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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER
PER S.S. VISWANETHRA RAVI, JM :
This appeal by the assessee against the order dated 28-11-2007 passed by the Commissioner of Income Tax (Appeals)-II, Pune [„CIT(A)‟] for assessment year 2004-05.
We find this appeal was filed with a delay of 2937 days. The ld. AR contended that this Tribunal condoned the said delay with a condition subject to payment of cost of Rs.20,000/- and accordingly, the assessee paid the said amount on 16-01-2018. The ld. AR placed on record on-line receipt showing payment of cost. Therefore, in view of the same, we proceed to hear the main appeal on merits.
Shri Prayag Jha, the ld. AR submits that the assessee is not interested to prosecute ground No. 1 and prayed to dismiss the same as not pressed. Accordingly, the ground No. 1 raised by the assessee is dismissed as not pressed.
Ground Nos. 2 and 3 raised by the assessee challenging the action of CIT(A) in confirming the order of AO on account of benefit under Sales Tax is not eligible for deduction u/s. 80IA(i) of the Act.
Heard both parties and perused the material available on record. We find that this issue was decided by this Tribunal against assessee in assessee‟s own case vide its order dated 22-04-2019 passed in for A.Y. 2003-04 wherein the assessee raised similar issue challenging the action of CIT(A) in holding that the Sales Tax benefit is not eligible for claiming deduction u/s. 80IA(i) of the Act. This Tribunal by placing reliance on the order dated 07-09-2018 in assessee‟s own case for A.Ys. 2006-07 to 2008-09 dismissed grounds raised by the assessee in challenging the action of CIT(A) in confirming the order of AO in denying deduction u/s. 80IA of the Act in respect of Sales Tax benefit is not eligible business income u/s. 80IA of the Act. We find the facts and circumstances in the year under consideration are similar and identical to the facts and circumstances in A.Y. 2003-04. Therefore, ground Nos. 2 and 3 raised by the assessee fails and are dismissed.
Ground Nos. 4 to 6 raised by the assessee challenging the action of CIT(A) in confirming the order of AO in terms of amendment brought in sub-section (2) of section 80IA of the Act w.e.f. 01-04-2000 in the facts and circumstances of the case.
Heard both parties and perused the material available on record. The ld. AR placed on record the consolidated order dated 10-04-2015 in & 2226/PN/2013 for A.Ys. 2004-05 & 2005-06 wherein we note that in para No. 27, this Tribunal held the issue is covered in favour of the assessee by order dated 31-10-2014 for A.Y. 2008-09 in assessee‟s own case and held that where the losses have been adjusted against the assessable income other than the profits of the industrial undertaking, then the said losses could not be availed to be adjusted against the income arising in the year in which the assessee had shown profits from the said industrial undertaking. The relevant portion from para Nos. 27 to 30 are reproduced here-in-below for ready reference : “27. The learned Authorized Representative for the assessee at the outset pointed out that this issue is squarely covered by the order of Tribunal in assessee‟s own case in ITA No.2227/PN/2013 relating to assessment year 2008- 09, wherein the Tribunal vide order dated 31.10.2014 had held the assessee to be entitled to the claim of deduction under section 80IA of the Act at the exercise of an option of 10 consecutive years. Further, the Tribunal also had held that where the losses have been adjusted against the assessable income other than the profits of the industrial undertaking, then the said losses could not be availed to be adjusted against the income arising in the year in which the assessee had shown profits from the said industrial undertaking. 28. The learned Departmental Representative for the Revenue placed reliance on the order of CIT(A). 29. We have heard the rival contentions and perused the record. We find that both the issues raised vide grounds of appeal
Nos.3 to 5 were considered by the Tribunal in assessee‟s own case and it was held as under:-
7. We have heard the rival contentions and perused the record. We find that the issue arising in the present appeal in relation to the provisions of section 80-IA(5) of the Act. Similar issue arose before the Tribunal in the case of Shri Sangram Patil vs. ITO in ITA No.177 & 178/PN/2011 relating to assessment year 2006-07 & 2007-08 vide dated 12.12.2012. The Tribunal considered the provisions of section 80-IA(5) of the Act and observed as under :-
5. The bone of contention between the assessee and the Revenue is with regard to the provisions of section 80-IA(5) of the Act. Section 80- IA(5) of the Act creates a fiction that for the purpose of computing deduction u/s 80-IA of the Act, it was to be presumed that the eligible unit was only the source of income of the assessee during the previous year relevant to initial assessment year and also to every subsequent year upto and including the assessment year for which the determination is to be made.”
8. The Tribunal further referred to the ratio laid down by another Bench of the Tribunal in the case of Serum International Ltd. vs. Addl.CIT (supra) in para 6 and observed as under :- “6. Before us, the learned counsel for the assessee has submitted that the Pune Bench of the Tribunal in the case of Serum International Ltd. Vs. Addl. CIT Range 6, Pune in to 292/PN/2010 for A.Y. 2004-05 to 2006-07 vide order dated 28-9- 2011 has considered an identical controversy and after following the decision of the Hon‟ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (2010) 38 DTR (Mad) 57 decided the issue in favour of the assessee. Following discussion in the order of the Tribunal is relevant in this regard:- “11. The issue raised before the bench is as to whether in view of the provisions of Sec. 80IA(5) of the I.T. Act 1961, the profit from the eligible business for the purpose of deduction u/s. 80IA of the Act has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other non-eligible business income in earlier years. The submission of the Ld A.R. remained that on the wind mills set up in the previous year relevant to A.Y. 2002-03, the assessee had claimed depreciation at the rate of 100% thereon i.e. Rs. 3.54 Crores, which was fully set off against the another income in the said A.Y. 2002-03 itself. In the A.Y. 2004-05, the assessee had positive income from the said generation activity and there were no brought forward losses/ unabsorbed depreciation of the preceding year, which had remained to be set off in the A.Y. 2004-05. The A.O., notionally brought forward unabsorbed depreciation for the A.Y. 2003-04 to the impugned A.Y. 2004-05 and denied the claim for deduction made by the assessee u/s. 80IA in respect of the profit earned by it in A.Y. 2004-05. The Ld. A.R. submitted that sub-section (2) of Section 80IA provides an option to the assessee to choose 10 consecutive A.Ys. out of 15 years for claiming the deduction. He submitted that the term initial year in sub-section (5) of 80IA is not defined and is used in contradiction to the words “beginning from the year” used in sub-section (2). He submitted that the assessee chose A.Y. 2004-05 as initial A.Y being the first year in which it claimed deduction u/s. 80IA and therefore, losses/depreciation beginning from A.Y. 2004-05 alone could only be brought forward and set off. Depreciation of the preceding A.Y. 2002-03 could not have been notionally brought forward and set off against profit for the A.Y. 2004- 05. The Ld. A.R. placed heavy reliance on the decision of Hon‟ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). He submitted that the decision of Hon‟ble Madras High Court will prevail upon the decision of the Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares and Finance (P) Ltd. (Supra) followed by the Pune Bench of the Tribunal in its recent decision in the case of Prima Paper Engg (P) Ltd. Vs. ITO (Supra) and there the assessee did not dispute the fact that the authorities below have decided the issue following the decision of Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares.. The Ld. A.R. pointed out that decision of Hon‟ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra) was not cited before the Pune Bench in the case of Prima Paper Engg (P) Ltd. Vs. ITO (Supra). The Ld. A.R. has also cited the decision of Pune Bench of the Tribunal in the case of ACIT Vs. Aurangabad Holiday Resorts (P) Ltd., (Supra) holding that even a decision of nonjurisdictional High Court is a binding precedent for the Tribunal until a contrary decision is given by any other competent High Court. Similar view has been expressed by the Hon‟ble Bombay High Court in the case of Commissioner of Central Excise Vs. M/s. Valson Dyeing, Bleaching and Printing Works (Supra).
