TMI Blog2015 (1) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, we agree with the contention of the Ld. Counsel for the assessee that no disallowance u/s.14A can be made under the facts and circumstances of the case. Accordingly, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the disallowance - ITA Nos. 1832 & 1833/PN/2013 - - - Dated:- 22-1-2015 - Ms. Sushma Chowla And Shri R.K. Panda, JJ. Assessee by : Shri Sanket Joshi Department by : Shri B.D. Singh ORDER R.K. Panda, The above 2 appeals filed by the Revenue are directed against the separate orders dated 31-07-2013 of the CIT(A), Aurangabad relating to Assessment Years 2009-10 2010-11 respectively. Since identical grounds have been taken by the Revenue in both these appeals, therefore, these were heard together and are being disposed of by this common order. ITA No.1832/PN/2013 (A.Y.2009-10) : 2. Grounds of appeal No.1 to 3 by the Revenue are as under : 1. Whether in the facts and circumstances of the case, the Ld. CIT(A) was correct in interpreting the provision of section 80IA(5) in the light of decision in the case of M/s Hyderabad Chemicals Supplies Ltd., APIE, Balanagar Hyderabad-37 Vs. The ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Income from business other than power generation Adjustment of losses Gross total income 2001-02 (i)5523819 -- 1,848,124.00 -- (3,675,695.00) 2002-03 (-)5525198 (-)8733850 893,177.00 -- (13,365,871.00) 2003-04 577711 (-)700990 4,774,982.00 -- 1,648,297.00) 2004-05 612644 (1)521563 16,720,247.00 (1,68,11,328.00) -- 2005-06 1109079 1328204 6,138,601.00 (2,022,004.00) 6,553,880.00 2006-07 763760 1624501 (10,050,843.00) -- (7,662,582.00) 2007-08 1078858 1517347 18,880,112.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,737.00 - (3,284,271.00) 2009-10 657,700.00 657,700.00 - (2,626,571.00) 2.4 The A.O., therefore, concluded that for the purpose of determining quantum of deduction u/s 80IA of the Act, the assessee company has no profit available for claiming deduction under the said section. In support of the disallowance of deduction claimed by the assessee u/s 80IA(4), the AO relied on the following decisions (i) ACIT Vs. Goldmines Shares Investments. Pvt. Ltd. (Special Bench Ahmadabad ITAT) 113 ITD 209. (ii) Swarnagiri Wire Insulations (P) Ltd. Vs. ITO, ITA No.200/Bang/2010 A.Y.2006-07 dated 21/05/2010. (iii) M/s Hyderabad Chemicals Suppliers Ltd., APIE, Balanagar, Hyderabad-37 Vs. ACIT, Circle-l(4), Hyderabad dated 21/01/2011. (iv) Daya Engineering Works Ltd. Vs. CIT (2010) 322 ITR 55. (v) Addl. CIT Vs. Ashok Alco Chemicals Ltd. (2005) 96 ITD 160 (Mum). 2.5 However, the Assessing Officer was not satisfied with the explanation given by the assessee. Distinguishing the decisions cited before him and relying on various decisions and the definition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is as to whether in view of section 80IA(5) of the I.T. Act, 1961 the quantum of deduction is to be computed after reducing the notional brought forward losses and depreciation of the eligible business even though the same might have been set off against other income in the earlier years or the year in which the assessee exercises the option contained in sub-section 80IA(2) of the Act of identifying 10 consecutive assessment years out of 15 years for which the deduction is to be availed. We find an identical issue had come up before the Pune Bench of the Tribunal in the case of Sangram Patil (Supra) wherein the Tribunal, following the decision of the Pune Bench of the Tribunal in the case of Serum International Ltd. (Supra) has decided the issue in favour of the assessee by observing as under : 4. The assessee is an individual engaged in the business of power generation, construction and earthmoving. For the A.Y. 2006-07, assessee filed a return of income declaring total income of ₹ 7,44,078/- which, inter alia, included a claim for deduction u/s 80-IA of the Act amounting to ₹ 25,62,413/- in relation to the profits earned from the activity of power generation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by the assessee for A.Y. 2002-03 and 2003-04 from the activity of windmill have to be reduced from the current year s profits of the windmill activity in order to compute the amount eligible for deduction u/s 80-IA of the Act, having regard to the provisions of section 80-IA(5) of the Act. Pertinently, it is not disputed that the losses of A.Y. 2002-03 and 2003-04 from windmill activity are otherwise lying absorbed against assessable incomes in the past years. As per the Revenue, section 80-IA(5) of the Act requires that the profits of the eligible units i.e. windmill are to be computed for the purposes of determining the quantum of deduction u/s 80-IA(1) of the Act, in a manner as if such eligible business was the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year thereof. As per the Revenue, initial assessment year in this case was 2002- 03 being the year of set-up of the windmill. Therefore, the past losses starting from the A.Y. 2002-03 have to be set-off against the profits of this year in order to arrive at the deduction computable u/s 80-IA(1) of the Act for the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O., notionally brought forward unabsorbed depreciation for the A.Y. 2003-04 to the impugned A.Y. 2004-05 and denied the claim for deduction made by the assessee u/s. 80IA in respect of the profit earned by it in A.Y. 2004-05. The Ld. A.R. submitted that sub-section (2) of Section 80IA provides an option to the assessee to choose 10 consecutive A.Ys. out of 15 years for claiming the deduction. He submitted that the term initial year in sub-section (5) of 80IA is not defined and is used in contradiction to the words beginning from the year used in subsection (2). He submitted that the assessee chose A.Y. 2004-05 as initial A.Y being the first year in which it claimed deduction u/s. 80IA and therefore, losses/depreciation beginning from A.Y. 2004- 05 alone could only be brought forward and set off. Depreciation of the preceding A.Y. 2002-03 could not have been notionally brought forward and set off against profit for the A.Y. 2004-05. The Ld. A.R. placed heavy reliance on the decision of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). He submitted that the decision of Hon ble Madras High Court will prevail upon the decision of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dt. 21st January 2011, the Hyderabad Bench of the Tribunal in the case of Hyderabad Chemical Supplies Ltd. Vs. ACIT (Supra) has also decided an identical decision in favour of the Revenue following the decision of Special Bench of the Tribunal in the case of ACIT Vs. Goldman Shares Finance (P) Ltd. (Supra). He submitted that the Hyderabad Bench of the Tribunal while deciding the issue has also discussed the decision of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). The Ld. D.R. submitted that even in the case of Liberty India Vs. CIT (Supra), the Hon ble Supreme Court has been pleased to explain the intention of Parliament and scope of deduction u/s. 80IA and 80IB of the Act. The Hon ble Supreme Court has been pleased to hold that such profits are to be computed as if such eligible business is the only source of income of the assessee. The devices adopted to reduce or inflate the profit of eligible business has got to be rejected in view of the overriding provisions of Sub-section (5) of Section 80IA of the Act. 13. Having been considered the above submissions, we find that the issue raised in Ground No. 1 as to what would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdictional Bombay High Court in the case of Commissioner of Central Excise Vs. Valson Dyeing, Bleaching and Printing Works (Supra) wherein the Hon ble Bombay High Court has been pleased to hold in a case of excise matter that Tribunal is bound by the decision of High Court , even of a different State, so long as there is no contrary decision of any other High 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 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Tribunal in the case of Goldmine Shares and Finance (P) Ltd. (supra) which was to the contrary. In this context, the Tribunal came to the conclusion that when the assessee exercised option identifying ten consecutive years as contained in sub-section (2) of section 80-IA of the Act, only the losses of the year beginning from such initial assessment year are to be brought forward and set-off while applying the provisions of section 80-IA(5) of the Act and not the losses of earlier years which otherwise were set-off against other income of the assessee. 8. At the time of hearing, the learned DR has not brought to our notice any decision of a High Court contrary to that of the Hon ble Madras High Court in the case of Velaydhaswamy Spinning Mills (P) Ltd. (supra) on the issue in question. Therefore, we find that the controversy before us is no longer res integra and is in fact covered in favour of the assessee by the decision of Pune Bench of the Tribunal in the case of Serum International Ld. (supra) which has been decided following the decision of the Hon ble Madras High Court in the case of Velaydhaswamy Spinning Mills (P) Ltd. (supra). 9. Before parting we may also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the same is upheld and the grounds raised by the Revenue are accordingly dismissed. 6. Grounds of appeal No.4 5 by the Revenue are as under : 4. Whether in the facts and in the circumstances of the case, the Ld. CIT(A) was correct in interpreting the provision of Section 14A r.w.Rule 8D in the light of decision of Jurisdictional High Court rendered in the case of Godrej Boyce Mfg. Co. Ltd. Vs. Dy. CIT reported in (2010) 43 DTK (Bom) 328 ITR 81 (Bom). 5. Whether in the facts and in the circumstances of the case, the CIT(A) was correct in interpreting that the assessee has not earned dividend income and has not claimed exemption, the provisions of Section 14A r.w. rule 8D are not applicable in view of the judgments in the cases of - Cheminvest Ltd. Vs Income Tax Officer 124 TTJ 577 (Del) (SB), Shankar Chemical Works Vs. DCIT (2011) 47 SOT 121 (Ahmadabad), CIT Vs. Rajendra. Prasad Mody 115 ITR 519 (SC), Technopak Advisors (P) Ltd. Vs. Addl. CIT'(2012) 50 SOT 31(Delhi) Maxopp Investment Ltd. others Vs CIT (2011) 64 DTR 122 (Del). 6.1 Facts of the case, in brief, are that during the course of assessment proceedings the Assessing Officer noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon ble Punjab High Court in the case of CIT Vs. Lakhani Marketing vide ITA No.970/2008 order dated 02- 09-2014 has held that when the assessee has not received any dividend income out of the shares held as investment and no disallowance u/s.14A has been made in the preceding as well as succeeding assessment years, disallowance u/s.14A of the Act cannot be made. He accordingly submitted that the order of the CIT(A) being in consonance with law should be upheld and the grounds raised by the Revenue should be dismissed. 10. The Ld. Departmental Representative on the other hand submitted that the Hon ble Delhi High Court in the case of Tulipstar Hotels Ltd. Vs. ADdl.CIT (2008) 114 ITD 202 (Delhi) and in the case of J.K. Synthetics reported in 200 Taxmann 101 has held that even if there is no exempt income, still disallowance u/s.14A can be made. 11. The Ld. Counsel for the assessee in his rejoinder submitted that when divergent views are available the view which is favourable to the assessee has to be followed in absence of any direct decision of the jurisdictional High Court. For the above proposition he relied on the decision of the Hon ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s.14A cannot be made when there is no tax free income. 9.2 We find the Hon ble Allahabad High Court in the case of Shivam Motors Pvt. Ltd.(Supra) has observed as under : As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the C1T(A), which has been affirmed by the Tribunal, hence does not give rise to any substantial question of law. Hence, the deletion of the disallowance of ₹ 2,03,752/- made by the Assessing Officer was in order. 9.3 We find the Hon ble Punjab Haryana High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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