The Principal Commissioner of Income-tax I, Coimbatore v. Jewels Magnum
[Citation -2020-LL-0909-62]

Citation 2020-LL-0909-62
Appellant Name The Principal Commissioner of Income-tax I, Coimbatore
Respondent Name Jewels Magnum
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 09/09/2020
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags commencement of production • computation of deduction • unabsorbed depreciation • special economic zone
Bot Summary: 260 261 of 2018 For Respondent : Mr.R.Sivaraman COMMON JUDGMENT Order of the Court was made by T.S.SIVAGNANAM, J. These appeals filed by the Revenue, under Section 260A of the Income Tax Act, 1961 are directed against the orders, dated 19.02.2016 passed by the Income Tax Appellate Tribunal, Madras 'C' Bench,, in I.T.A.No. 260 261 of 2018 culminated in issuing the order of penalty to them vide order dated 03.9.2014. The said writ petition was allowed, by order dated 11.02.2015, setting aside the order of penalty dated 03.9.2014, and remanded back to the Development Commissioner, MEPZ-Special Economic Zone, Tambaram, Chennai, with a direction to the said authority to adjudicate the show cause notice. The authority took up that matter for consideration and passed an order dated 20.04.2015, imposing penalty on the assessee, under Section 13 of the Foreign Trade Act, 1992. 465/14-15 before the Commissioner of Income Tax, who dismissed both the appeals vide order dated 16.12.2015. 13538 of 2015, challenging the order of penalty, appears to have been pending. Even in the order dated 03.9.2014, imposing penalty on the assessee, which was subsequently quashed, the Development Commissioner has recorded that the date of commencement of production as 14.04.2009.


T.C.A.Nos.260 & 261 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 09.09.2020 CORAM HONOURABLE Mr.JUSTICE T.S.SIVAGNANAM and HONOURABLE Mrs.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.Nos.260 & 261 of 2018 Principal Commissioner of Income Tax I No.63, Race Course Road Coimbatore. .. Appellant / Respondent (in both appeals) Versus M/s.Jewels Magnum No.333, First Floor, Big Bazaar Street Coimbatore 641 001. PAN : AAG FJ 3110 Q .. Respondent / Appellant (in both appeals) Common Prayer:- Tax Case Appeals filed under Section 260-A of Income Tax Act, 1961, against order of Income Tax Appellate Tribunal, Madras ''C'' Bench, Chennai, dated 19.02.2016 in I.T.A.No.2311/Mds/2015 and ITA.No.2312/Mds/2015, respectively. For Appellant : Mr.T.R.Senthil Kumar (in both appeals) Senior Standing Counsel assisted by Ms.K.G.Ushnarani Junior Standing Counsel 1/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 For Respondent : Mr.R.Sivaraman (in both appeals) COMMON JUDGMENT [Order of Court was made by T.S.SIVAGNANAM, J.] These appeals filed by Revenue, under Section 260A of Income Tax Act, 1961 ('the Act' for brevity) are directed against orders, dated 19.02.2016 passed by Income Tax Appellate Tribunal, Madras 'C' Bench, ('the Tribunal' for brevity), in I.T.A.No.2311/Mds/2015 and ITA.No.2312/Mds/2015, for assessment year 2011-12 & 2012-13. 2. These appeals are entertained on following substantial questions of Law: (i) Whether on facts and circumstance of case Appellate Tribunal was right in law in holding that assessee is entitled to deduction under Section 80 IA of Income Tax Act? (ii) Whether on facts and circumstances of case, Income Tax Appellate Tribunal was right in holding that 2/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 unabsorbed depreciation of earlier years before first year or claim, which was already been absorbed, should not be notionally carried forward and taken into consideration for computation of deduction u/s.80 IA of Income Tax Act? 3. We have elaborately heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel assisted by Ms.K.G.Usharani, learned counsel for appellant-Revenue and Mr.R.Sivaraman, learned counsel for respondent-assessee. 4. short question that falls for consideration is whether assessee is entitled to benefit of Section 10AA of Act. said provision is special provision in respect of newly established units in Special Economic Zone. Section 10AA of Act states that in computing total income of assessee, being entrepreneur as referred to in clause (j) of section (2) of Special Economic Zones Act, 2005, from his unit, who begins to manufacture or produce articles or things or provide any services during previous year relevant to any assessment year commencing on or after 1st day of April, 2006, but before 1 st day of 3/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 April 2011, would be entitled to deductions as mentioned in 1(i) and 1(ii) in Section 10(A)(1). Thus, assessee to be entitled to benefit of Section 10(A)(A), first condition to be fulfilled is that assessee should be entrepreneur as defined under Section 2(j) of Special Economic Zone Act, 2005. said provision defines : 2(j) enterpreneur means person who has been granted letter of approval by Development Commissioner under sub-section 9 of Section 15. Undisputed fact is that assessee was granted Letter of Approval and therefore, assessee would fall within definition of entrepreneur as defined under Section 2(j) of Special Economic Zones Act, 2005. Assessing Officer sought to deny benefit on ground that assessee has violated terms and conditions in Letter of Approval, which was granted by Development Commissioner, for manufacture of bangles and pendants. basis for arriving at such conclusion is on ground that Development Commissioner initiated proceedings under provisions of Foreign Trade (Development and Regulations) Act 1992, as assessee had violated conditions in Letter of Approval, which 4/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 culminated in issuing order of penalty to them vide order dated 03.9.2014. 5. It is to be noted that respondent-assessee had challenged said order, by filing writ petition in W.P.No.25765 of 2014. said writ petition was allowed, by order dated 11.02.2015, setting aside order of penalty dated 03.9.2014, and remanded back to Development Commissioner, MEPZ-Special Economic Zone, Tambaram, Chennai, with direction to said authority to adjudicate show cause notice. On such remand, authority took up that matter for consideration and passed order dated 20.04.2015, imposing penalty on assessee, under Section 13 of Foreign Trade (Development & Regulation) Act, 1992. This order was put to challenge by way of writ petition in W.P.No.13538 of 2015. When writ petition was pending, assessments were completed under Section 143(3) of Act, for both assessment years i.e., AY 2011-12 and AY 2012-13 on 20.03.2014 and 31.10.2014 respectively. 6. assessee carried matters on appeal in ITA.No.419/14-15 5/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 (for AY 2011-12) and ITA.No.465/14-15 (for AY 2012-13) before Commissioner of Income Tax (Appeals), who dismissed both appeals vide order dated 16.12.2015. This was because Development Commissioner had held that assessee had violated terms and condition stipulated in Letter of Approval by manufacturing medallions instead of pendants, and exporting same. At that relevant time, writ petition filed by assessee in W.P.No.13538 of 2015, challenging order of penalty, appears to have been pending. Aggrieved by dismissal order dated 16.12.2015, assessee had preferred appeals in ITA.Nos.2311/Mds/2015 & 2312/Mds/2015, before Tribunal. assessee was successful in convincing Tribunal to hold that there is no violation of Letter of Approval and there is no marked difference or distinction between pendant and medallion. writ petition which was pending before this Court came to be allowed vide order 13.02.2017. 7. It is submission of Mr.T.R.Senthil Kumar, learned Senior Standing Counsel appearing for appellant-Revenue that writ petition was allowed by this Court, based upon order of Tribunal. 6/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 8. We have gone through order passed in W.P.No.13538 of 2015 and found that it was not only ground on which writ petition was allowed and Court has also given specific finding that medallion is termed as piece of jewellery in shape of medal worn as pendant. More importantly, learned Writ Court has referred to letter of Customs Department dated 12.03.2014, addressed to Assistant Development Commissioner of MEPZ, SEZ, wherein they have clarified that medallions are also pendants. This was also taken note of by learned Writ Court and quashed order of penalty imposed by Development Commissioner under provisions of Foreign Trade (Development and Regulations) Act 1992. Thus, basis or substratum, based on which assessment was completed denying benefit to assessee, did not no longer survive. That apart, what is required to be seen for extending benefit under Section of 10AA Act is, to see whether assessee is entrepreneur as referred to, defined under Section 2(j) of Special Economic Zone Act. No doubt, assessee falls within said definition, as they had been granted Letter of 7/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 Approval by Development Commissioner under Section 15(9) of Special Economic Zones Act. That apart, competent authority who intends to certify as to what would be date of commencement of production, would be Development Commissioner and not Income Tax Officer. Even in order dated 03.9.2014, imposing penalty on assessee, which was subsequently quashed, Development Commissioner has recorded that date of commencement of production as 14.04.2009. This date is binding on Income Tax Department, as competent authority to certify date of production is Development Commissioner and not Assessing Officer. 9. It was pointed by Mr.R.Sivaraman, leaned counsel appearing for assessee/respondent that assessee has fullfiled terms and conditions of Letter of Approval and nett foreign exchange earning of assessee for years 2010, 2011, 2012 & 2013 is Rs. 74.49 crores. 10. Considering all these facts, we are of view that relief granted by Tribunal by interpreting as to what is pendant and 8/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 medallion, cannot be interfered in appeal filed under Section 260-A of Act. argument of Mr.T.R.Senthil Kumar, learned Senior Counsel appearing for Revenue, that issue goes to root of matter is not acceptable because of subsequent developments that had taken place in writ petition filed by assessee, being allowed by this Court and order of penalty imposed by Development Commissioner being set aside. reason for setting aside order of penalty imposed on assessee, is that assessee has not violated terms and conditions of Letter of Approval and that medallion is also classifiable as pendant. 11. Thus, for above reasons, we find no grounds to disturb findings of Tribunal. In result, both appeals filed by Revenue are dismissed and substantial questions of law are answered against Revenue. No costs. (T.S.S.,J) (V.B.S.,J) 09.09.2020 ds Index: Yes / No Speaking Order/Non-Speaking Order 9/10 http://www.judis.nic.in T.C.A.Nos.260 & 261 of 2018 T.S.SIVAGNANAM, J., AND V.BHAVANI SUBBAROYAN.J., ds To : 1.The Principal Commissioner of Income Tax-I Coimbatore. 2.The Income Tax Appellate Tribunal Chennai, 'C' Bench. T.C.A.Nos.260 & 261 of 2018 09.09.2020 10/10 http://www.judis.nic.in Principal Commissioner of Income-tax I, Coimbatore v. Jewels Magnum
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