SHEVIE EXPORTS, MUMBAI V. JCIT RG 18(2), MUMBAI

ITA 321/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3832 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Keywords: Business income; Depreciation; Difference of opinion; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 14A; 263

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 321/MUM./2012 ( &) * !+* / ASSESSMENT YEAR : 200809 ) M/S. SHEVIE EXPORTS 304/A, PHONIX HOUSE 462, SENAPATI BAPAT MARG LOWER PAREL, MUMBAI 400 013 .. ,- / APPELLANT ) V/S JT. COMMISSIONER OF INCOME TAX RANGE18(2), MUMBAI .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AABFS3445E 1! 2 3 / ASSESSEE BY : DR. K. SHIVRAM A/W MR. RAHUL K. HAKANI &) *4# 2 3 / REVENUE BY : MR. GIRIJA DAYAL )! 2 # / DATE OF HEARING 12.02.2013 $ 5+ 2 # / DATE OF ORDER 10.04.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. IN THE PRESENT APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER DATED 7 TH DECEMBER 2011, PASSED UNDER SECTION 263 OF THE INC OME TAX M/S. SHEVIE EXPORTS 2 ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 200809, BY THE LEARNED COMMISSIONER OF INCOME TAX HOLDING THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER IS ERRONEOUS INASMUCH AS IT I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 2. FACTS IN BRIEF : THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGA GED IN THE BUSINESS OF EXPORT OF HAND EMBROIDERED ITEMS AN D SUPPLYING THE SAME TO TOP FASHION HOUSES IN EUROPE AND U.S.A. BESIDES THI S, THE ASSESSEE IS ALSO ENGAGED IN POWER GENERATION THROUGH WIND MILLS INST ALLED IN DISTRICT DHULE, MAHARASHTRA. THE RETURN OF INCOME WAS FILED FOR AS SESSMENT YEAR 200809 ON A TOTAL INCOME OF ` 3,77,80,540 ON 18 TH SEPTEMBER 2008. ALONG WITH THE SAID RETURN OF INCOME, THE ASSESSEE HAD FILED AUDIT REPORT IN FORM10CCB FOR CLAIMING DEDUCTION UNDER SECTION 80IA WITH REGARD T O WIND MILL UNDERTAKING. IN THE SAID REPORT, THE ASSESSEE HAD MENTIONED THAT THE DATE OF COMMENCEMENT AND OPERATION OF THE UNDERTAKING WAS 2 9 TH SEPTEMBER 2006, AND THE INITIAL ASSESSMENT YEAR FROM WHICH THE DEDU CTION HAS BEEN CLAIMED IS ASSESSMENT YEAR 200809. THE DEDUCTION UNDER SECTIO N 80IA WAS CLAIMED AT ` 7,16,904. SUCH A RETURN OF INCOME WAS SUBJECTED TO SCRUTINY UNDER SECTION 143(3) AND THE ASSESSMENT WAS COMPLETED AT AN INCOM E OF ` 3,80,34,580, VIDE ORDER DATED THE DECEMBER 2010, AFTER MAKING DI SALLOWANCE UNDER THE HEAD FOREIGN TRAVEL EXPENSES FOR A SUM OF ` 1,31,075, DISALLOWANCE UNDER SECTION 14A AT ` 59,896 AND EXCESS PAYMENT OF EMBROIDERY CHARGES OF ` 63,070. THE DEDUCTION CLAIMED UNDER SECTION 80IA AS PER AUDIT REPORT FOR A SUM OF ` 7,60,904 WAS ALLOWED. 3. THEREAFTER A SHOW CAUSE NOTICE UNDER SECTION 263 WA S ISSUED BY THE LEARNED COMMISSIONER OF INCOMETAX ON 3 RD NOVEMBER 2011 ON THE GROUND THAT THE ASSESSMENT ORDER IS ERRONEOUS INASMUCH AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE MAINLY ON THREE GROUNDS; F IRSTLY, THE WIND MILL WAS INSTALLED IN THE YEAR 2006 WHICH HAS COMMENCED ITS OPERATION ON 29 TH SEPTEMBER 2006 AND IN THE FIRST YEAR OF ITS OPERATI ON I.E., FOR THE ASSESSMENT YEAR 200708, THE ASSESSEE HAD SHOWN A LOSS OF ` 3,52,47,398, ON ACCOUNT M/S. SHEVIE EXPORTS 3 OF DEPRECIATION AND INTEREST AND THIS LOSS WAS SET OFF AGAINST EXPORT BUSINESS INCOME OF NONELIGIBLE UNITS IN THE ASSESSMENT YEAR 200708 ITSELF. IN ASSESSMENT YEAR 200809, THE PROFIT OF ` 7,16,904, HAS BEEN CLAIMED AS DEDUCTION UNDER SECTION 80IA WITHOUT SETTING OFF TH E LOSS. IT WAS FURTHER OBSERVED THAT WHILE COMPLETING THE ASSESSMENT IN AS SESSEES CASE FOR ASSESSMENT YEAR 200910, THE CLAIM OF DEDUCTION UND ER SECTION 80IA AT ` 19,65,160, HAS BEEN DISALLOWED BY THE ASSESSING OFF ICER ON THE GROUND THAT AS PER THE PROVISIONS OF SECTION 80 IA, DEDUCTION I S TO BE ALLOWED AFTER ADJUSTMENT OF CARRIED FORWARD LOSSES FROM THE WIND MILL DIVISION AND THIS FINDING OF THE ASSESSING OFFICER WAS DULY SUPPORTED BY THE SPECIAL BENCH DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN ACIT V/S GOLDMINE SHARES AND FINANCE PVT. LTD. [2008] 302 ITR (AT) 208 (SB) (AHD.). THE SAID FINDING OF THE ASSESSING OFFICER WILL ALSO BE APPLICABLE FO R ASSESSMENT YEAR 200809 ALSO AS THE PROFIT OF ` 7,16,904 WOULD BE ADJUSTED AGAINST BROUGHT FORWARD LOSSES OF ` 3,52,47,398 OF EARLIER ASSESSMENT YEAR 200708 AND , THEREFORE, THE DEDUCTION CLAIMED UNDER SECTION 80IA FOR A SUM OF ` 7,16,904, HAS WRONGLY BEING ALLOWED. THE SECOND GROUND WAS THAT T HE DISALLOWANCE OF FOREIGN TRAVEL EXPENSES HAS BEEN MADE ON FIXED PERC ENTAGE OF 4% OF THE EXPENSES DESPITE THAT THE ASSESSING OFFICER HAS NOT ED THAT THE DESIRED DETAILS / DOCUMENTARY EVIDENCES WERE NOT SUBMITTED. THE THI RD GROUND WAS THAT THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE GENERAT OR GUARANTEE CLAIM RECEIVABLE OF ` 28,00,000 AND ALSO OTHER RECEIVABLE OF ` 30,41,000 AS NO ENQUIRY HAS BEEN DONE TO FIND OUT THE EXACT NATURE OF THE SOURCES AND OTHER TAXABILITY. 4. IN RESPONSE, THE ASSESSEE FILED A DETAIL REPLY BEFO RE THE LEARNED COMMISSIONER WHEREIN IT WAS CONTENDED THAT ALL THE DOCUMENTS AND INFORMATION ON WHICH THE PROPOSED REVISION HAS BEEN INVOKED WAS DULY AVAILABLE WITH THE ASSESSING OFFICER WHO HAD APPLIE D HIS MIND IN DETERMINING THE ALLOWABILITY OF DEDUCTION UNDER SECTION 80IA AN D THE SPECIAL BENCH DECISION CANNOT BE THE REASON FOR REVISION UNDER SE CTION 263. SECONDLY, THE VIEW TAKEN BY THE ASSESSING OFFICER IS A POSSIBLE V IEW UNDER THE LAW AND, M/S. SHEVIE EXPORTS 4 THEREFORE, IN VIEW OF THE VARIOUS CASE LAWS WHEREIN IT HAS BEEN UPHELD THAT WHERE THE ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW, THEN THE ASSESSMENT CANNOT BE HELD AS ERRONEOUS INASMUCH AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE UNDER SECTION 263. FURTHER, AFT ER THE AMENDMENT IN SECTION 80IA BY THE FINANCE ACT, 1999, AN ASSESSEE HAS AN OPTION FOR SELECTING THE YEAR OF CLAIMING RELIEF UNDER SECTION 80IA AND THE ASSESSEE HAS CHOSEN ASSESSMENT YEAR 200809 AS THE INITIAL ASSES SMENT YEAR, THEREFORE, THERE IS NO QUESTION OF SETTINGOFF NOTIONALLY CARR IED FORWARD UNABSORBED DEPRECIATION OR LOSS AGAINST THE PROFITS OF THE ELI GIBLE BUSINESS UNIT. THE SPECIAL BENCH DECISION WILL NOT BE APPLICABLE AS TH E SAME PERTAINS TO THE ASSESSMENT YEAR PRIOR TO THE AMENDMENT. WITH REGARD TO FOREIGN TRAVEL EXPENSES, IT WAS SUBMITTED THAT ALL THE DETAILS OF FOREIGN TRAVELING EXPENSES AND RATIO OF CLAIM OF SUCH EXPENSES WITH THAT OF EX PORT SALES WERE DULY PRODUCED BEFORE THE ASSESSING OFFICER AND ALSO FOR THE EARLIER YEARS FOR COMPARISON. BASED ON THE EARLIER YEARS PARAMETER, THE ASSESSING OFFICER HAS DISALLOWED 4%. THUS, A VIEW HAS BEEN TAKEN BY THE A SSESSING OFFICER ABOUT THE NATURE OF DISALLOWABILITY OF SUCH EXPENSES. REG ARDING THE AMOUNT RECEIVABLE, IT WAS SUBMITTED THAT THE SAME WAS ALRE ADY CREDITED TO THE REVENUE ACCOUNT IN PROFIT & LOSS ACCOUNT, HENCE, TH ERE IS NO QUESTION OF TAKING ANY ADVERSE VIEW. 5. THE LEARNED COMMISSIONER, HOWEVER, WITH REGARD TO T HE TWO ASPECTS I.E., THE CLAIM OF DEDUCTION UNDER SECTION 80IA AND FOREIGN TRAVELING EXPENSES, SET ASIDE THE ASSESSMENT AND DIRECTED THE ASSESSING OFFICER TO RE EXAMINE BOTH THE ISSUES AFTER OBSERVING AND HOLDING AS UNDER: 7. ON CAREFUL CONSIDERATION OF SUBMISSION MADE BY THE LD. AR., I DO NOT FIND ANY MERIT THEREIN WITH REGARD TO BOTH THE ISSUES IN HAND. IN RESPECT THE DEDUCTION U/S 801A, THE A.O. HAS NOT AP PRECIATED THE PROVISION OF SEC 801A(5) OF THE ACT IN PROPER PROSP ECTIVE. THE HONBLE SPECIAL BENCH HAS DELIBERATED AT LENGTH IN THE CASE REFERRED ABOVE AND CATEGORICALLY HELD THAT THE ELIGIBLE BUSINESS HAS T O BE CONSIDERED ON STAND ALONE BASIS. ACCORDINGLY, PROFIT OF THE ELIGI BLE LIMIT IS TO BE DETERMINED AFTER DEDUCTION OF NOTIONAL BROUGHT FORW ARD LOSES AND DEPRECATION OF ELIGIBLE UNIT EVEN THOUGH THEY WERE SET OFF IN THE EARLIER YEARS. THE ASSESSEE HAS NOT BEEN ABLE TO PLACE ON R ECORD ANY CONTRARY M/S. SHEVIE EXPORTS 5 DECISION IN ANY OTHER COURT OF LAW. THEREFORE, THER E IS NEITHER A CASE OF DEBATABLE ISSUE NOR CHANGE OF OPINION. SINCE THE A. O. HAS FAILED TO APPLY CORRECT PROVISION OF LAW, PROVISIONS OF SECTI ON 263 ARE CLEARLY APPLICABLE. 8. WITH REGARD TO FOREIGN TRAVELLING EXPENSES ALSO, CONTENTION OF THE ASSESSEE CAN NOT BE ACCEPTED IN VIEW OF THE CONTRAD ICTION IN THE ASSESSMENT ORDER BY THE A.O. HIMSELF. IT IS EVIDENT THAT DESPITE THE FACT THAT THE ASSESSEE COULD NOT PRODUCE RELEVANT D OCUMENTARY EVIDENCES, THE A.O. WENT ON TO MAKE ONLY A NEGLIGIB LE DISALLOWANCE VIS-AVIS QUANTUM OF CLAIM. IT IS QUITE APPARENT TH AT THE A.O. HAS ALLOWED DEDUCTION DESPITE THE SAME BEING UNPROVED. IN SUCH A SITUATION, THE ORDER COULD BE CONSIDERED TO PREJUDI CIAL TO THE INTEREST OF THE REVENUE, AS HELD IN THE CASE OF EMERY SWOON MAN UFACTURING CO 213 ITR 843 (RAJASTHAN). 6. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT IN FO RM NO.10CCB, THE ASSESSEE HAS CLEARLY SHOWN THAT THE INITIAL ASSESSM ENT YEAR FOR CLAIM OF DEDUCTION WAS ASSESSMENT YEAR 200809, THEREFORE, T HERE WAS NO QUESTION OF CARRY FORWARD OF NOTIONAL LOSS TO BE SETOFF IN THIS YEAR. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS PVT. LTD. V/S ACIT, [ 2012] 340 ITR 477 (MAD.) AND CIT V/S EMERALA JEWEL INDUSTRY PVT. LTD. , [2011] 53 DTR 262 (MAD.). REGARDING SPECIAL BENCH DECISION OF THE TR IBUNAL IN GOLDMINE SHARES AND FINANCE PVT. LTD. (SUPRA), THE LEARNED COUNSEL SUBMITTED THAT THIS DECISION WILL NOT BE APPLICABLE, AS THE SAME WAS RE LEVANT FOR THE PROVISIONS APPLICABLE IN THE ASSESSMENT YEARS 199697 AND 1997 98, WHICH WAS PRIOR TO THE AMENDMENT BROUGHT IN THE STATUTE BY THE FINA NCE ACT, 1999. HE FURTHER SUBMITTED THAT THE ASSESSEES CLAIM FOR DED UCTION UNDER SECTION 80IA AND ASSESSING OFFICERS DECISION TO ALLOW SUCH A CL AIM WAS BASED ON VARIOUS DECISIONS IN FAVOUR OF THE ASSESSEE AT THAT TIME AN D IF THE SAME HAS BEEN ALLOWED BY TAKING ONE POSSIBLE VIEW, THE SAME CANNO T BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE WITHIN THE MEANING OF SECTION 263. IN SUPPORT OF THIS CONTENTION, HE R ELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN MALABAR INDUSTRIES CO. LTD . V/S CIT, [2000] 243 ITR 83 (SC), GRASIM INDUSTRIES LTD. V/S CIT, [2010] 321 ITR 92 (BOM.) AND RANKA JEWELLERS V/S ACIT [2010] 328 ITR 148 (BOM.). REGARDING FOREIGN M/S. SHEVIE EXPORTS 6 TRAVEL EXPENSES, HE SUBMITTED THAT IN EARLIER YEARS ALSO, ON SIMILAR FACTS, DISALLOWANCE OF 4% WAS MADE BASED ON THE RATIO OF E XPORT SALES. MOREOVER, ALL THE NECESSARY DETAILS WERE FILED BEFORE THE ASS ESSING OFFICER. THUS, THE VIEW TAKEN BY THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS. HE SUBMITTED THAT THE IMPUGNED ORDER CANCELING THE ASS ESSMENT ON THE AFORESAID TWO ISSUES IS ERRONEOUS BOTH IN LAW AND O N FACTS. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE RELYING HEAVILY UPON THE ORDER OF THE LEARNED COMMISSIONER SUBMITTED THAT THE TRIBUNAL, HYDERABAD BENCH, IN HYDERABAD CHEMICAL SU PPLIES LTD. V/S ACIT, [2011] 137 TTJ 732 (HYD.) HAS UPHELD THE REVISION O RDER UNDER SECTION 263 ON SIMILAR GROUNDS. HE DREW OUR ATTENTION TO THE RE LEVANT FACTS AND FINDINGS GIVEN BY THE TRIBUNAL. FURTHER, RELIANCE WAS ALSO P LACED ON THE DECISION OF PIDILITE INDUSTRIES V/S DCIT, [2011] 46 SOT 263 (MU M.) (URO) AND DREW OUR SPECIFIC ATTENTION TO PARAS4, 5 AND 6 OF THE ORDER WHEREIN THE TRIBUNAL HAS CONSIDERED THE SPECIAL BENCH DECISION IN GOLDMINE S HARES AND FINANCE PVT. LTD. (SUPRA) AND ALSO THE DECISION OF THE HONBLE M ADRAS HIGH COURT IN VELAYUDHA SWAMY SPINNING MILLS PVT. LTD. (SUPRA). B ASED ON THIS DECISION, HE MADE HIS DETAIL SUBMISSIONS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD AND VARIOUS CASE LAWS RELIED UPON BY EITHER PARTY. THE ASSESSEE HAD SETUP A WIND MILL AT DISTRICT DHULE, MAHARASHTRA AND COMMENCEMENT OF ITS OPERATION WAS STARTED ON 29 TH SEPTEMBER 2006 I.E., ASSESSMENT YEAR 200708. IN ASSESSMENT YEAR 200708 , THE ASSESSEE HAD SHOWN A LOSS OF ` 3,52,47,398 ON ACCOUNT OF DEPRECIATION AND INTERES T FROM WIND MILL UNDERTAKINGAND THIS LOSS WAS SETOFF AGAI NST THE EXPORT BUSINESS INCOME (WHICH IN THE PRESENT CASE, CAN BE CONSIDERE D AS NONELIGIBLE UNIT) IN THE ASSESSMENT YEAR 200708. IN THE ASSESSMENT YEAR 200809, THE ASSESSEE HAS EARNED PROFIT OF ` 7,16,904 AND HAS CLAIMED DEDUCTION UNDER SECTION 80IA BY TREATING THE ASSESSMENT YEAR 20080 9 AS INITIAL ASSESSMENT YEAR. THE SOLE GROUND FOR CANCELING THE ASSESSMENT ORDER UNDER SECTION 263 M/S. SHEVIE EXPORTS 7 BY THE LEARNED COMMISSIONER IN THIS REGARD IS THAT IN THE SUBSEQUENT YEAR I.E., THE ASSESSMENT YEAR 200910, THE CLAIM OF THE ASSESSEE UNDER SECTION 80IA HAS BEEN REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SPECIAL BENCH DECISION OF THE TRIBUNAL, AHMEDABAD B ENCH IN GOLDMINE SHARES AND FINANCE PVT. LTD. (SUPRA) DOES NOT SUPPO RT SUCH A CLAIM. 9. SECTION 80IA, WHICH HAS BEEN SUBSTITUTED W.E.F. 1 ST APRIL 2000, PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING FROM ANY ELIGIBLE B USINESS REFERRED TO IN SUBSECTION 4, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME, THE DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIV ED FROM SUCH BUSINESS FOR 10 CONSECUTIVE YEARS. SUBSTITUTED SUBSECTION ( 2) OF SECTION 80IA, PROVIDES THAT AN OPTION IS GIVEN TO THE ASSESSEE FO R CLAIMING ANY 10 CONSECUTIVE ASSESSMENT YEAR OUT OF 15 YEARS BEGINNI NG FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AN D BEGIN TO OPERATE. THE 15 YEARS IS THE OUTER LIMIT WITHIN WHICH THE ASSESS EE CAN CHOOSE THE PERIOD OF CLAIMING THE DEDUCTION. SUBSECTION (5) IS A NONOB STANTE CLAUSE WHICH DEALS WITH THE QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSIN ESS. THE RELEVANT PROVISIONS OF SUBSECTION (5) OF SECTION 80IA, READ S AS UNDER: (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB -SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS I F SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 10. FROM A PLAIN READING OF THE ABOVE, IT CAN BE GATHER ED THAT IT IS A NON OBSTANTE CLAUSE WHICH OVERRIDES THE OTHER PROVISION S OF THE ACT AND IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 80IA, FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR M/S. SHEVIE EXPORTS 8 ANY SUBSEQUENT ASSESSMENT YEAR TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME. THUS, THE FICTION CRE ATED IS THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME AND THE DEDUC TION WOULD BE ALLOWED FROM THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR. IT NOWHERE DEFINES AS TO WHAT IS THE INITIAL ASSESSMEN T YEAR. PRIOR TO 1 ST APRIL 2000, THE INITIAL ASSESSMENT YEAR WAS DEFINED FOR V ARIOUS TYPES OF ELIGIBLE ASSESSEES UNDER SECTION 80IA(12). HOWEVER, AFTER TH E AMENDMENT BROUGHT IN STATUTE BY THE FINANCE ACT, 1999, THE DEFINITION OF INITIAL ASSESSMENT YEAR HAS BEEN SPECIFICALLY TAKEN AWAY. NOW, WHEN THE ASS ESSEE EXERCISES THE OPTION OF CHOOSING THE INITIAL ASSESSMENT YEAR AS C ULLED OUT IN SUBSECTION (2) OF SECTION 80IA FROM WHICH IT CHOOSES ITS 10 YE ARS OF DEDUCTION OUT OF 15 YEARS, THEN ONLY THE LOSSES OF THE YEARS STARTING F ROM THE INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AS STIPULATED IN SECTION 80IA(5). THE LOSS PRIOR TO THE INITIAL ASSESSMENT YEAR WHICH HAS ALREADY BEEN SETOFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO THE PER IOD OF TEN YEARS FROM THE INITIAL ASSESSMENT YEAR AS CONTEMPLATED OR CHOSEN B Y THE ASSESSEE. IT IS ONLY WHEN THE LOSS HAVE BEEN INCURRED FROM THE INITIAL A SSESSMENT YEAR, THEN THE ASSESSEE HAS TO ADJUST LOSS IN THE SUBSEQUENT ASSES SMENT YEARS AND IT HAS TO BE COMPUTED AS IF ELIGIBLE BUSINESS IS THE ONLY SOU RCE OF INCOME AND THEN ONLY DEDUCTION UNDER SECTION 80IA CAN BE DETERMINED . THIS IS THE TRUE IMPORT OF SECTION 80IA(5). 11. IN THE DECISION OF GOLDMINE SHARES AND FINANCE PVT. LTD. (SUPRA), DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL, THE C LAIM OF DEDUCTION BY THE ASSESSEE HAD STARTED FROM ASSESSMENT YEAR 199697 O NWARDS AND THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA S TARTING FROM THE FIRST YEAR ITSELF I.E., ASSESSMENT YEAR 199697. THUS, TH E SPECIAL BENCH WAS DEALING WITH THE OPERATION OF SECTION 80IA(5) WHERE THE ASSESSEE HAD FIRST CLAIMED THE DEDUCTION IN THE ASSESSMENT YEAR 19969 7 AND FOR SUBSEQUENT ASSESSMENT YEARS. THIS ASPECT OF THE MATTER HAS BEE N VERY WELL ELABORATED BY THE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS PVT. LTD. (SUPRA) AFTER CONSIDERING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN GOLDMINE M/S. SHEVIE EXPORTS 9 SHARES AND FINANCE PVT. LTD. (SUPRA) AND RELEVANT P ROVISIONS OF THE ACT I.E., PRE AMENDMENT AND POST AMENDMENT HAVE COME TO THE S AME CONCLUSION: FROM READING OF THE ABOVE, IT IS CLEAR THAT THE EL IGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT 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 BROUGH T FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YE ARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE R EVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLI ER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OF F AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE SET OFF IS TAKEN PL ACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVEN UE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB- SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOU NT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED . 14. IN THE PRESENT CASES, THERE IS NO DISPUTE THAT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED AGAI NST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT Y EAR, THE ASSESSEE EXERCISED THE OPTION UNDER S. 80-IA(2). IN TAX CASE NOS. 909 OF 2009 AS WELL AS 940 OF 2009, THE ASSESSMENT YEAR WAS 200 5-06 AND IN THE TAX CASE NO. 918 OF 2008 THE ASSESSMENT YEAR WAS 20 04-05. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRE CIATION OR LOSS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING TH E YEAR. THE UNREPORTED JUDGMENT OF THIS COURT CITED SUPRA CONSIDERED THE S COPE OF SUB-S. (6) OF S. 80-I, WHICH IS THE CORRESPONDING PROVISION OF SUB-S. (5) OF S. 80- IA. BOTH ARE SIMILARLY WORDED AND THEREFORE WE AGRE E ENTIRELY WITH THE DIVISION BENCH JUDGMENT OF THIS COURT CITED SUPRA. IN THE CASE OF CIT VS. MEWAR OIL & GENERAL MILLS LTD. (2004) 186 CTR ( RAJ) 141 : (2004) 271 ITR 311 (RAJ), THE RAJASTHAN HIGH COURT ALSO CO NSIDERED THE SCOPE OF S. 80-I AND HELD AS FOLLOWS: 'HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLL OW ON THE LINE NOTICED ABOVE, WE ARE OF THE OPINION THAT ON FINDING THE FACT THAT THERE WAS NO CARRY FORWARD LO SSES OF 1983-84, WHICH COULD BE SET OFF AGAINST THE INCOME OF THE CURRENT ASST. YR. 1984-85, THE RECOMPUTATION OF INC OME FROM THE NEW INDUSTRIAL UNDERTAKING BY SETTING OFF THE CARRY FORWARD OF UNABSORBED DEPRECIATION OR DEPRECI ATION ALLOWANCE FROM PREVIOUS YEAR DID NOT SIMPLY ARISE A ND ON THE FINDING OF FACT NOTICED BY THE CIT(A), WHICH HA S NOT BEEN DISTURBED BY THE TRIBUNAL AND CHALLENGED BEFOR E US, THERE WAS NO ERROR MUCH LESS ANY ERROR APPARENT ON THE M/S. SHEVIE EXPORTS 10 FACE OF THE RECORD WHICH COULD BE RECTIFIED. THAT Q UESTION WOULD HAVE BEEN GERMANE ONLY IF THERE WOULD HAVE BE EN CARRY FORWARD OF UNABSORBED DEPRECIATION AND UNABSO RBED DEVELOPMENT REBATE OR ANY OTHER UNABSORBED LOSSES O F THE PREVIOUS YEAR ARISING OUT OF THE PRIORITY INDUS TRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE I NCOME OF THE CURRENT YEAR. IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AG AINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUND ER. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRI BUNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFIC ATION POSSIBLE UNDER S. 80-I IN THE PRESENT CASE, ALBEIT, FOR REASONS SOMEWHAT DIFFERENT FROM THOSE WHICH PREVAIL ED WITH THE TRIBUNAL. THERE BEING NO CARRY FORWARD OF ALLOWABLE DEDUCTIONS UNDER THE HEAD DEPRECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAI NST THE INCOME OF THE CURRENT YEAR AND, THEREFORE, RECOMPUTATION OF INCOME FOR THE PURPOSE OF COMPUTIN G PERMISSIBLE DEDUCTION UNDER S. 80-I FOR THE NEW IND USTRIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. ACCORDINGLY, THIS APPEAL FAILS AND IS HEREBY DISMIS SED WITH NO ORDER AS TO COSTS.' FROM READING OF THE ABOVE, THE RAJASTHAN HIGH COURT HELD THAT IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE R EOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. WE ALSO AGREE WIT H THE SAME. WE SEE NO REASON TO TAKE A DIFFERENT VIEW . 12. THIS JUDGMENT HAS BEEN FURTHER FOLLOWED BY THE SAME HIGH COURT IN CIT V/S EMERALD JEWEL INDUSTRY (P) LTD. [2011] 53 DTR 2 62 (MAD.). FROM THE ABOVE, RATIO OF THE HIGH COURT, IT IS AMPLY CLEAR T HAT SUBSECTION (5) OF SECTION 80IA WILL COME INTO OPERATION ONLY FROM THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR. THE OPTION OF CHOOS ING THE INITIAL ASSESSMENT YEAR IS WHOLLY UPON THE ASSESSEE IN THE POST AMENDMENT PERIOD I.E., AFTER 1 ST APRIL 2000 BY VIRTUE OF SECTION 80IA(2). 13. NOW COMING TO THE DECISION OF THE MUMBAI BENCH TRIB UNAL IN PIDILITE INDUSTRIES (SUPRA) AS RELIED UPON BY THE LEARNED DE PARTMENTAL REPRESENTATIVE IN THIS CASE, THE TRIBUNAL WAS DEALI NG WITH REGARD TO TWO M/S. SHEVIE EXPORTS 11 ELIGIBLE UNITS ONE GUJARAT UNIT WHICH WAS SETUP IN THE YEAR 199596 AND SECOND MAHARASHTRA UNIT IN THE YEAR 200001. WITH R EGARD TO GUJARAT UNIT, THE TRIBUNAL HELD THAT PREAMENDMENT DEFINITION OF INITIAL ASSESSMENT YEAR WOULD BE APPLICABLE I.E., PROVISIONS WHICH WERE PRI OR TO 1 ST APRIL 1999 WILL APPLY BECAUSE THE ASSESSEE HAD STARTED COMMERCIAL P RODUCTION IN THE FINANCIAL YEAR 199697. REGARDING SECOND UNIT, THE TRIBUNAL HELD THAT THE JUDGMENT OF MADRAS HIGH COURT IN VELAYUDHASWAMY SPI NNING MILLS PVT. LTD. (SUPRA) WILL NOT BE APPLICABLE BECAUSE THE INCOME F ROM NON ELIGIBLE BUSINESS WAS SETOFF FROM THE LOSS OF ELIGIBLE BUSINESS IN T HE YEAR OF COMMENCEMENT. IN THIS CASE, IT WAS NOT AN ISSUE AS TO WHETHER THE LOSSES PERTAINED TO PRIOR TO INITIAL ASSESSMENT YEAR OR AFTER THE INITIAL ASSESS MENT YEAR. IF THE LOSSES HAVE BEEN INCURRED IN THE ELIGIBLE UNIT AND HAS BEEN SET OFF AGAINST THE NON ELIGIBLE UNIT AFTER THE INITIAL ASSESSMENT YEAR, TH EN THE RATIO LAID DOWN BY THE TRIBUNAL IS IN FULL CONSONANCE WITH THE LAW. HOWEVE R, THIS IS NOT THE CASE IN THE INSTANT CASE BECAUSE THE LOSS PERTAINED TO PRIO R TO INITIAL ASSESSMENT YEAR WHICH HAVE BEEN SETOFF AGAINST THE PROFITS OF NON ELIGIBLE UNITS. THE BEGINNING OF THE INITIAL ASSESSMENT YEAR AS ADOPTED BY THE ASSESSEE IS ASSESSMENT YEAR 200809 ONLY AND, THEREFORE, THE LO SS OF ASSESSMENT YEAR 200708 CANNOT BE NOTIONALLY CARRIED FORWARD WITHIN THE MEANING OF SECTION 80IA(5). THUS, THE RELIANCE PLACED BY THE LEARNED D EPARTMENTAL REPRESENTATIVE ON THE DECISION OF PIDILITE INDUSTRI ES (SUPRA), WILL NOT BE APPLICABLE IN THE PRESENT CASE. 14. THE OTHER DECISION HEAVILY RELIED UPON BY THE LEARN ED DEPARTMENTAL REPRESENTATIVE IN HYDERABAD CHEMICAL SUPPLIES LTD. (SUPRA) WILL ALSO NOT APPLY TO THE FACTS OF THE PRESENT CASE, AS IN THAT CASE, THE WIND MILL STARTED ITS OPERATION ON 31 ST MARCH 1999 AND THE FIRST YEAR OF OPERATION WAS ASSESSMENT YEAR 19992000. THUS, IN THE ASSESSMENT YEAR 19992000, THE DEFINITION OF INITIAL ASSESSMENT YEAR WAS ALREADY THERE IN THE ACT AND THERE WAS NO PROVISION THROUGH WHICH THE ASSESSEE COULD H AVE CHOSEN ITS INITIAL ASSESSMENT YEAR. THIS PROVISION WAS BROUGHT IN STAT UTE W.E.F. 1 ST APRIL 2000, BY VIRTUE OF SECTION 80IA. THUS, THIS DECISION ALSO WILL NOT HELP THE CASE OF THE M/S. SHEVIE EXPORTS 12 DEPARTMENT. IN ASSESSEES CASE, AS SPECIFICALLY STA TED IN THE FOREGOING PARAGRAPHS, THE ASSESSEES CLAIM FOR INITIAL ASSESS MENT YEAR I.E., ASSESSMENT YEAR 200809 AND ITS CLAIM FOR DEDUCTION UNDER SECT ION 80IA MADE FOR THE FIRST TIME FROM ASSESSMENT YEAR 200809, HAS NOT BE EN DISPUTED. THUS, THE AFORESAID JUDGMENT RELIED UPON BY THE LEARNED DEPAR TMENTAL REPRESENTATIVE WILL NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 15. MOREOVER, THE CLAIM OF DEDUCTION UNDER SECTION 80IA WAS BASED ON POSSIBLE LEGAL VIEW WHICH HAS BEEN ALLOWED BY THE A SSESSING OFFICER, THEREFORE, IT CANNOT BE HELD THAT THE SAME IS ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. MERELY BECAUSE THE ASSESSING OFFICER IN THE SUBSEQUENT ASSESSMENT YEAR HAS FOLLO WED SPECIAL BENCH DECISION WHICH ADMITTEDLY WAS RENDERED WITH REGARD TO THE CLAIM OF DEDUCTION STARTING FROM THE ASSESSMENT YEAR 199697 WHEREIN T HERE WAS NO CONCEPT OF ASSESSEE CHOOSING HIS OPTION OF INITIAL ASSESSMENT YEAR IN VIEW OF THE PROVISIONS PRIOR TO THE AMENDMENT, IT CANNOT BE HEL D THAT THE ASSESSEES CLAIM OF INITIAL ASSESSMENT YEAR BEING ASSESSMENT Y EAR 200809 AND ITS CLAIM FOR DEDUCTION ALLOWED BY THE ASSESSING OFFICE R UNDER SECTION 80IA IS ERRONEOUS IN LAW. THUS, ON THIS COUNT, WE DO NOT FI ND ANY REASON TO UPHOLD THE CANCELLATION OF ASSESSMENT ORDER UNDER SECTION 263 ON THE GROUND THAT IT IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. 16. REGARDING DISALLOWANCE OF FOREIGN TRAVELLING EXPENS ES, IT IS SEEN THAT ON SIMILAR CIRCUMSTANCES AND FACTS, THE ASSESSING OFFI CER HAS DISALLOWED 4% OF THE EXPENDITURE CLAIMED WHICH WAS BASED ON RATIO OF SUCH EXPENSES WITH EXPORT SALES. THUS, SUCH A VIEW TAKEN BY THE ASSESS ING OFFICER CANNOT BE DISTURBED WITHOUT ANY DIFFERENCE IN THE FACTS AND C IRCUMSTANCES OF THE CASE. THUS, WE DO NOT FIND ANY MERITS IN THE IMPUGNED ORD ER PASSED UNDER SECTION 263 BY THE LEARNED COMMISSIONER FOR CANCELLING THE ASSESSMENT AND TO RE EXAMINE THE SAME. CONSEQUENTLY, WE SET ASIDE THE IM PUGNED ORDER PASSED UNDER SECTION 263 BY THE LEARNED COMMISSIONER AND U PHOLD THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. M/S. SHEVIE EXPORTS 13 17. 4 #7 &) *4# 2 !# 8 ) 1# 9: ; 16. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED. $ 2 5+ < =)7 10 TH APRIL 2013 2 > ; ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH APRIL 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, =) =) =) =) DATED : 10 TH APRIL 2013 $ 2 .&#'? @?+# / COPY OF THE ORDER FORWARDED TO : (1) &) *4# / THE ASSESSEE; (2) 1! / THE REVENUE; (3) A () / THE CIT(A); (4) A / THE CIT, MUMBAI CITY CONCERNED; (5) ?!D> .&#&) , , / THE DR, ITAT, MUMBAI; (6) >E* F / GUARD FILE. /?# .&# / TRUE COPY $) / BY ORDER . 1. GH / PRADEEP J. CHOWDHURY !4I &)1 G! / SR. PRIVATE SECRETARY J / 9 1 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI