The Commissioner Of Income Tax,Trichy v. M/S.prem Textile International

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 01.06.2016 CORAM: THE HONOURABLE MR.JUSTICE S.MANIKUMARand THE HONOURABLE MR.JUSTICE D.KRISHNA KUMAR T.C.A.No.333 of 2016 The Commissioner of Income Tax,Trichy .. Appellant versus M/s.Prem Textile International No.32, Ramakrishnapuram,Karur 639 001. .. Respondent Prayer: Tax Case Appeal filed under Section 260A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal, B Bench Chennai and made in I.T.A.No.311/Mds/2015,dated 15.05.2015 against the order of the Commissioner of IncomeTax (Appeals) Tiruchirappalli dated 27.11.2014 and made inI.T.A.NO.317/2013-14/CIT(A) TRY against the order of theAssistant Commissioner of Income Tax, Circle -II, Range -II,tiruchirapalli dated 26.2.2014 and made in PAN/GIR.No.AAAFP4219Lfor the assessment year 2011-12. Challenge in this Tax Case Appeal, is to an order made bythe Income Tax Appellate Tribunal in I.T.A.No.311/Mds/2015,dated 15.05.2015, by which, the Tribunal has dismissed theappeal preferred by the revenue, against the order of theCommissioner of Income-Tax, dated 27.11.2014. 2.Short facts leading to the appeal are that the assesseefiled the return for the assessment year 2011-12, on29.09.2011, admitting the total income of Rs.15,19,456/-. Thenature of business of the assessee is to export home textilesproducts and generate power using wind energy. The case wasselected for scrutiny under CASS and Notice, under Section 143(2) of the Income Tax Act, was issued. The Assessment Officercompleted the assessment under Section 143(3), making thefollowing deductions, https://hcservices.ecourts.gov.in/hcservices/ 1.Addition for low profitRs.5,00,000/-2. Addition – 80IARs.65,12,277/-Being aggrieved by the same, the assessee challenged the orderof assessment, before the Commissioner of Income-Tax, contendinginter alia,(a) The Assistant Commissioner of Income-Taxhas failed to understand the provisions ofSection 80-IA(5) had been interpreted and decidedby the jurisdictional Court and based on the saidratio the appellant had claimed the deduction.(b) The deduction claimed by the appellantis as per the decision of the Madras High Courtin M/s.Velayudhaswamy Spinning Mills (P) Ltd., v.Assistant Commissioner of Income-Tax reported in340 ITR 477. 3.Before the appellate authority, the assessee contendedthat he had total turnover of Rs.74,26,272/-, through sale ofpower generated out of windmill and admitted Rs.65,12,277/- asincome from windmill business and claimed deduction underSection 80-IA. Placing reliance on a decision inM/s.Velayudhaswamy Spinning Mills (P) Ltd., v. AssistantCommissioner of Income-Tax reported in 340 ITR 477, theCommissioner of Income-Tax, Tiruchirapalli, directed toAssessing Officer to allow deduction claimed by the assessee,under Section 80-IA, to the tune of Rs.65,12,277/- and observedthat if the Hon'ble Apex Court reverses the decision given bythis Court in Velayudhaswamy Spinning Mills Pvt. Ltd.,'s case(stated supra), the Assessing Officer may accordingly takesuitable remedial action. 4.Being aggrieved by the same, the the AssistantCommissioner of Income-Tax, Trichy, filed an appeal before theIncome-Tax Appellate Tribunal, “B” Bench, Chennai. After hearingthe learned counsel appearing for the department and byobserving that the decision of this Court in VelayudhaswamySpinning Mills Pvt. Ltd.,'s case (stated supra), is squarelyapplicable to the facts of the case, the Tribunal dismissed theappeal filed by the revenue. 4.Being aggrieved by the same, the the AssistantCommissioner of Income-Tax, Trichy, filed an appeal before theIncome-Tax Appellate Tribunal, “B” Bench, Chennai. After hearingthe learned counsel appearing for the department and byobserving that the decision of this Court in VelayudhaswamySpinning Mills Pvt. Ltd.,'s case (stated supra), is squarelyapplicable to the facts of the case, the Tribunal dismissed theappeal filed by the revenue. 5.Mr.J.Narayanasamy, learned counsel appearing for therevenue assailed the correctness of the order of the Income-TaxAppellate Tribunal, “B” Bench, Chennai, dated 15.05.2015, on thegrounds that the Tribunal has erred in holding that the assesseeis entitled for the claim of deduction, under Section 80-IA,with respect to the wind mill unit and further contended thatthe Tribunal ought to have appreciated that profit and gains ofsuch business, right from the beginning, had to be computedseparately and after reducing the past losses, unabsorbed depreciation and unabsorbed investment allowance, deductionunder Section 80-IB can be allowed on the balance amount andtherefore, raised a substantial question of law, as to whether,the Tribunal was right in holding that the assessee is entitledfor deduction under Section 80IA, with respect of the windmilldivision, by following the decision of this Court inVelayudhaswamy Spinning Mills Pvt. Ltd.,'s case (stated supra). 6.Chapter VIA of the Income-Tax Act, 1961, deals withdeductions to be made in computing the total income. As perSection 80-A(1), in computing the total income of an assessee,there shall be allowed from his gross total income, inaccordance with and subject to the provisions of Chapter VIA,the deductions specified in Section 80-C and 80U. Section 80-IAdeals with deductions in respect of profits and gains fromindustrial undertakings or enterprises engaged in infrastructuredevelopment, etc. Section 80-IA(1) reads hereunder: “(1) Where the gross total income of an assesseeincludes any profits and gains derived by anundertaking or an enterprise from any businessreferred to in sub-section (4) (such business beinghereinafter referred to as the eligible business),there shall, in accordance with and subject to theprovisions of this section, be allowed, in computingthe total income of the assessee, a deduction of anamount equal to hundred per cent of the profits andgains derived from such business for ten consecutiveassessment years.” 7.In Velayudhaswamy Spinning Mills Pvt. Ltd.,'s case(stated supra), the assessee therein was engaged in the businessof manufacture of IMFL products, generation of power throughwind and biomass and also trading in iron ore and coal. Thereturn of income for the assessment year 2004-05 was filed on1st Nov., 2004 admitting a total income of Rs.9,54,41,024. Thesaid return of income was processed under Section 143(1) on 19thFeb., 2005. Subsequently, this case was selected for scrutinyand notice was issued under Section 143(2) on 21st Oct., 2005.While computing the assessment, the Assessing Officer disallowedthe claim of deduction made by the assessee under Section 80-IAamounting to Rs.10,63,74,164/-, on the ground that the eligiblededuction under Section 80-IA after setting off, of the loss,which works out to 'nil'. 8.Aggrieved by the said order, appeal was filed by theassessee therein before the CIT(A) and that the same wasdismissed. Against the said order, the assessee therein filed anappeal before the Tribunal. The said appeal was allowed by theTribunal on a finding that there is no question of setting off https://hcservices.ecourts.gov.in/hcservices/ 8.Aggrieved by the said order, appeal was filed by theassessee therein before the CIT(A) and that the same wasdismissed. Against the said order, the assessee therein filed anappeal before the Tribunal. The said appeal was allowed by theTribunal on a finding that there is no question of setting off https://hcservices.ecourts.gov.in/hcservices/ notionally carried forward unabsorbed depreciation or lossagainst the profits of the units and the assessee therein wasentitled to claim deduction under Section 80-IA on currentassessment year on the current year's profit and thereby, setaside the order of the authority. Aggrieved by the said order,the Revenue filed the appeal by raising a substantial questionsof law, as to (1) whether, on the facts and circumstances of thecase, the Tribunal was right in not admitting a letter from theAssessing Officer showing that assessee had exercised the optionof claiming the deduction under s. 80-IA during the assessmentyear 1999-2000 which is the first/initial assessment year forthe purpose of deduction under Section 80-IA, as additionalevidence and holding that the assessment year 2004-05 isfirst/initial assessment year in which the assessee had claimedthe deduction under s. 80-IA? (2) Whether in the facts andcircumstances of the case, the Tribunal was right in holdingthat carried forward loss and unabsorbed depreciation cannot beset off against the profits of the units and therefore theassessee is entitled for deduction under Section 80-IA r/wSection 80AB? and Whether in the facts and circumstances of thecase, the Tribunal was right in holding that the assessee hasthe option to choose the first/initial assessment year of claimfor deduction under s. 80-IA ?" 9.On the facts and circumstances of the case, whileadverting to the substantial questions of law and afterconsidering the judgment of the Apex Court in Liberty India vs.CIT (2009) 225 CTR (SC) 233 : (2009) 28 DTR (SC) 73 : (2009) 317ITR 218 (SC) and the judgment of the Rajasthan High Court in CITvs. Mewar Oil & General Mills Ltd. (2004) 186 CTR (Raj) 141 :(2004) 271 ITR 311 (Raj), a Hon'ble Division Bench of this Courtin Velayudhaswamy Spinning Mills Pvt. Ltd.,'s case (statedsupra), held that once the losses and other decisions have beenset off against the income of the previous year, it should notbe re-opened again for the purpose of compution of the currentyear income under Section 80-I and 80-IA of the Act. 10.Velayudhaswamy Spinning Mills Pvt. Ltd.,'s case (statedsupra), has been followed in CIT v. R.Yuvaraj reported in [2015]57 TAXMANN.COM 252 (Madras). 11.Though it is contended that SLP filed against the abovereported judgment, is pending on the file of the Hon'ble SupremeCourt, the effect of the same, would not amount to reversal orerase the dictum. 12.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 Velayudhaswamy https://hcservices.ecourts.gov.in/hcservices/ Spinning Mills Pvt. Ltd. (supra), allowed the claim of theassessee and concurred that, in case the Apex Court reverses thedecision given by the Madras High Court in the above case ofVelayudhaswamy Spinning Mills Pvt. Ltd. (supra), and supportscontention of the Department in future, the Assessing Officermay accordingly take suitable remedial action.” The above viewexpressed by the appellate authority has been confirmed by theIncome-Tax Appellate Tribunal, Chennai. 13.There are no valid grounds to reverse the abovesaidorders, stated supra. Question of law raised is answered againstthe revenue and in favour of the assessee. 14.In the result, the Tax Case Appeal is dismissed. Nocosts. Consequently, connected Miscellaneous Petition is alsoclosed. Spinning Mills Pvt. Ltd. (supra), allowed the claim of theassessee and concurred that, in case the Apex Court reverses thedecision given by the Madras High Court in the above case ofVelayudhaswamy Spinning Mills Pvt. Ltd. (supra), and supportscontention of the Department in future, the Assessing Officermay accordingly take suitable remedial action.” The above viewexpressed by the appellate authority has been confirmed by theIncome-Tax Appellate Tribunal, Chennai. 13.There are no valid grounds to reverse the abovesaidorders, stated supra. Question of law raised is answered againstthe revenue and in favour of the assessee. 14.In the result, the Tax Case Appeal is dismissed. Nocosts. Consequently, connected Miscellaneous Petition is alsoclosed. Sd/- Asst.Registrar (CS IV ) /true copy/Sub Asst. RegistrarskmTo1. The Income Tax Appellate Tribunal,“B” Bench, Chennai.2. The Commissioner of Income TaxTrichy3. The Commissioner of Income Tax (Appeals) Trichy 4. The Assistant Commissioner of Income Tax Circle II,. Trichy 1 cc to M/s.J. Narayanasamy, Advocate, Sr. 29387 T.C.A.No.333 of 2016 ALA (CO)kk 29/6