Dhumal Industries, Nashik V. CIT-I, Nashik

ITA 1040/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72128 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADARSH KUMAR MODI
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO S . 1040 & 1041 / P N/ 20 12 ASSESSMENT YEAR S : 2006 - 07 & 2008 - 09 DHUMAL INDUSTRIE S, E - 36, D ROAD, MIDC, SATPUR, NASHIK VS. COMMISSIONER OF INCOME TAX - I, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AACFD0528N APPELLANT BY: SHRI NIKHIL PATHAK RESPONDENT BY: SHRI ADARSH KUMAR MODI DATE OF HEARING : 18 - 07 - 2013 DATE OF PRONOUNCEM ENT : 29 - 08 - 2013 ORDER P ER R.S. PADVEKAR , JM : - THESE TWO APPEALS ARE FILED BY THE ASSESSEE CHALLENGING THE RESPECTIVE IMPUGNED ORDERS OF THE LD. CIT - I, NASHIK PASSED U/S. 263 OF THE INCOME - TAX ACT FOR THE A.YS. 2006 - 07 AND 2008 - 09. THE ISSUES AND FACTS ARE IDENTICAL MORE OR LESS THE GROUNDS ALSO AND HENCE , THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS WHICH ARE COMMON IN BOTH THE ORDERS. 1. THE ORDER U/S. 263 IS BAD IN LAW AS THE ASST. ORDER WHICH IS REVISED WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE REVENUE. 2. THE LEARNED CIT ERRED IN DIRECTING THE A.O. TO EXAMINE THE ISSUE OF CLAIM OF DEDUCTION U/S. 80IA IN RESPECT OF THE PROFITS FROM THE WINDMILL WITHOUT APPRECIATING THAT THE LEARNED A.O. HAD DULY VERIFIED THIS ISSUE AT THE TIME OF PASSING THE ASST. ORDER AND HENCE, THERE WAS NO REASON TO REVISE THE ORDER U/S. 263. 3. THE LEARNED CIT FAILED TO APPRECIATE THAT THE LEARNED A.O. AFTER DUE VERIFICATION HAD ALLOWED THE CLAIM OF DEDUCTION U/S. 80IA AND HEN CE, THERE WAS NO REASON TO REVISE THE ASST. ORDER U/S. 263. 4. THE LEARNED CIT FAILED TO APPRECIATE THAT THE CLAIM OF DEDUCTION U/S. 80IA WAS JUSTIFIED AND THERE WAS NO REASON TO REVISE THE ASST. ORDER. 2 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK 2. THE ASSESSEE HAS SET UP WIND MILL AT SATARA AND HAS CLAIMED DEPRECIATION ON IT. FOR THE A.Y. 2006 - 07 THE ASSESSMENT HAS BEEN COMPLETED BY THE ASSESSING OFFICER U/S. 143(3) R.W.S. 147 OF THE INCOME - TAX ACT DETERMINING TOTAL INCOME AT RS. 3,20,71,750/ - . THE ASSESSEE IS A FIRM BY STATUS. THE ASSESSEE HAS CL AIMED DEPRECIATION/LOSS ES OF RS.1,45,02,600/ - IN THE A.Y. 2002 - 03 TO A.Y. 2007 - 08 WHICH IS MORE THAN THE INCOME FROM WIND MILL. AS OBSERVED BY THE LD. CIT - I, NASHIK THE ASSESSEE HAS SET OFF THE DEPRECIATION AGAINST THE OTHER SOURCES OF THE INCOME. THE AS SESSEE CLAIMED THE DEDUCTION U/S. 80IA(4)(IV) OF THE INCOME - TAX ACT F OR THE FIRST TIME IN THE A.Y. 2005 - 06 AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT WHICH WAS CANCELLED BY THE CIT - I, NASHIK BY E XERCISING HIS REVISIONARY POWERS U/S. 263 OF THE ACT. 3. SO FAR AS A.Y. 2005 - 06 IS CONCERNED THE LD. CIT HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME OF THE WIND MILL UNIT SEPARATELY FOR EACH YEAR BY ALLOWING THE DEPRECIATION AND OTHER EXPEN SES IN THE LOSSES E VEN THOUGH THE SAID LOSSES/DEPRECIATION HAVE BEEN SET OFF AGAINST THE INCOME FROM OTHER BUSINESS IN ANY RESPECTIVE YEAR IN THE REGULAR COMPUTATION. IN THE A.Y. 2005 - 06 , THE LD. CIT - I, NASHIK HAS PLACED HIS RELIANCE ON THE DECISION IN TH E CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE LTD. 113 ITD 209 (AHD.) AND FINALLY WITHDRAWN THE DEDUCTION. THE MATTER WAS CARRIED TO THE TRIBUNAL IN THE A.Y. 2005 - 06 AND THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSM ENT ORDER PASSED BY THE ASSESSING OFFICER FOR THE A.Y. 2005 - 06 IS NOT ERRONEOUS AND QUASHED THE ORDER PASSED U/S. 263 OF THE ACT. IN THE A.Y. 2006 - 07 THE LD. CIT - I, NASHIK HAS DONE THE SAME EXERCISE . A S PER THE COMPUTATION CHART IN THE IMPUGNED ORDER ON PAGE NO. 2 , L D. CIT HAS DEMONSTRATED THAT THE DEPRECIATION CLAIMED FROM THE REGULAR BUSINESS IS MORE THAN THE PROFITS IN THE WIND MILL AND THE ASSESSEE HAS CLAIMED THE 3 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK DEDUCTION U/S. 80IA(4) OF THE ACT TO THE EXTENT OF RS.49,34,515/ - IN THE A.YS. 2005 - 06 T O 2008 - 09. 4. IN SUM AND SUBSTANCE, IN THE OPINION OF THE LD. CIT - I, NASHIK THE WIND MILL HAS TO BE TREATED AS SEPARATE INDEPENDENT UNIT AND THE LOSSES/DEPRECIATION OF THE WIND MILL HAVE TO BE NOTIONALLY CARRY FORWARD AND SET OFF I RRESPECTIVE OF THE FAC T WHETHER WHILE COMPUTING THE REGULAR INCOME THE ASSESSEE HAS ALREADY SET OFF THE LOSSES/DEPRECIATION OF THE WIND MILL UNIT AGAINST THE OTHER BUSINESS INCOME. IN THE A.Y. 2006 - 07 THE ASSESSEE HAS CLAIMED THE DEDUCTION OF RS. 12,13,885/ - U/S. 80IA(4)(IV) OF THE ACT WHICH IN THE OPINION OF THE LD. CIT - I, NASHIK IS WRONGLY ALLOWED. 5. SO FAR AS A.Y. 2008 - 09 IS CONCERNED THE ASSESSEES ASSESSMENT IS COMPLETED U/S. 143 OF THE ACT VIDE ASSESSMENT ORDER DATED 27 - 12 - 2010. IN THIS YEAR ALSO THE LD. CIT - I, NASHIK E XERCISE D HIS JURISDICTION U/S. 263 AND HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER ALLOWING THE DEDUCTION TO THE ASSESSEE TO THE EXTENT OF RS.9,63,480/ - HAS TO BE WITHDRAWN AS THE SAME HAS BEEN ALLOWED WRONGLY. THE REASONS GIVEN BY LD. CIT - I, NASH IK ARE THE SAME AS IN THE A.Y. 2006 - 07. IN SUM AND SUBSTANCE IN BOTH THESE ASSESSMENT YEARS THE LD. CIT BY INVOKING HIS POWERS U/S. 263 OF THE ACT AS HELD THAT THE RESPECTIVE ASSESSMENT ORDERS ARE ERRONEOUS AND HENCE , BOTH THE ORDERS ARE SET ASIDE AND DIR ECTED THE ASSESSING OFFICER TO DECIDE THE ISSUE OF THE DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF THE PROFITS FROM THE WIND MILL AFRESH. NOW THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE PARTIES. WE FIND THAT IN THE A. Y. 2005 - 06 ON THE IDENTICAL REASON S LD. CIT - I, NASHIK HAS SET ASIDE THE ASSESSMENT ORDER BY EXERCISING HIS REVISIONARY POWER U/S. 263 OF THE ACT AND ON THE 4 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK ISSUE OF DEDUCTION CLAIMED BY THE ASSESSE E U/S. 80IA(4)(IV) OF THE ACT AND THE TRIBUNAL HAS QUASHED THE ORDER PASSED BY LD. CIT , NASHIK. THE ASSESSEE HAS FILED THE COPY OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE A.Y. 200 5 - 06 BEING ITA NO. 322/PN/2010 ORDER DATED 31 - 05 - 2013. THE OPERATIVE PART OF THE TRIBUNAL ORDER IS AS UNDER: 4. WE HAVE HEAR D THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. THE LD. COUNSEL SUBMITS THAT SO FAR AS THE ISSUE OF INITIAL ASSESSMENT YEAR WHICH IS ONE OF THE REASON FOR EXERCISING REVISIONARY POWER BY THE LD. CIT IN RESPECT OF CLAIM OF DEPRECIATION ON THE WINDMILL IS C ONCERNED, THE SAID ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010) 38 DTR (MAD) 57. HE SUBMITS THAT THE SAID DECISION HAS BEEN FOLLOWED BY THE ITAT PUNE BENCH IN THE CASE OF SERUM INTERNATIONAL LTD. VS. ADDL. CIT (ITA NO. 290 TO 292/PN/2010, ORDER DATED 28 - 11 - 2011). HENCE THE ORDER PASSED BY THE AO ON MERITS ITSELF CANNOT BE SAID TO BE ERRONEOUS. HE SUBMITS THAT FOR EXERCISING POWER U/S 263 THE RESPECTIVE ORDER SHOULD BE SUFFERING FROM FOLLOWING THE TWO MANDATES (I) THE SAID ORDER SHOULD BE ERRONEOUS; (II) IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUBMITS THAT THE EXPRESSION 'ERRONEOUS' HAS BEEN EXPLAINED BY THE HON'BLE SUPREM E COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC). HE ALSO PLACED RELIANCE ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108. HE SUBMITS THAT SO FAR AS THE FIRST REASON IS CONC ERNED ON MERITS ITSELF, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDICIAL INTERPRETATION. THE ORDER OF THE AO CANNOT BE SAID TO BE ERRONEOUS AND HENCE THE LD. CIT HAS WRONGLY EXERCISED HIS REVISIONARY POWERS U/S 263 OF THE ACT. IN RESPECT OF S ECOND ISSUE, VIZ. NOTIONAL SALES - TAX LIABILITY, HE SUBMITS THAT THE ASSESSEE'S UNIT IS COVERED UNDER THE PACKAGE SCHEME OF INCENTIVES 1993 BEING A SPECIAL PROVISION FOR THE GENERATION OF NON - CONVENTIONAL ENERGY AND ASSESSEE IS GIVEN EXEMPTION FROM THE PAYM ENT OF SALES - TAX. HE SUBMITS THAT AS PER THE PROVISIONS OF LAW MORE PARTICULARLY UNDER THE MAHARASHTRA SALES - TAX ACT, THE ASSESSEE CAN COLLECT THE SALES - TAX FROM THE CUSTOMERS AND PAY THE SAME TO THE STATE GOVERNMENT. IF THE ASSESSEE HAS COLLECTED THE TAX AND IF THAT TAX IS NOT PAID TO THE GOVERNMENT THEN IT CAN BE SAID THAT THERE IS ACCRUAL OF BENEFIT TO THE ASSESSEE WITHIN THE MEANING OF SEC. 5 OF THE ACT. HE SUBMITS THAT NOTIONAL WAIVER OF THE 5 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK SALES - TAX WHICH OTHERWISE, THE ASSESSEE HAS NOT COLLECTED FRO M THE CUSTOMERS CANNOT BE SAID TO BE ACCRUAL OF INCOME TO THE ASSESSEE WITHIN THE MEANING OF SEC. 5. HE PLEADED FOR QUASHING THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT. 5. PER CONTRA, THE LD. DR SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT. THE LAW IS WELL SETTLED IN RESPECT OF POWERS OF LD. CIT U/S 263. IN THE LANDMARK DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA), IT IS HELD THAT TWO MANDATES OF THE SAID SECTION MUST BE FULFILLED; THAT THE ORDER MUST BE E RRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS ALSO HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO, CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. UNLESS BOTH THE MANDATES OF SEC. 263 ARE FULFILLED, THE CIT CANNOT EXERCISE HIS REVISIONARY POWERS U/S 263. IN THE PRESENT CASE, SO FAR AS THE ISSUE OF INITIAL ASSESSMENT YEAR IN RESPECT OF WINDMILL U/S 80 - IA(5) IS CONCERNED, IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) THE HON'B LE MADRAS HIGH COURT HAS HELD THAT IT IS OPTION OF THE ASSESSEE THE YEAR IN WHICH HE CHOOSES TO OPT FOR DEDUCTION I.E. THE INITIAL YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80 - IA(4)(IV)(A) OF THE ACT. THE SAID DECISION HAS BEEN FOLLOWED BY THE ITAT PU NE BENCH IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) AND PREFERRED TO GO WITH THE RATIO OF SAID DECISION INSTEAD OF FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF GOLDMINE SHARES AND FINANCE LTD (SUPRA). THE RELEVANT PART OF THE ORDER OF THE TRIBUNA L'S DECISION IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) IS AS UNDER: '11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHETHER IN VIEW OF THE PROVISIONS OF SEC. 80IA(5) OF THE I. T. ACT 1961, THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DEDU CTION U/S. 80IA OF THE ACT HAS TO BE COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER NON - ELIGIBLE BUSINESS INCOME IN EARLIER YEARS. THE SUBMISSIO N OF THE LD A.R. REMAINED THAT ON THE WIND MILLS SET UP IN THE PREVIOUS YEAR RELEVANT TO A, Y. 2002 - 03, THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 100% THEREON I.E. RS. 3.54 CRORES, WHICH WAS FULLY SET OFF AGAINST THE ANOTHER INCOME IN THE SAID A . Y. 2002 - 03 ITSELF. IN THE A. Y. 2004 - 