Assistant Commissioner of Income-tax, V. M/s. Patankar Wind Farm Pvt. Ltd., Satara

ITA 2227/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8453 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: DR PRAYAG JHA
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2227/PN/2013 (ASSESSMENT YEAR : 2008-09) ASSTT. COMMISSIONER OF INCOME TAX, SATARA CIRCLE, SATARA. . APPELLANT VS. PATANKAR WIND FARMS PVT. LTD., SHIKKA MANSION, A/P. PATAN, TAL. PATAN, DIST.- SATARA. PAN : AABCP1365R . RESPONDENT DEPARTMENT BY : MR. P. S. NAIK ASSESSEE BY : MR. (DR.) PRAYAG JHA DATE OF HEARING : 29-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 ORDER PER SUSHMA CHOWLA, JM : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-III, PUNE DATED 09.10.2013 RELATING TO ASSESSMENT YEAR 2008-0 9 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LA W, THE LD. CIT(A) IS CORRECT IN ALLOWING THE DEDUCTION U/S 80I A OF THE ACT, AS CLAIMED BY THE ASSESSEE IGNORING THE PROVISIONS OF SECTION 80I A(5) OF THE ACT, INSTEAD OF CONFIRMING SUCH ADDITION. 3. WHETHER IN TERMS OF PROVISIONS U/S 80IA(5) OF TH E IT ACT, THE PROFITS AND GAINS FROM THE ELIGIBLE BUSINESS, FOR T HE PURPOSE OF DETERMINATION OF QUANTUM OF DEDUCTION U/S 80IA OF THE ACT, HAS TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR A ND EVERY SUBSEQUENT ASSESSMENT YEAR UPTO WHICH THE DETERMINATION OF DED UCTION U/S 80IA TO BE DETERMINED BUT THERE WAS NOTIONAL LOSS REMAINED TO BE CARRIED FORWARD FOR SUBSEQUENT YEARS. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED I N FOLLOWING THE DECISION OF ITAT, PUNE IN THE CASE OF SERUM INT ERNATIONAL EVEN THOUGH SEVERAL SUPPORTING JUDICIAL DECISIONS INCLUDING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY LNDIA (2009) 1 83 TAXMAN 349 (SC). ITA NO.2227/PN/2013 5. FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE COMMISSIONER OF IN COME-TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE HON'BLE ITAT. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN REL ATION TO THE CLAIM OF DEDUCTION UNDER SECTION 80-IA(5) OF THE ACT. THE B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN POWER GENERATION A ND WAS ALSO DEALING IN LAND DEVELOPMENT ACTIVITIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT ON POWER GENERATION RECEIPTS. THE ASSESSING OFFICER NOTED T HAT THE ASSESSEE WAS CLAIMING THE SAID DEDUCTION UNDER SECTION 80-IA OF THE ACT ON THE POWER GENERATION RECEIPTS INCLUDING THE SALES TAX BENEFIT RECEIPTS. UPTO THE PRECEDING ASSESSMENT YEAR, THE DEPARTMENT WAS DISAL LOWING THE ASSESSEES CLAIM ATTRIBUTABLE TO THE RECEIPTS ON ACCOUNT OF SA LE TAX BENEFIT RECEIVED BY IT. IT WAS FURTHER NOTED BY THE ASSESSING OFFICER THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD REVISED ITS METHOD OF CLAIMING DEDUCTION UNDER SECTION 80-IA AND IT HAD NOT INCLUDED THE REC EIPTS ON ACCOUNT OF THE SALES TAX INCENTIVES IN ITS RECEIPTS ELIGIBLE FOR D EDUCTION UNDER SECTION 80-IA OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT AT RS.14,63,932/- AS PER THE DETAILS TABULATED AT P AGE 7 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER NOTED THAT ASSESSEE H AD TAKEN SOME WRONG FIGURES AND FURTHER THERE WAS A TOTALING ERROR AND THE DEDUCTION UNDER SECTION 80-IA OF THE ACT WAS REWORKED AT RS.14,68,892/-. T HE NEXT POINT RAISED BY THE ASSESSING OFFICER WAS THAT WHILE COMPUTING THE CLAI M OF DEDUCTION UNDER SECTION 80-IA OF THE ACT, THE NOTIONAL CARRY FORWAR D OF LOSS ON ACCOUNT OF UNABSORBED DEPRECIATION HAD TO BE CONSIDERED IN VIE W OF THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. THE ASSESSEE HAD TABU LATED THE DETAILS OF UNABSORBED DEPRECIATION WHICH WAS FURNISHED IN THE COMPUTATION OF INCOME ACCOMPANYING THE RETURN OF INCOME. THE ASSESSING O FFICER WAS OF THE VIEW THAT THE INCOME OF THE TWO BUSINESS CARRIED ON BY T HE ASSESSEE SHOULD HAVE ITA NO.2227/PN/2013 BEEN COMPUTED SEPARATELY TREATING BOTH THE UNITS AS INDIVIDUAL UNIT AND THEREAFTER ANY DEDUCTION UNDER SECTION 80-IA OF THE ACT, WAS TO BE ALLOWED IF THERE WERE ANY PROFITS AND GAINS OF THE ELIGIBLE UN IT. CONSIDERING THE POWER GENERATION UNIT AS A SEPARATE UNIT, THE NOTIONAL LO SS OF THE ASSESSEE COMPANY AS CALCULATED IN PAST ASSESSMENT YEAR VIDE ORDER PA SSED UNDER SECTION 143(3) OF THE ACT, RELATING TO A.Y. 2007-08 WAS TABULATED BY THE ASSESSING OFFICER AT PAGE 9 OF THE PAPER BOOK. AS PER THE ASSESSING OFF ICER, THERE WAS NOTIONAL LOSS OF RS.1,15,36,367/- TO BE CARRIED FORWARD FOR A.Y. 2008-09 FROM THE WINDMILL UNIT UNDER SECTION 80-IA(5) OF THE ACT, FO R CALCULATING THE DEDUCTION UNDER SECTION 80-IA(4)(I) OF THE ACT FOR THE YEAR U NDER CONSIDERATION. THE ASSESSING OFFICER THUS TABULATED THAT IN VIEW OF TH E BROUGHT FORWARD LOSSES, AND THE BALANCE LOSSES TO BE CARRIED FORWARD TO THE SUCCEEDING YEAR, THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF DEDUCTION U/S 80-IA OF THE ACT. 4. BEFORE THE CIT(A), THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SE RUM INTERNATIONAL LTD. VS. ITO IN ITA NOS.290 TO 292/PN/2010 DATED 28.09.2011 WHEREIN IT WAS HELD THAT ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INIT IAL ASSESSMENT YEAR WERE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE EARLIE R YEARS WHICH HAD ALREADY BEEN SET-OFF AGAINST THE OTHER INCOME OF THE ASSESS EE. THE CIT(A) NOTED THAT ASSESSEE HAD STARTED CLAIMING THE DEDUCTION U/S 80- IA OF THE ACT AND NOT FROM THE FIRST YEAR OF STARTING THE WINDMILL UNIT. THE CIT(A) PLACED RELIANCE ON THE RATIO LAID DOWN BY THE SPECIAL BENCH OF THE ITAT, A HMEDABAD IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (PVT.) LTD., 113 ITD 209 (SB)(AHD.). IN VIEW OF THE INITIAL ASSESSMENT YEAR, THE HARMONIOUS CONSTRUCTION OF SECTION 80- IA(5) READ WITH SECTION 80-IA OF THE ACT WAS THAT T HE INITIAL ASSESSMENT YEAR IS THE YEAR IN WHICH THE GENERATION OF POWER FROM WIND MILL BEGINS I.E. A.Y. 2007-08 AND NOT THE YEAR OF CLAIMING THE DEDUCTION FOR THE FIRST TIME I.E. A.Y. 2010-11. ITA NO.2227/PN/2013 5. THE SECOND ASPECT OF THE ISSUE DECIDED BY THE CI T(A) WAS THAT WHETHER BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF THE WINDMILL PROJECT PERTAINING TO THE EARLIER YEARS WHICH WERE ALREADY SET-OFF AGAINST THE OTHER INCOME OF THE ASSESSEE, COULD BE THE NOTIONAL BROUG HT FORWARD LOSSES AND SET- OFF AGAINST THE INCOME FROM THE WINDMILL UNIT IN TH E CURRENT YEAR FOR THE PURPOSE OF COMPUTING THE DEDUCTION IN RESPECT OF IN COME FROM THE ELIGIBLE BUSINESS. THE CIT(A) RELIED UPON VARIOUS DECISIONS OF THE TRIBUNAL AND ALSO THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 (SC) AND OBSERVED THAT THE APE X COURT HAD HELD THAT THE ELIGIBLE PROFITS WERE TO BE COMPUTED AS IF THE ELIG IBLE BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THEREAFTER REFER ENCE WAS MADE TO ON THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL I N THE CASE OF SERUM INTERNATIONAL LTD. VS. ITO (SUPRA) WHICH, IN TURN, HAD FOLLOWED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS (P) LTD., 38 DTR 57 AND HELD THAT WHERE THE ASSESSEE E XERCISES THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A SSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF THE EARLIER Y EAR, WHICH HAVE BEEN ALREADY SET-OFF AGAINST THE OTHER INCOME OF THE ASS ESSEE. HOWEVER, THE CIT(A) PLACED RELIANCE ON THE RATIO LAID DOWN BY THE MUMBA I BENCH OF THE TRIBUNAL IN THE CASE OF PIDILITE INDUSTRIES LTD., 46 SOT 263 AN D THE EARLIER DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KHINVASAR A INVESTMENT (P) LTD., 110 ITD 198 AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) AND THE EXPLICIT PROVISION S OF SECTION 80-IA(5) OF THE ACT OBSERVED : IN THESE CIRCUMSTANCES, I AM CONSTRAINED TO FOLLOW THE DECISION OF THE ITAT, PUNE IN THE CASE OF SERUM INTERNATIONAL ( SUPRA), THOUGH I DO NOT FIND MYSELF IN AGREEMENT WITH THE VIEW TAKEN BY THE HON BLE BENCH ON THIS ISSUE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO A LLOW THE DEDUCTION CLAIMED BY THE APPELLANT UNDER SECTION 80-IA OF THE ACT OF RS.14,63,932/- AS CLAIMED BY THE APPELLANT IN RESPECT OF ITS ELIGIBLE UNIT . ITA NO.2227/PN/2013 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CITA). THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. THE LEARNED AUTHORIZED REPR ESENTATIVE, HOWEVER, POINTED OUT THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT THE ISSUE ARISING IN THE PRESENT APPEAL IN REL ATION TO THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. SIMILAR ISSUE AROSE B EFORE THE TRIBUNAL IN THE CASE OF SHRI SANGRAM PATIL VS. ITO IN ITA NO.177 & 178/P N/2011 RELATING TO ASSESSMENT YEAR 2006-07 & 2007-08 VIDE DATED 12.12. 2012. THE TRIBUNAL CONSIDERED THE PROVISIONS OF SECTION 80-IA(5) OF TH E ACT AND OBSERVED AS UNDER :- 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 PRESUM ED THAT THE ELIGIBLE UNIT WAS ONLY THE SOURCE OF INCOME OF THE ASSESSEE DURING TH E PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND ALSO TO EVERY SUBSEQUEN T YEAR UPTO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 8. THE TRIBUNAL FURTHER REFERRED TO THE RATIO LAID DOWN BY ANOTHER BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD . VS. ADDL.CIT (SUPRA) IN PARA 6 AND OBSERVED AS UNDER :- 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 ITA NOS. 290 TO 292/PN/2 010 FOR A.Y. 2004-05 TO 2006-07 VIDE ORDER DATED 28-9-2011 HAS CONSIDERED A N IDENTICAL CONTROVERSY AND AFTER FOLLOWING THE DECISION OF THE HONBLE MAD RAS 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. FOLLO WING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD:- 11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHE THER IN VIEW OF THE PROVISIONS OF SEC. 80IA(5) OF THE I.T. ACT 1961 , THE PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT HAS TO BE COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROU GHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH T HEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER NON-ELIGIBLE BUSINESS INCOME IN EARLIER YEARS. THE SUBMISSION OF THE LD A.R. REMAINED TH AT ON THE WIND MILLS SET UP IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2002-03, THE ITA NO.2227/PN/2013 ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 10 0% THEREON I.E. RS. 3.54 CRORES, WHICH WAS FULLY SET OFF AGAINST THE AN OTHER 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 A ND THERE WERE NO BROUGHT FORWARD 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 THE IMPUGNED A.Y. 2004-05 AND DENIED THE CLA IM FOR DEDUCTION MADE BY THE ASSESSEE U/S. 80IA IN RESPECT OF THE PR OFIT EARNED BY IT IN A.Y. 2004-05. THE LD. A.R. SUBMITTED THAT SUB-SECT ION (2) OF SECTION 80IA PROVIDES AN OPTION TO THE ASSESSEE TO CHOOSE 1 0 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 CLAIME D DEDUCTION U/S. 80IA AND THEREFORE, LOSSES/DEPRECIATION BEGINNING FROM A .Y. 2004-05 ALONE COULD ONLY BE BROUGHT FORWARD AND SET OFF. DEPRECIA TION OF THE PRECEDING A.Y. 2002-03 COULD NOT HAVE BEEN NOTIONAL LY BROUGHT FORWARD AND SET OFF AGAINST PROFIT FOR THE A.Y. 200 4-05. THE LD. A.R. PLACED HEAVY RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). HE SUBMITTED THAT THE DECISION OF HONBLE MADRAS HIGH 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 R ECENT DECISION IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA) A ND THERE THE ASSESSEE DID NOT DISPUTE THE FACT THAT THE AUTHORI TIES BELOW HAVE DECIDED THE ISSUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES.. THE LD. A.R. POINTED OUT THAT DECISION OF HONBLE MADRAS HIGH CO URT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA) WAS NOT CITED BEFORE THE PUNE BENCH IN THE CASE OF PRIMA PA PER ENGG (P) LTD. VS. ITO (SUPRA). THE LD. A.R. HAS ALSO CITED THE D ECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURAN GABAD HOLIDAY RESORTS (P) LTD., (SUPRA) HOLDING THAT EVEN A DECIS ION OF NON- JURISDICTIONAL HIGH COURT IS A BINDING PRECEDENT FO R THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. VA LSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAN D REMAINED THAT DEDUCTION U/S. 801 AND 801A COVERED INTER ALIA, INDUSTRIAL UNDERTAKINGS. THE POWER GENERATION UNIT S 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 INI TIAL A.Y WAS DEFINED AND MEANT THE FIRST A.Y. RELEVANT TO TH E PREVIOUS YEAR IN WHICH THE ELIGIBLE 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 NO T FIND A MENTION. BUT NOWHERE, IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL HAS ANY MENTION THAT THERE WAS ANY I NTENTION TO IGNORE LOSSES AND DEPRECIATION FROM FIRST YEAR OF POWER GE NERATION/PRODUCTION AND THAT SUCH LOSSES TILL FIRST YEAR OF CLAIM OF DE DUCTION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSEE DOES NOT FIND AN Y SUPPORT. HE SUBMITTED THAT THERE IS NO DISCERNIBLE CHANGE IN LA W OR INTENTION OF ITA NO.2227/PN/2013 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 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 HYDE RABAD CHEMICAL SUPPLIES LTD. VS. ACIT (SUPRA) HAS ALSO DECIDED AN IDENTICAL DECISION IN FAVOUR OF THE REVENUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMAN SHARES & F INANCE (P) LTD. (SUPRA). HE SUBMITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE HAS ALSO DISCUSSED THE DE CISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SP INNING MILLS (P) LTD VS. ACIT (SUPRA). THE LD. D.R. SUBMITTED THAT EVEN IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA), THE HONBLE SUPREME 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 THAT SUCH PROFITS ARE TO BE COMPUTE D AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF ELIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVERRIDING PROVISIONS OF S UB-SECTION (5) OF SECTION 80IA OF THE ACT. 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS, W E FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WH AT 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 PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALLA STUD AND AGRO FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DISCUSSING THE ISSUE I N DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE INITIAL A.Y F OR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISIN G 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 THE INITIAL A.Y FOR THE PURPO SES OF SECTION 80IA(2) R.W.S. 80IA (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY FROM THE WIND MILL ACTIVITY. WE ALSO F IND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDING THE ELIGIBILITY OF THE A SSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINISHED BY UNABSORBED LOSS ES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME, IS FULLY COVERED BY THE DECISION OF HONBLE MADRAS HIG H COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80IA, PROFI TS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES 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 EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THE HONBLE MA DRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNO T NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREAD Y BEEN SET OFF AGAINST THE OTHER INCOME OF ASSESSEE AND SET OFF A GAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED B Y SUB-SECTION (5) OF SECTION 80IA DOES NOT CONTEMPLATE SUCH NOTIONAL SET OFF, HELD THE HONBLE HIGH COURT. THE HONBLE MADRAS HIGH COURT IN THAT DECISION HAS ALSO REFERRED THE DECISION OF HONBLE SUPREME C OURT 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-JUR ISDICTIONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTI L A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. IN THI S REGARD, WE FIND ITA NO.2227/PN/2013 STRENGTH FROM THE RECENT DECISION OF HONBLE JURISD ICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VALSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) WHEREI N THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD IN A CAS E OF EXCISE MATTER THAT TRIBUNAL IS BOUND BY THE DECISION OF HI GH COURT , EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DE CISION OF ANY OTHER HIGH COURT. THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLL OW 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 THER E IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL E XCISE VS. VAKSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DECISION OF THE HONBLE MADRAS HIGH CO URT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY SPIN NING MILLS (P) LTD VS. ACIT (SUPRA). WE THUS RESPECTFULLY FOLLOWING T HE DECISION TAKEN BY THE HONBLE MADRAS HIGH COURT IN THAT CASE ON AN ID ENTICAL ISSUE UNDER ALMOST SIMILAR FACTS, HOLD THAT WHEN THE ASSESSEE E XERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FRO M 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 TH E ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS O F EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER IN COME OF THE ASSESSEE AND SET OFF THE SAME AGAINST THE CURRENT I NCOME OF THE ELIGIBLE BUSINESS. WE THUS SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDU CTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD A NY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEE N SET OFF AGAINST OTHER INCOME OF THE ASSESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.L TD. VS. ITO (SUPRA) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE DECISION OF THE HONBLE MADRAS HIGH COU RT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SU PRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY T HE LD. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGAINST TH E ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. G OLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIE S BELOW. THE LD. AR THEREIN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., B UT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSE SSEE AS THE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. THE GRO UND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. 9. THE TRIBUNAL THUS HELD AS UNDER :- 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 CA SE OF VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) WAS BEING CITED WHE REAS THE REVENUE HAD RELIED UPON THE DECISION OF SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF ASSTT. CIT VS. GOLDMINE SHARES AND FINANCE (P) LTD. (2008) 116 TTJ (AHD) (SB) ITA NO.2227/PN/2013 705 TO THE CONTRARY. THE TRIBUNAL NOTICED THAT HAV ING REGARD TO THE DECISION OF THE HONBLE MADRAS HIGH COURT THE ISSUE WAS TO BE D ECIDED ACCORDINGLY AND NOT ON THE BASIS OF DECISION OF SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) WHICH WAS TO THE CONTRARY. IN THIS CONTEXT, THE TRIBUNAL CAME TO THE CONCLUSION T HAT WHEN THE ASSESSEE EXERCISED OPTION IDENTIFYING TEN CONSECUTIVE YEARS AS CONTAINED IN SUB-SECTION (2) OF SECTION 80-IA OF THE ACT, ONLY THE LOSSES OF THE YEAR BEGINNING FROM SUCH INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD A ND SET-OFF WHILE APPLYING THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT AND N OT THE LOSSES OF EARLIER YEARS WHICH OTHERWISE WERE SET-OFF AGAINST OTHER INCOME O F THE ASSESSEE. 8. AT THE TIME OF HEARING, THE LEARNED DR HAS NOT B ROUGHT TO OUR NOTICE ANY DECISION OF A HIGH COURT CONTRARY TO THA T OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MI LLS (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. (SUPRA) WHICH HAS BEEN DECIDED FOLLOWING THE DECISI ON OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MI LLS (P) LTD. (SUPRA). 10. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE IDENTICAL TO THE FACTS BEFORE THE TRIBUNAL IN THE CASE OF SHRI SANGR AM PATIL VS. ITO (SUPRA). THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D CLAIMED DEDUCTION UNDER SECTION 80-IA(5) OF THE ACT. THE ASSESSING O FFICER HAD TABULATED THE NOTIONAL LOSSES FROM YEAR TO YEAR AT PAGE 9 OF THE ASSESSMENT ORDER. HOWEVER, THE SAID LOSSES WERE BEING ADJUSTED AGAINS T THE OTHER INCOME ARISING TO THE ASSESSEE FROM TIME TO TIME. WHERE THE LOSSE S HAVE ALREADY BEEN ADJUSTED AGAINST ASSESSABLE INCOME IN THE PRECEDING YEAR, THE SAID LOSSES CANNOT BE SAID TO BE AVAILABLE TO BE ADJUSTED AGAIN ST THE INCOME OF THE ASSESSEE ARISING IN THE YEAR UNDER CONSIDERATION. 11. THE SECOND ASPECT OF THE ISSUE IS THE YEAR FROM WHICH THE SAID LOSSES ARE TO BE CONSIDERED. AS HELD BY THE TRIBUNAL IN T HE CASE OF SHRI SANGRAM PATIL VS. ITO (SUPRA) THAT, WHERE THE ASSESSEE EXER CISED THE OPTION OF THE TEN CONSECUTIVE YEARS AS CONTAINED IN SECTION 80-IA OF THE ACT, ONLY THE LOSSES BEGINNING FROM SUCH INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND SET- OFF WHILE APPLYING THE PROVISIONS OF SECTION 80-IA( 5) OF THE ACT AND NOT THE LOSSES OF THE EARLIER YEARS, WHICH HAVE ALREADY BEE N SET-OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO ITA NO.2227/PN/2013 CLAIM OF DEDUCTION UNDER SECTION 80-IA(5) OF THE AC T. THE GROUNDS OF APPEAL RAISED BY THE REVENUES ARE DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2014. SD/- SD/- (G. S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST OCTOBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE