TaxTMI 
TaxTMI 
2014 (9) TMI 1261
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....ar for the purpose of claiming deduction u/s.80IA(4) of the I.T. Act. It was argued that the initial year has not been defined in I.T. Act and according to the assessee "initial year" is the year in which the assessee has chosen to claim the deduction u/s.80IA(4) of the I.T. Act. It was further argued that for the purpose of claiming deduction under the said section, the profits have to be computed as if the eligible business is the only source of income and when the assessee exercises the option only the loss of the years beginning from the initial assessment year are to be brought forward and not losses of the earlier years which have already been set off against other income of the assessee. For the above proposition, the assessee relied on the decision of Hon'ble Madras High Court in the case of Velayudhaswami Spinning Mills Pvt. Ltd. reported in 340 ITR 477. 3. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that the assessee has set-off depreciation on the Wind Mill not only against the income from Wind Mill business, but also against the income from other sources from A.Y. 2006-07, which is not as per the provisions i....
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....ion of the appellant and perused the material available on record. The appellant has raised three grounds of appeal and in ground no. 1 and its sub-grounds the disallowance of deduction claimed u/s 80IA(4) amounting to Rs. 38,82,992/- has been contested. During the assessment proceedings the A.O. held that in view of section 80IA(5), 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. Accordingly, the A.O. has set off the notional depreciation against the income from windmill activity and has held that the unabsorbed depreciation is much more that the income received from the activity of windmill and hence, the assessee is not entitled to claim deduction u/s 80IA of the Act. As the assessee have been claiming deduction u/s 80IA in respect of profits from the eligible business without adjusting the prior year's losses from such eligible business against the current year's income, the A.O. went on to disallow the claim amounting to Rs.38,82,992/-. 3.3 The appellant during the appellate proceedings has con....
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....f against other income of the assessee. The appellant has pointed out that the aforesaid legal interpretation has been approved by the Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs ACIT (2012) 340 ITR 477 (Mad) and appellant has placed reliance on this decision for the preposition of its claim. The appellant has also relied upon the decision of the Pune ITAT in the case of Poonawalla Estate & Stud Farm Ltd. (2011) 136 TTJ 236 (Pune) / (2010) 48 DTR 40. The appellant has relied on the following judicial decisions: 1) Serum International Ltd., ITA Nos. 290 to 292/PN/2010 2) Chordia Food Products Ltd. Pune Tribunal order dt. 26.06.2012 3) Shevie Exports, Mumbai - ITA No. 321/Mum/2012 4) Malpani Sales Corporation, ITA No. 471/PN/2010 dated 26.08.2011 5) Prashant Caterers, Mumbai, ITA No, 4226/M/2011 dt. 6.02.2013 3.4 The Assessing Officer during the assessment proceedings held that for the purpose of deduction u/s 80IA the depreciation set off in the earlier years against other income of the appellant had to be carried forward notionally to be set off only against the income of the said eligible windmill. The A.O., thus calculated the deduction ....
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....depending upon the facts of the case and the option exercised by the assessee, the year of claim also can be considered as 'initial assessment year'. It also held that the issue is squarely covered by the Hon'ble Madras High Court cited supra and that where such an overriding judgment of the constitutional court is governing the issue, we are not permitted to rely on the decision of the Special Bench of the Ahmedabad Tribunal." 3.6.2 In the case of Serum International Ltd. Vs Addl. CIT, ITA No. 290 to 292/PN/2010 dated 28.09.2011, the Pune ITAT has considered the Special Bench decision of the Ahmedabad ITAT cited (supra) as also the decision of the Madras High Court in the case of Velayudhaswami Spinning Mills Pvt. Ltd. 231 CTR 368, as under: "13. Having been considered the above submissions, we find that the issue raised in Ground no. 1 as to what would be the initial A. Y. for the purposes of section 80IA(5) of the Act has been decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs ACIT (Supra). In that case after discussing the issue in detail, the Tribunal has come to the conclusion that th....
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....f a different State, so long as there is no contrary decision of any other High Court. The Hon'ble Bombay High Court has been pleased to hold further that the Tribunal had no option but to follow the judgement of the Madras High Court. An authority like Income Tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so land as there is no contrary decision of any other High Court on that question. We thus respectfully following the ratio laid down by the Hon'ble jurisdictional High Court in the case of Commissioner of Central Excise Vs. Vakson Dyeing, Bleaching and Printing Works (supra) hold that the Tribunal is bound by the decision of the Hon'ble Madras High Court on an identical issue in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (supra). We thus respectfully following the decision taken by the Hon'ble Madras High Court in that case on an identical issue under almost similar facts, hold that when the assessee exercising the option, only the losses of the year beginning from the initial A. Y. are to be brought forward and not the losses of earlier year which have been already set....
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....8 and submitted that the issue stands squarely covered in favour of the Assessee and against the Revenue. It has been held in the said decision that when the assessee exercises the option identifying 10 consecutive years as contained in sub-section (2) of section 80IA of the Act, only the losses of the year beginning from such initial assessment year are to be brought forward and set off while applying the provisions of section 80IA(5) of the Act and not losses of earlier years which otherwise were set off against other income of the assessee. He accordingly submitted that the order of the CIT(A) being in accordance with the consistent decision of the Tribunal as well as the decision of the Hon'ble Madras High Court in the case of Velayudhaswami Spinning Mills Pvt. Ltd. (Supra) therefore, the grounds raised by the Revenue should be dismissed. 8. The Ld. Departmental Representative on the other hand relied on the decision of the Mumbai Bench of the Tribunal in the case of Pidilite Industries Ltd. Vs. DCIT reported in (2011) 12 taxmann.com 96 (Mum) and submitted that the Tribunal following the decision of the Special Bench in the case of ACIT Vs. Goldman Shares and Finance Pvt. Ltd.....
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..... The undertaking of the assessee generating power (viz. windmill) was set up in the previous year relevant to the assessment year 2002-03 at Vankusawade, Tal. Pathan, Dist. Satara. In terms of section 80-IA of the Act, the profits derived by such undertaking of the assessee was eligible for the benefit of deduction to the extent of 100% of such profits. This deduction was available for a period of ten consecutive years at the option of the assessee out of the fifteen years beginning from the year in which the undertaking i.e. windmill started generating power. The assessee asserted before the Assessing Officer that such an option was exercised by the assessee w.e.f. 2004-05 and it was explained that the relevant disclosure was made in the income-tax return filed for such assessment year. 5. The bone of contention between the assessee and the Revenue is with regard to the provisions of section 80-IA(5) of the Act. Section 80-IA(5) of the Act creates a fiction that for the purpose of computing deduction u/s 80-IA of the Act, it was to be presumed that the eligible unit was only the source of income of the assessee during the previous year relevant to initial assessment year and al....
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....assessee is that the 'initial assessment year' in this case is to be treated as 2004-05 i.e. the year in which assessee exercised the option contained in section 80-IA(2) of the Act of identifying ten consecutive assessment years out of fifteen years for which the deduction is to be availed. It is contended that the expression 'initial assessment year' referred to in section 80- IA(5) is to be understood with respect to A.Y. 2004-05 in this case and therefore, the losses for assessment year prior to 2004-05 cannot be considered, which otherwise also were lying absorbed in the respective years. It is only the losses which have been incurred in the years starting from A.Y. 2004-05 onwards which are to be set off against the profits of the eligible business in order to quantify the deduction u/s 80-IA of the Act. 6. Before us, the learned counsel for the assessee has submitted that the Pune Bench of the Tribunal in the case of Serum International Ltd. Vs. Addl. CIT Range 6, Pune in ITA Nos. 290 to 292/PN/2010 for A.Y. 2004-05 to 2006-07 vide order dated 28-9- 2011 has considered an identical controversy and after following the decision of the Hon'ble Madras High Court in the case of....
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....ldmine Shares and Finance (P) Ltd. (Supra) followed by the Pune Bench of the Tribunal in its recent decision in the case of Prima Paper Engg (P) Ltd. Vs. ITO (Supra) and there the assessee did not dispute the fact that the authorities below have decided the issue following the decision of Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares.. The Ld. A.R. pointed out that decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra) was not cited before the Pune Bench in the case of Prima Paper Engg (P) Ltd. Vs. ITO (Supra). The Ld. A.R. has also cited the decision of Pune Bench of the Tribunal in the case of ACIT Vs. Aurangabad Holiday Resorts (P) Ltd., (Supra) holding that even a decision of non-jurisdictional High Court is a binding precedent for the Tribunal until a contrary decision is given by any other competent High Court. Similar view has been expressed by the Hon'ble Bombay High Court in the case of Commissioner of Central Excise Vs. M/s. Valson Dyeing, Bleaching and Printing Works (Supra). 12. The contention of the Ld. D.R. on the other hand remained that deduction u/s. 801 and 801A covered inter alia, indu....
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....he Act has been decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT (Supra). In that case after discussing the issue in detail, the Tribunal has come to the conclusion that the initial 'A.Y' for the purpose of claiming deduction u/s. 80IA was the first year in which the assessee claimed the deduction u/s. 80IA (1) after exercising his option as per the provisions of 80IA (2) of the Act. It was held that the Ld CIT(A) has erred in holding that the initial A.Y for the purposes of Section 80IA(2) r.w.s. 80IA (5) was the year in which the assessee started generating electricity from the wind mill activity. We also find that the issue raised in Ground No. 2 regarding the eligibility of the assessee to claim deduction u/s. 80IA undiminished by unabsorbed losses and depreciation also set off in earlier years against the other income, is fully covered by the decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra) holding that as per Sub-section (5) of Section 80IA, profits are to be computed as if such eligible business is the only source of income of the asse....
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....ilar facts, hold that when the assessee exercising the option, only the losses of the year beginning from the initial A.Y. are to be brought forward and not the losses of earlier year which have been already set off against the other income of the assessee. The revenue cannot notionally bring forward any loss of earlier years which has already been set off against any other income of the assessee and set off the same against the current income of the eligible business. We thus set aside the orders of the authorities below and direct the A.O to allow the claimed deduction u/s. 80IA without bringing the notionally brought forward any loss or depreciation of earlier years which has already been set off against other income of the assessee. The decision of Pune Bench of the Tribunal in the case of Prima Paper Engineering P.Ltd. Vs. ITO (Supra) cited by the Ld. DR is also not helpful to the revenue since firstly the decision of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (Supra) on the issue was not cited before the Bench and secondly the ld. AR fairly agreed that the issue raised was covered against the assessee by the decision of Specia....