TMI Blog2016 (2) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... es was for export promotion capital goods authorization; therefore, the same is also wholly and exclusively for the business of the assessee. The professional fees paid to Shri Mukesh Patel and Shri Saurabh Soparkar was also for consultancy/legal services against the service rendered by them, hence the same is also wholly and exclusively for the business of the assessee. Therefore, the impugned disallowance made by the Assessing Officer on lump-sum basis is not tenable in the eyes of law. CIT(A) was justified in deleting the addition of ₹ 9,00,000/- against the total disallowance of ₹ 12,00,000/- made by the Assessing Officer on account of legal and professional fees of ₹ 82,58,275/-. Therefore, we uphold the order of CIT(A) in this regard. - ITA Nos. 2295/Ahd/2011 & 1759/Ahd/2012 - - - Dated:- 9-2-2016 - Shri Shailendra Kumar Yadav And Shri Anil Chaturvedi, JJ. Revenue by : Shri M J Paul, Sr. DR Assessee(s) by : Shri Tushar Hemani, AR ORDER Shailendra Kumar Yadav, These are the appeals filed by the Revenue against the orders of the Commissioner of Income-tax (Appeals)-VIII, Ahmedabad dated 05.07.2011 and 16.05.2012 for Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the other income in earlier year. The Assessing Officer found out that for AY 2005-06, there was a carry forward loss of ₹ 4,12,48,605/- when the unit was considered as a standalone basis and if the said carry forward loss was notionally set off against the income for AY 2006-07, 2007-08 and 2008-09, then still there would be carry forward loss of ₹ 2,36,95,030/- for AY 2009-10. Accordingly, the Assessing Officer, after invoking provisions of Section 80IA(5) of the Act, disallowed deduction of ₹ 1,05,98,781/- u/s. 80IA(iv) of the Act. 5.2 Similarly, in the Assessment Year 2008-09 also, the Assessing Officer disallowed deduction of ₹ 85,14,513/- u/s 80(IA)(iv) of the Act. 5.3. Matter was carried before the First Appellate Authority for both the Assessment Years, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) has allowed the claim of the in both the assessment years under consideration, by observing that this issue has been covered in favour of the assessee by the decision of Hon ble High Court of Madras in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT, reported in 231 CTR 368, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier 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 contention of the AR of the assessee is that after the amendment made by the Finance Act, 1999 in Section 80IA whereby u/s. 80IA(2) the assessee has the option to choose the initial year for claiming the deduction u/s. 80IA for 10 consecutive years within 15 consecutive years from the date of the commencement of the eligible unit. By placing reliance on the decision of the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. (supra) it was the submission of the learned DR that once the assessee selects the initial year for claiming deduction under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 assessees under Section 80IA(12). However, after the amendment brought in statute by the Finance Act, 1999, the definition of initial assessment year has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in sub-section (2) of Section 80IA from which it chooses its 10 years of deduction out of 15 years, then only the losses of the years starting from the initial assessment year alone are to be brought forward as stipulated in section 80IA(5). The loss prior to the initial assessment year which has already been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 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-s. (6) of s. 8o-I, which is the corresponding provision of subs. (5) of s. 80- IA. Both are similarly worded and therefore we agree entirely with the Division Bench judgment of this Court cited supra. In the case of CIT vs. Mewar Oil .General Mills Ltd. (2004) 186 CTR (Raj) 141: (2004) 271ITR 311 (Raj), the Rajasthan High Court also considered the scope of s. 80-I and held as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, the Tribunal was dealing with regard to two eligible units one Gujarat Unit which was set-up in the year 1995-96 and second Maharashtra Unit in the year 2000-01. With regard to Gujarat Unit, the Tribunal held that preamendment definition of initial assessment year would be applicable i.e., provisions which were prior to 1st April 1999 will apply because the assessee had started commercial production in the financial year 1996-97. Regarding second unit, the Tribunal held that the judgment of Madras High Court in Velayudhaswamy Spinning Mills Pvt. Ltd. (supra) will not be applicable be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 39. Facts being identical, respectfully following the precedent, we set aside the order of lower authorities on this issue and allow ground Nos.2, 3 4 of the appeal. 4.1. Nothing contrary has been brought to our knowledge on behalf of the Revenue. Facts being similar, so following the same reasoning, we set aside the order of lower authorities on the issue and allow the ground in favour of the assessee as discussed above. 5.5 Nothing contrary was brought to our knowledge on behalf of the Revenue. Facts being similar, so following the same reasoning, we are not inclined to interfere in the findings of the CIT(A) who has rightly deleted the addition of ₹ 85,14,513 in the Assessment Year 2008-09 and ₹ 1,05,98,781/- in the Assessment Year 2009-10 made in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason as to why the same are not for the purpose of business of the assessee. The Assessing Officer ought to have appreciated that the payment to Deloitte was for consulting and seeking advice on bidding for acquisition of European cage manufacturing company since assessee is engaged in the business of manufacturing bearing cages. Such consultancy was potential risk and reward attached with assessee s business; therefore the expenditure on the same is wholly and exclusively for the business of the assessee. Payment to Mars Export Services was for export promotion capital goods authorization; therefore, the same is also wholly and exclusively for the business of the assessee. The professional fees paid to Shri Mukesh Patel and Shri Saurabh Soparkar was also for consultancy/legal services against the service rendered by them, hence the same is also wholly and exclusively for the business of the assessee. Therefore, the impugned disallowance made by the Assessing Officer on lump-sum basis is not tenable in the eyes of law. In view of above, the CIT(A) was justified in deleting the addition of ₹ 9,00,000/- against the total disallowance of ₹ 12,00,000/- made by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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