TMI Blog2014 (9) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... odernization with the use of modern technology.the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable - The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry – the matter is remitted back for fresh adjudication – Decided in favour of assessee. Deduction u/s 80IA - Profits from electricity generation from wind mill – Held that:- Following the decision in M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - in all the appeals under consideration the initial year chosen by the assessee for claiming deduction is after 1-4-2000 when the amended provision of section 80IA was applicable - 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 or any subsequent assessment year to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to related parties to the income of the assessee – relying upon M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - Decided against Revenue. Amount paid to sister concern disallowed u/s 40A(2)(b) – Held that:- Following the decision in M/s. Jivraj Tea & Industries Ltd. Versus The ACIT, Central Circle-2, Surat [2014 (1) TMI 234 - ITAT AHMEDABAD] - by comparing weekly average the CIT(A) found that the average price of the assessee from its associate concerns were lower than the average price of purchase from others - no material was brought on record by the Revenue to rebut the contention of the assessee that the tea which the assessee purchased from its sister concerns were in turn purchased by those sister concerns in auction from un-related parties and the price at which similar concerns sold those tea to the assessee were merely 2% higher than the auctioned price and the difference of 2% also includes actual expenses which sister concerns had to incur in the transactions - the disallowance was made on a wrong footing - the disallowance u/s 40(A)(2)(b) of the Act in its entirety – Decided in favour of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Liberty India Vs. CIT, 317 ITR 128, wherein it has been held that profit on sale of DEPB and Duty Trade Back are not derived from the eligible business and therefore not eligible for deduction u/s. 80IA or 80IB of the Act. 31. Learned AR for the assessee during the course of hearing submitted that the main contention of the assessee before the learned CIT(A) was that the sales tax incentive was a capital receipt of the assessee and hence not liable to tax and for this proposition he relied on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Birla VXL Ltd. (supra). He contended that the learned CIT(A) has not adjudicated upon this contention of the assessee and neither has recorded the same in his order which was submitted to him by way of a written submission. He therefore contended that in view of the decision of the Hon'ble Jurisdictional High Court it has to be held that the sales tax incentives are capital receipt in the hands of the assessee not liable to tax. In the alternate submission he contended that if it is so held that its sales tax incentive was liable to tax that in view of the decision of the Hon'ble Gauhati H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government's incentive to undertake large-scale modernization with the use of modern technology. It was for this purpose that the said scheme was framed giving benefit of the Sales Tax Waiver/Deferment, at the option of the industry concerned. Such benefit had to be computed in terms of the percentage of the fixed capital investment. Benefits were to last for specified periods and upto exhausting maximum limit computed in terms of the percentage of the fixed capital investment. 12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to- day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry. 33. We, therefore, set aside this issue back to the file of the AO to re-adjudicate the same after considering the scheme of sales tax entitlement of the Government of Maharastra under which the assessee has received sales tax entitlement and also after taking into consideration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s.80IA of the I.T. Act. For this, the Assessing Officer placed the reliance on the decision of Hon'ble Supreme Court in the case of Liberty India Limited vs CIT 183 Taxman 349(SC). 6.3 Further, the Assessing Officer observed that for calculating the amount of deduction u/s.80IA, the provision of section 80IA(5) has to be applied and thereby unabsorbed business losses and depreciation of earlier year in respect of windmills has to be considered by treating it as the only unit existing from the year of installation, notwithstanding with the fact that unabsorbed business loss and depreciation was set off in the earlier year against the profit of other units. The Assessing Officer observed that the windmill at Ahmednagar Maharashtra was installed and commenced operations in AY.2002-03 and unabsorbed depreciation / business loss of this unit in isolation comes to ₹ 3,53,59,339/- up to A.Y.2007-08. Similarly, windmill at Jodha Rajasthan was installed /commenced production in A.Y.2004-05 and the unabsorbed depreciation /business loss carried forward till A.Y.2007-08 comes to ₹ 2,88,81,178/-, and windmill at Chitra Durga Karnataka was installed in A.Y.2005-06 up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar Maharashtra, in A.Y.2006-07 for Rajasthan windmill and in A.Y.2007-08 for Karnataka windmill, which becomes the initial year. The losses and depreciation of the years earlier to the initial assessment year (i.e. A.Y.2004-05, 2006-07 2007-08 respectively), which have already been absorbed against the profits of the other business, cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA of the Act. For this, the appellant has relied on the decision of Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT 38 DTR 57 (Mad). It was further submitted that the decision of Hon'ble Ahmedabad ITAT in the case of ACIT vs Goldmine Shares Finance P. Ltd. 116 TTJ (Ahd)(SB), is not applicable as that decision was delivered before the amendment to the section by Finance Act, 1999. Before the amendment, initial assessment year was defined in the Act but after the amendment, there is no definition for initial assessment year in the Act and there is option to the assessee in selecting the year for claiming relief u/s.80IA of the Act. 6.6 I have considered the facts and the submissions. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . has held that section 80IA(5) deems that, for the purposes of determining the quantum of deduction, the eligible business as the only source of income of the assessee during the initial assessment year as well as subsequent years and has an over riding effect on all other provisions of the Act , (para 23) Section 80IA(5) bids one to treat the eligible business as the only source of income of an undertaking as real, which is an imaginary state of affairs. One must surely (imagine) as also real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flown from or accompanied it i.e., there was no other source of income of the assessee. The statute says that you must imagine a certain state of affairs (eligible business being the only source); it does sot say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of the state of affairs, that there are other sources and that against those sources the unabsorbed depreciation or losses of eligible business were set off , (para 30) It is implicit from the tenor and phraseology implied in section 80IA(5) that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the other income. 7.3 The submission of the appellant that initial assessment year has to be taken as the year in which the appellant first claimed deduction u/s.80IA and not the year of installation, is not acceptable. The appellant has relied on the decision of Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT 38 DTR 57 (Mad), wherein the Hon'ble High Court has held that the initial assessment year means the year when first time the assessee opted for the deduction u/s.80IA and not the year of setting up/commencement of the business of the unit, because the initial year has not been defined in the Act and thus, liberal interpretation has to be made for the term 'initial assessment year' so that the appellant is allowed possible benefits given by the Act. With due respect to the Hon'ble Court, it is submitted that when any term is not defined and interpretation is to be made, the point of equity has also to be taken into consideration and it should not lead to discrimination among various assesees. If we take the initial year as not the year of installation/commencement but the year of first claim opted for, it will be disadvantag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I.T. Act. Even otherwise, the plain meaning of the word 'initial year' means the year of installation/commencement of business of the eligible unit. 7.6 Therefore, in my humble opinion, even after the amendment in section 80IA by Finance Act 1999, the Special Bench decision in the case of ACIT vs Goldmine Shares Finance Pvt. Ltd. (supra), will remain applicable without any change in the situation, and the initial year has to be taken as the year of installation / commencement of the business of eligible windmill units. 7.7 In view of this, it is held that the Assessing Officer was justified in disallowing the claim of the deduction u/s.80IA of the Act which is upheld and the appellant's ground is rejected. 8. Learned AR submitted that the issue regarding the initial year for deduction u/s. 80IA was decided in favour of the assessee by the decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT, (2012), 340 ITR 477, wherein the Hon'ble High Court after considering the amendment made by the Finance Act, 1999, w.e.f. 1.4.2000 and also considering the amended Section 80IA on para 16 of page 489 of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been informed about certain statutory provisions that are directly relevant, it is not to be followed. In our opinion, judgment of Special Bench in the case of Goldmine Shares and Finance (P.) Ltd (supra) was squarely applicable to the assessee and following the same we are inclined to decide the issue against the assessee relating to the allowability of deduction u/s.80IA that in terms of the provisions u/s.80IA(5) of the IT Act the profit from the eligible business for the purpose of determination of quantum of deduction u/s. 80IA has to be computed after deduction of the notional brought forward losses and depreciation of the eligible business even though they have been allowed set off against other income in earlier years. 10. In the rejoinder, the learned AR for the assessee submitted before the amendment made by the Finance Act, 1999 to Section 80IA, the initial year of deduction was defined in Section 80IA(2)(iv)(b) as the year in which the eligible undertaking begins to generate power any time during the year beginning on the 1st day of April, 1999 and ending on 31st day of March, 2000. He submitted that by the Finance Act, 1999 the original Section 80IA was spli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (supra), it was held that where the judgment of the non Jurisdictional High Court though the only judgment on the point had been rendered without having been informed about certain statutory provisions which are directly relevant, the judgment rendered without noticing a previous binding precedent or a relevant statutory rule was per incuriam , and therefore, was not binding on the Tribunal. He submitted that the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. (supra) had considered the amended provisions of Section 80IA of the Act while rendering the decision and it was the only decision of the High Court. No contrary decision has been cited by the learned DR and therefore respectfully following the same the issue should be decided in favour of the assessee. 14. Learned AR further argued that amount received on sale of sales tax entitlement was capital receipt, therefore, was not liable to tax. For this he placed reliance on the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Birla VXL Ltd. (2013) 32 Taxmann.com 330 Gujarat and submitted that the Hon'ble Gujarat High Court after considering the scheme of sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Representative submitted that the Hon'ble Gujarat High Court was considering the sales tax deferment scheme of the Government of Gujarat whereas in the case of the assessee the eligible unit was in the State of Maharastra, and therefore, the decision of Hon'ble Gujarat High Court rendered in the case of Birla VXL Ltd. (supra) would not apply to the assessee. The other argument of the learned Departmental Representative was that since the assessee had sold the sales tax entitlement, therefore, the assessee would not be eligible to claim the same as capital receipt not liable to tax. 16. In the rejoinder, the learned AR argued that the scheme in the case of the assessee of sales tax deferment was exactly the same as that of Gujarat Government and the Revenue has placed no material on record to show any distinguishing factors in the same. He submitted that merely because the assessee sold the sales tax incentive which is a capital asset as held by the Hon'ble Gujarat High Court in the case of Birla VXL Ltd. cannot be a ground to treat the receipt as revenue. 17. We have heard the rival submissions and perused the order of the lower authorities and material availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking from any eligible business referred to in sub-section 4, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive years. Substituted sub- section (2) of section 80IA, provides that an option is given to the assessee for claiming any 10 consecutive assessment year out of 15 years beginning from the year in which the undertaking or the enterprise develops and begin to operate. The 15 years is the outer limit within which the assessee can choose the period of claiming the deduction. Sub-section (5) is a non-obstante clause which deals with the quantum of deduction for an eligible business. The relevant provision 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 initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Madras High Court in Velayudhaswamy Spinning Mills Pvt. Ltd. (supra) after considering the Special Bench decision of the Tribunal in Goldmine Shares And Finance Pvt. Ltd. (supra) and relevant provisions of the Act i.e., pre amendment and post amendment have come to the same conclusion:- 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 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 any loss of earlier years and bring forward notionally even though the same were set off against other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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-I for the purpose of computing admissible deductions thereunder. 23. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under s. 8o-I in the present case, albeit, for reasons somewhat different 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 under s. 8o-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. 24. From reading of the above, the Rajasthan High Court held that it is not at all required that losses or other deductions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of section 80IA(5). Thus, the reliance placed by the learned Departmental Representative on the decision of Pidilite Industries (supra), will not be applicable in the present case. 27. The other decision heavily relied upon by the learned Departmental Representative in Hyderabad Chemical Supplies Ltd. (supra) will also not apply to the facts of the present case, as in that case, the wind mill started its operation on 3ist March 1999 and the first year of operation was assessment year 1999-2000. Thus, in the assessment 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. ist April 2000, by virtue of section 8oIA. Thus, this decision also will not help the case of the M/s. Shevie Exports Department. In asseessee's case, as specifically stated in the foregoing paragraphs, the assessee's claim for initial assessment year i.e., assessment year 2008-09 and its claim for deduction under section 80A made for the first time from assessment year 2008-09, has not been disputed. Thus, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Rules, 1962 and computed the expenditure in relation to the investments made to earn the exempt income on account of interest at ₹ 1,49,710/- and administrative expenses for such investments attributable to earn the exempt income at ₹ 12,750/-, thereby he made a total disallowance u/s 14A of ₹ 1,62,460/-. 14. On appeal, the ld. CIT(A) confirmed the action of the Assessing Officer observing that in the case of Shankar Chemical Works reported in 27 SOT 121 (AHD) 2011, the Ahmedabad Bench of the Tribunal has held that disallowance of interest u/s 14A can be made even if there is no dividend income or only meager of dividend income is received. Therefore, he rejected the assessee's arguments on the meager dividend amount. 15. As regards the submissions of the assessee that the Assessing Officer has worked out average investments, income from which is exempt, at ₹ 25,49,834/-; closing balance of such investments is worked out at ₹ 50,99,668/-. Thus, the ld. CIT(A) observed that the Assessing Officer rejected the claim of the assessee that no expenditure was incurred for these investments. He observed that it is not possible to segregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the opinion that expenditure incurred for earning the exempt dividend income was not allowable to the assessee and the assessee has not disallowed any expenditure towards the earning of the exempted dividend income, he by invoking the provisions of Section 14A computed expenditure attributable to the earning of exempt dividend income under Rule 8D of the Income-tax Rules and made disallowance for interest expenditure of ₹ 1,49,710/- and administrative expenses of ₹ 12,750/-. The assessee unsuccessfully appealed before the CIT(A). The contention of the assessee is that the interest free funds available with the assessee in the form of share capital and free reserves as on the date of balance-sheet was ₹ 17,86,69,501/- and the investments at the end of the year was at ₹ 1,26,00,538/- only. Therefore, in view of the decision of the Hon'ble Gujarat High Court in the case of Hitachi Home and Life Solutions (I) Ltd. (supra) and Torrent Power Ltd. (Supra), no disallowance towards interest expenditure incurred for earning exempt income can be made. Regarding the disallowance of administrative expenses of ₹ 12,750/-, we find that the Chandigarh Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artmental Representative could not point out any specific error in the order of ld. CIT(A). He also could not bring any material on record to show that the order of the Tribunal for AY 2006-07 was varied in appeal by any High Forum. Therefore, we confirm the order of the learned CIT(A) and dismiss the ground of the Revenue. ITA No.1994/Ahd/2012 : AY 2009-10 : Assessee's Appeal 27. Ground No.1 of the appeal is directed against the order of ld. CIT(A) confirming the disallowance u/s 40A(2)(b) of ₹ 6,52,49,095/- paid to sister concerns. 28. The brief facts of the case are that the Assessing Officer has made a total disallowance of ₹ 6,52,49,095/- u/s 40A(2)(a) of the I.T. Act in respect of purchases made from the following associate concern. Name of the Party Total purchase amount M/s Surin Corporation Rs.35,46,26,295/- The Assessing Officer made a comparison of the average purchases price of ₹ 117.93 per kg in respect of outside parties and average rate of ₹ 144.52 per kg from the above related party. After making the above comparison, the Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year by dividing the total purchase value by the total quantity of Tea purchased from associate concern and from outside parties. 6.3.2 On comparison of average price as above, it was found that average purchase price from associate concerns was much higher than the average purchase price from outside parties. The Assessing Officer in those three years made an addition solely relying on the basis of yearly average purchase price. The Hon'ble ITAT in the AY 2006-07 held that addition cannot be made by simply comparing average purchase price of the entire year. 6.3.3 Following the order of the ITAT for AY 2006-07, the CIT(A)1, Surat deleted the addition in AY 2007-08 and 2008-09 as in these two years also the basis of addition was comparison of yearly average price. However, in the present Astt Year a new fact has emerged. It is not just that appellant's average purchase price from associate concern is higher than the average purchase price from other parties, the AO also noticed that the sale price to associate concern is lower than the sale price to other parties. If appellant's explanation regarding variation in the quality of tea is accepted, it leads to a pecul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s necessary to understand how the of tea is graded. The main varieties of tea on the basis of the area in which the Tea is grown, are Darjeeling Tea, Assam Tea, and Nilgiris Tea. Almost all the bills filed by appellant during appellate proceedings are of Guwahati and some of Kolkata. This means that geographical area is more or less same for all the tea purchased. 6.3.8 Black tea is usually graded on one of the four scales of quality. Whole leaf tea is of highest quality followed by broken leaves, fannings and dusts. The leaf tea is produced with little or no alteration to the tea leaf. This results in a finished product with a coarser texture than that of bagged tea. Whole leaf teas are widely considered the most valuable, especially if they contain leaf tips. Broken leaves are commonly sold as medium grade loose teas. Small broken varieties may be included in tea bags. Fannings are usually small parties of tea left over from the production of larger tea varieties, but are occasionally manufactured specifically for use in bagged teas. Dusts are the fines particles of tea left over from production of the above varieties, and are often used for tea bags with very fast, very harsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification mainly depends on the size and type of leaf though for green tea and Oolong tea, classification is slightly wider, but the principle remains the same. 6.3.12 From the bills of 20th week furnished by the appellant and also the bills in the submission filed on 23.04.2012, it is noticed that the majority of the tea always falls in classification BP/BOP/DUST. In view of the same, appellant's contention that there are innumerable varieties of tea and any sort of comparison is not feasible is not correct. Moreover, the contention that it always buys high quality tea from sister concern and low quality tea from other is not accepted. This findings also finds supports from the fact that for sales, appellant's arguments are just the opposite which, defies common sense. 6.3.13 Another argument of the appellant that there is no tax advantage of shifting income from one entity to another also does not support the case of the appellant. At the outset, the section 40A(2)(a) /40A(2)(b) do not require a finding on the issue of tax advantage for the group as a whole. Section applies, if the Assessing Officer is of the opinion that the expenditure is excessive or unreas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to verification. 6.3.18 Considering the detailed discussion (supra), it is held that the Assessing Officer was correct in coming to the conclusion that the purchase price from associate concern is excessive and unreasonable having regard to the fair market value of the goods. 6.3.19 The fact also draw supports from the over all modus operandi of the appellant according to which, it always shows inflated purchase price in respect of purchases from the associate concern while at the time of sale, it sells goods to associate concern at lower than the market price. 7. Therefore, this ground of appeal is decided against the appellant and the addition made by the Assessing Officer is confirmed. 31. The AR of the assessee heavily relied on the decision of this Bench of the Tribunal in assessee's own case for AY 2006-07 and submitted that the facts and issues involved in the present appeal are identical and therefore the CIT(A) was not justified in not following the order for AY 2006-07 in the case of the assessee and confirming the addition made by the AO. He further submitted that though the CIT(A) has taken weekly average of the purchase price of tea by the assessee fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage price of purchase from others. After reaching this finding also the CIT(A) confirmed the action of AO in its entirety. Be that as it may. 34. The Tribunal has categorically recorded a finding in the case of the assessee itself in AY 2006-07 in ITA Nos. 3013 3093/Ahd/2010, order dated 26.03.2010, that no attempt has been made to ascertain the price prevailing in the market on the day when purchases are stated to have been made from the sister concerns, especially when the price prevailing on a particular day fluctuates even in respect of tea from the same garden and of the same grade. We find that similar to the facts of AY 2006-07 in the year under consideration also no material was brought before us by the Revenue to show that the fair market value of the grade and quality of the tea which was purchased by the assessee from its sister concerns was lower on the date then the price at which such purchase was made. The onus which was upon the Revenue has not been discharged. Moreover, there is no allegation that any evasion of tax took place because of the purchase transactions made by the assessee from its sister concerns. 35. Further, we also find that no material was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the scheme formed by the Maharashtra State Government. Hence, it is not profit derived by the Industrial Undertaking and thus, not eligible for deduction u/s.80IA of the I.T. Act. For this, the Assessing Officer placed the reliance on the decision of Hon'ble Supreme Court in the case of Liberty India Limited vs CIT 183 Taxman 349(SC). 6.3 Further, the Assessing Officer observed that for calculating the amount of deduction u/s.80IA, the provision of section 80IA(5) has to be applied and thereby unabsorbed business losses and depreciation of earlier year in respect of windmills has to be considered by treating it as the only unit existing from the year of installation, notwithstanding with the fact that unabsorbed business loss and depreciation was set off in the earlier year against the profit of other units. The Assessing Officer observed that the windmill at Ahmednagar Maharashtra was installed and commenced operations in AY.2002-03 and unabsorbed depreciation / business loss of this unit in isolation comes to ₹ 3,53,59,339/- up to A.Y.2007-08. Similarly, windmill at Jodha Rajasthan was installed /commenced production in A.Y.2004-05 and the unabsorbed depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the previous year in which the industrial undertaking commences operation. The appellant first time claimed deduction in A.Y.2004-05 for the unit Ahmednagar Maharashtra, in A.Y.2006-07 for Rajasthan windmill and in A.Y.2007-08 for Karnataka windmill, which becomes the initial year. The losses and depreciation of the years earlier to the initial assessment year (i.e. A.Y.2004-05, 2006-07 2007-08 respectively), which have already been absorbed against the profits of the other business, cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA of the Act. For this, the appellant has relied on the decision of Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT 38 DTR 57 (Mad). It was further submitted that the decision of Hon'ble Ahmedabad ITAT in the case of ACIT vs Goldmine Shares Finance P. Ltd. 116 TTJ (Ahd)(SB), is not applicable as that decision was delivered before the amendment to the section by Finance Act, 1999. Before the amendment, initial assessment year was defined in the Act but after the amendment, there is no definition for initial assessment year in the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for which the determination is to be made. 7.1 The Hon'ble ITAT Ahmedabad Special Bench in the case of ACIT vs Goldmine Shares and Finance Pvt. Ltd. has held that section 80IA(5) deems that, for the purposes of determining the quantum of deduction, the eligible business as the only source of income of the assessee during the initial assessment year as well as subsequent years and has an over riding effect on all other provisions of the Act , (para 23) Section 80IA(5) bids one to treat the eligible business as the only source of income of an undertaking as real, which is an imaginary state of affairs. One must surely (imagine) as also real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flown from or accompanied it i.e., there was no other source of income of the assessee. The statute says that you must imagine a certain state of affairs (eligible business being the only source); it does sot say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of the state of affairs, that there are other sources and that against those sources the unabso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his year's income. There is no justification for treating it as being set off with other business in earlier years, even if this was actually set off with the other income. 7.3 The submission of the appellant that initial assessment year has to be taken as the year in which the appellant first claimed deduction u/s.80IA and not the year of installation, is not acceptable. The appellant has relied on the decision of Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs ACIT 38 DTR 57 (Mad), wherein the Hon'ble High Court has held that the initial assessment year means the year when first time the assessee opted for the deduction u/s.80IA and not the year of setting up/commencement of the business of the unit, because the initial year has not been defined in the Act and thus, liberal interpretation has to be made for the term 'initial assessment year' so that the appellant is allowed possible benefits given by the Act. With due respect to the Hon'ble Court, it is submitted that when any term is not defined and interpretation is to be made, the point of equity has also to be taken into consideration and it should not lead to discrimination a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the initial year should not be taken as year of installation/commencement but the year when the first time the assessee opts for deduction u/s.80IA of the I.T. Act. Even otherwise, the plain meaning of the word 'initial year' means the year of installation/commencement of business of the eligible unit. 7.6 Therefore, in my humble opinion, even after the amendment in section 80IA by Finance Act 1999, the Special Bench decision in the case of ACIT vs Goldmine Shares Finance Pvt. Ltd. (supra), will remain applicable without any change in the situation, and the initial year has to be taken as the year of installation / commencement of the business of eligible windmill units. 7.7 In view of this, it is held that the Assessing Officer was justified in disallowing the claim of the deduction u/s.80IA of the Act which is upheld and the appellant's ground is rejected. 8. Learned AR submitted that the issue regarding the initial year for deduction u/s. 80IA was decided in favour of the assessee by the decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT, (2012), 340 ITR 477, wherein the Hon'ble High Court afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional Bench of the Tribunal. However, where the judgment of non Jurisdictional High Court, though the only judgment on the point has been rendered without having been informed about certain statutory provisions that are directly relevant, it is not to be followed. In our opinion, judgment of Special Bench in the case of Goldmine Shares and Finance (P.) Ltd (supra) was squarely applicable to the assessee and following the same we are inclined to decide the issue against the assessee relating to the allowability of deduction u/s.80IA that in terms of the provisions u/s.80IA(5) of the IT Act the profit from the eligible business for the purpose of determination of quantum of deduction u/s. 80IA has to be computed after deduction of the notional brought forward losses and depreciation of the eligible business even though they have been allowed set off against other income in earlier years. 10. In the rejoinder, the learned AR for the assessee submitted before the amendment made by the Finance Act, 1999 to Section 80IA, the initial year of deduction was defined in Section 80IA(2)(iv)(b) as the year in which the eligible undertaking begins to generate power any time during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned DR by pointing out that in the decision of the 3rd Member of the Ahmedabad Bench of the Tribunal in the case of Kanel Oil and Export Industries Ltd. (supra), it was held that where the judgment of the non Jurisdictional High Court though the only judgment on the point had been rendered without having been informed about certain statutory provisions which are directly relevant, the judgment rendered without noticing a previous binding precedent or a relevant statutory rule was per incuriam , and therefore, was not binding on the Tribunal. He submitted that the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. (supra) had considered the amended provisions of Section 80IA of the Act while rendering the decision and it was the only decision of the High Court. No contrary decision has been cited by the learned DR and therefore respectfully following the same the issue should be decided in favour of the assessee. 14. Learned AR further argued that amount received on sale of sales tax entitlement was capital receipt, therefore, was not liable to tax. For this he placed reliance on the decision of the Hon'ble Gujarat High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and hence, the receipt was a capital receipt not liable to tax as held by the Hon'ble High Court. 15. On the other hand, the learned Department Representative submitted that the Hon'ble Gujarat High Court was considering the sales tax deferment scheme of the Government of Gujarat whereas in the case of the assessee the eligible unit was in the State of Maharastra, and therefore, the decision of Hon'ble Gujarat High Court rendered in the case of Birla VXL Ltd. (supra) would not apply to the assessee. The other argument of the learned Departmental Representative was that since the assessee had sold the sales tax entitlement, therefore, the assessee would not be eligible to claim the same as capital receipt not liable to tax. 16. In the rejoinder, the learned AR argued that the scheme in the case of the assessee of sales tax deferment was exactly the same as that of Gujarat Government and the Revenue has placed no material on record to show any distinguishing factors in the same. He submitted that merely because the assessee sold the sales tax incentive which is a capital asset as held by the Hon'ble Gujarat High Court in the case of Birla VXL Ltd. cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been substituted w.e.f. 1st April 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 and subject to the provisions of this section, be allowed in computing the deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive years. Substituted sub- section (2) of section 80IA, provides that an option is given to the assessee for claiming any 10 consecutive assessment year out of 15 years beginning from the year in which the undertaking or the enterprise develops and begin to operate. The 15 years is the outer limit within which the assessee can choose the period of claiming the deduction. Sub-section (5) is a non-obstante clause which deals with the quantum of deduction for an eligible business. The relevant provision 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 determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 Madras High Court in Velayudhaswamy Spinning Mills Pvt. Ltd. (supra) after considering the Special Bench decision of the Tribunal in Goldmine Shares And Finance Pvt. Ltd. (supra) and relevant provisions of the Act i.e., pre amendment and post amendment have come to the same conclusion:- 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermane 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 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-I for the purpose of computing admissible deductions thereunder. 23. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under s. 8o-I in the present case, albeit, for reasons somewhat different 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 under s. 8o-I for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and is hereby dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year as adopted by the assessee is assessment year 2008-09 only and, therefore, the loss of assessment year 2007-08 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 (supra), will not be applicable in the present case. 27. The other decision heavily relied upon by the learned Departmental Representative in Hyderabad Chemical Supplies Ltd. (supra) will also not apply to the facts of the present case, as in that case, the wind mill started its operation on 3ist March 1999 and the first year of operation was assessment year 1999-2000. Thus, in the assessment 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. ist April 2000, by virtue of section 8oIA. Thus, this decision also will not help the case of the M/s. Shevie Exports Department. In asseessee's case, as specifically stated in the foregoing paragraphs, the assessee's claim for initial assessment year i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.2 The appellant during the course of appellate proceedings, submitted that provisions of section 40A(2)(a) / 40A(2)(b) cannot be applied on sales. The appellant further submitted that the issue is covered in favour of appellant by the Order of ITAT for Asst Year 2006- 07. Without prejudice to the same the appellant submitted as under on merits. '... it would be relevant to submit before your Honour that though the appellant clearly submitted before the ld AO that it has sold to the sister concern the dust and leaf tea which was not blended, processed and branded as well as packed; whereas the tea sold to the outside parties was blended, processed, branded and packed.......' 8.3 As regards decision of Asst. Year 2006-07 of ITAT, the said decision was in respect of purchases made from associate concerns and therefore, not relevant for this ground. However, the Assessing Officer failed to appreciate the provisions of section 40A(2)(a)/40A(2)(b). These sections deal with deductions for expenditure and not receipts. If appellant has sold goods at less than market price to associate concerns, addition cannot be made u/s 40A(2)(a)/40(2)(b). The appellant's argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions thereon. 45. The Ground No.1 and the additional ground No.2 read as under:- 1. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of Compensation expenses paid of ₹ 18,41,122/- on the ground of non deduction of TDS u/s 40(a)(ia) of the Act. Additional Ground No.2 2. The appellant submits that as the payee Shri Sureshchandra Shah has paid due tax considering compensation payable as per the agreement with appellant, as per the amended provision of section 40(a)(ia) inserted by Finance Act, 2012 applicable retrospectively, no disallowance is required to be made. 46. The brief facts of the case are that the Assessing Officer has observed that the assessee has paid an amount of ₹ 18,41,122/- to Shri Suresh Chandra Shah. Although the expense was claimed as compensation paid to Shri Suresh Chhandra Shah, but in real terms, it was for the use of property of Shri Suresh Chandra Shah for shop No.258-259, Ruwala Tekra, Surat having furniture and weighing skills etc. The amount payable was @Rs.3.50 per kg on total sale of tea on monthly basis subject to minimum amount of ₹ 1.25 lacs per month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the tax is to be deducted from the rent paid by whatever name called for hire of a property. The incident of tax at source does not depend upon the nomenclature but on the content of the agreement and further it was clarified that even if there is composite agreement for user of premises and provision of man power for which consideration is paid as per specified percentage of turnover, section 194-1 of the Act would be attracted if the agreement is in the essence, for rent. The provision of section 40(a)(ia) is applicable for rent from the assessment year 2007-08 onwards. The appellant's reliance on ITAT's order in the case of Jivraj Tea Industries Ltd. for AY 2000-01, is not applicable as in that case, the issue was regarding reasonableness of the payment u/s 40A(2)(b) and the issue was not whether payment is in the nature of rent or not. Further, in the case of Jaipur Vidyut Vitran Nigam Limited v. DCIT 26 DTR 79, the main issue was whether TDS is applicable on payment of transmission, wheeling and SLDC charges and the Hon'ble ITAT have held that on this issue whether tax is to be deducted at source, is not free from doubt and since the payment is not in disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction for ₹ 18,41,122/- paid to Shri Sureshchandra Shah as rent as the assessee failed to deduct TDS u/s 194I of the Act and therefore, provisions of section 40(a)(ia) were applicable. On appeal, CIT(A) has upheld the disallowance made by the AO. The AR of the assessee has filed additional evidence evidencing the fact that the recipient of the amount Shri Sureshchandra Shah has shown the amount received ₹ 18,41,122/- in his return of income filed and paid tax thereon. Therefore, in view of the second proviso to 40(a)(ia) of the Act inserted by the Finance (No.2) Act, 2004, w.e.f. 01.04.2004, which has been held to be retrospective in effect by the Agra Bench of the Tribunal in the case of Rajeev Kumar Agarwal (supra), no disallowance can be made in the hands of the assessee of the expenditure claimed by the assessee. Therefore, we accept the additional evidence filed by the assessee since the DR has not objected to the same and restore the matter back to the file of the AO for re-adjudication of the issue afresh after taking into consideration the additional evidences filed by the assessee as per law. Needless to mention that he shall allow reasonable and proper oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover or the profit of the unit. The source of the sales tax exemption entitlement lies in the scheme formed by the Maharashtra State Government for sales tax. Thus, the entitlement flows from the sales tax exemption scheme. The Hon'ble Supreme Court has held in the case of Liberty India Ltd. that DEPB/Duty Draw Back are incentives which flows from the schemes framed by the Central Government or from section 75 of the Customs Act, 1962, hence incentive profits are not profits derived from the eligible business and therefore, duty draw back receipt/DEPB benefits do not form part of the net profit of the industrial undertaking for the purpose of section 80IA or 80IB. The ratio of this decision clearly applies to the facts of the present case. In this case, the source of the sales tax exemption entitlement lies in the scheme formed by the Maharashtra State Government for sales tax. Thus, the entitlement flows from the sales tax exemption scheme. Hence, by following the decision of Hon'ble Supreme Court, it is held that the Assessing Officer was justified in holding that the profit on sale of sales tax exemption entitlement, is not derived from the industrial undertaking an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of CIT V/s. Meghalaya Steel Ltd., (2013) 217 Taxmann.com 184 (Gau), the assessee is entitled for deduction on the sale of sales tax entitlement u/s.80IA of the Act because in that case the Hon'ble High Court has held that transport subsidy, power subsidy, interest subsidy and Insurance subsidy reduces the cost of production of an Industrial undertaking and therefore there is first degree nexus between the said subsidies and profits and gains derived by industrial undertaking and the assessee was entitled for deduction u/s. 80IB in respect of subsidies so granted. We find that neither of the parties have filed before us copy of the sales tax entitlement scheme of the Government of Maharashtra under which the assessee has received the sales tax entitlement. Without going through the scheme it is not possible for us to adjudicate the issue completely. In our considered opinion, it shall be in the interest of justice to remit this matter back to the file of the AO for adjudication afresh. 32. The Hon'ble Gujarat High Court in the case of Birla VXL Ltd. has held as under: 11. From the above provisions contained in the said Scheme, it can be immediately not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon'ble Gujarat High Court in the case of Birla VXL Ltd. (supra) quoted above. Needless to mention that the AO shall allow reasonable opportunity of hearing to the assessee before re-adjudicating the issue afresh. We order accordingly thus ground of appeal of the assessee is allowed for statistical purpose. 58. Facts being identical, respectfully following the precedent, we set aside the order of lower authorities and remand the matter back to the file of the Assessing Officer for re-adjudicating the issue afresh as per the directions of the Tribunal given in the case of sister concern of the assessee for AY 2007- 08 as quoted above. Thus, these grounds of appeal of the assessee are treated as allowed for statistical purposes. 59. Grounds No. 3 and 4 of the appeal read as under:- 3. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of the deduction claimed u/s 80IA for profits derived from electricity generation from Wind Mill at Bhogat, Gujarat of ₹ 3,42,255/-. 4. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the disallowance of the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajasthan was installed /commenced production in A.Y.2004-05 and the unabsorbed depreciation /business loss carried forward till A.Y.2007-08 comes to ₹ 2,88,81,178/-, and windmill at Chitra Durga Karnataka was installed in A.Y.2005-06 up to A.Y.2007-08 the unabsorbed depreciation / business loss comes to ₹ 4,20,00,983/- and there remains no business profit as per the working given in the Annexure to the assessment order. By applying the provisions of section 80IA(5) and setting off with the business loss and unabsorbed depreciation of earlier year beginning from the year of installation of the windmill, the Assessing Officer has held that by doing this, there remains no profit from the windmill units. For this, the Assessing Officer has relied on the decision of Hon'ble ITAT Special Bench Ahmedabad in the case of ACIT vs Goldmine Shares Finance Pvt Ltd. 113 ITD 209/Ahd(SB) whereon it was held that, in view of specific provisions of section 80IA(5), profits from the eligible business for the purposes of determination of quantum of deduction u/s.80IA, has to be computed after deduction of notional brought forward losses and depreciation of eligible business, even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct but after the amendment, there is no definition for initial assessment year in the Act and there is option to the assessee in selecting the year for claiming relief u/s.80IA of the Act. 6.6 I have considered the facts and the submissions. I do not agree with the appellant's views. The sales tax exemption entitlement are the incentives given by the Maharashtra Government on the investment made by the assessee for installation of windmill and is calculated on the investment which in this case is 1/6th of the investment. It is not based on the turnover or the profit of the unit. The source of the sales tax exemption entitlement lies in the scheme formed by the Maharashtra State Government for sales tax. Thus, the entitlement flows from the sales tax exemption scheme. The Hon'ble Supreme Court has held in the case of Liberty India Ltd. that DEPB/Duty Draw back are incentives which flows from the schemes framed by the Central Government or from section 75 of the Customs Act, 1962, hence incentive profits are not profits derived from the eligible business and therefore, duty draw back receipt/DEPB benefits do not form part of the net profit of the industrial undertaking for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state of affairs, that there are other sources and that against those sources the unabsorbed depreciation or losses of eligible business were set off , (para 30) It is implicit from the tenor and phraseology implied in section 80IA(5) that in substance, a legal fiction is created by which the eligible business has been treated as the only source of income. In construing this legal fiction, it will be proper and necessary to assume all those facts on which alone the fiction can operate, so, necessarily, all the provisions in the Act in respect of source of income will apply. As a consequence, the other sources of income of an assessee/undertaking would have to be assumed as not existing and consequently, any depreciation or loss cannot be set off against any other source which is assumed to have not been in existence and therefore, the depreciation or the loss of the ineligible business which could not be set off against the loss of the eligible business itself has to be carried forward or set off of the profits of the very source of ineligible business in the subsequent year , (para 31) The words as if such eligible business were the only source of income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity has also to be taken into consideration and it should not lead to discrimination among various assesees. If we take the initial year as not the year of installation/commencement but the year of first claim opted for, it will be disadvantageous to those assessees who do not have any other source of income, other than the eligible business. The following example will illustrate this point - The assessee A has started windmill in A.Y.2002-03 and had loss of ₹ 2,50,22,495/- in 2002-03 ₹ 1,50,13,463/-- in A.Y.2003-04 which was set off with other income. When the assessee claims deduction u/s.80IA for A.Y.2004-05, for the profit earned from windmill, he will get the deduction as per this interpretation. However, if another person B has installed same windmill in A.Y.2002-03 and incurred the same loss from windmill in A.Ys.2002-03 2003-04, and does not have any other business having profit to set off with this loss, he will not have benefit of deduction u/s.80IA for same amount of profit earned in A.Y.2004-05. This will lead to discrimination. The logical and equitable interpretation warrants that initial assessment year has to be taken as the year of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Mills (P) Ltd. Vs. ACIT, (2012), 340 ITR 477, wherein the Hon'ble High Court after considering the amendment made by the Finance Act, 1999, w.e.f. 1.4.2000 and also considering the amended Section 80IA on para 16 of page 489 of the order concluded that loss in the year earlier to the initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profit of the eligible business as no such mandate was provided u/s.80IA(5). He further placed reliance on the decision of the Chennai Bench of the Tribunal in the case of Rangamma Steels and Malleables vs. ACIT, (2010), 6 taxmann.com 47 (Chennai) and submitted that the Tribunal after considering the decision of the Special Bench of the Tribunal in the case of ACIT vs. Goldmine Shares and Finance (P.) Ltd., (2008), 113 ITD 209 (Ahd) (SB), arrived at the conclusion that sub section (5) would come into operation only in the year in which the assessee started claiming deduction u/s.80IA, i.e., from the initial year and depreciation relating to the years prior to the initial assessment year cannot be brought back notionally to be adjusted against the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in which the eligible undertaking begins to generate power any time during the year beginning on the 1st day of April, 1999 and ending on 31st day of March, 2000. He submitted that by the Finance Act, 1999 the original Section 80IA was split into two Sections i.e., Section 80IA and Section 80IB. He submitted that in the amended Section 80IA sub section (2) provides that the deduction specified in sub section (1) may at the option of the assessee be claimed by him for any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking generate powers or commence transmission or distribution of power. Thus, his submission was that the initial year of deduction was left to the option of the assessee and the assessee could claim deduction for any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking begins to generate power. He further submitted that in the amended Section 80IA there was no provision as originally existed u/s. 80IA(5) of the Act. He submitted that in Section 80IB (13) it has been provided that provision contained in sub section (5) of Section 80IA so far as may be applied to eligible busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this he placed reliance on the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Birla VXL Ltd. (2013) 32 Taxmann.com 330 Gujarat and submitted that the Hon'ble Gujarat High Court after considering the scheme of sales tax entitlement held that from the provisions of the said scheme it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to per centage of various capital investments. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once a commercial production commences. However this by itself would not be either a sole or concluding factor. In the case of Sahany Stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset as held by the Hon'ble Gujarat High Court in the case of Birla VXL Ltd. cannot be a ground to treat the receipt as revenue. 17. We have heard the rival submissions and perused the order of the lower authorities and material available on record. In the case of Jivraj Tea Ltd., the assessee claimed deduction u/s. 80IA(4) of the Act on 100% profit derived from generation of electricity from windmill situated at Ahmednagar Maharashtra, Jodha Rajasthan and Chitradurga Karnataka. The Assessing Officer observing that since the assessee had carried forward losses of earlier years, therefore, the assessee was not entitled to deduction u/s.80IA(4) as after the adjustment of the brought forward losses there was no positive profit for allowing deduction u/s. 80IA. The same was confirmed in appeal by the learned CIT(A). The case of the Revenue is that in view of the decision of the Special Bench of the Tribunal rendered in the case of Goldmine Shares and Private Limited (supra) brought forward losses and depreciation of earlier years has to be deducted from the profits of the years under consideration before allowing deduction u/s. 80IA of the Act. On the other hand, the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness to which the provisions of sub-section (1) apply shall, for the purposes of determining 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. 20. 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 or 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 business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year. Prior to 1st April 2000, the initial assessment year was defined for various types of eligible assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 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. 22. 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 s. 8o-IA(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in the Tax Case No. 918 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not required in the present case. Accordingly, this appeal fails and is hereby dismissed with no order as to costs. 24. 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 Section 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. 25. This judgment has been further followed by the same High Court in CIT v/s Emerald Jewel Industry (P) Ltd. [2011] 53 DTK 262 (Mad.). From the above, ratio of the High Court, it is amply clear that sub- section (5) of section 8oIA will come into operation only from the initial assessment year or any subsequent assessment year. The option of choosing the initial assessment year is wholly upon the assessee in the post amendment period i.e., after 1st April 2000 by virtue of section 80IA(2). 26. Now coming to the decision of the Mumbai Bench Tribunal in Pidilite Industries (supra) as relied upon by the learned Departmental Representative in this case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the foregoing paragraphs, the assessee's claim for initial assessment year i.e., assessment year 2008-09 and its claim for deduction under section 80A made for the first time from assessment year 2008-09, has not been disputed. Thus, the aforesaid judgment relied upon by the learned Departmental Representative will not be applicable to the facts of the present case. 28. We reiterate in the instant case, it is not in dispute that the initial Assessment Year in the case of Jivraj Tea Industries Ltd. is the Assessment Year 2004-05 and in the case of Jivraj Tea Ltd. is Assessment Year 2007-08 and it is also not in dispute that the assessee has not suffered any loss in the said year, therefore, in our considered opinion no brought forward loss or depreciation could be reduced for determining the amount in which the deduction is to be allowed u/s. 80IA of the Act. We, therefore, set aside the orders of the lower authorities on this issue and allow the ground of appeal of the assessee. 62. Facts being identical, respectfully following the precedent, we set aside the order of lower authorities on this issue and allow ground Nos.3 4 of the appeal of the assessee. 63. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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