EXCEL CROP CARE LTD, MUMBAI V. DCIT CEN CIR 38, MUMBAI

ITA 3100/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79437 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 21-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KIRIT R KANDAR
• Keywords: Depreciation; Rule of consistency; Earning of tax free income; Unabsorbed depreciation
• Section: 14A; 12

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI ! , ' #$ % % % % , , #$ & BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUICIAL MEMBER ./ I.T.A. NO.3100, 3101, 8741 &7155/MUM/2010 ( ' ' ' ' / ASSESSMENT YEARS :2005-06 TO 2008-09 M/S. EXCEL CROP CARE LTD., 184/87, S.V. ROAD, JOGESHWARI (W), MUMBAI 400 102 / VS. THE DCIT, CENTRAL CIRCLE 38, AAYAKAR BHAVAN, MUMBAI-400 020 ./ I.T.A. NO.8246/MUM/2010 ( ' ' ' ' / ASSESSMENT YEARS :2007-08 THE DCIT, CENTRAL CIRCLE 38, AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. EXCEL CROP CARE LTD., 184/87, S.V. ROAD, JOGESHWARI (W), MUMBAI 400 102 $( ' ./ ) ./ PAN/GIR NO. : AAACW 3810D ( (* / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / ASSESSEE BY: SHRI RAJAN VORA & SHRI KIRIT R. KANDAR +,(* . - / REVENUE BY: SHRI JEEVAN LAL LAVIDIYA . /0' / DATE OF HEARING :21.07.2014 12' . /0' / DATE OF PRONOUNCEMENT :25.07.2014 #3 / O R D E R PER BENCH : EXCEL CROP CARE LTD. 2 THESE FOUR APPEALS BY THE ASSESSEE ARE FOR ASSESSM ENT YEARS 2005- 06, 2006-07, 2007-08 AND 2008-09. ITA NO. 8246/M/2 010 IS CROSS APPEAL BY THE REVENUE FOR A.Y. 2007-08. IN ALL THE APPEALS BY THE ASSESSEE, COMMON GRIEVANCES HAVE BEEN RAISED WHICH RELATE TO: (I) DISALLOWANCE IN RESPECT OF PROVISIONS FOR LEASE REN T. (II) DISALLOWANCE U/S. 14A (III) DENIAL OF DEDUCTION U/S. 80IA AND (IV) LEVY OF INTEREST U/S. 234B/234C OF THE ACT. 2. IN ASSESSMENT YEAR 2007-08, REVENUE IS IN APPEAL AGAINST: (I) ALLOWING THE CLAIM OF DEDUCTION U/S. 35DD OF THE AC T (II) DISALLOWANCE U/S. 14A OF THE ACT. BECAUSE OF THE COMMON ISSUES MENTIONED HEREINABOVE, ALL THESE APPEALS AND CROSS APPEAL BY THE REVENUE WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE STATED THAT HE IS NOT PRESSING THE GROUND RELATING TO THE DISALLOWANC E OF PROVISION FOR LEASE RENT. THIS GROUND IS ACCORDINGLY DISMISSED FOR ALL THE YEARS UNDER CONSIDERATION. 4. THE ASSESSEE COMPANY WAS PREVIOUSLY KNOWN AS WE ST COAST OXYGEN LTD. AND CHANGED ITS NAME AS EXCEL CROP CAR E LTD., WITH EFFECT FROM 13.1.2003. A SCHEME OF ARRANGEMENT BETWEEN TH E ASSESSEE COMPANY AND EXCEL INDUSTRIES LTD. WAS SANCTIONED BY THE HONBLE HIGH EXCEL CROP CARE LTD. 3 COURT OF JUDICATURE AT BOMBAY ON 18.7.2003 AND 1.8. 2003 AND BECOME EFFECTIVE FROM 1.9.2003. AS PER THE SCHEME, ENTIRE UNDERTAKING OF EXCEL INDUSTRIES LTD RELATED TO AGRI BUSINESS WAS TRANSFE RRED TO THE ASSESSEE COMPANY AS A GOING CONCERN FROM THE APPOINTED DATE 1.4.2002. 4.1. DURING THE YEAR UNDER CONSIDERATION, THE ASSES SING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED UTI INCOME OF US-64 WHICH WAS CLAIMED AS EXEMPT U/S. 10(33) OF THE ACT. THE AO FOUND THA T THE ASSESSEE HAS NOT ATTRIBUTED ANY EXPENSES WHICH HAVE BEEN INCURRED TO EARN THE EXEMPT INCOME, THOUGH FOR EARNING OF ANY INCOME SOME KIND OF EXPENDITURE NECESSARILY TO BE INCURRED. THE ASSESSEE WAS ASKED TO JUSTIFY ITS STAND. THE ASSESSEE CLAIMED THAT THERE IS NO EXPENDITURE I NADMISSIBLE U/S. 14A OF THE ACT. IT WAS FURTHER CLAIMED THAT RULE 8D HA S BEEN INSERTED WITH EFFECT FROM 24.3.2008. THE AO DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE AND WENT ON TO COMPUTE THE DISALLOWANCE UN DER RULE 8D RS. 6,53,926/- WAS DISALLOWED IN A.Y. 2005-06, RS. 18,5 3,125/- IN A.Y. 2006-07 AND RS. 28,50,505/- IN A.Y. 2007-08, NO DI SALLOWANCE WAS MADE IN A.Y. 2008-09. 5. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE IN A.Y . 2005-06 AND 2006-07 HOLDING THAT THE AO HAS MADE THE DISALLOWAN CE ON THE BASIS OF SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. IN ITA NO. 8057/M/03. IN A.Y. 2007-08, THE LD. CIT(A) OBSERVED THAT RULE 8D IS NOT APPLICABLE. HO WEVER, AT THE SAME TIME, THE LD. CIT(A) DIRECTED THE AO TO RECOMPUTE T HE DISALLOWANCE U/S. 14A AS PER THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. VS DCIT 328 ITR 81 . IN A.Y. 2008- 09, THE AO ACCEPTED THE DISALLOWANCE MADE BY THE AS SESSEE BEING 10% OF THE SALARY PAID TO G.M. (FINANCE) AS A REASONABLE D ISALLOWANCE. EXCEL CROP CARE LTD. 4 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FAIR LY CONCEDED THAT REASONABLE DISALLOWANCE HAS TO BE MADE AND THEREFOR E 10% OF THE SALARY PAID TO G.M (FINANCE) HAS BEEN ACCEPTED AS A REASON ABLE DISALLOWANCE IN A.Y. 2008-09. A SIMILAR VIEW SHOULD BE TAKEN IN OT HER ASSESSMENT YEARS. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY CONTENDED THAT THOUGH RULE 8D IS APPLICABLE FROM A. Y. 2008-09, YET THE DISALLOWANCE HAS TO BE MADE DRAWING SUPPORT FROM TH E SPIRIT OF RULE 8D. 8. HAVING HEARD BOTH THE SIDES WE FIND THAT THE AO HAS APPLIED RULE 8D WHILE COMPUTING THE DISALLOWANCE U/S. 14A. AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F GODREJ & BOYCE MANUFACTURING (SUPRA), THE APPLICABILITY OF RULE 8 D IS PROSPECTIVE WITH EFFECT FROM 2008-09. HOWEVER, AT THE SAME TIME A R EASONABLE DISALLOWANCE HAS TO BE MADE. IN OUR CONSIDERED VIE W, SINCE THE AO HAS ACCEPTED 10% OF THE SALARY PAID TO THE G.M (FINANCE ) AS A REASONABLE DISALLOWANCE FOR A.Y. 2008-09, THE SAME RATIO SHOUL D BE FOLLOWED FOR A.Y. 2005-06, 2006-07 AND 2007-08. WE, ACCORDINGLY , DIRECT THE AO TO DISALLOW 10% OF THE SALARY PAID TO G.M. (FINANCE) F OR ALL THE YEARS UNDER CONSIDERATION. THIS GROUND IS ACCORDINGLY DECIDED G IVING PART RELIEF TO THE ASSESSEE. GROUND NO. 2 IS PARTLY ALLOWED FOR THE A SSESSEE AND THE REVENUE. 9. THE THIRD GRIEVANCE RELATES TO THE DENIAL OF DED UCTION U/S. 80IA. WE FIND THAT FOR A.Y. 2005-06 AND 2006-07, THE AO D ENIED THE CLAIM BECAUSE THE ASSESSEE DID NOT FILE THE AUDIT REPORT ALONGWITH RETURN OF INCOME AND IN A.Y. 2007-08 AND 2008-09, THE AO WAS OF THE VIEW THAT THE QUANTUM OF DEDUCTION U/S. 80IA OF THE ACT HAS T O BE COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOSSES AN D DEPRECIATION OF EXCEL CROP CARE LTD. 5 ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWE D SET OFF AGAINST OTHER INCOME IN EARLIER YEARS. 10. IN A.Y. 2005-06 AND 2006-07, THE LD. CIT(A) CO NFIRMED THE FINDINGS OF THE AO HOLDING THAT IT IS MANDATORY FOR THE ASSESSEE TO CLAIM THE DEDUCTION IN THE RETURN ITSELF AND THE AUDIT RE PORT HAS TO BE FILED ALONGWITH RETURN. THE LD. CIT(A) FURTHER RELIED UP ON THE PROVISIONS OF SEC. 80AC OF THE ACT WHICH WAS INTRODUCED BY THE FI NANCE ACT 2006 W.E.F 1.4.2006. IN A.Y. 2007-08, THE LD. CIT(A) CO NFIRMED THE FINDINGS OF THE AO HOLDING THAT HIS PREDECESSOR HAS DENIED T HE CLAIM OF DEDUCTION FOR A.Y. 2005-06 AND 2006-07. IN A.Y. 2008-09, THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE AO RELYING UPON THE D ECISION OF HIS PREDECESSOR AND IN ADDITION HELD THAT DEDUCTION U/S . 80IA IS TO BE ALLOWED ONLY AFTER DEDUCTING CARRIED FORWARD LOSSES AND D EPRECIATION. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEH EMENTLY SUBMITTED THAT FILING OF AUDIT REPORT ALONGWITH RETURN OF INC OME IS NOT SACROSANCT AND THE ASSESSEE HAD FILED THE AUDIT REPORT BEFORE THE COMPLETION OF THE ASSESSMENT PROCEEDINGS BEFORE THE AO THEREFORE, THE CLAIM CANNOT BE DENIED SOLELY ON THE GROUND OF NON FILING OF THE AU DIT REPORT. THE LD. COUNSEL FURTHER STATED THAT THE LD. CIT(A) HAS RELI ED UPON THE PROVISIONS OF SEC. 80AC OF THE ACT WHICH IS NOT APPLICABLE FOR A.Y. 2005-06. THE LD. COUNSEL FURTHER RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS K.C.A. LTD 283 ITR 65, DELHI HIGH COURT IN THE CASE OF CIT VS WEB COMMERCE (INDIA) (P) LTD 318 ITR 135 AGAINST WHICH SLP FILED BY THE REVENUE WAS DISMISSED BY THE HONBLE SUPREME COURT QUA SLP NO. SLP (C) NO. 20057 OF 2009. IN SO FAR AS THE CLAIM NOT MADE IN THE RETURN OF INCOME, IT IS THE SAY OF THE LD. COUNSEL THAT THE SAID CLAIM SHOULD BE CONSIDERED IN THE LIGHT OF THE DECI SION OF THE HONBLE EXCEL CROP CARE LTD. 6 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PR UTHVI BROKERS & SHAREHOLDERS (P) LTD 349 ITR 336 AND IN SO FAR AS T HE LOSSES AND UNABSORBED DEPRECIATION PERTAINING TO YEARS EARLIER TO THE INITIAL ASSESSMENT YEAR WHICH HAVE ALREADY BEEN SET OFF AGA INST THE PROFITS OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFITS OF THE ELIGIBLE BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S. 80IA OF THE ACT, THE LD. COUNSEL RELIED UPON T HE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS (P) LTD. VS ACIT 231 CTR 368, KARNATAKA HIGH COURT IN THE CASE OF ANIL H. LAD VS DCIT 102 DTR 241. 12. PER CONTRA, THE LD. DR STRONGLY SUBMITTED THAT THE AO HAS RIGHTLY DENIED THE CLAIM FOR NON FILING OF THE AUDIT REPORT ALONGWITH RETURN BECAUSE THE AO HAS NO AUTHORITY TO ALLOW ANY CLAIM BEYOND WHAT IS PROVIDED IN THE STATUTE. THE AO IS BOUND TO FOLLOW THE CONDITIONS PRESCRIBED UNDER THE PROVISIONS OF THE ACT. THE AO CANNOT ALLOW ANY ARTIFICIAL TIME. SINCE THE ASSESSEE HAS NOT FOLLOW ED THE MANDATORY PROVISIONS OF THE ACT THE AO HAS RIGHTLY DENIED TH E CLAIM OF THE ASSESSEE. THE LD. DR FURTHER STATED THAT THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION IN ITS RETURN OF INCOME, THE CLAIM WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE THE AO WAS PRE CLUDED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LTD. VS CIT 284 ITR 323. IN SO FAR AS SET OFF OF NOTION AL LOSSES IS CONCERNED, THE LD. DR RELIED UPON THE FINDINGS OF THE LOWER AU THORITIES. 13. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW IN THE LIGHT OF THE ARGUMENTS MADE BY BOTH THE SIDES. THE REQUIREMENT OF FILING THE AUDIT REPORT ALONGWITH RETURN OF INCOME IS DECLARATORY AND IF THE ASSESSEE COMPLIES WITH THE SAME BEFORE COMPLETION OF THE ASSESSMENT EXCEL CROP CARE LTD. 7 AND OFFERED A SATISFACTORY EXPLANATION FOR HIS FAIL URE TO SUBMIT THE SAME IN TIME, THE ITO MAY CONSIDER THE SAME AND EXAMINE THE CLAIM OF THE ASSESSEE. FOR THIS PROPOSITION, WE DRAW SUPPORT FR OM THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS SHIVANAND ELECTRONICS (BOMBAY) 209 ITR 63. WE FURTHER FIND S UPPORT FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF WEB COMMERCE (INDIA) (SUPRA) WHEREIN THE HONBLE COURT HAS HELD THAT ONCE THE AUDIT REPORT IS FILED BEFORE FRAMING OF THE ASSESSMENT, T HE REQUIREMENT OF THE PROVISIONS STANDS COMPLIED. THE SAME VIEW HAS BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS C ONTIMETERS ELECTRICALS PVT. LTD. 317 ITR 249 (DELHI). RESPECTFULLY FOLLO WING THE RATIOS LAID DOWN BY THE HONBLE HIGH COURTS (SUPRA), THE CLAIM OF DEDUCTION U/S. 80IA CANNOT BE DENIED BECAUSE THE ASSESSEE DID NOT FILE THE AUDIT REPORT ALONGWITH RETURN OF INCOME. 13.1. THE CLAIM HAS ALSO BEEN DENIED BECAUSE THE AS SESSEE HAS NOT MADE THE CLAIM IN THE RETURN OF INCOME BUT HAS MADE THE CLAIM DURING THE ASSESSMENT PROCEEDINGS. THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA) HAS HELD AS UNDER: IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT H OLD ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFECT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE AO, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPELLATE AUT HORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BE NEGATED BY THE SU PREME COURT IN THIS JUDGEMENT. IN FACT, THE SUPREME COUR T MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND THAT THE JUDGMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBUNAL U/S. 254. EXCEL CROP CARE LTD. 8 13.2. THIS DECISION OF THE JURISDICTIONAL HIGH COUR T HAS AMPLY MADE IT CLEAR THAT THE ASSESSEE CAN MAKE AN ADDITIONAL CLAI M WITH THE APPELLATE AUTHORITY AND THE APPELLATE AUTHORITY IS WITHIN HIS POWER TO ADMIT THE ADDITIONAL CLAIM. THEREFORE, THE CLAIM CANNOT BE DE NIED ON THIS GROUND ALSO. 13.3. LASTLY, THE CLAIM HAS BEEN DENIED BECAUSE THE LOWER AUTHORITIES HAS TAKEN A VIEW THAT THE LOSSES AND UNABSORBED DEPRECI ATION HAVE TO BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROF ITS OF THE ELIGIBLE BUSINESS. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO WAS SATISFIED WITH THE MANDATORY CONDITION FOR THE CLAI M OF DEDUCTION AS THERE IS NO SPECIFIC FINDING STATING THAT THE ASSESSEE HA S NOT COMPLIED WITH THE MANDATORY CONDITION EXCEPT THAT THE AUDIT REPORT WA S NOT FILED ALONGWITH RETURN OF INCOME. WE FIND THAT THE AO WAS NOT SATI SFIED WITH THE COMPUTATION OF THE CLAIM OF DEDUCTION AS HE WAS OF THE FIRM BELIEF THAT LOSSES OF EARLIER YEARS HAVE TO BE SET OFF AGAINST THE INCOME OF THE ELIGIBLE UNIT. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISIONS R ELIED UPON BY THE ASSESSEE. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS FULFILLED ALL THE MANDATORY CONDITION FOR THE CLAIM OF DEDUCTION U/S. 80IA. THE ONLY DISPUTE RELATES TO THE LOSSES WHICH WERE ALREADY SE T OFF AGAINST OTHER INCOME IN THE EARLIER YEARS. IT IS THE CASE OF THE REVENUE THAT THOUGH THE DEPRECIATION AND THE LOSSES HAVE ALREADY BEEN SET O F IN EARLIER YEARS, THE SAME HAS TO BE NOTIONALLY BROUGHT FORWARD AND AGAIN SET OFF AGAINST THE CURRENT YEARS INCOME. THIS IS CONTRARY TO THE DECI SION IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD.(SUPRA) WHER EIN THE HONBLE COURT HAD THE OCCASION TO CONSIDER THE FOLLOWING QU ESTIONS: EXCEL CROP CARE LTD. 9 '(A) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT THE APPELL ANT IS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80-IA ? (B) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT INITIAL AS SESSMENT YEAR IN SECTION 80-IA(5) WOULD ONLY MEAN THE YEAR OF COMMEN CEMENT AND NOT THE YEAR OF CLAIM ? (C) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN SAYING THAT UNABSORBED DEPRECIATION OF EARLIER YEARS BEFORE THE FIRST YEAR OF CLAIM, WHICH HAS ALREADY BEEN ABSORBED, COULD BE NOTIONALLY CARRIED FORWARD AND T AKEN INTO CONSIDERATION FOR COMPUTATION OF DEDUCTION UNDER SE CTION 80-IA ? (D) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN FOLLOWING THE DECISION OF THE SPECIAL BENCH IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. [2008] 302 ITR (A T) 208 (AHD.) WHEN ADMITTEDLY THE SAID DECISION WAS RENDERED PRIOR TO THE AMENDMENT TO SECTION 80-IA BY THE FINA NCE ACT, 1999 ?' 15. THE HIGH COURT THUS OBSERVED THAT IN THE PRESENT CASE THERE IS NO DISPUTE THAT LOSSE S INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED A GAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED OPTION U/S. 80IA(2), DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRECIATION OR LO SS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABS ORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING T HE YEAR. THEREAFTER, THE HONBLE HIGH COURT FOLLOWED THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF MEWAR OIL AND GENERAL MILLS LTD (SUPRA) AND FINALLY CONCLUDED THAT IT IS NOT A T ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST EXCEL CROP CARE LTD. 10 THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME U/S. 80-IA FOR THE PU RPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. 16. A SIMILAR VIEW WAS TAKEN BY THE HIGH COURT OF M ADRAS IN THE CASE OF CIT VS EMERALD JEWEL INDUSTRY (SUPRA) WHEREIN IT WAS HELD AS UNDER: ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IA IN RES PECT OF WINDMILL INSTALLED BY IT AND THE UNABSORBED DEPRECI ATION SET OFF IN EARLIER YEARS COULD NOT BE REDUCED FROM PROF ITS FOR COMPUTING DEDUCTION U/S. 80-IA. 17. THOUGH THE TRIBUNAL MUMBAI BENCHES IN THE CASE OF HERCULES HOISTS LTD 22 ITR (TRIB) 527 HAS TAKEN A CONTRARY VIEW BUT WE FIND THAT SUBSEQUENT TO THE DECISION OF THE TRIBUNAL MUMBAI B ENCH, THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS ANIL H. LAD 102 DTR 241 HAS FOLLOWED THE DECISION OF THE HIGH COURT OF MADR AS IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT. LTD.(SUPRA) AND HELD THAT: IF BEFORE CLAIMING DEDUCTION U/S. 80IA, THE LOSS A ND DEPRECIATION CLAIMED BY THE ASSESSEE IN RESPECT OF ELIGIBLE BUSINESS IS SET OFF AGAINST INCOME OF THE ASSESSEE FROM OTHE R SOURCES, THE SAID LOSS OR DEPRECIATION CANNOT AGAIN BE NOTIONALL Y SET OFF AGAINST THE PROFITS OF ELIGIBLE BUSINESS FOR COMPUTING DEDU CTION. 18. NOW WE ARE CONFRONTED WITH A SITUATION, WHERE O N THE ONE HAND THERE ARE DECISIONS OF THE HONBLE HIGH COURTS WHIC H ARE IN FAVOUR OF THE ASSESSEE AND ON THE OTHER HAND WE HAVE A DECISION O F THE TRIBUNAL MUMBAI BENCH WHICH IS IN FAVOUR OF THE REVENUE. WHI CH DECISION SHOULD GET PRECEDENCE? THE ANSWER LIES IN THE DECISION OF THE TRIBUNAL AHEMDABAD BENCH IN THE CASE OF KANEL OIL & EXPORT INDUS. LTD. VS JCIT 121 ITD 596 WHEREIN THE TRIBUNAL HAS HELD AS U NDER: EXCEL CROP CARE LTD. 11 A SIMPLE ANSWER WOULD BE THAT THE JUDGEMENT OF A HIGH COURT, THOUGH NOT OF THE JURISDICTIONAL HIGH COURT, PREVAILS OVER AN ORDER OF THE SPECIAL BENCH EVEN THOUGH IT IS FRO M THE JURISDICTIONAL BENCH OF THE TRIBUNAL ON THE BASIS O F THE VIEW THAT THE HIGH COURT IS ABOVE THE TRIBUNAL IN THE JUDICIA L HIERARCHY. THE TRIBUNAL FURTHER OBSERVED THAT THIS SIMPLE VIEW IS SUBJECT TO SOME EXCEPTIONS. IT CAN WORK EFFICIENTLY WHEN THERE IS ONLY ONE JUDGEMENT OF A HIGH COURT ON THE ISSUE AND NO CONTR ARY VIEW HAS BEEN EXPRESSED BY ANY OTHER HIGH COURT. 19. BEFORE US, THE DECISIONS CITED BY THE LD. COUNS EL ARE FROM THE HIGH COURTS OF MADRAS AND KARNATAKA WHICH ARE IN FAVOUR OF THE ASSESSEE. NO CONTRARY DECISION OF ANY OTHER HIGH COURTS HAVE BEE N BROUGHT ON RECORD BEFORE US. THEREFORE, RESPECTFULLY FOLLOWING THE D ECISIONS OF THE HONBLE HIGH COURTS OF MADRAS AND KARNATAKA, FINDINGS OF TH E LD. CIT(A) ARE REVERSED. GROUND NO. 3 IS ACCORDINGLY ALLOWED ON P OINT OF LAW. 20. HOWEVER, AT THE SAME TIME WE FIND THAT THE ASSE SSEE HAS NOT BROUGHT ANY EVIDENCE TO DEMONSTRATE THAT THE LOSSES AND UNABSORBED DEPRECIATION HAVE ACTUALLY BEEN SET OFF AGAINST THE INCOME DURING THE ASSESSMENT YEARS EARLIER TO THE INITIAL ASSESSMENT YEAR. THEREFORE, FOR THIS LIMITED VERIFICATION, WE RESTORE THIS ISSUE TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY WHETHER LOSSES HAVE ACTUALLY BEEN SET OFF IN EARLIER ASSESSMENT YEARS PRIOR TO INITIAL ASSESSMENT YEAR A ND IF FOUND CORRECT, THE CLAIM OF DEDUCTION U/S. 80IA SHOULD BE ALLOWED. 21. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO T HE LEVY OF INTEREST U/S. 234B/234C OF THE ACT. THE AO IS DIRECTED TO CHARGE INTEREST AS PER EXCEL CROP CARE LTD. 12 PROVISIONS OF THE LAW AFTER GIVING REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATIS TICAL PURPOSE. 22. IN THE CROSS APPEAL BY THE REVENUE FOR A.Y. 200 7-08, THE REVENUE HAS CHALLENGED THE DELETION OF THE DISALLOWANCE MAD E U/S. 35DD OF THE ACT. 23. WE FIND THAT A SIMILAR CLAIM OF DEDUCTION U/S. 35DD WAS ALLOWED BY THE LD. CIT(A) IN A.Y. 2005-06 AND 2006-07 AND T HE DEPARTMENT HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL AND HAS AC CEPTED THE ORDER OF THE LD. CIT(A). FOLLOWING THE RULE OF CONSISTENCY, WE C ONFIRM THE FINDINGS OF THE LD. CIT(A) FOR A.Y. 2007-08 ALSO. 24. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE CROSS APPEAL FILED BY T HE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014 . #3 . 2' ' 4 5#6 25.7.2014 2 . 7 SD/- SD/- (VIVEK VARMA ) (N.K. BILLAIYA) #$ / JUDICIAL MEMBER ' #$ / ACCOUNTANT MEMBER MUMBAI; 5# DATED : 25.7.2014 . . ./ RJ , SR. PS EXCEL CROP CARE LTD. 13 #3 #3 #3 #3 . .. . +/ +/ +/ +/ 8'/ 8'/ 8'/ 8'/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. #3 #3 #3 #3 / BY ORDER, ,/ +/ //TRUE COPY// = == = / > > > > (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI