Income Tax Appellate Tribunal - Panji
Suma Shilp Ltd.,, vs Joint Commissioner Of Income-Tax,, on 16 June, 2017
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "बी
बी"
बी पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी डी.
डी. क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 1036/PUN/2016
िनधा रण वष / Assessment Year : 2011-12
Suma Shilp Limited, .......... अपीलाथ /
93/5A, Erandwane, Appellant
Pune - 411 004
PAN : AACCS4724N
बनाम v/s
JCIT, Range-6,
Pune .......... यथ /
Respondent
Assessee by : Shri Nikhil Pathak
Revenue by : Shri Gaurav Batham
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing :13.06.2017 Date of Pronouncement: 16.06.2017
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal filed by the Assessee is against the order of CIT(A)-4, Nashik dated 01-03-2016 for the Assessment Year 2011-12.
2. Assessee raised couple of issues in the Grounds of Appeal. Ground Nos. 1.1 to 1.4 deals with the "first issue" relating to disallowance of claim of deduction u/s.80IA(4)(iv)(a) of the Act amounting to Rs.91,40,903/- in respect of windmill units. Ground No.2 relates to the 2nd issue of claim of disallowance of depreciation amounting to Rs.66,35,717/- while computing the deduction allowable u/s.80IA(4)(iii) of the Act.
2ITA No.1036/PUN/2016
3. Briefly stated relevant facts are that the assessee is a Promoter, engaged in the business of development of residential and commercial properties. He is also in the business of running windmills. During the assessment proceedings, the AO noticed that the assessee installed tall windmills in Dhule, Maharashtra relevant to the Assessment Year 2007-08. Assessee incurred losses from the Assessment Years 2007-08 to 2009-10 and the same was set off against the other income from the other ineligible units. In the year under consideration, assessee opted 2010-11 as the initial assessment year and claimed deduction accordingly.
4. During the assessment proceedings, AO considered windmill units on standalone basis and all the brought forward losses from these units since A.Y.2007-08 were set off against the income from the windmills in the year under consideration and thereby AO caused loss to the assessee to the extent of claim of deduction of Rs.91,40,903/-. The assessee relied heavily on the orders of the Tribunal in the case of Poonawalla Estates Stud & Agro Farm Pvt. Ltd. Vs. ACIT (136 TTJ 236) (Pune) and the judgment of Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. Vs. ACIT (231 CTR 368) and others for the legal proposition that assessee is entitled to opt for initial assessment year in his discretion and the losses of the eligible units, if any, are allowed to be set off against the other income of the ineligible units of the assessee in accordance with the provisions of section 80IB(4)(iv)(a) of the Act. He accordingly made addition of the said amount. Further, while recomputing the deduction, AO also altered the claim of deduction u/s.80IB(4) qua the claim of depreciation u/s.32 of the Act.
5. During the First Appellate Proceedings, assessee made various submissions in writing and relied heavily in the case of Poonawalla Estates Stud & Agro Farm Pvt. Ltd. Vs. ACIT and the judgment of Madras High Court 3 ITA No.1036/PUN/2016 in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. Vs. ACIT (supra). Further, assessee also relied heavily on the CBDT Circular No.01/2016 dated 15-02-2016 in support of the assessee's claim of initial assessment year and the manner of computation of losses of the eligible units against the other income earned from the ineligible units of the assessee. CIT(A) did not agree with the submissions of the assessee. Regarding the first issue contents of Para No.4.1 is relevant. On this issue, CIT(A) opined that the said decision of the Pune Bench of the Tribunal and the judgment of the Hon'ble Madras High Court cited (supra) is on the initial assessment year and not relating to the issue of set off of losses. CIT(A) has given the following reasoning while deciding the first issue. For the sake of completeness relevant lines are extracted as under :
"4.1 . . . . . . . . . . . . In the present case the business income operational in AY 2007-08 and deduction was claimed from AY 2010-11. In case of Poonawalla Estates Stud & Agro Farm Pvt. Ltd. vs. ACIT (supra) in Pune ITAT, the appeal is regarding the initial assessment year. As per the current case, the question is for set off of losses u/s.80IA(4)(iv)(a) and not the initial assessment year. The initial assessment year has been taken as AY 2010-11 which has been accepted by the assessee as well as the AO. Hence, the above case law is not relevant for the current case (emphasis placed by me). As per section 80IA(2), the assessee has the option to claim the deduction for 10 consecutive years out of 15 years beginning from the year of generation of power. Once the initial assessment year of claiming the deduction is decided by the assessee, he has to claim the deduction for the next 9 years. The Circular No.1/2016 (supra) issued by the CBDT clarifies the meaning of 'Initial Assessment Year' as given in section 80IA(5) to mean the year of first claiming deduction and not the year of commencement of eligible business. In this regard, I find that, AO has rightly taken the initial assessment year in accordance with the CBDT Circular No.1/2016 (supra) and I find no dispute on this issue."
6. Aggrieved with the above findings of the CIT(A) before us, Ld. Counsel for the assessee submitted that the above findings/observations of the CIT(A) are completely erroneous both on facts and on law. In the case of M/s. Poonawalla Estates Stud & Agro Farm Pvt. Ltd. (supra), the appeal deals with the manner of computation of losses, and also the option of the assessee in matters relating to "initial assessment year". CIT(A) erred in 4 ITA No.1036/PUN/2016 mentioning that the AO agreed 2010-11 as the "initial assessment year"
which is not borne on the facts. In the current case, AO is of the opinion that 2007-08 is the initial assessment year and thereby the option of the assessee in chosing the initial assessment was denied completely. First Appellate authority did not appreciate the fact that the claim of losses/brought forward losses against the other income of the ineligible units of the assessee which is intrinsically linked that leads the assessee to chose later assessment year as the initial assessment year,. Therefore, the CIT(A) did not appreciate the above fact before not applying the Circular of CBDT cited (supra) to the facts of the present case and approving the findings of the AO eventually.
7. Bringing our attention to the said order of the Pune Bench of the Tribunal, where one of us is a party (Accountant Member), the Ld. Counsel for the assessee submitted that the facts of the said case are identical where losses were set off against the other income of the ineligible units of the assessee selecting later years as initial assessment years and the said of the claim of the assessee was approved by the Tribunal in the appeal before the Tribunal.
8. On the other hand, Ld. Departmental Representative for the Revenue, on this issue heavily relied on the orders of the AO and the CIT(A) and submitted for confirming the same.
9. We heard both the sides on this issue and perused the orders of the Revenue and the cited decisions before us. On perusal of the said order of the Pune Bench of the Tribunal, we find the decision of the Tribunal is relevant for the following proposition :
5ITA No.1036/PUN/2016
"Assessee having chosen A.Y. 2004-05 as the initial assessment year and paid taxes on the profits of its windmill activity in the earlier years as per the statute, the year in which the assessee started generating electricity (A.Y. 2002-02) cannot be treated as the initial assessment year for the purposes of sec. 80IA(2) r.w.s. 80IA(5); initial assessment year for the above purposes is the first year in which the assessee claimed deduction u/s.80IA(1) after exercising the option as per the provisions of sec. 80IA(2)."
10. The above view of the Tribunal was approved by the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. Vs. ACIT (supra). Therefore, the CIT(A) has not properly appreciated the said decision (supra). In the remand proceedings, CIT(A) is directed to consider the existing legal position on the issue under consideration and allow the claim of the assessee in accordance with law. Assessee shall be given reasonable opportunity of being heard to the assessee in accordance with the principles of natural justice. In the process, we find there is no reason for disallowing the claim of the assessee and the losses of the earlier assessment years prior to A.Y. 2010-11 are eligible for set off against the profits of the other income of the ineligible units of the earlier years. AO has grossly erred in disallowing the said set off of the said brought forward losses against the income earned from the windmills of the eligible units in the current year under consideration. Accordingly, Ground Nos. 1.1 to 1.4 raised by the assessee are allowed, in principle, subject to the above conditions.
11. Regarding the issue raised in Ground No.2 the limited issue for adjudication before us relates to whether the authorities are justified in reducing the depreciation claimed out of the deduction quantified or the deduction u/s.32 is required to be considered while determining the total income of the assessee, i.e. prior to the computation of deduction under Chapter VIA of the Act.
6ITA No.1036/PUN/2016
12. In this regard, Ld. Counsel for the assessee brought our attention to the contents of Para Nos. 5 to 7 and submitted that the CIT(A) erred in following the judgment of jurisdictional High Court in the case of Plastiblends India Limited Vs. ACIT without appreciating the facts. The issue under consideration is entirely different and it related to the method of allowing claim of depreciation while computing the total income of the assessee.
13. After hearing both the sides, we find Para No.7 of CIT(A) is relevant. For the sake of completeness, we proceed to extract relevant lines of the said para (Page 14) and the same reads as under :
"7. . . . . . . . . . .
.............
Thus for the purpose of deductions under Chapter VI-A, the gross total income has to be computed by claiming deduction allowable under sections 30 to 43D of the Act and the assessee cannot claim a double advantage, i.e. in the subsequent years for claiming deduction u/s.80IA(4)(iii), the assessee should claim deduction after reducing depreciation irrespective of the amount claimed as the total income. Hence, in view of the foregoing discussion, and in the light of the decision of the jurisdictional High Court in the case of Plastiblends India Limited (supra), the appellant's claim of deduction u/s.80IA(4)(iii) will be restricted to the extent of Rs.1,24,01,288/-. Hence, the order of the AO restricting the claim of the appellant u/s.80IA(4)(iii) of the Act to Rs.1,24,01,288/- is upheld. The AO is, therefore, directed to restrict the claim of deduction u/s.80IA(4)(iii) of the Act of the extent of RS.1,24,01,288/-."
14. From the above, it is evident that the issue considered by the CIT(A) is whether the assessee is justified in not making a claim u/s.32 of the Act while quantifying the allowable deduction u/s.80IA(4) of the Act. Considering the fact, the AO has no objection for thrusting of depreciation and however, the issue that it to be adjudicated is whether the said depreciation should be reduced from the claim of deduction or reducing while computing the total income of the assessee. On considering the facts and the discussion given in the orders of the Revenue, we find there is some confusion with regard to the issue adjudicated by the CIT(A). Further, we 7 ITA No.1036/PUN/2016 find relevant Ground No.2 is the relevant one which is raised by the assessee before the CIT(A) and contrary to the same, the adjudication of the CIT(A) is on different issue and not in the issue of allowing depreciation while computing the total income of the assessee and not while computing deduction allowable u/s.80IA(4)(iii)(a) of the Act. The issue, in principle, should be decided in favour of the assessee as the computing of total income is done in accordance with the provisions of sections 28 to 44 which include section 32 of the Act. CIT(A) is directed to grant reasonable opportunity to the assessee and consider the Ground No.2 raised before him in proper perspective and decide the issue afresh in accordance with law. Accordingly, Ground No. 2 is allowed subjection to the condition discussed above.
15. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on this 16th day of June, 2017.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 16th June, 2017.
सतीश
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-4, Pune
4. CIT-4, Pune
5. DR, ITAT, "B Bench" Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
//True Copy //
//True Copy//
सहायक रिज
ार/Assistant Registrar
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune