Madras High Court
Principal Commissioner Of Income ... vs Shri K.T.Kunjumon on 23 February, 2021
T.C.A.No.664 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 23.02.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
T.C.A.No.664 of 2019
Principal Commissioner of Income Tax,
Central 1,
108, Nungambakkam, High Road,
Chennai-600 034. .. Appellant/Appellant
-vs-
Shri K.T.Kunjumon,
Buddha Street, Ashok Nagar,
Directors Colony, Chennai-600 024.
PAN No.ACZPK 1724A .. Respondent/Respondent
Appeal under Section 260A of the Income Tax Ac, 1961 against the
order dated 12.02.2019 made in I.T.(SS)A.No.06/CHNY/2018 on the file of
the Income Tax Appellate Tribunal 'B' Bench, Chennai for the assessment
block period 01.04.1986 to 31.03.1996 and 01.04.1996 to 30.01.1997.
For Appellant : Mr.T.R.Senthil Kumar,
Senior Standing Counsel
assisted by Ms.K.G.Usha Rani,
Junior Standing Counsel
1/9
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T.C.A.No.664 of 2019
For Respondent : Ms.Vandhana,
for Mr.R.Sivaraman
******
JUDGMENT
(Judgment of the Court was delivered by T.S.Sivagnanam, J.)
This appeal, by the Revenue, filed under Section 260A of the Income
Tax Act, 1961 (hereinafter referred to as “the Act”), is directed against the
order dated 12.02.2019, made in I.T.(SS)A.No.06/CHNY/2018 on the file of
the Income Tax Appellate Tribunal 'B' Bench, Chennai (for brevity “the
Tribunal”) for the assessment block period 01.04.1986 to 31.03.1996 and
01.04.1996 to 30.01.1997.
2.The appeal has been filed raising the following substantial
questions of law:-
“(1) Whether on the facts and in the
circumstances of the case, the Appellate Tribunal is
justified in allowing the claim of deduction u/s 80IA
without appreciating that the conditions laid down in
Section 80IA have not been satisfied by the assessee?
and
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T.C.A.No.664 of 2019
(2) Whether on the facts and in the circumstances
of the case, the Appellate Tribunal is correct in law in
not appreciating that the relied upon decision and the
assessee's case are distinguishable on facts?”
3.Heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel
assisted by Ms.K.G.Usha Rani, learned Junior Standing Counsel for the
appellant/Revenue and Ms.Vandhana, learned counsel for Mr.R.Sivaraman,
learned counsel for the respondent/assessee.
4.The short issue, which falls for consideration, is whether the
Tribunal was right in allowing the claim of deduction under Section 80IA of
the Act.
5.The argument of Mr.T.R.Senthil Kumar, learned Senior Standing
Counsel is that the assessee miserably failed to fulfil the conditions
stipulated under sub-Section (7) of Section 80IA of the Act.
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T.C.A.No.664 of 2019
6.The case has had a chequered history pursuant to a search, which
was conducted during 1997. The assessee had gone before the Income Tax
Settlement Commission, Chennai (for brevity “the Settlement
Commission”) and an order dated 22.07.1999, was passed under Section
245D(1) of the Act in which, the Settlement Commission brought out the
facts and observed that the documents reveal that two business concerns,
viz., ARS International and ARS Film International with Mr.A.Pavithran
and Mr.Francis Joseph were in fact, actually controlled by the
respondent/assessee and they were his benamidars. Further, the Settlement
Commission observed that the computation of undisclosed income thereon
involved a very complex exercise of working out not only the undisclosed
income of the assessee, but also suppressed income of the related
benamidars and also matching the available sources with the unaccounted
investments made by the assessee.
7.Furthermore, in the case of the said benamidar, Mr.Francis Joseph,
assessment proceedings were initiated and ultimately, the matter came up to
this Court in T.C.A.No.1318 of 2005 at the instance of the Revenue. The
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T.C.A.No.664 of 2019
tax case appeal was filed raising identical substantial questions of law, as
raised before us in this appeal by the Revenue. The Division Bench, by
judgment dated 22.06.2012, disposed of the appeal and restored the matter
back to the files of the Assessing Officer for the assessee to produce
necessary material to satisfy the conditions under sub-Clause (ii) of sub-
Section (2) of Section 80IA of the Act. In paragraph 12 of the judgment,
the Court had recorded that if the assessee (Francis Joseph) is able to prove
that it is not a form by the transfer to a new business of machinery or plant
previously used for any purpose, then the assessee would qualify for
deduction, since he had qualified on the other condition, viz., manufacture
of an article or thing.
8.As noted above, the said Francis Joseph has been held to be a
benamidar. In fact, the assessee had accepted the factual position and the
matter proceeded from the said stage.
9.The Revenue challenged the order passed by the Commissioner of
Income Tax (Appeals)-18, Chennai (for brevity “the CIT(A)”) dated
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T.C.A.No.664 of 2019
31.01.2018, which held that the assessee was entitled to claim deduction
under Section 80IA of the Act. The Revenue, being aggrieved by such
order, filed appeal before the Tribunal raising only two grounds stating that
the assessee was using already existing machinery and cannot be stated to
be a new industrial undertaking, which came into existence during the
relevant previous year. Further, the assessee was only doing a new project
in the same line of business by producing cinemas and every new project in
the nature of new cinema cannot be termed as a “new industrial
undertaking”. The correctness of the said contention was examined by the
Tribunal, after taking note of the decision of the High Court of Bombay in
the case of CIT vs. Jyoti Prakash Dutta [(2014) 367 ITR 568 (Bom.)]
wherein, it was held if the assessee has satisfied the condition stipulated in
sub-Section (2) of Section 80IA, it would be eligible for the deduction
claimed by it. In the said case also, the assessee was engaged in the activity
of film production. Thus, after taking note of the said decision and also
noting that the Revenue was not able to show that there was any transfer of
used machinery or plant to a new business and that the production of cinema
film would amount to manufacturing or processing of goods as qualified by
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T.C.A.No.664 of 2019
the Central Board of Direct Taxes circular dated 23.07.1999, decided the
case in favour of the assessee.
10.The point, now canvassed before us by the Revenue stating that
the condition stipulated in sub-Section (7) of Section 80IA of the Act has
not been fulfilled by the assessee, is a point, which was never taken by the
Revenue at any earlier point of time. That apart, the benamidar of the
assessee, viz., Francis Joseph had availed the benefit of the KVSS Scheme
by filing a declaration and certificate was also issued. Subsequently, the
assessee addressed the Department on 27.09.1999, stating the factual
position. This has led to the issuance of a notice/order dated 01.11.1999 by
the Commissioner of Income Tax (Central), Chennai stating that Mr.Francis
Joseph has obtained the certificate under Section 90(2) of the Finance
(No.2) Act, 1998 by making a false declaration. In the said notice/order, it
was also mentioned that Mr.Francis Joseph, by letter dated 21.10.1999, has
expressed his consent for the adjustment of tax of Rs.8,69,338/- paid by him
under KVSS Scheme towards the tax payable by the assessee before us
under the KVSS in view of the inclusion of Francis Joseph's income for the
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T.C.A.No.664 of 2019
relevant year 1994-95 in the hands of the assessee before us. All the above
facts will clearly show that there is no error in the order passed by the
Tribunal.
11.Accordingly, the appeal stands dismissed and the substantial
questions of law are answered against the Revenue. No costs.
(T.S.S., J.) (R.N.M., J.)
23.02.2021
Index: Yes/ No
Speaking Order : Yes/ No
abr
To
The Income Tax Appellate Tribunal 'B' Bench, Chennai.
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T.C.A.No.664 of 2019
T.S.Sivagnanam, J.
and
R.N.Manjula, J.
(abr)
T.C.A.No.664 of 2019
23.02.2021
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