Income Tax Appellate Tribunal - Pune
Malpani Sales Corporation,, Pune vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND
SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER
ITA No. 471/PN/2010
(Assessment Year: 2006-07)
M/s Malpani Sales Corporation
4/1, Ganesh Peth,Burud Lane
Pune-411004 .. Appellant
PAN AACFM4993J
Vs.
Addl.CIT,R-3, Pune .. Respondent
Appellant by: Shri Nikhil Pathak, AR
Respondent by: Ann Kapthuama, DR
ORDER
PER D.KARUNAKARA RAO, A.M.:
This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals) II, Pune dated 15-01- 2010 for the assessment year 2006-07.
2. Following are the grounds raised by the assessee in its appeal.
1. the ld.CIT(A) erred in confirming the denial of deduction u/s 80IA of Rs.27,26,580/- by applying the provisions of section 80IA(5).
2. The ld.CIT(A) erred in holding that the initial assessment year for the purposes of section 80IA(20 r.w.s.80IA(5) was the year in which the assessee started generating the electricity without appreciating that the term 'initial assessment year' for the above purposes was the first year in which the assessee claimed the deduction u/s 80IA(1).
3. The ld.CIT(A) erred in holding that the past losses of the undertaking entitled to claim deduction u/s 80IA which have been set off in the earlier years should have been set off against the profit of the aid undertaking for the current year and only on the balance income, the deduction u/s 80IA was to be allowed to the assessee.
4. The ld.CIT(A) failed to appreciate that the provisions of section 80IA(5) were applicable only from the initial asst.year i.e. the asst.year in which deduction u/s 80IA was first claimed by the assessee and only for the years starting from the initial asst.year and thereafter, the provisions of sec.80IA(5) were applicable and hence, in the present case, there was no 2 ITA No. 471/PN/2010 (Assessment Year: 2006-07) M/s Malpani Sales Corporation reason to set off the notional brought forward losses/depreciation while computing the deduction u/s 80IA for the present asst.year.
5. The ld.CIT(A) erred in holding that the appellant had conceded that the decision of special Bench in the case of Goldmine Shares and Finance Pvt.ltd. (116 TTJ 705) had held that the year of setting up of windmill was to be considered as the initial asst.year without appreciating that no such admission was made by the appellant and in fact, the appellant had clarified that the said decision of Special Bench was not applicable since the facts of that case were distinguishable and the case of the assessee was covered by the ITAT, Chennai decision in the case of Mohan Breweries and Distilleries Ltd. ( 114 TTJ 532).
3. At the very outset, the learned counsel for the assessee mentioned that denial of deduction u/s 80IA has resulted in the addition of Rs.27,26,580/-. The assessing officer disallowed the said claim of deduction by thrusting the 'initial assessment year' on the assessee in contravention of the provisions of Act. In this regard, he has argued that assessee has an option to choose the initial assessment year and such an option cannot be taken away by the revenue. In this regard, he relied on a reported decision of this Bench in the case of Poonawalla Estate Stud and Agro Farm Pvt.Ltd. v. ACIT(2011) 136 TTJ (Pune) 236 and read out paragraphs 13 to 15 of the said order, which are reproduced hereunder for the sake of completeness of this order.
"13. We have heard both the parties and perused the factual matrix of the case and orders of the revenue and the paper book. We have also examined the legal position on the matter. Before adjudicating the issue in question, it is necessary to examine the scope of the provisions relating to the initial assessment year.
"80IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc - (1) Where the gross total income of an assessee includes any profit and gains derived from any business of an industrial undertaking or an enterprise referred to in sub-s.(4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to hundred per cent of profits and gains derived from such business for the first five assessment years commencing at any time during the periods as specified in sub-s.(2) and thereafter, twenty-five per cent of the profits and gains for further five assessment years.3 ITA No. 471/PN/2010
(Assessment Year: 2006-07) M/s Malpani Sales Corporation Provided that where the assessee is a company, the provisions of this sub-section shall have effect as if for the words 'twenty-five per cent'; the words 'thirty per cent' had been substituted.
(2) The deduction specified in sub-s.(1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or generates power or commences transmission or distribution of power.
Provided that where the assessee begins operating and maintaining any infrastructure facility referred to in cl.(b) of explanation to cl.(i) of sub-s.(4), the provisions of this sub- section shall have effect as if for the words 'fifteen years', the words 'twenty years' had been substituted......."
14. From the above provisions of sub-s.(2) of s.80IA of the act, it is evident that the assessee is granted the option to select 'initial assessment year' i.e. first assessment year of the 'any ten consecutive assessment years out of fifteen years. Starting assessment year for counting the duration of fifteen years is also provided in the aid sub-section. As per thee provisions, the assessee is not allowed to jump the assessment year once an initial assessment year is opted. Therefore, we find no fault with the assessee in selecting the asst.year 2004-05 as the 'initial assessment year'. In this regard, i.e. on the issue of assessee's option to select the 'initial assessment year', we have perused the citations relied upon by the assessee's counsel. The conclusion by the Tribunal Mumbai bench decision in ITA No.4620/Mum/2007 (asst.yr.2004-05) in the case of DCIT v. Ushdev International Ltd. Is straight on this issue of initial assessment year and the option to the assessee and the held portion of the decision reads as under:
"In view of the above learned CIT(A)'s order to the extent of holding that initial assessment year and subsequent succeeding assessment years can only be considered for the purpose of computing deduction u/s 80IA. Coming to the facts of the case, however, as seen from the schedule of details available in the learned CIT(A)'s order the assessee has incurred losses in the asst.years 197-98 and 1998-99 only. Subsequently in all the years there were profits till asst.yar 204-05. It is not clear whether the assessee has claimed any deduction in earlier years under sec.80IA. This being the 8th year of starting the project, assessee would be left with only anther 7 years of claim out of the 10 years available to the assessee. Considering this we are of the opinion that the 'initial assessment year is to be determined on the basis of the year the assessee chose to claim the deduction for the first time.........."
15. When the statute have granted the option to choose the initial assessment year and when the assessee has so chosen the current assessment year as the initial assessment year 4 ITA No. 471/PN/2010 (Assessment Year: 2006-07) M/s Malpani Sales Corporation and when the assessee accordingly paid the taxes o the profits of the windmill activity in the earlier years as per the statute, the assessing officer's decision to thrust the initial assessment year on the assessee is not in tune with the provisions of s.80IA(2) of the act. Accordingly, we are of the opinion, the ld.CIT(A) erred in holding that the initial assessment year for the purposes of s.80IA(2) r.w.s.80IA(5) was the year in which the assessee started generating the electricity. Therefore, the order of the CIT(A) has to be reversed on this issue. It is clear that the 'initial assessment year' for the above purposes was the first year in which the assessee claimed the deduction u/s 80IA(1) after exercising his option as per the provisions of s.80IA(2) of the Act. Consequently, the assessee is entitled to claim the deduction of Rs.25,44,326 u/s 80IA in respect of the profits from the windmill activity. Accordingly, the clarificatory ground raised is allowed. In the result, adjudication of the grounds 3 and 4 raised in the appeal is mere academic and hence they are dismissed as infructuous."
4. Considering the above, we are of the opinion that the order of the CIT(A) has to be reversed. It is also to be noted that the above ratio is upheld by the High Court of Chennai in the case of 231 ITR 368. Accordingly, the appeal of the assessee is allowed.
5. In the result, appeal of the assessee is allowed.
Order pronounced in the court on 26-8-2011.
Sd/- Sd/-
(I.C.SUDHIR) (D.KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 26-8-2011
Copy to:-
1) Assessee
2) Addl.CIT, Range 3, Pune
3) The CIT (A) II, Pune
4) The CIT concerned
5) The Departmental Representative, "B" Bench, I.T.A.T.,
Pune.
5
ITA No. 471/PN/2010
(Assessment Year: 2006-07)
M/s Malpani Sales Corporation
By Order
//true copy//
Asst. Registrar,
I.T.A.T., Pune