Income Tax Appellate Tribunal - Mumbai
Asst Cit 24(2), Mumbai vs Lovely Fragrances, Mumbai on 7 December, 2018
आयकर अपीलीय अधिकरण "A " न्यायपीठ मब
ुं ई में ।
IN THE INCOME TAX APPELLATE TRIBUNAL " A" BENCH, MUMBAI
श्री महावीर स हिं , न्याययक दस्य एविं श्री राजेश कुमार लेखा दस्य के मक्ष ।
BEFORE SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM
Aayakr ApIla saM . / ITA No. 4147/Mum/2017
(inaQa- a rNa baYa- / Assessment Year 2012-13)
The Asst. Commissioner of Lovely Fragrances
income Tax 24(2), A-701, Bakers Field, Shastri
Room No. 413, Piramal Vs. Nagar, Andheri (W ),
Chambers Lalbaug, Parel, Mumbai-400 058
Mumbai-400 012
(ApIlaaqaI- / Appellant) .. (p`%yaqaaI- / Respondent)
स्थायी ले खा िं . / PAN No. AAAFL1837E
अपीलाथी की ओर े / Appellant by : Shri Sachhidanand Dube, DR
प्रत्यथी की ओर े / Respondent by : Shri Mahaveer Jain, AR
न
ु वाई की तारीख / Date of hearing: 05-12-2018
घोषणा की तारीख / Date of pronouncement : 07-12-2018
AadoSa / O R D E R
महावीर स हिं , न्याययक दस्य/
PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-39, Mumbai [in short CIT(A)], in appeal No. CIT(A)-39/IT-545/ACIT-24(2)/2015-16 vide order dated 24.03.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle-24(2) Mumbai (in short 'ACIT/ ITO/ AO') for the A.Y. 2012-13 vide order dated 05.03.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act').
2ITA No . 4 1 47 / Mu m /2 0 17
2. The only issue in this appeal of Revenue is against the order of CIT(A) allowing the claim of deduction under section 80IA of the Act without considering the brought forward losses have to be adjusted against the current year income before calculating the eligible amount of deduction under section 80IA of the Act. For this Revenue has raised the following three grounds: -
"1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in allowing the entire claim of deduction u/s. 80IA of the IT Act. 1961 without appreciating the fact that brought forward losses have to be adjusted against the current year's income before calculating the eligible amount of deduction u/s. 801A of the l.T. Act, 1961
2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in allowing the entire claim of deduction u/s 80IA of the I.T. Act. 1961 without appreciating the fact the assessee is eligible for deduction only after setting off/ absorbing business losses of earlier years".
3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in allowing the entire claim of deduction u/s 80IA of the I T Act without appreciating the fact that the similar issue had been decided by Hyderabad ITAT in the case of Hyderabad Chemicals Supplies Limited Vs. ACIT, ITA No. 352/Hyd/2005 and decision of ITAT, Special Bench, Ahmedabad, in the case of ACIT vs. Goldmine 3 ITA No . 4 1 47 / Mu m /2 0 17 Shares and Finance Pvt Ltd 113 lTD 209 (SB) in favour of the Revenue."
3. Briefly stated facts are that the assessee is engaged in the business of generation of electricity through wind mills. It has installed wind mills in different locations in the state of Karnataka and Rajasthan. The assessee filed the return of income claiming the deduction under section 80IA of the Act at ₹ 2,55,02,715/- and declared annual income. The AO noticed from the records that the losses of the two initial years when the unit was set up has not been considered while calculating the profit for the year under consideration. The AO required the assessee as to why the losses be not considered while calculating the profit for the year under consideration. The assessee replied that section 80IA of the Act as enacted by the Finance Act, 1999 with effect from 1st April, 2000 gives an option to the assessee with effect from 1st April, 2000 to claim relief under this section for any 10 consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. Once the assessee has opted for the first year of relief then it continues for further 9 consecutive years. The section mandates that the year in which the relief is claimed under this section for the first time is called as the initial assessment year. This will be the year in which the undertaking has to be treated as a separate sole source of income within meaning of s.80IA(5) of the Act and, therefore, depreciation and loss of earlier years cannot be notionally carried forward to be set off against income of the initial assessment year for computing deduction under section 80IA of the Act. The AO has not accepted the claim of the assessee but CIT(A) following the decision of Madras High court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT (231 CTR 368) (Mad) and CBDT circular No. 1/2016 and in ITAT decision in the case of The 4 ITA No . 4 1 47 / Mu m /2 0 17 Tata Power Co. Ltd vs. ACIT in ITA No. 3382/Mum/2010 for AY 2005-06 of Mumbai Tribunal allowed the Claim of the assessee vide Para 5 as under:-
"5. I have considered the facts of the case, assessment order, submission of the assessee and relevant judicial pronouncements as applicable to the facts of the case. Section 80 IA as enacted by the Finance Act, 1999 w.e.f. April, 2000 gives an option to the assessee we.!. V April, 2000 to claim relief under this section for any ten consecutive assessment years out of fifteen years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. Once the assessee has opted for the first year of relief then the same has to be taken as 'initial assessment year' and the deduction continues for further nine consecutive assessment years. The section mandates that the year in which the relief is claimed under this section for the first time is called as the 'initial assessment year' and that this will be the year in which the undertaking has to be treated as a separate sole source of income within meaning of section 80- IA(5). The assessee has the option to decide the 'initial assessment year' and it snot mandated that the first year of operation of the eligible business has to be taken as initial assessment year' for the purpose of set off of carried forward losses and depreciation. Hence, the provisions of section 80 IA(5) treating undertaking as a separate sole source of income cannot applied to a year prior to the year 5 ITA No . 4 1 47 / Mu m /2 0 17 in which the appellant had opted to claim deductions under this section for the first time. Accordingly, depreciation and carry forward losses of the unit of previous years, cannot notionally be carried forward and set off against the income from the year in which the assessee has started claiming deduction under section 8OlA.
5.1 It is found that the matter has been examined by CBDT, vide circular no. 1/2016 relevant portion of which is as below:
"it is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80- IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slob 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 80-IA 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."
5.2 Further, it is found that the issue is covered in the favour of the assessee vide decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (F') Ltd. vs. ACF (supra) relied upon by the assessee wherein the Hon'ble High Court has also considered the decision of the special bench of Hon'ble Ahmedabad Tribunal in the case of ITAT vs 6 ITA No . 4 1 47 / Mu m /2 0 17 Goldmine Shares and Finance Pvt., relied upon by the Id. AO. In this case, it was held by the Hon'ble Madras High Court that as per sub-s. (5) of s. 80-IA, profits are to be computed as if such eligible business is the only source of income of the assessee and When the assessee exercises the option, only the tosses of the years beginning from the initial assessment year are to be brought forward and not the losses of earlier years which have been already set off against the income of the assessee and that in that case revenue cannot notionally bring forward any loss of earlier years which has already been set off against other income of the assessee and set off the same against the current income of the eligible business. It was also held that the fiction created by sub-s. (5) of s. 80-IA does not contemplate such notional set off and in the case before Hon'ble Court since, losses incurred by the assessee have already been set off and adjusted against the profits of the earlier years, there was a positive profit during the relevant year, therefore, loss or depreciation in the year earlier to initial assessment year already absorbed against the profit of other business cannot be nationally brought forward and set off against the profits of the eligible business.
Further, Hon'ble Mumbai Tribunal in the case of The Tata Power Co. Ltd vs ACIT(Supra) has decided the issue in favor of the Assessee after placing reliance on the decision of Hon'ble Madras High Court (supra) as well as the CBDT circular dated 152- 7 ITA No . 4 1 47 / Mu m /2 0 17 2016 (Circular No. 1/2016 1F.NO.200/31/2015-ITA- I1), referred to earlier. The findings of the Hon'ble Tribunal is as below "Thus keeping in view judgment of the Hon'ble Madras Court in the case of Veloyudhoswarny Spinning Mills Private Limited V. ACIT(2012) 340 1TR477(Mad.) judgment of Hon'ble Madras High Court in the case of CIT v. GIRT Jewellers (lndia) (supra), CBOT Circular No. 0112016 dated 15-02- 2016, provisions of Section 80IA 49 ITA 30781Mum/2009 of the Act and as per discussions and reasoning as set out above, we have no hesitation in holding that the assessment year 2002-03 chosen by the assessee company shall be the initial Assessment year for the purposes of claiming deduction u/s 80lA of the Act, although the Jojobera 67.5Mw unit stoned generating power w.e.f. assessment year 1997-98. Thus, Jojobera 67.5 MW power undertaking shall be deemed to be the only source of the income as provided u/s 80IA(5) of the Act only from the assessment year succeeding the assessment year 2002-03 being the initial assessment year and subsequent assessment year up-to and including the assessment year for which the determination is to be made which in any case shall not transgress beyond fifteen years from the year when Jojobera 67.5 MW power generating 8 ITA No . 4 1 47 / Mu m /2 0 17 unit started generating power. We also hold that the notionally brought forward losses/ depreciation of the Jojobera 67.5 MW power generating unit for the period from the assessment year 1997-98 to 2001-02 which are already set off against the other business income in earlier years and set-off being allowed by the Revenue shall not be adjusted from the profit so computed by the assessee company with respect to Jojobera 67.5MW power generating unit for the assessment year 2002-03 for the purposes of computing deduction u1s.801A of the Act.
5.3 In this case, since, there is no dispute about the dates of commissioning of the windmills under consideration and Initial Assessment Year in which the deduction u/s 80lA of the Act was claimed by the assessee in respect of these Windmills, considering the fact that the Appellant's case is squarely covered by the above decisions of Hon'ble Madras High Court and Mumbai ITAT, it is held that the assessee had the option to opt for the 'Initial assessment year' for claiming deduction u/s SOIA and hence, loss or depreciation in the year earlier to 'initial assessment year' already absorbed against the profit of other business could not be notionally brought forward and set off against the profits of the eligible of the assessee. The Ground is accordingly Allowed."
4. At the outset, the learned Counsel for the assessee stated that this issue is squarely covered by the decision of Hon'ble Bombay High Court 9 ITA No . 4 1 47 / Mu m /2 0 17 in the case of CIT vs. Hercules Hoists Ltd., Income Tax Appeal No. 707 of 2014 order dated 14 June 2017 vide Para 8 and 9 as under: -
"8. The said issue is now no longer res-integra in view of the judgment of the Madras High Court in a case of Velayudhaswamy Spinning Mills P. Ltd. & Sudan Spinning Mills (P). Ltd. (supra), the Court observed as under:-
"From a readying of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in subsection does not contemplates to bring set off 10 ITA No . 4 1 47 / Mu m /2 0 17 amount notionally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created.
9. The said judgment of the Madras High Court has been confirmed by the Apex Court, as such has attained finality. Even in the assessee's own case for the previous year, the losses were set off in the relevant years. The Revenue had challenged the said action before this Court in Income Tax Appeal No.2485 of 2013 and it was held that the said action is legal and proper. The said judgment is also upheld by the Apex Court."
5. The learned Sr. Departmental Representative could not point out any adverse judgment. Respectfully following the Hon'ble Bombay High court in the case of Hercules Hoists Ltd (supra), the issue is squarely covered, we confirm the order of CIT(A) and dismiss this appeal of Revenue.
6. In the result, the appeal of Revenue is dismissed.
Order pronounced in the open court on 07-12-2018.
Sd/- Sd/-
(राजेश कुमार / RAJESH KUMAR) (महावीर स ह
िं /MAHAVIR SINGH)
(लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER)
मिंब
ु ई, ददनािंक/ Mumbai, Dated: 07-12-2018 सदीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS 11 ITA No . 4 1 47 / Mu m /2 0 17 आदे श की प्रनिललपप अग्रेपिि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. आयकर आयुक्त(अपील) / The CIT(A)
4. आयकर आयुक्त / CIT
5. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मुिंबई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शािसार/ BY ORDER, त्यावपत प्रयत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीलीय अधिकरण, मुिंबई / ITAT, Mumbai