TaxTMI 
TaxTMI 
2014 (10) TMI 987
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....mmissioner of Income Tax (Appeals) has erred in law and on facts in confirming the action of the ld. A.O. of excluding the amount received on Sales Tax entitlements of Rs. 24,20,833/- from the profit derived from eligible unit being wind mill at Satara, Maharashtra. 3) The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of the deduction claimed u/s. 80IA for profits derived from electricity generation from Wind Mill at Bhogat, Gujarat of Rs. 5,40,148/-. 4) The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of the deduction claimed u/s. 80IA for profits derived from electricity generation from Wind Mill at Satara, Maharashtra of Rs. 35,91,513/-. 5) It is, therefore, prayed that the amount received on sale of sales tax entitlements be considered as part of income of wind mill at Satara, Maharashtra and the above disallowances confirmed by the learned Commissioner of Income Tax (Appeal) may please be deleted. 6) The Appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual ....
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.... of section 40(a)(ia) were applicable. On appeal, CIT(A) has upheld the disallowance made by the AO. The AR of the assessee has filed additional evidence evidencing the fact that the recipient of the amount Shri Sureshchandra Shah has shown the amount received Rs. 18,41,122/- in his return of income filed and paid tax thereon. Therefore, in view of the second proviso to 40(a)(ia) of the Act inserted by the Finance (No.2) Act, 2004, w.e.f. 01.04.2004, which has been held to be retrospective in effect by the Agra Bench of the tribunal in the case of Rajeev Kumar Agarwal (supra), no disallowance can be made in the hands of the assessee of the expenditure claimed by the assessee. Therefore, we accept the additional evidence filed by the assessee since the DR has not objected to the same and restore the matter back to the file of the AO for readjudication of the issue afresh after taking into consideration the additional evidences filed by the assessee as per law. Needless to mention that he shall allow reasonable and proper opportunity of hearing to the assessee, before adjudicating the issue afresh. Thus, these grounds of appeal of the assessee are treated as allowed for statistical p....
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....% profit derived from generation of electricity from windmill situated at Ahmednagar Maharashtra, Jodha Rajasthan and Chitradurga Karnataka. The Assessing Officer observing that since the assessee had carried forward losses of earlier years, therefore, the assessee was not entitled to deduction u/s.80IA(4) as after the adjustment of the brought forward losses there was no positive profit for allowing deduction u/s. 80IA. The same was confirmed in appeal by the learned CIT(A). The case of the Revenue is that in view of the decision of the Special Bench of the Tribunal rendered in the case of Goldmine Shares and Private Limited (supra) brought forward losses and depreciation of earlier years has to be deducted from the profits of the years under consideration before allowing deduction u/s. 80IA of the Act. On the other hand, the contention of the AR of the assessee is that after the amendment made by the Finance Act, 1999 in Section 80IA whereby u/s. 80IA(2) the assessee has the option to choose the initial year for claiming the deduction u/s. 80IA for 10 consecutive years within 15 consecutive years from the date of the commencement of the eligible unit. By placing reliance on the d....
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....essment year up to and including the assessment year for which the determination is to be made." 20. From a plain reading of the above, it can be gathered that it is a non- obstante clause which overrides the other provisions of the Act and it is for the purpose of determining the quantum of deduction under section 80IA, for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year to be computed as if the eligible business is the only source of income. Thus, the fiction created is that the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year. Prior to 1st April 2000, the initial assessment year was defined for various types of eligible assessees under Section 80IA(12). However, after the amendment brought in statute by the Finance Act, 1999, the definition of "initial assessment year" has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in sub-section (2) of Section 80IA from which it chooses ....
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....ligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. Fiction created in sub- section does not contemplates to bring set off amount notionally. Fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. 22. In the present cases, there is no dispute that losses incurred by the assessee were already set off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee exercised the option under s. 8o-IA(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in the Tax Case No. 918 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the year. The unreported judgment of this Court cited supra considered the scope of sub-s. (6) of s. 8o-I, which is the corresponding provision of sub-s. (5) of s. 80- IA. Both are similarly worded and ....
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....e of the previous year should be reopened again for computation of current income under Section 80-1 for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view." 25. This judgment has been further followed by the same High Court in CIT v/s Emerald Jewel Industry (P) Ltd. [2011] 53 DTK 262 (Mad.). From the above, ratio of the High Court, it is amply clear that sub-section (5) of section 8oIA will come into operation only from the initial assessment year or any subsequent assessment year. The option of choosing the initial assessment year is wholly upon the assessee in the post amendment period i.e., after 1st April 2000 by virtue of section 80IA(2). 26. Now coming to the decision of the Mumbai Bench Tribunal in Pidilite Industries (supra) as relied upon by the learned Departmental Representative in this case, the Tribunal was dealing with regard to two eligible units one Gujarat Unit which was set-up in the year 1995-96 and second Maharashtra Unit in the year 2000-01. With regard to Gujarat Unit, the Tribunal held that pre-amendment definition of initial assessment year would be applicable i....
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....arned Departmental Representative will not be applicable to the facts of the present case. 28. We reiterate in the instant case, it is not in dispute that the initial Assessment Year in the case of Jivraj Tea & Industries Ltd. is the Assessment Year 2004-05 and in the case of Jivraj Tea Ltd. is Assessment Year 2007-08 and it is also not in dispute that the assessee has not suffered any loss in the said year, therefore, in our considered opinion no brought forward loss or depreciation could be reduced for determining the amount in which the deduction is to be allowed u/s. 80IA of the Act. We, therefore, set aside the orders of the lower authorities on this issue and allow the ground of appeal of the assessee." 39. Facts being identical, respectfully following the precedent, we set aside the order of lower authorities on this issue and allow ground Nos.2, 3 & 4 of the appeal." 4.1. Nothing contrary has been brought to our knowledge on behalf of the Revenue. Facts being similar, so following the same reasoning, we set aside the order of lower authorities on the issue and allow the ground in favour of the assessee as discussed above. 5. Next issue is with regard....
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..../2013, has held as under:- "29. The other issue in this appeal pertains to whether deduction u/s. 80IA will be allowable to the assessee on the sale proceeds of sales tax entitlement received by the assessee during the year under consideration. 30. The AO as well as the learned CIT(A) following the decision of Hon'ble Supreme Court in the case of Liberty India Vs. CIT, 317 ITR 128, wherein it has been held that profit on sale of DEPB and Duty Trade Back are not derived from the eligible business and therefore not eligible for deduction u/s. 80IA or 80IB of the Act. 31. Learned AR for the assessee during the course of hearing submitted that the main contention of the assessee before the learned CIT(A) was that the sales tax incentive was a capital receipt of the assessee and hence not liable to tax and for this proposition he relied on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Birla VXL Ltd. (supra). He contended that the learned CIT(A) has not adjudicated upon this contention of the assessee and neither has recorded the same in his order which was submitted to him by way of a written submission. He therefore contended that in v....
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.... or for mere expansion of the existing production capacities of the industries. Thus, the main purpose of the resolution was to modernize industries, which ordinarily would come at a considerable cost, particularly when such industries were located in under-developed areas. It can be imagined that the industries will find it difficult without Government's incentive to undertake large-scale modernization with the use of modern technology. It was for this purpose that the said scheme was framed giving benefit of the Sales Tax Waiver/Deferment, at the option of the industry concerned. Such benefit had to be computed in terms of the percentage of the fixed capital investment. Benefits were to last for specified periods and upto exhausting maximum limit computed in terms of the percentage of the fixed capital investment. 12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-today functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee ....
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....d that payment made to its sister concern i.e. Jivraj Tea Ltd. is unreasonable and excessive. Consequently, the A.O. considered the average rate of 106.20 per kg is reasonable and made an addition to the extent of Rs. 2,62,32,096/- @ Rs. 24 per kg for 1093004 kgs tea purchased from M/s Jivraj Tea Ltd. 9.2 In Appeal, CIT(A) has allowed the appeal in favour of the assessee. Ld. A.R. pointed out that similar issue arose in A.Y. 06-07 in ITA No. 3005/Ahd/2009, wherein Tribunal has decided the similar issue in favour of the assessee by observing as under: "10. We have heard both the parties and gone through the facts of the case as also the decisions relied upon. The relevant provisions of sec. 40A(2) of the Act stipulate that where an assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of the said sub-section, and the Assessing Officer is of the opinion that such expenditure is unreasonable or excessive having regard to the fair market value of the goods, services and the facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit deriv....
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....ustries Ltd. & Surin Corporation and concluded that the assessee paid excessive purchase price to sister concerns. The yard stick adopted by the AO is average purchase price of tea from the other parties. Now the tea has large varieties and its price depends upon a number of factors depending upon it as against tea grown at lower altitudes and plucked from old bushes. The tea from a garden at higher altitudes will fetch higher price as compared to tea grown in gardens at lower altitudes. Fresh tea normally fetches higher prices as compared to old stock. Tea is generally sold in auction by various gardens and the market rates of a particular quality depends upon the best of leaf tea. In view of variety of factors affecting tea trade, there can be no standard for fixing the price of tea. The AO has compared average price of tea purchased from outside parties vis-à-vis purchase from sister concerns. No attempt has been made to ascertain the price prevailing in the market on the day when purchases are stated to have been made from the sister concerns, especially when the price prevailing on a particular day fluctuates even in respect of tea from the same garden and of the same g....
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....ay. There is no material on record as to what were the prices prevailing on a particular day when tea of a particular variety and quality was purchased from sister concern nor any attempt seems to have been made to compare the price paid to sister concerns with those prices. As pointed out in the case of Indo Saudi Travel Services(P) Ltd.(supra), CBDT Circular No. 6-P, dt. 6th July,1968 stipulated that no disallowance can be made under s. 40A(2) of the Act in respect of the payments made to the relatives and sister concerns where there is no attempt to evade tax. The assessees before us are stated to be paying tax at the maximum prevailing rates and there is no evidence on record nor there is any allegation regarding evasion of tax by any of these assessees. The ld. DR did not point out as to how the assessee evaded payment of tax by alleged payment of higher purchase price to its sister concern since since the sister concerns were also paying tax at higher rates , as admitted before us by the ld. AR. 10.3 Moreover, it is nobody's case that the transactions of purchase from the sister concerns were not bona fide transactions nor is it the case of the Revenue that these....
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....to tax at all. He has erred in holding the same as taxable by treating it as "revenue receipt" instead of "capital receipt". 12. First issue is with regards to disallowance of deduction claimed u/s. 80IA for profits derived from electricity generation from Wind Mill at Bhogat, Gujarat of Rs. 2,37,129/-. A.O. made disallowance of deduction u/s. 80IA for profits derived from electricity generation from Wind Mill at Bhogat, Gujarat of Rs. 2,37,129/-, which was confirmed by CIT(A) following assessee's own case for A.Y. 08-09. We find that in ITA No. 1193/Ahd/2013 on similar issue has been decided in favour of assessee vide para 7 to 9 of this order. 12.1 Facts being similar, so following the same reasoning, we hereby direct to allow the deduction claimed u/s. 80IA for profits derived from electricity generation from Wind Mill at Bhogat, Gujarat of Rs. 2,37,129/-. 13. Next issue is with regards to disallowance of the deduction claimed u/s 80IA for profits derived from electricity generation from Wind Mill at Satara, Maharashtra of Rs. 16,08,779/-. CIT(A) following the decision for A.Y. 08-09 has decided the issue against assessee. We find that in ITA No. 1193/Ahd/2013 on simila....