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TMI Blog2014 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowing the assessee's claim for deduction u/s.80-IA(4) of the Act of Rs.3,39,44,245/- (for AY 2005-06), Rs.9,11,193/- (for AY 2006-07) & Rs.59,98,462/- (for AY 2007-08). 3. At the time of hearing, the ld.ARs for the assessee submitted that except for change in figure the facts of the case are same in all the years and, therefore, there are being argued together for the sake of convenience. The facts of the case as stated by the CIT(A) in the Asst.Year 2005-06 are as under:- "6.1. Grounds No.4, 5 & 7 are against restricting the appellant's claim of deduction of Rs.4,81,64,760/- u/s.80IA to Rs.1,42,25,550/-. The A.O. while computing the deduction u/s.80IA, has first allocated the common expenses including gross expenditure on account of interest to different units and then allocated the losses of various loss making units to various units earning profits and after setting off the losses of units with profits of other units, deduction has been calculated. The AO has also invoked the provisions of Sec.80IA(5) of the I.T.Act and made the computation of deduction u/s.80IA after discussing in detail the facts of the case, provisions of the I.T.Act and various case laws in the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der No.ACIT C.8/60/2006-07 & ACIT C.8/59/2006-07 both dated 03/01/2007 respectively. While deciding the appeals, it was observed that after the introduction of Sec.80AB, the loss in other units has to be considered before arriving the figure for calculating the deduction and this view is supported by the Madras High Court in the case of CIT v. Macmillan Co. of India Ltd. 243 ITT 4031 and Motilal Pesticides (I) Pvt.Ltd. v. CIT., 243 ITR 26 (SC). As the facts are similar in this year, following the order of CIT(A), supra, I hold that the action of AO in computing the deduction u/s.80IA was quite justified and the same is upheld." 3.1. The ld.ARs for the assessee submitted that during the year under consideration, the assessee had claimed deduction u/s.80-IA(4) of the Act in respect of Udaipur Undertaking, Viramgam Undertaking, Malvan Undertaking and Banas Syphon Undertaking. The AO has invoked provisions of Section 80-IA(5) of the Act. It was submitted that regarding the claim made in respect of Malvan Undertaking and Banas Syphon Undertaking, since no loss were incurred in earlier years, the AO has allowed the claim made for the year under consideration. However, in respect of Udai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that regarding the controversy whether non-jurisdictional High Court decision would prevail or the Special Bench order on the same issue where both the authorities have taken a contrary view is concerned, it is most respectfully submitted that such controversy would not take place in the present case. The reason is that the Hon'ble Madras High Court has rendered the decision after duly taking the cognizance of the Special Bench order. Had it been the case where the High Court would have rendered the decision without taking into cognizance of the Special Bench order, the controversy could have been arisen. It was further submitted that in the case of Kanel Oil (Ahmedabad Bench Third Member) reported in 121 ITD 596, it was held that the view of the High Court is above the Tribunal in the judicial hierarchy and that the judgement of a non-jurisdictional High Court would prevail over that of the Special Bench is subject to the exception that where there is only one judgement of the High Court on the issue and no contrary view has been expressed by any other High Court and that where the judgement of the non-jurisdicitonal High Court, though the only jdugement on the point is 'per inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions, perused the material available on record and gone through the orders of the authorities below. In the instant case, the assessee claimed deduction u/s.80IA(4) of the Act for all the years which were disallowed by the AO on the ground that as per provisions of section 80IA(5) of the Act the computation of deduction has to be done by setting off of brought forward losses and depreciation of eligible business against their respective eligible incomes. After doing so, deduction u/s.80IA(4) of the Act, allowable to the assessee works out to Rs.1,42,20,515 in AY 2005-06. Accordingly, the AO disallowed the claim for deduction u/s.80IA of Rs.3,39,44,245/- to the assessee. Similarly, the AO disallowed u/s.80-IA(4) of the Act Rs.9,11,193/- (for AY 2006-07) & Rs.59,98,462/- (for AY 2007-08). 6. On appeal, the ld.CIT(A) confirmed the action of the AO on the very same reason. We find that the assessee had set up Udaipur Undertaking and Viramgam Undertaking in AY 2003-04. The assessee incurred losses from these two eligible Units for deduction u/s.80-IA and, therefore, no deduction was claimed in the said AY u/s.80-IA of the Act. In the AY 2005-06, the assessee earned profit fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an eligible business. The relevant provisions of sub-section (5) of section 80IA, reads as under:- "(5) 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 upto and including the assessment year for which the determination is to be made." 6.2 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 and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years 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 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. 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. 14. In the present cases, there is no dispute that losses incurred by the assessee were already set off and adjusted against the profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from those which prevailed with the Tribunal. There 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 1under s. 80-1 for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and From 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 s. 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." 6.4. This judgement has been followed by the same High Court in the case of CIT vs. Emerald Jewel Industry (P) Ltd. (2011) 53 DTR 262 (Mad.). From the above ratio of the High Court, it is amply clear that sub-section (5) of section 80IA will come into operation only from the initial assessment year or any subsequent assessment year. The option of choosing the init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1999- 2000, the definition of "initial assessment year" was already there in the Act and there was no provision through which the assessee could have chosen its initial assessment year. This provision was brought in statute w.e.f. 1/04/2000, by virtue of section 80IA. Thus, this decision also will not help the Department. In the assessee's case, as specifically stated in the foregoing paragraphs, the assessee's claim for initial assessment year, i.e. assessment year 2005-06 and its claim for deduction under section 80IA made for the first time from assessment year 2005-06, has not been disputed. Thus, the aforesaid judgement relied upon by the ld.DR for the assessee will not be applicable to the facts of the present case. 9. We reiterate that in the instant case, it is not in dispute that initial assessment year is the assessment year 2005-06 and subsequent years thereto involved in the present appeals are assessment years 2006-07 & 2007-08 and it is also not in dispute that the assessee has not suffered any loss in the said three assessment years. Therefore, in our considered opinion, no brought forward loss or depreciation could be reduced for determining the amount for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of the Tribunal in the case of M/s.Shriram Properties Pvt.Ltd. vs. ACIT reported in 36 taxmann.com 398 (Chennai), wherein it was held that the AO disallowed claim of deduction u/s.80-IB of the Act in respect of two eligible projects, as loss on two other eligible projects was more than such profit. The Tribunal held that profit derived from a particular eligible industrial undertaking is qualified for deduction u/s.80IB without reduction of loss suffered by any other eligible industrial undertaking, subject to gross total income of assessee. Thus, where gross total income of the assessee, after adjusting losses suffered by assessee in other projects was more than claim of deduction u/s.80IB, deduction could not be disallowed. With regard to the AYs 2003-04 & 2004-05, the ld.AR of the assessee submitted that due to smallness of the amount involved, appeals filed before the Tribunal in ITA Nos.762 & 763/Ahd/2007 were withdrawn by the assessee, therefore the same were dismissed as withdrawn by the Tribunal vide order dated 12/08/2010. Thus, it cannot be held that the decision of the Tribunal in AYs 2003-04 & 2004-05 was after considering the merits of the issue and, therefore, app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion allowable u/s.80IA to the assessee allocated the gross interest expenditure in place of net interest expenditure to two different units. On appeals, the ld.CIT(A) confirmed the action of the AO on the ground that in the AYs 2003-04 & 2004-05 vide CIT(A)'s order No.ACIT C.8/60/2006-07 & ACIT C.8/59/2006-07 both dated 03/01/2007. 14.2. The ld.AR of the assessee submitted that thought he assessee filed the appeal before the Tribunal for AYs 2003-04 & 2004-05 against the order of the ld.CIT(A) in ITA Nos.762 & 763/Ahd/2007, but withdrew the same due to smallness of the amount. Thus, as the appeal of the assessee was dismissed without deciding the same on merits by the Tribunal on the ground of want of prosecution, the said decision cannot be a binding precedent to be applied in the case of the assessee in the subsequent assessment years. He further relied on the decision of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt.Ltd. vs. CIT 343 ITR 89 (SC) and submitted that the Hon'ble Supreme Court has held that only net expenditure on account of interest can be taken into consideration while working out the deduction u/s.80-IA of the Act and not the gross amount of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The next issue involved in appeal of the assessee in AYs 2005-06 & 2007-08 is that the ld.CIT(A) erred in confirming the disallowance made by the AO of Rs.12,80,355/- in the AY 2005-06 and Rs.15,88,516/- in the AY 2007-08 on account of Employees Contribution to PF. 17. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO following the decision of Hon'ble Kerala High Court in the case of CIT vs. South India Corporation Ltd. reported in 242 ITR 114 disallowed the deduction claimed in respect of employees' contribution to PF on the ground that the same was paid after the due date provided under the PF Act. On appeal, the ld.CIT(A) directed the AO to allow the deduction for the same if it was paid within the grace-period allowed under the respective Act. 18. The ld.AR of the assessee submitted that the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (319 ITR 306)[SC] has held that if the employees' PF contribution was deposited by the assessee before the due date of filing of return of income u/s.139(1) of the Act, then the same should be allowed while computing the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure of Rs.515,61,431/- was deposited by the assessee before the due date of filing of return of income u/s.139(1) of the Act, and if so, then allow the claim for deduction to the assessee. Thus, this ground of the assessee is also allowed. 23. The other issues involved in AYs 2006-07 & 2007-08 in the appeal of the assessee is that the ld.CIT(A) erred in confirming the action of the AO in not allowing the credit for tax deducted at source on mobilization advance received. 24. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The brief facts of the case are that the assessee claimed credit for TDS of Rs.1,73,52,062/- for the AY 2006-07 and Rs.2,25,09,037/- in AY 2007- 08 which was not allowed by the AO on the ground that the income in respect of the said TDS was not shown by the assessee in view of the provisions of section 199 of the Act. The ld.CIT(A) also confirmed the same. 25. The AR of the assessee submitted that the issue is now covered in favour of the assessee by the decision of Hon'ble Visakhapatnam Bench of the Tribunal in ITA No.324/Vizag/2009 for AY 2006-07, dated 03/03/2011 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given. Section 199. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made." 26. The ld. DR could not cite any contrary decision or any other good reason for which the aforesaid decision of the Co-ordinate Bench of the Tribunal should not be followed by us. Respectfully following the aforesaid order of the Tribunal, we set aside the orders of the lower authorities and direct the AO to allow credit for the TDS to the assessee. Thus, the ground of appeal of the assessee is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncealment cannot be levied in the case of the appellant merely on the basis of addition made which had been confirmed by the CIT(Appeals), as full particulars of the claim have been disclosed being fully supported by audit report and claim of netting of income u/s.80IA and applicability of section 80IA(4) r.w.s.(5) being debatable issue, there being two views, no malafide intention can be attributed to the appellant. The bona fide of the appellant is further established by the fact that in the return of income though it has disclosed income of Rs.1,98,28,045/- under the normal provisions of the Act, the appellant had voluntarily opted to pay higher amount of tax u/s.115JB on the Book profit of rs.7,47,72,995/-. Hence, having considered the totality of the facts and circumstances of the case, I hold that it is not a fit case for levy of the penalty u/s.271(1)(c). Before parting, it is pertinent to mention here that in the appellant's own case penalty levied u/s.271(1)(c) for AY 2003-04 was deleted by the CIT(Appeals) vide order dated 19/9/2008 and on appeal filed by the revenue, the ITAT had upheld the order of the CIT(A) vide the order dated 13/3/2009 in ITA No.3902/AHD/2008 as si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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