Lap Finance & Consultancy Pvt Ltd., Pune V. DCIT,

ITA 1718/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72543 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS.1716 TO 1718/PN/2012 (A. YS. : 2004-05, 2005-06 & 2008-09) LAP FINANCE & CONSULTANCY PVT. LTD., OFFICE NO. 9 & 10, 5 TH FLOOR, AKSHAY COMPLEX, I.T.I. ROAD, AUNDH, PUNE 411 007. PAN : AAACL3209M . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE- 11 (2), PUNE. . RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI P. L. PATHADE DATE OF HEARING : 31-10-2013 DATE OF PRONOUNCEMENT : 30-12-2013 ORDER PER G. S. PANNU, AM THE CAPTIONED THREE APPEALS FOR ASSESSMENT YEARS 20 04-05, 2005-06 AND 2008-09 HAVE BEEN PREFERRED BY THE ASSESSEE INV OLVING CERTAIN COMMON ISSUES AND THEREFORE THEY HAVE CLUBBED AND HEARD TO GETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. ALL THE APPEALS ARISE FROM A CONSOLIDATED ORDER PAS SED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 25.01.2012 WH ICH, IN TURN, HAS ARISEN FROM SEPARATE ASSESSMENT ORDERS PASSED BY THE ASSES SING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FO R ASSESSMENT YEAR 2008-09 DATED 30.12.2010 AND U/S 143(3) R.W.S. 147 OF THE A CT DATED 01.12.2010 FOR THE OTHER TWO ASSESSMENT YEARS OF 2004-05 AND 2005- 06 RESPECTIVELY. 2. AS THE CIT(A) HAS TAKEN-UP THE APPEAL FOR ASSESS MENT YEAR 2008-09 AS THE LEAD YEAR FOR THE PURPOSE OF DISCUSSION AND ADJ UDICATION, WE ALSO PROCEED ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 TO ADJUDICATE THE CONTROVERSY CONSIDERING THE APPEA L FOR ASSESSMENT YEAR 2008-09 AS THE LEAD CASE. 3. THE APPELLANT IS A COMPANY INCORPORATED UNDER TH E PROVISIONS OF THE COMPANIES ACT, 1956 AND IS INTER-ALIA ENGAGED IN THE BUSINESS OF FINANCE, INCOME FROM HOUSE PROPERTY AND WINDMILL BUSINESS, E TC. . FOR THE ASSESSMENT YEAR 2008-09, ASSESSEE FILED A RETURN OF INCOME DEC LARING TOTAL INCOME OF RS.7,82,14,997/- WHICH WAS SUBJECTED TO SCRUTINY AS SESSMENT U/S 143(3) OF THE ACT DATED 30.12.2010 WHEREBY THE TOTAL INCOME W AS DETERMINED AT RS.2,26,11,168/-. THE PRESENT APPEAL HAS ARISEN FR OM THE SAID ASSESSMENT, WHICH HAS SINCE BEEN AFFIRMED BY THE CIT(A) ALSO. IN THIS CONTEXT, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DEDUCTION OF RS.77,34,533.00 AS CLAIMED BY THE APPE LLANT U/S 80IA OF THE INCOME TAX ACT MAY PLEASE BE ALLOWED AND THE ORDER OF THE LEARNED C.I.T. (A) DENYING THE SAID EXEMPTION BE VACATED. 2. THE CONCLUSION DRAWN BY THE LEARNED ASSESSING OF FICER AND AS CONFIRMED BY THE LEARNED C.I.T. (A) THAT TILL A.Y. 2008-09, THE APPELLANT ASSESSEE DID NOT ACTUALLY EARN ANY POSITIVE INCOME FROM THE BUSINESS OF WIND MILL GENERATION ELIGIBLE FOR DEDUCTION U/S 80 IA (4 ) OF THE INCOME TAX ACT, 1961 BEING PATENTLY ILLEGAL, ARBITRARY, UNSUSTAINABLE AN D DEVOID OF MERITS THE SAME MAY PLEASE BE VACATED AND THE DEDUCTION U/S 80IA AS CLAIMED BY THE APPELLANT ASSESSEE MAY PLEASE BE GRANTED. 3. THE INTERPRETATION OF PROVISIONS OF SECTION 80IA (5) OF THE INCOME TAX ACT, 1961 AS MADE BY THE LEARNED C.I.T.(A) BEING LE GALLY UNSUSTAINABLE, ARBITRARY AND DEVOID OF MERITS, THE SAME MAY PLEASE BE VACATED AND THE DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961 AS C LAIMED BY THE APPELLANT MAY PLEASE BE ALLOWED. 4. THE LEARNED ASSESSING OFFICER HAVING HELD THAT T HE SALES TAX INCENTIVE RECEIVED BY THE APPELLANT BEING A TRADING RECEIPT, THE LEARNED C.I.T.(A) OUGHT TO HAVE HELD THAT AN AMOUNT OF RS.5 4,42,500.00 RECEIVED BY THE APPELLANT ON TRANSFER OF SALES TAX INCENTIVES Q UALIFIES FOR DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961. THE SAID DEDUCTIO N MAY PLEASE BE ALLOWED TO THE APPELLANT AS CLAIMED IN THE RETURN OF INCOME . 5. THE CONCLUSION DRAWN BY THE LEARNED C.I.T.(A) RE GARDING THE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF SECTION 80 IA (4 )(IV) OF THE I.T. ACT, 1961 MEANS THE YEAR IN WHICH THE WIND MILL IS SET UP, IS BEING PATENTLY ILLEGAL, ARBITRARY, UNSUSTAINABLE AND DEVOID OF MERITS THE S AME MAY PLEASE BE VACATED. 6. WITHOUT PREJUDICE TO GROUNDS OF APPEAL NOS 1 TO 5 ABOVE AND BY WAY OF AN ALTERNATE SUBMISSION, IT IS SUBMITTED THAT IT MAY PLEASE BE HELD THAT THE SALES TAX INCENTIVE RECEIVED BY THE APPELLANT UNDER THE POLICY ON WIND MILL GENERATION ISSUED BY GOVERNMENT OF MAHARASHRA ON 12 /03/1998 IS CAPITAL ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 SUBSIDY GRANTED BY GOVERNMENT OF MAHARASHTRA AS AN INCENTIVE FOR INSTALLATION AND OPERATION OF WIND MILLS FOR POWER AND THEREFORE THE SAME IS EXEMPT FROM INCOME TAX. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED C.I.T.(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF CERTAIN INDIRECT EX PENDITURE AMOUNTING TO RS.6,98,886.00 FROM THE PROFITS OF WIND MILL BUSINE SS. THE SAID FINDING BEING ARBITRARY, PERVERSE AND DEVOID OF MERITS THE SAME M AY PLEASE BE VACATED. 8 . THE DISALLOWANCE OF RS.9,91,140.00 AS MADE BY THE L EARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED C IT(A) U/S 14A OF THE INCOME TAX ACT, 1961 IS PATENTLY ILLEGAL, BAD IN LA W, ARBITRARY, PERVERSE AND DEVOID OF MERITS THE SAME MAY PLEASE BE DELETED. 9. THE DISALLOWANCE OF RS.7,20,650.00 AS CONFIRMED BY THE LEARNED C.I.T.(A) OUT OF FOREIGN TRAVEL EXPENDITURE BEING A RBITRARY, UNREASONABLE, UNJUSTIFIED AND DEVOID OF MERITS THE SAME MAY PLEAS E BE DELETED. 4. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFIC ER DISALLOWED THE DEDUCTION OF RS.77,34,533/- CLAIMED BY THE ASSESSEE U/S 80IA(4) OF THE ACT WITH RESPECT TO THE PROFITS FROM THE BUSINESS OF WI NDMILL POWER GENERATION. THE GROUNDS OF APPEAL NOS. 1 TO 3 AND 5 RELATE TO T HE MANNER OF COMPUTING DEDUCTION U/S 80IA(4) OF THE ACT WITH RESPECT TO TH E PROFITS FROM THE WINDMILL POWER GENERATION BUSINESS. THE PRIMARY DISPUTE ON THIS ASPECT BETWEEN THE REVENUE AND THE ASSESSEE IS ON ACCOUNT OF INTERPRET ATION AND APPLICATION OF SECTION 80IA(5) OF THE ACT WHICH PROVIDES THAT FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION U/S 80IA OF THE ACT, THE P ROFIT OF THE ELIGIBLE BUSINESS IS TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT T O THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO A ND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE. NOTABLY, THE PROVISIONS OF SECTION 80IA(1) OF THE ACT PROVIDES D EDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED FROM THE E LIGIBLE BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS TO AN UNDERTAKING OUT OF A PERIOD OF 15 YEARS STARTING FROM THE ASSESSMENT YEAR IN WHICH THE UNIT IS SET-UP. ACCORDING TO THE INTERPRETATION OF SECTION 80IA(5) OF THE ACT PLACED BY THE ASSESSING OFFICER, IT MEANS THAT LOSSES AND DEPRECIATION OF THE ELIGIBLE UNIT ARE TO BE KEPT SEPARATELY FROM THE YEAR OF ITS SETTING-UP EVEN IF THE SAME ARE SET-OFF AGAINST THE PROFITS DERIVED FROM THE OTHER BUSINESS OF THE ASSESSEE, IF ANY. ON THE ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 OTHER HAND, THE STAND OF THE ASSESSEE HAS BEEN THAT THE PROVISIONS OF SECTION 80IA(5) OF THE ACT ARE TO BE APPLIED FROM THE INITI AL ASSESSMENT YEAR I.E. THE YEAR IN WHICH ASSESSEE FIRST EXERCISES HIS OPTION T O CLAIM DEDUCTION U/S 80IA OF THE ACT AND THEREFORE IT IS ONLY THE LOSSES AND DEP RECIATION FROM SUCH INITIAL YEAR WHICH ARE TO BE KEPT SEPARATELY AND ARE LIABLE TO BE CONSIDERED FOR WORKING OUT THE DEDUCTION IN THE SUBSEQUENT YEARS. THE ASSESSING OFFICER, AND THEREAFTER THE CIT(A) HAS NOT ACCEPTED THE STAN D OF THE ASSESSEE. IN PARA 3.3 OF THE ORDER OF THE CIT(A), A TABULATION OF PRO FITS/LOSSES/DEPRECIATION FOR VARIOUS ASSESSMENT YEARS STARTING FROM THE ASSESSME NT YEAR 2002-03, WHICH IS THE YEAR SET-UP OF WINDMILL, HAS BEEN ENUMERATED ACCORDING TO WHICH EVEN AS ON 31.03.2008 I.E. AT THE END OF THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR 2008-09 THE WINDMILL POWER GENERATI ON UNIT OF THE ASSESSEE HAS A NET LOSS. THUS, IN THE OPINION OF THE ASSESS ING OFFICER AS WELL AS THE CIT(A) THERE IS NO PROFIT AVAILABLE IN THE WINDMILL BUSINESS FOR ASSESSMENT YEAR 2008-09 ON AN APPLICATION OF SECTION 80IA(5) O F THE ACT AND THUS NO DEDUCTION U/S 80IA WAS ALLOWABLE TO THE ASSESSEE. 5. AT THE TIME OF HEARING BEFORE US, IT WAS A COMMO N POINT BETWEEN THE PARTIES THAT IDENTICAL CONTROVERSY HAS BEEN CONSIDE RED BY THE PUNE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2006-07 VIDE ORDER IN ITA NO. 1292/PN/2010 DATED 28.02.2012 IN F AVOUR OF THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE SAID DECISION OF TH E TRIBUNAL CONTINUES TO HOLD THE FIELD AS IT HAS NOT BEEN ALTERED BY ANY HIGHER AUTHORITY. THE TRIBUNAL UPHELD THE STAND OF THE ASSESSEE BY FOLLOWING AN EA RLIER DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNAT IONAL LTD., PUNE VS. ADDL.CIT IN ITA NOS. 290 TO 292/PN/2010 DATED 28.09 .2011 WHEREIN THE ISSUE HAS BEEN DECIDED FOLLOWING THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT, (2010) 38 DTR 57 (MAD). AT THE TIME OF HEARING, NO OTHER DECISIO N OF ANY HIGH COURT CONTRARY TO THAT OF THE HONBLE MADRAS HIGH COURT IN THE CAS E OF VELAYUDHASWAMY ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 SPINNING MILLS (P) LTD. (SUPRA) HAS BEEN BROUGHT OU T BY THE REVENUE. THEREFORE, IN THE AFORESAID BACKGROUND, CONSIDERING THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2006-07 (SUPRA), THE PLEA OF THE ASSESSEE IS LIABLE TO BE U PHELD AND THE REVENUE HAS TO FAIL. 6. SO, HOWEVER, BEFORE PARTING, WE MAY DEAL WITH SO ME OF THE POINTS WHICH HAVE PREVAILED WITH THE CIT(A) TO ADJUDICATE THE IS SUE AGAINST THE ASSESSEE. OSTENSIBLY, THE ORDER OF THE TRIBUNAL DATED 28.02. 2012 (SUPRA) IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 WAS NOT BEFORE THE CIT(A) AS HE HAS PASSED THE IMPUGNED ORDER ON AN EARLIER D ATED OF 25.01.2012. HOWEVER, THE ASSESSEE HAD PLACED RELIANCE THE ORDER OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD . (SUPRA) WHEREIN SIMILAR ISSUE WAS DECIDED FOLLOWING THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE. THE CIT(A) HAS NEITHER FOLLOWED THE DECI SION OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) AND NOR TH E JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPI NNING MILLS (P) LTD. (SUPRA) AND INSTEAD HAS CHOSEN TO ADJUDICATE THE C ONTROVERSY FOLLOWING A CONTRARY VIEW EXPRESSED IN THE DECISION OF THE SPEC IAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE PVT. LTD., 113 ITD 209 (SB) (AHD.) AND KHINVSARA INVESTMENT PVT. LTD., 110 ITR 198 (PU NE). IN OUR CONSIDERED OPINION, THE AFORESAID APPROACH OF THE CIT(A) IS IN CORRECT ON THE TOUCHSTONES OF JUDICIAL DISCIPLINE. FIRSTLY, IT MAY BE POINTED OUT THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. (S UPRA) WAS SEIZED OF THE CONTRARY VIEWS ON THE SUBJECT, NAMELY, THE VIEW TAK EN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FIN ANCE PVT. LTD. (SUPRA) AND OTHER DECISIONS OF THE DIVISION BENCH OF THE TRIBUN AL ON ONE HAND, AND THE CONTRARY VIEW OF THE HONBLE MADRAS HIGH COURT IN T HE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA), WH ICH WAS IN FAVOUR OF THE ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 ASSESSEE. FOR THE REASONS DETAILED IN ITS ORDER, T HE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) DECIDED THE ISSUE FOLLOWING THE VIEW EXPRESSED BY THE HONBLE MADRAS HIGH COURT PRIMARIL Y FOR THE REASON THAT THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT WAS BINDI NG ON THE TRIBUNAL AS IT WAS A SOLITARY JUDGMENT OF A HIGH COURT AND THERE W AS NO CONTRARY DECISION OF ANY OTHER HIGH COURT. IN COMING TO SUCH CONCLUSION , THE TRIBUNAL RELIED UPON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. VALSON DYEI NG, BLEACHING AND PRINTING WORKS, 2010 TIOL 710 HC MUM CX WHEREIN IT HAS BEEN HELD THAT THE TRIBUNAL IS BOUND BY THE DECISION OF A HIGH COU RT, EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANOTHER HIGH COURT. THE HONBLE BOMBAY HIGH COURT HAS EXPRESSED THE AFORESAID VIEW BY REFERRING TO ITS EARLIER DECISION IN THE CASE OF CIT VS. SMT. GODAVARIDEVI S ARAF, (1978) 113 ITR 589 (BOM). THUS, IN THE CASE OF SERUM INTERNATIONAL LT D. (SUPRA) THE TRIBUNAL, FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT, APPLIED THE LAW AS UNDERSTOOD BY THE HONBLE MADRAS HIGH COURT IN PREF ERENCE TO WHAT WAS DECIDED BY A SPECIAL BENCH AND/OR A DIVISION BENCH OF THE TRIBUNAL. THEREFORE, IT WAS INCORRECT ON THE PART OF THE CIT( A) TO SAY THAT THE MATTER WAS TO BE ADJUDICATED ON THE BASIS OF THE DECISION OF T HE SPECIAL BENCH OF THE TRIBUNAL AND NOT ON THE BASIS OF THE JUDGMENT OF TH E HONBLE MADRAS HIGH COURT. FIRSTLY, IN OUR VIEW, THE EXERCISE OF CHOOS ING BETWEEN THE TWO CONTRARY INTERPRETATIONS WAS NOT AVAILABLE WITH THE CIT(A) S INCE THE SAME WAS ADDRESSED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA), WHICH WAS BROUGHT HIS N OTICE, AND THE SAME WAS BINDING ON HIM. SECONDLY, EVEN OTHERWISE WE FIND THAT THE CIT(A) HA S NOT CORRECTLY APPRECIATED THE LEGAL POSITION IN COMING TO CONCLUD E THAT THE VIEW EXPRESSED BY THE SPECIAL BENCH OF THE TRIBUNAL IS TO BE PREFE RRED THAN THAT EXPRESSED BY THE HONBLE MADRAS HIGH COURT. ACCORDING TO THE CI T(A), THE DECISION OF THE ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 MADRAS HIGH COURT IS OF A NON-JURISDICTIONAL HIGH C OURT AND ON THE BASIS OF THE PRINCIPLE OF STARE-DECISIS EXPLAINED IN THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. THANA ELECTRICITY SUPPLY LTD., (1994) 206 ITR 727 (BOM), THE DECISION OF THE HONBLE MADRAS HIGH COURT IS NOT A BINDING PRECEDENT ON THE PUNE BENCH OF THE TRIBUNAL. HOWEV ER, IT CANNOT BE LOST SIGHT, THAT IN THE SAME JUDGMENT HONBLE BOMBAY HIG H COURT HAS OBSERVED THAT THE JUDGMENT OF A HIGH COURT OUTSIDE ITS TERRI TORIAL JURISDICTION WOULD HAVE A PERSUASIVE EFFECT. NOW, FOR THE SAKE OF ARGUMENT EVEN IF WE SAIL ALONG WITH THE STAND OF THE CIT(A) TO THE EFFECT THAT THE JUDG MENT OF THE HONBLE MADRAS HIGH COURT IS NOT A BINDING PRECEDENT ON THE PUNE B ENCH OF THE TRIBUNAL, THE MOOT QUESTION THAT ARISES IS WHETHER THE PUNE BENCH OF THE TRIBUNAL IN SERUMS CASE (SUPRA) ERRED IN APPLYING THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. (SUPRA) IN PREFERENCE TO THE CONTRARY DECISIONS OF THE TRIBUNA L? IN OUR CONSIDERED OPINION, THE ANSWER IS AN EMPHATIC NO, BECAUSE FO R A TRIBUNAL THE DECISION OF A HIGH COURT THOUGH OF A NON-JURISDICTIONAL HIGH CO URT, HAS A HIGHER PERSUASIVE EFFECT THAN THE DECISIONS OF OTHER TRIBU NALS, AS A TRIBUNAL STANDS ON A LOWER PEDESTAL THAN A HIGH COURT. IN ANY CASE , IN THE PRESENT CASE, UNDISPUTEDLY, THE JUDGMENT OF THE HONBLE MADRAS HI GH COURT IS THE SOLITARY JUDGMENT OF A HIGH COURT AND THEREFORE, FOLLOWING T HE RATIO LAID DOWN IN THE CASE OF GODAVARIDEVI SARAF (SUPRA), THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) MADE NO MISTAKE IN DECID ING THE ISSUE IN ACCORDANCE WITH THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT. THEREFORE, IN OUR VIEW, THERE IS NO JUSTIFICATION ON THE PART OF THE CIT(A) FOR NOT FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA). 7. THEREFORE, IN SO FAR AS THE GROUNDS OF APPEAL NO S. 1 TO 3 AND 5 ARE CONCERNED THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DEDUCTION ALLOWABLE FOLL OWING THE DECISION OF THE ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 DATED 28.02.2012 (SUPRA). 8. THE ISSUE IN GROUND OF APPEAL NO. 4 RELATES TO A CTION OF THE ASSESSING OFFICER IN HOLDING THAT THE RECEIPTS OF SALES-TAX B ENEFIT CANNOT BE CONSIDERED AS A PROFIT DERIVED BY THE ASSESSEE FROM THE ELIGIBLE BUSINESS OF WINDMILL POWER GENERATION AND THEREFORE, THE AMOUNT OF RS.54,42,50 0/- INCLUDED IN THE ELIGIBLE RECEIPTS WAS NOT CONSIDERED FOR COMPUTING THE DEDUC TION OF RS.77,34,533/- U/S 80IA(4) OF THE ACT. THE ASSESSING OFFICER HAS DISC USSED THE ISSUE IN PARA 3.3.9 AND 3.4 OF THE ASSESSMENT ORDER WITHOUT PREJU DICE TO HIS CONCLUSION THAT THERE ARE NO PROFITS ELIGIBLE FOR THE CLAIM OF DEDU CTION U/S 80IA(4) OF THE ACT ON ACCOUNT OF APPLICATION OF SECTION 80IA(5) OF THE AC T. THE CIT(A) HAS ALSO UPHELD THE ACTION OF THE ASSESSING OFFICER AND DISM ISSED THE GROUND RAISED BY THE ASSESSEE BEFORE HIM. THE RELEVANT DISCUSSION I S CONTAINED IN PARAS 4.2 TO 4.3 OF THE ORDER OF THE CIT(A), WHICH READS AS UNDE R :- 4.2. THE APPELLANT IN THEIR SUBMISSION DATED 19.01 .2012 HAS STATED REGARDING THE ABOVE REFERRED GROUND THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT GIVEN IN THE CASE OF LIBERTY INDIA VS . CIT REPORTED IN 317 ITR 218, THIS GROUND CAN BE TREATED AS FAILED. 4.3. AS THE APPELLANT HAS ACCEPTED THE FINDING OF T HE ASSESSING OFFICER IN RESPECT OF THE ABOVE GROUND, THERE IS NO T MUCH TO DISCUSS ON THIS ISSUE AND IN VIEW OF THE SAME, GROUND NO. 4 IS TREA TED AS DISMISSED. 9. THE CIT(A) DISMISSED THE GROUND RAISED BY THE AS SESSEE BY NOTING THAT ASSESSEE HAD ACCEPTED THE FINDING OF THE ASSESSING OFFICER. FOR THE AFORESAID REASONS WE FIND NO REASONS TO ENTERTAIN THE PRESENT GROUND RAISED BY THE ASSESSEE INASMUCH AS THERE IS NO PLEA RAISED BY THE ASSESSEE WHICH WOULD REQUIRE INTERFERENCE IN THE CONCLUSION DRAWN BY THE CIT(A). THUS, GROUND OF APPEAL NO. 4 IS DISMISSED. 10. IN GROUND OF APPEAL NO. 6 THE ISSUE PERTAINS TO ASSESSEES PLEA THAT THE SALES-TAX AND INCENTIVES RECEIVED BY THE ASSESS EE UNDER THE POLICY OF WINDMILL POWER GENERATION ISSUED BY THE GOVERNMENT OF MAHARASHTRA IS LIABLE ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 TO BE TREATED AS A SUBSIDY RECEIVED OF CAPITAL NATU RE WHICH IS EXEMPT FROM INCOME-TAX. ON THIS ASPECT, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2006-07 (SUPRA) HAS DECIDED THE ISSUE AGAINST THE ASSESSEE FOLLOWIN G AN EARLIER DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RASIKLAL M. DHARIWAL (HUF) VS. DCIT DATED 31.03.2011. AT THE TIME OF HEARING, THE RE IS NOTHING TO INDICATE THAT THE AFORESAID DECISION OF THE TRIBUNAL IN THE ASESSEES OWN CASE DATED 28.02.2012 (SUPRA) HAS BEEN ALTERED BY ANY HIGHER A UTHORITY AND THEREFORE FOLLOWING THE AFORESAID PRECEDENT, THE GROUND OF AP PEAL NO. 6 IS HEREBY DISMISSED. 11. IN GROUND OF APPEAL NO. 7, THE ISSUE RELATES TO THE COMPUTATION OF PROFITS OF THE WINDMILL POWER GENERATION UNIT. IN ITS WINDMILL BUSINESS, ASSESSEE HAD CLAIMED THE NET INCOME OF RS.77,34,352 /- AGAINST GROSS RECEIPTS OF RS.1,02,97,961/- BY DEDUCTING EXPENSES OF RS.25, 63,428/-. THE ASSESSING OFFICER NOTED THAT NO INDIRECT EXPENSES WERE CLAIME D BY THE ASSESSEE IN THE SAID WORKING AND WAS ACCORDINGLY SHOW-CAUSED AS TO WHY NO INDIRECT EXPENSES HAVE BEEN DEDUCTED FOR COMPUTING INCOME FR OM THE WINDMILL BUSINESS. ASSESSEE SUBMITTED THAT NO INDIRECT EXPE NSES ARE INCURRED FOR EARNING THE SAID INCOME BUT THE ASSESSING OFFICER W AS NOT SATISFIED. AS PER THE ASSESSING OFFICER, ASSESSEE HAD CLAIMED VARIOUS EXPENSES IN RUNNING ITS VARIOUS BUSINESSES VIZ. DIRECTORS REMUNERATION, SA LARY, TRAVELLING, LEGAL FEES, AUDIT FEES, ETC. AND A PORTION OF SUCH INDIRECT EXP ENSES WAS RELATABLE TO THE BUSINESS OF WINDMILL ALSO. ACCORDINGLY, THE ASSESS ING OFFICER APPORTIONED INDIRECT EXPENSES BETWEEN VARIOUS BUSINESS ACTIVITI ES OF THE ASSESSEE COMPANY VIZ. (A) SALE OF SHARES; (B) WINDMILL; (C) INTEREST INCOME; AND, (D) OTHER INCOME ON THE BASIS OF THE RESPECTIVE TURNOVE R. ACCORDINGLY, INDIRECT EXPENDITURE RELATED TO THE WINDMILL BUSINESS WAS DE TERMINED AT RS.6,98,886/- AND THE SAME WAS DEDUCTED FROM THE WINDMILL BUSINES S PROFITS WHICH WAS ACCORDINGLY DETERMINED AT RS.70,35,647/-. THUS, TH E ASSESSING OFFICER NOTED ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 THAT THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA (4) OF THE ACT OF RS.77,34,533/- WAS LIABLE TO BE REDUCED BY AN AMOUN T OF RS.6,98,886/-. HOWEVER, AS THE ENTIRE DEDUCTION CLAIMED BY THE ASS ESSEE OF RS.77,34,533/- WAS DISALLOWED BY THE ASSESSING OFFICER BY APPLYING SECTION 80IA(5) OF THE ACT, NO SEPARATE DISALLOWANCE WAS MADE ON THIS COUN T. 12. BEFORE THE CIT(A), ASSESSEE CONTENDED THAT THE DISALLOWANCE OF INDIRECT EXPENSES MADE BY THE ASSESSING OFFICER WAS ON A HIG HER SIDE AND SUBMITTED THAT A REASONABLE DISALLOWANCE AS PER THE APPELLANT S WORKING IS OF RS.2,99,312/-. THE CIT(A) NOTICED THAT THE ASSESSE E DID NOT FURNISH ANY WORKING FOR THE DISALLOWANCE OF RS.2,99,312/- SOUGH T TO BE CANVASSED BEFORE HIM. THE CIT(A) FURTHER NOTICED THAT SINCE THE ASS ESSEE HAD AGREED IN- PRINCIPLE TO THE PROPOSITION OF THE ASSESSING OFFIC ER THAT A PART OF INDIRECT EXPENSES ARE LIABLE TO BE ALLOCATED TO WINDMILL BUS INESS, HE UPHELD THE ACTION OF THE ASSESSING OFFICER BUT DIRECTED THE ASSESSING OFFICER TO RE-CALCULATE THE COMPUTATION OF DISALLOWANCE AFTER CONSIDERING THE W ORKING OF THE ASSESSEE. AGAINST SUCH DECISION OF THE CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 13. EVEN BEFORE US, THERE IS NO WORKING OF RS.2,99, 312/- WHICH IS SOUGHT TO BE CLAIMED AS A REASONABLE DISALLOWANCE BY THE ASSE SSEE. THE ASSESSING OFFICER HAS COMPUTED THE DISALLOWANCE BY ALLOCATING INDIRECT EXPENSES ON THE BASIS OF TURNOVERS OF RESPECTIVE BUSINESSES. IN-PR INCIPLE, WE FIND NO ERROR IN THE APPROACH OF THE LOWER AUTHORITIES, SO HOWEVER, THE DIRECTION OF THE CIT(A) TO THE ASSESSING OFFICER TO THE EFFECT THAT THE DIS ALLOWANCE BE RE-CALCULATED ON THE BASIS OF WORKING THAT MAY BE FURNISHED BY THE A SSESSEE IS HEREBY AFFIRMED. AS A RESULT, THE ORDER OF THE CIT(A) IS HEREBY AFFI RMED AND ASSESSEE FAILS ON THIS COUNT. 14. BY WAY OF GROUND OF APPEAL NO. 8, ASSESSEE HAS ASSAILED THE DISALLOWANCE OF RS. 9,91,140/- MADE BY THE ASSESSIN G OFFICER INVOKING SECTION ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 14A OF THE ACT. IN BRIEF, THE FACTS ARE THAT ASSES SING OFFICER NOTICED THAT ASSESSEE HAD DECLARED EXEMPT INCOME OF RS.1,18,384/ - AS DIVIDEND ON SHARES AND ALSO AN AMOUNT OF RS.9,48,226/- ON ACCOUNT OF P ROFIT OF SALE ON MUTUAL FUNDS U/S 10(34) AND SECTION 10(38) OF THE ACT RESP ECTIVELY. ASSESSEE HAD NOT CLAIMED ANY EXPENSES IN RELATION TO THE SAID EXEMPT INCOME AND THEREFORE, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE SHOULD NOT BE MADE OF EXPENSES IN RELATION TO SUCH EXEMPT INCOME ON ACCOUNT OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). THE CLAIM OF THE ASSESSEE WAS THAT NO EXPENDITURE WAS DEBITED TO THE PROFIT & LOSS (P&L) ACCOUNT IN RELAT ION TO THE SAID INCOMES AND EVEN THE INTEREST EXPENDITURE OF RS.31,56,718/- DEB ITED TO THE P&L ACCOUNT WAS NOT FOR FUNDS UTILIZED FOR THE IMPUGNED INVESTM ENTS. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY OF THE ASS ESSEE AND NOTICED THAT EVEN DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD MA DE INVESTMENTS WHICH YIELDED EXEMPT INCOME AND THEREFORE HE COMPUTED THE DISALLOWANCE U/S 14A OF THE ACT R.W. RULE 8D OF THE RULES OF A SUM OF RS .9,91,140/-. OUT OF THE TOTAL DISALLOWANCE OF RS.9,91,140/-, A SUM OF RS. 7,08,44 2/- WAS DISALLOWED OUT OF INTEREST EXPENDITURE AND THE BALANCE OF RS. 2,82,69 8/- WAS DISALLOWED OUT OF OTHER EXPENDITURES IN TERMS OF RULE 8D OF THE RULES . THE CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE, AGAINST WHICH THE ASSES SES IS IN APPEAL BEFORE US. 15. IN THIS CONTEXT, THE LEARNED COUNSEL FOR THE AS SESSEE VEHEMENTLY POINTED OUT THAT IN THE WRITTEN SUBMISSIONS MADE TO THE ASSESSING OFFICER, WHICH HAVE BEEN REPRODUCED IN THE ASSESSMENT ORDER, ASSESSEE HAD POINTED OUT THAT THE INTEREST DEBITED TO THE P&L ACCOUNT OF RS.31,56,718/- WAS PAID ON DEPOSITS RAISED, WHICH WERE NOT UTILIZED FOR MAKING THE IMPUGNED INVESTMENTS. IT WAS POINTED OUT THAT INTEREST WAS PAID ON FIVE D EPOSITS, OUT OF WHICH FOUR DEPOSITS WERE ACCEPTED IN THE PRECEDING YEARS AND O NLY ONE DEPOSIT OF RS. 60,00,000/- WAS ACCEPTED DURING THE YEAR UNDER CONS IDERATION AND SUCH DEPOSIT WAS USED PARTLY FOR PAYMENT OF ADVANCE TAX AND PARTLY FOR RE-PAYMENT ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 OF INTER-CORPORATE DEPOSIT. IN SUPPORT, ASSESSEE F URNISHED A COPY OF BANK STATEMENT AND ON THIS BASIS IT WAS SOUGHT TO BE DEM ONSTRATED THAT INTEREST EXPENDITURE WAS NOT RELATABLE TO THE FUNDS UTILIZED TO ACQUIRE SHARES/MUTUAL FUNDS, WHICH HAVE YIELDED THE IMPUGNED EXEMPT INCOM E. EVEN BEFORE US, THE AFORESAID PLEA HAS BEEN CANVASSED AND IT IS ALSO PO INTED OUT THAT THE FACTUAL ASSERTIONS OF THE ASSESSEE HAVE NOT BEEN NEGATED BY THE ASSESSING OFFICER OR THE CIT(A) BUT THE DISALLOWANCE HAS BEEN MECHANICAL LY MADE U/S 14A OF THE ACT R.W. RULE 8D OF THE RULES. 16. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS JUSTIFIED THE DISALLOWANCE BY POINTING OUT THAT THE SAME HAS BEEN WORKED OUT AS PER THE MANNER LAID DOWN IN RULE 8D OF THE RULES AND THEREFORE, NO FAULT CAN BE FOUND WITH THE ORDER OF THE AUTHORITIES BELO W. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE PRESENT CASE, ONLY ONE LIMB OF THE DISALLOWANCE PERTAINING TO THE INTEREST EXPENDITURE IS SOUGHT TO BE ASSAILED BY THE ASSESSEE. THE DEFE NCE OF THE ASSESSEE IS THAT THE INTEREST EXPENDITURE DEBITED TO THE P&L ACCOUNT IS NOT RELATABLE TO THE FUNDS UTILIZED TO ACQUIRE SHARES/MUTUAL FUNDS, WHIC H HAVE YIELDED THE IMPUGNED EXEMPT INCOME. FACTUALLY, THE AFORESAID W AS ASSERTED BEFORE THE ASSESSING OFFICER, AS IS EVIDENT FROM THE SUBMISSIO NS OF THE ASSESSEE DATED 09.12.2010 WHICH HAVE BEEN REPRODUCED IN THE ASSESS MENT ORDER. THE ASSERTION OF THE ASSESSEE WAS THAT THE INTEREST WAS PAID ON DEPOSITS WHICH WERE EITHER NOT RAISED DURING THE YEAR UNDER CONSID ERATION OR FOR A DEPOSIT WHICH WAS SPECIFICALLY USED FOR THE PURPOSES OTHER THAN THE ACQUISITION OF SHARES/MUTUAL FUNDS IN QUESTION. IT HAS ALSO BEEN POINTED OUT BY THE LEARNED COUNSEL AT THE TIME OF HEARING THAT IN THE PAST YEA RS THERE HAS BEEN NO DISALLOWANCE BY INVOKING SECTION 14A OF THE ACT. I N OUR CONSIDERED OPINION, THE PLEA OF THE ASSESSEE INVOLVES FACTUAL APPRECIAT ION, WHICH HAS BEEN GLOSSED-OVER BY THE AUTHORITIES BELOW AND THE DISAL LOWANCE HAS BEEN ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 SUSTAINED WITHOUT DUE APPLICATION OF MIND. IF THE ASSESSEE IS ABLE TO ESTABLISH THAT THE INTEREST EXPENDITURE DEBITED IN THE P&L AC COUNT IS NOT CONNECTED WITH THE FUNDS USED FOR INVESTMENTS IN ACQUIRING SHARES/ MUTUAL FUNDS, WHICH HAVE YIELDED EXEMPT INCOME, THEN NO DISALLOWANCE U/S 14A OF THE ACT OUT OF THE INTEREST EXPENDITURE IS CALLED FOR. THEREFORE, FOR THE AFORESAID PURPOSE, WE REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DETERMINE THE ISSUE AFRESH ON THE LIMITED ASPECT OF ASSESSEES PLEA THAT THE INTEREST EXPENDITURE IS NOT RELATABLE TO THE FUNDS USED FOR ACQUISITION OF SHARES/MUTUAL FUNDS, WHICH HAVE YIELDED EXEMPT INCO ME. IF THE ASSESSING OFFICER IS SATISFIED WITH THE REPLIES/MATERIAL FURN ISHED BY THE ASSESSEE, THEN NO DISALLOWANCE SHALL BE CALLED FOR OUT OF INTEREST EX PENDITURE AND IF THE ASSESSING OFFICER IS NOT SO SATISFIED, HE MAY RECOR D HIS REASONS AND THEREAFTER PROCEED AS PER LAW. NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT. THUS, ON THIS ASPECT, ASSESSEE PARTLY SUCCEEDS. 18. IN THE LAST GROUND OF APPEAL NO. 9, ASSESSEE HA S ASSAILED THE ACTION OF THE CIT(A) IN SUSTAINING THE DISALLOWANCE OF RS.7,2 0,650/- OUT OF FOREIGN TRAVELLING EXPENSES. ON THIS ASPECT, IT WAS A COMM ON POINT BETWEEN THE PARTIES THAT SIMILAR DISALLOWANCE WAS A SUBJECT-MAT TER OF CONSIDERATION BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 (SUPRA) WHEREIN AN IDENTICAL CIRCUMSTANCES THAT THE DISALLO WANCE WAS DIRECTED TO BE RESTRICTED 50% OF THE EXPENDITURE CLAIMED. FOLLOWI NG THE AFORESAID PRECEDENT, IN THIS YEAR ALSO THE ASSESSING OFFICER IS DIRECTED TO RETAIN THE DISALLOWANCE ACCORDINGLY. THUS, ON THIS ASPECT, ASSESSEE PARTLY SUCCEEDS. 19. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 2008-09 IS PARTLY ALLOWED. ITA NOS.1716 TO 1718/PN/2012 A.YS. 2004-05, 20 05-06 & 2008-09 20. IN SO FAR AS THE OTHER TWO APPEALS RELATING TO ASSESSMENT YEARS 2004-05 AND 2005-06 ARE CONCERNED, THE ISSUES RAISED ARE SI MILAR TO THOSE ADJUDICATED IN THE ABOVE PARAGRAPHS RELATING TO THE ASSESSMENT YEAR 2008-09. OUR DECISION IN THE APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2008-09 SHALL APPLY MUTATIS-MUTANDIS IN THE ABOVE TWO ASSESSMENT YEARS ALSO WITH RESPEC T TO THE RESPECTIVE GROUNDS OF APPEALS. 21. RESULTANTLY, THE THREE CAPTIONED APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 30 TH DECEMBER, 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, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE