Assistant Commissioner of Income-tax, V. Mrs. Sulbha Subhash Lodha, Pune

ITA 1845/PUN/2013

• Counselvise Citation: 184524514 RSA 2013
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1845/PN/2013 (ASSESSMENT YEAR : 2010-11) ACIT, CIRCLE-2, PUNE .. APPELLANT VS. MRS. SULBHA SUBHASH LODHA, 417-19, MARKET YARD, PUNE 411037 PAN NO.AAGPL 0006K .. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 23-09-2014 DATE OF PRONOUNCEMENT : 24-09-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30-04-2013 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IN AN INDIVIDUAL ENGAGED IN THE BUSINESS OF SHARE TRADING AND POWER GENERATION FROM WINDMILL. SHE FILED HER RETURN OF INCOME ON 30-09- 2010 DECLARING INCOME OF RS.28,70,285/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IA(4) OF THE I .T. ACT OF AN AMOUNT OF RS.38,82,992/- ON ACCOUNT OF PROFITS DERI VED FROM 2 GENERATION AND SALE OF ELECTRICITY FROM WINDMILL. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF SUCH DEDUCTION U/S.80IA(4). 2.1 THE ASSESSEE SUBMITTED THAT A.Y. 2010-11, I.E. THE IMPUGNED ASSESSMENT YEAR IS THE FIRST YEAR FOR THE PURPOSE O F CLAIMING DEDUCTION U/S.80IA(4) OF THE I.T. ACT. IT WAS ARGU ED THAT THE INITIAL YEAR HAS NOT BEEN DEFINED IN I.T. ACT AND ACCORDING TO THE ASSESSEE INITIAL YEAR IS THE YEAR IN WHICH THE ASSESSEE HA S CHOSEN TO CLAIM THE DEDUCTION U/S.80IA(4) OF THE I.T. ACT. IT WAS FURTHER ARGUED THAT FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER THE SAI D SECTION, THE PROFITS HAVE TO BE COMPUTED AS IF THE ELIGIBLE BUSI NESS IS THE ONLY SOURCE OF INCOME AND WHEN THE ASSESSEE EXERCISES TH E OPTION ONLY THE LOSS OF THE YEARS BEGINNING FROM THE INITIAL AS SESSMENT YEAR ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF THE EARLIER YEARS WHICH HAVE ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE AS SESSEE. FOR THE ABOVE PROPOSITION, THE ASSESSEE RELIED ON THE DECIS ION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMI SPI NNING MILLS PVT. LTD. REPORTED IN 340 ITR 477. 3. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THA T THE ASSESSEE HAS SET-OFF DEPRECIATION ON THE WIND MILL NOT ONLY AGAINST THE INCOME FROM WIND MILL BUSINESS, BUT ALSO AGAINST TH E INCOME FROM OTHER SOURCES FROM A.Y. 2006-07, WHICH IS NOT AS PE R THE PROVISIONS IN SEC. 80IA(5) OF THE I.T. ACT. THE TOTAL TAXABL E INCOME OF THE ASSESSEE MAY BE DETERMINED BY SETTING OFF THE DEPRE CIATION ON WIND 3 MILL AGAINST INCOME FROM OTHER SOURCES, BUT FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION FROM THE ELIGI BLE BUSINESS, THE ELIGIBLE BUSINESS SHOULD BE CONSIDERED AS THE O NLY BUSINESS OF THE ASSESSEE. ACCORDINGLY, IN THE INITIAL ASSESSM ENT YEAR WHEN THE DEDUCTION IS CLAIMED, THE QUANTUM OF DEDUCTION HAS TO BE DETERMINED ON THE PREMISE THAT THE ONLY SOURCE OF I NCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE I NITIAL ASSESSMENT YEAR IS THE ELIGIBLE BUSINESS. IN THE CASE OF THE A SSESSEE THE INITIAL YEAR OF CLAIM OF DEDUCTION IS A.Y. 2010-11 THOUGH T HE ASSESSEE HAS STARTED THE ACTIVITY IN THE FINANCIAL YEAR RELEVANT TO A.Y. 2006-07. SINCE THE INITIAL YEAR OF CLAIM IS A.Y. 2010-11, TH E QUANTUM OF DEDUCTION HAS TO BE DETERMINED AFTER SETTING OFF OF THE TOTAL DEPRECIATION ALLOWABLE ON THE WIND MILL UP TO 31.03 .2009 AGAINST THE TOTAL INCOME GENERATED FROM WIND MILL BUSINESS. WITH SUCH SET-OFF, THE ASSESSEE WOULD STILL HAVE A DEPRECIATI ON LOSS OF RS.3,99,57,927/-. HENCE, WHEN THE INCOME IS NEGA TIVE, THERE IS NO QUESTION OF ALLOWING DEDUCTION U/S. 80IA(4) OF THE I.T. ACT. BASED ON THE ABOVE DISCUSSION, THE AO HELD THAT THE ASSESSEE'S CLAIM OF DEDUCTION U/S.80IA(4) OF THE I.T. ACT IS NO T IN ACCORDANCE WITH LAW AND ACCORDINGLY HE WITHDREW THE CLAIM. 4. BEFORE THE CIT(A) THE ASSESSEE RELYING ON VARIOU S DECISIONS SUBMITTED THAT WORKING OF ALLOWABLE DEDUCTION U/S.8 0IA AS MADE BY THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH THE PROVISIONS OF I.T. ACT AND ALSO NOT IN ACCORDANCE WITH THE VARIOU S DECISIONS. THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS : 4 1. VELAYUDHASWAMY SPINNING MILLS (P) LTD. 340 ITR 47 7 (MAD.) 2. POONAWALA ESTATE & STUD FARMS (P) LTD. (PUNE-B) (2 010) 48 DTR 210 3. SERUM INTERNATIONAL LTD. VS. ADDL.CIT IN ITA NOS.2 90 TO 292/PN/10 VIDE ORDER DT.28/09/2011. 4. CHORDIA FOOD PRODUCTS LTD. PUNE TRIBUNAL ORDER DT. 26-06-2012 5. SHAVIE EXPORTS, MUMBAI - ITA NO.321/MUM/2012 6. MALPANI SALES CORPORATION ITA NO.471/PN/2010 7. PRASHANT CATERERS, MUMBAI ITA NO.4226/MUM/2011 ORDER DT. 06-02-2013 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE BY OBSERVING AS UNDER : 3.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE APPELL ANT HAS RAISED THREE GROUNDS OF APPEAL AND IN GROUND NO. 1 AND ITS SUB-GROUNDS THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80IA(4) AMO UNTING TO RS. 38,82,992/- HAS BEEN CONTESTED. DURING THE ASSESSMEN T PROCEEDINGS THE A.O. HELD THAT IN VIEW OF SECTION 80I A(5), THE QUANTUM OF DEDUCTION IS TO BE COMPUTED AFTER REDUCIN G THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF THE ELIGIBL E BUSINESS EVEN THOUGH THE SAME MIGHT HAVE BEEN SET OFF AGAINST O THER INCOME IN THE EARLIER YEARS. ACCORDINGLY, THE A.O. HAS SET O FF THE NOTIONAL DEPRECIATION AGAINST THE INCOME FROM WINDMILL ACTIVI TY AND HAS HELD THAT THE UNABSORBED DEPRECIATION IS MUCH MORE TH AT THE INCOME RECEIVED FROM THE ACTIVITY OF WINDMILL AND H ENCE, THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 80IA OF T HE ACT. AS THE ASSESSEE HAVE BEEN CLAIMING DEDUCTION U/S 80IA IN RE SPECT OF PROFITS FROM THE ELIGIBLE BUSINESS WITHOUT ADJUSTING THE PRIOR YEAR'S LOSSES FROM SUCH ELIGIBLE BUSINESS AGAINST THE CURRENT YEA R'S INCOME, THE A.O. WENT ON TO DISALLOW THE CLAIM AMOUN TING TO RS.38,82,992/-. 3.3 THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS CONTESTED THE MADE BY THE A.O. AND HAS SUBMITTED THAT THE A.O. HAS WRONGLY APPLIED THE PROVISIONS OF SECTION 80IA(4) OF T HE ACT, AS THE SUB-SECTION PROVIDES THAT FOR THE PURPOSE OF COMPUTING THE QUANTUM OF DEDUCTION U/S 80IA FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR IN SUBSEQUENT ASSESSMENT YEAR, THE PROFIT OF THE ELIGIBLE BU SINESS SHOULD BE COMPUTED AS IF THE SAID BUSINESS WAS THE ONLY SO URCE OF INCOME TO THE ASSESSEE RELEVANT TO THE INITIAL ASSESSMENT Y EAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR, THEREAFTER. IT HAS AL SO BEEN CONTENDED THAT THE BASIC ISSUE WITH RESPECT TO THE MEAN ING OF THE TERM 'INITIAL ASSESSMENT YEAR' USED IN SUB-SECTION (5) AS T O WHETHER THE TERM 'INITIAL ASSESSMENT YEAR' MEANS THE FIRST YEAR IN WHICH THE WINDMILL WAS SETUP OR THE FIRST YEAR OF CLAIMING DEDUC TION OUT OF THE 15 YEARS PERIOD PROVIDED BY THE SECTION. THE APPE LLANT HAS SUBMITTED THAT FOR A.Y. 2010-11, DEDUCTION U/S 80IA O F RS. 5 38,82,9927- HAS BEEN CLAIMED WHICH IS SUPPORTED BY THE REPORT IN THE FORM NO. 10CCB FILED ALONG WITH THE RETURN OF I NCOME. IT HAS BEEN STATED THAT THE PRESENT YEAR I.E. A.Y. 2010-11 I S THE INITIAL YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA. THE A PPELLANT HAS FURTHER CONTENDED THAT INITIAL YEAR IS NOT DEFINED I N THE IT. ACT, 1961 AND, THEREFORE, AS UNDERSTOOD 'INITIAL YEAR' IS THE ASSE SSMENT YEAR IN WHICH THE ASSESSEE CHOSE TO CLAIM THE DEDUCTION U/S 80IA. IT HAS FURTHER BEEN STATED THAT THE DEDUCTION HAS BEEN RIGHT LY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80IA(5) TREA TING THE UNDERTAKING AS SEPARATE AND SOLE SOURCE OF INCOME, AND WHILE CALCULATING THE DEDUCTION U/S 80IA THE BROUGHT FORWA RD DEPRECIATION ON WINDMILL AND THE CURRENT YEAR'S DEPR ECIATION HAVE BEEN REDUCED FROM THE NET REVENUE INCOME OF THE SAID WINDMILL. THE APPELLANT HAS REPRODUCED THE COMPUTATION OF THE CLAIM OF DEDUCTION U/S 80IA WHEREBY THE ELIGIBLE AMOUNT OF D EDUCTION HAS BEEN WORKED OUT AT RS. 38,82,992/-. THE APPELLANT H AS EMPHASIZED THAT AS PER THE PROVISIONS OF SUB-SECTION (5) OF SECTION 80IA PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ON LY SOURCE OF INCOME OF THE ASSESSEE AND WHEN THE ASSESSEE EXERCISES THE O PTION ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF T HE EARLIER YEARS WHICH HAVE ALREADY BEEN SET OFF AGAINST OTHER IN COME OF THE ASSESSEE. THE APPELLANT HAS POINTED OUT THAT THE AFORESAI D LEGAL INTERPRETATION HAS BEEN APPROVED BY THE MADRAS HIGH C OURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS ACIT (2012) 340 ITR 477 (MAD) AND APPELLANT HAS PLACED RELIANCE ON THIS DECISION FOR THE PREPOSITION OF ITS CLAIM. THE APPELLA NT HAS ALSO RELIED UPON THE DECISION OF THE PUNE ITAT IN THE CASE OF POONAWALLA ESTATE & STUD FARM LTD. (2011) 136 TTJ 236 (PUNE) / (2010) 48 DTR 40. THE APPELLANT HAS RELIED ON THE FOLLOWING JU DICIAL DECISIONS: 1) SERUM INTERNATIONAL LTD., ITA NOS. 290 TO 292/PN/ 2010 2) CHORDIA FOOD PRODUCTS LTD. PUNE TRIBUNAL ORDER DT . 26.06.2012 3) SHEVIE EXPORTS, MUMBAI - ITA NO. 321/MUM/2012 4) MALPANI SALES CORPORATION, ITA NO. 471/PN/2010 DA TED 26.08.2011 5) PRASHANT CATERERS, MUMBAI, ITA NO, 4226/M/2011 DT. 6.02.2013 3.4 THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS HELD THAT FOR THE PURPOSE OF DEDUCTION U/S 80IA THE DEPRECIATION SET OFF IN THE EARLIER YEARS AGAINST OTHER INCOME OF THE APPELLANT HAD TO BE CARRIED FORWARD NOTIONALLY TO BE SET OFF ONLY AGA INST THE INCOME OF THE SAID ELIGIBLE WINDMILL. THE A.O., THUS CALCULA TED THE DEDUCTION U/S 80IA AFTER DEDUCTING THE SAID NOTIONAL LOSS /DEPREC IATION WHICH WAS SET OFF IN THE EARLIER ASSESSMENT YEARS WHICH RESULTED IN LOSS HENCE THE CLAIM OF DEDUCTION U/S 80IA WAS FOUND TO BE NOT ALLOWABLE. 3.5 IN THE PRESENT CASE THE APPELLANT HAD INSTALLED TH E WINDMILL IN A.Y.2006-07 AND THE DEDUCTION U/S 80IA HAS BEEN CL AIMED FOR THE FIRST TIME IN A.Y.2010-11. THE A.O. IN THE ASSESSMENT O RDER HAS MENTIONED THAT THE QUANTUM OF DEDUCTION HAS TO BE DE TERMINED AFTER SETTING OFF THE TOTAL DEPRECIATION ALLOWABLE O N THE WINDMILL UPTO 31.03.2009 AGAINST THE TOTAL INCOME GENERATED F ROM WINDMILL BUSINESS AND WITH SUCH SET OFF THE APPELLANT WOULD STILL HAVE A 6 DEPRECIATION LOSS OF RS. 3,99,57,927/- AND HENCE WHEN THE INCOME IS NEGATIVE THERE WAS NO QUESTION OF ALLOWING DEDUCTIO N U/S 80IA(4). THE ASSESSING OFFICER HAS DISCUSSED THE ENTIRE ISSU E IN PARA 4 OF THE ASSESSMENT ORDER. 3.6 THE AFORESAID ISSUE WAS THE SUBJECT MATTER BEFORE TH E PUNE ITAT IN THE CASE OF POONAWALLA STUD FARM & AGRO LTD. CITED ABOVE AND RELIED BY THE APPELLANT, THE BENCH HELD THAT IN ITIAL ASSESSMENT YEAR MEANS THE YEAR IN WHICH THE ASSESSEE CLAIMS DEDUCTIO N FOR THE FIRST TIME U/S 80IA AND NOT THE YEAR IN WHICH THE ASSESSE E STARTS GENERATING ELECTRICITY. IN ANOTHER DECISION OF THE P UNE ITAT IN THE CASE OF MALPANI SALES CORPORATION CITED SUPRA, THE BE NCH ON SIMILAR SET OF FACTS ALLOWED THE APPEAL OF THE ASSESSEE AFTER CON SIDERING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF GOLDMINE SHARES & FINANCE PVT. LTD., 116 TTJ 705 AND POONAWALA STUD & AGRO FARM PVT. LTD. HOLDING THAT 'INITIAL ASSESSMENT YEAR' IS IN WHICH THE DEDUCTION IS CLAIMED FOR THE FIRST TIME BY THE ASSESSEE. 3.6.1 IN ANOTHER DECISION BY THE BANGALORE ITAT IN THE CAS E OF ANIL H. LAD VS CIT, ITA NO. 1262/BANG/2010, A.Y. 200 8-09, DATED 07.01.2011, THE BANGALORE BENCH FOLLOWED THE DECISIO N OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VALAYUDHASWA MI SPINNING MILLS PVT. LTD. CITED (SUPRA) AND HELD THAT: '.............WHERE THE DEPRECIATION AND LOSS OF EARL IER YEARS HAVE ALREADY BEEN SET OFF AGAINST OTHER BUSINESS INCOME OF T HOSE ASSESSMENT YEARS, THERE IS NO NEED FOR NOTIONALLY CARRYIN G FORWARD AND SETTING OFF OF THE SAME DEPRECIATION AND LOSS IN CO MPUTING THE QUANTUM OF DEDUCTION AVAILABLE U/S 801. THE HON'BLE COURT HAS HELD FURTHER THAT THE YEAR OF COMMENCEMENT ALONE NE ED NOT BE THE 'INITIAL YEAR', BUT DEPENDING UPON THE FACTS OF THE CASE AND THE OPTION EXERCISED BY THE ASSESSEE, THE YEAR OF CLAIM ALSO CAN BE CONSIDERED AS 'INITIAL ASSESSMENT YEAR'. IT ALSO HELD THAT THE ISSUE IS SQUARELY COVERED BY THE H ON'BLE MADRAS HIGH COURT CITED SUPRA AND THAT WHERE SUCH AN O VERRIDING JUDGMENT OF THE CONSTITUTIONAL COURT IS GOVERNING THE ISSUE, WE ARE NOT PERMITTED TO RELY ON THE DECISION OF THE SPECIAL BENCH OF THE AHMEDABAD TRIBUNAL.' 3.6.2 IN THE CASE OF SERUM INTERNATIONAL LTD. VS ADDL .CIT, ITA NO. 290 TO 292/PN/2010 DATED 28.09.2011, THE PUNE ITAT HAS CONSIDERED THE SPECIAL BENCH DECISION OF THE AHMEDABA D ITAT CITED (SUPRA) AS ALSO THE DECISION OF THE MADRAS HIGH C OURT IN THE CASE OF VELAYUDHASWAMI SPINNING MILLS PVT. LTD. 231 CT R 368, AS UNDER: '13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS, WE FI ND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WHAT WOULD BE TH E INITIAL A. Y. FOR THE PURPOSES OF SECTION 80IA(5) OF THE ACT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE PUNE BENCH OF THE TRIBUNA L IN THE CASE OF POONAWALLA STUD AND AGRO FARM PVT. LTD. VS ACIT ( SUPRA). IN THAT CASE AFTER DISCUSSING THE ISSUE IN DETAIL, THE TRIBUNAL H AS COME TO THE CONCLUSION THAT THE INITIAL 'A. Y.' FOR THE PURP OSE OF CLAIMING DEDUCTION U/S 80IA WAS THE FIRST YEAR IN WHICH THE AS SESSEE CLAIMED THE DEDUCTION 80IA(1) AFTER EXERCISING HIS OPTION AS P ER THE PROVISIONS OF 80IA(2) OF THE ACT. IT WAS HELD THAT THE LD. CIT(A) HAS 7 ERRED IN HOLDING THAT THE INITIAL A.Y. FOR THE PURP OSES OF SECTION 80IA(2) R.W.S. 80IA(5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY FROM THE WINDMILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDING THE ELIGIBI LITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 80IA UNDIMINISHED BY UNAB SORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGA INST THE OTHER INCOME, IS FULLY COVERED BY THE DECISION OF HON 'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MI LLS (P) LTD. VS ACIT (SUPRA) HOLDING THAT AS PER SUBSECTION (5) OF SE CTION 80IA, PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS I S THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISE S THE OPTION, ONLY THE LOSSES OF THE YEARS BEGINNING FROM THE INITIAL A. Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE E ARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THE HON'BLE MADRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LO SS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER INCOME OF ASSESSEE AND SET OFF AGAINST THE CORRECT INCOME OF THE EL IGIBLE BUSINESS. FICTION CREATED BY SUB-SECTION (5) OF SECTION 8 0IA DOES NOT CONTEMPLATE SUCH NOTIONAL SET OFF, HELD THE HON'B LE HIGH COURT. THE HON'BLE MADRAS HIGH COURT IN THAT DECISION HAS ALSO REFERRED THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) AND THE DECISION OF SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) . THERE IS NO DISPUTE THAT EVEN A DECISION OF NON-JURISDICTIONAL HIG H COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. IN THIS REGARD, W E FIND STRENGTH FROM THE RECENT DECISION OF HON'BLE JURISDICTIONAL BO MBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VALSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD IN A CASE O F EXCISE MATTER THAT TRIBUNAL IS BOUND BY THE DECISION OF HIGH COURT EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DEC ISION OF ANY OTHER HIGH COURT. THE HON'BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLLOW THE JUDGEMENT OF THE MADRAS HIGH COURT. AN AUTHORITY LIK E INCOME TAX TRIBUNAL ACTING ANYWHERE IN THE COUNTRY HAS TO RESPEC T THE LAW LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE , SO LAND AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON TH AT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER O F CENTRAL EXCISE VS. VAKSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DECISION OF TH E HON'BLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA ). WE THUS RESPECTFULLY FOLLOWING THE DECISION TAKEN BY THE HON' BLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTICAL ISSUE UNDER AL MOST SIMILAR FACTS, HOLD THAT WHEN THE ASSESSEE EXERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A. Y. AR E TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. THE RE VENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHI CH 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 BUSINE SS. WE THUS SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIREC T THE A.O. TO ALLOW THE CLAIMED DEDUCTION U/S 80IA WITHOUT BRINGIN G THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION O F EARLIER YEARS 8 WHICH HAS ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESSEE.' 3.7 IN VIEW OF THE ABOVE FACTS AND THE JUDICIAL DECI SION CITED (SUPRA), THE DISALLOWANCE MADE BY THE A.O. IS LIABLE T O THE DELETED AND THE GROUNDS RAISED BY THE APPELLANT VIDE NO. 1 & ITS SUB- GROUNDS ARE ALLOWED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE INITIAL ASSESSMENT YEAR FOR THE PUR POSE OF CLAIMING DEDUCTION U/S.80IA(4) OF THE ACT WAS THE FIR ST YEAR IN WHICH THE ASSESSEE MADE SUCH CLAIM AFTER EXCERCISING THE OPTION, IGNORING THE PROVISIONS OF SECTION 80IA(2) ACCORDING T O WHICH THE FIRST YEAR WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENE RATING ELECTRICITY (2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN FAILING TO APPRECIATE THE PROVISIONS OF SECTION 80I A(5) OF THE ACT WHICH STIPULATES THAT FOR THE PURPOSE OF DETERMINING T HE QUANTUM OF DEDUCTION U/S.80IA(1), PROFITS AND GAINS OF ELIGIBL E BUSINESS OF THE ASSESSEE WOULD BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PRE VIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SU BSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FO R WHICH THE DETERMINATION HAS TO BE MADE. (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE'S CLAIM OF DE DUCTION U/S.80IA OF THE ACT WAS REQUIRED TO BE DETERMINED ONL Y AFTER SET OFF OF PREVIOUS YEARS' LOSSES ON STANDALONE BASIS. (4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY OR ALL THE GROUNDS OF APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET F ILED A COPY OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF SANGRAM PATIL VS. ITO VIDE ITA NOS. 177 AND 178/PN/ 2011 ORDER DATED 12-12-2012 FOR A.YRS. 2006-07 AND 2007-08 AND SUBMITTED THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IT HAS BEEN HELD IN THE SAID DECISION THAT WHEN THE ASSESSEE EXERCISES THE OPTION IDENTIFYING 10 CO NSECUTIVE YEARS AS 9 CONTAINED IN SUB-SECTION (2) OF SECTION 80IA OF THE ACT, ONLY THE LOSSES OF THE YEAR BEGINNING FROM SUCH INITIAL ASSE SSMENT YEAR ARE TO BE BROUGHT FORWARD AND SET OFF WHILE APPLYING THE P ROVISIONS OF SECTION 80IA(5) OF THE ACT AND NOT LOSSES OF EARLIE R YEARS WHICH OTHERWISE WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BEING IN ACCORDANCE WITH THE CONSISTENT DECISION OF THE TRIB UNAL AS WELL AS THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF VELAYUDHASWAMI SPINNING MILLS PVT. LTD. (SUPRA) THE REFORE, THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN THE CASE OF PIDILITE INDUSTRIES LTD. VS. DCIT REPORTED IN (2011) 12 TAXMANN.COM 96 (MUM) AND SUBMITTED THAT THE TRIBUNA L FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF AC IT VS. GOLDMAN SHARES AND FINANCE PVT. LTD. REPORTED IN 113 ITD 20 9 HELD THAT IN VIEW OF SPECIFIC PROVISIONS OF SECTION 80IA(5), PRO FITS FROM ELIGIBLE BUSINESS FOR THE PURPOSE OF DETERMINATION OF QUANTU M OF DEDUCTION U/S.80IA HAVE TO BE COMPUTED AFTER DEDUCTION OF NOT IONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINES S EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN EARLIER YEARS. 9. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDE R SUBMITTED THAT THE DECISION OF THE SPECIAL BENCH HAS BEEN OVE RRULED BY THE HONBLE MADRAS HIGH COURT. SINCE THE PUNE BENCH OF THE TRIBUNAL IS CONSISTENTLY TAKING THE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE 10 AND SINCE THE LD.CIT(A) HAS FOLLOWED THE DECISION O F THE PUNE BENCH OF THE TRIBUNAL, THEREFORE, THE DECISION RELI ED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE ORDER OF THE LD.CIT(A) IS IN CONSONANCE WITH THE CONSISTENT VIEW OF THE TRIBU NAL, THEREFORE, THE SAME SHOULD BE UPHELD AND THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. THE ONLY DISPUTE TO BE DECIDED IN THE IMPUG NED GROUNDS RAISED BY THE REVENUE IS AS TO WHETHER IN VIEW OF S ECTION 80IA(5) OF THE I.T. ACT, 1961 THE QUANTUM OF DEDUCTION IS TO B E COMPUTED AFTER REDUCING THE NOTIONAL BROUGHT FORWARD LOSSES AND DE PRECIATION OF THE ELIGIBLE BUSINESS EVEN THOUGH THE SAME MIGHT HA VE BEEN SET OFF AGAINST OTHER INCOME IN THE EARLIER YEARS OR THE YE AR IN WHICH THE ASSESSEE EXERCISES THE OPTION CONTAINED IN SUB-SECT ION 80IA(2) OF THE ACT OF IDENTIFYING 10 CONSECUTIVE ASSESSMENT YE ARS OUT OF 15 YEARS FOR WHICH THE DEDUCTION IS TO BE AVAILED. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF SANGRAM PATIL (SUPRA) WHEREIN THE TRIBUNAL, FOLLOWING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF SERUM INTERNATIONAL LTD. (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 4. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF POWER GENERATION, CONSTRUCTION AND EARTHMOVING. FOR THE A.Y. 2006-07, ASSESSEE FILED A RETURN OF INCOME DECLARING TO TAL INCOME OF RS. 7,44,078/- WHICH, INTER ALIA, INCLUDED A CLAIM F OR DEDUCTION U/S 80-IA OF THE ACT AMOUNTING TO RS. 25,62,413/- IN REL ATION TO THE PROFITS EARNED FROM THE ACTIVITY OF POWER GENERATION IN THE 11 WINDMILL. THE UNDERTAKING OF THE ASSESSEE GENERATING POWER (VIZ. WINDMILL) WAS SET UP IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03 AT VANKUSAWADE, TAL. PATHAN, DIST . SATARA. IN TERMS OF SECTION 80-IA OF THE ACT, THE PROFITS DERI VED BY SUCH UNDERTAKING OF THE ASSESSEE WAS ELIGIBLE FOR THE BENEFIT OF DEDUCTION TO THE EXTENT OF 100% OF SUCH PROFITS. THIS DEDUCTION WAS AVAILABLE FOR A PERIOD OF TEN CONSECUTIVE YEARS AT THE OPTION O F THE ASSESSEE OUT OF THE FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING I.E. WINDMILL STARTED GENERATING POWER. THE ASSESSEE ASSERTED BEFORE THE ASSESSING OFFICER THAT SUCH AN OPTION WAS EXERCISED BY THE ASSESSEE W.E.F. 2004-05 AND IT WAS EXP LAINED THAT THE RELEVANT DISCLOSURE WAS MADE IN THE INCOME-TAX RET URN FILED FOR SUCH ASSESSMENT YEAR. 5. THE BONE OF CONTENTION BETWEEN THE ASSESSEE AND THE REVENUE IS WITH REGARD TO THE PROVISIONS OF SECTION 80- IA(5) OF THE ACT. SECTION 80-IA(5) OF THE ACT CREATES A FICTION THAT FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80-IA OF THE ACT, IT WAS TO BE PRESUMED THAT THE ELIGIBLE UNIT WAS ONLY THE SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSE SSMENT YEAR AND ALSO TO EVERY SUBSEQUENT YEAR UPTO AND INCLU DING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MA DE. HAVING SET UP THE WINDMILL UNIT IN THE A.Y. 2002-03, ASSESSEE I NCURRED LOSSES IN A.Y. 2002-03 AS WELL AS 2003-04 FOR RS. 86,74,0 10/- AND RS. 59,58,553/- RESPECTIVELY. SUCH LOSSES WERE SET-OFF A GAINST INCOME FROM OTHER BUSINESS AND INCOMES FROM HEADS OTHER THAN THE BUSINESS INCOME. FOR A.Y. 2003-04 LOSS OF RS. 24,08,079/ - HOWEVER, REMAINED TO BE ABSORBED. IN A.Y. 2004-05, ASSESSEE HAD PROFITS FROM WINDMILL ACTIVITY OF RS. 18,93,846/- AND AFTER SETTING OFF THE BROUGHT FORWARD LOSS FROM THE WINDMILL ACTIVITY OF RS. 24,08,079/-, THERE REMAINED A LOSS OF RS. 3,47,134/-. IN A.Y. 2005 -06, THERE WAS A PROFIT FROM WINDMILL ACTIVITY OF RS. 21,96,821/- A ND AFTER SETTING OFF THE BROUGHT FORWARD LOSS OF WINDMILL ACTIVITY OF RS. 3,47,134/-, ASSESSEE CLAIMED DEDUCTION U/S 80-IA OF THE ACT ON THE B ALANCE OF THE PROFITS. IN THE YEAR UNDER CONSIDERATION I.E. 20 06-07, THE ASSESSEE HAD PROFITS FROM WINDMILL ACTIVITY AT RS. 25,62 ,314/- WHICH HAS CLAIMED TO BE EXEMPT IN TERMS OF SECTION 80- IA OF THE ACT. HOWEVER, AS PER THE REVENUE, THE LOSSES INCURRED BY THE ASSESSEE FOR A.Y. 2002-03 AND 2003-04 FROM THE ACTIVITY OF W INDMILL HAVE TO BE REDUCED FROM THE CURRENT YEARS PROFITS OF THE WIN DMILL ACTIVITY IN ORDER TO COMPUTE THE AMOUNT ELIGIBLE FOR DEDUCTI ON U/S 80-IA OF THE ACT, HAVING REGARD TO THE PROVISIONS OF SECTION 80 -IA(5) OF THE ACT. PERTINENTLY, IT IS NOT DISPUTED THAT THE LOSSES OF A.Y. 2002-03 AND 2003-04 FROM WINDMILL ACTIVITY ARE OTHERWISE LYI NG ABSORBED AGAINST ASSESSABLE INCOMES IN THE PAST YEARS. AS PER THE RE VENUE, SECTION 80-IA(5) OF THE ACT REQUIRES THAT THE PROFITS OF THE ELIGIBLE UNITS I.E. WINDMILL ARE TO BE COMPUTED FOR THE PURPO SES OF DETERMINING THE QUANTUM OF DEDUCTION U/S 80-IA(1) OF THE ACT, IN A MANNER AS IF SUCH ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE I NITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR THE REOF. AS PER THE REVENUE, INITIAL ASSESSMENT YEAR IN THIS CASE WAS 2002- 03 BEING THE YEAR OF SET-UP OF THE WINDMILL. THERE FORE, THE PAST LOSSES STARTING FROM THE A.Y. 2002-03 HAVE TO BE SET-OFF AGAINST THE PROFITS OF THIS YEAR IN ORDER TO ARRIVE AT THE DEDUCT ION COMPUTABLE U/S 80-IA(1) OF THE ACT FOR THE YEAR UNDER CONSIDERAT ION. ON THE OTHER HAND, THE PLEA OF THE ASSESSEE IS THAT THE INITIA L ASSESSMENT YEAR IN THIS CASE IS TO BE TREATED AS 2004-05 I.E. THE YEAR IN WHICH 12 ASSESSEE EXERCISED THE OPTION CONTAINED IN SECTION 80-IA( 2) OF THE ACT OF IDENTIFYING TEN CONSECUTIVE ASSESSMENT YEARS OUT O F FIFTEEN YEARS FOR WHICH THE DEDUCTION IS TO BE AVAILED. IT IS CONTENDED THAT THE EXPRESSION INITIAL ASSESSMENT YEAR REFERRED TO IN SE CTION 80- IA(5) IS TO BE UNDERSTOOD WITH RESPECT TO A.Y. 2004-05 IN THIS CASE AND THEREFORE, THE LOSSES FOR ASSESSMENT YEAR PRIOR TO 20 04-05 CANNOT BE CONSIDERED, WHICH OTHERWISE ALSO WERE LYING ABSORBED IN THE RESPECTIVE YEARS. IT IS ONLY THE LOSSES WHICH HAVE B EEN INCURRED IN THE YEARS STARTING FROM A.Y. 2004-05 ONWARDS WHICH ARE TO BE SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS IN ORD ER TO QUANTIFY THE DEDUCTION U/S 80-IA OF THE ACT. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. VS. ADDL. CIT RANGE 6, PUNE IN IT A NOS. 290 TO 292/PN/2010 FOR A.Y. 2004-05 TO 2006-07 VIDE ORDER DATED 28-9- 2011 HAS CONSIDERED AN IDENTICAL CONTROVERSY AND AFTER FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010 ) 38 DTR (MAD) 57 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FO LLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD:- 11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHETHER IN VIEW OF THE PROVISIONS OF SEC. 80IA(5) OF THE I.T. AC T 1961, THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT HAS TO BE COMPUTED AF TER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAV E BEEN ALLOWED SET OFF AGAINST OTHER NON-ELIGIBLE BUSINESS INCO ME IN EARLIER YEARS. THE SUBMISSION OF THE LD A.R. REMAINED THAT ON THE WIND MILLS SET UP IN THE PREVIOUS YEAR RELEVA NT TO A.Y. 2002-03, THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 100% THEREON I.E. RS. 3.54 CRORES, WHICH WAS F ULLY SET OFF AGAINST THE ANOTHER INCOME IN THE SAID A.Y. 2002 -03 ITSELF. IN THE A.Y. 2004-05, THE ASSESSEE HAD POSITIVE INCOME FR OM THE SAID GENERATION ACTIVITY AND THERE WERE NO BROUG HT FORWARD LOSSES/ UNABSORBED DEPRECIATION OF THE PRECEDI NG YEAR, WHICH HAD REMAINED TO BE SET OFF IN THE A.Y. 2 004-05. THE A.O., NOTIONALLY BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE A.Y. 2003-04 TO THE IMPUGNED A .Y. 2004-05 AND DENIED THE CLAIM FOR DEDUCTION MADE BY THE ASSESSEE U/S. 80IA IN RESPECT OF THE PROFIT EARNED BY IT IN A.Y. 2004-05. THE LD. A.R. SUBMITTED THAT SUB-SECTION (2) OF SECTION 80IA PROVIDES AN OPTION TO THE ASSESSEE TO CHOO SE 10 CONSECUTIVE A.YS. OUT OF 15 YEARS FOR CLAIMING THE D EDUCTION. HE SUBMITTED THAT THE TERM INITIAL YEAR IN SUB-SECTION (5) OF 80IA IS NOT DEFINED AND IS USED IN CONTRADICTION TO TH E WORDS BEGINNING FROM THE YEAR USED IN SUB-SECTION (2). H E SUBMITTED THAT THE ASSESSEE CHOSE A.Y. 2004-05 AS INITIAL A.Y BEING THE FIRST YEAR IN WHICH IT CLAIMED DEDUCTION U /S. 80IA AND THEREFORE, LOSSES/DEPRECIATION BEGINNING FROM A.Y. 2004-05 ALONE COULD ONLY BE BROUGHT FORWARD AND SET OFF. DEPRECIATION OF THE PRECEDING A.Y. 2002-03 COULD N OT HAVE BEEN NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST P ROFIT FOR THE A.Y. 2004-05. THE LD. A.R. PLACED HEAVY RE LIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA ). HE SUBMITTED THAT THE DECISION OF HONBLE MADRAS HIGH 13 COURT WILL PREVAIL UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN ITS RECENT DECISION IN THE CASE OF PRIMA P APER ENGG (P) LTD. VS. ITO (SUPRA) AND THERE THE ASSESSEE D ID NOT DISPUTE THE FACT THAT THE AUTHORITIES BELOW HAVE DECI DED THE ISSUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES.. THE LD. A .R. POINTED OUT THAT DECISION OF HONBLE MADRAS HIGH COUR T IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) WAS NOT CITED BEFORE THE PUNE BENCH IN THE C ASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA). THE LD. A.R. HAS ALSO CITED THE DECISION OF PUNE BENCH OF THE TRIBUNA L IN THE CASE OF ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LTD., (SUPRA) HOLDING THAT EVEN A DECISION OF NON-JURISDICT IONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HI GH COURT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENT RAL EXCISE VS. M/S. VALSON DYEING, BLEACHING AND PRINTING W ORKS (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAN D REMAINED THAT DEDUCTION U/S. 801 AND 801A COVERED I NTER ALIA, INDUSTRIAL UNDERTAKINGS. THE POWER GENERATION UNITS FOUND A SPECIFIC MENTION FOR THE FIRST TIME W.E.F. 1 .4.1993. IN ALL THE YEARS FROM 1.4.1981 TO 31 TO 31 ST MARCH 2000 IN BOTH U/S. 80I AND 80IA, THE TERM INITIAL A.Y WAS DEFINED AND MEANT THE FIRST A.Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGIBLE UNIT COMMENCES PRODUCTION/POWER GENERAT ION. ONLY FROM 1.4.2000, WHEN SECTIONS 80IA WAS REPLACED W ITH SECTION 80IA AND 80IB, THE DEFINITION OF INITIAL A .Y. DID NOT FIND A MENTION. BUT NOWHERE, IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL HAS ANY MENTION THAT THERE WAS ANY INTENTION TO IGNORE LOSSE S AND DEPRECIATION FROM FIRST YEAR OF POWER GENERATION/PRODUCTION AND THAT SUCH LOSSES TILL FIRST YE AR OF CLAIM OF DEDUCTION IS TO BE IGNORED. THE VIEW CANV ASSED BY THE ASSESSEE DOES NOT FIND ANY SUPPORT. HE SUBMITTED THA T THERE IS NO DISCERNIBLE CHANGE IN LAW OR INTENTION OF PARLIAMENT W.E.F. 1.4.2000. THE LD. D.R. SUBMITTED THAT THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CAS E OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) IS FULL Y APPLICABLE IN THE PRESENT CASE. HE POINTED OUT THAT IN ITS RECENT DECISION DT. 21 ST JANUARY 2011, THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICAL SU PPLIES LTD. VS. ACIT (SUPRA) HAS ALSO DECIDED AN IDENTICAL DE CISION IN FAVOUR OF THE REVENUE FOLLOWING THE DECISION OF S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). HE SUBMITTED THA T THE HYDERABAD BENCH OF THE TRIBUNAL WHILE DECIDING TH E ISSUE HAS ALSO DISCUSSED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P ) LTD VS. ACIT (SUPRA). THE LD. D.R. SUBMITTED THAT EVEN I N THE CASE OF LIBERTY INDIA VS. CIT (SUPRA), THE HONBLE SU PREME COURT HAS BEEN PLEASED TO EXPLAIN THE INTENTION OF PARLIAMENT AND SCOPE OF DEDUCTION U/S. 80IA AND 80IB OF THE ACT. THE HONBLE SUPREME COURT HAS BEEN PLEASED TO HOLD 14 THAT SUCH PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBL E BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF E LIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVERRIDI NG PROVISIONS OF SUB-SECTION (5) OF SECTION 80IA OF THE ACT. 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS, WE FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WHAT WOULD BE THE INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA( 5) OF THE ACT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE PU NE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALLA STUD AND AGRO FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE A FTER DISCUSSING THE ISSUE IN DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE INITIAL A.Y FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE AS SESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF 80IA (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A) HAS ERRED IN HOLDING THAT TH E INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA(2) R.W.S. 80IA ( 5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTR ICITY FROM THE WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDING THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINISHED BY UNABSORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIE R YEARS AGAINST THE OTHER INCOME, IS FULLY COVERED BY TH E DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA ) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80IA , PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE O NLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTION, ONLY THE LOSSES OF THE YEARS BEGINN ING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THE HONBLE MADRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVE NUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER INCO ME OF ASSESSEE AND SET OFF AGAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED BY SUB-SECTION (5) OF SECTION 80IA DOES NOT CONTEMPLATE SUCH NOTIONAL SET O FF, HELD THE HONBLE HIGH COURT. THE HONBLE MADRAS HIGH COURT IN THAT DECISION HAS ALSO REFERRED THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) AND THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). THERE IS NO DISPUTE THAT EVEN A DECISION OF NON-JURISDICTIONAL HIG H COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CO NTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. IN THIS REGARD, WE FIND STRENGTH FROM THE RECENT DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VALSON DYEING, BLEACH ING AND PRINTING WORKS (SUPRA) WHEREIN THE HONBLE BOMBA Y HIGH COURT HAS BEEN PLEASED TO HOLD IN A CASE OF EXCIS E MATTER THAT TRIBUNAL IS BOUND BY THE DECISION OF HIGH COURT , EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONT RARY DECISION OF ANY OTHER HIGH COURT. THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIB UNAL HAD NO OPTION BUT TO FOLLOW THE JUDGMENT OF THE MADRAS HIGH 15 COURT. AN AUTHORITY LIKE AN INCOME TAX TRIBUNAL AC TING ANYWHERE IN THE COUNTRY HAS TO RESPECT THE LAW LAID D OWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LA ID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF COMMISSIONER OF CENTRAL EXCISE VS. VAKSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DECISION OF THE HONBLE MADR AS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA ). WE THUS RESPECTFULLY FOLLOWING THE DECISION TAKEN BY T HE HONBLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTICA L ISSUE UNDER ALMOST SIMILAR FACTS, HOLD THAT WHEN THE ASSESSEE EXERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BE GINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHI CH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME OF THE ASSESSEE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. WE THUS SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE C LAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONAL LY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER Y EARS WHICH HAS ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.LTD. VS. ITO (SUPRA ) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINC E FIRSTLY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPR A) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECOND LY THE LD. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CAS E OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. THE LD. AR THERE IN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINS T THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS THE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. 7. OSTENSIBLY, IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA), THE TRIBUNAL HAS CONSIDERED AN IDENTICAL CONTROVERSY. ON BEHALF OF THE ASSESSEE, THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) WAS BE ING CITED WHEREAS THE REVENUE HAD RELIED UPON THE DECISION OF S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ASSTT. CIT VS. GOLDMINE SHARES AND FINANCE (P) LTD. (2008) 116 TTJ (AHD) (SB) 705 TO T HE CONTRARY. THE TRIBUNAL NOTICED THAT HAVING REGARD TO THE DECI SION OF THE HONBLE MADRAS HIGH COURT THE ISSUE WAS TO BE DECIDED ACCORDINGLY AND NOT ON THE BASIS OF DECISION OF SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPR A) WHICH WAS TO THE CONTRARY. IN THIS CONTEXT, THE TRIBUNAL CAM E TO THE CONCLUSION THAT WHEN THE ASSESSEE EXERCISED OPTION IDENTIFYING TEN CONSECUTIVE YEARS AS CONTAINED IN SUB-SECTION (2) OF SECTION 80-IA O F THE ACT, 16 ONLY THE LOSSES OF THE YEAR BEGINNING FROM SUCH INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND SET-OFF WHILE APP LYING THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT AND NOT THE LOSSES OF EARLIER YEARS WHICH OTHERWISE WERE SET-OFF AGAINST OTHE R INCOME OF THE ASSESSEE. 8. AT THE TIME OF HEARING, THE LEARNED DR HAS NOT BR OUGHT TO OUR NOTICE ANY DECISION OF A HIGH COURT CONTRARY TO THAT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNIN G MILLS (P) LTD. (SUPRA) ON THE ISSUE IN QUESTION. THEREFORE, WE FIND THAT THE CONTROVERSY BEFORE US IS NO LONGER RES INTEGRA AND IS IN FACT COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LD. (SUPR A) WHICH HAS BEEN DECIDED FOLLOWING THE DECISION OF THE HONBLE M ADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA). 9. BEFORE PARTING WE MAY ALSO REFER TO THE DECISION O F THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENG G. (P) LTD. VS. ITO IN ITA NO. 1755 AND 1205/PN/2007 FOR A.Y. 2002- 03 AND 2003-04 VIDE ORDER DATED 31-1-2011 WHICH IS CONTRARY TO THE AFORESAID POSITION. THE SAID DECISION OF THE TRIBUNAL HAS BEEN EXPLAINED IN THE CASE OF SERUM INTERNATIONAL LTD (SUP RA) WHEREIN IT HAS BEEN CLEARLY BROUGHT OUT AS TO HOW THE SAID DECISIO N DOES NOT HELP THE CASE OF THE REVENUE. FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF PRIMA PAPER ENGINEERING P.LTD. VS. ITO (SUPRA) CITED BY TH E LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNI NG MILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED B EFORE THE BENCH AND SECONDLY THE LD. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECI AL BENCH IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. THE LD. AR THERE IN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINS T THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS T HE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. 10. IN VIEW OF THE AFORESAID DISCUSSION, WE THEREFORE, HOLD THAT THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80-IA OF THE ACT FOR THE YEAR UNDER CONSIDERATION IN A MANNER WHEREBY THE INITIAL ASSESSMENT YEAR REFERRED TO IN SECTION 80-IA(5) OF THE ACT IS TO BE TAKEN AS THE A.Y. 2004-05 AND NOT THE A.Y. 2002-03 A S CANVASSED BY THE REVENUE. RESULTANTLY, WE THEREFORE, SET ASIDE T HE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE AN D ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80-IA OF THE ACT AS ABOVE. 10.1 RESPECTFULLY FOLLOWING THE DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL, WE UPHOLD THE ORDER OF THE CIT(A). GROUNDS RAISED 17 BY THE REVENUE ARE ACCORDINGLY DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24-09-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 24 TH SEPTEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE