Principal Commissioner Of Income Tax, Central v. Shri K.t.kunjumon,Buddha Street, Ashok Nagar,Directors Colony, Chennai-600 024

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 23.02.2021 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MS.JUSTICE R.N.MANJULA T.C.A.No.664 of 2019 Principal Commissioner of Income Tax, Central 1,108, Nungambakkam, High Road,Chennai-600 034. .. Appellant/Appellant -vs- Shri K.T.Kunjumon,Buddha Street, Ashok Nagar,Directors Colony, Chennai-600 024.PAN No.ACZPK 1724A.. Respondent/Respondent Prayer :Appeal under Section 260A of the Income Tax Ac, 1961against the order dated 12.02.2019 made in I.T.(SS)A.No.06/CHNY/2018 on the file of the Income Tax AppellateTribunal 'B' Bench, Chennai for the assessment block period01.04.1986 to 31.03.1996 and 01.04.1996 to 30.01.1997. Preferred against the order dated 31.01.2018 made inI.T.A.No.31/16-17 on the file of the Commissioner of Income Tax,(Appeals)-18 46, Mahatma Gandhi Road, Nungambakkam and againstthe order dated 31.03.2016 on the file of the The DeputyCommissioner of Income Tax, Central Circle 1(4) No.46, mahatmaGandhi Salai, Nungambakkam, Chennai-34, PAN No. ,Assessment Year-Assessment Year related to block 01.04.1986 to31.03.1996 to 30.01.1997. For Appellant:Mr.T.R.Senthil Kumar,Senior Standing Counselassisted by Ms.K.G.Usha Rani,Junior Standing Counsel For Respondent :Ms.Vandhana,for Mr.R.Sivaraman ****** JUDGMENT (Judgment of the Court was delivered by T.S.Sivagnanam, J.)This appeal, by the Revenue, filed under Section 260A ofthe Income Tax Act, 1961 (hereinafter referred to as “the Act”),is directed against the order dated 12.02.2019, made in I.T.(SS)A.No.06/CHNY/2018 on the file of the Income Tax AppellateTribunal 'B' Bench, Chennai (for brevity “the Tribunal”) for theassessment block period 01.04.1986 to 31.03.1996 and 01.04.1996to 30.01.1997. 2.The appeal has been filed raising the followingsubstantial questions of law:-“(1) Whether on the facts and in thecircumstances of the case, the AppellateTribunal is justified in allowing the claim ofdeduction u/s 80IA without appreciating that theconditions laid down in Section 80IA have notbeen satisfied by the assessee? and (2) Whether on the facts and in thecircumstances of the case, the AppellateTribunal is correct in law in not appreciatingthat the relied upon decision and the assessee'scase are distinguishable on facts?” 3.Heard Mr.T.R.Senthil Kumar, learned Senior StandingCounsel assisted by Ms.K.G.Usha Rani, learned Junior StandingCounsel for the appellant/Revenue and Ms.Vandhana, learnedcounsel for Mr.R.Sivaraman, learned counsel for therespondent/assessee. 4.The short issue, which falls for consideration, iswhether the Tribunal was right in allowing the claim ofdeduction under Section 80IA of the Act. 5.The argument of Mr.T.R.Senthil Kumar, learned SeniorStanding Counsel is that the assessee miserably failed to fulfilthe conditions stipulated under sub-Section (7) of Section 80IAof the Act. 6.The case has had a chequered history pursuant to asearch, which was conducted during 1997. The assessee had gonebefore the Income Tax Settlement Commission, Chennai (forbrevity “the Settlement Commission”) and an order dated22.07.1999, was passed under Section 245D(1) of the Act inwhich, the Settlement Commission brought out the facts andobserved that the documents reveal that two business concerns, viz., ARS International and ARS Film International withMr.A.Pavithran and Mr.Francis Joseph were in fact, actuallycontrolled by the respondent/assessee and they were hisbenamidars. Further, the Settlement Commission observed thatthe computation of undisclosed income thereon involved a verycomplex exercise of working out not only the undisclosed incomeof the assessee, but also suppressed income of the relatedbenamidars and also matching the available sources with theunaccounted investments made by the assessee. viz., ARS International and ARS Film International withMr.A.Pavithran and Mr.Francis Joseph were in fact, actuallycontrolled by the respondent/assessee and they were hisbenamidars. Further, the Settlement Commission observed thatthe computation of undisclosed income thereon involved a verycomplex exercise of working out not only the undisclosed incomeof the assessee, but also suppressed income of the relatedbenamidars and also matching the available sources with theunaccounted investments made by the assessee. 7.Furthermore, in the case of the said benamidar,Mr.Francis Joseph, assessment proceedings were initiated andultimately, the matter came up to this Court in T.C.A.No.1318 of2005 at the instance of the Revenue. The tax case appeal wasfiled raising identical substantial questions of law, as raisedbefore us in this appeal by the Revenue. The Division Bench, byjudgment dated 22.06.2012, disposed of the appeal and restoredthe matter back to the files of the Assessing Officer for theassessee to produce necessary material to satisfy the conditionsunder sub-Clause (ii) of sub-Section (2) of Section 80IA of theAct. In paragraph 12 of the judgment, the Court had recordedthat if the assessee (Francis Joseph) is able to prove that itis not a form by the transfer to a new business of machinery orplant previously used for any purpose, then the assessee wouldqualify for deduction, since he had qualified on the othercondition, viz., manufacture of an article or thing. 8.As noted above, the said Francis Joseph has been held tobe a benamidar. In fact, the assessee had accepted the factualposition and the matter proceeded from the said stage. 9.The Revenue challenged the order passed by theCommissioner of Income Tax (Appeals)-18, Chennai (for brevity“the CIT(A)”) dated 31.01.2018, which held that the assessee wasentitled to claim deduction under Section 80IA of the Act. TheRevenue, being aggrieved by such order, filed appeal before theTribunal raising only two grounds stating that the assessee wasusing already existing machinery and cannot be stated to be anew industrial undertaking, which came into existence during therelevant previous year. Further, the assessee was only doing anew project in the same line of business by producing cinemasand every new project in the nature of new cinema cannot betermed as a “new industrial undertaking”. The correctness ofthe said contention was examined by the Tribunal, after takingnote of the decision of the High Court of Bombay in the case ofCIT vs. Jyoti Prakash Dutta [(2014) 367 ITR 568 (Bom.)] wherein,it was held if the assessee has satisfied the conditionstipulated in sub-Section (2) of Section 80IA, it would beeligible for the deduction claimed by it. In the said case also, the assessee was engaged in the activity of filmproduction. Thus, after taking note of the said decision andalso noting that the Revenue was not able to show that there wasany transfer of used machinery or plant to a new business andthat the production of cinema film would amount to manufacturingor processing of goods as qualified by the Central Board ofDirect Taxes circular dated 23.07.1999, decided the case infavour of the assessee. also, the assessee was engaged in the activity of filmproduction. Thus, after taking note of the said decision andalso noting that the Revenue was not able to show that there wasany transfer of used machinery or plant to a new business andthat the production of cinema film would amount to manufacturingor processing of goods as qualified by the Central Board ofDirect Taxes circular dated 23.07.1999, decided the case infavour of the assessee. 10.The point, now canvassed before us by the Revenuestating that the condition stipulated in sub-Section (7) ofSection 80IA of the Act has not been fulfilled by the assessee,is a point, which was never taken by the Revenue at any earlierpoint of time. That apart, the benamidar of the assessee, viz.,Francis Joseph had availed the benefit of the KVSS Scheme byfiling a declaration and certificate was also issued.Subsequently, the assessee addressed the Department on27.09.1999, stating the factual position. This has led to theissuance of a notice/order dated 01.11.1999 by the Commissionerof Income Tax (Central), Chennai stating that Mr.Francis Josephhas obtained the certificate under Section 90(2) of the Finance(No.2) Act, 1998 by making a false declaration. In the saidnotice/order, it was also mentioned that Mr.Francis Joseph, byletter dated 21.10.1999, has expressed his consent for theadjustment of tax of Rs.8,69,338/- paid by him under KVSS Schemetowards the tax payable by the assessee before us under the KVSSin view of the inclusion of Francis Joseph's income for therelevant year 1994-95 in the hands of the assessee before us.All the above facts will clearly show that there is no error inthe order passed by the Tribunal. 11.Accordingly, the appeal stands dismissed and thesubstantial questions of law are answered against the Revenue.No costs. Sd/- Assistant Registrar(IV) //True copy// Sub Assistant Registrar abr To 1. The Income Tax Appellate Tribunal 'B' Bench, Chennai. 2. The Principal Commissioner of Income Tax, Central I, Chennai. https://hcservices.ecourts.gov.in/hcservices/ 3. The Commissioner of Income Tax. (Appeals)-18, Chennai. 4. The Deputy Commissioner of Income Tax, Central Circle 1(4),Chennai. +1cc to Mr.T.R.Senthil Kumar, Senior Standing Counsel, AdvocateSR.No.11079 T.C.A.No.664 of 2019 MGR(CO)GMY(15/04/2021)