Ratnam Metals & Tubes Limited, Ahmedabad V. The Dy. Commissioner of Income Tax, Central Circle-2(3), Ahmedabad

ITA 2081/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4253 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 11-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SHAH
• Assessee Lawyers: P D SHAH
• Keywords: Depreciation; Question of law; Revised return
• Section: 143(3); 139(5)

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2081/AHD/2016 ( ASSESSMENT YEAR : 2012-13) RATNAMANI METALS & TUBES LIMITED, MEHTA LODHA & CO., CHARTERED ACCOUNTANTS, 105, SAKAR-I, ASHRAM ROAD, AHMEDABAD-380009 / VS. DEPUTY COMMISSIONER OF INCOME TAX,, CENTRAL CIRCLE -2(3), AHMEDABAD - 380014 ./ ./ PAN/GIR NO. : AABCR1742E ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI P. D. SHAH, A.R. / RESPONDENT BY : SHRI DINESH SHAH, SR. D.R. DATE OF HEARING 17/07/2018 !'# / DATE OF PRONOUNCEMENT 14/08/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-12, AHMEDA BAD (CIT(A) IN SHORT), DATED 05.04.2016 ARISING IN THE ASSESSMENT ORDER DATED 23.02.2015 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSES SMENT YEAR 2012- 13. ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA DS AS UNDER: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN LAW AND FACTS BY REJECTING THE CLAIM OF DEDUCTIO N OF RS.7,35,01,934/- U/S 80IA(4)(IV) AND THEREFORE THE LEARNED AO SHOULD BE DIRECTED TO ALLOW THE SAID CLAIM WHILE CO MPUTING THE TOTAL INCOME. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE ADDITION TO THE EXTENT OF RS.1,70,439/- MADE ON ACCOUNT OF NON-RECONCILIATION OF DIFFERENCE IN THE CLOSING BALANCE AND THEREFORE THE LEARNED AO SHOULD BE DIRECTED TO DELETE THE SAID ADDITION WHILE COMPUTIN G THE TOTAL INCOME. 3. AS REGARDS GROUND NO.1 OF THE ASSESSEES APPEAL , THE RELEVANT FACTS ARE THAT THE ASSESSEE, A DOMESTIC COMPANY, IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SALE TUBES AND PIPES. THE ASSESSEE IS ALSO ENGAGED IN GENERATION OF ELECTRICI TY THROUGH WINDMILL WHICH IS ELIGIBLE BUSINESS FOR THE PURPOSES OF DEDU CTION UNDER S.80IA(4) OF THE ACT. THE ASSESSEE FILED ITS RETUR N OF INCOME FOR THE AY 2012-13 AND CLAIMED DEDUCTION OF RS.3,05,59,000/ - UNDER S. 80IA(4) OF THE ACT IN RESPECT OF INCOME EARNED FROM THE ACTIVITY OF GENERATION OF ELECTRICITY THROUGH ITS WINDMILL PROJ ECT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE AFORESAID AMOUNT O F DEDUCTION HAS BEEN ARRIVED AFTER CONSIDERING THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF WINDMILL BUSINESS EVEN THOUGH SUCH LOSSES/DEPRECIATION HAVE BEEN DULY SET OFF AGAINST OTHER INCOME GENERATED IN THE EARLIER ASSESSMENT YEARS. THE ASS ESSEE ACCORDINGLY CLAIMED DEDUCTION AFTER SET OFF OF CARRY FORWARD NO TIONAL LOSSES AND COMPUTED THE ELIGIBLE PROFIT FOR DEDUCTION AT RS.3, 05,59,270/-. THE AO HOWEVER DENIED THE AFORESAID DEDUCTION ON THE GR OUND THAT THE ASSESSEE COULD NOT HAVE SET OFF THE LOSSES OF ELIGI BLE BUSINESS AGAINST THE INCOME OF THE REGULAR BUSINESS IN THE EARLIER Y EAR WHEN IT INTENDED TO CLAIM DEDUCTION UNDER S.80IA(4) OF THE ACT IN TH E SUCCEEDING ASSESSMENT YEARS. CONSEQUENTLY, FOR SUCH BIZARRE RE ASONING THE ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 3 - ADDITION OF RS.3,05,59,000/- WAS MADE TO THE TOTAL INCOME BY DENYING THE CLAIM OF DEDUCTION. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE FILED ADDITIONAL GROUND SEEKING CLAIM OF DEDUCTION OF ENTIRE PROFIT GENERATED FROM WINDMILL POWER PROJECT WITHOUT REDUCING NOTIONAL BROUGHT FORWARD L OSSES AND DEPRECIATION. THE CIT(A) AGREED ON PRINCIPLES THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S.80IA(4)(IV) OF THE A CT OF THE ENTIRE PROFIT FROM ITS WINDMILL PROJECTS UNENCUMBERED AND UNIMPACTED BY THE CLAIMS OR CARRY FORWARD OF DEPRECIATION OR LOSSES O F THE PAST YEARS PRIOR TO INITIAL ASSESSMENT YEAR AS OPTED BY THE ASSESSEE. THE CIT(A) HOWEVER OBSERVED THAT SUCH ADDITIONAL CLAIM OF DEDUCTION 80IA(4) ON ACCOUNT OF WRONG SET OFF OF NOTIONAL BUS INESS LOSS/DEPRECIATION (IN DEVIATION WITH CBDT CIRCULAR NO.1 OF 2016 DATED 15.02.2016 & ORDER OF ITAT IN THE CASE OF HAR SHA ENGINEERING IN ITA NO. 2295/AHD/2011 AND 1795/AHD/2012) CAN BE ENTERTAINED ONLY WHERE THE ASSESSEE HAS REVISED ITS ORIGINAL RE TURN AS PROVIDED UNDER S.139(5) OF THE ACT. THE CIT(A) ACCORDINGLY ACCEPTED THE CLAIM OF RS.3,05,59,000/- TOWARDS DEDUCTION UNDER S.80IA( 4) OF THE ACT AS MADE IN THE RETURN OF INCOME BUT HOWEVER DECLINED T HE ADDITIONAL CLAIM OF RS.7,35,01,934/- RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUND AROSE DUE TO WRONG SET OFF TOWARDS NOTIONAL LOSSES OF EARLIER YEARS. THE RELEVANT PARA DEALING WITH THE ISSUE BY THE CIT(A) IN ITS ORDER REPRODUCED HEREUNDER FOR THE SAKE OF CONVENIE NCE: 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPAN Y HAD CLAIMED DEDUCTION U/S 80IA(4)(IV) TO THE TUNE OF RS.3,05,59 ,000/-. THE LD. AO CALLED UPON THE APPELLANT TO EXPLAIN WHY THE CLAIM SHOULD NOT BE REJECTED/REDUCED IN VIEW OF THE FACT THAT FOR PERIO D PRIOR TO A.Y.2009- 10, THE BUSINESS OF THE WINDMILL HAD INCURRED LOSSE S AND IN VIEW OF SECTION 80IA(5), THE CARRIED FORWARD LOSS HAS TO BE REDUCED FROM THE INCOME FROM THE WINDMILL BEFORE COMPUTATION OF INCO ME ELIGIBLE FOR ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 4 - DEDUCTION U/S 80IA(4)(IV). THE APPELLANT'S REPLY H AS BEEN REPRODUCED BY THE LD. AO AND, INSISTING THAT HIS OWN INTERPRET ATION OF SECTION 80IA(5) IS TO BE GIVEN EFFECT TO, AND BECAUSE THE D ECISION OF CIT(A) HOLDING IN FAVOUR OF THE APPELLANT ON THE ISSUE HAS BEEN FURTHER CONTESTED IN APPEAL BEFORE THE ITAT, HE HOLDS VIDE PAGE 6 OF HIS ORDER THAT THE DEDUCTION CLAIMED BY THE APPELLANT IS NOT TO BE ALLOWED IN VIEW OF CARRIED FORWARD LOSSES OF THE ELIGIBLE UNIT ON S TAND-ALONE BASIS. THUS HE MAKES AN ADDITION OF RS.3,05,59,000/- DISALLOWIN G CLAIM OF THE APPELLANT. 3. BEFORE ME, THE LD. AR HAS SUBMITTED THE COPY OF ORDER NO.CIT(A)-III/724/DCIT/CC2(3)/13-14 DATED 16/5/2014 OF MY LD. PREDECESSOR FOR A.Y.2011-12, WHEREIN, RELYING ON IT AT SPECIAL BENCH IN THE CASE OF GOLDMINE SHARES & FINANCE PUT. LTD. AND MADRAS HIGH COURT DECISION IN THE CASE OF VELAYUDHASWAMMY SPINN ING MILLS (P) LTD. 38 DT 57, THE CLAIM OF THE APPELLANT U/S 80IA(4) WI THOUT ANY REDUCTION OF THE SAME BY AMOUNT OF LOSSES OF THE EARLIER YEAR S WAS HELD ALLOWABLE BY HIM. THE LD. AR HAS ALSO POINTED OUT THAT THE VIEW OF THE LD. CIT(A) IN APPELLANT'S OWN CASE FOR A.Y.2009-10 HAS FURTHER BEEN APPROVED BY HON. ITAT IN ITA NO.274/AHD/2012. I REP RODUCE PARA 7 OF THE SAID ORDER OF THE TRIBUNAL: '...7. AFTER GOING THROUGH THE RIVAL CONTENTIONS AN D MATERIAL AVAILABLE ON RECORD, WE FIND THAT IN THE CASE OF DE DUCTION U/S 80IA, PROVISIONS OF SECTION 80IA(5) WHICH STARTS WITH NON -OBSTINATE CLAUSE THAT PROFITS FOR THE PURPOSE OF SECTION 80IA IS TO BE WORKED OUT AS IF ELIGIBLE INDUSTRIAL UNDERTAKING IS THE ON LY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR. TH IS PROVISION OF THE ACT MAKES IT CLEAR THAT ELIGIBLE PROFITS FOR DE DUCTION U/S 80IA IS TO BE COMPUTED FOR THE ELIGIBLE INDUSTRIAL UNDERTAK ING INDIVIDUALLY. IT SIMPLY MEANS THAT IF SUCH INDUSTRIAL UNDERTAKING HAD SUFFERED LOSSES IN THE EARLIER YEARS, THESE LOSSES HAS TO BE SET OFF AGAINST INCOME OF THE CURRENT YEAR. AFTER THIS SET OFF, IF THERE ARE SOME PROFITS, THE SAME IS ELIGIBLE FOR DEDUCTION U/S 80I A(IV). IN THIS REGARD, WE FIND THAT IN THE CASE OF ACTT VS. GOLDMI NE SHARES AND FINANCE PVT. LTD. (2008) 302 ITR 209 (AND), IT WAS HELD AS UNDER: 'TO CONCLUDE WE ANSWER THE QUESTION REFERRED IN THE AFFIRMATIVE, IN THE FAVOUR OF THE REVENUE AND AGAIN ST THE ASSESSEE, IN THE TERMS THAT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 80IA(5) OF THE INCOME-TAX ACT, 1961 THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DETER MINATION OF THE QUANTUM OF DEDUCTION U/S 80IA OF THE ACT HAS TO BE COMPUTED AFTER DEDUCTION OF NOTIONAL BROUGHT FORWAR D LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH T HEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN EARLIE R YEARS. THE ABOVE FACTS MAKE IT CLEAR THAT NOTIO NAL BROUGHT FORWARD LOSS & DEPRECIATION OF THE EARLIER YEAR S, IF ANY, PERTAINING TO THE ELIGIBLE BUSINESS NEEDS TO BE SET OFF AGAINST PROFITS OF CURRENT YEAR TO REACH TO CORRECT FIGURE OF ELIGIBLE PROFITS FOR DEDUCTION U/S 80IA(IV). IN THIS CASE, THE ASS ESSING OFFICER HAD ANNEXED DETAILS OF PROFIT AND LOSS ACCOUNT SINCE A. Y.2004-05 ALONG WITH ASSESSMENT ORDER. PERUSAL OF THESE DETAILS R EVEALED THAT THE ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 5 - ASSESSEE HAD SUFFERED LOSS OF RS.3,56,17,980/- (2, 13,15,196 + 1,43,02,784) FOR THE AYS 2004-05 & 2005-06. PERUS AL OF THIS CHART FURTHER REVEALED THAT FOR AYS 2006-07, 2007-08 & 20 08-09, THE ASSESSEE HAD EARNED PROFIT OFRS.3,09,96,800/- (68,9 0,448 + 1,21,53,374 + 1,19,52,978). THIS WAY, AT THE END O F ASSESSMENT YEAR 2008-09, THE ASSESSEE WAS HAVING A BROUGHT FO RWARD BUSINESS LOSS OF ELIGIBLE UNIT AT RS.46,21,180 (3,56,17,980- 3,09,96,800). DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS D ECLARED PROFIT FROM WIND MILLS AT RS.1,30,26,967/-. AS PER THE AB OVE DISCUSSIONS, ELIGIBLE PROFITS FOR DEDUCTION U/S80IA(IV) CAN BE C OMPUTED AFTER SET OFF OF NOTIONAL BROUGHT FORWARD LOSS OF RS.46,21,18 0 AGAINST THIS PROFIT. LIKEWISE, THE ELIGIBLE PROFIT U/S 80IA(IV) WAS WORKED OUT AT RS.84,05,787/-, (1,30,26,967-46,21,180). ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA(IV) ON A PROFIT OF RS.84,05,787/ - ONLY. THUS, THE ASSESSEE'S COMPUTATION FOR ELIGIBLE .PROFITS FOR TH E PURPOSE OF DEDUCTION U/S 80IA(IV) WAS WELL WITHIN THE PURVIEW OF INCOME-TAX ACT. THUS, IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.84,05,787/- MADE BY THE ASSESSING OF FICER U/S 80IA(IV) OF THE ACT. ACCORDINGLY, WE UPHOLD THE ORD ER OF THE CIT(A) IN THIS REGARD.' 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER, ORDER OF MY LD. PREDECESSOR, WRITTEN SUBMISSIONS MADE BY THE AR AND FURTHER THE ORDER OF THE HON. TRIBUNAL. I FIND AS PER PARA (IV) OF TH E SUBMISSIONS OF THE APPELLANT BEFORE THE AO REPRODUCED ON PAGE 4 OF THE ORDER THAT THE APPELLANT HAS CLAIMED DEDUCTION U/S 801A ONLY AFTER SETTING OFF OF THE BROUGHT FORWARD LOSSES AND DEPRECIATION CLAIMED IN THE EARLIER YEARS. AS SUCH AS PER THE CHART, SUBMITTED BY THE APPELLAN T WITH REGARD TO THE INCOME FROM WINDMILLS DURING THE YEAR UNDER REFEREN CE, AS PER ANNEXURE 5 FILED ALONG WITH THE WRITTEN SUBMISSIONS , THE ONLY PROGRESSIVE PROFITS FROM SHIKARPUR, UKHRALA, PATELK A AND LAMBA (2) UNITS OF WINDMILLS HAVE BEEN CLAIMED ELIGIBLE FOR D EDUCTION U/S 80IA BY THE APPELLANT BEFORE THE AO. I FIND THAT THE HON. I TAT IN APPELLANT'S OWN CASE HAS HELD IN FAVOUR OF THE APPELLANT AND OB SERVED IN PARA 7 OF THE ORDER THAT THE' COMPUTATION OF ELIGIBLE PROFITS FOR A.Y.2009-10 HAS ALREADY EXHAUSTED THE LOSSES BROUGHT FORWARD FROM E ARLIER YEARS AND ONLY THE NET AMOUNT WAS CLAIMED FOR DEDUCTION DURIN G A.Y.2009-10. THEREFORE, AS THERE IS NO CHANGE IN FACTS, RESPECTF ULLY FOLLOWING THE DECISIONS OF MY LD. PREDECESSOR AND ITAT IN APPELLA NT'S OWN CASE, THE ADDITION TO THE EXTENT OF RS.3,05,59,000/- IS DELET ED. RELATED GROUNDS SUCCEED . 5. DURING THE COURSE OF HEARING, THE APPELLANT HAS RAISED THE FOLLOWING ADDITIONAL GROUND IN VIEW OF THE DECISION OF JURISDICTIONAL TRIBUNAL, AHMEDABAD BENCH IN THE CASE OF M/S. HARSH A ENGINEERING/IN ITA NO.2295 OF 2011 & 1795 OF 2012. THE ADDITIONAL GROUND READS AS UNDER: 'THAT THE RELYING ON FACTS, LAW AND ORDER OF THE HO N'BLE ITAT, AHMEDABAD, IN THE CASE OF ACIT VS. HARSHA ENGINEERS LTD., DEDUCTION U/S 80IA(4)(IV) OF THE ACT IS TO BE ALLOW ED WITHOUT REDUCING NOTIONAL BROUGHT FORWARD LOSSES AND DEPREC IATION OF BUSINESSES EVEN THOUGH IT HAS BEEN SET OFF AGAINST OTHER INCOME IN ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 6 - EARLIER ASSESSMENT YEARS AND ACCORDINGLY THE LD. AO BE DIRECTED TO ALLOW RS. 9,82,17,328/- WHILE COMPUTING THE TOTAL I NCOME.' THE LETTER OF THE APPELLANT DATED 12/02/2016 RAISIN G THE ADDITIONAL GROUND WAS FORWARDED TO THE AO WHOSE RESPONSE THERE TO HAS BEEN RECEIVED THROUGH THE RANGE HEAD ON 24/2/2016. IT IS COMMENTED BY THE LD. AO THAT THE DECISION OF ITAT IN M/S. HARSH ENGI NEERING HAS BEEN CONTESTED BEFORE HON. HIGH COURT. 6. I HAVE PERUSED THE DECISION OF ITAT IN M/S. HARS H ENGINEERING. THE HON. ITAT HAS HELD VIDE PARA 5.5, FOLLOWING ITS OWN DECISION IN ITA NO. 1193 AND 1194/AHD/2013 IN THE CASE OF JIVRA J TEA COMPANY (PARA 28) TO THE EFFECT THAT NO BROUGHT FORWARD LOS S OR DEPRECIATION COULD BE REDUCED FOR DETERMINING THE AMOUNT ON WHIC H THE DEDUCTION IS TO BE ALLOWED U/S 80IA OF THE ACT. TO A QUERY RAISE D BY THE UNDERSIGNED AS TO HOW THE ADDITIONAL GROUND WITH RESPECT TO A C LAIM WHICH WAS MADE NEITHER IN THE RETURN OF INCOME NOR BY WAY OF A CONTENTION OR WRITTEN SUBMISSIONS BEFORE THE AO CAN BE RAISED IN THE APPELLATE PROCEEDINGS, THE LD. AR FURNISHED THE COPY OF ITAT DECISION IN ITA NO.473/AHD/2011 DATED 30/6/2011 IN THE CASE OF ARVI ND MILLS LTD. AND HON. GUJARAT HIGH COURT JUDGEMENT IN TAX. APPEAL NO . 1407 OF 2011 DATED 5/7/2012 UPHOLDING THE VIEW THEREIN TO CONTEN D THAT THE ADDITIONAL GROUND HAS BEEN VALIDLY RAISED IN VIEW O F THE CORRECT LAW AS LEARNT BY THE APPELLANT AS DECLARED BY ITAT IN HARS H ENGINEERING (SUPRA) SUBSEQUENT TO THE COMPLETION OF THE ASSESSM ENT PROCEEDINGS. PARA 5 TO 7 FROM HIGH COURT DECISION IS REPRODUCED AS UNDER: '5. AS SUCH IN GOETZE (SUPRA) THE SUPREME COURT WHI LE DISMISSING THE APPEAL CLARIFIED THAT ITS DECISION W AS RESTRICTED TO THE POWER OF ASSESSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY A REVISED RETURN, AND DID NOT IMP INGE ON THE POWERS OF THE ASSESSING AUTHORITY UNDER SECTION 254 OF THE ACT. 6. WHEN THE CLAIM OF THE ASSESSEE WAS GENUINE AND A CCEPTABLE ON MERITS, THE APPELLATE COMMISSIONER ACTED WITHIN ITS POWERS AND RIGHTLY ALLOWED THE SAME. THAT WAS CONFIRMED BY THE TRIBUNAL. IN THAT VIEW, THE IMPUGNED ORDER OF THE TRIBUNAL WARRA NTS NO INTERFERENCE. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. 7. ACCORDINGLY, THE APPEAL IS DISMISSED.' 6.1 THE LD. AR HAS ALSO HEAVILY RELIED ON CIRCULAR 1 OF 2016 DATED 15/2/2016 TO FURTHER PLEAD THAT AS PER THE BOARD'S CIRCULAR, THE 'INITIAL ASSESSMENT YEAR' WITHIN THE MEANING OF SECTION 801A (5) HAS TO BE NECESSARILY THE INITIAL YEAR AS CHOSEN BY THE APPEL LANT HIMSELF. ONCE SUCH CHOICE IS MADE BY THE APPELLANT, IT WAS SUBMIT TED, ALL THE PAST BAGGAGE OF UNABSORBED LOSSES OR UNABSORBED DEPRECIA TION CARRIED FORWARD FROM PRECEDING YEAR BECOME IRRELEVANT FOR Q UANTIFICATION OF ELIGIBLE DEDUCTION IN TERMS OF SECTION 80IA(5) IN V IEW OF HARSHA ENGINEERING AND BOARD CIRCULAR. THE INTERPRETATION THUS ADOPTED BY HON. ITAT IN HARSH ENGINEERING (SUPRA) IS THUS FURT HER SANCTIFIED BY THE CIRCULAR NO.1 OF 2016 WHEREIN THE BOARD HAS DIR ECTED THAT PURSUIT ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 7 - OF PENDING LITIGATION ON ALLOWABILITY OF DEDUCTION U/S 80IA SHALL ALSO BE DECIDED KEEPING THIS PARTICULAR INTERPRETATION OF ' INITIAL YEAR' IN MIND. IT WAS FURTHER SUBMITTED THAT FOR AND FROM 'INITIAL ASSESSMENT YEAR' (AS CHOSEN BY THE APPELLANT) FOR THE CLAIM OF DEDUCTION U/S 80IA, THE PROFIT OF ELIGIBLE UNIT HAS TO BE COMPUTED KEEPING IN MIND THE INITIAL YEAR AS CHOSEN BY THE APPELLANT, AND ALL PRECEDING ASSES SMENT YEARS AND THE PROFIT/LOSS/DEPRECIATION' AS COMPUTED OR ADJUSTED I N THE YEARS PRECEDING THE 'INITIAL YEAR', WHETHER OR NOT ADJUSTED AGAINST THE PROFITS OF OTHER UNITS OR WHETHER OR NOT CARRIED FO RWARD BY THE APPELLANT, ARE ISSUES WHOLLY IRRELEVANT FOR THE PUR POSE OF COMPUTING THE ELIGIBLE PROFITS U/S 80IA(4)(IV). THIS IS, IT WAS ARGUED, THE RATIO OF HARSHA ENGINEERING AND MANDATE OF CIRCULAR 1/2016. 7. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE FACT S ON RECORD AND THE POINT OF LAW INVOLVED. AFTER CONSIDERING THE AU THORITIES RELIED UPON BY THE LD. AR AND IN VIEW OF THE FACT THAT THE LD. AO HAS OBJECTED TO THE ADMISSION OF THE ADDITIONAL GROUND ONLY ON THE FACT THAT FURTHER APPEAL IN THE CASE OF M/S. HARSH ENGINEERING HAS BE EN FILED BY THE DEPARTMENT, THE ADDITIONAL GROUND AS RAISED BY THE APPELLANT IS ADMITTED IN VIEW OF CLEAR MANDATE CONTAINED IN THE HIGH COURT DECISION IN M/S. ARVIND MILLS LTD. (SUPRA). I THERE FORE PROCEED TO ADJUDICATE THE ADDITIONAL GROUND. 8. THE APPELLANT, BY WAY OF A SMALL ENCLOSURE TO TH E ADDITIONAL GROUND, HAS FURNISHED THE COPY OF THE PROFIT & LOSS ACCOUNT FOR THE WINDMILL PROJECTS AT SHIKARPUR, UKHARALA, PATELKA, LAMBA (2 AND 3), VANKU AND MOTI SINDHOLI, AS PER ANNEXURE 5 TO THE WRITTEN SUB MISSIONS DATED 12/2/2016 TO CONTEND THAT THE PROFITS FOR THE WINDM ILLS FOR F.Y.2011-12 RELATABLE TO A.Y.2012-13 WORKS OUT AS UNDER: SR. NO. WINDMILL PROJECT AMOUNT OF PROFIT FROM WINDMILL FOR THE YEAR PROGRESSIVE PROFIT/LOSS (ON WHICH 80IA CLAIMED IN THE RETURN AFTER SET OFF OF NOTIONAL CARRY FORWARD LOSS) 1 SHIKARPUR RS.43,60,740 RS.43,60,740 2 UKHARALA RS. 1,44,22, 475 RS. 1,44,22,475 3 PATELKA RS.95,18,397 RS.95,18,397 4 LAMBA (2) RS. 81,01,264 RS.22,57,388 5 LAMBA (3) RS.94,48,211 (-)RS.26,21,360 6 VANKU RA.78, 47,801 (-)RS.1,65,03,084 7 MOTI SINDHOLI RS.5, 03,62,3 16 (-)RS.37,42,52,717 TOTAL RS.10,40,61,204 RS.3,05,59,270 RELIEF BY WAY OF ADDITIONAL GROUND CLAIMED RS.7,35,01,934 8.1 AFTER HAVING CAREFULLY CONSIDERED THE FACT S, THE DECISION IN M/S. HARSH ENGINEERING (SUPRA) AND THE CONTENTS OF CIRCU LAR NO.1 OF 2016, I HAVE NO DOUBT IN MIND THAT THE PROFITS OF THE ELIGI BLE UNITS ON 'STAND- ALONE BASIS HAS ONLY TO BE CONSIDERED FOR AND FROM THE 'INITIAL ASSESSMENT YEAR' AS OPTED BY THE APPELLANT. HOWEVE R, FROM THE CHART GIVEN BY THE LD. AR, AND FROM THE COPY OF ITAT'S OR DER IN APPELLANT'S OWN CASE (SUPRA) DATED 11/12/2015, IT BECOMES CRYST AL CLEAR THAT AS PER THE PRAYER OF THE APPELLANT CONTAINED IN THE ADDITI ONAL GROUND, THE ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 8 - APPELLANT WOULD WANT A DIRECTION TO THE AO THAT THE APPELLANT'S RETURNED INCOME BE ALLOWED TO BE REDUCED BY AN AMOU NT OF RS.7,35,01,934/- IN PURSUANCE TO ITAT DECISION IN H ARSHA ENGINEERING (SUPRA). AFTER HAVING GIVEN A CAREFUL CONSIDERATION TO THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND AND AFTER PERUSAL OF TH E AUTHORITIES CITED AND RELIED UPON BY THE AR, INCLUDING JURISDICTIONAL HIGH COURT IN ARVIND MILLS LTD. (SUPRA), I AM NOT PERSUADED TO GR ANT THE RELIEF AS CLAIMED BY WAY OF ADDITIONAL GROUND. WHILE FULLY AGREEING WITH THE- LD. AR THAT THE RATIO AS LAID DOWN, BY THE HON. ITA T IN HARSHA ENGINEERING IS TO THE EFFECT THAT DEDUCTION U/S 80I A(4)(IV) IS TO BE COMPUTED FOR AND FROM ASSESSMENT YEAR DECLARED BY T HE APPELLANT TO BE THE 'INITIAL ASSESSMENT YEAR', UNENCUMBERED OR U NIMPACTED BY THE CLAIMS OR CARRY FORWARD OF DEPRECIATION OR LOSSES O F THE PAST YEARS, I AM UNABLE TO FIND MYSELF IN AGREEMENT WITH THE FURT HER AND CONSEQUENT PRAYER OF THE APPELLANT THAT IN VIEW, OF JURISDICTI ONAL HIGH COURT IN ARVIND MILLS, THE INCOME ALREADY RETURNED BY THE AP PELLANT CAN BE ALLOWED TO BE REDUCED AS A REASON OF SUBSEQUENT DEC ISIONS ON A POINT OF LAW, PARTICULARLY IN APPELLATE PROCEEDINGS. IN MY C ONSIDERED OPINION, THE ONLY PROCEDURE PRESCRIBED STATUTORILY ENABLING THE APPELLANT TO REDUCE THE TAX-PAID INCOME AS RETURNED BY WAY OF A RETURN OF INCOME IS TO FILE A REVISED RETURN. AS PROVIDED U/S 139(5) WI THIN THE LIMITATION OF TWO YEARS AS PRESCRIBED THEREIN. THE EXCLUSION FOR CIT(A) OR APPELLATE AUTHORITIES FROM THE OPERATION OF GOETZ INDIA LTD., 327 FCR 305 (SC) WITH REGARD TO CLAIM BY WAY OF PRAYER DURING PROCEE DINGS WITHOUT REVISING THE RETURN OF INCOME AS APPROVED BY THE JU RISDICTIONAL HIGH COURT IN ARVIND MILLS LTD., IN MY CONSIDERED OPINIO N, CANNOT BE STRETCHED OR APPLIED SO AS TO GRANT A 'RELIEF OR AL LOW AN ADDITIONAL GROUND WHICH HAS EFFECT OF REDUCING THE RETURNED IN COME. AS SUCH, THE PRAYER MADE BEFORE THE AO NOT RESULTING INTO REDACT ION OF RETURNED INCOME AND REJECTED BY THE AO CAN ONLY, IN MY CONSI DERED OPINION, QUALIFY, ON FACTS, FOR APPLICATION OF JURISDICTIONA L HIGH COURT DECISION IN ARVIND MILLS LTD. (SUPRA). IN VIEW OF THIS, I FIND NO MERIT IN THE ADDITIONAL GROUND RAISED BY THE APPELLANT AND THERE FORE, THE SAME IS DISMISSED. 6. AGGRIEVED BY THE DENIAL OF THE ADDITIONAL CLAIM WHICH HAS THE EFFECT OF REDUCING THE ASSESSED INCOME BELOW THE RE TURN OF INCOME, THE ASSESSEE KNOCKED THE DOOR OF TRIBUNAL. 7. THE LEARNED AR FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE DISPUTE IN THE PRESENT CASE IS NOT TOWARDS ELIGIBIL ITY OF DEDUCTION UNDER S.80IA(4) OF THE ACT. IT WAS SUBMITTED THAT THE CIT(A) AFTER EXAMINATION OF FACTS HAS READILY ACCEPTED THE CLAIM OF DEDUCTION TO THE EXTENT MADE BY THE ASSESSEE IN ITS RETURN OF INCOME . THE DISPUTE IS TOWARDS ADDITIONAL CLAIM OF DEDUCTION MADE BY THE A SSESSEE BEFORE THE ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 9 - CIT(A) WHICH WAS DENIED ON THE GROUNDS OF ABSENCE O F REVISED RETURN OF INCOME IN THIS REGARD. THE LEARNED AR SUBMITTED THAT THE ASSESSEE EARNED PROFIT FROM THE WINDMILL PROJECT AMOUNTING T O RS.10,40,61,204/- IN AGGREGATE DURING THE YEAR. HO WEVER, WHILE MAKING THE CLAIM OF DEDUCTION AT THE TIME OF FILING RETURN OF INCOME, THE ASSESSEE WRONGLY APPLIED THE PROVISIONS OF LAW AND JUDICIAL INTERPRETATION RENDERED IN THIS REGARD AND THUS WRO NGLY ADJUSTED THE LOSSES INCURRED IN THE WINDMILL PROJECT IN THE PAST PRIOR TO THE EXERCISE OF OPTION TOWARDS INITIAL ASSESSMENT YEAR ENVISAG ED UNDER S.80IA(4) OF THE ACT. DELVING FURTHER, THE LEARNED AR SUBMIT TED THAT THE ASSESSEE INCURRED LOSSES IN THE WINDMILL PROJECTS IN THE EAR LIER YEARS, WHICH WAS CLAIMED AS SET OFF AGAINST ITS REGULAR BUSINESS IN EARLIER YEARS IN ACCORDANCE WITH LAW. THUS, NO UNADJUSTED BUSINESS LOSS/DEPRECIATION REMAINED TO BE CARRIED FORWARD FOR SET OFF. HOWEVE R, FOR THE PURPOSE OF DETERMINATION OF ELIGIBLE PROFIT UNDER S.80IA(4) OF THE ACT, THE ASSESSEE MISUNDERSTOOD THE RESTRICTIONS PLACED UNDE R S.80IA(5) OF THE ACT FOR THE PURPOSE OF DETERMINATION OF QUANTUM OF DEDUCTION. THE ASSESSEE THUS INCORRECTLY RECREATED THE BUSINESS LO SS/DEPRECIATION AROSE IN THE PRECEDING YEARS (PRIOR TO INITIAL ASSESSMENT YEAR) AND NOTIONALLY ADJUSTED THE SAME FROM THE ELIGIBLE PROFIT AROSE DU RING THE YEAR TO ITS DETRIMENT, OWING TO SUCH MIS-INTERPRETATION OF LAW. THE ASSESSEE IMPROPERLY REDUCED ITS ELIGIBLE PROFIT FOR DEDUCTIO N TO RS.3.05 CRORE AS AGAINST RIGHTFUL CLAIM TOWARDS ELIGIBLE PROFIT O F RS.10.40 CRORE AS A RESULT OF WRONGFUL ADJUSTMENT OF SUCH NOTIONAL LOSS ES DEEMED TO BE CARRIED FORWARD. THE LEARNED AR THEREAFTER CONTEND ED THAT HAVING ACCEPTED THE ELIGIBILITY OF CLAIM OF DEDUCTION ON F ULL AMOUNT OF PROFIT, THERE WAS NO WARRANT FOR THE CIT(A) TO DENY THE DED UCTION ONLY ON A TECHNICAL GROUND THAT SUCH CLAIM IS PERMISSIBLE ONL Y WHERE THE ASSESSEE FILED THE REVISED RETURN AND NOT OTHERWISE . THE DECISION OF THE CIT(A) AGAINST THE ASSESSEE RESTS ON THE OBSERV ATION THAT GRANT OF RELIEF ON ACCOUNT OF SUCH ADDITIONAL GROUND WHICH H AS THE EFFECT OF ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 10 - REDUCING THE ASSESSED INCOME BELOW THE RETURNED INC OME IS NOT PERMISSIBLE. THE LEARNED AR SUBMITTED THAT SUCH PR EMISE FOR DENIAL OF LAWFUL RELIEF BY THE CIT(A) IS SQUARELY AT ODDS WIT H THE LONG LINE OF JUDICIAL PRECEDENTS INCLUDING THE DECISION OF THE H ONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT GAS CO. LTD. VS. JCIT 245 ITR 84 (GUJ); CIT VS. MILTON LAMINATES LTD. TAX APPEAL NO. 1022 O F 2010 JUDGMENT DATED 24.01.2012; CIT VS. ARVIND MILLS LTD. TAX APP EAL NO. 1407 OF 2011 JUDGMENT DATED 05.07.2012; CIT VS. PRUTHVI BRO KERS & SHAREHOLDERS PVT. LTD. [2012] 349 ITR 336 (BOM.) ET C. THE LEARNED AR THUS SUBMITTED THAT THE ADDITIONAL CLAIM TOWARDS ENHANCED DEDUCTION ELIGIBLE UNDER S.80IA(4) OF THE ACT BE DI RECTED TO BE ALLOWED TO THE ASSESSEE IN ACCORDANCE WITH LAW. 8. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED. THE CENTRAL ISSUE IN THE PRESENT APPEAL IS WHETHER THE CLAIM OF THE ASSESSEE TOWARDS HIGHER QUANTIFICATION OF DEDUCTION UNDER S. 80IA(4) OF THE ACT CAN BE ENTERTAINED ON THE BASIS OF FACTS AVAILABLE ON RECORD AND IN THE LIGHT OF JUDICIAL PRECEDENTS AND CBDT CIRCULAR WHER E THE ASSESSEE HAS ORIGINALLY CLAIMED LOWER AMOUNT OF DEDUCTION BY WAY OF RETURN OF INCOME UNDER ERRONEOUS IMPRESSION OF LAW. AS NOTICE D, THE CLAIM MADE BY THE ASSESSEE IN ITS RETURN OF INCOME TOWARDS DED UCTION UNDER S.80IA(4) OF THE ACT WAS DULY ACCEPTED BY THE CIT(A ) AT THE FIRST APPELLATE STAGE. THE CIT(A) REFUSED HIS INDULGENCE TOWARDS THE ADDITIONAL CLAIM AROSE ON ACCOUNT OF RE-WORKING OF DEDUCTION IN THE LIGHT OF PREVAILING JUDICIAL PRECEDENTS AND CBDT CI RCULAR NO.1 OF 2016 DATED 15.02.2016 ON THE GROUND THAT THE ASSESS EE HAS FAILED TO FILE THE REVISED RETURN AND CONSEQUENTLY THE ADDITI ONAL RELIEF CANNOT BE ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 11 - ENTERTAINED AS IT WOULD HAVE THE EFFECT OF BRINGING THE ASSESSED INCOME BELOW THE RETURNED INCOME. WE DO NOT FIND ANY MERI T WHATSOEVER IN SUCH REASONING PROPOUNDED BY THE CIT(A). THE RATIO NALE ADOPTED BY THE CIT(A) FOR REFUSAL OF THE ADDITIONAL CLAIM IS I N DIRECT CONTRAVENTION WITH THE JUDICIAL PRECEDENTS CITED ON BEHALF OF THE ASSESSEE (SUPRA). THEREFORE, WE HAVE NO HESITATION TO HOLD ON FIRST PRINCIPLES THAT THE ADDITIONAL CLAIM REQUIRES TO BE ENTERTAINED WHEN FOUND ELIGIBLE AS PER THE RELEVANT PROVISIONS OF TH E ACT IN THE LIGHT OF THE JUDICIAL PRECEDENTS AND CBDT CIRCULAR ISSUED IN FAVOUR OF THE ASSESSEE. IT IS WELL SETTLED THAT THE APPELLATE AU THORITY IS NOT PRECLUDED FROM ADJUDICATING THE ADDITIONAL CLAIMS OF AN ASSES SEE REGARDLESS OF WHETHER THE RETURN WAS REVISED OR NOT. THE REVENUE IS UNDER DUTY TO ASSESS THE TRUE PROFITS OF AN ASSESSEE AND CANNOT T AKE ADVANTAGE OF THE IGNORANCE OF THE ASSESSEE ON THE PROVISIONS OF THE ACT. THUS, THE ACTION OF THE CIT(A) TO THIS EXTENT REQUIRES TO BE SET ASIDE AND ADDITIONAL CLAIM OF THE ASSESSEE AMOUNTING TO RS.7, 35,01,934/- REQUIRES TO BE ENTERTAINED. HOWEVER, IN THE SAME V AIN, WE NOTICE THAT THE QUANTIFICATION ASPECTS OF ADDITIONAL CLAIM FLOW ING FROM NOTIONAL SET OFF / CARRY FORWARD OF LOSSES OF EARLIER YEARS FROM ELIGIBLE PROFITS HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW. AC CORDINGLY, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR THE LIMIT ED PURPOSES OF DETERMINATION OF CORRECT QUANTUM OF DEDUCTION TO BE COMPUTED WITHOUT SETTING OFF ANY NOTIONAL LOSSES OF THE WINDMILL POW ER PROJECT PERTAINING TO THE EARLIER ASSESSMENT YEARS AS DISCU SSED HEREINABOVE. THE AO SHALL ALLOW ENHANCED DEDUCTION UNDER S.80IA( 4) OF THE ACT AS ELIGIBLE TO ASSESSEE IN ACCORDANCE WITH LAW REGARDL ESS OF CLAIM MADE BY THE ASSESSEE IN THIS REGARD IN ITS RETURN OF INC OME. 10. IN THE RESULT, GROUND NO.1 OF THE ASSESSEES AP PEAL IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2081/AHD/16 [RATNAMANI METALS & TUBES LTD. V S. DCIT] A.Y. 2012-13 - 12 - 11. GROUND NO.2 CONCERNS ADDITION OF RS.1,70,439/- ON ACCOUNT OF DIFFERENCES IN THE CLOSING BALANCES OF ONE OF ITS P ARTY NAMELY ASSOCIATED ROAD CARRIERS LTD. IN THE COURSE OF HEAR ING, THE LEARNED AR FOR THE ASSESSEE FAILED TO SUPPORT THE AFORESAID GR OUND. A PERUSAL OF THE ORDER OF THE CIT(A) GIVES THE IMPRESSION THAT T HE CIT(A) HAS APPROACHED THE ISSUE CORRECTLY AND IN RIGHT PERSPEC TIVE. THEREFORE, WITHOUT REITERATING THE OBSERVATIONS OF THE CIT(A) , WE FIND OURSELVES IN AGREEMENT THEREWITH. 12. IN THE RESULT, GROUND NO.2 OF THE ASSESSEES AP PEAL IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (PRADI P KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 14/08/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 14/08/ 2018