TMI Blog2018 (2) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessments, AO has not brought any comparables from the market to make out that the current payment is excessive and unreasonable within the meaning of section 40A(2)(b). We therefore uphold the order of CIT(A) for both the years and dismiss the relevant grounds raised by the revenue for both the assessment years, i.e. A.Yrs. 2010-11 and 2011-12. Invoking the provisions of section 80IA(5) - Held that:- As decided in Serum International Ltd. [2013 (1) TMI 688 - ITAT PUNE] when the assessee exercises the option, only the losses of the years beginning from the initial A.Y. are to be brought forward and not the losses of the earlier years which have been already set off against the income of the assessee - no notional brought forward and set off against the profits of the eligible business as no such mandate is provided in section 80-IA(5). When the assessee exercises the option, only the losses of the years beginning from the initial A.Y. are to be brought forward and not the losses of the earlier years which have been already set off against the income of the assessee. As DR has not brought to the notice of the Bench any decision contrary on the issue in question it is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is a company engaged in the manufacturing of Engineering goods and Generation of electricity through windmill. Assessee made a claim of deduction u/s.80IA(4) of the Act amounting to ₹ 77,62,555/- by way of filing the revised return of income u/s.139(5) of the Act. Admittedly, the assessee could not claim the same in the original return filed u/s.139(1) of the Act. Considering the omissions, assessee made use of the provisions of section 139(5) of the Act and filed the revised return well in time. Without appreciating the same, in the assessment proceedings, the AO denied the said benefit of claim of deduction u/s.80IA(4) of the Act. Contents of Para No.5 onwards of the assessment order are relevant in this regard. AO relied on the literal interpretation of the provisions of section 80AC of the Act relating to Deduction not to be allowed unless return furnished . This section mandates for allowing the claims of deductions only when the condition of filing of return of income u/s.139(1) in time are fulfilled by the assessee. Assessee relied on various decisions in support of his claim of deduction through the filing of valid revised return of income and explained th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile so deciding, learned CIT(A) kept reliance on the decision of Bal Kishan Dhawan HUF V. ITO - 18 taxman.com 234 (Amrtisar). Appellant's reliance on the decision of Yash Developers V. ITO - ITA No. 809/MUM/2011 was held as misplaced by observing that 4th proviso to section 139(1) was introduced from AY 2006-07 while the decision of Mumbai ITAT related to AY 1972-73. Various other issues were also involved in the appeal before the Ld.CIT(A) and all have been deliberated. 4. Appeal before the Honorable ITAT - Learned CIT(A) order dated 12/9/2014 is challenged before the Honorable A Bench of Pune ITAT by the Appellant as well as by the I-T department. A detailed paperbook containing 163 pages has already been placed before the Honorable A Bench of the ITAT. 5. Submissions - Appellant justifies the claim of deduction on following points. a. Provision of section 80-AC - The text of section 80-AC reads as under Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of section 80AC makes it clear that from the assessment year 2006-07, deduction claimed under section 80IA / 80-IB / 80-IC / 80-ID / 80-IE shall not beallowed unless the assessee furnishes a return on or before due date specified under sub-section (1) of section 139. Nowhere in the section it was provided that unless the assessee makes a claim in its return filed under section 139(1), the said claim is allowable. The section does not speak of a claim to be made in the return filed under section 139(1). The section speaks of filing a return within the time specified under section 139(1) and nothing else. Here the assessee filed a return under section 139(1) within due date specified but no claim was made under section 80IA in such return. However, a revised return was filed under section 139(5) on 30.3.2010 claiming deduction under section 80IA at 37,27,928/-. The section says unless the assessee files a return under section 139(1) within the due date, deduction under section 80IA / 80-IB / 80-IC /80- ID / 80-IE shall not be allowed and at the same time section 139(5) provides for filing a revised return, when the assessee discovers any omission or any wrong statement made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Allahabad Bench in the case of Parmeshwar Cold Storage Pvt. Ltd. Vs. ASCIT (supra). All these decisions are pronounced on the factual matrix of filing return of income u/s 139(4) of the Act and in the absence of return filed u/s 139(1) of the Act. On examining the facts of the present case and its facts, we find the Assessee s case, with both original and revised returns filed in time, is placed in a better position. Therefore, in our opinion the claim of the Assessee s claim of deduction u/s 80IA of the Act is allowable despite the provisions of section 80AC of the Act due to the judgmental laws in favour of their liberal interpretation. Therefore, the ground raised by the assessee should be allowed. Accordingly, Ground No.1 raised by the assessee is allowed. 9. The second issue raised in this appeal of the assessee relates to correctness of disallowance u/s.14A of the Act. 10. Before us, Ld. AR for the assessee submitted that there is no issue regarding the disallowance made by the AO amounting to ₹ 1,26,880/- under clause (ii) of Rule 8D(2) of I.T. Rules, 1962. It is part of the total disallowance of ₹ 9,69,976/- u/s.14A r.w. Rule 8D of the I.T. Rules, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee should be given relief on the amount of ₹ 8,43,096/-. Thus, Ground No.2 raised by the assessee is allowed. 14. Considering the relief given by us in Ground No.2, we are of the opinion that adjudicating of Grounds Nos. 3 and 4 raised by the assessee without prejudice to Ground Nos. 1 and 2, becomes an academic exercise. Accordingly, the same are dismissed as academic. 15. In the result, appeal of the assessee for A.Y. 2010-11 is partly allowed. ITA Nos. 2283/PUN/2014 and 1262/PUN/2015 (By Revenue - A.Yrs. 2010-11 and 2011-12) 16. Grounds raised by the revenue in these 2 appeals are identical and they relate to the common issue of disallowance u/s.40A(2)(b) of the Act amounting to ₹ 40 lakhs for A.Y. 2010- 11 and ₹ 15 lakhs for A.Y. 2011-12. 17. In the A.Y. 2011-12, the revenue raised an additional issue relating to relief granted by the CIT(A) with reference to the applicability of provisions of section 80IA(5) of the Act. 18. Regarding the grounds raised with regard to the common issue of attracting the provisions of section 40A(2)(b) of the Act, Ld. AR narrated relevant facts. Referring to the discussion in Para 6 of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has not tested the payments on the above yardstick and has based his conclusion on the technical competency and low profitability of the firm which is my view is not relevant consideration for applying the provisions of Sec. 40A(2)(b) of Income-tax Act. The Assessing Officer has not obtained any comparative rate to justify the disallowance. The appellant in it's reply has categorically stated that M/s. Project Engineering Services retains gross margin of 15% only on the amount paid by the appellant. This being so, the gross margin allowed by the appellant on the payment of ₹ 1,15,68,528/- comes to ₹ 17,35,280/- only. The disallowance on 40 lacs is almost three times of gross margin allowed by the appellant. which cannot be held to be justified. The co-relation with PF deduction is also flawed as many contractors do not pay PF and other benefits to labourers due to less number of employees employed by them. Therefore, on the totality of facts, it is held that the Assessing Officer has made disallowance u/s. 40A(2)(b) of Income-tax Act without bringing sufficient evidence on record. Accordingly, he is directed to delete the addition of ₹ 40 lacs. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, we find the CIT(A) relied on the decisions of Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT and Serum International Ltd. ITA Nos. 290 to 292/PN/2010 order dated 28-09-2011 and granted relief to the assessee as per the discussion given in Para Nos. 7 and 8 of his order. For the sake of completeness of this order, we proceed to extract the said paragraphs as under : 7. Further, the issue has been decided in favour of appellant in ITA No.290 to 292/PN/2010 in the case of Serum International Ltd. Dated 28-09-2011. The relevant portion of the order is as under : 13. Having been considered the above submissions, we find that the issue raised in Ground No. 1 as to what would be the initial A.Y for the purposes of Section 80IA(5) of the Act has been decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT (Supra). In that case after discussing the issue in detail, the Tribunal has come to the conclusion that the initial A.Y for the purpose of claiming deduction u/s. 80IA was the first year in which the assessee claimed the deduction u/s. 80IA (1) after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the case of Commissioner of Central Excise Vs. Vakson Dyeing, Bleaching and Printing Works (Supra) hold that the Tribunal is bound by the decision of the Hon ble Madras High Court on an identical issue in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). We thus respectfully following the decision taken by the Hon ble Madras High Court in that case on an identical issue under almost similar facts, hold that when the assessee exercising the option, only the losses of the year beginning from the initial A.Y. are to be brought forward and not the losses of earlier year which have been already set off against the other income of the assessee. The revenue cannot notionally bring forward any loss of earlier years which has already been set off against any other income of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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