Aurangabad Electricals, Pune V. Assistant Commissioner of Income-tax,

ITA 1240/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7532 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income; Assessment record; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 14A; 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS. 1058 & 673/PUN/2016 / ASSESSMENT YEARS : 2007-08 & 2008-09 AURANGABAD ELECTRICALS LTD., PLOT NO.B-7, MIDC, VILLAGE MAHALUNGE, TALUKA KHED, PUNE 410501 PAN : AACCA2867L . /APPELLANT V/S DCI T, CIRCLE - 8, PUNE . /RESPONDENT . / ITA NO.1240/PUN/2014 & ITA NOS.369 & 370/PUN/2015 / ASSESSMENT YEARS : 2009-10 TO 2011-12 AURANGABAD ELECTRICALS LTD., PLOT NO.B-7, MIDC, VILLAGE MAHALUNGE, TALUKA KHED, PUNE 410501 PAN : AACCA2867L . /APPELLANT V/S ACIT, CIRCLE - 8, PUNE . /RESPONDENT . / ITA NO. 1265/PUN/2016, ITA NO. 999/PUN/2016 AND ITA NO.479/PUN/2015 / ASSESSMENT YEARS : 2007-08, 2008-09 AND 2011-12 JCIT (OSD), PUNE / DCIT, CIRCLE-8, PUNE . /APPELLANT V/S AURANGABAD ELECTRICALS LTD., PLOT NO.B-7, MIDC, VILLAGE MAHALUNGE, TALUKA KHED, PUNE 410501 PAN : AACCA2867L . /RESPONDENT 2 AURANGABAD ELECTRICALS LTD., ASSESSEE BY : SHRI SHARAD SHAH REVENUE BY : DR. VIVEK AGGARWAL / ORDER PER BENCH, AM : THERE ARE 8 APPEALS UNDER CONSIDERATION FILED BY B OTH THE ASSESSEE AND THE REVENUE COVERING THE ASSESSMENT YEARS 2007-08 T O 2011-12. FOR THE A.YRS. 2009-10 AND 2010-11, THERE ARE NO CROSS APP EALS BY THE REVENUE. THEREFORE, ALL THESE APPEALS ARE BEING ADJUDICATED BY THIS COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. TO START, WE SHALL TAKE UP THE CROSS APPEALS FOR A.Y. 2007-08 ITA NO.1265/PUN/2016 (BY REVENUE A.Y. 2007-08) : 3. IN THIS APPEAL, THE REVENUE RAISED A SOLITARY G ROUND AND IT READS AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT DISCOUNT OF RS.91,27,101/ - RECEIVED ON PRE-PAYMENT OF DEFERRED SALES TAX LOAN, AS NOT A REMISSION OR CE SSATION OF LIABILITY U/S.41(1)? 4. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSES SEE IS A COMPANY ENGAGED IN THE MANUFACTURE OF VARIOUS AUTOMOBILE CO MPONENTS. ASSESSEE FILED THE E-RETURN OF INCOME ON 15-11-2007 DECLARIN G TOTAL LOSS OF RS.6,81,18,176/-. AO NOTICED THAT AN AMOUNT OF RS. 91,27,101/-, BEING DISCOUNT ON EARLY REPAYMENT OF DEFERRED SALES TAX L OAN, WAS TREATED AS CAPITAL IN NATURE. FURTHER, THE AO NOTICED THAT THE SAME I SSUE AROSE IN EARLIER A.YRS. 2004-05, 2005-06 AND 2006-07 WHEREIN, THE AO HELD T HE SAID DISCOUNT DOES NOT CONSTITUTES CAPITAL RECEIPT AND THEREFORE, LIAB LE TO BE CHARGED TO TAX AS DEEMED PROFITS AND GAINS OF THE BUSINESS WITHIN THE PROVISIONS OF SECTION / DATE OF HEARING : 31.08.2017 / DATE OF PRONOUNCEMENT: 08.09.2017 3 AURANGABAD ELECTRICALS LTD., 41(1) OF THE ACT, 1961. THIS ADDITION WAS SUBSEQUE NTLY CONFIRMED BY THE CIT(A) FOR ALL THOSE ASSESSMENT YEARS. CONSIDERING THE ISSUE BEING SIMILAR IN A.Y. 2007-08 ALSO, THE AO TREATED THE AMOUNT OF RS. 91,27,101/- AS INCOME FROM BUSINESS AND PROFESSION OF THE ASSESSEE FOR TH E YEAR UNDER CONSIDERATION TOO. 5. BEFORE US, ON THE SAID ISSUE, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THE ASSESSEE GOT THE BENEFIT BY THE WAY OF DISCOUNT FOR EARLY PAYMENT OF SALES TAX LIABILITY BEING THE DIFFERENCE BETWEEN THE PAYABLE AND THE PAID AMOUNT OF THE SAID LIABILITY. AO TREATED IT AS THE INCOME OF THE ASSESSEE BY WAY OF REMISSION OF LIABILITIES U/S.41(1) OF THE ACT. LD. COUNSEL F OR THE ASSESSEE DREW OUR ATTENTION TO THE ORDER OF THE CIT(A) IN GENERAL AND PARA NO. 5 IN PARTICULAR AND DEMONSTRATED THAT, HE RELIED ON THE ORDERS OF THE T RIBUNAL WHILE GIVING RELIEF TO THE ASSESSEE, VIDE ITA NO. 388/PN/2012 AND ITA N O.1269/PN/2010 FOR THE A.YRS. 2005-06 AND 2006-07. LD. CIT(A) ALSO HEAVIL Y RELIED ON THE SPECIAL BENCH DECISION IN THE CASE OF SULZER INDIA LTD. VS. JCIT 42 SOT 457 (MUM) (SB). FURTHER, HE DEMONSTRATED THAT THE SAID DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL WAS SUBSEQUENTLY CONFIRMED BY THE JURI SDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. SULZER INDIA LTD. REP ORTED IN 369 ITR 0717. THEREFORE, LD. COUNSEL FOR THE ASSESSEE PRAYED FOR DISMISSING THE GROUND RAISED BY THE REVENUE. 6. BEFORE US, NO CONTRARY JUDGMENT WAS CITED BY THE REVENUE. THEREFORE, AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE BINDING JUDGMENT OF HONBLE BOMBAY HIGH COURT, WE ARE OF THE OPINION THAT THE D ECISION GIVEN BY THE CIT(A) IN PARA NO.5 IS FAIR AND REASONABLE AND IT D OES NOT CALL FOR ANY INTERFERENCE. THEREFORE, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 4 AURANGABAD ELECTRICALS LTD., ITA NO.1058/PUN/2016 ( BY ASSESSEE A.Y. 2007-08) : 8. GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE READ AS UNDER : 1. THE LD. AO HAS ERRED IN (AND HON. CIT-A ERRED I N CONFIRMING) ALLOCATING NOTIONALLY THE EXPENDITURE FOR EARNING E XEMPT INCOME AMOUNTING TO RS.4,92,227/- AND CONSEQUENTLY ERRED IN DISALLOWING SUCH EXPENDITURE U/S.14A. 2. THE LD. AO HAS ERRED IN INVOKING (CIT(A) ERRED I N CONFIRMING) PROVISIONS OF SECTION 14A R.W. RULE 8D IN RESPECT I NVESTMENTS MADE FOR HOLDING CONTROLLING STAKE/STRATEGIC INVESTMENT & IN JOINT VENTURE/SUBSIDIARY COMPANIES. 9. BEFORE US, ON THE SAID ISSUE, IT IS THE CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE THAT ASSESSEE HAS EXCESS INTEREST FREE FUNDS WHICH SHOULD BE PRESUMED TO HAVE BEEN INVESTED IN THE EXEMPT INCOME , IN WHICH CASE THERE IS NO NEED FOR DISALLOWANCE OF INTEREST U/S.14A R.W. R ULE 8D. FOR THIS PROPOSITION, HE RELIED ON THE DECISION OF HONBLE J URISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF HDFC BANK REPORTED IN 383 IT R 529. BRINGING OUR ATTENTION TO THE PATTERN OF INVESTMENTS, LD. COUNSE L FOR THE ASSESSEE DEMONSTRATED THAT THE INVESTMENT IS DONE IN THE SIS TER CONCERNS (OMR BAGLA AUTOMOTIVE SYSTEMS INDIA LIMITED) AND THE SAME CONS TITUTES A STRATEGIC INVESTMENT. LD. COUNSEL IS OF THE OPINION THAT SUC H INVESTMENTS IS OUTSIDE THE SCOPE OF SECTION 14A AND NO DISALLOWANCE ON ACCOUNT OF INTEREST PAYMENT ON SUCH INVESTMENT IS UNWARRANTED. HE ALSO SUBMITTED THAT CERTAIN INVESTMENTS NEVER YIELDED EXEMPT INCOME IN THE YEAR UNDER CONSI DERATION AND THEREFORE, SUCH INVESTMENT SHOULD BE EXCLUDED FOR THE CALCULAT IONS OF DISALLOWANCE U/S.14A OF THE ACT. WITHOUT PREJUDICE, HE ALSO SUB MITTED THAT THE DISALLOWANCE IF ANY IN THE SAID SCENARIO, HAS TO BE RESTRICTED TO THE EXTENT OF DIVIDEND RECEIVED DURING THE YEAR BY THE ASSESSEE. FOR THIS PROPOSITION, HE RELIED ON VARIOUS BINDING DECISIONS ON THE SUBJECT. 5 AURANGABAD ELECTRICALS LTD., 10. ON HEARING BOTH THE SIDES ON THIS ISSUE, WE FIN D THE ABOVE REFERRED RATIOS ON VARIOUS DECISIONS/JUDGMENTS ARE LATEST IN TIME, SUBSEQUENT TO THE PASSING OF ORDERS BY THE REVENUE AUTHORITIES. IN O UR CONSIDERED OPINION, IT IS IN THE INTEREST OF JUSTICE FOR BOTH THE PARTIES THA T THE ISSUES RELATING TO DISALLOWANCE OF EXPENDITURE U/S.14A R.W. RULE 8D(2) OF THE I.T. RULES, 1962, SHOULD BE REMANDED TO THE FILE OF THE AO FOR FRESH ADJUDICATION APPLYING THE SAID RATIOS OF THE JUDGMENTS. AO SHALL GRANT REASO NABLE OPPORTUNITY TO THE ASSESSEE AT THE TIME OF RE-ADJUDICATION OF THE ISSU ES. IT IS SETTLED PRINCIPLE OF JUDICIAL DISCIPLINE THAT THE AO SHOULD ABIDE BY THE BINDING JUDGMENTS OF THE HONBLE HIGH COURT AND THE DECISIONS OF THE COORDIN ATE BENCH OF THE TRIBUNAL. ACCORDINGLY, GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.3 (I) AND 3(II) RELATES TO THE DISALL OWANCE OF SHARE ISSUE EXPENSES AMOUNTING TO RS.18,94,491/- U/S.35D OF THE ACT. 12. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S DISALLOWANCE PERTAINS TO THE SHARE ISSUE EXPENDITURE INITIALLY INCURRED I N THE A.Y. 2006-07. ASSESSEE CLAIMED 1/5 TH OF THIS EXPENDITURE IN THIS YEAR AS DONE IN THE P AST. LD. COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THIS ISSUE W AS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE IN A.Y. 2006-07 AND THEREFORE, IN THIS YEAR ALSO, THE ISSUE REQUIRES TO BE DECIDED IN FAVOUR OF THE REVENUE. 13. WE HEARD BOTH THE SIDES ON THIS ISSUE. WE FIND THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY THE TRIBUNAL AGAINST THE ASSESS EE IN THE OWN CASE VIDE ITA NO.1269/PN/2010 FOR A.Y. 2006-07. WHILE DECIDI NG, TRIBUNAL RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BR OOK BOND INDIA LTD. 225 ITR 798. CONSIDERING THE FAIR SUBMISSION OF LD. AU THORISED REPRESENTATIVE FOR THE REVENUE, WE DISMISS THE GROUND RAISED BY THE AS SESSEE. 6 AURANGABAD ELECTRICALS LTD., 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. WE SHALL NOW TAKE UP THE CROSS APPEALS FOR A.Y. 200 8-09. ITA NO.999/PUN/2016 (BY REVENUE A.Y. 2008-09) : 15. THE ONLY GROUND RAISED BY THE REVENUE, RELATING TO THE TAXABILITY OF THE DISCOUNT LINKED TO THE SHORT TERM LOAN, IS IDENTICA L TO THE ONE RAISED BY THE REVENUE IN A.Y. 2007-08. WE HAVE ALREADY DISMISSED THE GROUND RAISED BY THE REVENUE IN THAT APPEAL. FOLLOWING THE SAME PAR ITY OF REASONING, WE PROCEED TO DISMISS THE GROUND RAISED BY THE REVENUE IN A.Y. 2008-09 TOO. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA NO.673/PUN/2016 (BY ASSESSEE A.Y. 2008-09) : 17. THE ONLY ISSUE RAISED VIDE GROUND NOS. 1 AND 3 RAISED BY THE ASSESSEE RELATING TO DISALLOWANCE U/S.14A R.W. RULE 8D(2) IS IDENTICAL TO THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE IN A.Y. 20 07-08. WE HAVE ALREADY ADJUDICATED THE ABOVE ISSUE IN A.Y. 2007-08 AND REM ANDED THE ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF B INDING JUDGMENTS OF HONBLE HIGH COURT AND THE DECISIONS OF THE TRIBUNAL. WE, THEREFORE, REMAND THE ISSUE TO THE FILE OF AO WITH SIMILAR DIRECTIONS AS GIVEN IN THE ORDER RELEVANT TO A.Y. 2007-08. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2009-10. IN THIS A.Y. 2009-10, THERE IS NO APPEAL BY THE REVENUE. 7 AURANGABAD ELECTRICALS LTD., ITA NO.1240/PUN/2014 (BY ASSESSEE A.Y. 2009-10) : 19. THE ISSUE RAISED VIDE GROUND NO. 1 BY THE ASSES SEE IS IDENTICAL TO THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE IN A.Y. 2007-08 AND IT RELATES TO DISALLOWANCE U/S.14A R.W. RULE 8D(2). W E HAVE ALREADY ADJUDICATED THE ABOVE ISSUE IN A.Y. 2007-08 AND REMANDED THE IS SUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF BINDING JUDGMENTS OF HONBLE HIGH COURT AND THE DECISIONS OF THE TRIBUNAL. WE, THEREFORE, REMA ND THE ISSUE TO THE FILE OF AO WITH SIMILAR DIRECTIONS AS GIVEN IN THE ORDER RE LEVANT TO A.Y. 2007-08. 20. GROUND NOS. 2 AND 3 RELATES TO DISALLOWANCE OF INCOME OF RS.79,610 ON ACCOUNT OF DIFFERENCE BETWEEN RECEIPTS AS PER ONLIN E ITS DATA AND RECEIPT AS PER BOOKS. 21. REGARDING THIS ISSUE, IT IS THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT ADDITION ON ACCOUNT OF ITS DATA IS RE QUIRED TO BE REMANDED TO THE FILE OF THE AO AS THE ONUS IN SUCH MATTERS IS H EAVILY ON THE AO TO SPECIFY TO THE ASSESSEE AS TO THE SPECIFIC ITEMS FOR RECONC ILIATION. AO IS REQUIRED TO DISCHARGE THE SAME. FURTHER, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FACT THAT THE AO BASED ON THE DATA AVAILABLE ON FORM 26AS MADE ADDITION TO THE INCOME RETURNED BY THE ASSESSE E. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO OUGHT NOT TO HAVE MADE SUCH ADDITION MERELY BASED ON THE SAID DATA WHEN THE BOO KS OF ACCOUNTS ARE DULY AUDITED. THE DATA AVAILABLE ON FORM 26AS WAS DULY TAKEN INTO ACCOUNT AFTER DUE RECONCILIATION. IT IS ALSO SUBMITTED THAT MAKI NG SUCH ADDITIONS WITHOUT REJECTING THE BOOKS OF ACCOUNTS VIOLATES THE PRINCI PLES OF NATURAL JUSTICE. THEREFORE, IT IS THE PRAYER OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ONUS SHOULD BE DISCHARGED BY THE AO WITH REGARD TO THE I TEM OF INCOMES WHICH ARE NOT RECOGNISED AS INCOME OF THE YEAR UNDER CONSIDER ATION. 8 AURANGABAD ELECTRICALS LTD., 22. ON HEARING BOTH THE SIDES, WE FIND THERE IS MER IT IN THE COUNSELS SUBMISSION THAT THE AO SHOULD EXAMINE EACH AND EVER Y ITEM OF INCOME/RECEIPT WHICH FIGURES IN THE FORM 26AS BUT NOT ACCOUNTED AS INCOME OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. HE SHOULD EXAMINE EACH AND EVERY SUCH ITEM AND PASS A SPEAKING ORDER AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PR INCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THIS PART OF THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 23. GROUND OF APPEAL NOS. 4 AND 5 ARE GENERAL IN NA TURE AND THEREFORE THEY ARE DISMISSED AS GENERAL. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2010-11. IN THIS YEAR ALSO, THERE IS NO APPEAL BY THE REVENUE. ITA NO.369/PUN/2015 (BY ASSESSEE A.Y. 2010-11) : 25. THE ISSUE RAISED VIDE GROUND NO. 1 BY THE ASSES SEE RELATING TO DISALLOWANCE U/S.14A R.W.RULE 8D(2) IS IDENTICAL TO THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE IN A.Y. 2007-08. WE H AVE ALREADY ADJUDICATED THE ISSUE IN A.Y. 2007-08 AND REMANDED THE ISSUE BA CK TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF BINDING JUDGMENTS OF HONBLE HIGH COURT AND THE DECISIONS OF THE TRIBUNAL. WE, THEREFORE, REMAND T HE ISSUE TO THE FILE OF AO WITH SIMILAR DIRECTIONS AS GIVEN IN THE ORDER RELEV ANT TO A.Y. 2007-08. 26. GROUND NO.2 RAISED BY THE ASSESSEE RELATES TO D ISALLOWANCE OF CARBON CREDIT EXPENSES AMOUNTING TO RS.5,00,000/-. 9 AURANGABAD ELECTRICALS LTD., 27. ON THIS ISSUE, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT ASSESSEE SOLD THE WINDMILL FOR A CONSIDERATION. IT IS A PAR T OF THE AGREEMENT THAT CERTAIN EXPENDITURE AMOUNTING TO RS.5 LAKHS WAS REQ UIRED TO BE INCURRED BY THE ASSESSEE THE SELLER AND IT CONSTITUTES A CONT RACTUAL OBLIGATION. THE SAID AMOUNT WAS INCURRED BY THE ASSESSEE AND CLAIMED AS AN ALLOWABLE EXPENDITURE. THEREFORE, THE SAME CONSTITUTES AN AL LOWABLE EXPENDITURE WHILE COMPUTING THE CAPITAL GAINS. HOWEVER, THE SAID CLA IM WAS NOT ALLOWED BY THE REVENUE AUTHORITIES. 28. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE TRIBUNAL MAY CONSIDER REDUCING THE SALE PRICE OF THE WINDMIL L TO THE EXTENT OF SAID RS.5 LAKHS AS THE LIABILITY IS ON THE ASSESSEE TO INCUR THE SAID AMOUNT. 29. IN OUR VIEW, THIS ARGUMENT IS RAISED FOR THE FI RST TIME WITH AN IMPLICATION ON THE W.D.V. OF THE ASSET IN THE HANDS OF THE BUYE R OF THE ASSET. AFTER HEARING BOTH THE SIDES, WE FIND IT RELEVANT TO REMA ND THIS ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION CONSIDERING THE AFORE SAID NEW ARGUMENT RAISED BY THE LD. COUNSEL FOR THE ASSESSEE. AO SHALL GRAN T REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 30. GROUND NOS. 3(A) AND 3(B) BY THE ASSESSEE READS AS UNDER : (A) THE LD. AO ERRED IN (AND CIT(A) ERRED IN CONFI RMING) DISALLOWING THE CLAIM OF DEDUCTION U/S.80IA(4)(IV)(A). THE AMOUNT CLAIMED IS RS.65,67,937/-. (B) THE LD. AO HAS ERRED IN (AND CIT(A) ERRED IN CO NFIRMING) CONSIDERING ALL WINDMILLS TOGETHER AS ONE UNIT ALTHOUGH DIFFERE NT WINDMILLS HAVE BEEN INSTALLED AT DIFFERENT TIMES AND AT DIFFERENT LOCAT ION. 31. THE GROUND RELATES TO CLAIM OF DEDUCTION OF RS. 65,67,937/- U/S.80IA(4) OF THE ACT. IN THIS REGARD, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT ASSESSEE PAID THE TAXES AS PER THE PROVISIONS OF SE CTION 115JB OF THE ACT. HOWEVER, AS PER THE REGULAR ASSESSMENT RECORDS, THE SET OFF OF BROUGHT FORWARD LOSSES ARE NOT AVAILABLE BECAUSE OF THE AD DITIONS MADE BY THE AO IN 10 AURANGABAD ELECTRICALS LTD., THE PREVIOUS ASSESSMENT YEARS. THE ASSESSED INCOME FOR THE YEAR UNDER CONSIDERATION WORKS OUT TO RS.2.79 CRORES (ROUNDED OFF). ON KNOWING THE ABOVE CHANGED POSITION REGARDING THE AVAILABILITY O F THE PROFITS FOR CLAIM OF DEDUCTION U/S.80IA(4) OF THE ACT, ASSESSEE MADE A C LAIM BY FILING A LETTER ASKING FOR THE CLAIM OF DEDUCTION U/S.80IA(4) OF T HE ACT. THE CONTENTS OF PARA 10 OF THE ASSESSMENT ORDER ARE RELEVANT. 32. IN THIS REGARD, BEFORE US, LD. COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE SAID CLAIM OF THE ASSESSEE MAY NOW BECOMES INFRUCTUOUS IN THE LIGHT OF THE LIKELY DELETION OF VARIOUS ADDITIONS, OF COU RSE, IF APPROVED BY THE TRIBUNAL OR IF NO ADDITIONS ARE REPEATED BY THE AO AS A RESULT OF REMAND PROCEEDINGS, IF ANY, AS DIRECTED BY THE TRIBUNAL IN THIS COMPOSITE ORDER. 33. AFTER HEARING BOTH THE SIDES, WE ARE OF THE CON SIDERED OPINION THAT IT IS CERTAIN THAT SOME OF THE ADDITIONS ARE LIKELY TO BE DELETED OR REDUCED IN THE REMAND PROCEEDINGS AS ORDERED ABOVE. THE CITED DEC ISIONS WOULD HELP THE ASSESSEE. FOR EXAMPLE WE HAVE NOW STATISTICALLY ALLOWED THE ISSUE RELATING TO DISALLOWANCE U/S.14A R.W. RULE 8D OF THE I.T. RU LES, 1962. THERE ARE CERTAIN OTHER ADDITIONS WHICH ARE REMANDED FOR FRES H ADJUDICATION BY THE AO. IN A WAY, THIS GROUND BECOMES CONSEQUENTIAL TO THE FINDINGS OF THE AO IN THE REMAND PROCEEDINGS. THEREFORE, WE ARE OF THE OPINI ON THAT, FOR THE TIME BEING, THIS GROUND SHOULD BE DISMISSED AS INFRUCTUO US. HOWEVER, WE DIRECT THE AO TO CONSIDER THE CLAIM OF THE ASSESSEE, IN CA SE OF POSITIVE PROFITS, IF ANY, AT THE END OF THE REMAND PROCEEDINGS. AO SHALL GRA NT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 34. GROUND NO.4 BY THE ASSESSEE BEING GENERAL IN NA TURE IS DISMISSED. 35. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11 AURANGABAD ELECTRICALS LTD., WE SHALL NOW TAKE UP THE CROSS APPEALS FOR A.Y. 201 1-12 ITA NO.479/PUN/2015 (BY REVENUE A.Y. 2011-12) : 36. REVENUE RAISED THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING DISALLOWANCE O F IPO EXPENSES OF RS.37,29,058/ - BY IGNORING THE DECISIONS IN CASE O F MASCON TECHNICAL SERVICES LTD. VS CIT (2013) 358 ITR 545 (MAD), CIT VS KODAK INDIA LTD. 253 ITR 445 AND BROOK BOND INDIA LTD. VS CIT 225 ITR 798 WHERE I N IT IS HELD THAT THE EXPENDITURE TO INCREASE SHARE CAPITAL IRRESPECTIV E OF WHETHER DID SO OR NOT, THE EXPENDITURE SO INCURRED FOR THE PUBLIC ISSUE WOULD REMAIN CAPITAL EXPENDITURE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) WAS JUS T IFIED IN ALLOWING THE ADDITIONAL C L AIM OF EXPENSES OF RS . 18,00,000/ - ALREADY DISALLOWED SUO MOTTO BY THE AS SESSEE IN ITS RETURN OF INCOME AS DISALLOWABLE ON TH E GROUND THAT THIS EXPENSE HAS BEEN INCURRED AS PROFESSIONAL CHARGES FOR THE PURPOSE OF PROPOSED PU BLIC ISSUE, WHICH IS CAPITAL IN NATURE . 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT TO INTERPRETE THE OPERATION OF SECTION 80IA(5) ONLY FROM THE YEAR OF FIRST CLAIM OF DEDUCTION U/S.80IA( 1) EVEN WHEN THE ELIGIBLE BUSINESS HAD COMMENCED IN EARLIER YEARS? 4. WHETHER ON THE FACTS AND CIRCUMS T ANCES OF THE CASE AND IN LAW, THE LD. CIT(A) AND HON'BLE ITAT, PUNE, ON WHICH T HE LD . CIT(A) PLACED RELIANCE WAS CORRECT TO TREAT THE JUDGEMENT OF NON-JURISDIC T IO N AL H I GH COURT AS A BINDING PRECEDENT THAT MUST BE FOLLOWED IN DISREGAR D TO THE PRINCIP L E L AID DOWN ON THIS ISSUE BY THE DIVISION BENCH OF THE BOM BAY HIGH COURT IN THE CASE OF CIT VS. THANE ELECTRICITY SUPPLY LTD. REPOR TED IN 206 ITR 727 ? 5. WHETHER ON THE FACTS AND CIRCUMS T ANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S. 80IA(4) B Y CONSIDERING THE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDU CT ION U/S.80IA(4) OF THE ACT, IS THE FIRST YEAR IN WHICH THE ASSESSEE CL AIMED DEDUCTIO N U/S.80 I A(IV)(4) FOR IGNORING THE OPERATION OF SEC. 80IA(5) OF THE I.T . ACT, 1961? 37. AT THE OUTSET, WITH REGARD TO THE ISSUE RAISED IN GROUND NOS.1 AND 2 (DISALLOWANCE OF IPO EXPENDITURE), LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE DECISION OF JURISDICTIONAL HIGH CO URT OF BOMBAY IN THE CASE OF NIMBUS COMMUNICATION VIDE ITA NO.4244/2010 WHICH IS RELEVANT FOR THE PROPOSITION THAT THE IPO EXPENDITURE INCURRED IN CO NNECTION WITH ISSUE OF SHARE. THE INITIAL PUBLIC OFFER CONSTITUTES AN ALL OWABLE REVENUE EXPENDITURE. CIT(A) GRANTED RELIEF ON THIS ISSUE FOLLOWING THE S AID DECISION. REVENUE IS OF THE OPINION THAT THE SAID EXPENSES INCURRED IN CONN ECTION WITH AN ABORTED IPO 12 AURANGABAD ELECTRICALS LTD., CONSTITUTES CAPITAL IN NATURE. AGGRIEVED WITH THE RELIEF GRANTED BY THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 38. ON HEARING BOTH THE SIDES ON THIS ISSUE, WE ARE OF THE VIEW THAT THE DECISION OF THE CIT(A) SHOULD BE CONFIRMED SINCE TH E CIT(A) HAS FOLLOWED THE DECISION OF JURISDICTIONAL HIGH COURTS JUDGMENT. WE THEREFORE AFFIRM THE ORDER OF CIT(A). ACCORDINGLY, THE GROUND RAISED BY THE R EVENUE ON THIS ISSUE STANDS DISMISSED. 39. WITH REGARD TO GROUND OF APPEAL NOS. 3 TO 5 BY THE REVENUE RELATING TO DISALLOWANCE OF CLAIM U/S.80IA(4) OF THE ACT IT IS THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO HAS NOTIONALLY BROUGHT FORWARD THE LOSSES OF EARLIER YEARS WHICH WAS ALREADY SET OFF A GAINST THE PROFITS OF THE EARLIER YEARS BY INVOKING THE PROVISIONS OF SECTION 80IA(5) OF THE ACT. IN THIS REGARD, LD. COUNSEL FOR THE SUBMITTED THAT SUCH TRE ATMENT IS NOT APPRECIATED BY THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. IN ITA NOS. 290 TO 292/PN/2010 ORDER DATED 28-09-2011. HE ALSO MENTIO NED THAT THE SAID DECISION OF THE TRIBUNAL IS IN TUNE WITH THE SUBSEQ UENT CIRCULAR ISSUED BY THE CBDT VIDE CIRCULAR NO.01/2016 DATED 01-05-2016. CO NSIDERING THE SAME, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE AND THEREFORE THE REVENUE IS IN APPEAL. 40. ON HEARING BOTH THE PARTIES, WE ARE OF THE OPIN ION THAT THE FINDING OF THE CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY T HE REVENUE ARE DISMISSED. 41. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA NO.370/PUN/2015 (BY ASSESSEE A.Y. 2011-12) : 42. THE ISSUE RELATING TO DISALLOWANCE U/S.14A R.W. RULE 8D(2) RAISED VIDE GROUND NO. 1(A) AND (B) BY THE ASSESSEE IS IDENTICA L TO THE GROUNDS OF APPEAL 13 AURANGABAD ELECTRICALS LTD., NO.1 AND 2 RAISED BY THE ASSESSEE IN A.Y. 2007-08. WE HAVE ALREADY ADJUDICATED THE ISSUE IN A.Y. 2007-08 AND REMANDED THE ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN VIEW OF BINDING JUD GMENTS OF HONBLE HIGH COURT AND THE DECISIONS OF THE TRIBUNAL. WE, THERE FORE, REMAND THE ISSUE TO THE FILE OF AO WITH SIMILAR DIRECTIONS AS GIVEN IN THE ORDER RELEVANT TO A.Y. 2007-08. 43. LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED TH E GROUND NOS. 2(A) & (B) CONSIDERING THE SMALLNESS OF AMOUNT INVOLVED. GROUND NO.3 IS GENERAL IN NATURE. THEREFORE, THE ABOVE GROUNDS BY THE ASSESS EE ARE DISMISSED AS SUCH. 44. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 45. TO SUM UP, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 08 TH SEPTEMBER, 2017. COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - 5, 6 AND 9 , PUNE 4. CIT - 5, 6 AND 9 PUNE 5. , , B BENCH PUNE; 6. GUARD FILE.