ACIT vs Hyderabad Chemical Products… | ITAT Hyderabad 2019

Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD

Before: SHRI D.KARUNAKARA RAO & SHRI V.DURGA RAO

PER D.KARUNAKARA RAO, A.M. :

These appeals by the Revenue are directed against the orders of the Commissioner of Income Tax (Appeals)-2, Hyderabad, for the AYs.2013-14 & 2014-15 respectively. Since the issue involved in these appeals is common and identical, except the amounts mentioned therein, these appeals were heard together and are being disposed-of by way of this common order.

For the sake of convenience, the appeal of Revenue for the AY.2013-14 is discussed hereunder in detail.

Brief facts of the case are that, the assessee is a company, engaged in the business of manufacturing pesticides and power

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generation (Wind Power). For the AY.2013-14, the assessee filed its return of income on 28-09-2013, admitting income of Rs.7,74,62,750/-, under the normal provisions, after claiming deduction u/s.80-IA of the Income Tax Act [Act] amounting to Rs.2,47,19,047/- in respect of its wind mill projects. The case was selected for scrutiny and deduction claimed u/s.80-IA was rejected and added back. Further disallowance of weighted deduction of Rs.3,45,860/- was made in the absence of Form 3CL. Finally, the Assessing Officer (AO) completed the assessment u/s.143(3) of the Act with total assessed income of Rs.10,25,27,660/-.

3.1. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).

3.2. Considering the submissions made by the assessee, Ld.CIT(A), following the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.1033/Hyd/2015, dt.10- 06-2016 (AY.2008-09), allowed the appeal of assessee partly, stating as under:

“6. The Decision: It is seen from the facts that the A.O. disallowed Rs. 2,47,19,047/- being the total quantum of deduction claimed during the A.Y. 2013-14 pertaining to Phase-II, III & IV of the windmills. It was observed by the A.O. that the appellant did not set off unabsorbed losses of phase-II to IV against the current year profit of the windmill unit before claiming deduction u/s. 80IA as required under the provisions of Sec 80IA(5). The AR contended that these phases were having losses for assessment years earlier to initial assessment year and such losses were already adjusted against income from pesticide business of the appellant. The AO notionally brought forward such losses and adjusted against the income of respective unit in the current year.

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The Hon'ble ITAT, Bench B, Hyderabad in ITA No. 1033/Hyd/2015 dated 10.06.2016 for A.Y. 2008-09 in appellant's own case (and also in A.Y. 2010-11) held as under:-

“………………Thus it is clear that the initial assessment year is not the year of operation or commencement of business, as interpreted by the Assessing Officer, but it is the first year in which the appellant has opted to claim the deduction u/s. 80-IA. In view of this clarification of Board, which clinches the issue in favour of the appellant, and is binding on the Revenue authorities, we accept the contentions of the appellant in this behalf, and direct the assessing officer to allow the claim of the appellant, after verifying the records as to the initial assessment year in which the appellant for the first time has claimed the deduction u/s 80-IA of the act, and consider the income of the appellant from the eligible unit from that year alone on a standalone basis. Appellant's grounds on this issue are accordingly allowed"

6.1 Since the issue involved is similar for the year under appeal also, respectfully following the decision of the Hon'ble ITAT mentioned supra, I direct the AO allow to allow deduction of Rs. 27,57,794/- for Phase-II, Rs. 91,91,520/- for Phase-III and Rs. 1,27,69,734/- for Phase-IV claimed by the appellant u/s. 80-IA of the Act after verifying the records as to the initial assessment year in which the appellant for the first time has claimed the deduction u/ s 80-IA of the Act. As a result, the ground nos. 2,3,4 & 6 which are pertaining to deduction u/s.80-IA are allowed in favour of the appellant.

6.2 The ground no. 1 being general needs no adjudication.

6.3 The ground no.5 pertaining to disallowance of weighted deduction u/s.35(2AB) of Rs. 3,45,860/-. The appellant in the submissions has conceded that it was not eligible for the same, however stated that the same should be allowed u/s.35(1)(ii) before the A.O., who disallowed the same as being not claimed in the return of income.

The deduction u/s. 35(1)(ii) reads as under:

35(1)(ii)- [an amount equal to [one and [three-fourth]] times of any sum paid] to a [research association] which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research; [provided that such association, university, college or other institution for the purposes of this clause- (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and (B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government.

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The appellant has given three bills, one of the bills state that the fund of Rs. 82,500/- has not been received by the said institution, whereas the other two bills are acknowledgement of Rs. 1,50,000/- & Rs. 1,12,500/-. The appellant has not been able to produce any of the pre-requisite qualification of these institutions as prescribed in the section cited above, therefore, in absence of approval or the institution being specified in the notification, no weighted deduction u/s. 35(1)(ii) can be allowed. In view of the same, this ground no.5 is dismissed accordingly.

6.4. In the result, the appeal is partly allowed”.

Aggrieved, now the Revenue is in appeal before us, raising the following Ground:

“Whether, on the facts and circumstances of the case, the CIT(A) is correct in law in deleting the disallowance of the deduction u/s.80IA made by the AO on the basis of section 80IA(5) by setting off the notionally brought forward unabsorbed losses against the income while arriving at the profits to be allowed u/s.80IA ?”

We heard both the counsels and the material placed on record, along with the decision of the Co-ordinate Bench of ITAT in this regard. There is no dispute on the fact that the issue is identical in respect of the AYs.2011-12 and 2012-13, wherein the Co-ordinate Bench of ITAT in assessee’s own case in ITA Nos.728 & 729/Hyd/2017, dt.04-09-2017 has decided the issue in favour of the assessee. Since the Ld.CIT(A) also followed the decision of the Hon'ble ITAT in the assessee’s own case for the earlier years, we do not find any infirmity in the order passed by the Ld.CIT(A). Respectfully following the said decision of the Co-ordinate Bench of the ITAT, we, therefore, dismiss the appeal of Revenue for this assessment year.

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AY.2014-15: 6. Since the facts of the present case are identical to one as decided by us in ITA No.2374/Hyd/2018, AY.2013-14 (supra) and therefore our findings in the said appeal, mutatis mutandis, would apply to this appeal as well. Hence, this appeal of Revenue is also dismissed.

To sum-up, appeals of Revenue for both the assessment years are dismissed.

Order pronounced in the open court on 4th December, 2019

Sd/- Sd/- (V. DURGA RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 4th December, 2019 TNMM

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Copy to : 1. The Asst.Commissioner of Income Tax, Circle-2(2), Hyderabad.

M/s.Hyderabad Chemical Products Private Limited, A-24/25, APIE, Balanagar, Hyderabad.

CIT(Appeals)-2, Hyderabad.

Pr.CIT-2, Hyderabad.

D.R. ITAT, Hyderabad.

Guard File.

ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD vs. HYDERABAD CHEMICAL PRODUCTS PRIVATE LIMITED , HYDERABAD