K.J. Infrastructure Projects India P.Ltd, Pune V. Dy. CIT, Cen Cir.1[2] Pune, Pune

ITA 1553/PUN/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1583 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Assessee Lawyers: C D UPASANI
• Keywords: Depreciation
• Section: 40A(3)

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NOS.1553 AND 1554/PN/2012 % % / ASSESSMENT YEARS : 2009-10 & 2010-11 K.J. INFRASTRUCTURE PROJECTS INDIA PVT. LTD., 408/10, PURANDAR COMPLEX, INDUSTRIAL ESTATE, MUKUNDNAGAR, PUNE 411037 PAN NO.AADCK3385J . / APPELLANT V/S DCIT, CENTRAL CIRCLE-1(2), PUNE . / RESPONDENT / APPELLANT BY : SHRI C.D. UPASANI / RESPONDENT BY : SHRI S.K. RASTOGI, CIT / ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE SEPARATE ORDERS DATED 31-05-2012 OF THE C IT(A) CENTRAL, PUNE RELATING TO THE ASSESSMENT YEARS 2009-10 2010-11 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.1553/PN/2012 (A.Y. 2009-10) : 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. THE LD.CIT(A) ERRED IN UPHOLDING THE STAND TAKEN BY THE LD. AO IN DISALLOWING DEDUCTION CLAIMED U/S.80IA OF RS.43,31, 300/- STATING / DATE OF HEARING :19.05.2016 / DATE OF PRONOUNCEMENT:19.07.2016 2 ITA NOS.1553 & 1554/PN/2012 THAT THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION U/S.80IA IN THE ORIGINAL RETURN AND THAT IT HAS NOT CONSIDERED THE NOTIONAL L OSSES WHILE CLAIMING THE DEDUCTION. THE LD.CIT(A) CENTRAL PUNE UNFORTUN ATELY, WITHOUT STATING HIS OPINION ON OUR SUBMISSION HAS CITED CIT VS. TH ANA ELECTRICITY SUPPLY LTD 206 ITR 727 (BOM) WHICH DEAL S WITH THE JURISDICTIONAL POWERS OF THE HON. SUPREME COURT AND H ON. HIGH COURTS. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. A SEARCH AC TION U/S.132 OF THE I.T. ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE COMPANY ON 23-12-2009. IN RESPONSE TO NOTICE U/S.153A THE ASSESSEE FILED THE RETURN OF INCOME ON 31-01 -2011 DECLARING TOTAL INCOME OF RS.12,67,25,400/-. DEDUCTION U/S.80I A AMOUNTING TO RS.43,41,300/- WAS ALSO CLAIMED IN THE SAID RET URN. IN THE ORIGINAL RETURN FILED ON 31-10-2009 TOTAL INCOME WA S DECLARED AT RS.10,79,14,591/- AND THERE WAS NO CLAIM OF DEDUCTION U/S.80IA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION 80IA AMOUNTING TO RS.43,31,300/- IN RESPECT OF POWER GENERATION FROM WINDM ILLS. TWO WINDMILLS WERE INSTALLED BY SHRI J.J. JADHAV IN A.Y. 2005-06 AND DEPRECIATION WAS CLAIMED ON THE WINDMILLS IN ALL THE YEAR S, I.E. A.YRS. 2006-07 TO 2010-11. DEDUCTION U/S.80IA WAS CLAIME D FOR THE FIRST TIME IN A.Y. 2009-10. THE AO FURTHER NOTED THAT WHILE COMPUTING THE SAID DEDUCTION ASSESSEE HAS NOT CONSIDERE D THE NOTIONAL BROUGHT FORWARD LOSSES ON THE WINDMILLS. HE, THEREFO RE, ISSUED A SHOW CAUSE NOTICE ASKING THE ASSESSEE TO EXPLAIN AS TO WH Y THE DEDUCTION U/S.80IA CLAIMED OF RS.43,31,300/- SHOULD NOT BE DISALLOWED AS PER THE PROVISIONS OF SECTION 80IA(5) OF THE ACT. 4. IT WAS EXPLAINED THAT DURING THE A.YRS. 2009-10 AND 2010-11 IT HAS PREPARED THE FINAL ACCOUNTS OF WINDMILL BUSINESS SEPA RATELY AS PER THE PROVISIONS OF THE ACT. THE FINAL ACCOUNTS HAVE BEEN 3 ITA NOS.1553 & 1554/PN/2012 PREPARED AND PROFITABILITY HAS BEEN ARRIVED SEPARATELY CO NSIDERING THE BASIS THAT WINDMILL IS THE ONLY ELIGIBLE BUSINESS OF THE A SSESSEE. IT WAS SUBMITTED THAT AS PER THE PROVISIONS OF THE I.T. ACT THE ASSESSEE CAN CLAIM THE DEDUCTION FROM THE ONLY ELIGIBLE BUS INESS AND CAN OPT TO CLAIM SUCH DEDUCTION FOR A PERIOD OF 10 ASSESSMENT YEARS WITHIN 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE ASSESSEE COMMENCES GENERATION OF POWER. THE FIRST ASSES SMENT YEAR IN WHICH THE ASSESSEE OPTS TO CLAIM THE DEDUCTION WO ULD BE THE INITIAL ASSESSMENT YEAR FROM WHEN THE ELIGIBLE BUSINESS WOULD BE TREATED AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. IN COMPUTING PROFITS QUALIFYING FOR THE DEDUCTION IN THE INITIAL ASSESSMENT YEARS, THE ASSESSEE IS NOT REQUIRED TO REDUCE THE LOSSES INCUR RED BY IT IN THE ASSESSMENT YEARS PRIOR TO THE INITIAL ASSESSMENT YEA R. IT WAS ACCORDINGLY SUBMITTED THAT THE CLAIM OF DEDUCTION U/S.80IA IS AS PER THE PROVISIONS OF THE I.T. ACT AND IN ACCORDANCE WITH THE INTERPRETATION OF SECTION 80IA(5) OF THE ACT. 5. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, AS PER THE PROVISIONS OF SECTION 80IA(5) OF THE I.T. ACT NOTIONAL CARRY FORWARD OF LOSSES HAS TO BE CONSIDERED WHILE CLAIMING THE SAID DEDUCTION. HE FURTHER NOT ED THAT VARIOUS APPELLATE AUTHORITIES HAVE CONFIRMED THE DISALLO WANCE MADE BY THE AOS IN THIS REGARD HOLDING THAT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 80IA(5) OF THE ACT, THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DE DUCTION U/S.80IA HAS TO BE COMPUTED AFTER DEDUCTION OF THE NOTIO NAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCO ME IN EARLIER YEARS. IN VIEW OF THE ABOVE, THE AO HELD THAT THE PROFIT HAS 4 ITA NOS.1553 & 1554/PN/2012 TO BE COMPUTED AFTER ADJUSTING THE BROUGHT FORWARD LOSS ES. HE NOTED THAT AFTER ADJUSTING THE BROUGHT FORWARD LOSSES, T HE ASSESSEE IS NOT LEFT WITH ANY PROFIT FOR CLAIMING THE DEDUCTION U/S.80IA OF THE ACT. FURTHER, THE ASSESSEE HAS NOT CLAIMED DEDUCTION U /S.80IA IN THE ORIGINAL RETURN. IT IS ONLY AFTER THE SEARCH ACTION U /S.132 AND SUBSEQUENT ISSUE OF NOTICE U/S.153A THAT THE ASSESSEE FIL ED THE RETURN OF INCOME ON 31-01-2011 WHEREIN FRESH CLAIM OF DE DUCTION U/S.80IA WAS MADE. THEREFORE, ON THE AFORESAID GROUND A LSO, THE DEDUCTION CANNOT BE ALLOWED TO THE ASSESSEE. HE ACCORDIN GLY REJECTED THE CLAIM OF DEDUCTION MADE U/S.80IA AMOUNTING T O RS.43,31,300/-. 6. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 3.3. A CAREFUL CONSIDERATION OF THE MATERIAL AVAIL ABLE ON RECORD REVEALS THAT THE AO DISALLOWED THE CLAIM AS THE APPELL ANT DID NOT CONSIDER THE NOTIONAL BROUGHT FORWARD LOSSES WHILE COMP UTING PROFIT AND GAIN OF THE UNDERTAKING AND ALSO, BECAUSE OF THE FACT THAT THE CLAIM WAS NOT MADE IN THE ORIGINAL RETURN. THE APPEL LANT'S STAND IS THAT IT CAN MAKE THIS CLAIM OF DEDUCTION U/S.80IA IN ITS RETURN U/S.153A. THE ISSUE RELATING TO ALLOWANCE OF DEDUCTION U/S.80IA AFTER SETTING OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION OF THE ELIGIBLE BUSINESS, EVEN THOUGH THESE LOSSES ALREADY STOOD SET OFF AGA INST OTHER INCOMES OF THE APPELLANT IN EARLIER YEARS HAS BEEN DEC IDED IN FAVOUR OF THE DEPARTMENT BY SPECIAL BENCH OF ITA T IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (2008) 113 ITD 20 9. APPELLANT'S RELIANCE ON VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS ASST. COMMISSIONER OF INCOME TAX (2012) 340 ITR 477 (MAD) & MOHAN BREWERIES & DISTILLERIES LTD. VS ASST. COMMISSIONER OF INC OME TAX (2008) 114 TTJ (CHENNAI) 532 IS MISPLACED. THE HON'BL E BOMBAY HIGH COURT IN CIT VS. THANA ELECTRICITY SUPPLY LTD . 206 ITR 727 HAS DISCUSSED THE BINDING NATURE OF THE JUDICIAL PRECEDENT S. THE POSITION HAS BEEN SUMMARIZED IN PARA 17 OF THE CASE BY LAYING D OWN THAT THE LAW DECLARED BY THE SUPREME COURT IS BINDING ON ALL THE COURTS IN INDIA. THE DECISION OF THE HIGH COURT IS BINDING ON T HE SUBORDINATE COURTS AND AUTHORITIES OR TRIBUNALS UNDER ITS SUPERINTENDENCE THROUGHOUT THE TERRITORIES IN RELATION TO WHICH I T EXERCISES ITS JURISDICTION . IT HAS FURTHER BEEN HELD THAT THE DECIS I ON OF THE HIGH COURT DOES NOT EXTEND BEYOND ITS TERRITORIAL JURISDICT ION. THE RELEVANT DISCUSSION ON THE BINDING NATURE OR OTHERWISE OF THE JU DGMENT OF NON-JUR I SD I CTIONAL HIGH COURT HAS BEEN MADE IN PARA (D) AS UNDER : 5 ITA NOS.1553 & 1554/PN/2012 '(D) THE DECISION OF ONE HIGH COURT IS NEITHER BINDIN G PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OU TSIDE ITS OWN TERRITORIAL JURISDICTION. IT IS WELL-SETTLED THAT THE DECISION OF A HIGH COURT WILL HAVE THE FORCE OF BINDING PRECEDE NT ONLY IN THE STATE OR TERRITORIES IN WHICH THE COURT HAS JURISDICTI ON. IN OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIGH COURT IT MAY, AT BEST, HAVE ONLY A PERSUASIVE EFFECT. BY NO AMO UNT OF STRETCHING OF THE DOCTRINE OF STARE DECISIS JUDGMENTS OF ONE HIGH COURT CAN BE GIVEN THE STATUS OF A BINDING PRECEDENT SO FAR AS OTHER HIGH COURTS OR COURTS OR TRIBUNALS WITHIN THEIR TERRITORIAL JURISDICTION ARE CONCERNED. ANY SUCH ATTEMPT WILL GO COUNTER TO THE VERY DOCTRINE OF STARE DECISIS AND ALSO THE VARIOUS DECISIONS OF THE SUPREME COURT WHICH HAVE INTERPRETED THE SCOP E AND AMBIT THEREOF. THE FACT THAT THERE IS ONLY ONE DECISI ON OF ANYONE HIGH COURT ON A PARTICULAR POINT OR THAT A NUMBER O F DIFFERENT HIGH COURTS HAVE TAKEN IDENTICAL VIEWS IN THAT REGARD IS NOT AT ALL RELEVANT FOR THAT PURPOSE. WHATEVER MAY BE THE C ONCLUSION, THE DECISIONS CANNOT HAVE THE FORCE OF BINDING PRECED ENT ON OTHER HIGH COURTS OR ON ANY SUBORDINATE COURTS OR TRIB UNALS WITHIN THEIR JURISDICTION. THAT STATUS IS RESERVED ONLY FOR THE DECISIONS OF THE SUPREME COURT WHICH ARE BINDING ON A IL COURTS IN THE COUNTRY BY VIRTUE OF ART. 141 OF THE CONSTITU TION.' UNDER THE CIRCUMSTANCES, THE CASE LAWS RELIED UPON BY T HE APPELLANT DO NOT HELP IT AND THE AO'S ACTION IN RESPECT OF SET OFF OF BROUGHT FORWARD LOSSES FOR WORKING OUT DEDUCTION U/S.80IA IS UPHELD. 3.3.1 IN VIEW OF THE RECENT JUDICIAL PRONOUNCEMENTS, THE AO'S CONTENTION THAT THE APPELLANT CANNOT CLAIM ANY NEW DEDUCTION / ALLOWANCE WHICH HAS NOT BEEN CLAIMED IN THE REGULAR RETURN IS ALSO UPHELD. THIS STAND HAS BEEN UPHELD IN MANY JUDICIAL RU LINGS INCLUDING IN THE RULING GIVEN IN THE CASE OF SUNCITY ALLOYS (P) LTD. VS. ACIT BY ITAT JODHPUR BENCH (2009) 122 TTJ (JD) 674 & 27 DTR 139. IN VIEW OF THE RECENT JUDICIAL PRONOUNCEMENTS I AM INCLINED TO AGREE WITH THE CONTENTION OF THE AO THAT THE CLAIM OF DEDUCTION U/ S.80IA CANNOT BE MADE BY THE APPELLANT IN ITS RETURN U/S.153A OF I.T. ACT AS IT DID NOT MAKE THIS CLAIM IN ITS REGULAR RETURN UTS.139(1) OF I. T. ACT. 3.3.2 THE APPELLANT ALSO CONTENDED THAT THE AO SHOULD HAVE ALLOWED THE MANDATORY RELIEF TO IT ON HIS OWN WITHOUT MAKIN G ANY CLAIM. A CAREFUL CONSIDERATION OF THIS CONTENTION OF THE APPELLANT THAT MANDATO R Y RELIEF AVAI L ABLE TO THE ASSESSEE SHOULD BE GIVEN TO HIM BY THE AO , ON HIS OWN , WITHOUT MAKING ANY CLAIM OF THE SAME , IS QU I TE M I SLEADING. ANY CLAIM OF DEDUCTION I S ALLOWED TO THE ASSESSEE BY THE AO ONLY IF I T I S ALLOWABLE TO HIM IN ACCORDANCE WI TH THE FACTS OF HIS CASE AND IN ACCORDANCE W I TH THE PROVISIONS OF THE I . T . ACT . THEREFORE , ONUS T O PROVE AVAILABILITY OF A PARTICULAR DEDUCTION IS ON THE ASSESSEE . UNLESS THE DEDUCTION I S CLAIMED BY THE ASSESSEE AND I S P R OVED TO BE ALLOWABLE T O H I M IN ACCORDAN C E WITH THE PROV I SIONS OF I . T . ACT , I T CANNOT BE ALLOWED T O H I M . 3 . 4 IN V I EW OF THE DISCUSSIO N I N THE PRECEDING PA R AGRAPHS , GROUND OF APPEAL NO .1 I S DISM I SSED . 6 ITA NOS.1553 & 1554/PN/2012 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS AGAINST THE ORIGINAL RETURN OF RS.10,79,14,591/- THE ASSESSEE FILED T HE RETURN IN RESPONSE TO NOTICE U/S.153A BY DECLARING TOTAL INCOME OF RS.12.67 CRORES AFTER CLAIMING DEDUCTION OF RS.43,31,300/- U/S.80IA. HE SUBMITTED THAT THE COMPANY WAS INCORPORAT ED IN MARCH 2008 AND THE COMPANY HAS TAKEN OVER THE RUNNIN G BUSINESS OF M/S. KALYAN JADHAV, PROPRIETARY CONCERN, ALONG WITH ALL A SSETS AND LIABILITIES FROM 01-04-2008. HE SUBMITTED THAT THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA ON TWO COUNTS NA MELY, (1) NOTIONAL CARRY FORWARD OF LOSSES IN WINDMILLS OF THE EARLIER YEARS WAS NOT CONSIDERED AS PER THE PROVISIONS OF SECTION 80IA (5) OF THE ACT AND (2) THE CLAIM OF DEDUCTION U/S.80IA WAS NOT MADE IN THE ORIGINAL RETURN AND THE SAME WAS CLAIMED FOR THE FIRST TIME IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.153A. 9. SO FAR AS THE ISSUE RELATING TO CLAIM OF DEDUCTION U/S.80 IA(5) FOR THE FIRST TIME IN RESPONSE TO NOTICE U/S.153A IS CONCER NED, HE SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CAS E OF SHETH DEVELOPERS PVT. LTD. FOLLOWING THE DECISION IN THE CASE OF P RITHVI STOCK BROKERS AND SHAREHOLDERS PVT. LTD. REPORTED IN 23 TAXCOMM.23 HAS HELD THAT ASSESSEE CAN MAKE A FRESH CLAIM BEFORE THE APPELLATE AUTHORITIES EVEN IF THE CLAIM WAS NOT MADE IN THE RETURN OF INCOME FILED BEFORE THE AO. HE ALSO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONT INENTAL WAREHOUSING CORPORATION REPORTED IN (2012)23 TAXMANN.COM 103 7 ITA NOS.1553 & 1554/PN/2012 AND SUBMITTED THAT THE ASSESSEE CAN MAKE A FRESH CLAIM IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.153A. 10. SO FAR AS THE OBJECTION OF THE AO THAT NOTIONAL BROU GHT FORWARD LOSSES HAS NOT BEEN CONSIDERED AND IF THE SAME IS CONSIDERED THERE IS NO PROFIT LEFT WITH THE ASSESSEE FOR CLA IM OF DEDUCTION U/S.80IA(5) IS CONCERNED, HE SUBMITTED THAT IT IS THE PREROGATIVE OF THE ASSESSEE TO CHOSE THE INITIAL ASSESSME NT YEAR. REFERRING TO THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VELAYUDHASWAMY SPINNING MILLS VS. ACIT REPO RTED IN 340 ITR 477 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT LOSS IN A YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFITS OF ELIGIBLE BUSINESS. HE SUBMITTED THAT FOLLOWING THE ABOVE DECISION THE PUNE BENC H OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. VS. ACIT R EPORTED IN ITA NOS. 290 TO 292/PN/2010 ORDER DATED 28-09-2011 FOR A.YRS. 2004-05 TO 2006-07 HELD THAT WHEN THE ASSESSEE EXERC ISES THE OPTION ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIA L ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND NOT TH E LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE O THER INCOME OF THE ASSESSEE. IT HAS BEEN HELD THAT THE REVE NUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEAR WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME OF THE ASSESSEE AN D SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. R EFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF CHORDIA FOOD PRODUCTS VS. ACIT VIDE ITA NO.478/PN/2011 ORDER DATED 26-06-2012 FOR A.Y. 2007-08 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT ONLY WHEN THE ASSESSE E EXERCISES 8 ITA NOS.1553 & 1554/PN/2012 THE OPTION LOSSES OF THE YEARS BEGINNING FROM SUCH YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF PRIOR YEARS W HICH HAVE OTHERWISE BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESS EE. HE ACCORDINGLY SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE MADRAS HIGH COURT AS WELL AS THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). REFE RRING TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE C ASE OF MICRO LABS LTD. VS. ACIT REPORTED IN 230 TAXMANN 647 H E SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISIO N HAS HELD THAT WHILE COMPUTING PROFITS FROM ELIGIBLE BUSINESS FOR ALLOWING DEDUCTION U/S.80IB DEDUCTION OF LOSSES SET OFF AGAINST PROFIT S FROM OTHER BUSINESS HAS TO BE TAKEN INTO CONSIDERATION. REFER RING TO THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CAS E OF HYDERABAD CHEMICALS SUPPLIES LTD. VS. ACIT REPORTED IN 13 7 TTJ 732 HE SUBMITTED THAT THE PROFIT FROM ELIGIBLE BUSINESS FOR T HE PURPOSE OF DETERMINATION OF QUANTUM OF DEDUCTION U/S.80IA HAS TO BE COMPUTED AFTER DEDUCTION OF NOTIONAL BROUGHT FORWARD LO SSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEE N ALLOWED TO BE SET OFF AGAINST OTHER INCOME IN EARLIER YEARS. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PIDILITE VS. DCIT REPORTED IN 46 SOT 263 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT PROFITS FROM ELIGIB LE BUSINESS FOR PURPOSE OF DETERMINATION OF QUANTUM OF DEDUC TION U/S.80IA HAVE TO BE COMPUTED AFTER DEDUCTION OF NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THO UGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN EAR LIER YEARS. 9 ITA NOS.1553 & 1554/PN/2012 HE FURTHER SUBMITTED THAT THE ASSESSEE IN ITS ORIGINAL RET URN OF INCOME HAS NOT CLAIMED THE DEDUCTION U/S.80IA. HE ACCOR DINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BEING IN CONSONAN CE WITH LAW SHOULD BE UPHELD AND THE GROUNDS RAISED BY THE ASSE SSEE SHOULD BE DISMISSED. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED T HE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS FILED THE RETURN OF INCOME IN RESPONSE T O NOTICE U/S.153A ON 31-01-2011 DECLARING TOTAL INCOME OF RS.12,67,25,400/- AFTER CLAIMING DEDUCTION OF RS.43,31,300/- U/S.80IA. THERE WAS NO CLAIM OF DEDUCTION U/S.80IA OF THE I.T. ACT IN THE ORIGINAL RETURN OF INCOME FILED ON 31-10-2009 DECLARING TOTAL INCOME AT RS.10,79,14,591/-. THE AO DENIED THE CLAIM OF DEDUCTION U/S.80IA ON THE GROUND THAT AS PER THE PROV ISIONS OF SECTION 80IA(5) PROFIT FROM ELIGIBLE BUSINESS FOR PURPOSE OF DETERMINATION OF QUANTUM OF DEDUCTION HAS TO BE COMPUTED AFTER DEDUCTION OF NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIAT ION OF ELIGIBLE BUSINESS. FURTHER, THE ASSESSEE HAS NOT CLAIMED S UCH DEDUCTION IN THE ORIGINAL RETURN OF INCOME. THE LD.CIT(A) UP HELD THE DISALLOWANCE MADE BY THE AO. IT IS THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT AN ASSESSEE CAN MAKE A FRESH CLAIM OF DEDUCTION IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.1 53A. FURTHER, IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR T HE ASSESSEE THAT IT IS THE PREROGATIVE OF THE ASSESSEE TO CHOSE THE INITIAL ASSESSMENT YEAR WHICH IN THE INSTANT CASE IS A.Y. 200 9-10 AND IN VIEW OF THE DECISION OF THE HONBLE MADRAS HIGH COU RT IN THE 10 ITA NOS.1553 & 1554/PN/2012 CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD. (SUPRA), THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CAS E OF SERUM INTERNATIONAL LTD. (SUPRA) AND CHORDIA FOOD PRODUC TS LTD. (SUPRA) ONLY WHEN THE ASSESSEE EXERCISES THE OPTION, LOSS ES OF THE YEARS BEGINNING FROM SUCH YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE PRIOR YEARS WHICH HAVE OTHER WISE BEEN SET OFF AGAINST OTHER INCOMES OF THE ASSESSEE. 13. WE FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR TH E ASSESSEE. SO FAR AS THE CLAIM OF DEDUCTION U/S.153A FOR TH E FIRST TIME U/S.80IA IS CONCERNED, THE PUNE BENCHES OF THE TRIBU NAL ARE CONSISTENTLY TAKING THE VIEW THAT WHEN AN ASSESSMENT IS PENDING ON THE DATE OF SEARCH, THE ASSESSEE CAN MAKE A NEW C LAIM IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.153A ALTHOUGH THE A SSESSEE HAS NOT MADE SUCH CLAIM IN THE ORIGINAL RETURN OF INCOME. HOWEVER, IT IS NOT CLEAR FROM THE RECORDS AS TO WHETHER THE ORIGINAL ASSESSMENT WAS COMPLETED ON THE DATE OF SEARCH OR NOT . WE THEREFORE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A D IRECTION TO VERIFY THE RECORDS AND IF THE ASSESSMENT WAS PENDING ON THE DATE OF SEARCH, TO ENTERTAIN THE CLAIM OF DEDUCTION U/S.80IA MADE BY THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S.153A. 14. AS REGARDS THE OBJECTION OF THE AO THAT IF THE NOTIO NAL BROUGHT FORWARD LOSSES AND DEPRECIATION IS CONSIDERED, THE ASSESSEE IS NOT LEFT WITH ANY PROFIT AND THEREFORE IS NOT E NTITLED TO DEDUCTION U/S.80IA IN VIEW OF THE SPECIFIC PROVISIONS OF SECTIO N 80IA(5) IS CONCERNED, WE FIND THE COORDINATE BENCHES OF THE TRIBUNAL FOLLOWING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS LTD. (SUPRA) ARE 11 ITA NOS.1553 & 1554/PN/2012 CONSISTENTLY TAKING THE VIEW THAT ONLY WHEN THE ASSESS EE EXERCISES THE OPTION, LOSSES OF THE YEARS BEGINNING FROM SUCH YEAR A LONE ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF PRIOR YEARS WHIC H HAVE OTHERWISE BEEN SET OFF AGAINST OTHER INCOMES OF THE ASSES SEE. IT HAS FURTHER BEEN HELD THAT THE DEPARTMENT CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN S ET OFF AGAINST OTHER INCOMES OF THE ASSESSEE SO AS TO REDUCE IT AGAIN FROM THE CURRENT INCOME OF THE ASSESSEE FROM THE ELIGIBLE BUSINESS. 15. THE DECISIONS OF THE MUMBAI BENCH OF THE TRIBUNAL AND HYDERABAD BENCHES OF THE TRIBUNAL RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE ARE NOT APPLICABLE TO THE FAC TS OF THE PRESENT CASE SINCE THOSE DECISIONS ARE BASED ON THE DE CISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMIN E SHARES AND FINANCE PVT. LTD. REPORTED IN 113 ITD 209. HOWEVER, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF CHORDIA FO OD PRODUCTS LTD. (SUPRA) AFTER CONSIDERING THE ABOVE DECISIONS HAS FOLLOWED THE EARLIER VIEW OF THE TRIBUNAL IN THE CASE OF SERU M INTERNATIONAL LTD. (SUPRA) WHICH IN TURN HAS FOLLOWED THE DEC ISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAM Y SPINNING MILLS LTD. (SUPRA). SO FAR AS THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MICRO LABS (SUPRA) IS CONCERNED, NO DOUBT THE SAID DECISION IS IN FAVOUR OF THE REVENUE. HOWEVER, WHEN TWO DIVERGENT VIEWS OF DIFFERENT HIGH COURTS OTHER THAN THE JURISDICTIONAL HIGH COURT ARE AVAILABLE, THE VIEW WH ICH IS IN FAVOUR OF THE ASSESSEE HAS TO BE FOLLOWED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF VEGETABLE REPORT ED IN 88 ITR 192. 12 ITA NOS.1553 & 1554/PN/2012 16. IN VIEW OF THE ABOVE DISCUSSION, WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE RECORDS AS TO WHETHER THE ASSESSMENT WAS PENDING ON THE DATE OF SEARCH OR NOT AND IN CASE THE SAME IS PENDING THEN ALLOW THE CLAIM OF DEDUCTION U/S.80IA IN THE LIGHT OF THE ABOVE DISCUSSION. GROUND RAISE D BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 17 . GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 2. THE LD.CIT(A) CENTRAL, PUNE HAS UPHELD THE STAND OF THE LEARNED AO REGARDING DISALLOWANCE OF RS.24,91,248/- U/S.40A(3) WITHOUT CONSIDERING OUR CONTENTIONS AND CASE LAWS CITED IN OUR FAVOUR. 18. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS ANALYSED THE SEIZED MATERIALS AND FOUND THAT THE ASSESSEE HAS MADE PAYMENTS IN CASH EXCEEDING RS.20,000/- IN CERTAIN CASES WHICH IS IN CONTRAVENTION OF T HE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT. SUCH PAYMENTS FOR THE IMPUGNED ASSESSMENT YEAR CAME TO RS.24,91,248/-. HE, THE REFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOU LD NOT BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 40A(3) OF THE I. T. ACT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE AO MADE DISALLOWANCE OF RS.24,91,248/- TO THE TOTAL INCOME OF TH E ASSESSEE U/S.40A(3). 19. BEFORE CIT(A) IT WAS SUBMITTED THAT THE AO SHOULD NOT HAVE MADE THIS ADDITION IN VIEW OF THE AMOUNT OF RS.79,50,000/- SURRENDERED BY IT IN THE RETURN FOR A.Y. 2010-11 WHICH WILL TAKE CARE OF ANY OMISSION AND COMMISSION DURING THE PERIOD UNDE R CONSIDERATION. THIS DISCLOSURE HAS BEEN CONSIDERED IN THE A.Y. 2010-11 WHICH IS THE LAST ASSESSMENT YEAR IN THE BLOCK P ERIOD. IT 13 ITA NOS.1553 & 1554/PN/2012 WAS ARGUED THAT THE SURRENDER OF AMOUNT OF RS.79,50,000/ - WAS FOR THE ENTIRE BLOCK PERIOD AND THEREFORE MERELY BECAUSE TH E ASSESSEE INCLUDED THE INCOME WRONGLY IN THE RETURN OF INCOME IN A P ARTICULAR YEAR IT DOES NOT VEST ANY JURISDICTION ON THE AO TO TAX IT IN THAT YEAR EVEN THOUGH IT DID NOT PERTAIN TO THAT YEAR. VARIOUS DE CISIONS WERE ALSO BROUGHT TO THE NOTICE OF THE CIT(A). HOWEVER, THE CI T(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESS EE AND SUSTAINED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : 4.3 A CAREFUL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD REVEALS THAT THE ONLY OBJECTION THE APPELLANT HAS RAISED AGAINST T HIS ADDITION IS THAT IT HAS SURRENDERED RS.79,50,000/- IN A.Y. 2010-11 TO T AKE CARE OF ANY OMISSIONS AND COMMISSIONS DURING THE PERIOD UNDER SURVEY F OR THE ENTIRE BLOCK. THE APPELLANT HAS NOT DISPUTED THE A DDITION ON MERIT. UNDER THE CIRCUMSTANCES, THE FACT REMAINS THAT RS.24,91 ,248/- REPRESENTS THE AMOUNT PAID BY THE APPELLANT IN THE PE RIOD RELEVANT FOR A.Y. 2009-10 IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3). THEREFORE, AO WAS JUSTIFIED IN MAKING THIS ADDITION. T HE APPELLANTS CONTENTION CANNOT BE ACCEPTED AS IT HAS OFFERED RS.79, 50,000/- IN A.Y. 2010-11 FOR OMISSIONS AND COMMISSIONS OF THAT ASSESSMENT YEAR . 4.4 IN VIEW OF THE DISCUSSIONS IN THE PRECEEDING PARAGR APHS, GROUND OF APPEAL NO.2 IS DISMISSED. 20. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 21. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE ORDER FOR A.Y. 2010-11 AND SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE AO DID NOT MAKE AN Y ADDITION U/S.40A(3) ON THE GROUND THAT THE CASH PAYMENT IN CONT RAVENTION OF SECTION 40A(3) AMOUNTING TO RS.13,06,000/- IS NOT TO BE ADDED IN VIEW OF DISCLOSURE OF RS.66,05,763/- FOR ANY OMISSION AND COMMISSION FOR THE YEAR UNDER CONSIDERATION. SINCE THE AS SESSEE HAS SURRENDERED AN AMOUNT OF RS.79,50,000/- FOR THE BLOCK PERIOD 14 ITA NOS.1553 & 1554/PN/2012 TO TAKE CARE OF ANY OMISSION OR COMMISSION, THEREFORE, ADDIT ION U/S.40A(3) SHOULD NOT HAVE BEEN MADE. 22. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 23. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO TH E FACT THAT THE ASSESSEE HAS MADE PAYMENTS IN CONTRAVENTION OF SEC TION 40A(3) TO DIFFERENT PERSONS THE TOTAL OF WHICH COMES TO RS.24,91,94 8/-. WE FIND THE AO MADE ADDITION U/S.40A(3) WHICH HAS BEEN UPHELD B Y THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE ADDITIONAL INCOME WAS DECLARED IN A.Y. 2010-11 TH E AO DID NOT MAKE ANY ADDITION U/S.40A(3) ALTHOUGH THE ASSESSEE HAS MADE CERTAIN CASH PAYMENTS IN A.Y.2010-11. HE HAS CONSC IOUSLY NOT MADE ANY ADDITION ON THE GROUND THAT ASSESSEE HAS MADE DISCLOSURE OF RS.66,05,763/- FOR OMISSION AND COMMISSION. S INCE IN THE INSTANT CASE THE ASSESSEE HAS DECLARED AN AMOUN T OF RS.79,50,000/- IN THE RETURN OF INCOME FOR THE A.Y.2010-11 T O TAKE CARE OF ANY OMISSION AND COMMISSION FOR THE ENTIRE BLOCK P ERIOD, THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS WILL TAKE CARE OF THE CONTRAVENTION OF SECTION 40A(3) TO THE EXTENT OF RS.24,91,248/-. WE, THEREFORE, SET A SIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIO N. GROUND OF APPEAL NO.2 IS ACCORDINGLY ALLOWED. 15 ITA NOS.1553 & 1554/PN/2012 ITA NO.1554/PN/2012 (A.Y. 2010-11) : 24. THE ONLY GROUND RAISED BY THE ASSESSEE READS AS UNDER : 1. THE LD.CIT(A) CENTRAL ERRED IN UPHOLDING THE STA ND TAKEN BY THE LD. AO IN DISALLOWING DEDUCTION CLAIMED U/S.80IA OF R S.43,31,300/- STATING THAT THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION U/S.80IA IN THE ORIGINAL RETURN AND THAT IT HAS NOT CONSIDERED THE NO TIONAL LOSSES WHILE CLAIMING THE DEDUCTION. THE LD.CIT(A) CENTRAL PUNE , UNFORTUNATELY, WITHOUT STATING HIS OPINION ON OUR SUBMISSION HAS CITED C IT VS. THANA ELECTRICITY SUPPLY LTD. 206 ITR 727 (BOM) WHICH DE ALS WITH THE JURISDICTIONAL POWERS OF THE HONBLE SUPREME COURT AN D HONBLE HIGH COURTS. 25. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DISALLOWED T HE CLAIM OF DEDUCTION U/S.80IA ON THE GROUND THAT WHILE COMP UTING THE SAID DEDUCTION THE ASSESSEE HAS NOT CONSIDERED THE NOTIONAL BROUGHT FORWARD LOSSES ON THE WINDMILLS. HOWEVER, IT IS A FA CT THAT THE ASSESSEE IN THE RETURN FILED ON 31-01-2011 HAD CLAIME D DEDUCTION OF RS.1,36,75,938/- U/S.80IA AND AFTER SUCH CLAIM HAD DECLARED TOTAL INCOME OF RS.12,60,26,670/-. WE FIND THE LD.CIT (A) FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE PVT. LTD. RE PORTED IN 113 ITD 209 AND VARIOUS OTHER DECISIONS REJECTED THE C LAIM OF THE ASSESSEE. WE FIND THE ISSUE REGARDING CLAIM OF DEDUCTION U/ S.80IA BEFORE ADJUSTING BROUGHT FORWARD NOTIONAL LOSS AND DEPREC IATION HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE PRECEDING PARAGRAPHS WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR A.Y. 2009-10. IT HAS BEEN HELD IN THE SAID DECISION THAT WHEN THE ASSESSEE EX ERCISES ITS OPTION, THE LOSSES OF THE YEARS BEGINNING FROM SUCH YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF PRIOR YEARS WHICH HAVE OTHERWISE BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESS EE. SINCE THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSES SEE IN THE PRECEDING PARAGRAPHS, THEREFORE, FOLLOWING THE SAME REASONIN GS WE 16 ITA NOS.1553 & 1554/PN/2012 SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF DEDUCTION U/S.80IA. GROUND OF APPEAL RAISED BY THE AS SESSEE IS ACCORDINGLY ALLOWED. 26. IN THE RESULT, ITA NO.1553/PN/2012 FILED BY THE ASSESS EE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NO.1554/PN /2012 FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19-07-2016. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 19 TH JULY , 2016. LRH'K ' (*+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) - THE CIT(A) CENTRAL, PUNE 4. % S / THE CIT CENTRAL, PUNE 5. ( ++, , , , IQ.KS / DR, ITAT, A PUNE; 6. 0 / GUARD FILE. / BY ORDER , ( + //TRUE COPY// 23 + , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE