AI Drafter 
TaxTMI 
TaxTMI 
2017 (9) TMI 1905
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....at the investment was made in Growth fund and no exempt income is earned on these investments." 3. The basic facts relevant for adjudication of these appeals include that the assessee was a Small Scale Industry (SSI) starting from A.Y. 2003-04 onwards. The said claim of SSI unit was allowed to the assessee in A.Y. 2003-04 and A.Y. 2004-05. In the earlier A.Y. 2005-06, the claim of the assessee was to be reexamined by way of re-assessment u/s.148 of the Act qua the SSI status. The ITAT, Pune quashed the said notice u/s.148 on technical grounds. In effect, the claim of the assessee was allowed in this year also. Assessee discontinued to claim the SSI status for A.Yrs. 2006-07 and 2007-08 for claiming of deduction u/s.80IB(3)(ii) of the Act. However, assessee renewed the claim of SSI status in the A.Yrs. 2008-09 and 2009-10. Following the decision of Pune Bench of the Tribunal in the case of M/s.Samruddhi Industries Ltd. Vs. JCIT in ITA No.1002/PN/2009 order dated 31-03-2011, the claim of SSI status of the assessee qua the deduction u/s.80IB(3)(ii) was denied. Assessee filed an appeal before the Hon'ble High Court and the same is pending for admission. 4. In the background of th....
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....u/s.80IB(3)(ii) of the Act to the assessee for the A.Yrs. 2008-09 and 2009-10. The appeals against the said orders of the Tribunal in assessee's own case are pending for admission before the jurisdictional High Court. Therefore, according to the Ld. AR, the Tribunal decided the issue both in the case of (1) M/s. Samruddhi Industries Ltd. as well as (2) in assessee' own case for A.Yrs. 2008-09 and 2009-10, against the assessees when the judgment of Hon'ble Karnataka High Court is not in existence on the issue under consideration. The issue relates to - if the SSI- assessee can continue to claim deduction u/s.80IB(3)(ii) of the Act even when the said assessee grows beyond the SSI definition. 7. On this issue, Ld. Counsel for the assessee brought our attention to the said judgment of the Hon'ble Karnataka High Court in the case of Ace Multi Axes Systems Ltd. (367 ITR 0266), which was the only favourable one and unfortunately not available when the case of M/s. Samruddhi Industries Ltd. was decided by the Tribunal against that assessee. Similarly, this judgment was also not available when the assessee's said appeals were decided against the present assessee. Further, referring to th....
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.... the list in the Eleventh Schedule, is also entitled to the aforesaid deduction. The fourth condition is, the said industrial undertaking employs 10 or more workers in a manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing process carried on without the aid of power. Once these four conditions are fulfilled, the assessee is entitled to the benefit under Sec. BOIB of the Act. Sub-sec.(3) of See. 80IB provides the extent of deduction eligible under Sec. 80IB and also the number of years such a deduction is available to such an undertaking. Sub-see. (3) mandates that the industrial undertaking shall be eligible for the said deduction for a period of 10 consecutive years, beginning with the initial assessment year. However, it is subject to two conditions as stipulated therein. The second condition is what is applicable to the case on hand which provides, if the industrial undertaking is a small scale industry undertaking, it has to begin manufacture or produce articles or things at any time during the period beginning on the 1st day of April 1995 and end on the 31st day of March 2002. This is a condition which a small scale industry h....
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....tion of a small scale industry, that should not come in the way of its claiming benefit under Sec. 80IB for 10 consecutive years, from the initial assessment year. Therefore the approach of the authorities runs counter to the scheme and the intent of the Legislature. Thereby they have denied the legitimate benefit, an incentive granted to the assessee. Both the said orders cannot be sustained. Therefore the substantial question of law is answered in favour of the assessee and against the Revenue. Hence we pass the following: * At this stage, we may also refer to the decision In case of Pravin Soni 333 ITR 0324 - Delhi He (relied upon by the revenue DR). This decision does not help revenue in a case where conditions were proved in the initial year. The decision quoted by the Ld. DR is in respect of situation where the conditions when the assessee first time put up its claim required to be fulfilled. Therefore, we pray your honor to follow judicial precedent (i.e. follow Karnataka HC decision) as the Binding precedent. This judicial precedent is as per Born HC decision in case of M/s Valson Dyeing Bleaching & Printing works - Bom HC - Central Excise Appeal ....
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....e of Smt. Godavaridevi Saraf (Supra). In our considered view, the Tribunal had no option but to follow the judgement of the Madras High Court. * Further, the decision in case of SMT. GODAVARIDEVI SARAF - HIGH COURT OF BOMBAY - 113 ITR 0589 also supports our contention - Appeal (Tribunal)-Jurisdiction of Tribunal-Constitutionality of provision vis- avis following High Court decision-IT Act is all-India statute and if the Tribunal in Madras, in view of the decision of the Madras High Court, has to proceed on the footing that s. 140A(3) was non-existent, the order of penalty thereunder cannot be imposed by the authority under the Act-Until a contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land-It is not possible to take the view that the Tribunal in Bombay, when it set aside the order of penalty, went into the question of the constitutionality of that section and gave a finding that it is ultra vires following the decision of the Madras High Court- What the Tribunal really did w....
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....9;ble Madras High Court is the solitary judgment of a High Court and therefore, following the ratio laid down in the case of Godavaridevi Saraf (supra), the Tribunal in the case of Serum International Ltd. (supra) made no mistake in deciding the issue in accordance with the judgment of the Hon'ble Madras High Court. Therefore, in our view, there is no justification on the part of the CIT(A) for not following the decision of the Tribunal in the case of Serum International Ltd. (supra). Therefore, in view of all the above, we pray your honor allow claim u/s 80IB(3)(ii) considering decision of Karnataka HC & Delhi HC." 9. Ld. Departmental Representative for the Revenue relied heavily on the order of the AO, CIT(A) and the Coordinate Bench orders of the Tribunal in the case of M/s. Samruddhi Industries Ltd.(supra) as well as the order in assessee' own case for A.Yrs. 2008-09 and 2009-10 (supra). Ld. DR submitted that the decision of the CIT(A) should be confirmed as the judgment of Hon'ble Karnataka High Court in the case of Ace Multi Axes Systems Ltd. (supra) constitutes the one from the nonjurisdictional High Court. Ld. DR merely relied on the order of the AO/CIT(A), ....
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....ion when it grows into a larger Industry outside the definition of SSI unit. The issue adjudicated by the Hon'ble Karnataka High Court in the case of Ace Multi Axes Systems Ltd. (supra) is the same precisely. We proceed to extract the Held portion from the said judgment : "Held : In the entire provision, there was no indication that these conditions had to be fulfilled by the assessee all the 10 years. When once the benefit of 10 years, commencing from the initial year, was granted, if the undertaking satisfy all these conditions initially, the undertaking was entitled to the benefit of 10 consecutive years. The argument that, in the course of 10 years, if the growth of the industry was fast and it acquires machinery and the total value of the machinery exceeds Rs. 1 crore, it ceases to have the said benefit, do not follow from any of the provisions. It was true that there was no express provision indicating either way, what would be the position if the small scale industry ceases to be a small scale industry during the said period of 10 years. Because of that ambiguity., a need for interpretation arises. If we keep in mind the object of the Legislature providing ....
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....). This judgment being dated 28-07-2014 was not available to the AO or to the Tribunal when the assessment orders for A.Yrs. 2008-09 and 2009-10 were finalized. The said judgment was also not available to the Tribunal which decided the appeal in the case of M/s. Samruddhi Industries Ltd. on 31-03-2011. Further, the said judgment since decided within the same week, i.e. 28-07-2014 (only a gap of 2 days) before the Tribunal's order in the assessee's own case was passed on 30-07-2014. Although the said judgment was relied on by the assessee during the appellate proceedings (at Para No.9) extracted above, the CIT(A) merely ignored the said ratio in the case of Ace Multi Axes Systems Ltd. (supra). CIT(A) did not adjudicate the facts before deciding the issue against the assessee. Therefore, we are of the considered view that the ratio laid down by the Hon'ble Karnataka High Court, in the absence of any other contrary judgments from any other High Courts, is binding for this Tribunal for the year under consideration. Principles of judicial discipline demands that such judgment of Hon'ble Karnataka High Court has binding effect in supercession of the existing orders of the Coordinate Benc....
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....ulfill each of the conditions laid down in the said instruction. The same is as under - Situation as per draft instruction Whether satisfied Remark Purchase and sale of securities is usual trade No Main business is Auto component manufacturing Purchase is made solely for sale No From the period of holding this can be established High scale of activity in the investment No The capital employed in manufacturing activity is much higher than Investments in shares Continuity in investment activities. No Number of transaction proves. Borrowed Funds No Sufficient own funds. Object of in MA an AA No Main object relates to manufacturing Typical Holding Period very small No The Figures are given in the earlier table Ratio of sales to purchase is high No The figures are given in the earlier table High time devoted to this activity No The scale of production activity and investment activity proves this Treatment in books -as stock No Balance sheet shows this as investment Whether listed shares Yes Naturally as the investment should be saleable Investment in sister concern No &nb....
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....exempt income which formed part of the total income ,i.e. Rs. 1,37,806/- in this case. For this proposition, he relied on various decisions in favour of the assessee. 19. On hearing both the parties, we are of the opinion that it is settled legal proposition that the disallowance u/s.14A read with Rule 8D should not exceed the exempt income. Therefore, we direct the AO to restrict the disallowance to the exempt income of Rs. 1,37,806/- after netting the suo moto disallowance of Rs. 24,508/- discussed above. With these directions, Ground No.3 raised by the assessee is partly allowed. 20. In the result, appeal of the assessee is partly allowed. ITA No.96/PUN/2015 - By Revenue : 21. Grounds raised by the Revenue are as under : "1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified to interpret the operation of section 80IA(5) only from the year of first claim of deduction u/s.80IA(1) even when the eligible business had commenced in earlier years. 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was correct to treat the judgment of non-jurisdictional High Court as the bind....
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.... "9. The Assessing Officer had disallowed the claim of deduction u/s.80IA(4)(iv)(a) of the I.T. Act amounting to Rs. 43,93,235/-. The Assessing Officer also treated Sangli and Dhule units as single one having same eligible business. The claim was made in respect of wind mill located at Sangli. The issue pertains to losses of the undertaking before the initial year already adjusted against other income. During the course of the assessment proceedings, the assessee relied upon various decisions including Pune Tribunal's decision in the case of Poonawala Finvest & Agro (P) Ltd. Vs. Asst. Commissioner of Income-tax reported in (2008) 118 TTJ (Pune) 68. The Assessing Officer however relying upon Special Bench decision of Ahmedabad Tribunal reported in the case of ACIT Vs. Goldmine Shares & Finance (P) Ltd. reported in 116 TTJ (Ahmedabad) 705, disallowed the claim of the assessee. While doing so, the Assessing Officer also held that initial assessment year has to be considered as the year in which power generation commences and not the year in which it chooses to make claim for deduction for the first time. The Assessing Officer held that in the current section 80IA(5), there is n....
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.... could not be followed in view of the Hon'ble Madras High Court judgment in case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT reported in 38 DTR 57. ITAT, Bangalore Bench in the case of Anil H Lad Vs. DCIT did not follow the Special Bench decision of the Ahmedabad Bench Tribunal in view of above judgment of Madras High Court. Relevant portion of the order is reproduced for the sake of clarity: "From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercise option, the only losses of the years beginning from initial A.Y. 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 o....