COMMISSIONER OF INCOME TAX vs. SHRI G.R.PADMANABHAN (INDL)

T.C.A.No.894 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.11.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.No.894 of 2019 Commissioner of Income Tax Central III, 121, Nungambakkam High Road, Chennai 600 034. ... Appellant Vs Shri G.R.Padmanabhan (Indl), 136, Usman Road, T.Nagar, Chennai - 600 017.

...Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 against the order dated 30.09.2010 in I.T.A.No.602/Mds/2010 on the file of the Income Tax Appellate Tribunal Chennai 'D' Bench for the assessment year 2006-07. For Appellant : Mr.T.R.Senthil Kumar For Respondent : Mr.M.P.Senthil Kumar 1/8 http://www.judis.nic.in T.C.A.No.894 of 2019 J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J) This tax case appeal has been filed against the order of the Income Tax Appellate Tribunal dated 30.09.2010 in I.T.A.No.602/Mds/2010 in dismissing the appeals filed by the assessee against the order of the Commissioner of Income Tax (Appeals) by which the appeal filed by the assessee was allowed. 2.Heard Mr.T.R.Senthil Kumar, learned Counsel for the appellant and Mr.M.P.Senthil Kumar, learned Counsel for the respondent. 3.This tax case appeal is admitted on the following substantial questions of law: "(i)Whether on facts and in the circumstances of the case, the Income Tax Tribunal was right in upholding the order of CIT(A), who directed the assessing officer to ignore all depreciation loss from wind mill business prior to assessment year 2000-01? 2/8 http://www.judis.nic.in T.C.A.No.894 of 2019 (ii)Whether on the facts and in the circumstances of the case, the Income Tax Tribunal was right in holding the unabsorbed deprecation loss prior to initial assessment year could be notionally carried forward while computing deduction u/s.80IA? (iii)Whether on the facts and in the circumstances of the case, this Appellate Tribunal was right in following the jurisdictional High Court Judgment which is a subject matter of SLP before the Hon'ble Supreme Court?"

4.Mr.T.R.Senthil Kumar, learned Counsel for the appellant submitted that a similar appeal in T.C.A.No.176 of 2016 has been disposed of by this Court and produced a copy of the Judgment. This Court has perused the same and the relevant portion of the said Judgment is usefully extracted as follows: "3. Even according to the learned Standing Counsel for the Department, this Court has consistently followed the decision in M/s.Velayudhaswamy Spinning Mills (340 ITR 477), despite the Honourable Supreme Court ordering notice. 4. Interestingly, on the basis of the decision in Velayudhaswamy Spinning Mills, the Central Board of Direct 3/8 http://www.judis.nic.in T.C.A.No.894 of 2019 Taxes has issued Circular No.1/2016 dated 15.2.2016. It will be useful to extract the circular in entirety, which is as follows : "Circular No. 1 /2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 15th February, 2016 Subject: Clarification of the term ‘initial assessment year' in Section 80IA(5) of the IncomeTax Act, 1961. Section 801A of the Income-tax Act, 1961(‘Act’), as substituted by Finance Act, 1999 with effect from 1.4.2000, provides for deduction of an amount equal to 100% of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in Sub-Section (4) of that Section) in accordance with the prescribed provisions. Sub-Section (2) of Section 801A further provides that the aforesaid deduction can be claimed by the assessee, at his option, for any ten consecutive assessment years out of fifteen years (twenty years in certain cases) beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. as stipulated therein. Sub-Section (5) Section 801A further provides as under : “Notwithstanding anything contained in any other 4/8 http://www.judis.nic.in T.C.A.No.894 of 2019 provision of this Act, the profits and gains of an eligible business to which the provisions of Sub-Section (1) apply shall, for the purposes of determining the quantum of deduction under that succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made”. In the above Sub-Section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term ‘initial assessment year’. It has been represented that some Assessing Officers are interpreting the term ‘initial assessment year’ as the year in which the eligible business/manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under Sub-Section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years. The matter has been examined by the Board. It is abundantly clear from Sub-Section (2) that an assessee who is eligible to claim deduction u/s 80IA 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 slab of fifteen (or twenty) years, as 5/8 http://www.judis.nic.in T.C.A.No.894 of 2019 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 801A 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. Hence, the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s 801A. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 801A in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting‘initial assessment year’ as mentioned in Sub-Section (5) of that section for which the Standing Counsel/DRs be suitably instructed. The above be brought to the notice of all Assessing Officers concerned." 5. Therefore, admittedly, questions of law 2 and 3 are also covered by the above circular. Hence, the appeal deserves to be dismissed." 6/8 http://www.judis.nic.in T.C.A.No.894 of 2019 5.Hence, in view of the above Judgment, this appeal is dismissed. No costs.

(N.K.K.,J.) (P.V.,J.) 22.11.2019 ay To Commissioner of Income Tax Central III, 121, Nungambakkam High Road, Chennai 600 034.

7/8 http://www.judis.nic.in T.C.A.No.894 of 2019 N.KIRUBAKARAN, J. and P.VELMURUGAN, J. ay T.C.A.No.894 of 2019 Dated:22.11.2019 8/8 http://www.judis.nic.in