Deputy Commissioner of Income-tax, Pune V. M/s. Advik Hi-tech Pvt. Ltd., Pune

ITA 1197/PUN/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7608 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Keywords: Depreciation; Capital receipt; Unabsorbed depreciation; Set aside
• Section: 143(3); 14A; 80IA

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1197/PUN/2017 / ASSESSMENT YEAR : 2012-13 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE. . / APPELLANT. V/S M/S. ADVIK HI - TECH PVT. LIMITED, GAT NO.357/99, CHAKAN, TALEGAON ROAD, TAL. KHED, CHAKAN, PUNE. PAN : AACCA3106E. . / RESPONDENT ASSESSEE BY : SHRI SHARAD SHAH. REVENUE BY : MS. NANDITA KANCHAN. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 6, PUNE DATED 30.01.2017 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BU SINESS OF MANUFACTURING OF AUTO COMPONENTS, GENERATION OF WIND POWER AND TRADING IN SHARES AND SECURITIES. ASSESSEE FILED ITS ORIGINA L RETURN OF / DATE OF HEARING : 22.08.2019 / DATE OF PRONOUNCEMENT: 16.10.2019 2 INCOME FOR A.Y. 2012-13 ON 29.09.2012 DECLARING TOTAL INCOM E OF RS.19,60,61,445/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER D ATED 26.02.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.26,23 ,73,346/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 30.01.2017 (IN APPEAL NO.PN/C IT(A)- 6/DCIT CIR-8/11/2015-6) ALLOWED THE APPEAL OF THE ASSESSE E. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW BEFORE US AND HA S RAISED THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD.CIT(A)HAS IGNORED THE PROVISIONS OF 80IA(5) WHIC H CLEARLY PROVIDES THE CONDITION WHERE ELIGIBLE UNIT IS TREAT ED AS SEPARATE UNIT WHICH MEAN IT IS TO BE TREATED AS INDEPENDENT UNIT FOR PROFIT AND LOSS PURPOSE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS FAILED TO CONSIDER THE DECISION OF JU RISDICTIONAL HON'BLE ITAT, PUNE IN THE CASE OF KHINVASARA INVESTMENT (P) LTD REPORTED IN 110 ITD. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS FAILED TO CONSIDER THE DECISION OF SP ECIAL BENCH OF THE ITAT IN THE CASE OF ACIT VS GOLDMINE SHARES & FINAN CE (P) LTD WHOSE RECENT DECISION IS REPORTED IN 116 IT J (AHMA DABAD) 705 WHERE IT HAS BEEN HELD THAT PROFITS THE ELIGIBLE UN IT HAS TO BE DEEMED AND TREATED AS THE ONLY UNIT FROM INCEPTION TO ARRI VE AT THE ELIGIBLE PROFITS IN ANY GIVEN YEAR QUANTUM OF DEDUCTION ALLO WABLE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS FAILED TO CONSIDER THE DECISION OF IT AT, MUMBAI IN THE CASE OF PIDILITE INDUSTRIES LTD. REPORTED IN 46 SOT 263, WHEREIN THE ITAT, ON IDENTICAL ISSUE. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS FAILED TO CONSIDER THE DECISION OF TH E HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIPLA LTD. REPOR TED IN 2 SOT 617. 6. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT DISCOUNT OF RS. 1,74,59,885/- RECEIVED ON PRE-PAYMENT OF LIABILITY UNDER THE 'SAL ES TAX DEFERRAL SCHEME', AS NOT A REMISSION OR CESSATION OF LIABILI TY U/S 41(1)? 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 15,241/- U/S.14(A) IGNORING THAT AO HAS CLEARLY RECORDED IN HIS ORDER THAT CORR ECT VALUE OF INVESTMENT IS NOT CONSIDERED BY ASSESSEE CALCULATIN G DEDUCTION U/S 14A. 3 3. GROUND NOS. 1 TO 5 ARE WITH RESPECT TO THE DISALLOWA NCE U/S 80IA OF THE ACT. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS.4,88,36,675/- U/S 8 0IA OF THE ACT WITH RESPECT TO THE PROFITS FROM WINDMILL. AO NOTICED TH AT ASSESSEE HAD SHOWN PROFIT IN RESPECT OF ALL THE WINDMILLS DUE TO THE FACT THAT 100% DEPRECIATION HAS ALREADY CLAIMED IN EARLIER YEARS A ND THEREFORE NO DEPRECIATION AS PER I.T ACT WAS CLAIMED IN THE CURRE NT YEAR. THE DEPRECIATION LOSS THAT WAS CLAIMED IN RESPECTIVE YEARS WA S SET OFF AGAINST THE REGULAR INCOME OF THE BUSINESS OF THE ASSESS EE. AO WAS OF THE VIEW THAT ASSESSEE HAS IGNORED THE PROVISIONS OF SEC TION 80IA(5) OF THE ACT. HE THEREAFTER WORKED OUT THE INCOME GENERATE D AGAINST SETOFF OF THE LOSSES AND CONCLUDED THAT ASSESSEE DID NOT DERIV E ANY POSITIVE INCOME DURING THE YEAR FROM WINDMILL OPERATIONS DUE TO T HE LOSSES OF THE WINDMILL UNITS BEING BROUGHT FORWARD AND SET OFF FROM THE PROFIT DERIVED FROM WINDMILL UNITS. HE ACCORDINGLY HELD THAT THE C LAIM OF DEDUCTION TO THE EXTENT OF RS.4,88,36,675/- U/S 80IA OF T HE ACT IS NOT ALLOWABLE AND ACCORDINGLY DISALLOWED THE SAME. AGGRIEVED B Y THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 5.2. DURING THE APPEAL PROCEEDINGS, THE APPELLANT SUBMITTED THAT THAT THE CBDT VIDE CIRCULAR NO.1/2016 DTD.15/2/2016 HAD ACCEPTED THE' DECISION OF THE MADRAS HIGH COURT OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT REPORTED IN 38 DTR 57. THE BOARD HAS C LARIFIED THROUGH THE CIRCULAR THAT THE INITIAL ASSESSMENT YEAR AS MENTIO NED IN SEC.80IA(5) WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 80IA. THE DEDUCTION IS ALLOWABLE FOR 10 YEARS FROM THE INITIAL ASSESSMENT YEAR SHOW CHOSEN BY THE ASSESSEE OUT OF THE 15 YEARS BEGINNING FROM THE YEAR IN WHICH UNDERTAKING COMMEN CES THE OPERATIONS. 4 5.3. THE SUBMISSIONS HAVE BEEN CONSIDERED AND THE LITIGATION REGARDING THE INITIAL ASSESSMENT YEAR MENTIONED IN SEC.801A HAS BEEN SETTLED BY THE MADRAS HIGH COURT IN THE CASE OF VEL AYUDHASWAMY SPINNING MILLS (P) LTD VS.ACIT REPORTED IN 38 DTR 5 7 AND THE SAME HAS BEEN ACCEPTED BY THE CBDT THROUGH THE CIRCULAR 1/20 16. WITH THIS CLARIFICATION, THE ASSESSEE IS ENTITLED TO CHOOSE T HE INITIAL ASSESSMENT YEAR AND THE DEDUCTION IS ALLOWABLE FOR 10 CONSECUT IVE ASSESSMENT YEARS STARTING WITH THE INITIAL ASSESSMENT YEAR IN A SLAB OF 15 YEARS STARTING FROM THE YEAR OF OPERATION OF THE UNDERTAKING. IT I S ONLY CONSEQUENT TO SUCH CHOOSING OF INITIAL ASSESSMENT YEAR, THE PROVI SIONS OF SEC.80IA(5) WOULD APPLY TO THE UNDERTAKING. THE AO SHOULD CONSI DER THE INTEREST COMPONENT ON THE LOAN AVAILED FOR SETTING OF THE UN IT IN THE EXPENSES RELATED TO THE UNIT WHILE WORKING OF THE PROFIT FRO M THE UNIT. THE AO IS THEREFORE DIRECTED TO RECALCULATE THE DEDUCTION AVA ILABLE FOR EACH OF THE SEVEN UNITS AS PER SEC.80IA(5) FROM THE INITIAL ASS ESSMENT YEAR SO CHOSEN BY THE APPELLANT FOR EACH OF THE UNITS. THE GROUND IS TREATED AS ALLOWED WITH THE ABOVE OBSERVATIONS. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 4. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT IDENTICAL ISSUE AROSE IN ASSESS EES OWN CASE IN A.Y. 2010-11 AND THE CO-ORDINATE BENCH OF THE TRIBUNAL BY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN A.YS . 2008-09 AND 2009-10 HAS UPHELD THE ORDER OF LD.CIT(A) VIDE ORDER DT.2 2.09.2017 IN ITA NOS.83 & 96/PUN/2015. HE PLACED ON RECORD THE COPY OF THE AFORESAID ORDER AND SUBMITTED THAT NO INTERFERENCE TO TH E ORDER O LD.CIT(A) IS CALLED FOR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DEDUCTION U/S 80IA(4) OF THE ACT. WE FIND THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE IN A.Y. 2010-11 BEFORE THE ITAT. THE CO-ORDINATE BENCH OF TH E TRIBUNAL VIDE ORDER DT.22.09.2017 (SUPRA) HAS DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 5 24. WE HEARD BOTH THE SIDES. WE FIND THE ISSUE UN DER CONSIDERATION WAS THE SUBJECT MATTER BEFORE THE TRIBUNAL IN THE A SSESSEES OWN CASE FOR THE A.YRS. 2008-09 AND 2009-10 (SUPRA). THE RELEVA NT OPERATIONAL PARAGRAPHS ARE EXTRACTED AS UNDER FOR THE SAKE OF C OMPLETENESS : 9. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA(4)(IV)(A) OF THE I.T. ACT AMOUNTING TO RS. 43,93,235/-. THE ASSESSING OFFICER ALSO TREATED SANGLI AND DHULE UNI TS AS SINGLE ONE HAVING SAME ELIGIBLE BUSINESS. THE CLAIM WAS MADE IN RESPECT OF WIND MILL LOCATED AT SANGLI. THE ISSUE PERTAINS TO LOSSES OF THE UNDERTAKING BEFORE THE INITIAL YEAR ALREADY ADJUSTE D AGAINST OTHER INCOME. DURING THE COURSE OF THE ASSESSMENT PROCEED INGS, THE ASSESSEE RELIED UPON VARIOUS DECISIONS INCLUDING PU NE TRIBUNAL'S DECISION IN THE CASE OF POONAWALA FINVEST & AGRO (P ) LTD. VS. ASST. COMMISSIONER OF INCOME-TAX REPORTED IN (2008) 118 TT J (PUNE) 68. THE ASSESSING OFFICER HOWEVER RELYING UPON SPECIAL BENCH DECISION OF AHMEDABAD TRIBUNAL REPORTED IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. REPORTED IN 116 TTJ (AHMEDABAD) 705, DISALLOWED THE CLAIM OF THE ASSESS EE. WHILE DOING SO, THE ASSESSING OFFICER ALSO HELD THAT INIT IAL ASSESSMENT YEAR HAS TO BE CONSIDERED AS THE YEAR IN WHICH POWE R GENERATION COMMENCES AND NOT THE YEAR IN WHICH IT CHOOSES TO M AKE CLAIM FOR DEDUCTION FOR THE FIRST TIME. THE ASSESSING OFFICE R HELD THAT IN THE CURRENT SECTION 80IA(5), THERE IS NO OPTION GIVEN T O THE ASSESSEE TO CHOOSE INITIAL ASSESSMENT YEAR. 9.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS FACTUAL AND LEGAL CONTENTIONS W ERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAD ALLOWED THE CLAIM OF THE ASSESSEE ON BOTH ACCOUNTS. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT F OR THE PURPOSE OF SECTION 80IA THE YEAR IN WHICH THE ASSESSEE CHOOSES TO CLAIM DEDUCTION HAS TO BE TREATED AS INITIAL ASSESSMENT Y EAR. THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT PROFIT OF THE ELI GIBLE BUSINESS HAS TO BE COMPUTED WITHOUT DEDUCTING THEREFROM BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION PRIOR TO THE INIT IAL YEAR OF CLAIM DE HORS THE PROVISION U/S. 80IA(5) OF THE ACT. THE CIT(A) ERRED IN IGNORING THAT THE ASSESSEE WAS IN POWER GENERATION BUSINESS AND HOLDING THAT EACH WINDMILL HAS TO BE TAKEN AS INDEP ENDENT ELIGIBLE BUSINESS. ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN HOLDING THAT EACH WINDMILL UNIT HAS TO BE TREATED ON STANDALONE BASIS DE HORS THE SPECIFIC STIPULATION I N SECTION 80IA(5) OF THE ACT THAT 'PROFIT AND GAINS OF ELIGIBLE BUSIN ESS' BEING POWER GENERATION BUSINESS HAVE TO BE TAKEN. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATI VE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 9.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT AS PER SEC. 80IA(2 ) OF THE IT. ACT, THE ASSESSEE HAS OPTION TO EXERCISE THE CHOOSING OF INITIAL ASSESSMENT YEAR OUT OF FIFTEEN YEARS BEGINNING WITH THE YEAR IN WHICH THE UNDERTAKING STARTS PRODUCTION. THE ASSES SING OFFICER WAS NOT CORRECT IN ASSERTING THAT THERE WAS NO OPTI ON TO THE ASSESSING OFFICER TO EXERCISE OPTION IN CHOOSING TH E INITIAL ASSESSMENT YEAR. AS REGARDS THE ISSUE OF LOSSES AND UNABSORBED DEPRECATION OF THE UNDERTAKING ALREADY ADJUSTED AGA INST THE OTHER INCOME IT WAS FOUND THAT THE SAME IS COVERED BY THE DECISION OF 6 PUNE TRIBUNAL IN CASE OF POONAWALA FINVEST (SUPRA) IN FAVOUR OF THE ASSESSEE. THE ASSESSING OFFICER HAS RELIED UPON SP ECIAL BENCH DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. REPORTED IN 116 TTJ (AHME DABAD) 705. HOWEVER, THE SAME COULD NOT BE FOLLOWED IN VIEW OF THE HON'BLE MADRAS HIGH COURT JUDGMENT IN CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT REPORTED IN 38 DTR 57. ITAT, BANGALORE BENCH IN THE CASE OF ANIL H LAD VS. DCIT DID NOT FOLLOW THE SPECIAL BENCH DECISION OF THE AHMEDABAD BENCH T RIBUNAL IN VIEW OF ABOVE JUDGMENT OF MADRAS HIGH COURT. RELEV ANT PORTION OF THE ORDER IS REPRODUCED FOR THE SAKE OF CLARITY: 'FROM READING OF THE ABOVE, IT IS CLEAR THAT THE EL IGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR A ND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISE OPTION, THE ONLY LOSSES OF THE YEARS BEGIN NING FROM INITIAL A.Y. ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST TH E INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOE S NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONA LLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME O F THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIO NALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED.' 27. THUS, THE HON'BLE MADRAS HIGH COURT HAS CLEARLY HELD THAT WHERE THE DEPRECIATION AND LOSS OF EARLIER ASS ESSMENT YEARS HAVE ALREADY BEEN SET OFF AGAINST OTHER BUSIN ESS 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.80I. THE HON'BLE COURT HAS HELD FURTHER THAT THE YEAR OF COMMENCEMENT ALONE NEED NO T 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' . THE COURT HAS ALSO EXAMINED THE ISSUE FROM A DIFFERENT LEGAL ANGLE AND HELD THAT THE PROPOSITION ARGUED BY THE R EVENUE IS NOT COMPATIBLE WITH THE SCHEME OF GROSS TOTAL IN COME CONCEPTUALIZED IN THE IT ACT ESPECIALLY IN THE LIGH T OF SECTION 80AB WHICH ARE ALL RELEVANT WHILE CONSIDERING THE D EDUCTION U/S.80IA WHICH IS FALLING UNDER CHAPTER VIA OF THE I.T. ACT, 1961. WHERE THE EARLIER DEPRECIATION AND LOSSES HAV E ALREADY BEEN SET OFF, THOSE LOSS AND DEPRECIATION D O NOT GO TO REDUCE THE GROSS TOTAL INCOME OF AN ASSESSEE WIT HIN THE MEANING OF SEC.80AB AND THEREFORE, BRINGING THE NOT IONAL CONCEPT OF CARRYING FORWARD AND SET OFF WILL BE CON TRARY TO THE SCHEME OF SEC.80AB AND CONCEPT OF GROSS TOTAL I NCOME. 28. NOW, IT IS CLEAR AS WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE ABOVE DISCUSSED JUDGEMENT OF THE HON 'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS P. LTD. VS. ACIT (38 DTR 57). WHERE SUCH AN OVERRIDING JUDGEMENT OF THE CONSTITUTIONAL COURT IS GOVERNING 7 THE ISSUE, WE ARE NOT PERMITTED TO RELY ON THE DECI SION OF THE SPECIAL BENCH OF THE AHMEDABAD TRIBUNAL. 29. THEREFORE, FOLLOWING THE ABOVE JUDGEMENT OF THE HON'BLE HIGH COURT OF MADRAS, WE ACCEPT THE CONTENTION OF T HE ASSESSEE AND REVERSE THE ORDER OF THE COMMISSIONER O F INCOME-TAX(A) ON THIS POINT AN DIRECT THE ASSESSING AUTHORITY TO GRANT DEDUCTION TO THE ASSESSEE U/S.80IA FOR THE QUANTUM CLAIMED BY THE ASSESSEE WITHOUT DILUTING THE SAME B Y THE NOTIONAL DEDUCTION OF EARLIER LOSS AND DEPRECIATION '. 9.3 IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S.80 IA(4)(IV)(A) OF THE ACT WITHOUT DEDUCTING BROUGHT FORWARD LOSS OR UNABS ORBED DEPRECIATION PRIOR TO INITIAL YEAR ON NOTIONAL BASI S. THIS REASONED FACTUAL AND LEGAL FINDING OF CIT(A) NEEDS NO INTERF ERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 25. FROM THE ABOVE, IT IS EVIDENT THAT THE TRIBUNAL HAS TAKEN A VIEW ON THIS ISSUE AND DECIDED IN FAVOUR OF THE ASSESSEE FO LLOWING VARIOUS DECISIONS DISCUSSED IN PARA 9.2 ABOVE. CONSIDERING THE SAME AND IN THE ABSENCE OF ANY SUSTAINABLE DECISIONS IN FAOVUR OF T HE REVENUE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) IS FAIR AN D REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ALL THE 3 GROUNDS R AISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 6. BEFORE US, REVENUE HAS NOT POINTED OUT ANY DISTINGUISHIN G FEATURE IN THE FACTS OF THE PRESENT CASE AND TO THE ASSESSEES OWN CASE IN A.Y. 2010-11 THAT WAS DECIDED BY THE TRIBUNAL IN ITA NO.83 A ND 96/PUN/2015 (SUPRA). REVENUE HAS ALSO NOT PLACED ANY M ATERIAL ON RECORD TO DEMONSTRATE THAT THE DECISION OF PUNE TRIBUNA L IN ASSESSEES OWN CASE FOR A.Y. 2010-11 HAS BEEN SET ASIDE / OVERTURN ED OR STAYED BY THE HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THE GROUNDS 1 TO 5 OF REVENUE ARE DISMISSED. 7. GROUND NO.6 IS WITH RESPECT TO ADDITION U/S 41(1) OF THE ACT. 7.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT AS ON 31.03.2011 ASSESSEE HAD SHOWN RS.3,90,29,906/- AS DEFE RRED PAYMENT LIABILITY UNDER THE HEAD SECURED LOAN. IT WAS ALSO NOTICED 8 THAT ASSESSEE HAD ACTUALLY PAID RS.2,15,70,021/- AND TH E ASSESSEE HAS SHOWN ADDITION OF RS.1,74,59,885/- AS CAPITAL RESERVE ON A CCOUNT OF SURPLUS ON PRE-PAYMENT OF SALES-TAX DEFERRAL AND IT WAS NOT OFFERED TO TAX. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE AMOUNT NOT BE BROUGHT TO TAX IN VIEW OF THE PROVISIONS OF SEC.41(1) OF THE ACT. THE ASSESSEE MADE SUBMISSIONS WHICH WERE NOT FOUND ACCEPTAB LE TO THE AO. AO WAS OF THE VIEW THAT THE TAXABILITY OF SALES TAX DEFERRA L WAS TO BE DECIDED UNDER THE PROVISIONS OF THE INCOME TAX ACT. HE WAS OF THE VIEW THAT THE AMOUNT SET ASIDE AS SALES TAX DEFERRAL WAS A P ROVISION TO MEET THE FUTURE LIABILITY AND ONCE THE ASSESSEE MADE THE PRE- PAYMENT OF TAX- LIABILITY AND GOT THE BENEFIT, THE AMOUNT WAS REQUIRED TO T REAT THE INCOME BY CREDITING IT TO THE PROFIT AND LOSS ACCOUNT. HE THEREFORE TREATED THE DIFFERENCE BETWEEN UNPAID SALES-TAX SCHEME A S TRADING LIABILITY AND MADE ADDITION OF RS1,74,59,885/- U/S 41(1) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE B Y OBSERVING AS UNDER : 6.3. THE ISSUE HAS BEEN EXAMINED. IT IS SEEN THAT THE BOOKS OF ACCOUNTS ARE MAINTAINED ON HISTORICAL COST BASIS AND THE INC OME TAX ACT ALSO PROVIDES FOR TAXING ON SUCH HISTORICAL COST BASIS. IN THE PRESENT CLAIM/ THE PAYMENT OF A NET PRESENT VALUE OF A FUTURE LIABILIT Y HAS LEAD TO EXTINCTION OF THE FUTURE LIABILITY. HOWEVER IN THE ACCOUNTS/ T HE DIFFERENCE CONTINUOUS TO BE SHOWN AS LIABILITY AND THIS LIABILITY IS TAKE N AS A CAPITAL RECEIPT. ONCE THIS LIABILITY CONTINUOUS TO BE SHOWN EITHER A S CAPITAL RESERVE OR UNDER ANY OTHER HEAD, WOULD REPRESENT EXCESS OF ASS ETS OVER LIABILITIES. SUCH EXCESS HAS TO BE TAXED AND THIS EXCESS IS ARIS ING OUT OF THE EXTINCTION OF A REVENUE LIABILITY. THIS REVENUE LIA BILITY WAS ALLOWED AS AN EXPENSE UNDER THE INCOME TAX ACT IN THE EARLIER YEA RS. THIS ISSUE IS DEBATABLE AND IT HAS NOT REACHED FINALITY. THOUGH T HE JURISDICTIONAL HIGH COURT DECISION HAS SETTLED THE MATTER IN FAVOUR OF THE APPELLANT AND IT IS BINDING ON THE AUTHORITIES WITHIN ITS JURISDICTION. RESPECTFULLY FOLLOWING THE DECISION OF MUMBAI HIGH COURT, THE GROUND IS A LLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 9 8. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT THE ISSUE IS COVERED IN ASSES SEES FAVOUR BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SULZER INDIA LIMITED REPORTED IN 369 ITR 717 AND THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. TRAVANCORE TITANIUM PRODUCT S LTD., REPORTED IN (2001) 247 ITR 186 (SC). HE ALSO PLACED ON RE CORD THE COPY OF THE AFORESAID DECISION. HE THUS SUPPORTED THE ORDER OF LD.CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO ADDITION MADE U/S 41(1) OF THE ACT. LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAD FOLLOWED THE DECISION OF HONBLE BOMBAY HIGH COURT. BEFORE US, REVENUE COULD NOT POINT OUT ANY FALLACY IN THE FIN DINGS OF LD.CIT(A). WE FURTHER FIND THAT HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. SULZER INDIA LTD., (SUPRA) HAS HELD THAT PRE- PAYMENT OF SALES TAX WOULD NOT AMOUNT TO PAYMENT OR CESSATION OF LIABILITY. BEFORE US, REVENUE HAS NOT POINTED OUT ANY CONTRARY BINDING DECISIO N IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INTERFERE WITH TH E ORDER OF LD.CIT(A ). THUS, GROUND NO.6 OF REVENUE IS DISMISSED. 10. GROUND NO.7 IS WITH RESPECT TO DISALLOWANCE U/S 14A OF THE ACT. 10.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO ON PERUSING THE DETAILS NOTICED THAT INVESTMENTS THAT WERE CARRIED OUT U NDER INVENTORY WERE NOT CONSIDERED BY THE ASSESSEE FOR THE DISALLOWANCE U/S 14A OF THE ACT. AO WAS OF THE VIEW THAT THOSE INVESTMENTS ALSO NE ED TO BE CONSIDERED FOR WORKING OUT THE DISALLOWANCE U/S 14A OF THE ACT. HE ACCORDINGLY WORKED OUT THE DISALLOWANCE U/S 14A OF THE A CT AT 10 RS.3,83,558/- AND DISALLOWED THE SAME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO BY FOLLOW ING THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT VS. INDIA ADVANTAGES SECURITIES LTD., (ITA NO.1131 OF 2013 DATED 30.04.2014) DELETE D THE ADDITION MADE BY THE AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL BEFORE US. 11. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A). HE ALSO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC VS. DCIT REPORTED IN 383 ITR 529. HE THUS SUPP ORTED THE ORDER OF LD.CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DISALLOWANCE U/S 14A OF THE ACT. AO WAS OF THE VIEW THAT DISALLOWANC E U/S 14A OF THE ACT HAS TO BE WORKED OUT EVEN ON THE INVESTMENTS SHOWN UNDER STOCK-IN-TRADE. WE FIND THAT HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. INDIA ADVANTAGES SECURITIES LTD., HAS HELD THAT NO DISALLOWANCE OF EXPENDITURE U/S 14A OF THE ACT COULD BE MADE IN RESPE CT OF STOCK-IN- TRADE. BEFORE US, REVENUE HAS NOT POINTED OUT ANY CON TRARY BINDING DECISION IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INT ERFERE WITH THE ORDER OF LD.CIT(A). THUS, GROUND NO.7 OF REVENUE IS DISMISSED. 11 13. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 16 TH DAY OF OCTOBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 16 TH OCTOBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-6, PUNE. PR. CIT-5, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.