TaxTMI 
TaxTMI 
2019 (5) TMI 1380
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....n its appeal in ITA no. 3036/Mum/2009 for AY 2003-04 in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal"), read as under:- " On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below: 1. The Ld. CIT(A) has erred in allowing the expenses on shelved project amounting to Rs. 1,68,94,456/- and expenses on feasibility studies amounted to Rs. 9,16,589/- without appreciating that these expenses are capital expenses. 2. The Ld. CIT(A) has erred in deleting the taxation of a sum of Rs. 2,31,67,715/- being the foreign exchange gain on repatriation of certificates of deposits (Euro Notes) without appreciating that the assessee itself is following a dual policy in respect of foreign exchange fluctuation gain/loss in various years. 3. The Ld. CIT(A) has erred in deleting the disallowance of provision for wages of Rs. 19,81,60,000/- without appreciating the fact that the provision debited by the assessee is contingent in nature and the liability is not accrued and / or crystallized. ....
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.... 5. The first ground of appeal raised by Revenue relates to expenditure incurred on shelved project amounting to Rs. 1,68,94,456/- and expenses incurred on preliminary studies, feasibility reports etc. on the projects which have not taken off to the tune of Rs. 9,16,589/-, aggregating to Rs. 1,78,11,045/-. The assessee had claimed these expenses as Revenue Expenses while the AO held the same to be capital expenditure. The AO observed that this issue being recurring in nature and in preceding years also these expenses were disallowed, the AO disallowed these expenses in this year also and added the same to the income of the assessee, vide assessment order dated 23.02.2016 passed by the AO u/s. 143(3) of the 1961 Act. 6. The assessee being aggrieved by the additions as were made by the AO carried the matter in appeal before Ld. CIT(A) by filing first appeal. The assessee submitted before learned CIT(A) that these expenses aggregating to Rs. 1,78,11,045/- were incurred on shelved projects and on preliminary studies, feasibility studies etc. on projects which never took off due to commercial expediency as they were found not to be profitable. It was claimed that these expenses wer....
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....orts as revenue expenditure. 6.2.1 The appellant has furnished the following details of expenditureon feasibility reports and preliminary studies incurred during the year ended 31st March, 2003 : Projects Amount Micro turbine applications 41,143 Power Plant at Dharamtar 19,360 LNG terminal at Trombay 2,58,740 Mulshi Mini Hydel scheme 62,247 New intake at Khand - Bhivpuri generating station 77,586 Installation of CFBC Boiler for Unit 4 15,000 Installation of FGD on Unit 6 3,47,221 Feasibility studies re. misc. power projects 95,292 Total 9,16,589 6.2.2 The appellant has submitted that the above projects are connected with the existing business of the appellant i.e. generation, transmission and distribution of electricity. 6.3 The decisions relied upon by the appellant, including the decisions of the CIT(A) for A.Y. 2001-02 and the Hon'ble Tribunal in the appellant's own case squarely cover the facts of the appellant's case for the year under reference and hence, this ground is decided in favour of the appellant. 6.4 In the result, this ground is allowed." Thus, Ld. CIT(A) f....
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....projects which are shelved are part of the pursuit of the growth opportunities by the assessee company by exploring to start new businesses which are closely connected with the assessee‟s company business but due to commercial expediency these projects did not took off or were shelved and hence these expenses were written off in the books of accounts by the assessee. Since these expenses were incurred for the projects which were closely connected with the business activities of the assessee company and these projects had either not taken off or were shelved, these expense are to be held as business expenses as rightly held by learned CIT(A). We have observed that tribunal in assessee‟s own case in ITA no. 3035/Mum/2009 for AY 2002-03 has decided this issue in favour of the assessee, vide orders dated 20.04.2012, by holding as under:- "16. Ground No.2 raised by the revenue reads as follows: "The ld. CIT(A) has erred in allowing the expenses on shelved project amounting to Rs. 17,26,02,558/- and expenses on feasibility studies amounted to Rs. 5,27,462/- without appreciating that these expenses are capital expenses." 17. As far as expenses on she....
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.... indicated there against, which have finally not materialized. The assessee submitted that all the above projects are connected with the existing business of the assessee i.e. generation, transmission and distribution of electricity. The expenses are mainly in the nature of pre-bid engineering services. These expenses have been claimed as revenue expenditure based on the decision of the Madras High Court in the case of B.Nagi Reddy vs. CIT (199 ITR 451) which according to the Assessee was directly on the issue. 31. The assessee has claimed expenditure incurred on feasibility reports as revenue expenditure. The assessee furnished the following details of expenditure on feasibility reports and preliminary studies incurred during the year ended 31st March, 2001. Projects Amount (Rs.) Augmentation of air conditioning LSHS Tank augmentation Flue gas desulphyurization- 3rd stream LNG Terminal 6,46,990 7,00,344 3,13,473 2,30,543 Proposed box culvert in Trombay main drainage Electro-chlorination plant Mini Hydro Scheme at Bhira 18,972 35,153 2,56,187 Mini Hydro Scheme at Mulshi Study for evaluation of 2 hydro projects....
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....electricity generating business of the Assessee by the Mumbai ITAT in its own case for A.Y's 1997-98, 1999-2000 and 2000-01. Copies of these orders have been placed in the paper book. In view of the above Gr.No.3 of the Revenue is dismissed." Facts and circumstances being identical respectfully following the order of the Tribunal we uphold the order of the CIT(A) and dismiss Ground No.2 raised by the revenue." Respectfully following the above decision of tribunal in assessee‟s own case for immediately preceding year for AY 2002-03 in ITA No. 3035/Mum/2009 vide orders dated 20.04.2012 and keeping in view that facts and circumstances remaining the same in the year under consideration, we allow the said expenses as business expenses of the assessee and uphold the decision of learned CIT(A). This issue is decided in favour of the assessee and the appeal of the revenue on this ground no. 1 stand dismissed. We order accordingly. 10. The next ground raised by Revenue in its appeal filed with tribunal relates to deletion of foreign exchange gain of Rs. 2,31,67,715/- on repatriation of certificates of deposits (Euro Notes). The assessee has received an income of Rs. ....
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....f Rs. 2,31,67,715 on buy back of euro notes is not in the nature of "income" as envisaged by section 2(24) of the Income-tax Act, 1961 ("the Act") and accordingly the same was not offered for tax in the return of income of the appellant. e. On inquiry from the Assessing Officer, the appellant, vide its letter dated 18th November 2005, had given detailed reasons in support of its claim that the surplus of Rs. 2,31,67,715 was not taxable. The Assessing Officer has, however, not accepted the claim of the appellant, by relying on the assessment orders for A.Y. 2000-01 and A.Y. 2002-03. 7.3 This ground has been dealt for A.Y. 2000-01 by the CIT(Appeals) and has decided the issue in favour of the appellant. It is noted that the Departmental appeal for that year has been dismissed by the Hon. Tribunal and the order of the CIT(Appeals) has been upheld. 7.4 It may be pointed out that the Hon'ble Tribunal has relied on the decision of the Bombay High Court in the case of Mahindra and Mahmdra Ltd. v/s CIT (261 ITR 501), where the facts of the case closely resemble those of the appellant and the decision of the Karnataka High Court in the case of CIT v/s....
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....isite, arising from business under section 28(iv) of the Act.'' 22. Briefly stated, the facts of the case are that the assessee had issued euro notes on 19.08.1997 to advance its capital expenditure programme. Some of the euro notes were due to mature in 2007 and the remaining in 2017. The assessee bought back euro notes of US$ 60,000,000/- out of which euro notes of US$ 30,000,000/- were due to mature in 2007 and the remaining euro notes of US$ 30,000,000/- in 2017. The euro notes were bought back at a discount to the face value resulting in a surplus of Rs. 37,96,26,000/-. The case of the assessee before the Assessing Officer was that the said surplus arising on buy back of euro notes was not in the nature of income of the assessee as envisaged by section 2(24) of the I-T Act. The Assessing Officer, however, did not accept the claim of the assessee. Proceeding on the basis that income/gain/ surplus of any kind has to suffer the incidence of tax,the Assessing Officer has held that the provisions of section 41(1) of the I-T Act are attracted, the assessee has become richer by the amount of surplus and that the surplus has changed colour as revenue receipt and there....
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....ng capital expenditure. On being asked by the Bench, the learned counsel for the assessee submitted that projects for which these Euro Notes were raised were completed and interest payable on Euro Notes was claimed as an business / Revenue expenses while computing income chargeable to tax.The bench directed assessee to file as to the fate of an appeal filed by Revenue for AY 2000-01 with regard to status of this issue with Hon‟ble Bombay High Court after the same was decided by tribunal in favour of assessee. The assessee has filed decision of Hon‟ble Bombay High Court dated 11th June 2014 in ITA no. 251 of 2012, wherein the Bombay High Court while deciding appeal for AY 2001-02 in assessee‟s own case held that no substantial question arose from the appellate order passed by tribunal, by holding as under:- "1] This appeal is directed against the order passed by the Income Tax Appellate Tribunal on 9th September, 2011. The assessment year in question is 2001-02. 2] The limited issue arising out of the question projected as a substantial question of law, is with regard to the use of repatriated funds. 3] The factual position and which a....
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....subsequent utilization was, therefore, not relevant. It is in that regard that the failure of the assessee to explain the utilization of the funds repatriated was held to be a factor not against the assessee. The facts of the case, therefore, justified the stand of the assessee. Once the admitted purpose was noted and remained undisputed throughout, then, merely because an entry was made in the Profit and Loss Account on the credit side does not change the nature of the receipt. In such circumstances, the view taken by the Tribunal and by the Commissioner of Income Tax (Appeals) cannot be termed as perverse. It is a view in consonance with the factual material placed before both. Such a view does not raise any substantial question of law. The appeal is devoid of any merits and is dismissed." 13. We have considered rival contentions and perused the material on record including cited case law. We have observed that the assessee had raised Euro Notes in 1997 towards incurring capital expenditure. The said Euro Notes were partly redeemable in 2007 and remaining in 2017. On being asked, it is admitted by the assessee that the projects for which Euro Notes were raised were co....
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....plus and that the surplus has changed colour as revenue receipt and therefore it has to suffer tax. The Assessing Officer has also held that the surplus is taxable alternatively as income from other sources. 23. Aggrieved by the aforesaid order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) has decided the issue in favour of the assessee for the reasons given by him at pages 10-12 of his appellate order. 24. In support of appeal, the ld. Departmental Representative has placed reliance on the order of the Assessing Officer. 25. In reply, the ld. Sr. counsel for the assessee has relied upon the order of the ld. CIT(A) and submitted that the order of the Ld. CIT-A fully covered by the following decisions: i) Mahindra and Mahindra Ltd. v. CIT, 261 ITR 501 (Bom HC) ii) CIT v. Industrial Cr. & Devlp. Syndicate Ltd., 285 ITR 310(Karn. HC) iii) Prism Cement Ltd. v. JCIT, 285 ITR 43 (Bom.) iv) Mohsin Rehman Penkar v. CIT, 16 ITR 183 (Bom.) v) Agarchand Chunnilal v. CIT, 16 ITR 430 (Nag.) vi) Orient Corpn. v. CIT, 18 ITR 28 (Bom.) vii} CIT v. Ga....
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....e ratio of said decisions to the facts of the case.The assessee is directed to produce all relevant facts in detail before the AO. The AO shall also be guided by decision of Hon‟ble Madras High Court in the case of CIT v. Ramaniyam Homes Private Limited (2016) 68 taxman.com 289 (Mad 2016) : (2016) 384 ITR 530(Mad.) and/or any other decision having bearing on the issues. All the contentions are kept open and the assessee will be allowed to submit evidences/explanations in its defence which shall be admitted by the AO and then adjudicated on merits in accordance with law uninfluenced by our observations. Thus, in the result, this ground no. 2 filed by Revenue is allowed for statistical purposes. We order accordingly. 14. The next issue raised by Revenue in its appeal filed with tribunal concerned itself with the disallowance of provision for wages of Rs. 19,81,60,000/- which was debited by the assessee as "Provision for Wages‟ but claimed as business expenses. As per AO, the said provision for wages was a contingent liability which has not accrued or crystallized during the year under consideration. The assessee submitted before the AO that the assessee review the w....
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....A). It was observed by the Ld. CIT(A) that the old wage agreement with employees expired on 31st December 2001 and new settlement has become due from 01.01.2002, which was finally reached on 18.06.2004 and hence in the intervening period, provision for wages was created, based on past experience and the demands made by workers which were under negotiation. The basis of computation of said provision for wages was also enclosed by the assessee before Ld. CIT(A). It was also submitted by assessee before Ld. CIT(A) that similar issue arose for the AY 1999-2000 when the earlier wage agreement had expired and provision had been created in the interim period before finalization of the next agreement. It was claimed that tribunal allowed the said claim in AY 1999-00 vide orders dated 11.07.2006 in assessee‟s own case in ITA no. 7485/Mum/2002 and 285/Mum/2003, which led learned CIT(A) to allow the claim of the assessee as facts in impugned assessment year were identical as that of AY 1999-2000 wherein tribunal allowed the claim of the assessee for provision for wages. The said order of tribunal for AY 1999-00 in assessee‟s own case is placed in paper book at page 325-337. 16.....
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....ee that finally an memorandum of settlement of wages was entered into with its employees for wage settlement which was signed on 18.06.2004 with effect from 1st January 2002. The said agreement is placed in file. It is claimed that provision was made keeping in view past experience and the liability is an liability in praesenti which is an accrued/crystallized liability and not an contingent liability. 18. The Ld. DR on the other hand relied upon the order of the AO. 19. We have considered rival contentions and perused the material on record including case laws cited before us. We have observed that the assessee is in the business of generation, distribution and transmission of power. The assessee enters into wage settlement agreement with its employees/workers for a period of four years. The last agreement expired on 31.12.2001 and a new wage settlement agreement was to be signed with effect from 01.01.2002 for which negotiation with workers/employees through their unions were underway which ultimately culminated into an agreement dated 18.06.2004.The assessee is following mercantile system of accounting and in order to comply with generally accepted principle of matching co....
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....ssing Officer held, this is only a contingent liability being liability on account of wage settlement and it comes into existence only when it is quantifies and not otherwise, Assessee made the provision only on anticipation of wage increase in future and the agreement has been executed in the next financial year only. Hence, the Assessing Officer held, the claim of the assessee is not allowable. Aggrieved by the above order, assessee approached the first appellate authority. 15. The claim of the assessee was rejected by the C1T(A) relying upon the following judgements:- i) C1T vs. Swadeshi Cotton and Flour Mills P.Ltd. (1964) 53 ITR 134 ii) GIT vs.Purshottam Gokuldas 237 1TR115 (Ker) iii) CIT vs.Roberts Mclean & Co.Ltd. 111 ITR 489 (Cal) iv) APS Cold Storage & Ice Factory Vs.CIT v) CIT Vs.Naskarpara Jute Mills Co.Ltd. 141 ITR 384 (Cal) vi) CIT Vs.Phalton Sugar Works Ltd, 162 ITR 622 (Bom) vii) CIT Vs. Bharat Fire Bricks & Pottery Ltd. 202 ITR 821,824 (Cal) Aggrieved by the above order, assessee is in appeal before the Tribunal. 16. The Learned counsel for the assessee relying upon the decisio....
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....is an accrued/crystallized liability which the assessee will be required to pay as only quantification is postponed to the signing of new revised wage settlement agreement. Under these circumstances we are in agreement with the decision of Ld. CIT(A) in granting relief to the assessee by following the decision of tribunal in assessee‟s own case for AY 1999-00 as this liability towards provision for wages is not a contingent liability but a liability in praesenti which is an crystallized /accrued liability of the assessee based on mercantile system of accounting by following matching principle of costs with income. Thus this ground of appeal bearing no. 3 raised by the Revenue lacks merit and is hereby dismissed. We order accordingly. 20. Ground no. 4 raised by Revenue in its appeal is consequential and general in nature and does not require separate adjudication. We order accordingly. 21. In the result, appeal of the Revenue in ITA No.3036/Mum/2009 for AY 2003-04 is partly allowed as indicated above. Assessee's appeal in ITA no. 3080/Mum/2009-AY 2003-04 22. The first ground of appeal raised by the assessee in its appeal filed with tribunal pertains to the grievanc....
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....bmitted before the authorities below and it is now submitted before the tribunal for the first time and it was prayed that the matter be restored to the file of the AO for verification. It was submitted that the total income earned from sale of sludge was of Rs. 23,43,201/- and the same should be allowed while rest of the disallowance of claim of the deduction which was confirmed by learned CIT(A) should be upheld. It was submitted that Ld. CIT(A) rightly allowed deduction u/s. 80IA with respect to sale and scrap from the Jojobera unit and thus keeping in view parity, the income earned from sale of sludge from Belgaun unit should be considered to have been derived from industrial undertaking and the same should be considered for grant of deduction u/s 80IA. It was submitted that since this is the first time these additional evidences by way of ledger account of sale of sludge derived from Belgaun unit is produced before the tribunal, the matter may be set aside and restore to the file of the AO and the same should be considered by AO on merits in accordance with law. The assessee relied upon the decision of Hon‟ble Madras High Court in the case of Fenner (India) Ltd. v. CIT (....
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....red view this issue need to be set aside and restored to the file of AO for verification of the claim of the assessee that said income was earned from sale of sludge which was derived from Belgaun unit eligible for deduction u/s 80IA of the 1961 Act. The assessee shall produce all relevant details before the AO who shall adjudicate the same on merits in accordance with law for granting deduction u/s 80IA of the 1961 Act. With respect to the interest Income on loans and advances granted to the staff and employees by the assessee, we are of the considered view that the said interest income cannot be said to be derived from the industrial undertaking at there is no direct first degree nexus between income of the undertaking and interest income from loans and advances granted to employees as it will be too far fetched to accept that interest on loans to employees is derived from industrial undertaking as the said interest income has first degree nexus with the loans granted by the assessee to the employees rather than industrial undertaking of the assessee. Thus,this ground no. 1(a) filed by the assessee is partly allowed for statistical purposes as indicated above.We order accordingly....
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....ived from generation of power. The assessee company has chosen the assessment year 2002-03 as the 'initial assessment year' for the purposes of claiming deduction u/s 80IA of the Act although the 67.5 MW Jojobera power generation undertaking commenced generating power in the assessment year 1997-98. Undisputedly the assessee company 67.5 MW Jojobera power generating undertaking has no unabsorbed business losses/depreciation of the earlier assessment years as they had already been set off and adjusted against the income from other businesses in the earlier years and set-off was allowed by the Revenue. The assessee company has the option to choose the 'initial assessment year' and thereafter deduction of 100% of the profit from generation of power is eligible for deduction u/s.80IA of the Act for ten consequent assessment years out of the fifteen years beginning from the commencement of generation of power. The CBDT has now come with Circular No. 1/2016[F. No. 200/31/2015-ITAI] dated 15- 2-2016 which is binding on the Revenue, whereby the Board has clarified the term "initial assessment year" in section 80-IA(5) of the Act wherein it has been categorically mentioned that the matter h....
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.... accordance with the prescribed provisions. Sub-section (2) of section 80IA 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 80IA 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 deduct....
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.... 3. O/o Pr. Director General of Income Tax(Systems) with request for uploading on official website in public domain 4. All Pr. Chief-Commissioners/Directors-General of Income-tax 5. All Officers and Technical Sections of CBDT 6. ITCC Division of CBDT (3 copies) 7. Addl./Jt. CIT Database Cell for uploading on IRS Officers website 8. ADG(PR,PP & OL) with request to post a tweet on official handle of the Department. 9. Guard File (Deepshikha Sharma) Director to the Government of India" The word 'initial assessment year' has been referred in section 80IA(5) of the Act being the year at the option of the tax-payer chosen to be the year from which the deduction u/s 80IA of the Act is to be available for ten consecutive assessment year out of fifteen assessment years commencing form the year when the power undertaking start generating power, and thereafter for the succeeding assessment years onward it will be considered that this undertaking is the only source of income of the assessee company as per section 80IA of the Act. Thus, in our considered view, the assessee company is entitled for deduction u/s 80IA of the Act....
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....ty, which is as follows: "Circular No. 1 /2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 15th February, 2016 Subject: Clarification of the term 'initial assessment year' in Section 80IA(5) of the Income Tax Act, 1961 Section 801A of the Income-tax Act, 1961 ('Act'), as substituted by Finance Act, 1999 with effect from 1.4.2000, provides for deduction of an amount equal to 100% 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 801A 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 801A further provides as under : "Notwithstanding anything containe....
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....ordance 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 Counsel/DRs be suitably instructed. above be brought to the notice of all Assessing Officers concerned." 5. Therefore, admittedly, questions of law 2 and 3 are also covered by the above circular. Hence, the appeal deserves to be dismissed. 6. Accordingly, the above tax case appeal is dismissed. No costs. 7. But, we cannot resist our temptation to record one more fact. If an issue is covered by the judgment of the High Court, it is always open to the Department to take it on appeal to the Supreme Court and get the law settled once and for all. But, once a decision is taken at the level of the Board, we do not know why repeated appeals should be filed, only to meet with the same fate as that of a decision, on which, a circular has been issued. The Department shall take note of this for future guida....
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....r, there is a profit. Therefore, the assessee claimed deduction under section 80-IA and the Revenue has no authority to notionally bring forward the unabsorbed depreciation and loss of the earlier year which has been already set off as against the current year profit from the unit. 11. It is pertinent to note that the learned senior counsel appearing for the assessee invited the attention of this court to an unreported judgment of this court dated December 23, 2009, in Tax Case (Appeal) No. 298 of 2004 wherein, this court considered the similar substantial question of law, which reads as follows : "Whether the Tribunal was right in holding that for the purpose of allowing deduction under section 80-I, the brought forward losses and unabsorbed depreciation, etc., of the new industrial undertaking need not be taken into consideration, once they have been set off against other sources of income, especially in view of the clear provisions of sub-section (6) of section 80-I, the application of which is mandatory ?" 12. By following the various decisions of the apex court, this court, in paragraph 15 of the said judgment, has held as follows : "The cum....
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....initial assessment year : (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under subsection (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years 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." 14. From a reading of the above, it is clear that the benefit is given to the profits and gains derived from the business of the hotel or the business of repairs to ocean-going vessels or other powered craft. The deduction is allowed to the extent of 20 per cent from the profits and....
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....or received by the assessee and which is included in his gross total income." 15. A mere reading of the above provision makes it clear that any income of the nature specified in that section, which is included in the gross total income of the assessee for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provision of this Act shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in the gross total income. Section 80AB defines "gross total income" which means the total income has to be computed in accordance with the Act before making deduction under this Chapter. Heading "B" deals with "deductions in respect of certain payments" which consists of sections 80C to 80GGC. Heading "C" deals with "deductions in respect of certain incomes", which consists of sections 80H to 80TT. The last heading "D" deals with "other deductions" which consists of sections 80U to 80V. Heading "C" is relevant for considering the issue in these appeals. The relevant provisions that are to be considered are sections 80-I, 80- IA and 80-IB. In t....
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....ulfils all the following conditions, namely :- (a)it is owned by a company registered in India or by a consortium of such companies (or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act) ; (b)it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing, or (ii) operating and maintaining, or (iii)developing, operating and maintaining a new infrastructure facility ; (c)it has started or starts operating and maintaining the infrastructure facility on or after the 1st April, 1995. (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of subsection (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 subseque....
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....s 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 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. 19. 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 section 80-IA(2). In Tax Case Nos. 909 of 2009 as well a....
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....e being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-I for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and is hereby dismissed with no order as to costs." 20. From a reading of the above, the Rajasthan High Court held that it is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-I for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view. 21. The standing counsel appearing for the Revenue is unable to bring to our notice any relevant material or any compelling reason or any contra judgment of other courts to take a different view. He only relied heavily on the Memorandum explaining the provisions in the Finance (No. 2) Bill, 1980, [1980] 123 ITR (St.) 154 to supp....
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....ggrieved by that order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). Before the appellate authorities also there is no dispute regarding the claim during the year. Line 3 in paragraph 2 of the order reads as follows : "The appellant has claimed deduction under section 80-IA for the first time in the current year, namely, the assessment year 2004-05." 26. The Revenue has not filed an appeal against the order of the Commissioner of Income-tax (Appeals). It reached finality. Aggrieved by the order of the Commissioner of Income-tax (Appeals) regarding the quantum of deduction, the assessee filed an appeal before the Tribunal. In the assessee's appeal, the Revenue filed a letter first time before the Tribunal and disputed the fact relating to the assessee's claim that assessment year 2004-05 is the initial assessment year. The Tribunal found that both the Assessing Officer and the Commissioner of Income-tax (Appeals) had given categorical finding that the assessee claimed deduction for the first time during the year 2004-05 and paragraph 5 reads as follows : "In the present case, there is a categorical finding by the Assessing ....
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.....-Where a fact which cannot be borne out by, or is contrary to, the record is alleged, it shall be stated clearly and concisely and supported by a duly sworn affidavit. 29. Production of additional evidence before the Tribunal.-The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.' These facts are contrary to the facts recorded by the Commissioner of Income-tax (Appeals) and the Assessing Officer. It cannot be considered. The above statement made by the Assessing Officer is not in accordance with rules 10 and 29. Hence, we decline to consider the same. ....
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....e is dismissed. 28. In fine, Tax Case (Appeal) Nos. 909 and 940 of 2009, all the questions answered in favour of the assessee and against the Revenue and, hence, these appeals are allowed. 29. Under these circumstances, we confirm the order of the Tribunal and answer all the questions in favour of the assessee and against the Revenue in Tax Case (Appeal) No. 918 of 2008 and dismiss the appeal." Thus keeping in view judgment of the Hon'ble Madras Court in the case of Velayudhaswamy Spinning Mills Private Limited v. ACIT(2012) 340 ITR477(Mad.), judgment of Hon'ble Madras High Court in the case of CIT v. GRT Jewellers(India) (supra), CBDT Circular No. 01/2016 dated 15-02-2016, provisions of Section 80IA of the Act and as per discussions and reasoning as set out above, we have no hesitation in holding that the assessment year 2002-03 chosen by the assessee company shall be the 'initial Assessment year' for the purposes of claiming deduction u/s 80IA of the Act, although the Jojobera 67.5MW unit started generating power w.e.f. assessment year 1997-98. Thus, Jojobera 67.5 MW power undertaking shall be deemed to be the only source of the income as provided u/s 8....
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....arned income during the previous year on its broadband project to the tune of Rs. 9,81,38,257/- as well income on the sale of scrap of the capital projects amounting to Rs. 1,27,67,139/-. The assessee did not offer the said income to tax. The assessee submitted before the AO that the said income on broadband project of Rs. 9,81,38,257/- represents income from providing broadband connectivity during trial runs wherein the said income was credited to capital work in progress. The assessee relied upon decision of Hon‟ble Supreme Court in the case of CIT v. Bokaro Steel Limited (236 ITR 315). The assessee had during the year ended 31st March 2003 had capitalized work in progress and claimed depreciation. Thus, the assessee reduced aforesaid incomes from the capital work in progress. The AO treated the said income from broadband project and also from sale of scrap of this project as revenue in nature and the same were added to the income of the assessee by the AO vide assessment order dated 23.02.2006 passed u/s 143(3) of the 1961 Act. 30. The matter reached learned Ld. CIT(A) at the behest of the assessee who was also pleased to dismiss the contentions of the assessee vide app....
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....e assessee also relied upon decision of Ahmedabad tribunal in the case of Adani Power Limited v. ACIT reported in (2015) 155 ITD 239(Ahmedabad-tribunal). 32.We have considered rival contentions and perused the material on record including cited case laws. We have observed from the material on record that the assessee broadband unit was under trial run and the same was not installed, when income from said project under installation to the tune of Rs. 9,81,38,257/- arose to the assessee.Similarly, there were scrap generated prior to installation of the broadband project which generated income to the tune of Rs. 1,27,67,139/-. The assessee was setting up broadband project and the cost incurred towards the said project was capitalised. The assessee reduced both the aforesaid income from capital work in progress of the broadband project as these income arose prior to installation of the said broadband project. During the year under consideration itself the broadband project became operational and the net capitalized cost (after excluding aforesaid income) was capitalised by the assessee and depreciation was also claimed on the net amount viz. capital cost less aforesaid two income....
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....ited by the appellant are distinguishable to the facts of the case of the appellant as the appellant has not claimed this amount in the return of income and no discussion to this effect has taken place in the assessment order. In view of the decision in Goetze India, I hold that such payment cannot be allowed as the same is not claimed in the return. Accordingly this ground of appeal is dismissed." 34. Now aggrieved by the appellate decision of learned CIT(A), the assessee has filed an appeal with tribunal. It was submitted by learned counse for the assessee that the payment were made to local schools schools at Khopoli, Tata Vidalaya at Bhivpuri Camp and Tata Vidyalaya at Bhira where the power units of the assessee are located in close vicinity. It is also claimed that children of the employees were also studying in these schools. It was submitted by learned counsel for the assessee that said claim was raised before the AO for the first time by filing letter dated 21.11.2005 but the AO did not admit this claim. The learned CIT(A) also rejected claim of the assessee on the ground that no such claim was made by the assessee while filing return of income with Revenue. Before us th....