TMI Blog2014 (9) TMI 1261X X X X Extracts X X X X X X X X Extracts X X X X ..... mber For the Assessee : Shri Nikhil Pathak. For the Revenue : Shri Rajesh Damor. ORDER PER R.K. PANDA, AM : This appeal filed by the Revenue is directed against the order dated 30-04-2013 of the CIT(A)-II, Pune relating to Assessment Year 2010-11. 2. Facts of the case, in brief, are that the assessee in an individual engaged in the business of share trading and power generation from windmill. She filed her return of income on 30-09- 2010 declaring income of Rs.28,70,285/-. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed deduction u/s.80IA(4) of the I.T. Act of an amount of Rs.38,82,992/- on account of profits derived from generation and sale of electricity from windmill. The Assessing Officer asked the assessee to justify the claim of such deduction u/s.80IA(4). 2.1 The assessee submitted that A.Y. 2010-11, i.e. the impugned assessment year is the first year for the purpose of claiming deduction u/s.80IA(4) of the I.T. Act. It was argued that the initial year has not been defined in I.T. Act and according to the assessee initial year is the year in which the assessee has chosen to claim the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee relying on various decisions submitted that working of allowable deduction u/s.80IA as made by the Assessing Officer is not in accordance with the provisions of I.T. Act and also not in accordance with the various decisions. The assessee also relied on the following decisions : 1. Velayudhaswamy Spinning Mills (P) Ltd. 340 ITR 477 (Mad.) 2. Poonawala Estate Stud Farms (P) Ltd. (Pune-B) (2010) 48 DTR 210 3. Serum International Ltd. Vs. Addl. CIT in ITA Nos.290 to 292/PN/10 vide order dt.28/09/2011. 4. Chordia Food Products Ltd. Pune Tribunal order dt. 26-06-2012 5. Shavie Exports, Mumbai - ITA No. 321/Mum/2012 6. Malpani Sales Corporation ITA No. 471/PN/2010 7. Prashant Caterers, Mumbai ITA No. 4226/Mum/2011 order dt. 06-02-2013 5. Based on the arguments advanced by the assessee the Ld. CIT(A) directed the Assessing Officer to delete the disallowance made by observing as under : 3.2 I have considered the submission of the appellant and perused the material available on record. The appellant has raised three grounds of appeal and in ground no. 1 and its sub-grounds the disallowance of deduction claimed u/s 80IA(4) amounting to Rs. 38,82,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction u/s 80IA. It has further been stated that the deduction has been rightly claimed in accordance with the provisions of section 80IA(5) treating the undertaking as separate and sole source of income, and while calculating the deduction u/s 80IA the brought forward depreciation on windmill and the current year's depreciation have been reduced from the net revenue income of the said windmill. The appellant has reproduced the computation of the claim of deduction u/s 80IA whereby the eligible amount of deduction has been worked out at Rs. 38,82,992/-. The appellant has emphasized that as per the provisions of sub-section (5) of section 80IA profits are to be computed as if such eligible business is the only source of income of the assessee and when the assessee exercises the option only the losses of the year beginning from the initial assessment year are to be brought forward and not the losses of the earlier years which have already been set off against other income of the assessee. The appellant has pointed out that the aforesaid legal interpretation has been approved by the Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs ACIT (2012) 340 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Special Bench in the case of Goldmine Shares Finance Pvt. Ltd., 116 TTJ 705 and Poonawala Stud Agro Farm Pvt. Ltd. holding that 'initial assessment year' is in which the deduction is claimed for the first time by the assessee. 3.6.1 In another decision by the Bangalore ITAT in the case of Anil H. Lad Vs CIT, ITA No. 1262/Bang/2010, A.Y. 2008-09, dated 07.01.2011, the Bangalore Bench followed the decision of the Hon'ble Madras High Court in the case of Valayudhaswami Spinning Mills Pvt. Ltd. cited (supra) and held that: .............where the depreciation and loss of earlier years have already been set off against other business income of those assessment years, there is no need for notionally carrying forward and setting off of the same depreciation and loss in computing the quantum of deduction available u/s 801. The Hon'ble Court has held further that the year of commencement alone need not be the 'initial year', but depending upon the facts of the case and the option exercised by the assessee, the year of claim also can be considered as 'initial assessment year'. It also held that the issue is squarely covered by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct income of the eligible business. Fiction created by sub-section (5) of section 80IA 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 Goldmine 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 contrary decision is given by any other competent High Court. In this regard, we find strength from the recent decision of Hon'ble jurisdictional 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 judgement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of determining the quantum of deduction u/s.80IA(1), profits and gains of eligible business of the assessee would be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination has to be made. (3) The Learned Commissioner of Income-tax (Appeals) erred in failing to appreciate that the assessee's claim of deduction u/s.80IA of the Act was required to be determined only after set off of previous years' losses on standalone basis. (4) The appellant craves leave to add, alter or amend any or all the grounds of appeal. 7. The Ld. Counsel for the assessee at the outset filed a copy of the decision of the Coordinate Bench of the Tribunal in the case of Sangram Patil Vs. ITO vide ITA Nos. 177 and 178/PN/2011 order dated 12-12-2012 for A.Yrs. 2006-07 and 2007-08 and submitted that the issue stands squarely covered in favour of the Assessee and against the Revenue. It has been held in the said decision that when the assessee exercises the option identifying 10 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 7,44,078/- which, inter alia, included a claim for deduction u/s 80-IA of the Act amounting to Rs. 25,62,413/- in relation to the profits earned from the activity of power generation in the windmill. The undertaking of the assessee generating power (viz. windmill) was set up in the previous year relevant to the assessment year 2002-03 at Vankusawade, Tal. Pathan, Dist. Satara. In terms of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 consideration. On the other hand, the plea of the assessee is that the initial assessment year in this case is to be treated as 2004-05 i.e. the year in which assessee exercised the option contained in section 80-IA(2) of the Act of identifying te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 sub-section (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 Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares and Finance (P) Ltd. (Supra) followed by the Pune Bench of the Tribunal in its recent decision in the case of Prima Paper Engg (P) Ltd. Vs. ITO (Supra) and there the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 refer to the decision of the Pune Bench of the Tribunal in the case of Prima Paper Engg. (P) Ltd. Vs. ITO in ITA No. 1755 and 1205/PN/2007 for A.Y. 2002-03 and 2003-04 vide order dated 31-1-2011 which is contrary to the aforesaid position. The said dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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