Income Tax Appellate Tribunal - Ahmedabad
Ratnamani Metals & Tubes Limited,, ... vs Dcit, Central Circle-2(3),, Ahmedabad on 3 December, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ - अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD - BENCH 'A'
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.958/Ahd/2018
नधा रण वष /Asstt. Year: 2013-2014
Ratnamani Metals & Tubes Ltd. Vs. DCIT, Cent.Cir.2(3)
C/o. Mehta Lodha & Co. Ahmedabad.
Chartered Accountants
105, Sakar-I, Ashram Road
Ahmedbaad 380 009.
PAN : AABCR 1742 E
अपीलाथ / (Appellant) तयथ
् / (Respondent)
Assessee by : Shri P.D. Shah, AR
Revenue by : Shri Vidhyut Trivedi, Sr.DR
सन
ु वाई क तार ख/Date of Hearing : 15/10/2019
घोषणा क तार ख /Date of Pronouncement: 03/12/2019
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-12, Ahmedabad dated 5.3.2018 passed for the Asstt.Year 2013-14.
2. Solitary grievance of the assessee is that the ld.CIT(A) has erred in not allowing additional ground/claim of deduction under section 80IA(4)(iv) of the Income Tax Act, 1961 amounting to Rs.6,84,59,347/- .
ITA No.958/Ahd/2018 23. Brief facts of the case are that the assessee-company has filed its return of income electronically on 30.11.2013 declaring total income at Rs.190,55,63,456/-. At the relevant time, the assessee-company was engaged in the business of manufacturing of steel type and its sale. It was also in the business of generating power through wind-mill. The assessee has claimed deduction under section 80IA(4) at Rs.4,82,22,557/-. The ld.AO had issued show cause notice inviting its explanation on the ground that the assessee-company has been engaged in the business of generation of electricity since Asstt.Year 2003-04, and it has only claimed deduction in the year 2009-10 and 2010-11, 2011-12 and 2012-13 in the return of income. According to the AO, in earlier years, the loss occurred mainly on the ground of set off of depreciation in respect of wind-mill business have been adjusted against the income from regular business, such as manufacturing of steel and tubes. He was of the opinion that loss of earlier years has to be brought forward notionally and adjust against the profit of business of generating electricity. The assessee filed its reply which has been considered by the AO. However, after putting reliance upon sub-section (5) of section 80IA, the ld.AO has disallowed the claim of the assessee. Dissatisfied with the disallowance, the assessee carried the matter in appeal before the ld.CIT(A). It has raised an additional ground of appeal also. It contended that as far as deduction claimed by the assessee at Rs.4,82,22,557/- is concerned, this issue is covered in its favour by earlier orders of the ITAT passed in its own case. It was also contended that from the Asstt.Year 2009-10, the ld.CIT(A) has already allowed this type of computation. However, it was contended that the assessee has misconstrued and misinterpreted the provisions of law, while putting claim before the AO in the return of income. Therefore, it has revised its computation and claimed the deduction of Rs.6,84,59,347/-. The assessee has filed the following submissions before the ld.CIT(A):
ITA No.958/Ahd/2018 3"1) In this regard we are submitting herewith the copy of the order of the Hon'ble ITAT-Ahmedabad, in the case ACIT Vs. .Harsha Engineers Ltd (ITA No. 2295/Ahd/2011 & 1759/Ahd/2012) as Annexure 5 where in para 19 of the order the Hon'ble ITAT has held has under:-
Substituted sub-section (2) of section 80IA,provides that an option is given to the assessee for claiming any 10 consecutive assessment year out of 15 years beginning from the year in which the undertaking or the enterprise develops and begin to operate. The 15 years is the outer limit within which the assessee can choose the period of claiming the deduction. Sub-section (5) is a non-obstante clause which deals with the quantum of deduction for an eligible business. The relevant provision of sub-section (5) of section 80IA, reads as under:-
"(5) Notwithstanding anything contained in any other provision of this Act,, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made."
20. From a plain reading of the above, it can be gathered that it is a non- obstante clause which overrides the other provisions of the Act and it is for the purpose of determining the quantum of deduction under section 80IA, for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year to be computed as if the eligible business is the only source of income. Thus, the fiction created is that the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year. Prior to 1st April 2000, the initial assessment year was defined for various types of eligible assessees under Section 80IA(12).However, after the amendment brought in statute by the Finance Act, 1999, the definition of "initial assessment year" has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in subsection (2) of Section 80IA from which it chooses its 10 years of deduction out of 15 years, ITA No.958/Ahd/2018 4 then only the losses of the years starting from the initial assessment year alone are to be brought forward as stipulated in section 80IA(5). The loss prior to the initial assessment year which has already been set-off cannot be taught forward and adjusted into the period of ten years from the initial assessment year as contemplated or chosen by the assesses. It is only when the loss have been incurred from the initial assessment year, then the assessee has to adjust loss in the subsequent assessment years and it has to be computed as if eligible business is the only source of income and then only deduction under section 80IA can be determined. This is the true import of section 80IA(5).
2) Till date the appellant company has been computing the profit eligible for deduction u/s 80IA(4)(iv) of the Act, after setting off notionally brought forward., loss and depreciation pertaining to each windmill and accordingly in case of other windmill even when there was net profit during the relevant assessment year the same was not claimed as after considering the brought forward loss since the date of put to use overall there is loss. However in light of the above recent judgment of Ahmedabad 1TAT it is at the option of the assessee to select the initial assessment year. Accordingly for the A.Y. 2012-13, there is Net Profit during the year under consideration and there is no brought forward loss or depreciation and hence the Id.AO should be directed to allow Rs. 6,84,59,347 u/s 80IA(4)(iv) of the Act. Working of the same is attached herewith as Annexure 6.
3) Without prejudice to above, vide Circular No. 1/2016 the Central Board of Direct Taxes has clearly stated that "It is abundantly clear from sub section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for 10 consecutive years, out of a slab of fifteen (or twenty years) as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80IA."
4) In view of the above facts, circumstances and legal position the addition made by the learned AO is bad in law and is therefore required to be deleted in full."
ITA No.958/Ahd/2018 54. The ld.CIT(A) has gone through the case of the assessee. She accepted the claim which was made before the AO, after putting reliance upon the order of her predecessor in earlier years i.e. Asstt.Year 2011-12 and 2012-13. However, with regard to the additional claim, the ld.CIT(A) has rejected it on the ground that this additional claim could only be made after a revised return is being filed by the assessee. Since the assessee has not filed revised return, therefore, its additional claim cannot be entertained. The finding recorded qua this addition, which is under challenge before the Tribunal reads as under:
"5.4 As to the additional ground wherein further deduction of Rs.6,84,59,347/-u/s 80IA(4)(iv) of the Act relying upon the order of the Hon'ble ITAT, Ahmedabad in the case of ACIT Vs Harsh Engineers Ltd (supra) is being claimed, it is seen that during the AY 2012-13 the appellant had taken similar additional ground for claim of deduction of Rs.9,82,17,328/- u/s 80IA and the contention of the appellant was examined thoroughly by my predecessor CIT (Appeal) and the additional ground was admitted holding that "After considering the authorities relied upon by the Ld AR and in the view of the fact that the Ld AO has objected to the admission of the additional ground only on the fact that further appeal in the case ofM/s Harsh Engineering has been filed by the department, the additional ground has raised by the appellant is admitted in view of clear mandate contenting the High Court decision in M/s Arvind Mills Ltd." Following the same, the additional ground for the A.Y.2013-14 is admitted. .
5.5 Having admitted the additional ground, my predecessor CIT (Appeals) examined the facts related to additional claim of deduction u/s 80IA and held that "After having carefully considered the facts, the decision in M/s Harsh Engineering and content of Circular No. 1 of 2016,1 have no doubt in my mind that the profits of the eligible units on standalone basis has only to be considered for and from initial assessment year as obtained by the appellant......... After having give a careful consideration to the issue raised by way of additional ground and after perusal of the Authority cited and relied upon by the AR, including jurisdictional High Court in Arvind Mills Ltd (supra) I am not persuaded to grant the relief as claimed by way of additional ITA No.958/Ahd/2018 6 ground. .......... In my considered opinion, the only procedure prescribed statutorily enabling the appellant to reduce tax paid income as returned, by way of return, of income is to file a revise return as provided u/s 139(5) ........ The exclusion of CIT (A) from the operation of Goetz India Ltd 327ITR 303 (SC) with regard to claim by way of prayer without revising the return of income as approved by the jurisdictional High Court in Arvind Mills Ltd, in my considered opinion, cannot be stretched so as to grant a relief or allow an additional ground which has effect of reducing the return income...... in view of this I find no merit in the additional ground raised by the appellant and therefore the same is dismissed." I agree to the stand taken by my predecessor.
5.6 I have perused the submission of the Appellant and though I have not obtained the comments of the AO on admission of additional ground (which would not have yielded a different outcome), I agree to the decision rendered by my predecessor for the A.Y. 2012-13 and following the same I also dismiss the additional ground raised by the appellant for the A.Y.2013-14.
6. In the result the appeal for the AY 2013-14 is partly allowed."
5. Before us, the ld.counsel for the assessee submitted that an identical issue arose in the Asstt.Year 2012-13 wherein the assessee has made additional claim before the ld.CIT(A). The ld.CIT(A) did not entertain this claim on the ground that it could only be made by filing revised return of income. The dispute travelled before the Tribunal in ITA No.2081/Ahd/2016, and the Tribunal has allowed appeal of the assessee vide order dated 14.8.2018. He placed on record copy of the Tribunal's order. On the strength of this order, he contended that finding of the ld.CIT(A) in the present assessment year is based on her predecessor's finding in the Asstt.Year 2012-13. That finding has already been set aside by the Tribunal, and therefore, order of the ld.CIT(A) on this issue is not sustainable. The ld.DR, on the other hand, was unable controvert this submission of the ld.counsel for the assessee.
ITA No.958/Ahd/2018 76. We have duly considered rival submissions and gone through the record carefully. A perusal of order of the ld.CIT(A) would reveal that the ld.CIT(A) has basically relied upon the finding of her predecessor in the Asstt.Year 2012-13. When that finding fallen for consideration before the Tribunal, then the Tribunal did not concur with the finding, and reversed it by recording the following finding:
"6. Aggrieved by the denial of the additional claim which has the effect of reducing the assessed income below the return of income, the assessee knocked the door of Tribunal.
7. The learned AR for the assessee submitted at the outset that the dispute in the present case is not towards eligibility of deduction under s.80IA(4) of the Act. It was submitted that the CIT(A) after examination of facts has readily accepted the claim of deduction to the extent made by the assessee in its return of income. The dispute is towards additional claim of deduction made by the assessee before the CIT(A) which was denied on the grounds of absence of revised return of income in this regard. The learned AR submitted that the assessee earned profit from the windmill project amounting to Rs.10,40,61,204/- in aggregate during the year. However, while making the claim of deduction at the time of filing return of income, the assessee wrongly applied the provisions of law and judicial interpretation rendered in this regard and thus wrongly adjusted the losses incurred in the windmill project in the past prior to the exercise of option towards 'initial assessment year' envisaged under s.80IA(4) of the act. Delving further, the learned AR submitted that the assessee incurred losses in the windmill projects in the earlier years, which was claimed as set off against its regular business in earlier years in accordance with law. Thus, no unadjusted business loss/depreciation remained to be carried forward for set off. However, for the purpose of determination of eligible profit under s.80IA(4) of the Act, the assessee misunderstood the restrictions placed under s.80IA(5) of the Act for the purpose of determination of quantum of deduction. The assessee thus incorrectly recreated the business loss/depreciation arose in the preceding years (prior to initial assessment year) and notionall y adjusted the same from the eligible profit arose during the year to its detriment, owing to such mis-ITA No.958/Ahd/2018 8
interpretation of law. The assessee improperly reduced its eligible profit for deduction to Rs.3.05 Crore as against rightful claim towards eligible profit of Rs.10.40 Crore as a result of wrongful adjustment of such notional losses 'deemed' to be carried forward. The learned AR thereafter contended that having accepted the eligibility of claim of deduction on full amount of profit, there was no warrant for the CIT(A) to deny the deduction only on a technical ground that such claim is permissible only where the assessee filed the revised return and not otherwise. The decision of the CIT(A) against the assessee rests on the observation that grant of relief on account of such additional ground which has the effect of reducing the assessed income below the returned income is not permissible. The learned AR submitted that such premise for denial of lawful relief by the CIT(A) is squarely at odds with the long line of judicial precedents including the decision of the Hon'ble Gujarat High Court in the case of Gujarat Gas Co. Ltd. vs. JCIT 245 ITR 84 (Guj); CIT vs. Milton Laminates Ltd. Tax Appeal No. 1022 of 2010 judgment dated 24.01.2012; CIT vs. Arvind Mills Ltd. Tax Appeal No. 1407 of 2011 judgment dated 05.07.2012; CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. [2012] 349 ITR 336 (Bom.) etc. The learned AR thus submitted that the additional claim towards enhanced deduction eligible under s.80IA(4) of the Act be directed to be allowed to the assessee in accordance with law.
8. The learned DR, on the other hand, relied upon the order of the CIT(A).
9. We have carefully considered the rival submissions and perused the orders of the authorities below as well as the case laws cited. The central issue in the present appeal is whether the claim of the assessee towards higher quantification of deduction under s. 80IA(4) of the Act can be entertained on the basis of facts available on record and in the light of judicial precedents and CBDT Circular where the assessee has originally claimed lower amount of deduction by way of return of income under erroneous impression of law. As noticed, the claim made by the assessee in its return of income towards deduction under s.80IA(4) of the Act was duly accepted by the CIT(A) at the first appellate stage. The CIT(A) refused his indulgence towards the additional claim arose on account of re- working of deduction in the light of prevailing judicial precedents and CBDT Circular No.1 of 2016 dated 15.02.2016 ITA No.958/Ahd/2018 9 on the ground that the assessee has failed to file the revised return and consequently the additional relief cannot be entertained as it would have the effect of bringing the assessed income below the returned income. We do not find any merit whatsoever in such reasoning propounded by the CIT(A). The rationale adopted by the CIT(A) for refusal of the additional claim is in direct contravention with the judicial precedents cited on behalf of the assessee (supra). Therefore, we have no hesitation to hold on first principles that the additional claim requires to be entertained when found eligible as per the relevant provisions of the Act in the light of the judicial precedents and CBDT Circular issued in favour of the assessee. It is well settled that the appellate authority is not precluded from adjudicating the additional claims of an assessee regardless of whether the return was revised or not. The Revenue is under duty to assess the true profits of an assessee and cannot take advantage of the ignorance of the assessee on the provisions of the Act. Thus, the action of the CIT(A) to this extent requires to be set aside and additional claim of the assessee amounting to Rs.7,35,01,934/- requires to be entertained. However, in the same vain, we notice that the quantification aspects of additional claim flowing from notional set off / carry forward of losses of earlier years from eligible profits has not been examined by the authorities below. Accordingly, we set aside the issue to the file of the AO for the limited purposes of determination of correct quantum of deduction to be computed without setting off any notional losses of the windmill power project pertaining to the earlier assessment years as discussed hereinabove. The AO shall allow enhanced deduction under s.80IA(4) of the Act as eligible to assessee in accordance with law regardless of claim made by the assessee in this regard in its return of income."
7. There is no disparity on the facts, therefore, respectfully following order of the Coordinate Bench, we allow this additional ground of appeal for statistical purpose. We remit this issue to the file of the AO. The ld.AO shall work out correct quantum of deduction in accordance with the finding recorded by the Tribunal in the Asstt.Year 2012-13. In view of the above discussion, sole substantial ground of appeal is allowed for statistical purpose.
ITA No.958/Ahd/2018 108. In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the Court on 3rd December, 2019 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER