Madras High Court
M/S.Chettinad Quartz Products Limited vs The Assistant Commissioner Of Income ... on 6 August, 2024
Author: C.Saravanan
Bench: R.Suresh Kumar, C.Saravanan
T.C.A.No.128 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 06.08.2024
CORAM
THE HONOURABLE MR.JUSTICE R.SURESH KUMAR
and
THE HONOURABLE MR.JUSTICE C.SARAVANAN
T.C.A.No.128 of 2015
M/s.Chettinad Quartz Products Limited,
(Now merged with M/s.Chettinad Morimura
Semi Conductor Material Private Limited),
37, Old Mahaballipuram Road,
Khazhipattur Village, Padur PO,,
Kancheepuram District - 603 103.
PAN:AAACC2461Q ... Appellant
-Vs-
The Assistant Commissioner of Income Tax,
Company Circle-I(3),
Chennai - 600 034. ... Respondent
PRAYER : Tax Case Appeal filed under Section 260 A of the Income Tax Act,
1961, against the order of the Income Tax Appellate Tribunal 'A' Bench,
chennai dated 16.10.2014 in I.T.A.No.430/Mds/2014 for the assessment year
2008-09.
For Appellant : Mr.A.S.Sriraman
For Respondent : Mr.T.Ravikumar
Senior Standing Counsel
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1/9
T.C.A.No.128 of 2015
JUDGMENT
(Judgment of the Court was delivered by C.SARAVANAN,J.)
The appellant is before this Court aggrieved by the impugned order dated
16.10.2014 passed by the Income Tax Appellate Tribunal 'A' Bench, Chennai
for the assessment year 2008-09.
2. The dispute pertains to availability of benefit of deduction under
Section 10B of the Income Tax Act, 1961. The Appellate Tribunal had rejected
the claim of the appellant vide impugned order with the following observations:
"5. Heard both sides. Perused orders of lower
authorities and the decisions relied on. We find that the
issue in appeal has been decided by the co-ordinate
Bench of this Tribunal in the case of S.R.A.Systems
Ltd.(supra) following the decision of the Hon'ble
Supreme Court in the case of M/s.Himatsingka Seide
Ltd.(supra). The co-ordinate Bench while deciding the
issue held that unabsorbed depreciation has to be set
off before computing exemption allowable under
Section 10A of the Act observing as under:-
"7. The third issue in appeal relates to the
method of computation of deduction u/s.10A of
the Act. The assessee has claimed deduction u/s
10A before setting off of unabsorbed
depreciation and brought forward losses. The
Id.AR of the assessee in order to fortify the stand
of assessee has placed reliance on the decision of
the Tribunal in assessee's appeal for the
A.Y.2005-06 and A.Y.2007-08 (supra). The Id.AR
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has also drawn support from the judgment of the
Hon'ble Karnataka High Court in the case of CIT
Vs.Yokogawa India Ltd. (supra). On the other
hand, the Id.DR has relied on the latest decision
of the Hon'ble Apex Court in the case of
M/s.Himatsingka Seide Ltd., Vs. CIT (supra). The
Hon'be Supreme Court of India dismissed the
appeal of the assessee and has upheld the
judgment of the Hon'ble Karnataka High Court.
The Hon'ble High Court has held that the
brought forward depreciation has to be adjusted
against the profits of the EOU before computing
the exemption allowable u/s.10B. The provisions
of Section 10A are pari materia with the
provisions of Section 10B of the Act. We find that
as far as unabsorbed depreciation is concerned,
the Hon'ble Supreme Court of India in the case of
M/s.Himatsingka Seide Ltd., Vs. CIT (supra), has
up-held the findings of the Hon'ble Karnataka
High Court and as such, un-absorbed
depreciation has to be set-off before computing
the exemption allowable u/s.10A. In respect of
setting-off of the brought forward losses, the
decision of the Hon'ble Karnataka High Court in
the case of CIT Vs. Yokogawa India Ltd. (supra)
still holds good. Accordingly, the assessee can
claim deduction u/s.10A before setting off of
brought forward losses. In view of the above, this
ground of appeal of the assessee is partly
allowed.
6. Respectfully following the above decision of the
Tribunal, we allow the grounds raised by the Revenue.
7. In the result, appeal of the Revenue is allowed."
3. The learned counsel for the appellant has relied on the following
decision of this Court :-
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(i) M/s.Comstar Automative Techonologies Private
Limited (formerly known as Visteon Powertrain
Control Systems India Private Limited,
Keelakaranai Village, Malrosapuram Post,
Maraimalai Nagar, Chenalpattu District - 603
204) Vs. The Deputy Commissioner of Income
Tax, Company Circle-I (3), 121, Nungambakkam
High Road, Chennai - 600 034 in T.C.A.No.228 of
2011;
(ii) Commissioner of Income Tax, Chennai Vs. SRA
Systems Limited in (2021) 129 taxmann.com 118
(Madras);
(iii) CIT vs. S.R.A.Systems Ltd T.C.A.No.975 of 2010
4. In M/s.Comstar Automative Techonologies Private Limited vs.
The Deputy Commissioner of Income Tax referred to supra, it was held as
under:-
27.Therefore the law has been settled by the
said decision of the Hon-ble Apex Court, where in
clear terms, it has been held that, the deductions
either under Section 10A or 10B would be made
while computing the gross total income of the
eligible undertaking (like the Assessee) under
Chapter IV of the Act and not at the stage of
computation of the total income under Chapter VI of
the Act.
28.Here is the case in hand, the total income was
first arrived at by the Revenue through the
Assessing Officer in the Assessment order by
computing the total income by way of brought
forward or carry forward the depreciation
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allowance of the earlier Assessment years and set
off the unabsorbed depreciation first and making
the return Nil, thereby leaving the Assessee in a
position where it could not claim an deduction
under Section 10B as there was no income after set
off of carry forward depreciation and unabsorbed
depreciation from earlier years. 29.This method of
computing the income in the present case made by
the Revenue is totally against the said law as has
been declared by the Hon-ble Apex Court in the
aforesaid decision in Commissioner of Income~tax
v. Yokogawa India Ltd., (cited supra).
30.Therefore we have no hesitation to hold that, the
decision of the ITAT, which is impugned herein,
would not stand in the legal scrutiny, in view of the
law having been declared by the Hon-ble Apex
Court. Therefore, we are of the view that, the
Substantial Question of Law raised in this Appeal is
covered by the said decision, therefore, it can be
answered accordingly
5. In the case of Commissioner of Income Tax, Chennai Vs. SRA
Systems Limited in (2021) 129 taxmann.com 118 (Madras), the Court upheld
the order passed by the Income Tax Appellate Tribunal dated 16.05.2008 in
I.T.A.No.2255/Mds/06 that the assessee would be entitled to deduction under
Section 10A and disallowance made by the Assessing Officer was not correct.
The Court followed its decision in M/s.Comstar Automative Techonologies
Private Limited referred to supra. In Commissioner of Income Tax, Chennai
Vs. SRA Systems Limited reads as under : -
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".....
7. The order passed by the Income Tax Appellate
Tribunal was challenged by the Department in
T.C.A.No.1916 of 2008 and the Hon'ble Division
Bench of this Court by its judgment dated
26.10.2018 confirmed the order of the Income Tax
Appellate Tribunal dated 16.05.2008 made in
I.T.A.No.2255/Mds/06 for the Assessment year
2002-03 and dismissed the appeal. In view of the
judgment of the Hon'ble Division Bench of this
Court, it is clear that the applicability of Clauses (ii)
and (iii) of Sub Clause (2) to Section 10B of the Act,
the impugned order passed by the Income Tax
Appellate Tribunal is proper. In view of the order
passed by the Income Tax Appellate Tribunal dated
16.05.2008 in I.T.A.No.2255/Mds/06 and the
judgment passed by the Hon'ble Division Bench of
this Court on 26.10.2018 in Tax Case Appeal
No.1916 of 2008, the assessee Company would be
entitled to deduction under Section 10A and
disallowance made by the Assessing Officer was not
correct. Since the order passed under Section 263
itself has been set aside, the cause of action for re-
assessment does not survive.
4. Mr.R.Sivaraman, learned counsel appearing for the
respondent~assessee submitted that following the
judgments referred above, the questions of law may
be decided in favour of the assessee and the appeal
may be dismissed.
5. In view of the submissions made by the learned
counsel on either side, following the decision of this
court dated 02.03.2021 made in T.C.A.No.975 of
2010 [cited supra], the Questions of Law are
decided against the Revenue and in favour of the
assessee. The appeal is liable to be dismissed.
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Accordingly, the Tax Case Appeal is dismissed. No
costs."
6. Both the learned counsel for the appellant and also learned counsel for
the respondent have submitted that as on date, the issue stands covered in
favour of the appellant in terms of above decision.
7. However, the learned Senior Standing Counsel appearing for the
respondent Department would submit that several appeals are pending in a
batch of appeals before the Hon'ble Supreme Court in Civil Appeal Nos.9175
of 2018 etc., batch in the case of Commissioner of Income Tax Vs.
M/s.Hewlett Packard Global Soft Limited. He further submitted that in terms
of the decision of the Hon'ble Supreme Court in the case of Kunayammed and
Others Vs. State of Kerala and another reported in 2000 (6) SCC 359, it
cannot be said that the issue has attained finality.
8. In our considered view, since the issue is covered in favour of the
appellant and considering the fact that the similar fact was decided in favour of
the appellant by the Income Tax Appellate Tribunal 'B' Bench, Chennai vide
order dated 23.07.2012, which is the appellant's own case relating to the
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assessment year 2007-08 in I.T.A.No.1180/Mds/2012, we are inclined to
answer the appeal in favour of the appellant.
9. Accordingly, this Tax Case Appeal is disposed of. No costs.
(R.S.K., J.) (C.S.N.,
J.)
06.08.2024
NCC : Yes / No
Index : Yes / No
Speaking Order : Yes / No
vji
To
The Assistant Commissioner of Income Tax,
Company Circle-I(3),
Chennai - 600 034.
https://www.mhc.tn.gov.in/judis
R.SURESH KUMAR, J.
and
C.SARAVANAN, J.
vji/kkd
06.08.2024
https://www.mhc.tn.gov.in/judis
