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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI DR. A.L. SAINI
PER SAKTIJIT DEY, J.M.
Aforesaid appeals by the Revenue are against two separate orders passed by the learned Commissioner (Appeals)–50, Mumbai, pertaining to assessment years 2012–13 and 2013–14.
./2016 Revenue’s Appeal – A.Y. 2012–13
The Revenue has raised three grounds. Besides, it has also raised an additional ground corresponding to the issue raised in ground no.2. Therefore, the additional ground will be taken up along with ground no.2.
In ground no.1, the Revenue has challenged allowance of assessee’s claim of deduction under section 80IA of the Income Tax Act, 1961 (for short “the Act”).
Brief facts are, the assessee company is engaged in manufacture of transformer and lubricating oil as well as generation of electricity through wind mills. For the assessment year under dispute, the assessee filed its return of income on 27th September 2012, declaring total income of ` 135,95,65,090 after claiming deduction of ` 12,84,01,149 under section 80IA of the Act in respect of wind mill
3 M/s. Savita Oil Technologies Ltd. units. The Assessing Officer while examining assessee’s claim of deduction under section 80IA of the Act was of the view that the assessee has not correctly worked out the profit of the wind mill unit. The Assessing Officer observed that as per section 80IA(5) of the Act, the losses of the years prior to the initial assessment year were required to be taken into consideration for working out the profit eligible for deduction under section 80IA(4)(iv) of the Act. Accordingly, the Assessing Officer worked out the profit of the wind mill unit after reducing the losses of the earlier years which resulted in determination of deduction under section 80IA of the Act at ` 3,58,09,143, as against assessee’s claim of ` 12,84,01,149. The assessee challenged the part disallowance of the deduction claimed before the first appellate authority.
The learned Commissioner (Appeals) taking note of the fact that while deciding identical issue in assessee’s appeal in assessment year 2011–12, the Tribunal has followed the decision of the Hon'ble Madras High Court in Valayudhaswamy Spinning Mills Pvt. Ltd. v/s ACIT, [2012] 340 ITR 477 (Mad.) and allowed assessee’s claim of deduction under section 80IA of the Act without reducing the loss prior to the initial assessment year, followed the same and allowed assessee’s
4 M/s. Savita Oil Technologies Ltd. claim of deduction under section 80IA of the Act in the impugned assessment year.
The learned Departmental Representative, though, agreed that the issue has been decided in favour of the assessee by the Tribunal in the preceding assessment year, however, he relied upon the observations of the Assessing Officer.
The learned Authorised Representative strongly supporting the order of the learned Commissioner (Appeals) submitted that the Tribunal while deciding identical issue in assessee’s own case for assessment year 2010–11 in ITA no.2986/Mum./2015, dated 28th August 2017, has disapproved the identical reasoning of the Assessing Officer and has upheld the order of the learned Commissioner (Appeals) in allowing assessee’s claim of deduction under section 80IA of the Act. He submitted, even, while deciding identical dispute in assessment year 2011–12, the Tribunal has upheld the decision of the learned Commissioner (Appeals) by dismissing the ground raised by the Revenue on this issue. Thus, he submitted, the order of the learned Commissioner (Appeals) deserves to be upheld.
We have considered rival submissions and perused materials on record. The learned Counsel appearing for the rival parties have 5 M/s. Savita Oil Technologies Ltd.
conceded before us that the issue has been decided in favour of the assessee by the Tribunal, Mumbai Bench, in assessee’s own case for assessment year 2010–11 and 2011–12. On a perusal of the order of the Co–ordinate Bench in ITA no.2986/Mum./2016, dated 28th August 2017, it is noticed that while deciding identical issue, the Bench has upheld the decision of the learned Commissioner (Appeals) in assessment year 2010–11 with the following observations:–
“6. Pertinently, Sec. 80IA of the Act, so far as is relevant for our purpose, prescribes for deduction of an amount equal to 100% of the profits and gains derived by an Undertaking or enterprise from an eligible business. Sub-section (2) of Sec. 80IA of the Act further prescribes that the 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 in the section. Sub-section (5) of Sec. 80IA of the Act, which is the bone of contention before us, prescribes the manner of determining the quantum of deduction with reference to the initial assessment year. The said section reads as under :- “80-IA(5) Notwithstanding anything contained in any other 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 sub-section for the assessment year immediately 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 section, the interpretation to the expression „initial assessment year‟ placed by the Assessing Officer is the year in which the eligible business/manufacturing activity had commenced operations. So however, the interpretation placed by the assessee is to the effect that the „initial assessment year‟
6 M/s. Savita Oil Technologies Ltd. refers to the year in which the assessee chooses to start claiming deduction as mandated in Subsection (2) of Sec. 80IA of the Act. In the context of the instant case, the Assessing Officer considered the losses incurred in the respective units in the years prior to the year in which assessee opted to start claiming deduction in order to arrive at the profits eligible for deduction. So however, as per the assessee, it is only the losses starting from the initial year, i.e. the first year of claim of deduction and thereafter, which are required to be taken into consideration for arriving at profits eligible for deduction. Factually speaking, there is no dispute that so far as losses considered by the Assessing Officer are concerned, they have otherwise been absorbed against other incomes of the assessee in the respective years. The CIT(A) has upheld the stand of the assessee by relying on the judgment of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. (supra) and even before us, no contrary decision of any High Court has been relied upon by the Revenue. Apart therefrom, we find that the stand of the Revenue is clearly in contrast to the decision taken by the CBDT in its Circular no. 1/2016 dated 15.2.2016. The following portion of the CBDT Circular is relevant :- “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 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 80IA 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 80IA. 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 80IA 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 subsection (5) of that section for which the Standing Counsels/D.R.s be suitably instructed.”
7 M/s. Savita Oil Technologies Ltd.
7. Quite clearly, as per the CBDT, the term „initial assessment year‟ used in Sec. 80IA(5) of the Act is to be understood to mean the first year opted for by the assessee for claiming deduction u/s 80IA of the Act. Considered in this light also, we find no error on the part of the CIT(A) in allowing the claim of the assessee. Further, it is pertinent to note that the CBDT has clarified that even the pending litigations on the allowability of deduction u/s 80IA of the Act should also not be pursued to the extent it relates to interpretation of the expression „initial assessment year‟ contained in Sec. 80IA(5) of the Act. Therefore, the prosecution of the aforesaid Ground of appeal by the Revenue before us is in direct conflict with the directions of the CBDT and, therefore, on this count also we find no merit in the ground raised by the Revenue. The same is hereby dismissed.”
9. Pertinently, while deciding identical issue again in assessee’s own case in assessment year 2011–12, vide ITA no.1730/Mum./2016, dated 16th February 2018, the Co–ordinate Bench has upheld the decision of the learned Commissioner (Appeals) accepting assessee’s claim of deduction u/s 80IA of the Act. There being no material difference in fact, following the consistent view of the Tribunal in assessee’s own case for preceding assessment years, as referred to above, we uphold the decision of the learned Commissioner (Appeals) on this issue by dismissing the ground raised.
10. In ground no.2, along with the additional ground, the Revenue has challenged the decision of the learned Commissioner (Appeals) in accepting assessee’s claim that the amount received from sale of carbon credit is in the nature of capital receipt, hence, not taxable.
8 M/s. Savita Oil Technologies Ltd.
Brief facts are, during the assessment proceedings, the Assessing Officer noticed that though the assessee has received an amount of ` 1,86,90,056, towards sale of carbon credit, however, it has not offered the said amount for taxation by claiming it as capital receipt. The Assessing Officer after calling upon the assessee to justify its claim and considering the submissions of the assessee ultimately held that the amount received by the assessee towards carbon credit is revenue in nature, hence, taxable. Accordingly, he added back the amount to the income of the assessee. Assessee challenged the addition before the first appellate authority.
The learned Commissioner (Appeals) following the decision of the Hon'ble Andhra Pradesh High Court in case of CIT v/s My Home Power Ltd., 365 ITR 82 (AP) accepted assessee’s claim of capital receipt and accordingly deleted the addition made by the Assessing Officer.
The learned Departmental Representative, though, fairly submitted that identical issue has been decided by the Tribunal in favour of the assessee in preceding assessment years, however, he relied upon the observations of the Assessing Officer.
The learned Authorised Representative strongly relying upon the observations of the learned Commissioner (Appeals) submitted that in 9 M/s. Savita Oil Technologies Ltd.
assessee’s own case for assessment year 2010–11 and 2011–12, the Tribunal has upheld the decision of the learned Commissioner (Appeals) holding that the amount received towards sale of carbon credit is capital in nature, hence, not taxable. In this context, he drew our attention to the relevant observations of the Tribunal.
We have considered rival submissions and perused materials on record. As could be seen from the facts on record, this is a recurring dispute between the parties from assessment year 2010–11 onwards. While deciding Revenue’s appeal, on identical issue in assessment year 2010–11, the Tribunal in ITA no.2986/Mum./2015, dated 28th August 2017, has held as under:–
Before us, although the Revenue has challenged the decision of CIT(A), but no decision contrary to that of the Hon'ble Andhra Pradesh High Court has been relied upon before us. Therefore, the decision of the Hon'ble Andhra Pradesh High Court relied upon by the CIT(A) is a binding decision in the absence of any other contrary decision of either the jurisdictional High Court or any other High Court. Therefore, we affirm the order of the CIT(A) on this aspect and Revenue fails on this ground.
Similar view was expressed again by the Tribunal while deciding Revenue’s appeal for assessment year 2011–12 in ITA no.1730/Mum./ 2016, dated 16th February 2018. Notably, the only decision of High Court available on the disputed issue is that of Hon'ble Andhra Pradesh High Court in My Home Power Ltd. (supra). Therefore, respectfully
10 M/s. Savita Oil Technologies Ltd. following the decision of the Hon'ble Andhra Pradesh High Court (supra) and the decisions of the Co–ordinate Benches in assessee’s own case for preceding assessment years, we uphold the decision of the learned Commissioner (Appeals) on the issue by dismissing the grounds raised.
In ground no.3, the Revenue has challenged deletion of addition made of ` 6,16,338, under section 14A r/w rule 8D(2)(ii).
Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has earned exempt income of ` 32,95,744, whereas, it has disallowed an amount of ` 4,60,581, under section 14A towards expenditure attributable to earning of exempt income called upon the assessee to explain why interest expenditure should not be disallowed in terms of rule 8D(2)(ii). Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the objections of the assessee disallowed an amount of ` 6,16,338 under rule 8D(2)(ii). The assessee challenged the disallowance before the first appellate authority.
In course of hearing before the learned Commissioner (Appeals), it was submitted that assessee’s own interest free surplus fund far exceed the investment made in exempt income yielding assets. Thus,
11 M/s. Savita Oil Technologies Ltd. no disallowance of interest expenditure under rule 8D(2)(ii) can be made. The learned Commissioner (Appeals) after examining the facts on record having found that interest free fund available with the assessee by way of reserve and surplus far exceeds the total investment made in shares and mutual fund, followed the decision of the Hon'ble Jurisdictional High Court in CIT v/s HDFC Bank Ltd., 107 DTR 140 (Bom.) and deleted the disallowance made by the Assessing Officer under rule 8D(2)(ii).
The learned Departmental Representative relied upon the observations of the Assessing Officer.
The learned Authorised Representative relying upon the observations of the learned Commissioner (Appeals) submitted that since interest free surplus fund available with the assessee is far in excess of the investment made in shares and mutual fund, no disallowance under section 14A r/w rule 8D(2)(ii) can be made. In this context, he relied upon the decision of the Hon'ble Jurisdictional High Court in HDFC Bank Ltd. (supra).
We have considered rival submissions and perused materials on record. It is evident from the impugned order of the learned Commissioner (Appeals) that the assessee was having interest free
12 M/s. Savita Oil Technologies Ltd. surplus fund by way of reserve and surplus which far exceeded the investments made in exempt income yielding asset. The aforesaid factual position has not been controverted by the learned Departmental Representative before us. That being the case, the ratio laid down by the Hon'ble Jurisdictional High Court in HDFC Bank Ltd. (supra) squarely applies to assessee’s case. Moreover, on identical facts the Tribunal in assessee’s own case in assessment year 2010–11 and 2011–12, have deleted the disallowance made under rule 8D(2)(ii). In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals) on this issue. Ground raised is dismissed.
In the result, Revenue’s appeal is dismissed. ./2016 Revennue’s Appeal – A.Y. 2013–14
The only ground raised by the Revenue is against allowance of assessee’s claim of deduction under section 80IA of the Act.
The learned Counsels appearing for rival parties have agreed before us that this issue is identical to the issue raised in ground no.1 of ITA no.5318/Mum./2016. Considering the aforesaid submissions of the parties and in consonance with our finding in respect of ground no.1 of ITA no.5318/Mum./2016, decided in the earlier part of the 13 M/s. Savita Oil Technologies Ltd.
order, we uphold the decision of the learned Commissioner (Appeals) on the issue by dismissing the ground raised.
In the result, Revenue’s appeal is dismissed.
To sum up, both the appeals of the Revenue are dismissed. Order pronounced in the open Court on 29.06.2018