The contention of the Ld. D.R. on the other hand remained that deduction u/s. 801 and 801A covered inter alia, industrial undertakings. The power generation units found a specific mention for the first time w.e.f. 1.4.1993. In all the years from 1.4.1981 to 31 to 31st March 2000 in both u/s. 80I and 80IA, the term initial A.Y was defined and meant the first A.Y. relevant to the previous year in which the eligible unit commences production/power generation. Only from 1.4.2000, when Sections 80IA was replaced with Section 80IA and 80IB, the definition of “initial A.Y.” did not find a mention. But nowhere, in the Parliament Speech of memorandum explaining the Finance Bill has any mention that there was any intention to ignore losses and depreciation from first year of power generation/production and that such losses till first year of claim of deduction is to be ignored. The view canvassed by the assessee does not find any support. He submitted that there is no discernible change in law or intention of parliament w.e.f. 1.4.2000. The Ld. D.R. submitted that the decision of Special Bench of the Tribunal in the case of Goldmine Shares and Finance (P) Ltd. (Supra) is fully applicable in the present case. He pointed out that in its recent decision dt. 21st January 2011, the Hyderabad Bench of the Tribunal in the case of Hyderabad Chemical Supplies Ltd. Vs. ACIT (Supra) has also decided an identical decision in favour of the Revenue following the decision of Special Bench of the Tribunal in the case of ACIT Vs. Goldman Shares & Finance (P) Ltd. (Supra). He submitted that the Hyderabad Bench of the Tribunal while deciding the issue has also discussed the decision of Hon‟ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). The Ld. D.R. submitted that even in the case of Liberty India Vs. CIT (Supra), the Hon‟ble Supreme Court has been pleased to explain the intention of Parliament and scope of deduction u/s. 80IA and 80IB of the Act. The Hon‟ble Supreme Court has been pleased to hold that such profits are to be computed as if such eligible business is the only source of income of the assessee. The devices adopted to reduce or inflate the profit of eligible business has got to be rejected in view of the overriding provisions of Sub-section (5) of Section 80IA of the Act.
Having been considered the above submissions, we find that the issue raised in Ground No. 1 as to what would be the initial A.Y for the purposes of Section 80IA(5) of the Act has been decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT (Supra). In that case after discussing the issue in detail, the Tribunal has come to the conclusion that the initial „A.Y‟ for the purpose of claiming deduction u/s. 80IA was the first year in which the assessee claimed the deduction u/s. 80IA (1) after exercising his option as per the provisions of 80IA (2) of the Act. It was held that the Ld CIT(A) has erred in holding that the initial A.Y for the purposes of Section 80IA(2) r.w.s. 80IA (5) was the year in which the assessee started generating electricity from the wind mill activity. We also find that the issue raised in Ground No. 2 regarding the eligibility of the assessee to claim deduction u/s. 80IA undiminished by unabsorbed losses and depreciation also set off in earlier years against the other income, is fully covered by the decision of Hon‟ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P)
Ltd Vs. ACIT (Supra) holding that as per Sub-section (5) of Section 80IA, profits are to be computed as if such eligible business is the only source of income of the assessee. When the assessee exercises the option, only the losses of the years beginning from the initial A.Y. are to be brought forward and not the losses of the earlier years which have been already set off against the income of the assessee. The Hon‟ble Madras High Court has been further pleased to hold that revenue cannot notionally bring forward any loss of earlier years which had already been set off against the other income of assessee and set off against the correct income of the eligible business. Fiction created by Sub-section (5) of Section 80IA does not contemplate such notional set off, held the Hon‟ble High Court. The Hon‟ble Madras High Court in that decision has also referred the decision of Hon‟ble Supreme Court in the case of Liberty India Vs. CIT (Supra) and the decision of Special Bench of the Tribunal in the case of Goldman Shares & Finance (P) Ltd. (Supra). There is no dispute that even a decision of non-jurisdictional High Court is a binding precedent for the Tribunal until a contrary decision is given by any other competent High Court. In this regard, we find strength from the recent decision of Hon‟ble jurisdictional Bombay High Court in the case of Commissioner of Central Excise Vs. Valson Dyeing, Bleaching and Printing Works (Supra) wherein the Hon‟ble Bombay High Court has been pleased to hold in a case of excise matter that Tribunal is bound by the decision of High Court , even of a different State, so long as there is no contrary decision of any other High Court. The Hon‟ble Bombay High Court has been pleased to hold further that the Tribunal had no option but to follow the judgment of the Madras High Court. An authority like an Income Tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. We thus respectfully following the ratio laid down by the Hon‟ble jurisdictional High Court in the case of Commissioner of Central Excise Vs. Vakson Dyeing, Bleaching and Printing Works (Supra) hold that the Tribunal is bound by the decision of the Hon‟ble Madras High Court on an identical issue in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). We thus respectfully following the decision taken by the Hon‟ble Madras High Court in that case on an identical issue under almost similar facts, hold that when the assessee exercising the option, only the losses of the year beginning from the initial A.Y. are to be brought forward and not the losses of earlier year which have been already set off against the other income of the assessee. The revenue cannot notionally bring forward any loss of earlier years which has already been set off against any other income of the assessee and set off the same against the current income of the eligible business. We thus set aside the orders of the authorities below and direct the A.O to allow the claimed deduction u/s. 80IA without bringing the notionally brought forward any loss or depreciation of earlier years which has already been set off against other income of the assessee. The decision of Pune Bench of the Tribunal in the case of Prima Paper Engineering P.Ltd. Vs. ITO (Supra) cited by the Ld. DR is also not helpful to the revenue since firstly the decision of the Hon‟ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (Supra) on the issue was not cited before the Bench and secondly the ld. AR fairly agreed that the issue raised was covered against the assessee by the decision of Special Bench in the case of ACIT Vs. Goldmine Shares & Finance (P) Ltd. (Supra) followed by the authorities below. The ld. AR therein thus contended that though the issue may be decided against the assessee in view of the Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares & Financial (P) Ltd., but it should not be construed as acquiescence from the side of the assessee as the legalposition on the subject is yet not settled. The Ground No. 2 is thus decided in favour of the assessee.”
The Tribunal thus held as under :- “7. Ostensibly, in the case of Serum International Ltd. (supra), the Tribunal has considered an identical controversy. On behalf of the assessee, the judgment of Hon‟ble Madras High court in the case of Velaydhaswamy Spinning Mills (P) Ltd. (supra) was being cited whereas the Revenue had relied upon the decision of Special Bench of the Tribunal in the case of Asstt. CIT Vs. Goldmine Shares and Finance (P) Ltd. (2008) 116 TTJ (Ahd) (SB) 705 to the contrary. The Tribunal noticed that having regard to the decision of the Hon‟ble Madras High court the issue was to be decided accordingly and not on the basis of decision of Special Bench of the Tribunal in the case of Goldmine Shares and Finance (P) Ltd. (supra) which was to the contrary. In this context, the Tribunal came to the conclusion that when the assessee exercised option identifying ten consecutive years as contained in sub-section (2) of section 80-IA of the Act, only the losses of the year beginning from such initial assessment year are to be brought forward and set-off while applying the provisions of section 80-IA(5) of the Act and not the losses of earlier years which otherwise were set-off against other income of the assessee.
At the time of hearing, the learned DR has not brought to our notice any decision of a High Court contrary to that of the Hon‟ble Madras High Court in the case of Velaydhaswamy Spinning Mills (P) Ltd. (supra) on the issue in question. Therefore, we find that the controversy before us is no longer res integra and is in fact covered in favour of the assessee by the decision of Pune Bench of the Tribunal in the case of Serum International Ld. (supra) which has been decided following the decision of the Hon‟ble Madras High Court in the case of Velaydhaswamy Spinning Mills (P) Ltd. (supra).”
10. The facts and circumstances of the present case are identical to the facts before the Tribunal in the case of Shri Sangram Patil vs. ITO (supra). The assessee during the year under consideration had claimed deduction under section 80-IA(5) of the Act. The Assessing Officer had tabulated the notional losses from year to year at page 9 of the assessment order. However, the said losses were being adjusted against the other income arising to the assessee from time to time. Where the losses have already been adjusted against assessable income in the preceding year, the said losses cannot be said to be available to be adjusted against the income of the assessee arising in the year under consideration.
The second aspect of the issue is the year from which the said losses are to be considered. As held by the Tribunal in the case of Shri Sangram Patil vs. ITO (supra) that, where the assessee exercised the option of the ten consecutive years as contained in section 80-IA of the Act, only the losses beginning from such initial assessment year are to be brought forward and set-off while applying the provisions of section 80- IA(5) of the Act and not the losses of the earlier years, which have already been set-off against the other income of the assessee. Accordingly, we hold that the assessee is entitled to claim of deduction under section 80- IA(5) of the Act. The grounds of appeal
raised by the Revenues are dismissed.”
30. Following the same parity of reasoning, we hold that where the assessee has exercised the option of 10 consecutive years as contained in section 80IA of the Act, then the losses beginning from such initial year were brought forward and set off while applying the provisions of section 80IA(5) of the Act and not the losses of earlier years, which had been adjusted against other income of the assessee in the relevant year itself. The grounds of appeal Nos.3 to 5 are thus, allowed.”
8. In the light of decision of this Tribunal in assessee‟s own case, we allow ground Nos. 4 to 6 raised by the assessee.
9. Ground No. 7 is general in nature, hence, requires no adjudication and is dismissed.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 29th January, 2020.
Sd/- Sd/- (Anil Chaturvedi) (S.S. Viswanethra Ravi) JUDICIAL MEMBER ACCOUNTANT MEMBER ऩुणे / Pune; ददनाांक / Dated : 29th January, 2020 RK आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-II, Pune 3. आयकर आयुक्त / The CIT-III, Pune 4. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रतत// True copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune