PARKKOT MARITIME AGENCIES PRIVATE LIMITED.,GOA vs. JOINT COMMISSIONER OF INCOME TAX, MARGAO RANGE, MARGAO

आयकर अपीऱीय अधिकरण, पणजी न्यायपीठ, पणजी IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI, BENCH PANAJI श्री ऱलऱत कुमार, न्याययक सदस्य एवं डॉ मीठा ऱाऱ मीना, ऱेखा सदस्य के समक्ष । BEFORE SHRI LALIET KUMAR, JM AND DR. MITHA LAL MEENA, AM ITA Nos.181&182/PAN/2015 (AY: 2010-2011 & 2011-2012) Parkkot Maritima Agencies Vs ACIT, Circle-2, Margao, Goa Private Limited, Parkkot House, Swatanthra Path, Vasco Da Gama, Goa PAN : AADCP 1208 P (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. यनधााररती की ओर से /Assessee by : Shri S.V.Shivrama Iyer, CA राजस्व की ओर से /Revenue by : Shri Sourabh Nayak, Sr.DR सुनवाई की तारीख / Date of Hearing : 04/10/2021 घोषणा की तारीख/Date of Pronouncement : 04/10/2021 आदेश / O R D E R Per Bench : These two appeals filed by the assessee against the order passed by the CIT(A)-1, Panaji, both dated 25.02.2015 for the assessment year 2010-2011 & 2011-2012. 2. Since similar grounds have been raised in both the appeals, therefore, the grounds and the facts taken in appeal of the assessee for A.Y.2010-2011 in ITA No.181/PAN/2015 are taken to be considered for deciding both the appeals. 3. The assessee in its appeal for A.Y.2010-2011 i.e. ITA No.181/PAN/2015 has raised the following grounds :- 1. The Appellant had preferred an appeal before The Commissioner of Income Tax (Appeals), Panaji-I, against the order of the Assistant Commissioner of Income Tax, Circle-2, Margao. One of the issues appealed against was, in respect of disallowance of claim made by the appellant under Section 80- IA.

2 ITA Nos.181&182/PAN/2015 2) While confirming the disallowance made by the Assistant Commissioner of Income Tax, Circle-2, Margao, the learned Commissioner of Income Tax (Appeals), Panaji-I, has greatly relied on the observations of the Assistant Commissioner of Income Tax based on the provisions of Section 80-I. Section 80-I has lost its applicability and relevance with effect from 1-4- 1991 when Section 80-IA was introduced and amended from time to time. 3) The learned Commissioner of Income Tax (Appeals), has failed in not applying the provisions contained in Section 80-IA(5) as amended by Finance Act 2000 correctly. 4) The scope of this Section 80-IA(5) is restricted to computation level only, and limited to the relevant provisions contained in Chapter IV. The computation provisions are distinct and different from the provisions regarding set off and carry forward. While Chapter IV deals with computation of income, the provisions regarding aggregation of Income and set off or carry forward of loss are covered in Chapter VI and are outside the scope of 80-IA(5). Hence the question of adjusting loss (whether notional or real) does not arise. 5) The set off or carry forward and set off of losses are dealt with specifically in sections 70 to section 80. There is no mention here with regard to notional losses being set off. The losses to be carried forward and setoff are 'Determined Losses'. "Notional losses" are not 'Determined Losses' . A loss once determined and setoff cannot be brought forward under circumstance whether notional or otherwise. 6) The fiction created in sub section 5 of Section 80-1A, was misunderstood and misinterpreted without considering the scope and relevance and applicability of the phrase "initial assessment year". This resulted in the denial of benefit under section 80-1A to the appellant. The fiction "eligible business is the only source of income of the assessee" , per se, does not mean nor does it give power to Income tax authorities to presume, that in the earlier years the eligible business could have made losses and that the fiction mandates a notional carry forward of loss from eligible business presuming that the eligible business is the only source of income. Such presumption, apart from creation of fiction upon fiction, results in total distortion of the provision. This is bad in law. Unless a fishing expedition is made into the past it will not be possible for the Income tax authorities to establish existence of past loss. The Income tax authority has no power to make fishing expedition. A legal fiction has to be interpreted in such a manner as would not work injustice to any party. 7) Chapter VI-A of the Income Tax Act, 1961, provides for incentives in the form of tax deductions which essentially belong to the category of 'Profit —linked incentives'. Once the losses

3 ITA Nos.181&182/PAN/2015 and other deductions have been set off against the income of an earlier assessment year, they should not be reopened again for the purpose of computation of the current year's income under section 80 I or section 80 IA and the assessee should not be denied the admissible deduction under section 80 IA. The memorandum explaining the Finance Bill 1999, (clause 50, quoted below) would clearly show that the claim of appellant is fully in line with the words and spirit of Section 80-IA as amended. Liberalisation of tax holiday provisions for infrastructure (2000) Under the existing provisions of section 80-IA, roads, highways, bridges, airports, ports and rail systems are regarded as infrastructure facilities and the undertakings engaged in providing or maintaining such infrastructure facilities are entitled to a tax holiday for five years and a deduction of 30% of profits for the next five years. These companies have the choice of availing such benefits in any ten consecutive years out of initial twelve years from the year in which these commence operation. Keeping in view the capital intensive nature and higher allowances of depreciation in the initial years in such enterprise, it is proposed to make the existing fiscal concessions more meaningful, by providing that such undertakings may avail of the benefits in any ten consecutive years out of initial fifteen years from the year in which these commence operation. Under the existing provisions of section 80-IA, undertakings generating or generating and distributing power, undertakings developing and operating • industrial parks and undertakings engaged in providing telecom services are entitled to a five year tax holiday and a deduction of 25% (30% in the case of companies) of profit in the subsequent five years. As such undertakings are capital intensive and get delayed returns on investments, it is proposed to similarly allow them to avail of the benefits in any ten consecutive years out of first fifteen years from the year in which such undertakings start operating or commence production. The proposed amendment will take effect from the 1st April, 2000 and will, accordingly apply in relation to the assessment year 2000-2001. [Clause 50 8) Learned Commissioner of Income Tax Appeals has erred in the matter of application of hierarchy of jurisdiction. Reliance was placed by the Learned Commissioner of Income Tax (Appeals) on the judgement of the Income tax Appellate Tribunal in the matter of ACIT Circle (4) Ahmedabad Vs. Goldmine Shares and Finance Private Limited (2008) 113 ITD 209 (Ahmedabad) (Special Bench). The Honourable Madras High Court's decision in the case of • Velayudhaswamy Spinning Mills Private Limited Vs. ACTT (2012)340 ITR 477 (Madras) was ignored stating that Revenue's appeal in the same case is pending before the Honourable Supreme Court of India. This matter has again

4 ITA Nos.181&182/PAN/2015 been reiterated by the Honourable Madras High Court in the decision of Commissioner of Income Tax Vs. Eastern Spinning Mills P Ltd in (2015) 372 ITR 88. It is needless to mention here that the decision of a higher legal authority which is also a subsequent decision (decided on 11th March 2010 and also considering the ITAT decision of 2008), takes precedence and is binding on all lower authorities, in as much as the Honourable Supreme Court has not decided otherwise and there be no decision of the Jurisdictional High Court, being Mumbai. In view of the above said points and those that may be adduced at the time of personal hearing, the appellant prays that the Honourable Income Tax Appellate Tribunal be pleased to allow the claim under Section 80-IA made by the appellant. 4. In this case the learned AR drew our attention to the order passed by the AO, wherein the AO in para 4.6 has noted as under :- 4.6 Further, the reliance on the judgment of the Madras High Court in case of Velayudhasamy Spinning Mills (P) Ltd. v/s ACIT. 38 DTR 57 (2010) by the assessee is not acceptable as revenue’s appeal in the same case is pending before the Hon’ble Supreme Court of India. 5. Thereafter the learned. AR drew our attention to para 5.4 of page 17 of CIT(A)’s order, wherein the CIT(A), despite specifically relying upon the decision of Hon’ble Madras High Court, has rejected the claim of the assessee. “5.4 I have gone through the assessment order and the submission of the appellant. There is no dispute about the legal position that in case of deduction u/s.80IA, the income has to be computed, as if the eligible I have gone through the assessment order and the submission of the appellant. There is no dispute about the legal position that in case of unit is the only and stand alone business concern. The A.O. has not deviated from this principle. He has calculated the income/loss of the eligible unit, as if it's the only source of income and found that in A.Yr.2010-11, the unit was still in a cumulative loss of Rs.3,58,87,185/-. Just because the assessee had set-off its losses from the eligible unit against other incomes or rather income from ineligible units in the earlier years; it does not mean, that it has made profits. The fact remains that the eligible unit is still in losses and no profit has arisen to the eligible unit and therefore, question of allowing deduction u/s.80IA does not arise. The decision of the Madras High Court in the case of Velayudhaswamy Spg. Mills Pvt. Ltd. allows the assessee to choose the initial year from which it can start claiming deduction, but it does not mean that deduction can be claimed on notional

5 ITA Nos.181&182/PAN/2015 income. Real income arises only when receipts exceed expenses and in the instant case, receipts have still not exceeded the expenses and there is no profit in respect of eligible unit. The A.O. has placed reliance on the decisions of ITAT, Bench, Mumbai in the case of Pidilite Industries Ltd Vs. DCIT [2011] 12 taxmann. corn 96 and has correctly applied the ratio of this decision. In view of the above, I find the decision of the A.O., correct and therefore disallowance of Rs.50,26,562/- is hereby confirmed. This ground of appeal of the appellant is dismissed accordingly.” 6. It was the contention of learned.AR that since the Special Leave Petition filed by the department had been rejected by the Hon’ble Supreme Court, therefore, the judgment of the Hon’ble Madras High Court requires to be applied with full force on the present facts of the case. 7. Per Contra, the learned DR relied on the orders of lower authorities. 8. We have heard the rival contention of the parties and perused the material available on record. The SLP arising out of the order passed by the Hon’ble Madras High Court has been rejected by the Hon’ble Supreme Court vide order dated 5th September, 2016. Admittedly, the AO while disallowing the claim of the assessee u/s.80IA of the Act has observed that the claim of the assessee is not acceptable as the revenue’s appeal is pending before the Hon’ble Supreme Court against the order passed by the Hon’ble Madras High Court in the case of Velayudhasamy Spinning Mills (P) Ltd. Vs. ACIT, 38 DTR 57 (2010). From the material available on record, we deem it appropriate to remand the matter to the file of AO with a direction to give the benefit of Section 80IA of the Act in the light of the judgment of the Hon’ble Madras High Court in the case of Velayudhasamy Spinning Mills (P) Ltd. (supra). However, the AO while applying the said decision shall keep into mind the other relevant provisions of the Act and the entitlement of the assessee to

6 ITA Nos.181&182/PAN/2015 claim the benefit u/s.80IA. In the light of the above, the appeal of the assessee is allowed statistical purposes. Since the grounds raised by the assessee in appeal for the assessment year 2011-2012 are same to the grounds raised in the appeal for A.Y.2010-2011, therefore, our above observations made in the appeal i.e. ITA No.181/PAN/2015 shall apply mutatis mutandis to the other appeal i.e. ITA No.182/PAN/2015 also. 9. In the result, both appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the open court on 04/10/ 2021. Sd/- Sd/- (डॉ मीठा ऱाऱ मीना) (ऱलऱत कुमार) (DR. MITHA LAL MEENA) (LALIET KUMAR) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER पणजी/Panaji; ददनाांक Dated 04/10/2021 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अऩीऱाथी / The Appellant- Parkkot Maritima Agencies Private Limited, Parkkot House, Swatanthra Path, Vasco Da Gama, Goa 2. प्रत्यथी / The Respondent- ACIT, Circle-2, Margao, Goa आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, पणजी / DR, 5. ITAT, Panjaji गाडा पाईऱ / Guard file. 6. सत्यावऩत प्रयत //True Copy// आदेशानुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, पणजी/ITAT, Panaji