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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY
The instant appeal has been filed by the assessee challenging the impugned order dated 21/09/2022, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016–17, emanating against the assessment order dated 18/12/2018, passed by the Asstt. CIT, Circle Amravati.
During the course of hearing, we find that there is a delay of 211 days in filing the present appeal before the Tribunal. The assessee has filed
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023 application for condonation of delay along with duly sworn Affidavit explaining the cause of delay. The relevant part of the Affidavit is reproduced as under:–
“1. I, Jaikumar Dhurat working as accountant in the office of Shri Sanjay Jadhao. I had downloaded order passed u/s 250 by National Faceless Appeal Centre (NFAC) in the case of Shri Sanjay Jadhao for Asstt. Year 2016-17 sometime in September 2022. Due to tax audit and return filing work, the order was mixed up with other files. Due to this reason it escaped my attention to 22 inform Shri Sanjay Jadhao and counsel for preparation of appeal. In first week of June 2023 it was noted by me that appeal has remained to be filed in the aforesaid case. The delay in filing the appeal is on account of my bonafide mistake and rush of work on my table. It is humbly prayed that delay on account of bonafide mistake be condoned.”
3. The learned Counsel for the assessee has referred to the decision of the Honb’ble Bombay High Court in the case of Anil Kumar Nehru Vs. ACIT, Circle 16(2), Mumbai, Income Tax Appeal (L) No.1448 of 2016 dated 13th January, 2017 wherein the Hon'ble High Court rejected the plea of the assessee of condonation of delay stating that reasons stated by the assessee is not bona- fide reason and therefore, delay cannot be condoned. Thereafter, the assessee therein preferred SLP before the Hon'ble Supreme Court in Civil Appeal No.(s) 11750/2018 (arising out of Special Leave Petition (C) No.(s) 15715/2017 in the case of Anil Kumar Nehru Vs. ACIT, Circle 16(2), Mumbai, wherein the Hon'ble Supreme Court has held that the High Court should not have taken such a technical view of dismissing the appeal in the instant case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year. For this reason, the Hon'ble Supreme Court set aside the order of the High Court, condoned the delay for filing the appeal and directed to decide the appeal on merits. The Ld. AR further referred to the decision in the case of DCIT Vs. Atlas Copco (India) Ltd. in & ITA No.1726/PUN/2014 & CO Nos.34
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023 & 35/PUN/2019 wherein the Tribunal has condoned the delay of 1965/1018 days by observing as follows:
"2. The Cross objection for the A.Y. 2008-09 is late by 1965 days. Similar cross objection filed by the assessee for the A.Y. 2009-10 is also late by 1018 days. The assessee has moved an application for condonation of delay. The Id. AR submitted that the assessee was not properly advised by its then counsel for espousing the legal issue now sought to be raised in the Cross objections, which is fundamental in nature. The ld. DR strongly opposed the condonation of delay.
It is seen that through the Cross objections, the assessee has raised a legal ground challenging the validity of assessment order passed u/s.143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter also called 'the Act'). The moot point is as to whether such a long delay deserves condonation. At this slage, it is relevant to note the judgment of the Hon'ble Bombay High Court in Vijay Vishin Meghani Vs. DCIT & Anr (2017) 398 ITR 250 (Bom) holding that none should be deprived of an adjudication on merits unless it is found that the litigant deliberately delayed the filing of appeal. Similar to the cases under consideration, in that case too, delay of 2984 days crept in due to improper legal advice. Relying on Concord of India Ins. Co. Limited VS Nirmala Devi (1979) 118 ITR 507 (SC), the Hon'ble jurisdictional High Court condoned the delay.
In yet another case in Anil Kumar Nehru and Another vs. ACIT (2017) 98 CCH 0469 BomHC, there was a delay of 1662 days in filing the appeal. Such a delay was not condoned by the Hon'ble High Court. In further appeal, condoning the delay, the Hon'ble Supreme Court in Anil Kumar Nehru vs. ACIT (2018) 103 CCH 0231 ISCC, held that: 'It is a matter of record that on the identical issue raised by the appellant in respect of earlier assessment, the appeal is pending before the High Court. In these circumstances, the High Court should not have taken such a technical view of dismissing the appeal in the instant. case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year. For this reason we set aside the order of the High Court; condone the delay for filing the appeal and direct to decide the appeal on merits.' 5. Turning to the facts of the instant cases, we find that the assessee has raised a legal ground through these Cross objections, which goes to the root of the matter. It would be seen infra that the said legal issue is squarely covered in the assessee's favour by several orders passed by the Tribunal including those by the Pune Benches. Under these circumstances, we condone the delay and take up the Cross objections for disposal on merits.”
The learned Departmental Representative submitted that he has no 4. objection if the delay is condoned.
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023 5. We have heard the rival submissions and gone through the application for condonation of delay in filing the appeal as well as the affidavit. We have also considered the judicial pronouncements placed before us. We find that reasons specified therein are justified and that the delay cannot be attributed to the deliberate conduct of the assessee neither through intention nor through action, Further, considering the judicial pronouncements as referred hereinabove, we condone the delay in filing the present appeal and proceed to dispose off the appeal on merits. However, a cost of ` 5,000, is levied upon the assessee for the delay in filing the petition, which should be paid to the account of The Nagpur High Court Legal Service Committee. In all fairness, the learned Counsel for the assessee agreed to this proposition.
The assessee has raised following ground of appeal:-
“1) The disallowance of claim of deduction u/s 801A(4) (iv) of I.T. Act 1961 at Rs. 10,11,059/- is unjustified, unwarranted and bad in law. 2) The learned A.O. erred in disallowing the claim of deduction u/s 801A(4)(iv) of I.T. Act 1961 at Rs.10,11,059/- by invoking the provision of section 801A(5) of I.T. Act 1961. 3) The learned A.O. ought to have accepted claim of deduction u/s 801A(4)(iv) of I.T. Act 1961 at Rs. 10,11,059/- as made in the return. 4) The learned CIT(A) erred in upholding the order passed by A.O. disallowing deduction as claimed u/s 801A(4)(iv) of I.T. Act 1961. 5) The learned CIT(A) erred in not following the judgement of Hon'ble Jurisdictional High Court in the case of CIT vs Hercules Hoists Ltd. in of 2014 even though copy of judgement was submitted in the course of appellate proceedings and is also available on the website of Hon'ble Jurisdictional High Court. 6) The learned CIT(A) erred in observing at para 5.2 that SLP has been granted by Hon'ble Apex Court in respect to order of Hon'ble Madras High Court in the case of Velayudhaswami Spinning Mills (P) Ltd. even though aforesaid SLP was dismissed vide order dated 05/09/2016 and was matter of record before CIT(A) in the form of submission of assessee reproduced in the appellate order.
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023 7. The assessee denies liability to be assessed to interest u/s 234D of Income Tax Act 1961. 8. Without prejudice the interest levied u/s 234D is unjustified and unwarranted.”
The facts of the case are culled out are, in the case of assessee assessment has been framed u/s 143(3) of the Act determining total income at Rs.1.89,90,190/- by Assistant Commissioner of Income tax, Amravati Circle, Amravati vide order dated 18/12/2018. The assessee is engaged in business of manufacturing and trading of D.R. Gin Machines and Generation and distributionof power. Assessee has filed return of income declaring total incomeat Rs.1,79,79,130/-. The assessee has claimed deduction at Rs. 10,11,059/- u/s 801A(4) (iv) of I.T. Act 1961. Assessee along with return of income has filed the audit report in Form 10CCB for claiming deduction u/s 80IA of I.T. Act 1961. In said report assessee has mentioned the date of commencement and operation of undertaking is 15/12/2011 and initial assessment year from which the deduction is claimed is Asstt. Year 2016-17. The assessee has started Windmill operation from Asstt. Year 2012-13. The losses from Asstt. Year 2012-13 to Asstt. Year 2014-15 were set off during relevant years in respect to other income and no losses remained to be carried forward. A.O. in assessment order has observed that net loss from eligible business of Windmill and Power Generation of assessee as on 31/03/2016 is Rs.3,22,74,323/- and held that deduction in respect of eligible business u/s 801A(4)(iv) cannot exceed the profit of the eligible unit as if it were the only source of income and by invoking the provisions of section 80IA(5) disallowed the claim of deduction under section 80IA(4)(iv) of the Act.
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023
Before the learned CIT(A), the assessee filed an elaborated written reply along with Form no.10CCB and relied upon certain judicial pronouncements which are noted by the learned CIT(A) in his order. The learned CIT(A), after considering the submissions of the assessee considering various judicial pronoucements as relied upon by the assessee, upheld the order of the Assessing Officer by observing as follows:-
“5.2 It can be seen that the above issues have nothing to do with the appellants case, and in fact support the case of the AO. The primary fact here is different, in as much as no deduction u/s 801A was claimed in the instant case. The copy of decision in of 2014 of the Bombay Hight Court is suspect, in as much the same is not available on the official website of the Hon'ble Court. The other case referred to by the appellant, the decision of HIGH COURT OF MADRAS in the case Velayudhaswamy Spinning Mills (P.) Ltd.v. Assistant Commissioner of Income-tax, [2012] 21 taxmann.com 95 (Madras)/[2012] 340 ITR 477 (Madras) is indeed more relevant. However, the department has challenged the decision in Supreme Court, and an SLP was granted by the Hon'ble Court.”
Aggrieved, the assessee is in further appeal before the Tribunal.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the said issue is now no longer res-integra in view of the judgment of the Hon’ble Madras High Court in a case of Velayudhaswamy Spinning Mills Pvt. Ltd. v/s ACIT, [2012] 340 ITR 477 (Mad.), the Court observed as under:-
"From a reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year Page | 6
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023 against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in sub- section does not contemplates to bring set off amount notionally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created.”
The said judgment of the Hon’ble Madras High Court has been confirmed by the Apex Court and as such the same has attained finality. Considering the above, we do not find any reason to uphold the impugned order passed by the learned CIT(A) in disallowing the deduction of the profit under section 80IA(5) of the Act without deducting the losses of the earlier years. Further, in the term “initial assessment year”, in section 80IA(5) OF THE Act, it has been clarified in Circular no.1 dated 15/02/2016, which is reproduced as under:-
“Departmental circular(s), etc.- Clarification of the term "initial assessment year" in section 80-LA(5) of the Income-tax Act, 1961. Section 80-1A of the Income-tax Act, 1961 ("Act"), as substituted by the Finance Act, 1999 (27 of 1999) with effect from 1-4-2000, provides for deduction of an amount equal to 100 per cent. of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in sub-section (4) of that section) in accordance with the prescribed provisions. Sub-section (2) of section 80-IA further provides that the aforesaid 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 therein. Sub-section (5) of section 80-IA further provides as under- "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 sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term "initial assessment year". It has been represented that some Assessing Officers are interpreting the term "initial assessment year" as the year in which the eligible business/manufacturing activity had commenced and are considering such first year of commencement/operation, etc., itself as the first year for granting Page | 7
Shri Sanjay Shankarrao Jadhao ITA no.198/Mum./2023 deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years. 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 under section 80-IA 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 under section 80-1A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfilment 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 under section 80-IA. 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 under section 80-IA 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 under section 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.Rs. be suitably instructed. The above be brought to the notice of all Assessing Officers concerned. [Circular No.1, dated 15-2-2016: (2016) 381 ITR 1-2 (St.).”
The reliance placed by the learned CIT(A) on Plastiblends India Ltd. v/s ACIT, [2017] 86 taxmann.com 137 (SC), is distinguishable on facts and not applicable to the facts of the present case, as the same is in different footings. For the reasons stated herein above, the impugned order passed by the learned CIT(A) is hereby set aside by allowing the grounds raised by the assessee.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 06/05/2024