The Commissioner Of Income Tax v. M/S.bannari Amman Sugars Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 13/6/2016 C O R A M The Honourable Mr.Justice S.ManikumarandThe Honourable Mr.Justice D.Krishnakumar Tax Case Appeal No.397 of 2016 The Commissioner of Income TaxNo.63 Race Course RoadCoimbatore....AppellantVs M/s.Bannari Amman Sugars LtdNo.1212 Trichy RoadCoimbatore 641 018....Respondent Prayer:Appeal filed under Section 260-A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal,Madras 'B' Bench, Chennai dated 22/7/2015 in ITA No.321/Mds/2015against the order of the Commissioner of Income Tax (Appeals)-I,Coimbatore, dated 27.11.14, made in Appeal No.477/13-14 againstthe assessment order of Assistant Commissioner of Income Tx,Company Circle, (2) Coimbatore, dated 31.1.2014. For appellant ... Mr.T.R.Senthil Kumar Senior Standing Counsel for Income Tax.J U D G M E N T(Judgment of the Court was made by S.Manikumar,J) Challenge in this Tax Appeal, is to an order passed by theIncome Tax Appellate Tribunal in I.T.A.No.321/Mds/2015, dated20/7/2015, by which, the Tribunal dismissed the appeal preferredby the revenue, against the order of the Commissioner of Income-Tax dated 27/11/2014. 2. Revenue has come up with the above appeal, raising thefollowing substantial questions of law:- “1. Whether under the facts andcircumstance of the case, the Hon'bleIncome Tax Appellate Tribunal right in lawin holding that assessee is entitled to https://hcservices.ecourts.gov.in/hcservices/ deduction under Section 80 IA withoutsettingoffthelosses/unabsorbeddepreciation pertaining to the windmill,which were set off in the earlier yearagainst other business income of theassessee, following the decision of thejurisdiction High Court in the case ofM/s.Velayudhasamy Spinning Mills (340 ITR477) when the same is pending appeal beforeHon'ble Supreme Court in SLP Civil No.33475of 2012? 2. Whether under the facts andcircumstances of the case, the Income TaxAppellate Tribunal was correct in holdingthat the initial Assessment year in Section80 IA (5) would only mean the year of claimof deduction under Section 80 IA and notthe year of commencement of eligiblebusiness?3. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the assessee has theoption to choose the first/initialassessment year of claim for deductionunder Section 80-IA?” 3. When the matter came up for admission, in the light ofthe Board Circular No.1/2016, dated 15/2/2016, Mr.T.R.SenthilKumar, learned counsel for the revenue, submitted that thesubstantial questions of law Nos.2 and 3 are not pressed. Hissubmission is placed on record. 4. As regards substantial question of law No.1 isconcerned, it is the fair representation of the learned SeniorStanding Counsel for Income Tax Department that this Court hasbeen consistently following the decision in M/s.VelayudhaswamySpinning Mills (P) Ltd., v. Assistant Commissioner of Income-Taxreported in 340 ITR 477. He also submitted that challenge tothe same, is pending before the Hon'ble Apex Court in SLP No.334of 2012. 5. Central Board of Direct Taxes has issued Circular No.1/2016, dated 15/2/2016 and the same reads 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 ‘initial https://hcservices.ecourts.gov.in/hcservices/ 5. Central Board of Direct Taxes has issued Circular No.1/2016, dated 15/2/2016 and the same reads 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 ‘initial https://hcservices.ecourts.gov.in/hcservices/ assessment 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 to https://hcservices.ecourts.gov.in/hcservices/ claim 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 tothe 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 of all Assessing Officers concerned." 6.Similar to the facts and circumstances of the case,while adverting to the substantial questions of law raised andafter considering the judgment of the Hon'ble Apex Court inLiberty India vs. CIT (2009) 225 CTR (SC) 233 : (2009) 28 DTR(SC) 73 : (2009) 317 ITR 218 (SC) and the judgment of theRajasthan High Court in CIT vs. Mewar Oil & General Mills Ltd.(2004) 186 CTR (Raj) 141 : (2004) 271 ITR 311 (Raj), a Hon'bleDivision Bench of this Court in Velayudhaswamy Spinning MillsPvt. Ltd.,'s case (stated supra), held that once the losses andother deductions are set off against the income of the assesseein the previous year, it should not be re-opened again, for the https://hcservices.ecourts.gov.in/hcservices/ purpose of computation of current year income, under Section 80-I and 80-IA of the Act. 7.Velayudhaswamy Spinning Mills Pvt. Ltd.,'s case (statedsupra), has been followed in CIT v. R.Yuvaraj reported in [2015]57 TAXMANN.COM 252 (Madras). 8.It is held that though it is contended that SLP filedagainst the above reported judgment, is pending on the file ofthe Hon'ble Supreme Court, the effect of the same, would notamount to reversal or erase the dictum. 9.Material on record discloses that while confirming theorder of the Commissioner of Income-Tax (Appeal), the Income-TaxAppellate Tribunal has rightly held that, “on appeal, theCommissioner of Income-tax(Appeals), following the aforesaidjudgment of the Madras High Court in the case of VelayudhaswamySpinning Mills Pvt. Ltd. (supra), allowed the claim of theassessee and concurred that, in case, the Hon'ble Apex Courtreverses the decision given by the Madras High Court, in thecase of Velayudhaswamy Spinning Mills Pvt. Ltd. (supra), andsupports contention of the Department, in future, the AssessingOfficer, may accordingly take suitable remedial action.” Theabove view expressed by the appellate authority has beenconfirmed by the Income-Tax Appellate Tribunal, Chennai. 10.Going through the material on record, we are of theview that there are no valid grounds to reverse the abovesaidorders, stated supra. Question of law No.1 raised is answeredagainst the revenue and in favour of the assessee. Since thequestions of law Nos.2 and 3 are also covered by the Circularextracted, the instant appeal deserves to be dismissed.11.In the result, the Tax Case Appeal is dismissed. Nocosts. Sd/- Assistant Registrar(CS VII) //True Copy// Sub Assistant Registrar mvs. https://hcservices.ecourts.gov.in/hcservices/ To 1. The Registrar, The Income Tax Appellate Tribunal, Madras 'B'Bench, Chennai.Bench, Chennai. 2. The Commissioner of Income Tax, Appeals(1), Coimbatore. 3. The Assistant Commissioner of Income Tax, Company Circle-1, (2), Coimbatore. + 1 cc to Mr.T.R. Senthilkumar, Advocate Sr.32738 Tax Case Appeal No.397 of 2016 KGK(CO) Eu 24.6.16