Superfine Photo Company Private Limited, Ahmednagar V. ITO, Ahmednagar

ITA 1127/PUN/2010

• Counselvise Citation: 112724514 RSA 2010
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANT KUMAR C LUAVA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1127/PN/2010 (ASSESSMENT YEAR : 2006-07) SUPERFINE PHOTO COMPANY PRIVATE LIMITED 1267, PRATIBHA DAL MANDAI, AHMEDNAGAR PAN : AAECS9467J . APPELLANT VS. INCOME TAX OFFICER WARD 4, AHMEDNAGAR . RESPONDENT APPELLANT BY : MR. M. K. KULKARNI RESPONDENT BY : MR. HEMANT KUMAR C. LUAVA DATE OF HEARING : 23-05-2013 DATE OF PRONOUNCEMENT : 27-05-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - I, PUNE DATE D 26.02.2010 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 24.12.2008 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3)(C) OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE FIRST ISSUE RAISED BY THE AS SESSEE IS WITH REGARD TO THE DEDUCTION CLAIMED BY THE ASSESSEE UND ER SECTION 80-IA(4) OF THE ACT AMOUNTING TO RS.9,49,781/- WHIC H HAS BEEN DENIED BY THE INCOME TAX AUTHORITIES. 3. BEFORE PROCEEDING TO ADJUDICATE THE RIVAL CLAIMS , IT WOULD BE APPROPRIATE TO NOTICE THAT WHILE FINALIZING THE ASS ESSMENT UNDER SECTION 143(3) OF THE ACT, ASSESSING OFFICER DISALL OWED THE CLAIM OF DEDUCTION UNDER SECTION 80-IA(4) OF THE ACT FOR A S UM OF ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 RS.22,50,738/- AND THE CIT(A) WHILE RETAINING THE D ISALLOWANCE HAS CORRECTED THE AMOUNT OF DISALLOWANCE TO RS.9,49,781 /- ON THE GROUND THAT THE CLAIM OF THE ASSESSEE WAS ONLY TO THE EXTE NT OF RS.9,49,781/-. ACCORDINGLY, BEFORE US THE QUANTUM O F DISALLOWANCE IN DISPUTE IS ONLY RS.9,49,781/-. 4. THE BRIEF BACKGROUND IS THAT THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS INTER-ALIA ENGAGED IN THE BUSINESS OF PHOTO PRINTING, DEVELOP ING AND TRADING IN PHOTOGRAPHIC MATERIAL AND POWER GENERATI ON. FOR THE ASSESSMENT YEAR 2006-07, ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.34,509/- WHICH INTER-ALIA INCLUDED A CLAIM OF DEDUCTION UNDER SECTION 80-IA OF THE ACT A MOUNTING TO RS.9,49,781/- IN RELATION TO THE PROFITS EARNED FRO M THE ACTIVITY OF POWER GENERATION I.E. WINDMILL. OSTENSIBLY, THE UND ERTAKING OF THE ASSESSEE GENERATING POWER I.E. WINDMILL WAS SETUP I N THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03. IN TE RMS OF SECTION 80-IA OF THE ACT, THE PROFITS DERIVED BY SUCH UNDER TAKING OF THE ASSESSEE WAS ELIGIBLE FOR BENEFIT OF DEDUCTION TO T HE EXTENT OF 100% OF SUCH PROFITS. THE DEDUCTION IS AVAILABLE FOR A P ERIOD OF 10 CONSECUTIVE YEARS AT THE OPTION OF THE ASSESSEE OUT OF THE 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING I. E. THE WINDMILL STARTED GENERATING POWER. THE ASSESSING OFFICER NOT ED THAT IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2006-07, ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IA OF T HE ACT OF RS.9,49,781/- FOR THE FIRST TIME. 5. THE POINT OF DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE IS WITH REGARD TO THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. SECTION 80-IA(5) OF THE ACT CREATES A FICTION FOR THE PURPOSES OF COMPUTING THE ELIGIBLE DEDUCTION UNDER SECTION 80-I A OF THE ACT ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 WHEREBY, IT IS TO BE PRESUMED THAT THE ELIGIBLE UNI T WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOU S YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND ALSO TO EVERY SU BSEQUENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH T HE DETERMINATION IS TO BE MADE. HAVING SET UP THE WINDMILL IN THE AS SESSMENT YEAR 2002-03, ASSESSEE INCURRED A LOSS OF RS.1,07,92,514 /- FOR THE ASSESSMENT YEAR 2002-03 IN RESPECT OF WINDMILL BUSI NESS AND SUCH LOSS WAS ON ACCOUNT OF THE DEPRECIATION CLAIMED AT RS.1,09,00,000/-. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESS EE CLAIMED THAT THE WINDMILL ACTIVITY HAD REFLECTED A PROFIT OF RS. 9,49,781/- WHICH WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF T HE ACT. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE DEPRECIATION R EMAINING UNABSORBED IN ASSESSMENT YEAR 2002-03 WAS LIABLE TO BE SET-OFF AGAINST THE CURRENT YEARS INCOME BEFORE THE QUANTU M OF DEDUCTION UNDER SECTION 80-IA OF THE ACT COULD BE WORKED OUT, HAVING REGARD TO THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. PERT INENTLY, IT IS NOT DISPUTED THAT THE ABOVE REFERRED DEPRECIATION PERTA INING TO ASSESSMENT YEAR 2002-03 IS OTHERWISE ABSORBED AGAIN ST THE ASSESSABLE INCOMES OF THE PAST YEARS. INSPITE OF TH E AFORESAID, AS PER THE REVENUE, SECTION 80-IA(5) OF THE ACT REQUIR ES THAT THE PROFITS OF THE ELIGIBLE UNIT I.E. WINDMILL ARE TO BE COMPUT ED FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTI ON 80-IA(1) OF THE ACT, IN A MANNER AS IF SUCH ELIGIBLE BUSINESS W AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASS ESSMENT YEAR THEREOF. AS PER THE REVENUE, IN THIS CASE PAST LOSS ES STARTING FROM THE ASSESSMENT YEAR 2002-03 ARE REQUIRED TO BE SET- OFF AGAINST THE PROFITS OF THIS YEAR IN ORDER TO ARRIVE AT THE DEDU CTION ELIGIBLE UNDER SECTION 80-IA(1) OF THE ACT FOR THE YEAR UNDER CONS IDERATION, EVEN IF SUCH PAST LOSS/DEPRECIATION IS OTHERWISE LYING ADJU STED AGAINST OTHER INCOMES IN THE RESPECTIVE YEARS. ON THE OTHER HAND, THE PLEA OF THE ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 ASSESSEE IS THAT THE AFORESAID PAST LOSS/DEPRECIATI ON HAS BEEN ADJUSTED IN THE RESPECTIVE YEARS AND THAT THE IMPUG NED ASSESSMENT YEAR IS THE FIRST ASSESSMENT YEAR IN WHICH THE ASSE SSEE HAS CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT. THE LEARN ED COUNSEL CONTENDED THAT THE PLEA OF THE ASSESSEE IS IN LINE WITH THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VEL AYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010) 38 DTR 57 ( MAD.) AND ALSO THE FOLLOWING JUDGMENTS OF THE PUNE BENCH OF THE TR IBUNAL :- (I) PADMAVATI WIND ENERGY P. LTD. VS. ACIT, ITA NO. 618 /PN/2008, (II) PATANKAR WIND FARM P. LTD. VS. CIT, ITA NO. 63 4/PN/2008, (III) G.B. RUBBER PRODUCTS VS. DCIT, ITA NO. 459/PN /2009, (IV) G.B. RUBBER PRODUCTS VS. DCIT, ITA NO. 1466/PN/2009, (V) SHRI SHANKARLAL KUNDANMAL PAREEK VS. ACIT, ITA NO. 583&5 84/PN/2009 AND MAHESH TEXTILE PROCESSORS VS. ACIT, ITA NO. 511 &512/PN/2009, COPIES OF WHICH HAVE BEEN PLACE ON RECORD. 6. IN THIS MANNER, THE LEARNED COUNSEL POINTED OUT THAT THE RELIANCE PLACED BY THE CIT(A) ON THE DECISION OF TH E SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SH ARES & FINANCE (PVT.) LTD. REPORTED IN 113 ITD 209 IS UNJUSTIFIED AS THE SAME IS CONTRARY TO THE JUDGEMENT OF THE HONBLE MADRAS HIG H COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUP RA). 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE POINTED OUT THAT THE LEGA L FICTION PROVIDED BY SECTION 80-IA(5) OF THE ACT CLEARLY SUPPORTS THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE ELIGIBLE DEDUCTI ON UNDER SECTION 80-IA OF THE ACT FOR THE ASSESSMENT YEAR UNDER CONS IDERATION, AFTER TAKING INTO ACCOUNT THE DEPRECIATION FOR THE ASSESS MENT YEAR 2002-03 WHICH IS OTHERWISE SET-OFF AGAINST OTHER IN COMES IN THE PAST YEARS. ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE PRECISE CONTROVERSY BEFORE US WAS A SUBJECT MATTER OF CONSIDERATION BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SE RUM INTERNATIONAL LTD. VS. ADDL. CIT RANGE 6, PUNE IN I TA NOS. 290 TO 292/PN/2010 FOR A.YS. 2004-05 TO 2006-07 VIDE ORDER DATED 28-9-2011. THE TRIBUNAL CONSIDERED AN IDENTICAL CON TROVERSY AND AFTER FOLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUP RA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FOLLOWING DISCUSSI ON IN THE ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD:- '11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHE THER IN VIEW OF THE PROVISIONS OF SEC. 80-IA(5) OF THE I. T . ACT 1961, THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE O F DEDUCTION U/S. 80-1A 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 SUBMISSION OF THE LD. A.R. REMAINED THAT ON THE WIND MILLS SET UP IN THE PREVI OUS YEAR RELEVANT TO A. Y. 2002-03, THE ASSESSEE HAD CLAIMED DEPRECIA TION AT THE RATE OF 100% THEREON I.E. RS. 3.54 CRORES, WHICH WA S FULLY SET-OFF AGAINST THE ANOTHER INCOME IN THE SAID A. Y. 2002-0 3 ITSELF. IN THE A. Y. 2004-05, THE ASSESSEE HAD POSITIVE INCOME FRO M THE SAID GENERATION ACTIVITY AND THERE WERE NO BROUGHT FORWA RD LOSSES/UNABSORBED DEPRECIATION OF THE PRECEDING YEA R, WHICH HAD REMAINED TO BE SET-OFF IN THE A.Y. 2004-05. THE 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. 80-IA IN RESPECT OF THE P ROFIT EARNED BY IT IN A.Y. 2004-05. THE LD. A.R. SUBMITTED THAT SUB -SECTION (2) OF SECTION 80-IA 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 80-IA IS NOT DEFINED AND IS USED IN CONTRADICTION TO THE WORDS ' BEGINNING FROM THE YEAR' USED IN SUB-SECTION (2). HE SUBMITTED THA T THE ASSESSEE CHOSE A. Y. 2004-05 AS INITIAL A. Y. BEING THE FIRS T YEAR IN WHICH IT CLAIMED DEDUCTION U/S. 80-IA AND THEREFORE, LOSSES/ DEPRECIATION BEGINNING FROM A.Y. 2004-05 ALONE COULD ONLY BE BRO UGHT FORWARD AND SET-OFF. DEPRECIATION OF THE PRECEDING A.Y. 200 2-03 COULD NOT ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 HAVE BEEN NOTIONALLY BROUGHT FORWARD AND SET-OFF AG AINST PROFIT FOR THE A. Y. 2004-05. THE LD. A.R. PLACED HEAVY RELIAN CE ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE O F VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA). HE SUBMITTED THAT THE DECISION OF HON'BLE MADRAS HIGH COURT WILL PREVAIL UPON THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE (P ) LTD. (SUPRA) FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN ITS R ECENT DECISION IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPR A) AND THERE THE ASSESSEE DID NOT DISPUTE THE FACT THAT THE AUTH ORITIES BELOW HAVE DECIDED THE ISSUE FOLLOWING THE DECISION OF SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARE S.. THE LD. A.R. POINTED OUT THAT DECISION OF HON'BLE MADRAS HI GH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. A CIT (SUPRA) WAS NOT CITED BEFORE THE PUNE BENCH IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA). THE LD. A.R. HAS ALS O CITED THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LTD., (SUPRA) HOLDIN G THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COURT IS A BIND ING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESS ED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSION ER OF CENTRAL EXCISE VS. M/S. VALSON DYEING, BLEACHING AND PRINTI NG WORKS (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAN D 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 31ST MARCH 2000 IN BOTH U/S. 80-I AND 80-IA, THE TERM INITIAL A.Y. WAS DEFINED AND MEANT THE FIR ST A. Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGIBLE UNIT COM MENCES PRODUCTION/POWER GENERATION. ONLY FROM 1.4.2000, WH EN SECTIONS 80-IA WAS REPLACED WITH SECTION 80-IA AND 80-IB, TH E DEFINITION OF 'INITIAL A. Y.' DID NOT FIND A MENTION. BUT NOWHERE , IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL HA S ANY MENTION THAT THERE WAS ANY INTENTION TO IGNORE LOSS ES AND DEPRECIATION FROM FIRST YEAR OF POWER GENERATION/PR ODUCTION AND THAT SUCH LOSSES TILL FIRST YEAR OF CLAIM OF DEDUCT ION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSEE DOES NOT FIND AN Y SUPPORT. HE SUBMITTED THAT THERE IS NO DISCERNIBLE CHANGE IN LA W 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 CA SE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) IS FULLY APPLIC ABLE IN THE PRESENT CASE. HE POINTED OUT THAT IN ITS RECENT DEC ISION DT. 21ST ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 JANUARY 2011, THE HYDERABAD BENCH OF THE TRIBUNAL I N THE CASE OF HYDERABAD CHEMICAL SUPPLIES LTD. VS. ACIT (SUPRA) H AS ALSO DECIDED AN IDENTICAL DECISION IN FAVOUR OF THE REVE NUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). HE S UBMITTED 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. A CIT (SUPRA), THE LD. D.R. SUBMITTED THAT EVEN IN THE CASE OF LIB ERTY INDIA VS. CIT (SUPRA), THE HON'BLE SUPREME COURT HAS BEEN PLE ASED TO EXPLAIN THE INTENTION OF PARLIAMENT AND SCOPE OF DE DUCTION U/S. 80-IA AND 80-IB OF THE ACT. THE HON'BLE SUPREME COU RT HAS BEEN PLEASED TO HOLD THAT SUCH PROFITS ARE TO BE COMPUTE D AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF T HE ASSESSEE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF ELIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVERRIDING PR OVISIONS OF SUB-SECTION (5) OF SECTION 80-IA OF THE ACT. 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS, W E FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WH AT WOULD BE THE INITIAL A. Y FOR THE PURPOSES OF SECTION 80-IA(5) O F 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 FA RM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DISCUSSING THE ISSUE IN DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE IN ITIAL 'A.Y.' FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80-IA WAS THE FI RST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80-IA (1) A FTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF 80-IA (2) OF TH E ACT. IT WAS HELD THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE I NITIAL A. Y FOR THE PURPOSES OF SECTION 80-IA(2) R.W.S. 801 A (5) WAS T HE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY FROM TH E WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GRO UND NO. 2 REGARDING THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80-IA UNDIMINISHED BY UNABSORBED LOSSES AND DEPRECI ATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME, IS F ULLY COVERED BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE O F VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80-IA, PROFI TS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY S OURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OP TION, ONLY THE LOSSES OF THE YEARS BEGINNING FROM THE INITIAL A. Y . ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE EARLIER Y EARS WHICH HAVE BEEN ALREADY SET-OFF AGAINST THE INCOME OF THE ASSE SSEE. THE HON'BLE MADRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 WHICH HAD ALREADY BEEN SET-OFF AGAINST THE OTHER IN COME OF ASSESSEE AND SET-OFF AGAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED BY SUB-SECTION (5) OF SEC TION 80-IA 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 O F LIBERTY INDIA VS. CIT (SUPRA) AND THE DECISION OF SPECIAL BENCH O F THE TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE (P) LTD. (S UPRA)'. THERE IS NO DISPUTE THAT EVEN A DECISION OF NON-JURISDICT IONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CON TRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. IN THIS RE GARD, WE FIND STRENGTH FROM THE RECENT DECISION OF HON'BLE JURISD ICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL E XCISE 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 DECISIO N OF HIGH COURT, EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO C ONTRARY DECISION OF ANY OTHER HIGH COURT. THE HON'BLE BOMBAY HIGH CO URT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OP TION 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 COU RT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CO MMISSIONER OF CENTRAL EXCISE VS. VAKSON DYEING, BLEACHING AND PRI NTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DECI SION OF THE HON'BLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA). WE THUS RESPECTFULLY FOLLOWING THE DECISION TAKEN BY THE HO N'BLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTICAL ISSUE UNDER ALMOST SIMILAR FACTS, HOLD THAT WHEN THE ASSESSEE EXERCISING THE O PTION, 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 HA VE BEEN ALREADY SET-OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. T HE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN SET-OFF AGAINST ANY OTHER INCOME OF TH E ASSESSEE AND SET-OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. WE THUS SET ASIDE THE ORDERS OF THE AUTHO RITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80-IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINS T OTHER INCOME OF THE ASSESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.LTD. VS. ITO (SUP RA) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SU PRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY T HE ID. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGAINST TH E ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT V S. GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE A UTHORITIES BELOW. THE ID. AR THEREIN THUS CONTENDED THAT THOUG H THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SH ARES & FINANCIAL (P) LTD., BUT 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 I N FAVOUR OF THE ASSESSEE.' 9. OSTENSIBLY, IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA), THE TRIBUNAL HAS CONSIDERED AN IDENTICAL CONTROVERSY. O N BEHALF OF THE ASSESSEE, THE JUDGMENT OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) WAS B EING CITED WHEREAS THE REVENUE HAD RELIED UPON THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ASSTT. CIT VS. GOLDM INE SHARES AND FINANCE (P) LTD. (SUPRA) TO THE CONTRARY. THE TRIBU NAL NOTICED THAT HAVING REGARD TO THE DECISION OF THE HON'BLE MADRAS HIGH COURT THE ISSUE WAS TO BE DECIDED ACCORDINGLY AND NOT ON THE BASIS OF DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) WHICH WAS TO TH E CONTRARY. IN THIS CONTEXT, THE TRIBUNAL CAME TO THE CONCLUSION T HAT WHEN THE ASSESSEE EXERCISED OPTION IDENTIFYING TEN CONSECUTI VE YEARS AS CONTAINED IN SUB-SECTION (2) OF SECTION 80-IA OF TH E ACT, ONLY THE LOSSES OF THE YEAR BEGINNING FROM SUCH INITIAL ASSE SSMENT YEAR ARE TO BE BROUGHT FORWARD AND SET-OFF WHILE APPLYING TH E PROVISIONS OF SECTION 80-IA(5) OF THE ACT AND NOT THE LOSSES OF E ARLIER YEARS WHICH OTHERWISE WERE SET-OFF AGAINST OTHER INCOME OF THE ASSESSEE. 10. AT THE TIME OF HEARING, THE LEARNED DEPARTMENTA L REPRESENTATIVE HAS NOT BROUGHT TO OUR NOTICE ANY DE CISION OF A HIGH COURT CONTRARY TO THAT OF THE HON'BLE MADRAS HIGH C OURT IN THE CASE ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 OF VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) ON THE ISSUE IN QUESTION. THEREFORE, WE FIND THAT THE CONTROVERSY B EFORE 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 TH E CASE OF SERUM INTERNATIONAL LTD. (SUPRA) WHICH HAS BEEN DECIDED F OLLOWING THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA). 11. BEFORE PARTING WE MAY ALSO REFER TO THE DECISIO N OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER EN GG. (P) LTD. VS. ITO IN ITA NOS. 1755 AND 1205/PN/2007 FOR A.YS. 200 2-03 AND 2003-04 VIDE ORDER DATED 31-01-2011 WHICH IS CONTRA RY TO THE AFORESAID POSITION. THE SAID DECISION OF THE TRIBUN AL HAS BEEN EXPLAINED IN THE CASE OF SERUM INTERNATIONAL LTD (S UPRA) WHEREIN IT HAS BEEN CLEARLY BROUGHT OUT AS TO HOW THE SAID DEC ISION DOES NOT HELP THE CASE OF THE REVENUE. FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT. 'THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.LTD. VS. ITO (SUPRA) CITE D BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIR STLY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VEL AYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISS UE WAS NOT CITED BEFORE THE BENCH AND SECONDLY THE ID. AR FAIRLY AGR EED THAT THE ISSUE RAISED WAS COVERED AGAINST THE ASSESSEE BY TH E DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. GOLDMINE SHAR ES & FINANCE (P) 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 O F THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SI DE OF THE ASSESSEE AS THE LEGAL POSITION ON THE SUBJECT IS YE T NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSES SEE.' 12. IN VIEW OF THE AFORESAID DISCUSSION, WE THEREFO RE, HOLD THAT THE ASSESSEE IS ELIGIBLE FOR THE CLAIM OF DEDUCTION UND ER SECTION 80-IA OF ITA NO. 1127/PN/2010 SUPERFINE PHOTO COMPANY PRIVATE LIMITED A.Y. 2006-07 THE ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN THE MANNER LAID OUT ABOVE. THEREFORE, WE SET ASIDE THE ORDER O F THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RE-COMPUTE AND ALLO W THE DEDUCTION TO THE ASSESSEE UNDER SECTION 80-IA OF THE ACT IN T HE AFORESAID MANNER. THUS ON THIS GROUND ASSESSEE SUCCEEDS. 13. THE NEXT ISSUE RAISED BY THE ASSESSEE IS WITH R EGARD TO THE DISALLOWANCE OF RS.56,250/- UNDER SECTION 40(A)(IA) OF THE ACT. THE SAID GROUND WAS NOT PRESSED AT THE TIME OF HEARING AND IS ACCORDINGLY DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MAY, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 27 TH MAY, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY I.T.A.T., PUNE