THE DCIT, 5(1), Bhopal V. M/S. SANWARIA AGRO OILS LTD., Bhopal

ITA 288/IND/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2366 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Question of law; Unabsorbed depreciation
• Section: 43B; 143(3); 142(1); 115JB; 145; 10

Judgement Text

ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.288/IND/2015 ASSESSMENT YEAR: 2010-11 ORDER PER MANISH BORAD, AM. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, BHOPAL [IN SHORT REFERRED TO AS THE CIT (A)] DATED 10.03.2015 ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT DATED 28.03.2013 FRAME D BY THE LD. DY. COMMISSIONER OF INCOME-TAX-1(1), BHOPAL PERTAIN ING TO ASSESSMENT YEAR 2010-11. INCOME TAX OFFICER 3 (1), BHOPAL VS. M/S. SANWARIA AGRO OILS LTD, E - 1/1, ARERA COLONY, BHOPAL ( REVENUE ) (RE SPONDENT ) PAN NO.AACCS1449N RE VENUE BY SHRI K.G. GOYAL , SR. DR RESPONDENT BY SHRI ANIL KHABYA ,CA (AR) DATE OF HEARING: 10.01.2018 DATE OF PRONOUNCEMENT: 16.01.2018 ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 2 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINE SS OF SOLVENT EXTRACTION PLANT AND WIND POWER GENERATION. THE AC TIVITIES UNDERTAKEN BY THE ASSESSEE ARE COVERED UNDER THE CA TEGORY OF INDUSTRIAL UNDERTAKINGS OR ENTERPRISES ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. RETURN OF INCOME FILED ON 15.10.2 010 SHOWING TOTAL INCOME OF RS.53.20 CRORES (APPROX). THE CASE SELECT ED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE D ULY SERVED UPON THE ASSESSEE. NECESSARY DETAILS AS CALLED FOR WERE SUBMITTED. GROSS TURNOVER OF THE COMPANY STOOD AT RS.1116.76 CRORES. AFTER MAKING VARIOUS ADDITIONS THE LD. AO COMPLETED THE ASSESSME NT, ASSESSING INCOME AT RS.56.13 CRORE. THE MAJOR ADDITIONS INCL UDED DENYING OF DEDUCTION U/S 80IA OF RS.1,47,99,495/- AND DISALLOW ANCE OF CLAIM U/S 43B OF THE ACT AT RS.1,01,80,852/-. 3. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD.CIT(A) AND PARTLY SUCCEEDED. 4. NOW THE REVENUE IS IN APPEAL BEFORE TRIBUNAL RA ISING FOLLOWING GROUNDS OF APPEAL. THE LEARNED DEPARTMENTAL REPRES ENTATIVE VEHEMENTLY ARGUED WITH REGARD TO BOTH THE GROUNDS A ND SUPPORTED THE ORDER OF LD. ASSESSING OFFICER AND THE LD. COUN SEL RELIED ON THE FINDINGS OF LD. CIT(A). 5. WE HAVE HEARD THE CONTENTIONS AND PERUSED THE RE CORD PLACED BEFORE US. ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 3 6. FIRST WE TAKE UP GROUND NO.1 : THE LD. A.O OBSERVED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA AND THE YEAR OF COMMENCEMENT OF PRODUCTION IS ASSESSMENT YEAR 2005- 06, BUT THE ASSESSEE OPTED ASSESSMENT YEAR 2010-11 AS THE FIRST YEAR FOR CLAIMING THE DEDUCTION U/S 80IA FOR 10 YEARS. IT W AS ARGUED BY THE ASSESSEE THAT SECTION 80IA, SUB-SECTION (2) OF THE ACT PROVIDES OPTION TO THE ASSESSEE TO CHOOSE TEN CONSECUTIVE A SSESSMENT YEARS OUT OF THE TOTAL PERIOD OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE OPERATION STARTS. HOWEVER THE LD.A.O DEN IED THE CLAIM FOR THE REASON THAT THE ASSESSEE CLAIMED SET OFF OF BROUGHT FORWARD LOSSES AGAINST THE INCOME EARNED IN THE INITIAL YEA RS. 7. WE FURTHER FIND THAT THE LD.CIT(A) HAS ELABORATE LY DEALT WITH THIS ISSUE PLACING RELIANCE OF VARIOUS JUDGMENTS AND HAS ALLOWED THE CLAIM U/S 80IA(2) AT RS.1,47,99,495/- OBSERVING AS FOLLOWS; 8.6 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT, THE SUBMISSION OF THE A.O DURING APPELLATE PROCEEDINGS AND FACTS OF THE CASE. THE APPELLANT IS ENGAGED IN THE BUSINESS OF SOLVENT EXTRACTION PLANT AND WIND POWER GENERATION. THE APPELLANT HAD COMMENCED WIND POWER GENERATION DURING F.Y 2006-07, FOR WHICH THE APPELL ANT WAS ENTITLE3D FOR DEDUCTION U/S 80IA OF THE ACT. SUB-SECTION(2) OF SE CTION 80IA PROVIDES THAT THE DEDUCTION AT THE OPTION OF THE ASSESSEE MAY BE CLAIMED FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OF FIFTEEN YEARS BEGIN NING FROM THE YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE DEVELOPS AND BE GINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR GENERATES POWER. ACCORDI NGLY, THE APPELLANT HAD OPTED THE CURRENT A.Y. 2010-11 AS THE FIRST INITIAL ASSESSMENT YEAR FOR CLAIMING DEDUCTION U/S 80IA(4) OF THE ACT. IT WOUL D BE RELEVANT TO REPRODUCE THE STATEMENT OF INCOME IN DIFFERENT YEAR S FROM GENERATION OF WIND POWER STARTING FROM THE YEAR, IN WHICH THE GEN ERATION STARTED FURNISHED BY THE APPELLANT, AS UNDER:- F.Y 2006-07 2007-08 2008-09 2009-10 2010-11 SALES 0 15103935 41458533 40632695 60952181 LESS;EXPENSES 145000 141082 236876 150000 1323600 ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 4 DEPRECIATION AS PER CO.ACT 528880 7653360 22028160 16784517 19817000 673880 7794442 22265036 16934517 21140600 PROFIT/LOSS ( - )673880 7309493 19193497 23698178 39811581 ADD BACK DEP CO. ACT ( - )145000 14962853 41221657 40482695 59 628581 LESS DEP AS PER RULES 60100000 196580000 128416000 25683200 5136640 (-)60245000 (-)181617147 (-)87194343 14799495 54491941 IT MAY BE NOTED THAT THE UNABSORBED DEPRECIATION OF EARLIER YEARS WAS SET OFF AGAINST THE INCOME FROM SOLVENT EXTRACTION BUSI NESS AND THERE WAS NO UNABSORBED DEPRECATION/LOSS AVAILABLE DURING THE YE AR UNDER CONSIDERATION. THE APPELLANT HAD CLAIMED DEDUCTION U/S 80IA(4) OF THE ACT ON 100% OF PROFIT DERIVED FROM GENERATION OF ELECTR ICITY FROM WIND GENERATORS FOR RS.1,47,99,495/- DURING THIS YEAR. THE A.O, IN APPELLATE PROCEEDINGS, CONTENDED THAT THE APPELLANT WAS NOT E NTITLED FOR DEDUCTION U/S 80IA OF THE ACT AS AFTER ADJUSTMENT OF BROUGHT FORWARD UNABSORBED DEPRECIATION, THERE WAS NO POSITIVE PROFIT IN THE C URRENT YEAR FOR ALLOWING DEDUCTION U/S 80IA OF THE ACT, BECAUSE AS PER SECTI ON 80IA(5) OF THE ACT, THE WIND POWER GENERATION UNIT WERE TO BE CONSIDERE D AS THE ONLY SOURCE OF INCOME OF THE APPELLANT. ON THE OTHER HAND, THE CO NTENTION OF THE A.R OF THE APPELLANT WAS THAT AS PER SECTION 80IA(2) OF TH E ACT, THE APPELLANT HAD THE OPTION TO CHOOSE THE INITIAL ASSESSMENT YEAR FO R CLAIMING DEDUCTION U/S 80IA OF THE ACT FOR TEN CONSECUTIVE ASSESSMENT YEAR S WITHIN FIFTEEN CONSECUTIVE YEARS FROM THE DATE OF COMMENCEMENT OF THE ELIGIBLE UNIT. IT WAS SUBMITTED THAT ONCE THE APPELLANT HAD SELECTED THE INITIAL ASSESSMENT YEAR FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT, TH EN THE EARLIER YEARS BROUGHT FORWARD UNABSORBED DEPRECIATION/LOSSES NEED NOT BE ADJUSTED AGAINST THE PROFIT OF THE INITIAL ASSESSMENT YEAR F ROM THE ELIGIBLE UNIT FOR ALLOWING DEDUCTION U/S 80IA OF THE ACT TO THE APPE LLANT WHEN THOSE HAD ALREADY BEEN SET OFF AGAINST OTHER BUSINESS INCOME IN EARLIER YEARS. SECTION 80IA OF THE ACT HAS BEEN SUBSTITUTED W. E.F. 01.04.2000. IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN AS SESSEE INCLUDES ANY PROFITS & GAINS DERIVED BY AN UNDERTAKING FROM ANY ELIGIBLE BUSINESS REFERRED TO IN SUB-SECTION (4), THERE SHALL, IN ACC ORDANCE WITH AN SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPU TING THE INCOME DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT Y EARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAK ING OR THE ENTERPRISE DEVELOPS OR BEGINS TO OPERATE. IT MAY NOTED THAT F IFTEEN YEARS IS THE OUTER LIMIT IN WHICH THE ASSESSEE CAN CHOOSE FOR CLAIMING THE DEDUCTION. IN ORDER TO DECIDE THE ISSUE UNDER CONSIDERATION, IT WOULD B E RELEVANT TO REPRODUCE THE PROVISIONS OF SUB-SECTION(5) OF SECTION 80IA OF THE ACT AS UNDER:- (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WH ICH THE PROVISIONS OF SUB- ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 5 SECTION(1) APPLY SHALL, FOR THE PURPOSES OF DETERMI NING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BU SINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PR EVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVER Y SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH T HE DETERMINATION IS TO BE MADE. FROM THE PLAIN READING OF THE PROVISION, IT CAN BE GATHERED THAT IT IS A NON-OBSTANTE CLAUSE WHICH OVERRIDES THE PROVISIONS OF THE ACT AND IT IS FOR DETERMINATION OF THE QUANTUM OF DEDUCTION U/S 80IA OF THE ACT FOR THE INITIAL ASSESSMENT YEAR AND SUBSEQUENT ASSESSMENT Y EARS AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE. IT IS CLEAR FROM THE ABOVE SUB-SECTION(5) THAT THE FICTION OR D EEMING PROVISION THAT SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF THE ASSESSEE HAS TO BE CONSIDERED DURING THE PREVIOUS YEAR RELEVANT TO INI TIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR. IT MAY BE NOTED THAT SECTION 80IA NOWHERE DEFINES THE TERM INITIAL ASSESSMENT Y EAR. PRIOR TO 1 ST APRIL, 2000, THE INITIAL ASSESSMENT YEAR WAS DEFINED FOR V ARIOUS TYPES OF ELIGIBLE BUSINESS IN ERSTWHILE SECTION 80IA(12), WHICH INTER -ALIA READ AS UNDER:- (12) FOR THE PURPOSES OF THIS SECTION, - (A) (AA) . (B) .. (C) INITIAL ASSESSMENT YEAR- (1) (2) IN THE CASE OF AN ENTERPRISE, CARRYING ON THE BUSIN ESS OF DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRU CTURE FACILITY, MEANS THE ASSESSMENT YEAR SPECIFIED BY THE ASSESSEE AT HIS OPTION TO BE THE INITIAL YEAR, NOT FALLING BEYOND THE TWELFTH ASSESSMENT YEAR STARTING FROM TH E PREVIOUS YEAR IN WHICH THE ENTERPRISE BEGINS OPERAT ING AND MAINTAINING THE INFRASTRUCTURE FACILITY; (3) THUS, IN THE DEFINITION GIVEN IN ERSTWHILE SEC TION 80IA(12) OF THE ACT, IN THE CASE OF DEVELOPING AND OPERATING INFRASTRUCTURE FACILITY, INITIAL ASSESSMENT YEAR WAS THE ASSESSMENT YEAR SPECIFIED BY THE ASSESSEE AT HIS OPTION TO BE THE INITIAL YEAR. THOUGH THESE PR OVISIONS ARE NO MORE ON THE STATUE AT PRESENT, STRENGTH CAN BE DRAWN FROM T HESE PROVISIONS TO UNDERSTAND EXPRESSION INITIAL ASSESSMENT YEAR USE D IN SECTION 80IA(5) OF THE ACT. NOW, IN THE INSTANT CASE, THE APPELLAN T HAD OPTED FOR THE INITIAL YEAR AS A.Y 2010-11 UNDER CONSIDERATION AND, THEREF ORE, THIS HAS TO BE CONSIDERED AS INITIAL ASSESSMENT YEAR. THUS, AS PER PROVISIONS OF SECTION 80IA(5) OF THE ACT, THE FICTION CREATED THA T THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURI NG THE PREVIOUS YEAR ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 6 RELEVANT TO THE INITIAL ASSESSMENT YEAR TO EVERY SU BSEQUENT ASSESSMENT YEAR WOULD BE APPLICABLE FROM INITIAL YEAR OF A.Y. 2010-11 AND NOT FROM EARLIER YEARS. THE HONBLE KERALA HIGH COURT IN CIT VS. VALVES LTD. (1987) 168 ITR 416 (KER) HELD THAT LEGAL FICTION IS TO THE PURPOSE FOR WHICH THEY ARE CREATED AND COULD NOT EXTENDED BEYON D THAT LEGITIMATE TIME. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MOTHER INDIA & REFRIGERATION INDUSTRIES PVT.LTD (1985) 115 ITR 711 (SC) ALSO HELD THAT LEGAL FICTION ARE CREATED ONLY FOR SOME SPECIF IC PURPOSE AND THEY MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTEND ED BEYOND THAT LEGITIMATE FIELD. THE FICTION CREATED BY THE DEEMI NG PROVISION U/S 80IA(5) OF THE ACT THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE HAS, THUS, TO BE CONSIDERED FOR INITIAL AS SESSMENT YEAR AND SUBSEQUENT ASSESSMENT YEAR. IT IS A FACT THAT EARL IER YEARS DEPRECIATION OF WIND POWER GENERATORS WAS SET OFF/ABSORBED AGAINST OTHER BUSINESS INCOME OF THE APPELLANT AND THERE WAS NO CARRY FORW ARD UNABSORBED DEPRECIATION OR BUSINESS LOSS WHICH COULD BE SET OF F AGAINST THE INCOME OF THE CURRENT A.Y. 2010-11. WHERE THE DEPRECATION AN D LOSS OF EARLIER YEARS HAD ALREADY BEEN SET6 OFF AGAINST OTHER BUSINESS IN COME OF THOSE ASSESSMENT YEARS, THERE IS NO NEED FOR NOTIONALLY C ARRYING FORWARD AND SETTING OFF THE SAME DEPRECIATION OR LOSS IN COMPUT ING THE QUANTUM OF DEDUCTION AVAILABLE U/S 80IA FOR INITIAL ASSESSMEN T YEAR. IF THE ASSESSEE HAS POSITIVE INCOME DERIVED FROM ELIGIBLE BUSINESS AS SPECIFIED U/S 80IA(5) OF THE ACT. THE LOSS IN THE YEAR EARLI ER TO THE INITIAL ASSESSMENT YEAR ALREADY SET OFF/ABSORBED AGAINST TH E PROFITS OF THE OTHER BUSINESS COULD NOT BE NOTIONALLY BROUGHT FORWARD AN D SET OFF AGAINST THE PROFITS DERIVED FROM THE ELIGIBLE BUSINESS IN THE I NITIAL ASSESSMENT YEAR. 8.7 THE HONBLE MADRAS HIGH COURT HAD AN OCCASION T O CONSIDER THIS ISSUE IN THE CASE OF VELAYUTHASWAMY SPINNING MILLS P. LTD VS. ACIT (2012 ) 340 ITR 477 (MAD.). IN THIS CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF YARN AND ELECTRICITY GEN ERATION THROUGH WIND ELECTRIC GENERATORS AND FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ADMITTING A TOTAL INCOME OF RS.1,36,36,470 UNDER NORMAL COMPUTATION AND RS.2,95,73,840 UNDER SECTION 115JB OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER DISALLOWED THE CL AIM OF DEDUCTION MADE BY THE ASSESSEE UNDER SECTION 80-IA AMOUNTING TO RS .1,70,76,945 ON THE GROUND THAT THE ELIGIBLE INCOME WAS A NEGATIVE FIGU RE. THE COMMISSIONER (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT SINCE THE ASSESSMENT YEAR 2005-06 WAS THE INITIAL ASSESSMENT YEAR, UNABSORBED DEPRECIATION OF EARLIER YEARS, WHICH HAD ALREADY BE EN ABSORBED, COULD NOT BE NOTIONALLY CARRIED FORWARD AND TAKEN INTO CONSID ERATION FOR COMPUTING DEDUCTION UNDER SECTION 80-IA. THE TRIBUNAL SET AS IDE THE ORDER OF THE COMMISSIONER (APPEALS) AND RESTORED THE ORDER OF TH E ASSESSING OFFICER. IT WAS HELD BY THE HONBLE HIGH COURT AS UNDER:- HELD, ALLOWING THE APPEAL, THAT THERE WAS NO DISPUT E THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED A GAINST THE PROFITS OF ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 7 THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED THE OPTION UNDER SECTION 80IA(2). DURING THE RELEVANT PERIOD, THERE WAS NO UNABSORBED DEPRECIATION OR LOSS OF THE ELIGIBLE UNDERTAKING AND THESE WERE ALREADY ABSORBED IN THE EARLIER YEAR S. THERE WAS A POSITIVE PROFIT DURING THE YEAR. THE LOSS IN THE YEAR EARLIER TO THE INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST TH E PROFIT OF OTHER BUSINESS COULD NOT BE NOTIONALLY BROUGHT FORW ARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE WAS PROVIDED IN SECTION 80-IA(5). THE ORDER OF THE TRIBUNAL WAS TO BE SET ASIDE. 8.8 THIS ISSUE ALSO CAME UP FOR CONSIDERATION IN A RECENT DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SHRI ANIL H. LAD IN ITA NO. 176/2011 ORDER DATED 5 TH FEBRUARY, 2014. IN THIS CASE, THE HONBLE HIGH COURT OBSERVED AS UNDER:- 9. THE MADRAS HIGH COURT IN THE AFORESAID VELAYUDH ASWAMYS CASE INTERPRETING THE VERY PROVISION HELD, FROM A READIN G OF SUB-SECTION (1) 80- IA, IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GRO SS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DER4IVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB- SECTION (4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPU TING HE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS AND TH E SAME IS DEFINED IN SUB-SECTION (4). SUB-SECTION (2) PROVIDES OPTION T O THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. O PTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WI LL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEV ELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB-SECTI ON(5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-SECTION (5) AND THE SAME IS NOT DEF INED UNDER THE PROVISIONS. IT IS TO BE NOTED THAT INITIAL ASSESS MENT YEAR EMPLOYED IN SUB-SECTION (5) IS DIFFERENT FROM THE WORDS BEGINN ING FROM THE YEAR REFERRED TO IN SUB-SECTION (2). SUB-SECTION (5) ST ARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED; FOR THE PURPOSE OF DE TERMINING THE QUANTUM OF DEDUCTION; FOR THE ASSESSMENT YEAR IMMEDIATELY S UCCEEDING THE INITIAL ASSESSMENT YEAR, THEREBY A FICTION IS CREATED BY IN TRODUCING A DEEMING PROVISIONS AND THEREFORE, IT IS CLEAR THAT THE ELIG IBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR REL EVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEA RS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE A LREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 8 YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS A NY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THO UGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE A ND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS . ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHE R INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMO UNT AND BRING IT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE A ND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHI CH IT IS CREATED. 10. THEREFORE, KEEPING IN MIND THE OBJECT WITH WHIC H THESE PROVISIONS ARE INTRODUCED, IT IS CLEAR THAT AN ASSESSEE IS GIVEN T HE BENEFIT OF 100% DEDUCTION OF THE PROFITS AND GAINS FROM THE ELIGIBL E BUSINESS. THE QUANTUM OF DEDUCTION IS TO BE CALCULATED WHEN THE C LAIM FOR DEDUCTION IS MADE. IF BEFORE CLAIMING DEDUCTION, THE LOSS AND D EPRECIATION CLAIMED BY THE ASSESSEE EVEN IN RESPECT OF ELIGIBLE BUSINESS I F SET OFF AGAINST INCOME OF THE ASSESSEE OR OTHER SOURCE, THE SAID LOSS OR D EPRECIATION IS ALREADY ABSOLVED, IT DOES NOT EXIST. FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SUB-SECTION (5) OF SECTI ON 80IA, THE REVENUE CANNOT TAKE INTO CONSIDERATION THE LOSS AND DEPRECIATION WHICH IS ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE FROM OTHER SOURCE AND COMPUTE THE PROFIT UNDER SECTION 8 0IA. THEREFORE, THE APPROACH OF THE TRIBUNAL IS IN ACCORDANCE WITH LAW. THE ASSESSING AUTHORITY AND THE COMMISSIONER COMMITTED A SERIOUS ERROR IN SETTING OFF THE PROFIT EARNED BY THE ASSESSEE UNDER SECTION 80I A AGAINST THE LOSSES AND DEPRECIATION OF THE ELIGIBLE BUSINESS WHICH IS ALREADY SET OFF FROM OTHER SOURCE BEFORE SUCH A CLAIM IS PUTFORTH. THUS , THERE IS NO ERROR COMMITTED BY THE TRIBUNAL IN SETTING ASIDE THE ORDE R PASSED BY THE ASSESSING AUTHORITY AS WELL AS THE LOWER APPELLATE AUTHORITY. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. 8.9 SIMILAR VIEW AS EXPRESSED BY VARIOUS BENCHES OF THE ITAT, SUCH AS IN (I) POONAWALLA ESTATE STUD FARM LTD. (2011) 136 TTJ 236 (PUNE ITAT) (II) CHORDIA FOOD PRODUCTS LTD, PUNE TRIBUNAL ORDER DATED 26.06.2012 (III) ACIT VS.SURBHA SUBHASH LODHA ITA NO. 1845/PN/ 2013 ORDER DATED 24.09.2014 (PUNE ITAT). THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL POSITION ON THE ISSUE, I AM OF THE VIEW THAT THE AP PELLANT WAS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT OF RS.1,47,99,495/- F OR THE PROFITS DERIVED FROM ELIGIBLE BUSINESS OF WIND POWER GENERATION FOR A.Y. 2010-11 UNDER CONSIDERATION OPTED BY THE APPELLANT AS THE INITIAL ASSESSMENT YEAR. ACCORDINGLY, THE DISALLOWANCE OF APPELLANTS CLAIM OF DEDUCTION U/S 80IA OF THE ACT OF RS.1,47,99,495/- MADE BY THE A.O. IS DELETED. ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 9 8. WE FIND NO INFIRMITY IN THE FINDINGS OF LD. CIT( A) AS THE CLAIM OF ASSESSEE IS WITHIN THE FOUR CORNERS OF LAW AS CONTE MPLATED IN SECTION 80IA, SUB-SECTION 2 OF THE ACT WHICH GIVES THE OPTION TO THE ASSESSEE TO START CLAIMING DEDUCTION U/S 80IA OF TH E ACT FOR ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF THE BLOCK OF 15 YEARS BEGINNING FROM THE YEAR OF THE START OF THE ACTIVITY. THERE I S NO DISPUTE AT THE END OF THE REVENUE ABOUT THE TYPE OF BUSINESS AND I TS ELIGIBILITY U/S 80IA OF THE ACT. WE THEREFORE UPHOLD THE FINDINGS OF LD.CIT(A) AND DISMISS THE GROUND NO.1 RAISED BY THE REVENUE. 9. NOW WE TAKE GROUND NO.2 WHICH RELATES TO DELETIO N OF ADDITION OF RS.1,01,80,852/- BY THE LD.CIT(A). THIS ADDITION W AS MADE BY THE LD.A.O BY DISALLOWING THE CLAIM OF ASSESSEE FOR PA YMENT OF LIABILITY OF COMMERCIAL TAX, ENTRY TAX AND WORKS CONTRACT TAX . THESE LIABILITIES AROSE ON ACCOUNT OF ORDERS OF ASSESSMEN T UNDER COMMERCIAL TAX AND ENTRY TAX. THE ASSESSEE FILED T HE APPEALS AGAINST THESE ORDERS AND HAD TO DEPOSIT PART OF DEM AND. REMAINING PART OF THE LIABILITY WAS PAID DURING THE YEAR. AS SUBMITTED BY THE ASSESSEE THAT AS PER THE PROVISIONS OF SECTION 43B OF THE ACT SUCH LIABILITIES CAN ONLY BE CLAIMED AS DEDUCTION AGAINS T THE INCOME IN THE YEAR OF ACTUAL PAYMENT IRRESPECTIVE OF ANY METH OD OF ACCOUNTING ADOPTED AND IRRESPECTIVE OF MANNER OF MAKING BOOK E NTRIES OR DESCRIPTION IN THE BOOKS OF ACCOUNTS. 10. WE FURTHER FIND THAT THE LD.A.O HAD NOT DISPUT ED THE ACTUAL PAYMENT OF THESE LIABILITIES. WE ALSO OBSERVE THAT THE COMMERCIAL ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 10 TAX AND ENTRY TAX ASSESSMENTS WERE COMPLETED FOR TH E EARLIER YEARS AND DEMANDS WERE CREATED AND THE IMPUGNED AMOUNT WA S PAID DURING THE YEAR AGAINST THESE LIABILITIES AND WERE NOT CHARGED TO THE PROFIT AND LOSS ACCOUNT BUT WERE SHOWN AS A DEPOSIT AND BALANCE WITH THE GOVERNMENT AUTHORITIES. THE ASSESSEE CLAI MED THESE DEDUCTION IN THE COMPUTATION OF INCOME UNDER THE PR OVISIONS OF SECTION 43B OF THE ACT. WE FURTHER FIND THAT THE LD . CIT(A) DELETED THESE ADDITIONS MADE BY THE LD.A.O U/S 43B OF THE A CT AT RS.1,01,80,852/- OBSERVING AS FOLLOWS; 6.5 I HAVE CAREFULLY CONSIDERED THE SU BMISSIONS OF THE APPELLANT, CONTENTION OF THE ASSESSING OFFICER AND FACTS OF TH E CASE. IN THIS CASE, THE COMMERCIAL-TAX SAND ENTRY TAX ASSESSMENTS WERE COMP LETED FOR THE EARLIER FINANCIAL YEARS AND DEMANDS WERE CREATED IN THE CASE OF THE APPELLANT. THUS, THE LIABILITY TO PAY COMMERCIAL T AX/ENTRY TAX HAD OCCURRED IN THIS CASE. HOWEVER, THE APPELLANT HAD TREATED ALL THE DEMANDS CREATED AS CONTINGENT LIABILITY AS THE APPE LLANT HAD CONTESTED THESE TAX DEMANDS IN APPEAL AND HAD ALSO NOT CLAIME D THE DEDUCTION OF THE SAME IN ITS PROFIT & LOSS ACCOUNT. BUT, THE AP PELLANT HAD MADE PAYMENTS OF COMMERCIAL TAX AND ENTRY TAX AGGREGATIN G TO RS.1,01,80,852/- DURING THE YEAR UNDER CONSIDERATIO N AGAINST THE LIABILITY OF TAX DEMANDS CREATED BY THE COMMERCIAL TAX DEPART MENT. THE APPELLANT HAD SHOWN THIS PAYMENT AS DEPOSIT & BALA NCES WITH THE GOVERNMENT AUTHORITIES IN THE BALANCE SHEET. THE ISSUE FOR CONSIDERATION IS WHETHER DEDUCTION FOR COMMERCIAL TAX AND ENTRY T AX PAID DURING THE YEAR, WHICH HAD NOT BEEN CHARGED TO THE PROFIT & LO SS ACCOUNT, CAN BE CLAIMED AS DEDUCTION IN VIEW OF SECTION 43B OF THE ACT. IT MAY BE NOTED THAT SECTION 43B SUPERSEDES THE PROVISIONS OF SECTI ON 145 OF THE ACT AND PROVIDES THAT DEDUCTION CAN ONLY BE ALLOWED ON THE CONDITION OF ACTUAL ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 11 PAYMENT IRRESPECTIVE OF THE METHOD OF ACCOUNTING AD OPTED BY THE ASSESSEE. NOW, IN THIS CASE, SINCE THERE WAS A LIA BILITY CREATED AGAINST APPELLANT FOR COMMERCIAL TAX AND ENTRY TAX AND THE APPELLANT HAD ACTUALLY PAID TAX TO THAT DEPARTMENT OF RS.1,01,80, 852/- DURING THE YEAR, IN VIEW OF PROVISIONS OF SECTION 43B OF THE ACT IT WAS TO BE ALLOWED AS DEDUCTION IN THE YEAR UNDER CONSIDERATION ON THE BA SIS OF PAYMENT, EVEN IF IT WAS NOT DEBITED TO PROFIT & LOSS ACCOUNT. 6.6 IN ASSOCIATED PIGMENTS LTD VS CIT (1 998) 234 ITR 589 (CAL.), THE HONBLE CALCUTTA HIGH COURT OBSERVED IN THIS REGARD AS UNDER:- THERE IS NO PART OF SECTION 43B OR THE INCOME-TAX ACT ITSELF WHICH REQUIRES THAT WHEN DEDUCTION IS CLAIMED ON THE BASI S OF SECTION 43B, THE ASSESSEE MUST SATISFY THE TWIN TEST OF BOTH PRO VIDING ACTUAL PAYMENT OF THE DUE TAX OR CESS IN THE PREVIOUS YEAR IN QUESTION AS WELL AS SATISFYING THE DEPARTMENT THAT DUE PROVISIO N HAD BEEN MADE IN THE BOOKS IN REGARD TO SUCH DUTY OR TAX FOR WHIC H PAYMENT WAS MADE LATER ON. TO INTRODUCE THIS DOUBLE TEST WOULD BE WRITING WORDS INTO THE SECTION WHICH NEITHER THE TRIBUNAL NOR THE COURT IS ENTITLED TO DO. THUS, IT WAS HELD IN THIS CASE THAT IT IS NOT NECES SARY THAT A PROVISION SHOULD BE MADE IN THE ACCOUNT SO AS TO ENTITLE TO T HE DEDUCTION OF AN AMOUNT WHICH IS PAID DURING THE YEAR UNDER SECTION 43B OF THE ACT. 6.7 SIMILAR VIEW WAS EXPRESSED BY THE HONBLE MAD RAS HIGH COURT IN THE CASE OF CHEMICALS & PLASTIC INDIA LTD. VS. CIT (200 3) 260 ITR 193 (MAD.) IN WHICH IT WAS OBSERVED AS UNDER:- SECTION 43B OF THE INCOME-TAX ACT, 1961, DOES NOT STIPULATE THAT BEFORE AN ASSESSEE COULD CLAIM DEDUCTION IN THAT YE AR, THE ASSESSEE SHOULD HAVE SHOWN THE AMOUNTS PAID TOWARDS DUTY UND ER A SEPARATE HEAD AND THAT THE INCLUSION OF THE DUTY EL EMENT IN THE VALUATION OF THE CURRENT ASSETS WOULD DISENTITLE TH E ASSESSEE FROM CLAIMING THE DEDUCTION UNDER SECTION 43B. HELD, THAT THE ASSESSEE WAS ENTITLED TO THE DEDUCTI ON OF THE AMOUNT OF DUTY PAID IN THE YEAR IN WHICH THE PAYMENT WAS M ADE. THE FACT THAT PART OF THE CUSTOMS DUTY WAS PAID IN RESPECT O F RAW MATERIALS WHICH REMAINED WITH THE ASSESSEE AT THE END OF THE YEAR WOULD NOT DEPRIVE THE ASSESSEE OF THE BENEFIT OF CLAIMING THE DEDUCTION IN THE YEAR IN WHICH DUTY HAD BEEN ACTUALLY PAID. SO ALSO THE RIGHT OF THE ASSESSEE TO CLAIM DEDUCTION FOR THE AMOUNT OF EXCIS E DUTY PAID IN THE YEAR IN WHICH IT WAS PAID IS UNAFFECTED BY THE FACT THAT PART OF THE DUTY PAID WAS IN RELATION TO FINISHED GOODS WHI CH REMAINED WITH THE ASSESSEE AT THE END OF THE YEAR. THE FACT THAT THE DUTY PAID WAS NOT CHARGED TO THE PROFIT AND LOSS ACCOUNT BY ITSEL F WOULD NOT ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 12 DISENTITLE THE ASSESSEE FROM CLAIMING DEDUCTION UND ER SECTION 43B. IT IS OPEN TO THE ASSESSEE TO FILE AN ADJUSTMENT STATE MENT BEFORE THE ASSESSING OFFICER. THUS, THE HONBLE MADRAS HIGH COURT HELD THAT WHERE THE ASSESSEE HAD ACTUALLY PAID CUSTOM & EXCISE DUTY BUT HAS NOT CHAR GED THE SAME TO THE PROFIT & LOSS ACCOUNT, IT WOULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING DEDUCTION U/S 43B OF THE ACT. NOW, IN THE INSTANT CASE, THE APPELLANT HAD ACTUALL Y PAID COMMERCIAL TAX AND ENTRY TAX OF RS.1,01,80,852/- DURING THE YEAR U NDER CONSIDERATION. THOUGH THE APPELLANT HAD NOT CHARGED THE SAME TO IT S PROFIT & LOSS ACCOUNT AND SHOWN THE SAME IN ITS BALANCE SHEET AS DEPOSIT S & BALANCES WITH GOVERNMENT AUTHORITIES. THE APPELLANT WAS ENTITLED TO DEDUCTION U/S 43B OF THE ACT. THEREFORE, THE A.O IS DIRECTED TO ALLO W THE DEDUCTION OF COMMERCIAL TAX AND ENTRY TAX OF EARLIER YEARS PAID BY THE APPELLANT DURING THE YEAR OF RS.1,01,80,852/- AS DEDUCTION U/S 43B O F THE ACT AS CLAIMED IN THE COMPUTATION OF INCOME. HENCE, GROUND NOS 2 & 3 ARE ALLOWED. 11. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTAN CES OF THE CASE AND DETAILED FINDINGS OF LD. CIT(A) AS WELL AS UNDE RSTANDING THE PROVISIONS OF SECTION 43B OF THE ACT FIND NO INFIRM ITY IN THE FINDINGS OF LD. CIT(A) AS THE IMPUGNED AMOUNT HAS BEEN PAID TOWARDS TAX LIABILITY AND IS VERY MUCH ELIGIBLE FOR DEDUCTION U /S 43B OF THE ACT AS THE AMOUNT HAS BEEN PAID DURING THE YEAR IN APPE AL. IN THE RESULT GROUND NO.2 OF THE REVENUE IS DISMISSED. 12. GROUND NO.3 IS GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 13. IN THE RESULT THE APPEAL OF REVENUE IS DISMISS ED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.201 8. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 16TH JANUARY, 2018 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 13 BY ORD ER PRIVATE SECRETARY/DDO, INDORE ITA NO.288/IND/2015 ASST. YEAR 2010-11 SANWARIA AGRO OILS LTD 14 1. DATE OF DICTATION : 11/01/2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER : 12/01/2018 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S./P .S: 14.1.2018 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT: 15.1.2018 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S.:16.1.2018 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:17.1 .18 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISSTANT R EGISTRAR FOR SIGNATURE OF THE ORDER. 9. DATE OF DESPATCH OF THE ORDER: