TMI Blog2014 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of “initial assessment year” has been specifically taken away – If the assessee exercises the option of choosing the initial assessment year as culled out in sub-section(2) of section 80IA from which it chooses its 10 years of deduction out of 15 years, then only the losses of the years starting from the initial assessment year alone are to be brought forward as stipulated in section 80IA(5) - The loss prior to the initial assessment year which has already been set off cannot be brought forward and adjusted into the period of 10 years from the initial assessment year as contemplated or chosen by the assessee - It is only when the loss have been incurred from the initial assessment year, then the assessee has to adjust loss in the subsequent assessment years and it has to be computed as if eligible business is the only source of income and then only deduction under section 80IA can be determined - No brought forward loss or depreciation could be reduced for determining the amount for which deduction is to be allowed u/s.80-IA of the Act – Decided in favour of assessee. Whether loss of various loss making units be allocated to various units earning profits for deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relatesDecided in favour of assessee. Penalty u/s 271(1)(c) – Held that:- The penalty for concealment cannot be levied in the case of the appellant merely on the basis of addition made which had been confirmed by the CIT(Appeals) - 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 – Decided in favour of assessee. - ITA No. 610/Ahd/2008, 1834/Ahd/2009, 2054/Ahd/2009, 1835/Ahd/2009, 2055/Ahd/2009, 2053/Ahd/2009 - - - Dated:- 19-12-2013 - Shri N. S. Saini And Shri Kul Bharat,JJ. For the Petitioner : Shri Mehul K. Patel Shri Tushar P. Hemani, ARs For the Respondent : Ms. Ila Varshi Sr. D. R. ORDER Per Shri N. S. Saini, Accountant Member: ITA No.610/Ahd/2008 for AY 2005-06 is the appeal filed by the assessee against the order of the CIT(Appeals)-XIV, Ahmedabad dated 1/12/2007. ITA Nos.1834 2054/Ahd/2009 are the cross-appeals filed by the Assessee and the Revenue against the order of the CIT(A)-XIV, Ahmedabad dated 13/04/2009 for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest expenditure should be taken into consideration. It was further submitted that the Assessing Officer was not justified in invoking the provisions of sec.80IA(5) of the Act for the purpose of deduction u/s.80IA, by ignoring the fact that the Deptt.has in appellant s own case has earlier computed the deduction u/s.80IA without applying the provisions of Sec.80IA(5)of the Act. In support of its contention, the appellant placed its reliance on various judicial decisions as under:- i) CIT v. Delhi Iron and Steel Co.Ltd., 85 TTJ 103 ii) Canara Workshops Pvt.Ltd. 161 ITR 320 (SC) iii)M.Pallonji Co. Pvt.Ltd. v. JCIT, (ITAT Mum.) iv) Indian Transformers Ltd. vs. CIT 86 ITR 192 v) CIT v. L.M. Van Mopps Diamond Tools (India) Ltd. 107 ITR 386 vi) ITO v. Kanchan Oil Indus. Ltd., 92 TTJ 739 vii)HCL Info-Sytems Ltd., v. Dy.CIT, 81 TTJ 922 viii)JCIT v. Dr.Reddys Lab.Ltd., INDLAW ITAT 66 ix) ITC Hotels v. Dy.CIT 107 TTJ 955 x) CIT vs. Siddhganga Oil Extraction Pvt.Ltd., 109 CTR 119 xi) Wipro Information Technology Ltd. v.Dy.CIT 88 TTJ 778 xii)Mitsui Industries Ltd. (ITAT A bad) 1038/Ahd/2000 1071/Ahd/2000. 6.3. I have considered the facts of the case and the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the first time claim was made and not the year of commencement for which the assessee placed reliance on the decision of Hercules Hoists Ltd. vs. ACIT reported in 22 ITR 527 (Mum.Trib). Further, it was argued that the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills vs. ACIT reported in 340 ITR 463 has decided a similar issue. The substantial question of law decided by the Hon ble High Court was as under:- (b) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that initial assessment year in section 80IA(5) would only mean the year of commencement and not the year of claim? The Hon ble Madras High Court answered this question in favour of assessee at page No.493 of the Income Tax Report. It was further held by the Hon ble High Court that loss in the year earlier to the initial assessment year cannot be notionally brought forward and set off against the profits of the eligible business as no such mandate is provided in Section 80IA(5) of the Act. It was further submitted that the Tribunal in the case of Velayudhaswamy Spinning Mills (supra) had followed the decision of Ahmedabad Tribunal Special Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submission that in view of the Third Member order of Kanel Oil (supra), the decision of the Hon ble Madras High Court would prevail over the Special Bench decision. Further, it was also submitted that a similar controversy has been addressed by the Pune Tribunal in the case of Serum International Ltd. vs. ACIT in ITA Nos.290 to 292/Pn/2010, wherein it was held that an authority such as Income Tax Appellate Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. The ld.AR for the assessee further relied on the decision of the Hon ble Madras High Court in the case of M/s.Emerald Jewel Industry P.Ltd. in Tax Case (Appeal) No.715 of 2010, wherein the Hon ble High Court followed its decision in the case of Velayudhaswamy Spinning Mills(supra). 4. On the other hand, ld.DR for the Revenue relied on the orders of the authorities below and admitted that there was no contrary decision of any High Court on the issue. The decision of the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills(supra) was the only issue on the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the other hand, the ld.AR of the assessee has relied on the judgement of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P.) Ltd. vs. ACIT (2012) 340 ITR 477 and the decision of Hon ble Madras High Court in the case of CIT vs. Emerald Jewel Industry (P) Ltd. (2011) 53 DTR (Mad) 262. Regarding the Special Bench decision of the Tribunal in the case of Goldmine Shares Finance (P) Ltd.(supra), the ld.AR submitted that this decision will not be applicable as the same was relevant for the provisions applicable in the assessment years 1996-97 and 1997-98, which was prior to the amendment brought in the Statute by the Finance Act, 1999. 6.1. We find that section 80IA of the Act which has been substituted with effect from 01/04/2000 provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking from any eligible business referred to in sub-section 4, there shall, in accordance with an subject to the provisions of this section, be allowed in computing the total income, the deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive years. Substituted sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward as stipulated in section 80IA(5). The loss prior to the initial assessment year which has already been set off cannot be brought forward and adjusted into the period of 10 years from the initial assessment year as contemplated or chosen by the assessee. It is only when the loss have been incurred from the initial assessment year, then the assessee has to adjust loss in the subsequent assessment years and it has to be computed as if eligible business is the only source of income and then only deduction under section 80IA can be determined. This is the true import of section 80IA(5). 6.3. In the decision of Goldmine Shares and Finance Pvt.Ltd.(supra), decided by the Special Bench of the Tribunal, the claim of deduction by the assessee had started from assessment year 1996-97 onwards and the assessee had claimed deduction under section 80IA starting from the first year itself i.e., assessment year 1996-97. Thus, the Special Bench was dealing with the operation of section 80IA(5) where the assessee had first claimed the deduction in the assessment year 1996-97 and for subsequent assessment years. This aspect of the matter has been very well elaborated by the Hon ble Madras H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Mewar Oil General Mills Ltd. (2004) 186 CTR (Raj) 141 : (2004) 271ITR 311 (Raj), the Rajasthan High Court also considered the scope of s. 80-I and held as follows:- "Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current asst. yr. 1984-85, the recomputation of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the CIT(A), which has not been disturbed by the Tribunal and challenged before us, there was no error much less any error apparent on the M/s. Shevie Exports face of the record which could be rectified. That question would have been germane only if there would have been carry forward of unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. It is not at all required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6- 97. Regarding second unit, the Tribunal held that the judgement of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt.Ltd.(supra) will not be applicable because the income from non-eligible business was set off from the loss of eligible business in the year of commencement. In this case, it was not an issue as to whether the losses pertained to prior to initial assessment year or after the initial assessment year. If the losses have been incurred in the eligible unit and has been set off against the non-eligible unit after the initial assessment year, then the ratio laid down by the Tribunal is in full consonance with the law. However, this is not the case in the instant case because the loss pertained to prior to initial assessment year which have been set off against the profits of non-eligible units. The beginning of the initial assessment year as adopted by the assessee is assessment year 2005-06 only and, therefore, the losses of assessment years 2003-04 2004-05 cannot be notionally carried forward within the meaning of section 80IA(5). Thus, the reliance placed by the learned Departmental Representative on the decision of Pidilite Industries (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On appeal before the ld.CIT(A), the assessee submitted that losses of loss making units should be ignored and not be allocated to the profits of the profit making units. The ld.CIT(A) did not accept the submissions of the assessee on the ground that the issue of allocating the losses of loss making units to the profits of profit making units arose in the AYs 2003- 04 2004-05 and the same was decided against the assessee vide CIT(A) s order 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 vs. Macmillan Co. of India Ltd. 243 ITR 4031 and Motilal Pesticides (I) Pvt.Ltd. vs. CIT 243 ITR 26 (SC). As the facts in the present year of appeal were same, following the order of earlier AYs 2003-04, 2004-05, the CIT(A) confirmed the action of the AO. 11. The ld.AR for the assessee submitted that section 80AB of the Act do not have any such enabling provisions whereby losses of all the units can be redis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. The ld.AR has submitted that due to smallness of the amount involved, the assessee though filed the appeal before the Tribunal in AYs 2003-04 2004-05 but had withdrawn the same and, therefore, the appeals of the assessee were dismissed as withdrawn. Thus, as the Tribunal has dismissed the appeals of the assessee for want of prosecution, it cannot be a decision on merits which can be applied in the subsequent years in the case of the assessee. We find force in the argument of the ld.AR of the assessee since the appeal of the assessee for AYs 2003-04 2004-05 was dismissed in limine by the Tribunal, therefore the ratio in the said decision is not a binding precedent to be applied to the assessee for the subsequent years on the same issue. We find that the issue as pointed out by the ld.AR of the assessee is covered in favour of the assessee by the decision of Chennai Bench of the Tribunal in the case of M/s.Shriram Properties Pvt.Ltd. vs. ACIT (supra), wherein it was held that the 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 gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee before us is netting of interest income with the interest expenditure of the assessee. In our considered view, when deposit in FDRs is made with the borrowed funds, then, only net income can be said to be the interest income derived from FDRs. However, we find that in the instant case, the assessee has brought no material before him to show that borrowed funds were utilized for making the FDRs. We find that also the assessee could not bring any material to show that there was any nexus between the interest expenditure and the interest income earned on FDRs. by the assessee. In the absence of the same, we do not find any good reasons to interfere with the orders of the lower authorities on this issue, which is confirmed. 15.1. In respect of decision of the Hon ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (supra), we find that the same was rendered in the context of section 80HHC of the Act. As per the Explanation (baa) to section 80HHC for computing the profit of the business, 90% of the interest income which has been included in the business income, is required to be excluded. In this context, the Hon ble Supreme Court has held that only 90% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the orders of the authorities below. The AO has disallowed the claim u/s.40(a)(ia) of the Act of Rs.55,61,431/- in AY 2005-06 on the ground that the payment of TDS was paid after the completion of the previous year. On appeal, the ld.CIT(A) confirmed the action of the AO. The ld.AR of the assessee submitted that the issue is now decided in favour of the assessee by the decision of the Hon ble Calcutta High Court in the case of Virgin Creation in G.A. No.3200/2011, wherein it has been held that amendment made by the Finance Act, 2010 was applicable retrospectively. The Ahmedabad Bench of the Tribunal following the said decision in the case of Shreeji Corporation in ITA No.2823/Ahd/2011 has allowed the appeal of the assessee. 21.1. On the other hand, the ld.DR supported the order of the ld.CIT(A). 22. After considering the rival submissions and perusing the material on record, we find that the disallowance u/s.40(a)(ia) of the Act made by the AO as the TDS on the expenditure in question was not paid to the credit of the Central Government by the assessee before the completion of the previous year. We find that the issue is now decided by the Hon ble Calcutta High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar for which such income is assessable" has been omitted. Meaning thereby, that the legislature was quite conscious about the facts and hardships faced by some assessees, while making the amendments in section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per amended provisions of section 199, in sub-section 1, it has been stated that any deductions 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. Therefore, as per the amended provisions, once the TDS was deducted, a credit of the same to be given to the assessees, irrespective of the year to which it relates. The pre-amended and the amended provisions of section 199 are extracted hereunder: "Section 199: Credit for tax deducted - (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 depositor or owner of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the years. 28. The only last issue in the Revenue s appeal is that the ld.CIT(A) erred in the AYs 2006-07 2007-08 in directing the AO to allocate the only net interest expenditure amongst authorized units of the assessee, while calculating deduction u/s.80-IA(4) of the Act. 29. We have decided a similar issue in the appeal of the assessee above in para No.15 of this order, wherein we have dismissed the ground of appeal of the assessee. For the same reason stated above, we allow the ground of appeal of the Revenue. 30. The Appeal for the Revenue in ITA No.2053/Ahd/2009 is against the order of the ld.CIT(A) deleting the penalty of Rs.1,24,21,048/- levied u/s.271(1)(c) of the Act in the AY 2005-06. The penalty u/s.271(1)(c) of the Act was levied by the AO on the ground of concealment of particulars of income or furnishing inaccurate particulars of income on the ground that the AO has made disallowance of Rs.3,39,44,245/- out of the claim of deduction u/s.80-IA(4) of the Act. 30.1. The brief facts of the case are that the AO while framing the assessment for AY 2005-06 disallowed Rs.3,39,44,245/- out of the claim for deduction u/s.80-IA(4) of the Act as in his view brought fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, we have held that deduction u/s.80-IA of the Act is to be allowed to the assessee without reducing the notional brought forward losses for AYs 2003-04 2004-05 because section 80-IA of the Act was amended by the Finance Act-1999 and, therefore, the losses of earlier years were not to be adjusted in view of the fact that the assessee has selected the present AY 2005-06 as initial assessment year. In view of our above finding in the quantum appeal of the assessee, the very basis for levy of penalty does not survive. Therefore, we confirm the order of the ld.CIT(A) in deleting the penalty of Rs.1,24,21,048/- in its entirety. Thus, this ground of the appeal of the Revenue is dismissed. 32. In the combined result, all the three appeals of the Assessee in ITA No.610/Ahd/08 for AY 2005-06, in ITA No.1834/Ahd/2009 for 2006-07 in ITA No.1835/Ahd/2009 for AY 2007-08 are partly allowed, whereas appeal of the Revenue in ITA No.2053/Ahd/2009 for AY 2005-06 is dismissed and appeals of the Revenue in ITA Nos.2054 2055/Ahd/2009 for AYs 2006-07 2007-08 are partly allowed. Order pronounced in Court on the date mentioned hereinabove at caption page. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
