Commissioner of Income-tax Company Circle-3(2), Chennai v. M/s.Ucal Fuel Systems Limited
[Citation -2015-LL-1123-14]

Citation 2015-LL-1123-14
Appellant Name Commissioner of Income-tax Company Circle-3(2), Chennai
Respondent Name M/s.Ucal Fuel Systems Limited
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 23/11/2015
Assessment Year 2005-06
Judgment View Judgment
Keyword Tags eligible business • industrial undertaking • initial assessment • positive income • quantum of deduction • source of income
Bot Summary: The assessees claim of deduction, under Section 80IA, for a sum of Rs.85,35,842/-, had been disallowed on the ground that, as per the provisions contained in Section 80IA(5), the profit and gains of an eligible business, to which sub section would apply, shall, for the purpose of determining the quantum of deduction, under the said sub section, for the assessment year immediately succeeding the initial assessment year or any subsequent year, be computed, as if such eligible business was the only source of income of the assessee company during the previous year relevant to the initial assessment year and to every subsequent assessment year upto, and including the assessment year for which the determination is to be made. 380/07-08/A.III. The Commissioner of Income Tax-III, 3 by his order, dated 23.6.2010, had allowed the appeal of the assessee regarding the disallowance, under Section 80IA of the Act, relying on the decision of the Income Tax Appellate Tribunal, made in Velayudhaswamy Spinning Mills Ltd. Vs. Assistant Commissioner of Income Tax, 368), and M/s.Mohan Breweries and Distelleries Limited Vs. ACIT, 2008. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was in right in allowing the deduction under Section 80IA of the Income Tax Act, when there is no positive income from the industrial undertaking during the initial assessment year 2. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in holding that the initial assessment year to Section 80IA(5) would only mean the year of claim of deduction under Section 80IA and not the year of commencement of eligible business 3. B. The Income Tax Appellate Tribunal erred in holding that the assessee is entitled to deduction under Section 80IA. C. The Income Tax Appellate Tribunal erred in allowing the deduction under Section 80IA of the Income Tax Act when there is no positive income from the industrial undertaking during the financial assessment year. D. The Income Tax Appellate Tribunal ought to have appreciated that as per section 80IA the undertaking eligible for deduction u/s 80IA should be treated as only source of income for computing the quantum of deduction. G. The Income Tax Appellate Tribunal ought to have appreciated that as per provisions of section 80IA(5) the undertaking eligible for deduction should be treated as only source of income for computing the quantum of deduction.


1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 23-11-2015 CORAM HONOURABLE MR.JUSTICE M.JAICHANDREN AND HONOURABLE MRS.JUSTICE S.VIMALA Tax Case Appeal No.1166 of 2015 Commissioner of Income Tax Company Circle-3(2) Chennai. .. Appellant. Versus M/s.Ucal Fuel Systems Limited Raheja Towers 7th Floor, Unit 705, No.177, Anna Salai, Chennai 600 002. .. Respondent. Prayer: Appeal presented to High Court against order of Income Tax Appellate Tribunal Madras `A' Bench, dated 26.6.2015, in ITA No.1107/MDS/2015. For Appellant : Mr.M.Swaminathan For Respondent : Mr.A.S.Sriraman ORDER This Tax Case Appeal has been filed against order of Income Tax Appellate Tribunal Bench, Chennai, dated 26.6.2015, made in I.T.A.No.1107/Mds./2015. 2 2. brief facts of case, necessary for disposal of appeal, are as follows: 2.1) assessee company had been engaged in manufacturing of carburettor fuel pumps for two wheelers and four wheelers. It had filed its return, for assessment year 2005-2006, declaring income of Rs.13,64,09,870/- and revised return had been filed, declaring income of Rs.19,47,94,750/-. case was selected for scrutiny. Notice under Section 143(2) of Income Tax Act, 1961 (hereinafter referred to as `the Act'), had been issued. assessees claim of deduction, under Section 80IA, for sum of Rs.85,35,842/-, had been disallowed on ground that, as per provisions contained in Section 80IA(5), profit and gains of eligible business, to which sub section (1) would apply, shall, for purpose of determining quantum of deduction, under said sub section, for assessment year immediately succeeding initial assessment year or any subsequent year, be computed, as if such eligible business was only source of income of assessee company during previous year relevant to initial assessment year and to every subsequent assessment year upto, and including assessment year for which determination is to be made. 2.3) Aggrieved by assessment order, assessee company had preferred appeal before Commissioner of Income Tax (Appeals)-III, in I.T.A.No.380/07-08/A.III. Commissioner of Income Tax (Appeals)-III, 3 by his order, dated 23.6.2010, had allowed appeal of assessee regarding disallowance, under Section 80IA of Act, relying on decision of Income Tax Appellate Tribunal, made in Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax, (231 CTR (Mad.) 368), and M/s.Mohan Breweries and Distelleries Limited Vs. ACIT, 2008 (116 ITD 241). 2.4) Aggrieved by order passed by Commissioner of Income Tax (Appeals)-III, department had preferred appeal before Income Tax Appellate Tribunal, in I.T.A.No.1107/Mds./2015. Tribunal, by its order, dated 26.6.2015, had dismissed appeal filed by department, following decision of this court in case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax, (231 CTR (Mad.) 368). 2.5) Challenging order of Tribunal, dated 26.6.2015, department has filed present Appeal, before this Court, under Section 260A of Act, raising following substantial questions of law. "1. Whether on facts and in circumstances of case, Appellate Tribunal was in right in allowing deduction under Section 80IA of Income Tax Act, when there is no positive income from industrial undertaking during initial assessment year? 2. Whether on facts and in circumstances of case, ITAT is right in holding that assessee is entitled to deduction under Section 80IA following decision of jurisdictional High Court in case of Velayudhaswamy 4 Spinning Mills (340 ITR 477) when same is pending before Hon'ble Supreme Court in SLP Civil 1136/11? 3. Whether on facts and in circumstances of case Income Tax Appellate Tribunal was correct in holding that initial assessment year to Section 80IA(5) would only mean year of claim of deduction under Section 80IA and not year of commencement of eligible business?" 3. learned counsel appearing on behalf of department had raised following grounds: "A. order of Appellate Tribunal is erroneous in law and opposed to facts and circumstances of case. B. Income Tax Appellate Tribunal erred in holding that assessee is entitled to deduction under Section 80IA. C. Income Tax Appellate Tribunal erred in allowing deduction under Section 80IA of Income Tax Act when there is no positive income from industrial undertaking during financial assessment year. D. Income Tax Appellate Tribunal ought to have appreciated that as per section 80IA (5) undertaking eligible for deduction u/s 80IA should be treated as only source of income for computing quantum of deduction. E. Income Tax Appellate Tribunal erred in following decision of Jurisdictional High Court in case of M/s.Velayuthasamy Spinning Mills when same is in appeal before Hon'ble Supreme Court. F. Income Tax Appellate Tribunal ought to have observed that since sub-section 5 of Section 80IA starts with non-obstante clause, restriction put in sub-section 5 will 5 prevail and deduction under 80IA has to be restricted accordingly. G. Income Tax Appellate Tribunal ought to have appreciated that as per provisions of section 80IA(5) undertaking eligible for deduction should be treated as only source of income for computing quantum of deduction." 4. Per contra, learned counsel appearing on behalf of respondent had submitted that decision rendered in Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax, (231 CTR (Mad.) 368), squarely applies to facts of present case. He had further submitted that Division Bench of this court had rendered similar decision, in Commissioner of Income-Tax, Circle-I, Tirupur Vs. R.Yuvaraj, [2015] 57 Taxmann.com 252 (Madras). In view of above decisions, appeal filed by Revenue is liable to be dismissed, as it is devoid of merits. 5. We have heard learned counsels appearing on behalf of appellant, as well as respondent. We have also perused records available before this Court. 6. It is noted that facts and circumstances based on which present Appeal had arisen are similar to those which had already been decided by this court in cases cited supra. Further, in batch of cases in CIT Vs. Eastman Exports Global Clothing (P) Ltd. [2015] 229 Taxman 6 449/54 Taxmann.com 408 (Madras), this Court had followed decision rendered in Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax, (231 CTR (Mad.) 368), and had decided matter in favour of assessee and against Revenue. Taking note of above said decisions, we are constrained to dismiss present Appeal filed by Revenue, confirming order passed by Tribunal, dated 26.6.2015. Accordingly, questions of law raised in appeal are answered against Revenue and in favour of assessee, for reasons stated above. Accordingly, Tax Case Appeal stands dismissed. (M.J.J.,) (S.V.J.,) Index:Yes/No 23-11-2015 Internet:Yes/No csh To Commissioner of Income Tax Company Circle-3(2) Chennai. 7 M.JAICHANDREN,J. AND S.VIMALA,J. csh Tax Case Appeal No.1166 of 2015 23-11-2015 Commissioner of Income-tax Company Circle-3(2), Chennai v. M/s.Ucal Fuel Systems Limited
Report Error