The Commissioner Of Income Tax v. M/S.best Corporation Ltd.,Tirupur - 641 605

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 23.3.2016 CORAM : THE HONOURABLE MR.JUSTICE V.RAMASUBRAMANIANANDTHE HONOURABLE MR.JUSTICE M.DURAISWAMY TCA.No.167 of 2016 and CMP.No.2523 of 2016 The Commissioner of Income Tax,63, Race Course Road,Coimbatore. Vs ... Appellant M/s.Best Corporation Ltd.,Tirupur - 641 605.PAN : ... Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 20.5.2015 made in I.T.A.No.2165/Mds/2014on the file of the Income Tax Appellate Tribunal 'C' Bench,Chennai for the assessment year 2011-12 and against the Orderdated 29.05.2014 made in ITA.No.486/13-14 on the file ofCommissioner of Income Tax(Appeals) - II, Coimbatore and againstthe Order dated 31.01.2014 and made in PAN.No./GIR No.AACCR6828Gon the file of Joint Commissioner of Income Tax, Tirupur Range,Tirupur. For Appellant : Mr.T.R.Senthilkumar Judgment was delivered by V.RAMASUBRAMANIAN,J The Revenue has come up with the above appeal raising thefollowing substantial questions of law :"(1) Whether under 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 set https://hcservices.ecourts.gov.in/hcservices/ off 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 ? (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 ?and(3) Whether on the facts and in thecircumstances of the case, the Tribunal wasright in holding that the assessee has theoptiontochoosethefirst/initialassessment year of claim for deduction underSection 80IA ?" 2. Heard Mr.T.R.Senthilkumar, learned Standing Counsel forthe Department. 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 /2016Government 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, 1999 https://hcservices.ecourts.gov.in/hcservices/ with 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 : https://hcservices.ecourts.gov.in/hcservices/ with 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 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." 5. Therefore, admittedly, questions of law 2 and 3 are alsocovered by the above circular. Hence, the appeal deserves to bedismissed. 6. Accordingly, the above tax case appeal is dismissed.Consequently, the above CMP is also dismissed. 7. But, we cannot resist our temptation to record one morefact. If an issue is covered by the judgment of the High Court, The above be brought to the notice of all Assessing Officers concerned." 5. Therefore, admittedly, questions of law 2 and 3 are alsocovered by the above circular. Hence, the appeal deserves to bedismissed. 6. Accordingly, the above tax case appeal is dismissed.Consequently, the above CMP is also dismissed. 7. But, we cannot resist our temptation to record one morefact. If an issue is covered by the judgment of the High Court, https://hcservices.ecourts.gov.in/hcservices/ 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(CO) //True Copy// Sub Assistant RegistrarRSTo1.The Income Tax Appellate Tribunal, 'C' Bench, Chennai. 2.The Commissioner of Income Tax, Coimbatore.3.The Commissioner of Income Tax(Appeals) II, Coimbatore.4.The Commissioner of Income Tax, Tirupur Range, Tirupur. TCA.No.167 of 2016 &CMP.No.2523 of 2016VD(CO)CA(06/04/2016)