M/s Yamun Power & Infrastructure Ltd., Jagadhari V. DCIT, Yamunanagar

CO 1/CHANDI/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2079 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: General deduction; Depreciation; Question of law; Unabsorbed depreciation
• Section: 80IB; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NOS. 1062 & 1063/CHD/2014 (ASSESSMENT YEARS : 2010-11 & 2011-12) THE D.C.I.T., VS M/S YAMUNA POWER & YAMUNA NAGAR CIRCLE, INFRASTRUCTURE LTD., YAMUNA NAGAR. SARDANA NAGAR, AMBALA ROAD, JAGADHRI. PAN NO.: AAACY0554A & C.O.NO.1/CHD/2015 ARISING OUT OF ITA NO. 1062/CHD/2014 (ASSESSMENT YEAR : 2010-11) M/S YAMUNA POWER & VS THE D.C.I.T., INFRASTRUCTURE LTD., YAMUNA NAGAR CIRCLE, SARDANA NAGAR, AMBALA ROAD, YAMUNA NAGAR. JAGADHRI. PAN NO.: AAACY0554A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL DEPARTMENT BY : SHRI MANOJ MISHRA, DR DATE OF HEARING : 21.12.2015 DATE OF PRONOUNCEMENT : 10.02.2016 O R D E R PER RANO JAIN, A.M. THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME (APPEALS), PANCHKULA, DATE D 2 22.9.2014 AND 26.9.2014 FOR ASSESSMENT YEARS 2010- 11 AND 2011-12 RESPECTIVELY. THE ASSESSEE HAS FIL ED CROSS OBJECTION AGAINST THE APPEAL OF THE REVENUE I N ITA NO.1062/CHD/2014. ITA NO.1062/CHD/2014 : 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE ESTABLISHED TWO WIND MILLS IN JAISALMER, RAJASTHAN AT VILLAGE GORERA AND ANOTHER AT VILLAGE SODA MADA ON 30.3.2004 AND 24.1.2004 RESPECTIVELY. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AMOUNTING TO RS.1,09,82,471/- @ 100% ON THE INCOME EARNED FROM THE BUSINESS OF WIND POWER GENER ATION PROJECTS. THE ASSESSING OFFICER FURTHER NOTED THAT ON THESE POWER PLANTS THE ASSESSEE COMPANY HAD INCURRE D LOSSES FOR ASSESSMENT YEARS 2004-05 TO 2006-07. TH ESE LOSSES WERE SET OFF BY THE ASSESSEE AGAINST THE INC OME DERIVED FROM THE BUSINESS OF CABLE JOINING ETC., WH ICH DOES NOT QUALIFIED FOR DEDUCTION UNDER SECTION 80IA OF T HE ACT. FURTHER REFERRING TO THE PROVISIONS OF SECTION 80IA (5) OF THE ACT HE OBSERVED THAT THE BROUGHT FORWARD LOSSES OF THE ELIGIBLE BUSINESS NEED TO BE SET OFF AGAINST THE IN COME FROM ELIGIBLE BUSINESS EVEN THOUGH THEY WERE SET OF F AGAINST THE NON-ELIGIBLE BUSINESS IN THE RESPECTIVE YEARS. HE FURTHER NOTED THAT AFTER SETTING OFF OF THE LOSS ES FOR ASSESSMENT YEARS 2004-05 TO 2006-07 AGAINST THE INC OME 3 FOR ASSESSMENT YEARS 2007-08 TO 2009-10, THERE ARE STILL BROUGHT FORWARD LOSSES OF RS.638.99 LACS, WHICH WER E TO BE SET OFF AGAINST THE INCOME FROM THE WIND MILL PR OJECTS. THIS EXERCISE RENDERS THE INCOME FROM THE ELIGIBLE BUSINESS AT NIL. AFTER CONSIDERING DETAILED SUBMIS SIONS FILED BY THE ASSESSEE AND RELYING ON THE DECISION O F AHMEDABAD TRIBUNAL IN THE CASE OF ACIT VS. GOLDMIN E SHARES & FINANCE PVT. LTD., 113 ITD 209(AHD), THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE UNDER SECTION 80IA OF THE ACT OF RS.1,09,82,471/-. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT AS PER SECTION 80IA(2) OF THE ACT, T HE DEDUCTION AT THE OPTION OF THE ASSESSEE CAN BE CLAI MED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY. AS PER SECTION 80IA(2) OF THE ACT, THE FIRST PREVIOUS YEAR FOR THIS PURPOSE WORKS OUT TO ASSESSMENT YEAR 2004-05 AND THE LAST YEAR WORKS OUT TO ASSESSMENT YEAR 2019-2020. THEREFORE, THE ASSESSEE HAD THE OPTION TO START CLAIMING DEDUCTION FROM ANY OF THE ASSESSMENT YEAR WITHIN A PERIOD OF FIFTEEN YEARS BE GINNING FROM ASSESSMENT YEAR 2004-05. SINCE THE ASSESSEE H AS OPTED ASSESSMENT YEAR 2008-09 AS THE INITIAL YEAR, THE INITIAL YEAR FOR THE PURPOSES OF PROVISIONS OF SECT ION 80IA(5) OF THE ACT IS 2008-09 AND NOT ASSESSMENT YE AR 2004-05. THE PROVISIONS OF SECTION 80IA OF THE ACT WILL BE 4 APPLICABLE ONLY FROM ASSESSMENT YEAR 2008-09 AND IT WILL BE ASSUMED THAT THE ONLY SOURCE OF INCOME OF THE AS SESSEE IS INCOME FROM GENERATION OF POWER FOR THE PURPOSE OF COMPUTING THE QUANTUM OF DEDUCTION UNDER SECTION 80 IA OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS :- A) MOHAN BREWERIES & DISTILLERIES LTD. VS. CIT (2008) 23 SOT 32 (CHENNAI (URO). B) VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. CIT (2010) 231 CTR 368 (MAD). C) RANGAMMA STEELS & MALLEABLES VS. CIT (2010) 132 TTJ 365 (CHENNAI). 4. THE LEARNED CIT (APPEALS) CALLED FOR A REPORT FROM THE ASSESSING OFFICER, WHO VIDE HIS OFFICE LET TER DATED 15.1.2014 FILED THE REPORT AND REITERATED THE FINDI NGS AS NARRATED IN THE ASSESSMENT ORDER. THE ASSESSEE FIL ED THE REJOINDER TO THE REMAND REPORT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REMAND REPORT OF THE ASSESSING OFFICER AND REJOINDER FILED BY THE ASSESS EE, THE LEARNED CIT (APPEALS) ALLOWED THE APPEAL OF THE ASS ESSEE. 5. AGGRIEVED BY THIS THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN LAW THAT DELETED THE ADDITIO N OF DISALLOWING THE DEDUCTION CLAIMED U/S 80IA OF THE IT ACT. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (APPE AL) BE SET- ASIDE AND THAT OF THE A.O. BE RESTORED. 5 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 6. THE LEARNED D.R. WHILE ARGUING BEFORE US RELIE D ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT NOT CONSIDERING THE YEAR OF START OF MANUFACTURING THE INITIAL YEAR THE ASSESSEE HAS GOT UNDUE BENEFIT IN THE FORM OF CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AT HIS OWN OPTION. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND RELIANCE WAS PLACED ON ANOTHER JUDGMENT OF THE KARN ATAKA HIGH COURT IN THE CASE OF CIT VS. ANIL H. LAD, 102 DTR 241 (KAR). 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ) WE SEE THAT HE HAS GIVEN VERY DETAILED FINDINGS ON THE ISSUE AS FOLLOWS : 4.10 AFTER CONSIDERING THE AO'S OBSERVATIONS, APPE LLANT SUBMISSION AND THE PROVISIONS OF SECTION 80IA(2) AND (5) OF THE ACT, IT IS NOTED THAT THE INITIAL ASSESSMENT YEAR FO R SECTION 80IA MEANS THE ASSESSMENT YEAR SPECIFIED BY THE ASSES SEE AT HIS OPTION TO BE THE INITIAL YEAR. THE INITIAL YEAR FAL LS IN ANY OF THE 15 ASSESSMENT YEARS AT THE OPTION OF THE ASS ESSEE STARTING FROM THE PREVIOUS YEAR IN WHICH THE ENTERPR ISE BEGINS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY . UNDER SECTION 80IB AND ALSO U/S 80IC, 80ID AND 80IE, THE FIRS T 6 YEAR IN WHICH THE PRODUCTION IS STARTED IS TAKEN AS I NITIAL PREVIOUS YEAR WHEREAS, AFTER THE AMENDMENT IN PROVIS IONS OF SECTION 80IA W.E.F. 01.04.2000 THE INITIAL ASSESSMENT YEAR IS AT THE OPTION OF THE ASSESSEE. IT MAY BE FIRST YEAR OF THE COMMENCEMENT OF ACTIVITY OR A SUBSEQUENT YEAR AS SEL ECTED BY THE ASSESSEE FOR THE PURPOSE OF CLAIMING DEDUCTION U /S 801 A OF THE ACT. IN THE APPELLANT'S CASE, THE FIRST YEAR OF COMMENCEMENT OF ACTIVITY WAS A.Y. 2004-05 BUT AS SE CTION 80IA(2) PERMITS THE APPELLANT HAS OPTED A.Y. 2008-09 A S THE INITIAL ASSESSMENT YEAR FOR AVAILING DEDUCTION FOR 10 CONSECUTIVE ASSESSMENT YEARS STARTING FROM A.Y. 2008-09. 4.11 NOW COMING TO THE COMPUTATION OF DEDUCTION, THE APPLICABLE SECTION IS 801 A(5) WHICH PROVIDES DEDUCTIO N FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR O N THE PROFIT AND GAIN FROM THE ELIGIBLE BUSINESS AS IF SUC H ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSES SEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSES SMENT YEAR OR TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO AN D INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINAT ION IS TO BE MADE. IN THE INSTANT CASE, THE PROVISIONS OF SECTION 80IA(5) WOULD BE APPLICABLE FROM PREVIOUS YEAR RELEVAN T TO A. Y. 2008-09. ANY PROFIT OR LOSS ARISING FROM THE WIND M ILLS BUSINESS WOULD BE CONSIDERED FOR THE COMPUTATION FRO M A.Y. 2008-09 TO SUBSEQUENT CONSECUTIVE 10 ASSESSMENT YEARS. THEREFORE, THE LOSSES PERTAINING TO PREVIOUS Y EARS PRIOR TO A.Y. 2008-09 WILL NOT BE TAKEN INTO CONSIDERATION F OR CALCULATING THE AMOUNT OF DEDUCTION U/S 80IA OF THE ACT. THIS VIEW IS ALSO SUPPORTED BY THE DECISIONS OF HON 'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (SUPRA) AND HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF ANI L H LAD (SUPRA). 4.12 THEREFORE, IN VIEW OF ABOVE DISCUSSIONS ON THE APPLICABILITY OF PROVISIONS OF SECTION 80IA(2) AND ( 5) AND JUDICIAL PRONOUNCEMENTS, THE AO WAS NOT JUSTIFIED I N 7 DISALLOWANCE OF CLAIM OF DEDUCTION OF RS. 1,09,82,4 71/-U/S 801 A OF THE ACT. THE AO IS DIRECTED TO DELETE THE ADDI TION MADE ON THIS ACCOUNT. THIS GROUND OF APPEAL IS ALLOWED. ' 9. ON PERUSAL OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) AS THE ONLY CONTROVERSY TO BE DECIDED IS WHETHER FOR CLAIM ING DEDUCTION UNDER SECTION 80IA OF THE ACT, THE LOSSES WHICH WERE INCURRED BY THE ELIGIBLE BUSINESS IN THE PERIO D EARLIER TO THE INITIAL YEAR ARE TO BE NOTIONALLY CARRIED FO RWARD TO THE INITIAL ASSESSMENT YEAR AND BE ADJUSTED BEFORE CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT. WE HAVE ALSO PERUSED THE JUDGMENT OF THE KARNATAKA HIG H COURT IN THE CASE OF ANIL H. LAD. (SUPRA), WHEREBY ADJUDICATING THE SAME ISSUE, THE HON'BLE COURT HAS ANALYZED THE JUDGMENT OF THE MADRAS HIGH COURT IN C ASE OF SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA), WHICH HAS BEEN RELIED VERY HEAVILY BY THE ASSESSEE. THE FINDINGS OF THE HON'BLE COURT ARE AT PARAS 9 AND 10 OF THE JUDGMENT, WHICH READS AS UNDER : 9. THE MADRAS HIGH COURT IN THE AFORESAID VELAYUDHASWAMY'S CASE INTERPRETING THE VERY PROVISI ON HELD, FROM A READING OF SUB-SECTION (1) SECTION 80-IA , IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTA KING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-S ECTION (4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESS EE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUS INESS AND 8 THE SAME IS DEFINED IN SUB-SECTION (4). SUB-SECTION (2) P ROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASS ESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BENE FIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM T HE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB- SECTION (5 ) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INITIAL ASSESSMENT YEAR' ARE USED IN SUB-SECTION (5) AN D THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THAT 'INITIAL ASSESSMENT YEAR' EMPLOYED IN SUB-SECTION (5) IS DIFFERENT FROM THE WORDS 'BEGINNING FROM THE YEAR' REFERRED TO IN SUB-SECTION (2). SUB-SECTION (5) STARTS WITH NON OBSTA NTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS O F THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; FOR THE PURP OSE OF DETERMINING THE QUANTUM OF DEDUCTION; FOR THE ASSESS MENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR, THEREBY A FICTION IS CREATED BY INTRODUCING A DEEMI NG PROVISION AND THEREFORE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVA NT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMEN T YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOS SES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALON E ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSES SEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE I NITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVEN UE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EA RLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WE RE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SE T OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. O NCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET O FF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB - SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIO NALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND TH E SAME 9 CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT I S CREATED. 10. THEREFORE, KEEPING IN MIND THE OBJECT WITH WHICH T HESE PROVISIONS ARE INTRODUCED, IT IS CLEAR THAT AN ASSESS EE IS GIVEN THE BENEFIT OF 100% DEDUCTION OF THE PROFITS AND GA INS FROM THE ELIGIBLE BUSINESS. THE QUANTUM OF DEDUCTION IS TO BE CALCULAT ED WHEN THE CLAIM FOR DEDUCTION IS MADE. IF BEFORE CLAIMIN G DEDUCTION, THE LOSS AND DEPRECIATION CLAIMED BY THE AS SESSEE EVEN IN RESPECT OF ELIGIBLE BUSINESS IS SETOFF AGAIN ST INCOME OF THE ASSESSEE OR OTHER SOURCE, THE SAID LOSS OR DEPREC IATION IS ALREADY ABSOLVED, IT DOES NOT EXIST. FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB-SECTI ON (5) OF SECTION 80IA , THE REVENUE CANNOT TAKE INTO CONSIDERATION THE LOSS AND DEPRECIATION WHICH IS ALREADY SETOFF AGAINST T HE INCOME OF THE ASSESSEE FROM OTHER SOURCE AND COMPUT E THE PROFIT UNDER SECTION 80IA . THEREFORE, THE APPROACH OF THE TRIBUNAL IS IN ACCORDANCE WITH LAW. THE ASSESSING AUTH ORITY AND THE COMMISSIONER COMMITTED A SERIOUS ERROR IN SE TTING OFF THE PROFIT EARNED BY THE ASSESSEE UNDER SECTION 80IA AGAINST THE LOSSES AND DEPRECIATION OF THE ELIGIBLE BUSINESS WHICH IS ALREADY SETOFF FROM OTHER SOURCE BEFORE SUCH A CLAIM IS PUTFORTH. THUS, THERE IS NO ERROR COMMITTED BY THE TRI BUNAL IN SETTING ASIDE THE ORDER PASSED BY THE ASSESSING AUT HORITY AS WELL AS THE LOWER APPELLATE AUTHORITY. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE. 10. THIS VIEW HAS ALSO BEEN UPHELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHEVIE EXPORT S (SUPRA), WHEREBY ALL THE JUDGMENTS RELIED ON BY THE ASSESSEE AS WELL AS THE REVENUE HAVE BEEN CONSIDERE D AND THE BENCH HAS GIVEN FINDINGS AT PARAS 9 TO 12, WHIC H READS AS UNDER : 10 9. SECTION 80IA, WHICH HAS BEEN SUBSTITUTED W.E.F. 1 ST APRIL 2000, PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF A N ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY A N UNDERTAKING FROM ANY ELIGIBLE BUSINESS REFERRED TO I N SUB SECTION 4, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING TH E TOTAL INCOME, THE DEDUCTION OF AN AMOUNT EQUAL TO 100% OF TH E PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR 10 CONSECUTIVE YEARS. SUBSTITUTED SUBSECTION (2) OF SECT ION 80IA, PROVIDES THAT AN OPTION IS GIVEN TO THE ASSESSEE FO R CLAIMING ANY 10 CONSECUTIVE ASSESSMENT YEAR OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGIN TO OPERATE. THE 15 YEAR S IS THE OUTER LIMIT WITHIN WHICH THE ASSESSEE CAN CHOOSE THE P ERIOD OF CLAIMING THE DEDUCTION. SUBSECTION (5) IS A NONOBSTA NTE CLAUSE WHICH DEALS WITH THE QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE RELEVANT PROVISIONS OF SUBSECT ION (5) OF SECTION 80IA, READS AS UNDER: (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN E LIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) A PPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR AN Y SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF T HE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE IN ITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH TH E DETERMINATION IS TO BE MADE. 10. FROM A PLAIN READING OF THE ABOVE, IT CAN BE GATH ERED THAT IT IS A NONOBSTANTE CLAUSE WHICH OVERRIDES THE OTHER PROVISIONS OF THE ACT AND IT IS 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 T O BE 11 COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOU RCE OF INCOME. THUS, THE FICTION CREATED IS THAT THE ELIGIBLE BUS INESS 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 T HE INITIAL ASSESSMENT YEAR. PRIOR TO 1 ST APRIL 2000, THE INITIAL ASSESSMENT YEAR WAS DEFINED FOR VARIOUS TYPES OF ELI GIBLE ASSESSEES UNDER SECTION 80IA(12). HOWEVER, AFTER THE AMENDMENT BROUGHT IN STATUTE BY THE FINANCE ACT, 19 99, THE DEFINITION OF INITIAL ASSESSMENT YEAR HAS BEEN SPECI FICALLY TAKEN AWAY. NOW, WHEN THE ASSESSEE EXERCISES THE OPT ION OF CHOOSING THE INITIAL ASSESSMENT YEAR AS CULLED OUT IN SU B 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 SETOFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO THE PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT YEAR A S CONTEMPLATED OR CHOSEN BY THE ASSESSEE. IT IS ONLY W HEN THE LOSS HAVE BEEN INCURRED FROM THE INITIAL ASSESSMENT YEA R, THEN THE ASSESSEE HAS TO ADJUST LOSS IN THE SUBSEQUENT A SSESSMENT YEARS AND IT HAS TO BE COMPUTED AS IF ELIGIBLE BUSINE SS IS THE ONLY SOURCE OF INCOME AND THEN ONLY DEDUCTION UNDER SECTION 80IA CAN BE DETERMINED. THIS IS THE TRUE IMPORT OF SE CTION 80IA(5). 11. IN THE DECISION OF GOLDMINE SHARES AND FINANCE P VT. LTD. (SUPRA), DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL, T HE CLAIM OF DEDUCTION BY THE ASSESSEE HAD STARTED FROM ASSESSMENT YEAR 199697 ONWARDS AND THE ASSESSEE HA D CLAIMED DEDUCTION UNDER SECTION 80IA STARTING FROM T HE FIRST YEAR ITSELF I.E., ASSESSMENT YEAR 199697. THUS, THE SPE CIAL BENCH WAS DEALING WITH THE OPERATION OF SECTION 80IA(5) WHERE THE ASSESSEE HAD FIRST CLAIMED THE DEDUCTION IN THE ASSESSMENT YEAR 199697 AND FOR SUBSEQUENT ASSESSME NT YEARS. THIS ASPECT OF THE MATTER HAS BEEN VERY WELL EL ABORATED BY THE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS 12 PVT. LTD. (SUPRA) AFTER CONSIDERING THE SPECIAL BENCH D ECISION OF THE TRIBUNAL IN GOLDMINE SHARES AND FINANCE PVT. L TD. (SUPRA) AND RELEVANT PROVISIONS OF THE ACT I.E., PRE AME NDMENT AND POST AMENDMENT HAVE COME TO THE SAME CONCLUSION: FROM READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGI BLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND E VERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS B EGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALR EADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT I S CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIE R YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WE RE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND TH E SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. O NCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE O THER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK TH E SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED I N SUB- SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOU NT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PUR POSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 14. IN THE PRESENT CASES, THERE IS NO DISPUTE THAT LOSS ES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND AD JUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING TH E RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED THE OPTION U NDER S. 80-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. THER E IS A POSITIVE PROFIT DURING THE YEAR. THE UNREPORTED JUDG MENT OF 13 THIS COURT CITED SUPRA CONSIDERED THE SCOPE OF SUB-S. (6) OF S.80-I, WHICH IS THE CORRESPONDING PROVISION OF SUB-S. (5) OF S. 80-IA. BOTH ARE SIMILARLY WORDED AND THEREFORE WE AGREE ENTIRELY WITH THE DIVISION BENCH JUDGMENT OF THIS COURT C ITED SUPRA. IN THE CASE OF CIT VS. MEWAR OIL & GENERAL MILLS LTD. (2004) 186 CTR (RAJ) 141 : (2004) 271 ITR 311 (RAJ), THE RAJASTHAN HIGH COURT ALSO CONSIDERED THE SCOPE OF S. 80-I AND HELD AS FOLLOWS: 'HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLLOW ON THE LINE NOTICED ABOVE, WE ARE OF THE OPINION THAT O N FINDING THE FACT THAT THERE WAS NO CARRY FORWARD LOS SES OF 1983-84, WHICH COULD BE SET OFF AGAINST THE INCOME OF THE CURRENT ASST. YR. 1984-85, THE RECOMPUTATION OF INCOME FROM THE NEW INDUSTRIAL UNDERTAKING BY SETTING OFF TH E CARRY FORWARD OF UNABSORBED DEPRECIATION OR DEPRECI ATION ALLOWANCE FROM PREVIOUS YEAR DID NOT SIMPLY ARISE AND ON THE FINDING OF FACT NOTICED BY THE CIT(A), WHICH HAS NOT BEEN DISTURBED BY THE TRIBUNAL AND CHALLENGED BEFORE U S, THERE WAS NO ERROR MUCH LESS ANY ERROR APPARENT ON T HE FACE OF THE RECORD WHICH COULD BE RECTIFIED. THAT QUE STION WOULD HAVE BEEN GERMANE ONLY IF THERE WOULD HAVE BEEN CARRY FORWARD OF UNABSORBED DEPRECIATION AND UNABSORBED DEVELOPMENT REBATE OR ANY OTHER UNABSORBE D LOSSES OF THE PREVIOUS YEAR ARISING OUT OF THE PRIOR ITY INDUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR. IT IS NOT A T ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVI OUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CUR RENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRIB UNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFIC ATION POSSIBLE UNDER S. 80-I IN THE PRESENT CASE, ALBEIT, FOR REASONS SOMEWHAT DIFFERENT FROM THOSE WHICH PREVAILE D WITH THE TRIBUNAL. THERE BEING NO CARRY FORWARD OF 14 ALLOWABLE DEDUCTIONS UNDER THE HEAD DEPRECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAINST THE INCOME OF THE CURRENT YEAR AND, THEREFOR E, RECOMPUTATION OF INCOME FOR THE PURPOSE OF COMPUTIN G PERMISSIBLE DEDUCTION UNDER S. 80-I FOR THE NEW INDUST RIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. ACCORDINGLY, THIS APPEAL FAILS AND IS HEREBY DISMISSED WITH NO ORDER AS TO COSTS.' FROM READING OF THE ABOVE, THE RAJASTHAN HIGH COURT HELD THAT IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DE DUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME O F THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATI ON OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COMPU TING ADMISSIBLE DEDUCTIONS THEREUNDER. WE ALSO AGREE WITH TH E SAME. WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 12. THIS JUDGMENT HAS BEEN FURTHER FOLLOWED BY THE SAME HI GH COURT IN CIT V/S EMERALD JEWEL INDUSTRY (P) LTD. [2011] 53 DTR 262 (MAD.). FROM THE ABOVE, RATIO OF THE HIGH COUR T, IT IS AMPLY CLEAR THAT SUBSECTION (5) OF SECTION 80IA WIL L COME INTO OPERATION ONLY FROM THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR. THE OPTION OF CHOOSING T HE INITIAL ASSESSMENT YEAR IS WHOLLY UPON THE ASSESSEE IN THE POST AMENDMENT PERIOD I.E., AFTER 1 ST APRIL 2000 BY VIRTUE OF SECTION 80IA(2). 11. IN VIEW OF THE JUDGMENT OF THE KARNATAKA HIGH COURT, WHICH HAS ALSO BEEN RELIED ON BY THE MUMBAI BENCH OF THE TRIBUNAL AND IN THE BACKGROUND THAT NO JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT H AS BEEN CITED BEFORE US, WE HOLD THAT CHOOSING OF INIT IAL ASSESSMENT YEAR FOR CLAIMING DEDUCTION UNDER SECTIO N 80IA OF THE ACT IN A BLOCK OF TEN YEARS OUT OF FIFT EEN YEARS IS WITH THE ASSESSEE I.E. IT IS THE OPTION OF THE A SSESSEE TO 15 CHOOSE THE INITIAL ASSESSMENT YEAR FOR CLAIMING DED UCTION UNDER SECTION 80IA OF THE ACT. FURTHER, THE LOSS C LAIMED BY THE ASSESSEE IN RESPECT OF ELIGIBLE BUSINESS IS TO BE SET OFF AGAINST THE INCOME OF THE ASSESSEE FROM OTHER INELIGIBLE BUSINESS AS IN RESPECT OF ASSESSMENT YEA RS AND THERE IS NOT NEED TO NOTIONALLY CARRY FORWARD THESE LOSSES UP TO THE INITIAL ASSESSMENT YEAR AND WRITE OFF THE SAME OUT OF THE PROFITS OF ELIGIBLE BUSINESS. 12. THE APPEAL OF THE REVENUE IN ITA NO.1062/CHD/2014 IS DISMISSED. ITA NO.1063/CHD/2014 : 13. THE FACTS IN THIS APPEAL OF THE REVENUE ARE SIMILAR TO THAT IN ITA NO.1062/CHD/2014 AND THE FIN DINGS GIVEN IN ITA NO.1062/CHD/2014 SHALL APPLY TO THIS C ASE ALSO WITH EQUAL FORCE. C.O.NO.1/CHD/2015 : (IN ITA NO.1062/CHD/2014) 14. THE GROUND NO.1 RAISED BY THE ASSESSEE IN CROS S OBJECTION READS AS UNDER : 1. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING SUM OF RS.77 ,947/- OUT OF DISALLOWANCE OF RS.2,45,872/- MADE BY THE ASSESSING OFFICER UNDER SECTION 37(1) (AFTER GIVING RELIEF OF RS.1,67,925/-) AS PER PARA 5.4 OF HIS ORDER. 15. BRIEFLY, THE FACTS ARE THAT ON PERUSAL OF THE LEDGER ACCOUNT, THE ASSESSING OFFICER NOTED THAT TH E 16 ASSESSEE HAD INCURRED EXPENSES IN CASH FOR UNLAWFUL PURPOSES. THE NARRATION OF EXPENSES SHOWED THAT TH ESE WERE IN THE NATURE OF BRIBE OR ILLEGAL GRATIFICATIO N WHICH ARE NOT ALLOWABLE UNDER SECTION 37 OF THE ACT. AFT ER CONSIDERING ASSESSEES REPLY, THE ASSESSING OFFICER CONCLUDED THAT IN VIEW OF THE EXPLANATION TO SECTIO N 37(1) OF THE ACT, WHICH STATES THAT THE EXPENDITURE INCUR RED BY THE ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY ANY LAW SHALL NOT BE DEEMED TO HAV E BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. THUS THE TOTAL DISALLOWANCE OF RS.2,45 ,872/- WAS MADE. 16. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE STATED THAT THE EXPENSES TOTALLED TO RS.1,54,317/- INSTEAD OF RS.2,45,872/- AS TAKEN BY THE ASSESSING OFFICER. IT WAS ALSO STATED THAT ALL THESE EXPENSES WERE INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ONLY. IN THE REMAND REPORT CALLED FROM THE ASSESSING OFFICER, IT WAS STATED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,54,317/- UNDER THE HEAD BUSINESS PROMOTION W HICH ARE REQUIRED TO BE DELETED. AFTER GOING THROUGH T HE SUBMISSION OF THE ASSESSEE, REMAND REPORT OF THE ASSESSING OFFICER AND REJOINDER FILED BY THE ASSESS EE, THE LEARNED CIT (APPEALS) ACCEPTED THE PLEA OF THE ASSE SSEE THAT THE EXPENSES UNDER THE HEAD BUSINESS PROMOTIO N WAS OF RS.1,54,317/- AND NOT RS.2,45,872/- AS TAKEN BY 17 THE ASSESSING OFFICER. REFERRING TO THE NARRATION GIVEN UNDER THE HEAD BUSINESS PROMOTION AND AFTER ANALY ZING THE INDIVIDUAL EXPENSES SO INCURRED BY THE ASSESSEE , THE LEARNED CIT (APPEALS) GAVE A PARTIAL RELIEF TO THE ASSESSEE. 17. AGGRIEVED BY THIS ACT OF THE LEARNED CIT (APPEALS), THE ASSESSEE HAS FILED CROSS OBJECTION B EFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE EXPENSES HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. 18. THE LEARNED D.R. RELIED ON THE ORDER OF THE LEARNED CIT (APPEALS). 19. AFTER HEARING BOTH THE PARTIES AND PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS), WE SEE THAT THE LEARNED CIT (APPEALS) HAS GIVEN DETAILED FINDING WITH RESPE CT TO EACH AND EVERY INDIVIDUAL ITEM OF THE EXPENSES INCU RRED UNDER THE HEAD BUSINESS PROMOTION AND AS REGARDS THE DISALLOWANCE SUSTAINED BY THE LEARNED CIT (APPEALS) , THE ASSESSEE HAS NOT BEEN ABLE TO GIVE ANY EVIDENCE TO PROVE THAT THESE EXPENSES WERE INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSES OF BUSINESS. WHEREVER REQUIRED, T HE CIT (APPEALS) HAS GIVEN RELIEF TO THE ASSESSEE. WE HE REBY CONFIRM THE ORDER OF THE LEARNED CIT (APPEALS) IN T HIS REGARD. 20. THE GROUND NO.2 RAISED BY THE ASSESSEE IN CROS S OBJECTION READS AS UNDER : 18 2. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.15,67,116/- AS PER PARA 6.5 OF H IS ORDER OUT OF TOTAL RENTAL EXPENSES CLAIMED AT RS. 2 6,11,860/- BY THE APPELLANT. 3. THAT THE RESPONDENT, CRAVES LEAVE TO ADD OR AMEN D ANY GROUND OF CROSS-OBJECTIONS BEFORE THE APPEAL IS FIN ALLY HEARD OR DISPOSED OFF. 21. BRIEFLY, THE FACTS ARE THAT THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE HAD DEBITED RENT CHARGES OF RS.26,11,860/- FOR HIRING THE PREMISES NOS.908 & 90 9, NARAIN MANZILL, 23, BARAH KHAMBA ROAD, NEW DELHI. THE NARRATION OF THE LEDGER ACCOUNT SHOWED THAT OUT OF THE TOTAL EXPENSES, 40% WAS TO BE PAID BY THE ASSESSEE AND THE REMAINING 60% WAS TO BE PAID BY THE SISTER CONC ERN S, NAMELY YAMUNA CABLE ACCESSORIES PVT. LTD. AND YGC PROJECT LTD. AT 30% EACH. HOWEVER, THE ENTIRE EXPE NSES OF RS.26,11,860/- WAS DEBITED IN THE BOOKS OF THE ASSE SSEE. THE ASSESSING OFFICER CONCLUDED THAT A PART OF THE EXPENSES OF THE SAID PREMISES WAS ATTRIBUTABLE TO T HE SISTER CONCERNS OF THE ASSESSEE AND DISALLOWED 60% OF THE RENTAL EXPENSES BEING RS.15,67,116/-. 22. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT ALTHOUGH THE SISTER CONCERNS M/S YAM UNA CABLE ACCESSORIES PVT. LTD. AND YGC PROJECT LTD. HA D ALSO GIVEN THEIR ADDRESS AT THE SAME OFFICE PREMISES BUT THEY DID NOT UTILIZE THE OFFICE SPACE. THE ASSESSEE PLA NS TO SHARE THE BUSINESS PREMISES WITH SISTER CONCERNS AN D ACCORDINGLY, WAS PLANNING TO CHARGE PROPORTIONATE L EASE 19 RENT FROM THEM. THESE WERE JUST CALCULATIONS AND N OT THE REAL THE TRANSACTION. THE ASSESSEE DID NOT CHARGE ANY RENT FROM TWO SISTER CONCERNS AND ALSO THE TWO SIST ER CONCERNS DID NOT MAKE ANY PROVISION OF RENT EXPENSE S IN THEIR ACCOUNTS. AS SUCH, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. A REMAND REPOR T WAS CALLED FROM THE ASSESSING OFFICER BY THE LEARNED CI T (APPEALS), IN WHICH HE REITERATED THE FINDINGS AS G IVEN IN THE ASSESSMENT ORDER. THE REJOINDER TO THE REMAND REPORT WAS FILED BY THE ASSESSEE. AFTER CONSIDER ING THE SUBMISSION OF THE ASSESSEE, THE LEARNED CIT (APPEAL S) CONCLUDED THAT THERE WAS ARRANGEMENT OF BIFURCATION OF RENTAL EXPENSES AMONG THE THREE COMPANIES THOUGH TH E OTHER COMPANIES HAVE NOT PAID THEIR PART OF RENTAL EXPENSES. HE WAS IN AGREEMENT WITH THE ASSESSING O FFICER IN DISDALLOWING 60% OF RENTAL EXPENSES. 23. AGAINST THIS, THE ASSESSEE HAS COME UP IN CROS S OBJECTION BEFORE US. THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 24. THE LEARNED D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE LEARNED CI T (APPEALS). 25. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. 20 ON PERUSAL OF THE ORDER OF THE LEARNED CIT (APPEALS ), WE SEE THAT HE HAS GIVEN HIS FINDINGS AT PAGE 15, PARA 7.5 AS UNDER : 6.5 AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSION, I REFERRED TO THE PROVISIONS OF SECTION 37(1) OF THE ACT. THE SECTION 37(1) IS A RESIDUARY SECTION WHICH PROVIDES FOR GENERAL DEDUCTION. IN ORDER TO CLAIM DEDUCTION UNDER THIS SECTION ONE OF HE CONDITIONS STIPULATED IS THE EXPENSE WHICH SHOULD HAVE BEEN EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF SUCH BUSINESS. TE PREMISE FOR WHICH RENTAL EXPENDITURE HAS BEEN CLAIMED WAS BEING USED BY THREE COMPANIES HAVING THEIR SEPARATE PROFIT AND LOSS ACCOUNTS. THERE WAS ARRANGEMENT FOR BIFURCATION OF RENTAL EXPENSE AMONG THE THREE COMPANIES IN THE RATIO OF 40:30:30. THOUGH THE SISTER CONCERNS HAVE NOT PAID THEIR PART OF RENTAL EXPENSES FOR USING THE PREMISES TO THE APPELLANT BUT TO ARRIVE AT THE CORRECT COMPUTATION OF TAXABLE INCOME OF THE APPELLANT IT WOULD BE NECESSARY TO CLAIM DEDUCTION ON ACCOUNT OF RENTAL EXPENDITURE TO THAT EXTENT WHICH IS ONLY ATTRIBUTABLE TO THE APPELLANT COMPANY. IN VIEW OF THIS I AM IN AGREEMENT WITH THE ASSESSING OFFICER IN DISALLOWANCE OF 60% OF RENTAL EXPENSE CLAIMED BY THE ASSESSMENT PROCEEDINGS COMPANY WHICH IS ATTRIBUTABLE TO ITS SISTER CONCERNS OPERATING FROM THE SAME PREMISES. THIS GROUND OF APPEAL IS DISMISSED. 26. AFTER CONSIDERING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) SINCE WE ARE IN AGREEMENT WITH THE FINDINGS OF THE LEARNE D CIT (APPEALS) THAT EVEN THOUGH THE SISTER CONCERNS HAVE NOT 21 PAID THEIR PART OF RENTAL EXPENSES FOR USING THE PR EMISES BUT TO ARRIVE AT THE CORRECT COMPUTATION OF TAXABLE INCOME OF THE ASSESSEE, IT WOULD BE NECESSARY TO CLAIM DED UCTION ON ACCOUNT OF RENTAL EXPENDITURE TO THAT EXTENT WHI CH IS ONLY ATTRIBUTABLE TO THE ASSESSEE COMPANY. THE GRO UND RAISED IN CROSS OBJECTION BY THE ASSESSEE IS DISMIS SED. 27. IN THE RESULT, BOTH THE APPEALS OF REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF FEBRUARY, 2016. SD/- SD/- (H.L. KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10 TH FEBRUARY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH