TMI Blog2017 (9) TMI 1905X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case are in sink with that of the facts of the case of Ace Multi Axes Systems Ltd. (supra) - Decided in favour of assessee. Gains earned on sale of shares - short term capital gain or business income - Assessee claimed it as capital gains - HELD THAT:- As assessee maintains two separate accounts, i.e., investment account and stock in trade. In the past also, similar dispute exists as the AO treated the short term capital gains income as the Business income of the assessee. On hearing both the parties and considering the facts, we find that the need of honouring the entries in the books of account. No case is made out for disturbing the claim of the assessee. This is the case where only 55 transactions are involved and separate account for investment is maintained. Therefore, there is a case for applying the Apex Court s judgement in the case of Gopal Purohit [ 2010 (11) TMI 222 - SC ORDER ]. Therefore, in our view, the order of the CIT(A) is required to be reversed on this issue and in favour of the assessee. Exemption u/s 14A - Suo moto disallowance by assessee - HELD THAT:- We are of the opinion that it is settled legal proposition that the disallowance u/s.14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 order dated 31-03-2011, the claim of SSI status of the assessee qua the deduction u/s.80IB(3)(ii) was denied. Assessee filed an appeal before the Hon ble High Court and the same is pending for admission. 4. In the background of the above facts, Ld. Counsel for the assessee submitted that deduction u/s.80IB(3)(ii) of the Act was claimed in the present A.Y. 2010-11. AO denied the said SSI status and therefore, the claim of said deduction too. CIT(A) confirmed the order of the AO relying on the order of the Tribunal in assessee s own case for the said earlier years for the A.Yrs. 2008-09 and 2009-10 which is now pending before the Hon ble High Court for admission. CIT(A) referred to the judgment of Hon ble Karnataka High Court in the case of M/s. Ace Multi Axes Systems Ltd. Vs. DCIT 367 ITR 0266 which was decided in favour of the assessee on similar facts. In para 8, the CIT(A) extracted the relevant portions from his order for the earlier A.Y. 2008-09. He also made a reference to the said Hon ble Karnataka High Court judgment in Para 9 of his order before upholding the binding nature of the decision of the jurisdictional Tribunal in the assessee s own case and in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s. Samruddhi Industries Ltd. was decided by the Tribunal against that assessee. Similarly, this judgment was also not available when the assessee s said appeals were decided against the present assessee. Further, referring to the finding of CIT(A) in Para 9 above, Ld. AR demonstrated that the CIT(A) failed to follow the said principles of judicial discipline which dictates that in the absence of judgment of jurisdictional High Court the judgment of other High Courts has to be followed in preference to the Coordinate Benches of the Tribunal. It is not the case of the CIT(A) that the said judgment is in applicable to the facts of the present case. For this proposition, he relied on the judgment of jurisdictional High Court in the case of Thana Electricity Supply Company reported in 206 ITR 0727 (Bom) and also the said judgment of Hon ble Karnataka High Court. Ld. Counsel for the assessee filed written submission in this regard giving the following fact and various legal propositions. 8. For the sake of completeness, we proceed to the extract the same in this order as under : The Karnataka High Court decision in case of a Ace Multi Axes Systems Ltd - 367 ITR 0266 - (Page 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to begin manufacture or produce articles or things at any time during the period beginning on the 1st day of April 1995 and end on the 31st day of March 2002. This is a condition which a small scale industry has to fulfill in addition to the conditions mentioned in Sub-sec.(2) of Sec. 80IB. Once all these conditions are fulfilled, a small scale industry is entitled to the benefit of deduction for a period of 10 consecutive years beginning with the initial assessment year. 5. In the entire provision, there is no indication that these conditions had to be fulfilled by the assessee all the 10 years. When once the benefit of 10 years, commencing from the initial year, is granted, if the undertaking satisfy all these conditions initially, the undertaking is entitled to the benefit of 10 consecutive years. The argument that, in the course of 10 years, if the growth of the industry is fast and it acquires machinery and the total value of the machinery exceeds ₹ 1 crore, it ceases to have the said benefit, do not follow from any of the provisions. It is true that there is no express provision indicating either way, what would be the position if the small scale industry ceases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow Karnataka HC decision) as the Binding precedent. This judicial precedent is as per Born HC decision in case of M/s Valson Dyeing Bleaching Printing works - Bom HC - Central Excise Appeal No. 58 of 2009 - copy of the decision is at Page 1 of Statute Compilation Book 1 - Relevant Para of the decision is reproduced here below - Para 13 (Page 85 of statute compilation Book) Until contrary decision is given by any other competent high court, Which is binding on a Tribunal in the state of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another state, is the final law of the land. When the tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 140(3). That Section was already declared ultra vires by a competent High Court in the country and 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 different state, so long as there is no contrary decision of any other High Court on that question. It is admitted before us that the time when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutionality of that section and gave a finding that it is ultra vires following the decision of the Madras High Court- What the Tribunal really did was that in view of the law pronounced by the Madras High Court it proceeded on the footing that s. 140A(3) was non-existent and so the order of penalty passed thereunder cannot be sustained. We also state that, The Ld. Revenue DR has relied upon decision in case of Thana Electricity - Bom HC - 206 ITR 727. However, that decision is distinguishable on facts and hon. Pune ITAT in Lap Finance Consultancy Pvt Ltd. - ITA No. 1716 to 1718/PN/22012 (Page 87 of statute compilation book 1) has distinguished the same by relying upon decision of Smt. Godavaridevi Saraf. Relevant para of the decision is as under - Para 6 . Secondly, even otherwise we find that the CIT(A) has not correctly appreciated the legal position in coming to conclude that the view expressed by the Special Bench of the Tribunal is to be preferred than that expressed by the Hon'ble Madras High Court. According to the CIT(A), the decision of the Madras High Court is of a non-jurisdictional High Court and on the basis of the principle of stare-decisis exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) constitutes the one from the nonjurisdictional High Court. Ld. DR merely relied on the order of the AO/CIT(A), when the Bench mentioned about the principle of judicial discipline and the requirement of following the judgment of any High Court when the judgment from jurisdictional High Court is not available on the subject. 10. We heard both the parties and perused the orders/judgments cited by the parties on the subject. We find that there is no dispute on the fact of SSI status when the assessee was incorporated and when it first claimed deduction u/s.80IB(3)(ii) of the Act in the A.Y. 2003-04. Under the said provisions, assessee is entitled for deduction for the period of 10 years. Relevant provisions in this regard read as under : 80IB(1) . . . . . . . (2) . . . . . . . . . . . (3) The amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) beginning with the initial assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation arises. If we keep in mind the object of the Legislature providing for these incentives and when a period of 10 years was prescribed, that was the period, probably, which was required for any industry to stabilize itself. During that period the industry not only manufactures products, it generates employment and it adds to the wealth of the country. Merely because an industry stabilizes early, makes profits, makes future investment in the said business, and it goes out of the definition of the small scale industry, the benefit under Sec. 80IB cannot be denied. If such a literal interpretation was placed on the said provision, it would run counter to the very object of granting incentives. It would kill the industry. Therefore keeping in mind the object with which these provisions are enacted, keeping in mind the industrial growth which was required to be achieved, if two interpretations are possible, the courts had to lean in favour of extending the benefit of deduction to an assessee who had availed the opportunity given to him under law and has grown in his business. Therefore it was viewed that if a small scale industry, in the course of 10 years, stabilizes early, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding effect in supercession of the existing orders of the Coordinate Bench decisions of the Tribunal. Ground No.1 raised by the assessee is allowed. 14. Ground No. 2 relates to the gains earned by the assessee on sale of shares constitutes short term capital gain or business income. Assessee claimed it as capital gains. The written submissions submitted by the assessee are extracted as under : We are continuously offering Investment Income arising out of Investment Held as Investment as a short-term capital gain/long term capital gain. (as the case may be). Income from Investments which are held as Inventory is duly offered for Tax as Business Income. In the Past also the Ld. AO treated Capital Gain Income as business Income, CIT(A) upheld the contention of the AO, upon to appeal to ITAT, Hon. ITAT set aside the matter for fresh adjudication. In Set Aside Matter, the CIT(A) has again decided the issue against the assessee and we have Filed 2nd appeal before Hon. ITAT. Copy of CIT(A) order (2nd order) is submitted during the course of Hearing. In view of the above, we pray your honor to decide the issue on merits. The brief facts of the case are as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities. No Number of transaction proves. Borrowed Funds No Sufficient own funds. Object of in MA an AA No Main object relates to manufacturing Typical Holding Period very small No The Figures are given in the earlier table Ratio of sales to purchase is high No The figures are given in the earlier table High time devoted to this activity No The scale of production activity and investment activity proves this Treatment in books as stock No Balance sheet shows this as investment Whether listed shares Yes Naturally as the investment should be saleable Investment in sister concern No Whether Transactions are by promoters Yes This is only because it is private company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed part of the total income ,i.e. ₹ 1,37,806/- in this case. For this proposition, he relied on various decisions in favour of the assessee. 19. On hearing both the parties, we are of the opinion that it is settled legal proposition that the disallowance u/s.14A read with Rule 8D should not exceed the exempt income. Therefore, we direct the AO to restrict the disallowance to the exempt income of ₹ 1,37,806/- after netting the suo moto disallowance of ₹ 24,508/- discussed above. With these directions, Ground No.3 raised by the assessee is partly allowed. 20. In the result, appeal of the assessee is partly allowed. ITA No.96/PUN/2015 By Revenue : 21. Grounds raised by the Revenue are as under : 1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified to interpret the operation of section 80IA(5) only from the year of first claim of deduction u/s.80IA(1) even when the eligible business had commenced in earlier years. 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was correct to treat the judgment of non-jurisdictional High Court as the binding precedent that mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had disallowed the claim of deduction u/s.80IA(4)(iv)(a) of the I.T. Act amounting to ₹ 43,93,235/-. The Assessing Officer also treated Sangli and Dhule units as single one having same eligible business. The claim was made in respect of wind mill located at Sangli. The issue pertains to losses of the undertaking before the initial year already adjusted against other income. During the course of the assessment proceedings, the assessee relied upon various decisions including Pune Tribunal's decision in the case of Poonawala Finvest Agro (P) Ltd. Vs. Asst. Commissioner of Income-tax reported in (2008) 118 TTJ (Pune) 68. The Assessing Officer however relying upon Special Bench decision of Ahmedabad Tribunal reported in the case of ACIT Vs. Goldmine Shares Finance (P) Ltd. reported in 116 TTJ (Ahmedabad) 705, disallowed the claim of the assessee. While doing so, the Assessing Officer also held that initial assessment year has to be considered as the year in which power generation commences and not the year in which it chooses to make claim for deduction for the first time. The Assessing Officer held that in the current section 80IA(5), there is no option given to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Madras High Court judgment in case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT reported in 38 DTR 57. ITAT, Bangalore Bench in the case of Anil H Lad Vs. DCIT did not follow the Special Bench decision of the Ahmedabad Bench Tribunal in view of above judgment of Madras High Court. Relevant portion of the order is reproduced for the sake of clarity: From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercise option, the only losses of the years beginning from initial A.Y. alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
