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2016 (11) TMI 1067 - ITAT MUMBAI

2016 (11) TMI 1067 - ITAT MUMBAI - TMI - Deduction claimed under Section 80-IC(3)(ii) - carry forward and set off of losses - Held that:- From the record we found that during the year under consideration, the assessee has no unabsorbed carry forward loss in respect of eligible undertaking at Uttarakhand. Losses of earlier assessment years 2008-2009 and 2009-2010 in Uttarakhand unit had already been set off against the profit of unit at Mumbai. Thus, the undisputed facts are that assessee has cla .....

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nit at Mumbai. The said losses were not available to be carried forward and set off during the year under consideration i.e., assessment year 2010-2011 under these facts and circumstances, applying the proposition of laws discussed above as referred by learned AR, we do not find any merit in the action of lower authorities for notionally carry forward and set off of losses which have already been set off in the earlier years against the profit of eligible unit during A.Y.2010-11 under considerat .....

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l contentions have been heard and record perused. 4. The facts in brief are that Assessee Company is in the business of manufacturing, assembling and repairing construction machinery and piling equipments. Prior to the previous year, relevant to the Assessment Year 2008-09, the Appellant Assessee Company had a unit in Mumbai. The Assessee Company started an additional unit in Uttarakhand in the previous year, relevant to the Assessment Year 2008-09. The said Uttarakhand unit being in declared ba .....

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st the income of the non-eligible unit at Mumbai in A.Ys 2008-09 and 2009-10 respectively. Therefore, the said losses were not available to be carried forward and set off in A.Y. 2010-11 under consideration. However, the A.O. while completing the assessment u/s. 143(3) of the Act for A.Y. 2010-11, notionally carried forward the losses of A.Y.s 2008-2009 and 2009-2010 which were already set off against the profit of the non-eligible unit at Mumbai and again set it off against the profit of ₹ .....

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of the eligible unit therefore, AO was not justified in artificially carrying forward the unabsorbed loss of earlier years which have already been set off by the assessee against the income of non-eligible unit. 6. Reliance was placed by learned A.R. on the decision of the Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. vs. ACIT (340 ITR 477) wherein under similar circumstances the Court held as under: "18. From a reading of the above, it is clear that the eligible .....

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ook 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. A fiction created in sub-section does not contemplates to bring set off amount notionally. The fiction is c .....

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sessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the year. The unreported judgment of this court cited supra considered the scope of sub-section (6) of section 80-1, which is the corresponding provision of sub-section (5) of section 80-IA. Both are similarly worded and, therefore, we agree entirely with the Division Bench judg .....

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ssessment year 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 Commissioner of Income-tax (Appeals), which has not been disturbed by the Tribunal and challenged before us, there" as no error much less any error apparent on the face of the record which could be rectified. That question would have been .....

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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 section 80-1 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, recomputati .....

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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." "22. We are not agreeing with the counsel for the Revenue. We are, therefore, of the view 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 profits of the eligible business as no such mandate is provide .....

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etation holding that depreciation on Wind Mills which had been already adjusted for the assessment years 1995-96 and 1996-9 again t th profits of Printing Business could artificially be carried forward for the impugned assessment year for the purpose of denial of relief u/s. 801A r/w sections 80AB and 801AA(7), of the Income Tax Act?... " The Hon. Madras High Court held as under: "In the light of the pronouncement of this court in Velayudhaswamy Spinning Mills P. Ltd.' s case (supr .....

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ed by this Court, the Revenue has filed appeals before the Supreme Court, which are stated to be pending, in which, only notice has been ordered and they are not yet admitted by the Supreme Court. "7. The facts in the present case are also identical to the above-said decision of this Court that the business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section SOlA of the Income Tax Act for the assessment yea .....

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the decision reported in Velayudhaswamy Spinning Mills, held in favour of the asses ee and against the Revenue. "9. We, therefore, taking note of the decision rendered by this Court in Velayudhasamy Spinning Mills and in a batch of cases in T.C.(A) Nos.40S of 2012, etc. dated 12.1.2015, are inclined to dismiss this Tax Case (Appeal), and, thereby, confirm the order passed by the Tribunal. Accordingly, the questions of law raised in this appeal are answered against the Revenue and in favour .....

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antum of deduction is to be calculated when the claim for deduction is made. If before claiming deduction, the loss and depreciation claimed by the assessee even in respect of eligible business is set off against income of the assessee or other source, the said loss or depreciation is already absolved, it does not exist. For the purpose of determining the quantum of deduction under sub-section (5) of Section 80-IA, the revenue cannot take into consideration the loss and depreciation which is alr .....

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nal in setting aside the order passed by the Assessing Authority as well as the lower Appellate Authority. The substantial question of law is answered in favour of the assessee and against the Revenue." (iv) In the case of ACIT vs. Hamilton Houseware Pvt. Ltd. in ITA No. 988/Ahm/2009 dated 9th June, 2015 the Hon. Tribunal Ahmedabad Bench held as under: "30. We have heard both sides. Orders of the lower authorities have also been perused. There is no dispute about the factual position n .....

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les tribunal's decision (supra). We follow the said case law and allow the assessee's claim of deduction. The relevant ground succeeds. (v) In the case of ACIT vs. M/s. Sanjeev Auto Parts Manufacturers Pvt. Ltd. in ITA No. 1387/PN/2014 for A.Y. 2011-12 dated 17th February 2016the Hon. Tribunal Pune Bench held as under: "10. We have heard the rival submissions and perused the orders of the authorities below. We find that the issue stands squarely covered in favour of the assessee by .....

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der of the Co-ordinate Bench of the Tribunal in assessee's own case in ITA Nos.1373 & 1374/PN/2013 relating to assessment years 2009-10 & 2010-11, order dated 27.05.2014 are reproduced hereunder for ready reference :- 5. We have heard the parties . We find that the issue stands squarely covered in favour of the assessee by the decision of the Hon ble High Court of Madras in the case of Velayudhaswamy Spinning Mills Pvt. Ltd., vs. ACIT 38 DTR 57 (Mad.) as well as the decision of the I .....

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Sub-section (5) of Section 80lA does not contemplate such notional set off, held the Hon'ble High Court. The Hon'ble Madras High Court in that decision has also referred the decision of Hon'ble Supreme Court in the case of Liberty India Vs. CIT (Supra) and the decision of Special Bench of the Tribunal in the case of Goldman Shares & Finance (P) Ltd. (Supra). There is no dispute that even a decision of non jurisdictional High Court is a binding precedent for the Tribunal until a .....

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igh Court. The Hon'ble Bombay High Court has been pleased to hold further that the Tribunal had no option but to follow the judgment of the Madras High Court. An authority like an Income Tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. We thus respectfully following the ratio laid down by the Hon'ble jurisdictional High Court in th .....

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t aside the orders of the authorities below and direct the A.O to allow the claimed deduction u/s. 80lA without bringing the notionally brought forward any lossor depreciation of earlier years which has already been set off against other income of the assessee. " "11. Following the parity of reasoning laid down by the earlier decision of the Co-ordinate Bench of the Tribunal in assessee s own case (supra) we confirm the order of the CIT(A). Accordingly, the Grounds taken by the Revenue .....

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following the decision of Velayudhswamy Spinning Mills Pvt. Ltd. vs. ACIT (340 ITR 477,Mad) and the decision of the Karnataka high Court in the case of CIT v. Anil H. Lad held as under: "7. "Thus, following the above ratio, we hold that firstly, the choosing of initial assessment year for the purpose of claiming deduction for the period of 10 years out of 15 years is with the assessee and secondly, before claiming deduction uls 80IA of the Act, the loss on depreciation claimed by the a .....

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has dealt with the issue in great detail and after applying correct proposition of law as laid down under section 80IC(7), 80IA(5) and 80IC(8)(v) had reached to the conclusion that eligible unit is an independent, therefore, its profit and loss has to be computed independently and the losses incurred by it is required to be set-off only against its profit and not against profit of other unit. Accordingly learned CIT(A) after applying various judicial pronouncements correctly reached to the conc .....

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also deliberated on the judicial pronouncements referred by AO and CIT(A) in their respective orders as well as cited by learned AR and DR during the course of hearing before us. From the record we found that during the year under consideration, the assessee has no unabsorbed carry forward loss in respect of eligible undertaking at Uttarakhand. Losses of earlier assessment years 2008-2009 and 2009-2010 in Uttarakhand unit had already been set off against the profit of unit at Mumbai. Thus, the u .....

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en set off against the income of unit at Mumbai. The said losses were not available to be carried forward and set off during the year under consideration i.e., assessment year 2010-2011 under these facts and circumstances, applying the proposition of laws discussed above as referred by learned AR, we do not find any merit in the action of lower authorities for notionally carry forward and set off of losses which have already been set off in the earlier years against the profit of eligible unit d .....

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Therefore, the decision is not applicable. 11. The CIT(A) has also referred to decision in case of Nitco Tiles Ltd. vs. DCIT (30 SOT 474, Mum. Trib.) dated 9th April, 2009. This judgment has followed the decision of ACIT vs. Goldmine Shares & Finance Pvt. Ltd. (113 ITD 209, Ahd. SB) which has been overruled by the Madras High Court in Velayudhswamy Spinning Mills Pvt. Ltd. vs. ACIT (340 ITR 477, Mad) dated 11th March 2010 and it has also been rendered prior to the decision of Velayudhswamy S .....

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