TaxTMI 
TaxTMI 
2015 (1) TMI 1404
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.... & Finance (P) Ltd. (2008) 113 ITD 209 (Ahd). 2. Whether in the facts and in the circumstances of the case, the Ld. CIT(A) was correct in interpreting "initial assessment year". 3. Whether in the facts and in the circumstances of the case, the definition of "Initial Assessment Year" as given in Section 80IB(14) of the Act is not applicable in the provision of Section 80IA of the Act." 2.1 Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of Automobile press components and windmill power generation. It filed its return of income on 30-09-2009 declaring total income at Rs. 4,96,15,470. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed deduction u/s.80IA(4)(iv)(a) of the Act from windmill power generation at Rs. 12,97,740/-. Since the assessee is having losses in earlier years he was of the opinion that the assessee is not eligible for the deduction as per provisions of section 80IA(5). The AO was of the opinion that as per the said provision, the profit and gain of the industrial unit for the purpose of determining quantum of deduction admissible to the undertaking ....
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....y source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year, for which the deduction is to be made. Accordingly, the AO worked out the allowable deduction u/s 80IA for A.Ys.2004- 2005 to 2008-09 as under: ASSESSMENT YEAR CURRRENT YEAR NOTIONAL (LOSS PROFIT) LOSS SET OFF CARRIED FORWARD CUMULATIVE BALANCE UNABSORBED LOSSESS 2001-02 (10,787,017.00) - (10,787,017.00) (10,787,017.00) 2002-03 561,963.00 561,963.00 - (10,225,054.00) 2003-04 437,261.00 437,261.00 - (9,787,793.00) 2004-05 1,517,692.00 1,348,919.00 - (8,438,874.00) 2005-06 964,434.00 964,434.00 - (7,474,440.00) 2006-07 1,517,692.00 1,517,692.00 - (5,956,748.00) 2007-08 1,374,740.00 1,374,740.00 - (4,582,008.00) 2008-09 1,297,737.00 1,297,737.00 - (3,284,271.00) 2009-10 657,700.00 657,700.00 - (2,626,571.00) 2.4 The A.O., therefore, concluded that for the purpose of determining quantum of deduction u/s 80IA of the Act, the assessee company has no profit available for claiming deduction under the ....
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....herefore claimed that the Legislature has not intended that the initial assessment year is to be the first year of operation, but the assessee has option to select initial year not falling beyond the fifteen assessment years starting from the previous years in which the undertaking begins power generation." 4. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 5. After hearing both the sides, we find identical issue had come up before the Pune Bench of the Tribunal in the case of ACIT Vs. Mrs. Sulbha Subhash Lodha. We find the Tribunal vide ITA No.1845/PN/2013 order dated 24-09-2014 has decided the issue in favour of the assessee by observing as under : "10. We have considered the rival arguments made by both the sides. The only dispute to be decided in the impugned grounds raised by the Revenue is as to whether in view of section 80IA(5) of the I.T. Act, 1961 the quantum of deduction is to be computed after reducing the notional brought forward losses and depreciation of the eligible business even though the same might have been set off against other income in the earlier years or the year in which the assessee exercises the option contained....
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....nd incomes from heads other than the business income. For A.Y. 2003-04 loss of Rs. 24,08,079/- however, remained to be absorbed. In A.Y. 2004-05, assessee had profits from windmill activity of Rs. 18,93,846/- and after setting off the brought forward loss from the windmill activity of Rs. 24,08,079/-, there remained a loss of Rs. 3,47,134/-. In A.Y. 2005-06, there was a profit from windmill activity of Rs. 21,96,821/- and after setting off the brought forward loss of windmill activity of Rs. 3,47,134/-, assessee claimed deduction u/s 80-IA of the Act on the balance of the profits. In the year under consideration i.e. 2006-07, the assessee had profits from windmill activity at Rs. 25,62,314/- which has claimed to be exempt in terms of section 80-IA of the Act. However, as per the Revenue, the losses incurred by the assessee for A.Y. 2002-03 and 2003-04 from the activity of windmill have to be reduced from the current year's profits of the windmill activity in order to compute the amount eligible for deduction u/s 80-IA of the Act, having regard to the provisions of section 80-IA(5) of the Act. Pertinently, it is not disputed that the losses of A.Y. 2002-03 and 2003-04 from windmill ....
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....ofit 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 claim....
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....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 ....
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....evenue 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 nonjurisdictional 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 Cour....
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....t it should not be construed as acquiescence from the side of the assessee as the legal position on the subject is yet not settled. The Ground No. 2 is thus decided in favour of the assessee." 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 y....
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....t the assessee is eligible for claim of deduction u/s 80-IA of the Act for the year under consideration in a manner whereby the initial assessment year referred to in section 80-IA(5) of the Act is to be taken as the A.Y. 2004-05 and not the A.Y. 2002-03 as canvassed by the Revenue. Resultantly, we therefore, set aside the order of the CIT(A) and direct the Assessing Officer to recompute and allow the deduction to the assessee u/s 80-IA of the Act as above. "10.1 Respectfully following the decision of the Coordinate Bench of the Tribunal, we uphold the order of the CIT(A). Grounds raised by the Revenue are accordingly dismissed." 5.1 Respectfully, following the decision of the Coordinate Bench of the Tribunal cited (Supra) and in absence of any contrary material brought to our notice, we find no infirmity in the order of the CIT(A) on this issue. Accordingly, the same is upheld and the grounds raised by the Revenue are accordingly dismissed. 6. Grounds of appeal No.4 & 5 by the Revenue are as under : "4. Whether in the facts and in the circumstances of the case, the Ld. CIT(A) was correct in interpreting the provision of Section 14A r.w.Rule 8D in the ....
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....na High Court in the case of CIT Vs. Winsome Textile Industries reported in 319 ITR 204. He further held that the assessee company has made investment in shares of related companies with whom it has business transactions in order to have control over the business matters of the said company and not for earning dividend income. 8. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 9. The Ld. Counsel for the assessee while supporting the order of the CIT(A) filed a copy of the decision of the Coordinate Bench of the Tribunal in the case of Shri Goyal Ishwarchand Kishorilal Vs. JCIT vide ITA No.422/PN/2013 order dated 26-06-2014. Referring to the said decision he submitted that the Tribunal following the decision of the Hon'ble Allahabad High court in the case of Shivam Motors Pvt. Ltd. vide ITA No.88/PN/2014 order dated 05-05-2014 and the decision of the Hon'ble Punjab High Court in the case of CIT Vs. Lakhani Marketing vide ITA No.970/2008 order dated 02- 09-2014 has held that when the assessee has not received any dividend income out of the shares held as investment and no disallowance u/s.14A has been made in the preceding as well as succeeding asses....
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....es like brokerage, documentation charges, Demat charges, manpower cost etc. We find the CIT(A) deleted the disallowance out of the interest expenses for which the Revenue is not in appeal before us. So far as the disallowance of Rs. 5,86,962/- by the Assessing Officer being 0.5% of the average value of investment towards administrative expenses etc. is concerned we find the CIT(A) sustained the same. 9.1 It is the submission of the Ld. Counsel for the assessee that all the shares are held in physical form and not in Demat account and no dividend income has been received on account of shares held under the head "investment". Whatever dividend was received was in the "share trading account". The above submission of the Ld. Counsel for the assessee could not be controverted by the Ld. Departmental Representative. We find various courts have held that disallowance u/s.14A cannot be made when there is no tax free income. 9.2 We find the Hon'ble Allahabad High Court in the case of Shivam Motors Pvt. Ltd.(Supra) has observed as under : "As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the C....