The ACIT, Circle-4, Ahmedabad V. Harsha Engineers Pvt. Ltd., Ahmedabad

ITA 1759/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89431 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M J PAUL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 37; 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NOS. 2295/AHD/2011 & 1759/AHD/2012 / ASSESSMENT YEAR: 2008-09 & 2009-10 THE ACIT, CIRCLE-4, AHMEDABAD .. APPELLANT VS HARSHA ENGINEERS LTD., SARKHEJ BAVLA ROAD, AT & POST CHANGODAR, SANAD, AHMEDABAD .. RESPONDENT PAN : AAACH 4828 C REVENUE BY : SHRI M J PAUL, SR. DR ASSESSEE(S) BY : SHRI TUSHAR HEMANI, AR / DATE OF HEARING 07/05/2015 ! /DATE OF PRONOUNCEMENT 14/05/2015 #$ #$ #$ #$ / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- VIII, AHMEDABAD DATED 05.07.2011 AND 16.05.2012 FOR ASSES SMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. BOTH APP EALS PERTAINED TO THE SAME ASSESSEE. SINCE THESE APPEALS INVOLVE COMMON ISSUES, THESE WERE HEARD TOGETHER AND ARE BE ING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 2 - 2. IN ITA NO.2295/AHD/2011 FOR ASSESSMENT YEAR 2008 -09, SOLE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.85,14,513/- MADE ON ACCOUNT OF T HE CLAIM OF ASSESSEE FOR DEDUCTION U/S 80IA(IV), WITHO UT APPRECIATING THE FACT THAT THE JURISDICTIONAL ITAT HAD DECIDED THE ISSUE IN FAVOUR OF REVENUE IN THE CASE OF GOLDMINE SHARES AND FINANCE PVT LTD IN ITA NO.4044 TO 4049/AHD/2003 DATED 30.04.2008 3. IN ITA NO.1759/AHD/2012 FOR ASSESSMENT YEAR 2009 -10, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.1,05,98,781/- MADE ON ACCOUNT OF THE CLAIM OF ASSESSEE FOR DEDUCTION U/S 80IA(4)(IV) (A), WITHOUT APPRECIATING THE FACT THAT THE JURISDICTION AL ITAT HAD DECIDED THE ISSUE IN FAVOUR OF REVENUE IN THE CASE OF GOLDMINE SHARES AND FINANCE PVT LTD IN ITA NO.4044 TO 4049/AHD/2003 DATED 30.04.2008 (AYS 1997-98 TO 2002-03. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.9,00,000/- OUT OF THE TOTAL DISALLOWANCE OF RS.12,00,000/- MADE ON ACCOUNT OF T HE CLAIM OF ASSESSEE FOR LEGAL AND PROFESSIONAL FEES O F RS.82,58,275/- WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO GIVE ANY JUSTIFICATION FOR THE S AID EXPENSES. 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF VARIOUS TYPES OF BEARING CAGES THROUGH TWO MANUF ACTURING ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 3 - UNITS LOCATED AT CHANGODHAR AND MORAIYA. IT ALSO H AS TWO WIND-MILL UNITS AT DHANK AND PATELKA. 5. THE FIRST ISSUE IS WITH REGARD TO DISALLOWANCE O F DEDUCTION/S 80IA(4)(IV) AMOUNTING TO RS.85,14,513 I N ASSESSMENT YEAR 2008-09 AND RS.1,05,98,781/- IN ASSESSMENT YEAR 2009-10. 5.1 WITH RESPECT TO ASSESSMENT YEAR 2009-10, THE AS SESSING OFFICER WAS OF THE VIEW THAT AS PER PROVISIONS OF S ECTION 80IA(5) OF THE ACT, THE PROFIT FROM THE ELIGIBLE BUSINESS F OR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDUCTION U/S 80 IA(4) HAS TO BE COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROU GHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN T HOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST THE OTHER INCOME IN EARLIER YEAR. THE ASSESSING OFFICER FOUND OUT THAT FOR AY 2 005-06, THERE WAS A CARRY FORWARD LOSS OF RS.4,12,48,605/- WHEN THE UNIT WAS CONSIDERED AS A STANDALONE BASIS AND IF TH E SAID CARRY FORWARD LOSS WAS NOTIONALLY SET OFF AGAINST THE INC OME FOR AY 2006-07, 2007-08 AND 2008-09, THEN STILL THERE WOUL D BE CARRY FORWARD LOSS OF RS.2,36,95,030/- FOR AY 2009-10. A CCORDINGLY, THE ASSESSING OFFICER, AFTER INVOKING PROVISIONS OF SECTION 80IA(5) OF THE ACT, DISALLOWED DEDUCTION OF RS.1,05 ,98,781/- U/S. 80IA(IV) OF THE ACT. 5.2 SIMILARLY, IN THE ASSESSMENT YEAR 2008-09 ALSO, THE ASSESSING OFFICER DISALLOWED DEDUCTION OF RS.85,14, 513/- U/S 80(IA)(IV) OF THE ACT. ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 4 - 5.3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY FOR BOTH THE ASSESSMENT YEARS, WHEREIN VARIOUS CONTENTI ONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) HAS ALLOWED THE CLAIM OF THE IN BOTH THE ASS ESSMENT YEARS UNDER CONSIDERATION, BY OBSERVING THAT THIS I SSUE HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE BY THE DECIS ION OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF VELAYUD HASWAMY SPINNING MILLS (P) LTD. VS. ACIT, REPORTED IN 231 C TR 368, WHEREIN THE HONBLE MADRAS HIGH COURT HAS ALLOWED T HE CLAIM MADE BY THE ASSESSEE U/S 80IA OF THE ACT. FOR THE Y EARS UNDER CONSIDERATION ALSO THE REVENUE HAS NOT BROUGHT ANY NEW OR FRESH DISTINGUISHABLE FACTS. FURTHER, THE CIT(A) VE RIFIED THE COMPUTATION OF INCOME FOR AY 2005-06, 2008-09 AND 2 009-10 AND FOUND THAT THE UNABSORBED LOSS AND DEPRECIATION OF THE WIND MILL FOR AY 2005-06 OF RS.2,12,48,605/- HAS AL READY BEEN SET OFF AGAINST THE INCOME OF OTHER BUSINESS OF THE ASSESSEE IN EARLIER YEARS AND THERE WAS NO CARRY FORWARD LOSSES IN AYS 2008-09 AND 2009-10. THEREFORE, THE CIT(A), AFTER C ONSIDERING THE FACTS OF EARLIER YEARS AND FOLLOWING THE DECISI ON OF HONBLE MADRAS HIGH COURT ON THE IDENTICAL FACTS, ALLOWED T HE APPEAL OF THE ASSESSEE IN BOTH THE ASSESSMENT YEARS UNDER APP EAL. 5.4. BEFORE US, THE LD. AR OF THE ASSESSEE POINTED OUT THAT SIMILAR ISSUE CAME ACROSS BEFORE THE ITAT A BENCH , AHMEDABAD IN THE CASE OF M/S. JIVRAJ TEA COMPANY V. DCIT IN ITA NOS. 1193 & 1194/AHD/2013, WHEREIN THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, BY OBS ERVING AS UNDER:- ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 5 - 4. NEXT ISSUE WITH REGARDS TO EXCLUDING AMOUNT REC EIVED ON SALE OF SALES TAX ENTITLEMENTS OF RS. 24,20,833/ - FROM THE PROFIT DERIVED FROM ELIGIBLE UNIT BEING WIND MI LL AT SATARA, MAHARASHTRA. ASSESSING OFFICER MADE ADDITIO N BY WAY OF EXCLUDING AMOUNT RECOVERED O SALE TAX ENTITL EMENT OF RS.24,20,833/- FROM THE PROFIT DERIVED FROM ELIG IBLE UNIT BEING WIND MILL AT SATARA, MAHARASHTRA. CIT(A) FOLLOWING THE ORDER FOR A.Y. 2009-10 OF JIVRAJ TEA LTD. DECIDED THE ISSUE AGAINST THE ASSESSEE. AT THE TIME OF HEARING LD. A.R. POINTED OUT THAT ITAT IN ITA NO. 1994/AHD/2012 FOR A.Y. 2009-10 TRIBUNAL FOLLOWING ASSESSEES OWN CASE FOR A.Y. 2007-08 HAD DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UND ER: 38. WE FIND THAT TRIBUNAL IN ASSESSEES OWN CASE F OR A.Y. 2007-08, VIDE ORDER DATED 19/12/2013, HAS HELD AS UNDER: 7 TO 16 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDER OF THE LOWER AUTHORITIES AND MATERIAL AVAILAB LE ON RECORD. IN THE CASE OF JIVRAJ TEA LTD., THE ASSESSE E CLAIMED DEDUCTION U/S. 80IA(4) OF THE ACT ON 100% PROFIT DE RIVED FROM GENERATION OF ELECTRICITY FROM WINDMILL SITUAT ED AT AHMEDNAGAR MAHARASHTRA, JODHA RAJASTHAN AND CHITRADURGA KARNATAKA. THE ASSESSING OFFICER OBSERV ING THAT SINCE THE ASSESSEE HAD CARRIED FORWARD LOSSES OF EARLIER YEARS, THEREFORE, THE ASSESSEE WAS NOT ENTI TLED TO DEDUCTION U/S.80IA(4) AS AFTER THE ADJUSTMENT OF TH E BROUGHT FORWARD LOSSES THERE WAS NO POSITIVE PROFIT FOR ALLOWING DEDUCTION U/S. 80IA. THE SAME WAS CONFIRME D IN APPEAL BY THE LEARNED CIT(A). THE CASE OF THE REVEN UE IS THAT IN VIEW OF THE DECISION OF THE SPECIAL BENCH O F THE TRIBUNAL RENDERED IN THE CASE OF GOLDMINE SHARES AN D PRIVATE LIMITED (SUPRA) BROUGHT FORWARD LOSSES AND DEPRECIATION OF EARLIER YEARS HAS TO BE DEDUCTED FR OM THE PROFITS OF THE YEARS UNDER CONSIDERATION BEFORE ALL OWING DEDUCTION U/S. 80IA OF THE ACT. ON THE OTHER HAND, THE CONTENTION OF THE AR OF THE ASSESSEE IS THAT AFTER THE ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 6 - AMENDMENT MADE BY THE FINANCE ACT, 1999 IN SECTION 80IA WHEREBY U/S. 80IA(2) THE ASSESSEE HAS THE OPTI ON TO CHOOSE THE INITIAL YEAR FOR CLAIMING THE DEDUCTION U/S. 80IA FOR 10 CONSECUTIVE YEARS WITHIN 15 CONSECUTIVE YEARS FROM THE DATE OF THE COMMENCEMENT OF THE ELIGIBLE U NIT. BY PLACING RELIANCE ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS PVT. LTD. (SUPRA) IT WAS THE SUBMISSION OF THE LEAR NED DR THAT ONCE THE ASSESSEE SELECTS THE INITIAL YEAR FOR CLAIMING DEDUCTION UNDER SECTION 80 IA (4) THEN THE EARLIER YEARS BROUGHT FORWARD LOSSES AND DEPRECIATIONS NEED NOT B E ADJUSTED AGAINST THE PROFITS OF INITIAL YEAR FROM T HE ELIGIBLE UNIT FOR ALLOWING DEDUCTION UNDER SECTION 80IA TO T HE ASSESSEE. THE PROVISIONS OF SECTION 80 IA (5) SHALL APPLY FOR THE YEARS AFTER THE INITIAL YEAR FOR COMPUTING THE DEDUCTION ALLOWABLE TO THE ASSESSEE UNDER SECTION 8 0IA OF THE ACT. 18. WE FIND FORCE IN THE SUBMISSION OF THE LEARNED AR OF THE ASSESSEE. WE ALSO FIND THAT IT IS AN UNDISPUTED FACT THAT IN ALL THE APPEALS UNDER CONSIDERATION THE INI TIAL YEAR CHOSEN BY THE ASSESSEE FOR CLAIMING DEDUCTION IS AF TER 1- 4- 2000 WHEN THE AMENDED PROVISION OF SECTION 80IA WAS APPLICABLE. 19. SECTION 80IA, WHICH HAS BEEN SUBSTITUTED W.E.F. 1ST APRIL 2000, PROVIDES THAT WHERE THE GROSS TOTAL INC OME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM ANY ELIGIBLE BUSINESS REFERRED TO IN SUBSECTION 4, THERE SHALL, IN ACCORDANCE WITH AND S UBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN CO MPUTING THE DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PRO FITS AND GAINS DERIVED FROM SUCH BUSINESS FOR 10 CONSECU TIVE YEARS. SUBSTITUTED SUB-SECTION (2) OF SECTION 80IA, PROVIDES THAT AN OPTION IS GIVEN TO THE ASSESSEE FO R CLAIMING ANY 10 CONSECUTIVE ASSESSMENT YEAR OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAK ING OR THE ENTERPRISE DEVELOPS AND BEGIN TO OPERATE. TH E 15 YEARS IS THE OUTER LIMIT WITHIN WHICH THE ASSESSEE CAN CHOOSE THE PERIOD OF CLAIMING THE DEDUCTION. SUB-SE CTION (5) IS A NON-OBSTANTE CLAUSE WHICH DEALS WITH THE ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 7 - QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE RELEVANT PROVISION OF SUB-SECTION (5) OF SECTION 80 IA, READS AS UNDER:- (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOU S YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVER Y SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE. 20. FROM A PLAIN READING OF THE ABOVE, IT CAN BE GA THERED THAT IT IS A NON- OBSTANTE CLAUSE WHICH OVERRIDES T HE OTHER PROVISIONS OF THE ACT AND IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 80IA, FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDIN G THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMEN T YEAR TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME. THUS, THE FICTION CREATED IS THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME AND THE DEDUCTION WOULD BE ALLOWED FROM THE INITIAL ASSESSM ENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR. IT NOWHERE DEFINES AS TO WHAT IS THE INITIAL ASSESSMENT YEAR. PRIOR TO 1ST APRIL 2000, THE INITIAL ASSESSMENT YEAR WAS DEF INED FOR VARIOUS TYPES OF ELIGIBLE ASSESSEES UNDER SECTION 8 0IA(12). HOWEVER, AFTER THE AMENDMENT BROUGHT IN STATUTE BY THE FINANCE ACT, 1999, THE DEFINITION OF INITIAL ASSES SMENT YEAR HAS BEEN SPECIFICALLY TAKEN AWAY. NOW, WHEN T HE ASSESSEE EXERCISES THE OPTION OF CHOOSING THE INITI AL ASSESSMENT YEAR AS CULLED OUT IN SUB-SECTION (2) OF SECTION 80IA FROM WHICH IT CHOOSES ITS 10 YEARS OF DEDUCTION OUT OF 15 YEARS, THEN ONLY THE LOSSES OF THE YEARS STARTING FROM THE INITIAL ASSESSMENT YEAR ALO NE ARE TO BE BROUGHT FORWARD AS STIPULATED IN SECTION 80IA (5). THE LOSS PRIOR TO THE INITIAL ASSESSMENT YEAR WHICH HAS ALREADY BEEN SET-OFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 8 - THE PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT YEAR AS CONTEMPLATED OR CHOSEN BY THE ASSESSEE. IT IS ONLY WHEN THE LOSS HAVE BEEN INCURRED FROM THE INITIAL ASSESS MENT YEAR, THEN THE ASSESSEE HAS TO ADJUST LOSS IN THE SUBSEQUENT ASSESSMENT YEARS AND IT HAS TO BE COMPUT ED AS IF ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOM E AND THEN ONLY DEDUCTION UNDER SECTION 80IA CAN BE DETERMINED. THIS IS THE TRUE IMPORT OF SECTION 80IA (5). 21. IN THE DECISION OF GOLDMINE SHARES AND FINANCE PVT. LTD. (SUPRA), DECIDED BY THE SPECIAL BENCH OF THE T RIBUNAL, THE CLAIM OF DEDUCTION BY THE ASSESSEE HAD STARTED FROM ASSESSMENT YEAR 1996-97 ONWARDS AND THE ASSESSEE HA D CLAIMED DEDUCTION UNDER SECTION 80IA STARTING FROM THE FIRST YEAR ITSELF I.E., ASSESSMENT YEAR 1996-97. TH US, THE SPECIAL BENCH WAS DEALING WITH THE OPERATION OF SEC TION 80IA(5) WHERE THE ASSESSEE HAD FIRST CLAIMED THE DEDUCTION IN THE ASSESSMENT YEAR 1996-97 AND FOR SUBSEQUENT ASSESSMENT YEARS. THIS ASPECT OF THE MAT TER HAS BEEN VERY WELL ELABORATED BY THE MADRAS HIGH CO URT IN VELAYUDHASWAMY SPINNING MILLS PVT. LTD. (SUPRA) AFTER CONSIDERING THE SPECIAL BENCH DECISION OF THE TRIBU NAL IN GOLDMINE SHARES AND FINANCE PVT. LTD. (SUPRA) AND RELEVANT PROVISIONS OF THE ACT I.E., PRE AMENDMENT AND POST AMENDMENT HAVE COME TO THE SAME CONCLUSION:- '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 ASSESSE E EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHIC H WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS A NY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE A SSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE E LIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PLACE IN EARLIE R YEAR ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 9 - AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVEN UE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIO NALLY. FICTION CREATED IN SUB- SECTION DOES NOT CONTEMPLAT ES TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 22. IN THE PRESENT CASES, THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND A DJUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING TH E RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED THE OPTION UNDER S. 8O-IA(2). IN TAX CASE NOS. 909 OF 2009 AS WELL A S 940 OF 2009, THE ASSESSMENT YEAR WAS 2005-06 AND IN THE TA X CASE NO. 918 OF 2008 THE ASSESSMENT YEAR WAS 2004-0 5. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBE D DEPRECIATION OR LOSS OF THE ELIGIBLE UNDERTAKINGS A ND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. TH ERE IS A POSITIVE PROFIT DURING THE YEAR. THE UNREPORTED J UDGMENT OF THIS COURT CITED SUPRA CONSIDERED THE SCOPE OF S UB-S. (6) OF S. 8O-I, WHICH IS THE CORRESPONDING PROVISIO N OF SUB- S. (5) OF S. 80- IA. BOTH ARE SIMILARLY WORDED AND THEREFORE WE AGREE ENTIRELY WITH THE DIVISION BENCH JUDGMENT OF THIS COURT CITED SUPRA. IN THE CASE OF CIT VS. MEWAR OIL &.GENERAL MILLS LTD. (2004) 186 CTR (RAJ) 141: (200 4) 271ITR 311 (RAJ), THE RAJASTHAN HIGH COURT ALSO CONSIDERED THE SCOPE OF S. 80-I AND HELD AS FOLLOWS :- 'HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLL OW ON THE LINE NOTICED ABOVE, WE ARE OF THE OPINION THAT ON FINDING THE FACT THAT THERE WAS NO CARRY FORWARD LO SSES OF 1983-84, WHICH COULD BE SET OFF AGAINST THE INCOME OF THE CURRENT ASST. YR, 1984-85, THE RECOMPUTATION OF INC OME FROM THE NEW INDUSTRIAL UNDERTAKING BY SETTING OFF THE CARRY FORWARD OF UNABSORBED DEPRECIATION OR DEPRECI ATION ALLOWANCE FROM PREVIOUS YEAR DID NOT SIMPLY ARISE A ND ON THE FINDING OF FACT NOTICED BY THE CIT(A), WHICH HA S NOT BEEN DISTURBED BY THE TRIBUNAL AND CHALLENGED BEFOR E US, THERE WAS NO ERROR MUCH LESS ANY ERROR APPARENT ON THE FACE OF THE RECORD WHICH COULD BE RECTIFIED. THAT Q UESTION WOULD HAVE BEEN GERMANE ONLY IF THERE WOULD HAVE BE EN CARRY FORWARD OF UNABSORBED DEPRECIATION AND UNABSO RBED ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 10 - DEVELOPMENT REBATE OR ANY OTHER UNABSORBED LOSSES O F THE PREVIOUS YEAR ARISING OUT OF THE PRIORITY INDUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE I NCOME OF THE CURRENT YEAR. IT IS NOT AT ALL REQUIRED THAT LO SSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AG AINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER S.80-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUND ER. 23. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRIBUNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFICATION POSSIBLE UNDER S. 8O-I IN THE PRESENT CASE, ALBEIT, FOR REASONS SOMEWHAT DIFFERENT FROM THOSE W HICH PREVAILED WITH THE TRIBUNAL. THERE BEING NO CARRY F ORWARD OF ALLOWABLE DEDUCTIONS UNDER THE HEAD DEPRECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAI NST THE INCOME OF THE CURRENT YEAR AND, THEREFORE, RECOMPUTATION OF INCOME FOR THE PURPOSE OF COMPUTIN G PERMISSIBLE DEDUCTION UNDER S. 8O-I FOR THE NEW IND USTRIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. ACCORDINGLY, THIS APPEAL FAILS AND IS HEREBY DISMIS SED WITH NO ORDER AS TO COSTS. 24. FROM READING OF THE ABOVE, THE RAJASTHAN HIGH C OURT HELD THAT IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAI N FOR COMPUTATION OF CURRENT INCOME UNDER SECTION 80-1 FO R THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUND ER. WE ALSO AGREE WITH THE SAME. WE SEE NO REASON TO TA KE A DIFFERENT VIEW.' 25. THIS JUDGMENT HAS BEEN FURTHER FOLLOWED BY THE SAME HIGH COURT IN CIT V/S EMERALD JEWEL INDUSTRY (P) LT D. [2011] 53 DTK 262 (MAD.). FROM THE ABOVE, RATIO OF THE HIGH COURT, IT IS AMPLY CLEAR THAT SUB-SECTION (5) OF SECTION 8OIA WILL COME INTO OPERATION ONLY FROM THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR. THE OPTION OF CHOOSING THE INITIAL ASSESSMENT YEAR IS W HOLLY UPON THE ASSESSEE IN THE POST AMENDMENT PERIOD I.E. , AFTER 1ST APRIL 2000 BY VIRTUE OF SECTION 80IA(2). ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 11 - 26. NOW COMING TO THE DECISION OF THE MUMBAI BENCH TRIBUNAL IN PIDILITE INDUSTRIES (SUPRA) AS RELIED U PON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THIS CAS E, THE TRIBUNAL WAS DEALING WITH REGARD TO TWO ELIGIBLE UN ITS ONE GUJARAT UNIT WHICH WAS SET-UP IN THE YEAR 1995-96 A ND SECOND MAHARASHTRA UNIT IN THE YEAR 2000-01. WITH REGARD TO GUJARAT UNIT, THE TRIBUNAL HELD THAT PRE- AMENDMENT DEFINITION OF INITIAL ASSESSMENT YEAR WOU LD BE APPLICABLE I.E., PROVISIONS WHICH WERE PRIOR TO 1ST APRIL 1999 WILL APPLY BECAUSE THE ASSESSEE HAD STARTED COMMERCIAL PRODUCTION IN THE FINANCIAL YEAR 1996-97 . REGARDING SECOND UNIT, THE TRIBUNAL HELD THAT THE JUDGMENT OF MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS PVT. LTD. (SUPRA) WILL NOT BE APPLIC ABLE BECAUSE THE INCOME FROM NON ELIGIBLE BUSINESS WAS S ET-OFF FROM THE LOSS OF ELIGIBLE BUSINESS IN THE YEAR OF COMMENCEMENT. IN THIS CASE, IT WAS NOT AN ISSUE AS TO WHETHER THE LOSSES PERTAINED TO PRIOR TO INITIAL AS SESSMENT YEAR OR AFTER THE INITIAL ASSESSMENT YEAR. IF THE L OSSES HAVE BEEN INCURRED IN THE ELIGIBLE UNIT AND HAS BEEN SET -OFF AGAINST THE NON- ELIGIBLE UNIT AFTER THE INITIAL AS SESSMENT YEAR, THEN THE RATIO LAID DOWN BY THE TRIBUNAL IS I N FULL CONSONANCE WITH THE LAW. HOWEVER, THIS IS NOT THE C ASE IN THE INSTANT CASE BECAUSE THE LOSS PERTAINED TO PRIO R TO INITIAL ASSESSMENT YEAR WHICH HAVE BEEN SET-OFF AGA INST THE PROFITS OF NON-ELIGIBLE UNITS. THE BEGINNING OF THE INITIAL ASSESSMENT YEAR AS ADOPTED BY THE ASSESSEE IS ASSESSMENT YEAR 2008-09 ONLY AND, THEREFORE, THE LO SS OF ASSESSMENT YEAR 2007-08 CANNOT BE NOTIONALLY CARRIE D FORWARD WITHIN THE MEANING OF SECTION 80IA(5). THUS , THE RELIANCE PLACED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE DECISION OF PIDILITE INDUSTRI ES (SUPRA), WILL NOT BE APPLICABLE IN THE PRESENT CASE . 27. THE OTHER DECISION HEAVILY RELIED UPON BY THE L EARNED DEPARTMENTAL REPRESENTATIVE IN HYDERABAD CHEMICAL SUPPLIES LTD. (SUPRA) WILL ALSO NOT APPLY TO THE FA CTS OF THE PRESENT CASE, AS IN THAT CASE, THE WIND MILL STARTE D ITS OPERATION ON 3IST MARCH 1999 AND THE FIRST YEAR OF OPERATION WAS ASSESSMENT YEAR 1999-2000. THUS, IN T HE ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 12 - ASSESSMENT YEAR 1999-2000, THE DEFINITION OF 'INITI AL ASSESSMENT YEAR' WAS ALREADY THERE IN THE ACT AND T HERE WAS NO PROVISION THROUGH WHICH THE ASSESSEE COULD H AVE CHOSEN ITS INITIAL ASSESSMENT YEAR. THIS PROVISION WAS BROUGHT IN STATUTE W.E.F. 1ST APRIL 2000, BY VIRTUE OF SECTION 8OIA. THUS, THIS DECISION ALSO WILL NOT HEL P THE CASE OF THE M/S. SHEVIE EXPORTS DEPARTMENT. IN ASSEESSEES CASE, AS SPECIFICALLY STATED IN THE FOR EGOING PARAGRAPHS, THE ASSESSEES CLAIM FOR INITIAL ASSESS MENT YEAR I.E., ASSESSMENT YEAR 2008-09 AND ITS CLAIM FO R DEDUCTION UNDER SECTION 80A MADE FOR THE FIRST TIME FROM ASSESSMENT YEAR 2008-09, HAS NOT BEEN DISPUTED. THU S, THE AFORESAID JUDGMENT RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WILL NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 28. WE REITERATE IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE INITIAL ASSESSMENT YEAR IN THE CASE OF JIV RAJ TEA & INDUSTRIES LTD. IS THE ASSESSMENT YEAR 2004-05 AN D IN THE CASE OF JIVRAJ TEA LTD. IS ASSESSMENT YEAR 2007 -08 AND IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT SUFFERED ANY LOSS IN THE SAID YEAR, THEREFORE, IN O UR CONSIDERED OPINION NO BROUGHT FORWARD LOSS OR DEPRECIATION COULD BE REDUCED FOR DETERMINING THE A MOUNT IN WHICH THE DEDUCTION IS TO BE ALLOWED U/S. 80IA O F THE ACT. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOW ER AUTHORITIES ON THIS ISSUE AND ALLOW THE GROUND OF A PPEAL OF THE ASSESSEE. 39. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING T HE PRECEDENT, WE SET ASIDE THE ORDER OF LOWER AUTHORIT IES ON THIS ISSUE AND ALLOW GROUND NOS.2, 3 & 4 OF THE APP EAL. 4.1. NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWL EDGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO F OLLOWING THE SAME REASONING, WE SET ASIDE THE ORDER OF LOWER AUTHORITIES ON THE ISSUE AND ALLOW THE GROUND IN FA VOUR OF THE ASSESSEE AS DISCUSSED ABOVE. 5.5 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 13 - FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED T O INTERFERE IN THE FINDINGS OF THE CIT(A) WHO HAS RIGHTLY DELETED THE ADDITION OF RS.85,14,513 IN THE ASSESSMENT YEAR 2008-09 AND RS.1,05,98,781/- IN THE ASSESSMENT YEAR 2009-10 MA DE IN RESPECT OF DEDUCTION U/S 80IA(4)(IV) OF THE ACT. TH US, THE ORDER OF THE CIT(A) IS UPHELD IN THIS REGARD. 6. THE NEXT ISSUE IS WITH REGARD TO THE DELETION OF ADDITION OF RS.9,00,000/- OUT OF TOTAL DISALLOWANCE OF RS.12,00 ,000/- MADE ON ACCOUNT OF THE CLAIM OF THE ASSESSEE FOR LE GAL AND PROFESSIONAL FEES FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS CLAIMED LEGAL AND PROFESSIONAL FEES EX PENDITURE OF RS.82,58,275/- IN THE ASSESSMENT YEAR 2009-10. THE ASSESSING OFFICER WAS OF THE VIEW THAT OUT OF SUCH EXPENDITURE, CERTAIN EXPENDITURE WAS NOT INCURRED FOR THE EXISTI NG BUSINESS OF THE ASSESSEE AND HE, ACCORDINGLY, DISALLOWED A L UMP-SUM AMOUNT OF RS.12,00,000/- OUT OF TOTAL EXPENDITURE O F RS.82,58,275/- CLAIMED BY THE ASSESSEE. 6.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED RELI EF TO THE ASSESSEE TO THE EXTENT OF RS.9,00,000/- OUT OF TOTA L DISALLOWANCE OF RS.12,00,000/- MADE BY THE ASSESSIN G OFFICER AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF O F THE REVENUE INTER ALIA SUBMITTING THAT THE CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.9,00,000/- OUT OF TOTAL DISALLOWANCE OF RS.12,00,000/- MADE ON ACCOUNT OF C LAIM OF ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 14 - ASSESSEE FOR LEGAL AND PROFESSIONAL FEES OF RS.82,5 8,275/- WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO GIVE ANY JUSTIFICATION FOR THE SAID EXPENSES. 6.2 ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 6.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER, ON LUMP -SUM BASIS, DISALLOWED RS.12,00,000/- OUT OF TOTAL LEGAL AND PR OFESSIONAL FEES OF RS.82,58,275/- OUT OF WHICH RS.9,00,000/- W AS DELETED BY CIT(A) AGAINST WHICH THE REVENUE IS IN APPEAL BE FORE US. THE ASSESSING OFFICER FAILED TO APPRECIATE THAT COM PLETE DETAILS OF LEGAL AND PROFESSIONAL FEES WERE PLACED ON RECOR D BEFORE THE TRIBUNAL AS MENTIONED IN PAGE NOS. 38-48 OF THE PAP ER-BOOK. EACH & EVERY EXPENDITURE WAS INCURRED WHOLLY AND EX CLUSIVELY FOR THE BUSINESS OF THE ASSESSEE, THEREFORE THE SAM E IS ALLOWABLE U/S 37 OF THE ACT. THE ASSESSING OFFICER MERELY PRESUMED THAT SOME OF THE EXPENDITURES WERE NOT FOR THE BUSINESS OF THE ASSESSEE; HOWEVER, THE ASSESSING OF FICER HAS NOT ASSIGNED ANY REASON AS TO WHY THE SAME ARE NOT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER OUGHT TO HAVE APPRECIATED THAT THE PAYMENT TO DELOI TTE WAS FOR CONSULTING AND SEEKING ADVICE ON BIDDING FOR ACQUIS ITION OF EUROPEAN CAGE MANUFACTURING COMPANY SINCE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING BEARING CA GES. SUCH CONSULTANCY WAS POTENTIAL RISK AND REWARD ATTACHED WITH ASSESSEES BUSINESS; THEREFORE THE EXPENDITURE ON T HE SAME IS ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 15 - WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSE SSEE. PAYMENT TO MARS EXPORT SERVICES WAS FOR EXPORT PROM OTION CAPITAL GOODS AUTHORIZATION; THEREFORE, THE SAME IS ALSO WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. T HE PROFESSIONAL FEES PAID TO SHRI MUKESH PATEL AND SHR I SAURABH SOPARKAR WAS ALSO FOR CONSULTANCY/LEGAL SERVICES AG AINST THE SERVICE RENDERED BY THEM, HENCE THE SAME IS ALSO WH OLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. THERE FORE, THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER ON LUMP-SUM BASIS IS NOT TENABLE IN THE EYES OF LAW. I N VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADD ITION OF RS.9,00,000/- AGAINST THE TOTAL DISALLOWANCE OF RS. 12,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LEGAL A ND PROFESSIONAL FEES OF RS.82,58,275/-. THEREFORE, WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. THUS, THIS GROUND O F APPEAL OF THE REVENUE IN AY 2009-10 IS ALSO REJECTED. 7. IN THE RESULT, THE APPEALS FILED BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 14TH OF MAY, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 14/05/2015 *BT ITA NOS.1759 AHD 2012 & 2295 AHD 2011 ACIT VS HARSHA ENGINEERS LTD AY 2008-09 & 2009-10 - 16 - #$ #$ #$ #$ %& %& %& %& '#& '#& '#& '#& / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. %*() / THE RESPONDENT. 3. + / CONCERNED CIT 4. + ( ) / THE CIT(A), 5. &,- % , , / DR, ITAT, AHMEDABAD 6. -. / / GUARD FILE. #$ #$ #$ #$ / BY ORDER, //TRUE COPY// 0 00 0 / 1 1 1 1 (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD