCA.248/2016), 447/2014-15 (in TCA.249/2016) respectively and,against the Assesment Order passed by the Assistant Commissionerof Income Tax, Company Circle, Tirupur I/c, dated 31.01.2014made in PA No./GIR Nos.AABCP0750E (in TCA.240/2016), AAECS1881Q(in TCA.241/2016), AAACC8791P (in TCA.243/2016), AAACC8788L (inTCA.244/2016), AABCM9581E (in TCA.245/2016), AAACG8020F (inTCA.246/2016), AABCP5926A (in TCA.248/2016), AAEP17557A (inTCA.249/2016) respectively and, against the Assessment Order ofthe Joint Commissioner of Income Tax, Tiruppur Range, Tiruppur,dated 31.01.2014 made in AADCS0676C (in TCA.242/2016),AADCS8200N (in TCA.247/2016), for the Assessment Year 2011-12. For Appellant in all TCAs : Mr.T.R.SenthilkumarFor Respondents in all TCAs : Mr.R.SivaramanCOMMON JUDGMENT(Judgment was delivered by V.RAMASUBRAMANIAN,J) The Revenue has come up with the above appeals raising thefollowing substantial questions of law :"(1) Whether on the facts andcircumstances of the case, the Income TaxAppellate Tribunal was right in law inholding that the assessee is entitled todeduction under Section 80IA without settingoff the losses/unabsorbed depreciationpertaining to the windmill, which were setoff in the earlier year against otherbusiness income of the assessee followingthe decision of the jurisdictional HighCourt in the case of M/s.VelayudhaswamySpinning Mills (340 ITR 477), when the sameis pending appeal before the Supreme Courtin SLP.Civil No. 1136 of 2011 ? and (2) Whether under the facts andcircumstances of the case, the Income TaxAppellate Tribunal was correct in holdingthat the initial assessment year in Section80IA(5) would only mean the year of claim ofdeduction under Section 80IA and not theyear of commencement of eligible business ?" 2. Heard Mr.T.R.Senthilkumar, learned Standing Counsel forthe Department. Mr.R.Sivaraman, learned counsel takes notice forthe respondents. 3. Even according to the learned Standing Counsel for theDepartment, this Court has consistently followed the decision inM/s.Velayudhaswamy Spinning Mills (340 ITR 477), despite theHonourable Supreme Court ordering notice. (2) Whether under the facts andcircumstances of the case, the Income TaxAppellate Tribunal was correct in holdingthat the initial assessment year in Section80IA(5) would only mean the year of claim ofdeduction under Section 80IA and not theyear of commencement of eligible business ?" 2. Heard Mr.T.R.Senthilkumar, learned Standing Counsel forthe Department. Mr.R.Sivaraman, learned counsel takes notice forthe respondents. 3. Even according to the learned Standing Counsel for theDepartment, this Court has consistently followed the decision inM/s.Velayudhaswamy Spinning Mills (340 ITR 477), despite theHonourable Supreme Court ordering notice. 4. Interestingly, on the basis of the decision inVelayudhaswamy Spinning Mills, the Central Board of Direct Taxeshas issued Circular No.1/ 2016 dated 15.2.2016. It will beuseful to extract the circular in entirety, which is as follows : "Circular No.1/2016 Government of IndiaMinistry of FinanceDepartment of RevenueCentral Board of Direct Taxes North Block, New Delhi, the 15th February,2016 Subject: Clarification of the term ‘initialassessment year' in Section 80IA(5) of theIncome Tax Act, 1961 Section 801A of the Income-tax Act, 1961(‘Act’), as substituted by Finance Act, 1999with effect from 1.4.2000, provides fordeduction of an amount equal to 100% of theprofits and gains derived by an undertakingor enterprise from an eligible business (asreferred to in Sub-Section (4) of thatSection) in accordance with the prescribedprovisions. Sub-Section (2) of Section 801Afurther provides that the aforesaid deductioncan be claimed by the assessee, at hisoption, for any ten consecutive assessmentyears out of fifteen years (twenty years incertain cases) beginning from the year inwhich the undertaking commences operation, begins development or starts providingservices etc. as stipulated therein. Sub-Section (5) of Section 801A further providesas under : “Notwithstanding anything contained inany other provision of this Act, the profitsand gains of an eligible business to whichthe provisions of Sub-Section (1) applyshall, for the purposes of determining thequantum of deduction under that Sub-Sectionfor the assessment year immediatelysucceeding the initial assessment year or anysubsequent assessment year, be computed as ifsuch eligible business were the only sourceof income of the assessee during the previousyear relevant to the initial assessment yearand to every subsequent assessment year up toand including the assessment year for whichthe determination is to be made”. In the above Sub-Section, whichprescribes the manner of determining thequantum of deduction, a reference has beenmade to the term ‘initial assessment year’.It has been represented that some AssessingOfficers are interpreting the term ‘initialassessment year’ as the year in which theeligible business/manufacturing activity hadcommenced and are considering such first yearof commencement/operation etc. itself as thefirst year for granting deduction, ignoringthe clear mandate provided under Sub-Section(2) which allows a choice to the assessee fordeciding the year from which it desires toclaim deduction out of the applicable slab offifteen (or twenty) years. The matter has been examined by theBoard. It is abundantly clear from Sub-Section (2) that an assessee who is eligibleto claim deduction u/s 80IA has the option tochoose the initial/first year from which itmay 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 that oncesuch initial assessment year has been optedfor by the assessee, he shall be entitled toclaim deduction u/s 801A for ten consecutiveyears beginning from the year in respect ofwhich he has exercised such option subject to The matter has been examined by theBoard. It is abundantly clear from Sub-Section (2) that an assessee who is eligibleto claim deduction u/s 80IA has the option tochoose the initial/first year from which itmay 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 that oncesuch initial assessment year has been optedfor by the assessee, he shall be entitled toclaim deduction u/s 801A for ten consecutiveyears beginning from the year in respect ofwhich he has exercised such option subject to the fulfillment of conditions prescribed inthe section. Hence, the term ‘initialassessment year’ would mean the first yearopted for by the assessee for claimingdeduction u/s 801A. However, the total numberof years for claiming deduction should nottransgress the prescribed slab of fifteen ortwenty years, as the case may be and theperiod of claim should be availed incontinuity. The Assessing Officers are, therefore,directed to allow deduction u/s 801A inaccordance with this clarification and afterbeing satisfied that all the prescribedconditions applicable in a particular caseare duly satisfied. Pending litigation onallowability of deduction u/s 80 IA shallalso not be pursued to the extent it relatesto interpreting ‘initial assessment year’ asmentioned in Sub-Section (5) of that sectionfor which the Standing Counsel/DRs besuitably instructed.The above be brought to the notice ofall Assessing Officers concerned." 5. Therefore, admittedly, the second question of law iscovered by the above circular. Hence, the appeals deserve to bedismissed. 6. Accordingly, the above tax case appeals are dismissed. Nocosts. 7. But, we cannot resist our temptation to record one morefact. If an issue is covered by the judgment of the High Court,it is always open to the Department to take it on appeal to theSupreme Court and get the law settled once and for all. But,once a decision is taken at the level of the Board, we do notknow why repeated appeals should be filed, only to meet with thesame fate as that of a decision, on which, a circular has beenissued. The Department shall take note of this for futureguidance. Sd/- Assistant Registrar(CS III) //True Copy// RS Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, 'B' Bench, Chennai. 'B' Bench, Chennai. 2.The Commissioner of Income Tax(A) - 3, Coimbatore. Coimbatore. 3.The Assistant Commissioner, Commissioner of Income Tax, Company Circle, Tirupur I/c, Tirupur. Commissioner of Income Tax, Company Circle, Tirupur I/c, Tirupur. 4.The Joint Commissioner of Income Tax, Tirupur Range, Tirupur. Tirupur Range, Tirupur. +10cc's to Mr.T.R.Senthilkumar, Advocate, S.R.Nos.17183 to 17192 TCA.Nos.240 to 249 of 2016 & CMP.Nos.4739 to 4747 of 2016 EV(CO)CA(12/04/2016)