TMI Blog2016 (2) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove that these expenses were incurred wholly and exclusively for the purposes of business. Wherever required, the CIT (Appeals) has given relief to the assessee. We hereby confirm the order of the learned CIT (Appeals) in this regard. Disallowance of rental expenses - Held that:- We are in agreement with the findings of the learned CIT (Appeals) that even though the sister concerns have not paid their part of rental expenses for using the premises but to arrive at the correct computation of taxable income of the assessee, it would be necessary to claim deduction on account of rental expenditure to that extent which is only attributable to the assessee company - ITA Nos. 1062 & 1063/Chd/2014 & C.O.No.1/Chd/2015 - - - Dated:- 10-2-2016 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For the Appellant: Shri Sudhir Sehgal For the Respondent: Shri Manoj Mishra, DR O R D E R PER RANO JAIN, A.M. These two appeals filed by the Revenue are directed against the separate orders of learned Commissioner of Income (Appeals), Panchkula, dated 22.9.2014 and 26.9.2014 for assessment years 2010 11 and 2011-12 respectively. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2019-2020. Therefore, the assessee had the option to start claiming deduction from any of the assessment year within a period of fifteen years beginning from assessment year 2004-05. Since the assessee has opted assessment year 2008-09 as the initial year, the initial year for the purposes of provisions of section 80IA(5) of the Act is 2008-09 and not assessment year 2004-05. The provisions of section 80IA of the Act will be applicable only from assessment year 2008-09 and it will be assumed that the only source of income of the assessee is income from generation of power for the purpose of computing the quantum of deduction under section 80IA of the Act. Reliance was placed on the following judgments :- a) Mohan Breweries Distilleries Ltd. Vs. CIT (2008) 23 SOT 32 (Chennai (URO). b) Velayudhaswamy Spinning Mills (P) Ltd. Vs. CIT (2010) 231 CTR 368 (Mad). c) Rangamma Steels Malleables Vs. CIT (2010) 132 TTJ 365 (Chennai). 4. The learned CIT (Appeals) called for a report from the Assessing Officer, who vide his office letter dated 15.1.2014 filed the report and reiterated the findings as narrated in the assessment order. The assessee fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f activity or a subsequent year as selected by the assessee for the purpose of claiming deduction u/s 801 A of the Act. In the appellant's case, the first year of commencement of activity was A.Y. 2004-05 but as section 80IA(2) permits the appellant has opted A.Y. 2008-09 as the initial assessment year for availing deduction for 10 consecutive assessment years starting from A.Y. 2008-09. 4.11 Now coming to the computation of deduction, the applicable section is 801 A(5) which provides deduction for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year on the profit and gain from the eligible business as if such eligible business was the only source of income of the assessee during the previous year relevant to the initial assessment year or to every subsequent assessment year upto and including the assessment year for which the determination is to be made. In the instant case, the provisions of section 80IA(5) would be applicable from previous year relevant to A. Y. 2008-09. Any profit or loss arising from the wind mills business would be considered for the computation from A.Y. 2008-09 to subsequent consecutive 10 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised. If it is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity etc. Sub- section (5) deals with quantum of deduction for an eligible business. The words initial assessment year are used in sub-section (5) and the same is not defined under the provisions. It is to be noted that 'initial assessment year' employed in sub-section (5) is different from the words beginning from the year referred to in sub-section (2). Sub-section (5) starts with non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored; for the purpose of determining the quantum of deduction; for the assessment year immediately succeeding the initial assessment year, thereby a fiction is created by introducing a deeming provision and therefore, it is clear that the eligible business were the only source of income, during the previous year relevant to initial assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and against the Revenue. 10. This view has also been upheld by the Mumbai Bench of the Tribunal in the case of Shevie Exports (supra), whereby all the judgments relied on by the assessee as well as the Revenue have been considered and the Bench has given findings at paras 9 to 12, which reads as under : 9. Section 80IA, 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, 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). 11. 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 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 eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under s. 80-I in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2014 is dismissed. 13. The facts in this appeal of the Revenue are similar to that in ITA No.1062/Chd/2014 and the findings given in ITA No.1062/Chd/2014 shall apply to this case also with equal force. C.O.No.1/Chd/2015 : (in ITA No.1062/Chd/2014) 14. The ground No.1 raised by the assessee in Cross Objection reads as under : 1. That the Worthy CIT(A) has erred in confirming the action of the Assessing Officer in disallowing sum of ₹ 77,947/- out of disallowance of ₹ 2,45,872/- made by the Assessing Officer under section 37(1) (after giving relief of ₹ 1,67,925/-) as per para 5.4 of his order. 15. Briefly, the facts are that on perusal of the ledger account, the Assessing Officer noted that the assessee had incurred expenses in cash for unlawful purposes. The narration of expenses showed that these were in the nature of bribe or illegal gratification which are not allowable under section 37 of the Act. After considering assessee s reply, the Assessing Officer concluded that in view of the explanation to section 37(1) of the Act, which states that the expenditure incurred by the assessee for any purpose which is an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of ₹ 15,67,116/- as per para 6.5 of his order out of total rental expenses claimed at ₹ 26,11,860/- by the appellant. 3. That the respondent, craves leave to add or amend any ground of cross-objections before the appeal is finally heard or disposed off. 21. Briefly, the facts are that the Assessing Officer noted that the assessee had debited rent charges of ₹ 26,11,860/- for hiring the premises Nos.908 909, Narain Manzill, 23, Barah Khamba Road, New Delhi. The narration of the ledger account showed that out of the total expenses, 40% was to be paid by the assessee and the remaining 60% was to be paid by the sister concern s, namely Yamuna Cable Accessories Pvt. Ltd. and YGC Project Ltd. at 30% each. However, the entire expenses of ₹ 26,11,860/- was debited in the books of the assessee. The Assessing Officer concluded that a part of the expenses of the said premises was attributable to the sister concerns of the assessee and disallowed 60% of the rental expenses being ₹ 15,67,116/-. 22. Before the learned CIT (Appeals), the assessee submitted that although the sister concerns M/s Yamuna Cable Accessories Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rental expenses for using the premises to the appellant but to arrive at the correct computation of taxable income of the appellant it would be necessary to claim deduction on account of rental expenditure to that extent which is only attributable to the appellant company. In view of this I am in agreement with the Assessing Officer in disallowance of 60% of rental expense claimed by the assessment proceedings company which is attributable to its sister concerns operating from the same premises. This ground of appeal is dismissed. 26. After considering the same, we do not find any infirmity in the order of the learned CIT (Appeals) since we are in agreement with the findings of the learned CIT (Appeals) that even though the sister concerns have not paid their part of rental expenses for using the premises but to arrive at the correct computation of taxable income of the assessee, it would be necessary to claim deduction on account of rental expenditure to that extent which is only attributable to the assessee company. The ground raised in Cross Objection by the assessee is dismissed. 27. In the result, both the appeals of Revenue and the Cross Objection filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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