05, THE ASSESSEE HAD POSITIVE INCOME FROM THE SAID 6 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK GENERATION ACTIVITY AND THERE WERE NO BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIATION OF THE PRECEDING YEAR, WHICH HAD REMAINED TO BE SET OFF IN THE A. Y. 2004 - 05. TH E 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 CONTRADICTI ON 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 M ADRAS 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 DISPUTE THE FACT THAT THE AUTHORITIES BELOW HAVE DECIDED THE ISSUE FOLLOW ING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES.. THE LD. A.R. POINTED OUT THAT DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) WAS NOT CITED BEFORE THE P UNE BENCH IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA). THE LD. A.R. HAS ALSO CITED THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LTD., (SUPRA) HOLDING THAT EVEN A DECISION OF NON - JURISDICTION AL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN 7 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK EXPRESSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. VALSON DYEIN G, BLEACHING AND PRINTING WORKS (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAND REMAINED THAT DEDUCTION U/S. 80 I AND 80 IA COVERED INTER ALIA, INDUSTRIAL UNDERTAKINGS. THE POWER GENERATION UNITS FOUND A SPECIFIC MENTION FOR THE FIRST TIME W.E. F. 1.4.1993. IN ALL THE YEARS FROM 1.4.1981 TO 31 TO 31 ST MARCH 2000 IN BOTH U/S. 801 AND 80IA, THE TERM INITIAL A. Y WAS DEFINED AND MEANT THE FIRST A. Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGIBLE UNIT COMMENCES PRODUCTION/POWER GENERATION. ONLY FROM 1.4.2000, WHEN SECTIONS 80IA WAS REPLACED WITH SECTION 80IA AND 80IB, THE DEFINITION OF 'INITIAL A. Y.' DID NOT FIND A MENTION. BUT NOWHERE, IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL HAS ANY MENTION THAT THERE WAS ANY INTENTI ON TO IGNORE LOSSES AND DEPRECIATION FROM FIRST YEAR OF POWER GENERATION/PRODUCTION AND THAT SUCH LOSSES TILL FIRST YEAR OF CLAIM OF DEDUCTION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSES DOES NOT FIND ANY SUPPORT. HE SUBMITTED THAT THERE IS NO DIS CERNIBLE CHANGE IN LAW OR INTENTION OF PARLIAMENT W.E.F. 1.4.2000. THE LD. D.R. SUBMITTED THAT THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) IS FULLY APPLICABLE IN THE PRESENT CASE. HE POINTED OUT THAT IN ITS RECENT DECISION DT. 21 ST 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 SP INNING 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. TH E 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 8 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK 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 ISSUE IN DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT T HE INITIAL 'A. Y' FOR THE PURPOSE 'OF CLAIMING DEDUCTION U/S. 801 A WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF 80IA (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A) HAS ER RED IN HOLDING THAT THE INITIAL A. Y FOR THE PURPOSES OF SECTION 80IA(2) R.W.S. 80IA (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY FROM THE WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GROUND NO, 2 REGARDING THE ELIGIBI LITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINISHED BY UNABSORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME, IS FULLY COVERED BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNIN G MILLS (P) LTD VS. ACIT (SUPRA) HOLDING THAT AS PER SUB - SECTION (5) OF SECTION 801 A, PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTION, ONLY THE LOSSES OF THE YEAR S BEGINNING FROM THE INITIAL A. Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THE HON'BLE MADRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNOT NOTI ONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER INCOME OF ASSESSEE AND SET OFF AGAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED BY SUB - SECTION (5) OF SECTION 801 A DOES NOT CONTEMPLATE SUC H 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 CA SE 9 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK OF GOLDMAN 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 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 O THER 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 BO UND 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 IDENTICA L 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 BEEN ALREADY SET OFF AGAINST THE OTH ER INCOME OF THE ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME OF THE ASSESSEE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. WE THUS SET A SIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESS EE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING 10 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK P. LTD. VS. ITO (SUPRA) CITED BY THE LD. OR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY S PINNING MILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY THE ID. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINA NCE IP ) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. THE ID. AR THEREIN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., B UT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS THE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE,' 6. WE THEREFORE FIND THAT THE FIRST ISSUE WHICH IS ONE OF THE REASONS FOR EXERCISING POWER BY LD. CIT IS IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA), AS WELL AS DECISION OF THE ITAT PUNE BENCH IN SERUM INTERNATIONAL LTD. (SU PRA) HENCE ON THAT ISSUE, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS. 7. . 8. AS DISCUSSED HEREINABOVE, THE MANDATE OF SECTION 263 SAYS THE ORDER MUST BE ERRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVENUE. IN OUR OPINION, THE ORDER WHICH IS THE SUBJECT MATTER OF REVISION U/S 263 IS NOT ERRONEOUS, AS BOTH THE MANDATES OF SEC. 263 ARE NOT FULFILLED. WE HAVE NO HESITATION TO QUASH THE ORDER PASSED BY LD. CIT NASIK U/S 263. WE ACCORDINGLY DO SO. 7. IN THE A.Y. 2005 - 06 THE OR DER PASSED BY LD. CIT - I, NASHIK U/S. 263 SETTING ASIDE THE ASSESSMENT ORDER ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S. 80IA(4)(IV) OF THE ACT HAS BEEN QUASHED BY THE TRIBUNAL IN ASSESSEES OWN CASE. THE REASONS GIVEN BY LD. CIT - I, NASHIK IN THE A.YS. 2006 - 07 AND 2008 - 09 ARE IDENTICAL FOR SETTING ASIDE THE ASSESSMENT ORDERS ON THE ISSUE IN DISPUTE . W E, THEREFORE, FOLLOWING THE ORDER OF THE 11 ITA NOS. 1040 & 1041/PN/2012, DHUMAL INDUSTRIES, NASHIK TRIBUNAL IN THE A.Y. 2005 - 06 HOLD THAT THE ASSESSMENT ORDERS FOR THE A.YS. 2006 - 07 AND 2008 - 09 ARE NOT ERRONEOUS A ND AS THE MANDATE OF SEC. 263 ARE NOT FULFILLED IN BOTH THE ASSESSMENT YEARS, THE ORDERS PASSED U/S. 263 ARE QUASHED. 8. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 - 08 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. P ADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 29 TH AUGUST, 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT - I , NASHIK 4 THE CIT, NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRU E COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE