Assistant Commissioner of Income-tax, V. M/s. Dhumal Industries, Nashik

ITA 2185/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8467 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 80IB; 63

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS. 2185 & 2186/PN/2013 (ASSESSMENT YEARS : 2006-07 & 2008-09) ACIT, CIRCLE-1, NASHIK .. APPELLANT VS. DHUMAL INDUSTRIES, E-36, D-ROAD, MIDC, SATPUR, NASHIK 422007 PAN NO.AACFD0528N .. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 29-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 ORDER PER R.S. PADVEKAR, JM : BOTH THESE APPEALS ARE FILED BY THE REVENUE CHALLENGING THE RESPECTIVE ORDERS OF THE LD.CIT(A)- I, NASHIK DATED 01-10-2013 FOR A.YRS. 2006-07 & 2008-09. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND WH ICH IS COMMON IN BOTH THE APPEALS : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING T HE DISALLOWANCE OF DEDUCTION U/S.80IA(4)(IV)(A), IGNOR ING THE RATIO OF THE ORDER IN M/S.PIDLITE INDUSTRIES LTD., VS. THE DCIT IN ITA NO.3355/MUM/2009. 2. FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDE R. THE ASSESSEE IS A FIRM ENGAGED IN THE PRODUCTION OF POULTRY EQUIPMENTS. THE FIRM SET UP AND COMMENCED THE WIND MILL AT SATARA AT THE COST OF RS.1,49,48,090/- IN THE F.Y. 2001-02. IN THESE CASES ORIGINAL ASSESSMENT ORDERS U/S.143(3 ) WERE 2 PASSED ON 01-12-2010 AND 27-12-2010 FOR A.Y. 2006-0 7 & 2008-09 RESPECTIVELY DETERMINING TOTAL INCOME AT RS.3,20,71,750/- FOR A.Y. 2006-07 AND RS.3,31,59,80 0/- FOR A.Y. 2008-09. THEREAFTER, ASSESSMENT ORDERS WERE P ASSED U/S.143(3) R.W.S. 263 OF THE ACT FOR A.YRS. 2006-07 & 2008- 09 ON 24-08-2012 WHEREIN THE ASSESSING OFFICER DISA LLOWED ASSESSEES CLAIM FOR DEDUCTION OF RS.12,13,845/- FO R A.Y. 2006-07 AND RS.9,63,480/- FOR A.Y. 2008-09 U/S.80IA OF THE ACT. NOW THOSE ASSESSMENT ORDERS ARE SUBJECT MATTER OF THESE APPEALS. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT TH E ORDERS PASSED BY THE LD.CIT U/S.263 WAS CHALLENGED BEFORE THIS HONBLE TRIBUNAL AND THIS HONBLE TRIBUNAL WAS PLEASED TO QUASH THE ORDERS PASSED BY THE LD.CIT U/S.263. THE LD. COUNSEL FILED COPY OF THE ORDER OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE IN ITA NO. 1040/ & 1041/PN/2012 ORDER DATED 29-08-2012 WHICH IS PLACED ON RECORD. WE HAVE HEAR D THE LD. DEPARTMENTAL REPRESENTATIVE. 4. WE FIND THAT LD.CIT-I, NASHIK HAS PASSED THE ORD ER U/S.263 OF THE ACT FOR THE A.YRS. 2006-07 & 2008-09 AND HAS SET-ASIDE THE ASSESSMENT ORDER FOR THE REASONS GIVE N IN THE SAID ORDERS. THOSE ORDERS WERE SUBJECT MATTER OF T HE APPEAL BEFORE THE ITAT, B BENCH, PUNE IN ITA NOS. 1040 & 1041/PN/2012 AND BOTH THE ORDERS WERE QUASHED. THE OPERATIVE PART OF THE TRIBUNALS ORDER IS AS UNDER : 6. WE HAVE HEARD THE PARTIES. WE FIND THAT IN THE A.Y. 2005-06 ON THE IDENTICAL REASONS LD. CIT-I, NASHIK HAS SET ASIDE THE ASSESSMENT ORDER BY EXERCISING HIS REVISI ONARY POWER U/S. 263 OF THE ACT AND ON THE ISSUE OF DEDUC TION CLAIMED BY THE ASSESSEE U/S. 80IA(4)(IV) OF THE ACT AND THE TRIBUNAL HAS QUASHED THE ORDER PASSED BY LD. CIT, N ASHIK. THE ASSESSEE HAS FILED THE COPY OF THE TRIBUNAL ORD ER IN 3 ASSESSEES OWN CASE FOR THE A.Y. 2005-06 BEING ITA NO. 322/PN/2010 ORDER DATED 31-05-2013. THE OPERATIVE PART OF THE TRIBUNAL ORDER IS AS UNDER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. THE LD. COUNSEL SUBMITS THAT SO FAR AS THE ISSUE OF INITIAL ASSESSMENT YEAR WHICH IS ONE OF THE REASON FOR EXERCISING REVISIONARY POWER BY THE LD. CIT IN RESP ECT OF CLAIM OF DEPRECIATION ON THE WINDMILL IS CONCERNED, THE SAID ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE O F VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (20 10) 38 DTR (MAD) 57. HE SUBMITS THAT THE SAID DECISION HAS BEEN FOLLOWED BY THE ITAT PUNE BENCH IN THE CASE OF SERU M INTERNATIONAL LTD. VS. ADDL. CIT (ITA NO. 290 TO 292/PN/2010, ORDER DATED 28-11 -2011). HENCE THE OR DER PASSED BY THE AO ON MERITS ITSELF CANNOT BE SAID TO BE ERRONEOUS. HE SUBMITS THAT FOR EXERCISING POWER U/S 263 THE RESPECTIVE ORDER SHOULD BE SUFFERING FROM FOLLOWING THE TWO MANDATES (I) THE SAID ORDER SHOULD BE ERRONEOUS; (I I) IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVEN UE. HE SUBMITS THAT THE EXPRESSION 'ERRONEOUS' HAS BEEN EX PLAINED BY THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC). HE ALSO PLACED RELIANCE ON THE DECISION OF BOMBAY HIGH COUR T IN THE CASE OF CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 1 08. HE SUBMITS THAT SO FAR AS THE FIRST REASON IS CONCERNE D ON MERITS ITSELF, THE ISSUE IS COVERED IN FAVOUR OF THE ASSES SEE BY THE JUDICIAL INTERPRETATION. THE ORDER OF THE AO CANNOT BE SAID TO BE ERRONEOUS AND HENCE THE LD. CIT HAS WRONGLY EXER CISED HIS REVISIONARY POWERS U/S 263 OF THE ACT. IN RESPE CT OF SECOND ISSUE, VIZ. NOTIONAL SALES-TAX LIABILITY, HE SUBMITS THAT THE ASSESSEE'S UNIT IS COVERED UNDER THE PACKAGE SC HEME OF INCENTIVES 1993 BEING A SPECIAL PROVISION FOR THE G ENERATION OF NON-CONVENTIONAL ENERGY AND ASSESSEE IS GIVEN EX EMPTION FROM THE PAYMENT OF SALES-TAX. HE SUBMITS THAT AS P ER THE PROVISIONS OF LAW MORE PARTICULARLY UNDER THE MAHAR ASHTRA SALES-TAX ACT, THE ASSESSEE CAN COLLECT THE SALES-T AX FROM THE CUSTOMERS AND PAY THE SAME TO THE STATE GOVERNM ENT. IF THE ASSESSEE HAS COLLECTED THE TAX AND IF THAT T AX IS NOT PAID TO THE GOVERNMENT THEN IT CAN BE SAID THAT THE RE IS ACCRUAL OF BENEFIT TO THE ASSESSEE WITHIN THE MEANI NG OF SEC. 5 OF THE ACT. HE SUBMITS THAT NOTIONAL WAIVER OF TH E SALES-TAX WHICH OTHERWISE, THE ASSESSEE HAS NOT COLLECTED FRO M THE CUSTOMERS CANNOT BE SAID TO BE ACCRUAL OF INCOME TO THE ASSESSEE WITHIN THE MEANING OF SEC. 5. HE PLEADED F OR QUASHING THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT. 5. PER CONTRA, THE LD. DR SUPPORTED THE IMPUGNED OR DER OF THE LD. CIT. THE LAW IS WELL SETTLED IN RESPECT OF POWERS OF LD. CIT U/S 263. IN THE LANDMARK DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA), IT IS HELD THAT TWO MANDATES OF THE SAID S ECTION MUST BE FULFILLED; THAT THE ORDER MUST BE ERRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVEN UE. IT IS ALSO HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUEN CE OF AN ORDER OF THE AO, CANNOT BE TREATED AS PREJUDICIAL T O THE INTEREST OF REVENUE. UNLESS BOTH THE MANDATES OF SE C. 263 ARE FULFILLED, THE CIT CANNOT EXERCISE HIS REVISION ARY POWERS U/S 263. IN THE PRESENT CASE, SO FAR AS THE ISSUE O F INITIAL ASSESSMENT YEAR IN RESPECT OF WINDMILL U/S 80-IA(5) IS CONCERNED, IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. (SUPRA) THE HON'BLE MADRAS HIGH COURT HAS HELD THAT IT IS OPTION OF THE ASSESSEE THE YEAR IN WHICH HE CHOO SES TO OPT 4 FOR DEDUCTION I.E. THE INITIAL YEAR FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80-IA(4)(IV)(A) OF THE ACT. THE SAID DECISION HAS BEEN FOLLOWED BY THE ITAT PUNE BENCH IN THE CAS E OF SERUM INTERNATIONAL LTD. (SUPRA) AND PREFERRED TO G O WITH THE RATIO OF SAID DECISION INSTEAD OF FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF GOLDMINE SHARES AND FINANC E LTD (SUPRA). THE RELEVANT PART OF THE ORDER OF THE TRIB UNAL'S DECISION IN THE CASE OF SERUM INTERNATIONAL LTD. (S UPRA) IS AS UNDER: '11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHETHER IN VIEW OF THE PROVISIONS OF SEC. 80IA(5) O F THE I. T. ACT 1961, THE PROFIT FROM THE ELIGIBLE BU SINESS FOR THE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT H AS TO BE COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER NON-ELIGIBLE BUSINESS INCOME IN EARLI ER YEARS. THE SUBMISSION OF THE LD A.R. REMAINED THAT ON THE WIND MILLS SET UP IN THE PREVIOUS YEAR RELEVANT TO A, Y. 2002-03, THE ASSESSEE HAD CLAIMED DEPRECIATIO N AT THE RATE OF 100% THEREON I.E. RS. 3.54 CRORES, WHICH WAS FULLY 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 FROM THE SAID GENERATION ACTIVITY AND THERE WERE NO BROUGHT FORWA RD LOSSES/ UNABSORBED DEPRECIATION OF THE PRECEDING YEAR, WHICH HAD REMAINED TO BE SET OFF IN THE A. Y. 2004-05. THE A.O., NOTIONALLY BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE A. Y. 2003-04 TO TH E 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 CHOOSE 10 CONSECUTIVE A. YS, OUT OF 15 YEARS FOR CLAIMING THE DEDUCTION. HE SUBMITTED THAT THE TERM INITIAL YEAR IN SUB-SECTION (5) OF 80IA IS NOT DEFINED AND IS USED IN CONTRADICTION TO THE WORDS 'BEGINNING FROM THE YEAR ' USED IN SUB-SECTION (2). HE 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 CO ULD NOT HAVE BEEN NOTIONALLY BROUGHT FORWARD AND SET OF F AGAINST PROFIT FOR THE A. Y. 2004-05. THE LD. A.R. PLACED HEAVY RELIANCE ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). HE SUBMITT ED THAT THE DECISION OF HON'BLE MADRAS HIGH COURT WILL PREVAIL UPON THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AN D FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN ITS RECENT DECISION IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA) AND THERE THE ASSESSEE DID NOT DISPUTE THE FACT THAT THE AUTHORITIES BELOW HAVE DECIDED THE ISSUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF ACIT VS. GOLDMINE SHARES.. THE LD. A.R. POINTED OUT THAT DECISION OF HON'BLE MADRAS HIGH COURT IN THE C ASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) WAS NOT CITED BEFORE THE PUNE BENCH IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA). 5 THE LD. A.R. HAS ALSO CITED THE DECISION OF PUNE BE NCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LTD., (SUPRA) HOLDING THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COURT IS A BIND ING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISIO N IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. VALSON DYEING, BLEACHING AND PRINTING WORK S (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAN D REMAINED THAT DEDUCTION U/S. 80I AND 80IA COVERED INTER ALIA, INDUSTRIAL UNDERTAKINGS. THE POWER GENERATION UNITS FOUND A SPECIFIC MENTION FOR THE F IRST TIME W.E.F. 1.4.1993. IN ALL THE YEARS FROM 1.4.198 1 TO 31 TO 31 ST MARCH 2000 IN BOTH U/S. 801 AND 80IA, THE TERM INITIAL A. Y WAS DEFINED AND MEANT THE FIR ST A. Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGI BLE UNIT COMMENCES PRODUCTION/POWER GENERATION. ONLY FROM 1.4.2000, WHEN SECTIONS 80IA WAS REPLACED WITH SECTION 80IA AND 80IB, THE DEFINITION OF 'INITIAL A . Y.' DID NOT FIND A MENTION. BUT NOWHERE, IN THE PARLIAM ENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL HAS ANY MENTION THAT THERE WAS ANY INTENTION TO IGNORE LOSSES AND DEPRECIATION FROM FIRST YEAR OF POWER GENERATION/PRODUCTION AND THAT SUCH LOSSES TI LL FIRST YEAR OF CLAIM OF DEDUCTION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSES DOES NOT FIND ANY SUPPORT. HE SUBMITTED THAT 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 CASE OF GOLDMI NE SHARES AND FINANCE (P) LTD. (SUPRA) IS FULLY APPLIC ABLE IN THE PRESENT CASE. HE POINTED OUT THAT IN ITS REC ENT DECISION DT. 21 ST JANUARY 2011, THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICAL SUPPLIES LTD. VS. ACIT (SUPRA) HAS ALSO DECIDED AN IDENTICAL DECISION IN FAVOUR OF THE REVENUE FOLLOWI NG THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). HE SUBMITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE HAS ALSO DISCUSSED THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD V S. ACIT (SUPRA). THE LD. D.R. SUBMITTED THAT EVEN IN T HE CASE OF LIBERTY INDIA VS. CIT (SUPRA), THE HON'BLE SUPREME COURT HAS BEEN PLEASED TO EXPLAIN THE INTENTION OF PARLIAMENT AND SCOPE OF DEDUCTION U/S. 80IA AND 80IB OF THE ACT. THE HON'BLE SUPREME COURT HAS BEEN PLEASED TO HOLD THAT SUCH PROFITS ARE TO B E COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF ELIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVERRIDING 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 FAVO UR OF THE ASSESSEE BY THE PUNE BENCH OF THE TRIBUNAL I N THE CASE OF POONAWALLA STUD AND AGRO FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DISCUSSING THE 6 ISSUE IN DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE INITIAL 'A. Y' FOR THE PURPOSE 'OF CLAIMING DEDUCTION U/S. 801 A WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIO NS OF 80IA (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A) HAS 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 F ROM 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 EARLIER YEARS AGAINST THE OTHER INCOME, IS FULLY CO VERED BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 801 A, PROFITS ARE TO BE COMPUTED AS IF SUC H ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF T HE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTION, ONLY THE LOSSES OF THE YEARS BEGINNING FROM THE INI TIAL 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 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 AGA INST THE OTHER INCOME OF ASSESSEE AND SET OFF AGAINST TH E CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CR EATED BY SUB-SECTION (5) OF SECTION 801 A DOES NOT CONTEMPLATE SUCH NOTIONAL SET OFF, HELD THE HON'BLE 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 THE TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE (P ) LTD. (SUPRA). THERE IS NO DISPUTE THAT EVEN A DECIS ION OF NON-JURISDICTIONAL HIGH COURT IS A BINDING PRECE DENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. IN THIS REGARD, WE FIND STRENGTH FROM THE RECENT DECISION OF HON'BLE JURISDICTIONAL BOMBAY 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 OF EXCISE MATTER THAT TRIBUNAL IS BOUND B Y THE DECISION OF HIGH COURT, EVEN OF A DIFFERENT STA TE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTH ER HIGH COURT. THE HON'BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OP TION BUT TO FOLLOW THE JUDGMENT OF THE MADRAS HIGH COURT . AN AUTHORITY LIKE AN INCOME TAX TRIBUNAL ACTING ANYWHERE IN THE COUNTRY HAS TO RESPECT THE LAW LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE , SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTH ER HIGH COURT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSION ER OF CENTRAL EXCISE VS. VAKSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BO UND BY THE DECISION OF THE 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 7 HON'BLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTI CAL ISSUE UNDER ALMOST SIMILAR FACTS, HOLD THAT WHEN TH E ASSESSEE EXERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A. Y, ARE TO BE BRO UGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HA VE BEEN ALREADY SET OFF AGAINST THE OTHER INCOME OF TH E ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWA RD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN SE T OFF AGAINST ANY OTHER INCOME OF THE ASSESSEE AND SE T OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIG IBLE BUSINESS. WE THUS SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINS T 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 . OR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY THE ID. AR FAIRLY AGREED THAT THE ISSU E RAISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE IP ) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. THE ID. AR THEREIN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH O F THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARE S & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUE D AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS THE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. T HE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE,' 6. WE THEREFORE FIND THAT THE FIRST ISSUE WHICH IS ONE OF THE REASONS FOR EXERCISING POWER BY LD. CIT IS IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA), AS WELL AS DECISION OF THE ITAT PUNE BENCH IN SERUM INTERNATIONAL LTD. (SUPRA) HENCE ON THAT ISSU E, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS. 7. . 8. AS DISCUSSED HEREINABOVE, THE MANDATE OF SECTION 263 SAYS THE ORDER MUST BE ERRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVENUE. IN OUR OPIN ION, THE ORDER WHICH IS THE SUBJECT MATTER OF REVISION U/S 2 63 IS NOT ERRONEOUS, AS BOTH THE MANDATES OF SEC. 263 ARE NOT FULFILLED. WE HAVE NO HESITATION TO QUASH THE ORDER PASSED BY LD. CIT NASIK U/S 263. WE ACCORDINGLY DO SO. 7. IN THE A.Y. 2005-06 THE ORDER PASSED BY LD. CIT- I, NASHIK U/S. 263 SETTING ASIDE THE ASSESSMENT ORDER ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S. 80IA(4)(IV) OF THE ACT HAS BEEN QUASHED BY THE TRIBUNAL IN ASSESSEES OWN CASE. THE REASONS GIVEN BY LD. CIT-I, NASHIK IN THE A.YS. 2006-07 AND 2008-09 ARE IDENTICAL FOR SETTING ASIDE THE ASS ESSMENT ORDERS ON THE ISSUE IN DISPUTE. WE, THEREFORE, FOL LOWING THE ORDER OF THE TRIBUNAL IN THE A.Y. 2005-06 HOLD THAT THE ASSESSMENT ORDERS FOR THE A.YS. 2006-07 AND 2008-09 ARE 8 NOT ERRONEOUS AND AS THE MANDATE OF SEC. 263 ARE NO T FULFILLED IN BOTH THE ASSESSMENT YEARS, THE ORDERS PASSED U/S. 263 ARE QUASHED. 5. ADMITTEDLY, THE PRESENT APPEALS ARE ARISING OUT OF THE ORDERS PASSED BY THE ASSESSING OFFICER IN COMPLIANC E WITH THE DIRECTIONS GIVEN BY THE LD.CIT-I, NASHIK U/S.263 OF THE I.T. ACT AND THOSE ORDERS ARE QUASHED BY THE TRIBUNAL. THE ORDER GIVING EFFECT TO THE ASSESSMENT ORDERS PASSED BY TH E ASSESSING OFFICER IN COMPLIANCE WITH THE DIRECTIONS GIVEN BY THE LD.CIT-I NASHIK DO NOT SURVIVE FOR THE A.YRS. 2 006-07 & 2008-09. WE ACCORDINGLY CONFIRM THE ORDER OF THE L D.CIT(A) AND DISMISS BOTH THE APPEALS. GROUNDS TAKEN BY THE REVENUE IN BOTH THE APPEALS ARE DISMISSED. 6. IN THE RESULT, BOTH THE REVENUE APPEALS ARE DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 31-10-2014. SD/- SD/- (R.K. PANDA) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 31 ST OCTOBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, NASHIK 4. CIT-I, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE