M/s. Dhumal Industires, Nashik V. CIT-I, Nashik

ITA 322/PUN/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67011 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Business income; Revision of order; Depreciation; Unabsorbed depreciation
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER I.T.A. NO. 322/PN/2010: A.Y. 2005-06 M/S. DHUMAL INDUSTRIES, E-36 D ROAD, MIDC SATPUR NASIK 422 007 PAN AACFDO 528 N APPELLANT VS. ADDL. CIT RANGE 1, NASIK RESPONDENT APPELLANT BY: SHRI NIKHIL PATHAK RESPONDENT BY: SHRI S.K. SINGH ORDER PER R.S. PADVEKAR, JM IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMP UGNED ORDER OF THE LD. CIT-I NASIK PASSED U/S 263 OF THE INCOME-TAX ACT 1961 DAT ED 27-11-2009 FOR THE A.Y. 2005- 06, SETTING ASIDE THE ASSESSMENT ORDER PASSED BY TH E AO FOR THE SAID ASSESSMENT YEAR U/S 143(3) OF THE ACT. 2. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 200 5-06 ON 31-10-2005 DECLARING TOTAL INCOME OF RS. 1,50,08,100/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S 143(3). SUBSEQUE NTLY, THE LD. CIT EXERCISING HIS REVISIONARY POWERS U/S 263 OF THE ACT, SET ASIDE TH E ASSESSMENT ORDER AND ENHANCED THE TOTAL INCOME FOR THE REASON GIVEN IN HIS ORDER PASSED U/S 263 OF THE ACT. THE LD. CIT ON THE FOLLOWING REASONS SET ASIDE THE ASSESSMENT O RDER PASSED BY THE AO U/S 143(3) OF THE ACT. I) THE CLAIM OF DEDUCTION U/S 80-IA(4)(IV)(A) BY T HE ASSESSEE ON THE INCOME OF THE WIND MILL UNIT, WHICH WAS ERECTED AT SATARA HAS BEEN FOUND TO BE WRONG AFTER GIVING EFFECT TO THE PROVISIONS OF SEC. 80IA(5) OF THE ACT. THE AO HAD NOT PROPERLY EXAMINED THE ALLOWABILITY OF TH E DEDUCTION. II) THE CLAIM OF DEPRECIATION ON THE WINDMILL HAD N OT BEEN EXAMINED BY THE AO. III) IF APPEARED THAT THE ASSESSEE HAS CONSIDERED C ERTAIN BENEFITS UNDER THE SALES TAX ACT FOR CLAIMING DEDUCTION U/S 80-IA. PAGE 2 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 3. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER. THE ASSESSEE HAS SET UP WINDMILL AT SATARA AND HAS CLAIMED DEPRECIATION ON IT. IN RESPECT OF FIRST REASON, THE LD. CIT HAS OBSERVED THAT AS PER THE RECORD, THE ASSESS EE HAS SET OFF THE BROUGHT FORWARD UNABSORBED DEPRECIATION OF THE ALLOWABLE UNIT AGAIN ST THE INCOME OF THE OTHER UNITS. ACCORDINGLY, THE ASSESSEE HAS DECLARED THE POSITIVE INCOME IN RESPECT OF ELIGIBLE UNITS FOR THE A.Y. 2005-06 AND HAS CLAIMED DEDUCTION U/S 80-IA(4)(IV)(A) OF THE ACT. THE LD. CIT HAS FURTHER OBSERVED THAT AS PER PROVISIONS OF SEC. 80-IA(5) THE PROFIT/GAIN OF INDUSTRIAL UNIT FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION ADMISSIBLE TO THE INDUSTRIAL UNDERTAKING IN THE ASSESSMENT YEAR IMMED IATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR AND THE SUBSEQUENT ASSESSMENT YEAR IS TO BE COMPUTED AS IF THE INDUSTRIAL UNDERTAKING IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND TO EVERY S UBSEQUENT ASSESSMENT YEARS UPTO AND INCLUDING THE ASSESSMENT YEARS FOR WHICH THE DE DUCTION IS TO BE MADE. AS OBSERVED BY THE LD. CIT, IN OTHER WORDS, THE INCOME OF THE UNDERTAKING IS TO BE COMPUTED SEPARATELY FOR EACH YEAR BY ALLOWING THE D EPRECIATION AND OTHER EXPENSES AND THE LOSSES OF THE UNIT THOUGH SET OFF AGAINST T HE INCOME FROM OTHER BUSINESS IN THAT YEAR FOR REGULAR COMPUTATION. THE LD. CIT PLACED H IS RELIANCE ON THE DECISION OF AHMEDABAD SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE LTD. (113 ITD 209) AND FINALLY HE HAS W ITHDRAWN DEDUCTION OF RS. 13,77,386/- WHICH WAS CLAIMED BY THE ASSESSEE U/S 8 0IA(4)(IV)(A) OF THE ACT ON THE PROFITS OF WINDMILL. 3.1. IN RESPECT OF THE SECOND REASON, IT IS SEEN TH AT THE ASSESSEE IS AVAILING THE SALES- TAX BENEFITS UNDER THE PACKAGE SCHEME OF INCENTIVES 1993 ON THE BASIS OF ELIGIBILITY CERTIFICATE ISSUED BY MAHARASHTRA ENERGY DEVELOPMEN T AGENCY (MEDA) TO AVAIL 3 RD YEARS SALES TAX BENEFIT BY WAY OF EXEMPTION FOR WIN D FARM PROJECT. IN THE OPINION OF THE LD. CIT, THE SAID TAX BENEFIT OR INCENTIVE AVAILED BY THE ASSESSEE IS TO BE TREATED AS TAXABLE INCOME DURING THE YEAR IN THE HANDS OF THE ASSESSEE IN WHICH SUCH BENEFITS ARE ACCRUED. THE ASSESSEE AVAILS THE SALES-TAX BENEFIT OF RS. 23,00,000/- PER YEAR FOR THREE FINANCIAL YEARS 2002-03, 2003-04 AND 2004-05. THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS NOT COLLECTED ANY SALES TAX ON THE SAL E OF ELECTRICITY AND SINCE NO SALES PAGE 3 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 TAX COLLECTED ON GOODS SOLD OR PURCHASE TAX ON THE GOODS PURCHASED, THERE IS NO QUESTION OF SALES-TAX LIABILITY AROSE. THE SALES-T AX LIABILITY WAS DETERMINED ON THE NOTIONAL BASIS. THE LD. CIT HAS NOTED THAT TOTAL S ALES LIABILITY FOR THE FINANCIAL YEAR 2004-05 RELEVANT TO A.Y. 2005-06 IS DETERMINATIVE A T RS. 51 LAKHS AND ODD OUT OF WHICH RS. 23,00,000/- IS TREATED AS SALES-TAX BENEFITS VI DE ELIGIBILITY CERTIFICATE DATED 28-6-2004 WHICH WAS IN THE NATURE OF NOTIONAL AWARD TO THE AS SESSEE. IN THE OPINION OF THE LD. CIT SALES-TAX BENEFIT AVAILED BY THE ASSESSEE IS IN THE NATURE OF ACCRUAL OF INCOME WITHIN THE MEANING OF SEC. 5 OF THE ACT. HE ALSO PLACED RELIAN CE ON FOLLOWING DECISIONS VIZ. STATE BANK OF TRAVANCORE VS. CIT (158 ITR 102 (SC), WESTE RN INDIA OIL DISTRIBUTING CO. LTD. VS. CIT 206 ITR 359 (BOM), UDYAN CHHINUBHAI VS. CIT 111 ITR 584 (GUJ). FINALLY HE HELD THAT THE ASSESSEE HAS GOT THE BENEFIT OF RS. 2 3,00,000- AS THE TAX TO THAT EXTENT THE SALES TAX PAYABLE BY THE ASSESSEE WAS WAIVED AND HE NCE THAT IS THE INCOME OF THE ASSESSEE. HE ACCORDINGLY ORDERED TO INCLUDE THAT S ALES-TAX BENEFIT OF RS. 23,00,000/- IN COMPUTATION OF THE ASSESSEES TOTAL INCOME FOR THE A.Y. 2005-06. SO THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. THE LD. COUNSEL SUBMITS THAT SO FAR AS THE ISSUE OF INITIAL ASSESSM ENT YEAR WHICH IS ONE OF THE REASON FOR EXERCISING REVISIONARY POWER BY THE LD. CIT IN RESP ECT OF CLAIM OF DEPRECIATION ON THE WINDMILL IS CONCERNED, THE SAID ISSUE STANDS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010) 38 DTR (MAD) 57. HE SUBMI TS THAT THE SAID DECISION HAS BEEN FOLLOWED BY THE ITAT PUNE BENCH IN THE CASE OF SERU M INTERNATIONAL LTD. VS. ADDL. CIT (ITA NO. 290 TO 292/PN/2010, ORDER DATED 28-11-2011 ). HENCE THE ORDER PASSED BY THE AO ON MERITS ITSELF CANNOT BE SAID TO BE ERRONEOUS. HE SUBMITS THAT FOR EXERCISING POWER U/S 263 THE RESPECTIVE ORDER SHOULD BE SUFFER ING FROM FOLLOWING THE TWO MANDATES (I) THE SAID ORDER SHOULD BE ERRONEOUS; (II) IT SHO ULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUBMITS THAT THE EXPRESSION ERRONEOUS HAS BEEN EXPLAINED BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD. VS. CIT (2000) 243 ITR 83 (SC). HE ALSO PLACED RELIANCE ON THE DECISI ON OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108. HE SUBMITS THAT SO FAR AS THE FIRST PAGE 4 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 REASON IS CONCERNED ON MERITS ITSELF, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDICIAL INTERPRETATION. THE ORDER OF THE AO CA NNOT BE SAID TO BE ERRONEOUS AND HENCE THE LD. CIT HAS WRONGLY EXERCISED HIS REVISIO NARY POWERS U/S 263 OF THE ACT. IN RESPECT OF SECOND ISSUE, VIZ. NOTIONAL SALES-TAX LI ABILITY, HE SUBMITS THAT THE ASSESSEES UNIT IS COVERED UNDER THE PACKAGE SCHEME OF INCENTI VES 1993 BEING A SPECIAL PROVISION FOR THE GENERATION OF NON-CONVENTIONAL ENERGY AND A SSESSEE IS GIVEN EXEMPTION FROM THE PAYMENT OF SALES-TAX. HE SUBMITS THAT AS PER T HE PROVISIONS OF LAW MORE PARTICULARLY UNDER THE MAHARASHTRA SALES-TAX ACT, THE ASSESSEE C AN COLLECT THE SALES-TAX FROM THE CUSTOMERS AND PAY THE SAME TO THE STATE GOVERNMENT. IF THE ASSESSEE HAS COLLECTED THE TAX AND IF THAT TAX IS NOT PAID TO THE GOVERNME NT THEN IT CAN BE SAID THAT THERE IS ACCRUAL OF BENEFIT TO THE ASSESSEE WITHIN THE MEANI NG OF SEC. 5 OF THE ACT. HE SUBMITS THAT NOTIONAL WAIVER OF THE SALES-TAX WHICH OTHERWI SE, THE ASSESSEE HAS NOT COLLECTED FROM THE CUSTOMERS CANNOT BE SAID TO BE ACCRUAL OF INCOME TO THE ASSESSEE WITHIN THE MEANING OF SEC. 5. HE PLEADED FOR QUASHING THE ORD ER PASSED BY THE LD. CIT U/S 263 OF THE ACT. 5. PER CONTRA, THE LD. DR SUPPORTED THE IMPUGNED OR DER OF THE LD. CIT. THE LAW IS WELL SETTLED IN RESPECT OF POWERS OF LD. CIT U/S 26 3. IN THE LANDMARK DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD. (SUPRA), IT IS HELD THAT TWO MANDATES OF THE SAID SECTION MUST BE FULFILLED; THAT THE ORDER MUST BE ERRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF RE VENUE. IT IS ALSO HELD THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO, CAN NOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. UNLESS BOTH THE MANDATES OF SEC. 263 ARE FULFILLED, THE CIT CANNOT EXERCISE HIS REVISIONARY POWERS U/S 263. IN THE PR ESENT CASE, SO FAR AS THE ISSUE OF INITIAL ASSESSMENT YEAR IN RESPECT OF WINDMILL U/S 80-IA(5) IS CONCERNED, IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) THE HONBLE MADRAS HIGH COURT HAS HELD THAT IT IS OPTION OF THE ASSESSEE THE YEAR IN WHICH HE CHOOSES TO OPT FOR DEDUCTION I.E. THE INITIAL YEAR FOR THE PURPOSE OF CLAIMING D EDUCTION U/S 80-IA(4)(IV)(A) OF THE ACT. THE SAID DECISION HAS BEEN FOLLOWED BY THE ITAT PUN E BENCH IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) AND PREFERRED TO GO WITH THE RATIO OF SAID DECISION INSTEAD OF FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF G OLDMINE SHARES AND FINANCE LTD PAGE 5 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 (SUPRA). THE RELEVANT PART OF THE ORDER OF THE TRI BUNALS DECISION IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA) IS AS UNDER: 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, TH E 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 BROUGHT FORWARD LOS SES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWE D SET OFF AGAINST OTHER NON- ELIGIBLE BUSINESS INCOME IN EARLIER YEARS. THE SUB MISSION OF THE LD A.R. REMAINED THAT ON THE WIND MILLS SET UP IN THE PR EVIOUS YEAR RELEVANT TO A.Y. 2002-03, THE ASSESSEE HAD CLAIMED DEPRECIATION AT T HE RATE OF 100% THEREON I.E. RS. 3.54 CRORES, WHICH WAS FULLY SET OFF AGAINST TH E ANOTHER INCOME IN THE SAID A.Y. 2002-03 ITSELF. IN THE A.Y. 2004-05, THE ASSE SSEE HAD POSITIVE INCOME FROM THE SAID GENERATION ACTIVITY AND THERE WERE NO BROU GHT FORWARD LOSSES/ UNABSORBED DEPRECIATION OF THE PRECEDING YEAR, WHIC H 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 CLAIM FOR DEDUCTION MADE BY THE ASSESSEE U/S. 80IA IN RESPECT OF THE PROFIT EARNED BY IT IN A.Y. 2004-05. THE LD. A.R. SUBMITT ED THAT SUB-SECTION (2) OF SECTION 80IA PROVIDES AN OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE A.YS. OUT OF 15 YEARS FOR CLAIMING THE DEDUCTION. HE SUB MITTED 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-SECTIO N (2). HE SUBMITTED THAT THE ASSESSEE CHOSE A.Y. 2004-05 AS INITIAL A.Y BEING T HE FIRST YEAR IN WHICH IT CLAIMED DEDUCTION U/S. 80IA AND THEREFORE, LOSSES/D EPRECIATION BEGINNING FROM A.Y. 2004-05 ALONE COULD ONLY BE BROUGHT FORWARD AN D SET OFF. DEPRECIATION OF THE PRECEDING A.Y. 2002-03 COULD NOT HAVE BEEN NOTI ONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFIT FOR THE A.Y. 2004-05. THE L D. 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 SUBMIT TED THAT THE DECISION OF HONBLE MADRAS HIGH COURT WILL PREVAIL UPON THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARE S AND FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN ITS RECENT DECISION IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA) A ND THERE THE ASSESSEE DID NOT DISPUTE THE FACT THAT THE AUTHORITIES BELOW HAV E DECIDED THE ISSUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. GOLDMINE SHARES.. THE LD. A.R. POINTED OUT THAT DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD V S. ACIT (SUPRA) 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 DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LTD., (SUPRA) HOLDING THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COU RT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN B Y ANY OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONB LE 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 U NDERTAKINGS. THE POWER GENERATION UNITS 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 INITIAL A.Y WAS DEFINED AND MEANT THE FIRST A. Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGIBLE UNIT COMMENCES PRODUCTIO N/POWER GENERATION. ONLY FROM 1.4.2000, WHEN SECTIONS 80IA WAS REPLACED WITH SECTION 80IA AND 80IB, THE DEFINITION OF INITIAL A.Y. DID NOT FIND A M ENTION. BUT NOWHERE, IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINA NCE BILL HAS ANY MENTION THAT THERE WAS ANY INTENTION TO IGNORE LOSSES AND DEPRECIATION FROM FIRST YEAR OF PAGE 6 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 POWER GENERATION/PRODUCTION AND THAT SUCH LOSSES TI LL FIRST YEAR OF CLAIM OF DEDUCTION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSEE DOES NOT FIND ANY SUPPORT. HE SUBMITTED THAT THERE IS NO DISCERN IBLE CHANGE IN LAW OR INTENTION OF PARLIAMENT W.E.F. 1.4.2000. THE LD. D.R. SUBMIT TED 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 CAS E. HE POINTED OUT THAT IN ITS RECENT DECISION DT. 21 ST JANUARY 2011, THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICAL SUPPLIES LTD. VS. AC IT (SUPRA) HAS ALSO DECIDED AN IDENTICAL DECISION IN FAVOUR OF THE REVENUE FOLL OWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDM AN SHARES & FINANCE (P) LTD. (SUPRA). HE SUBMITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE HAS ALSO DISCUSSED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). THE LD. D.R. SUBMITTED THAT EVEN IN THE CASE OF LIB ERTY INDIA VS. CIT (SUPRA), THE HONBLE SUPREME COURT HAS BEEN PLEASED TO EXPLA IN THE INTENTION OF PARLIAMENT AND SCOPE OF DEDUCTION U/S. 80IA AND 80I B OF THE ACT. THE HONBLE SUPREME COURT HAS BEEN PLEASED TO HOLD THAT SUCH P ROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF ELIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVERRIDING PROVISIONS OF 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 WHAT WOULD BE THE INIT IAL A.Y FOR THE PURPOSES OF SECTION 80IA(5) OF THE ACT HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALL A STUD AND AGRO FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DISCUSSI NG THE ISSUE IN DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE INITIA L A.Y FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS OPTIO N 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 PURPOSES OF SECTION 80IA(2) R.W.S. 80I A (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY FROM TH E WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDI NG THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINISHED BY UNABSORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME, IS FULLY COVERED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) HOLDING TH AT AS PER SUB-SECTION (5) OF SECTION 80IA, PROFITS ARE TO BE COMPUTED AS IF SUC H ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSE E 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 MADRAS HIG H COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNOT NOTIONALLY BRIN G FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OT HER INCOME OF ASSESSEE AND SET OFF AGAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED BY SUB-SECTION (5) OF SECTION 80IA DOES NOT CONTEMPLAT E SUCH NOTIONAL SET OFF, HELD THE HONBLE HIGH COURT. THE HONBLE MADRAS HIGH COU RT IN THAT DECISION HAS ALSO REFERRED THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF LIBERTY INDIA VS. CIT (SUPRA) AND THE DECISION OF SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). THERE I S NO DISPUTE THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COURT IS A BIND ING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER CO MPETENT HIGH COURT. IN THIS REGARD, WE FIND STRENGTH FROM THE RECENT DECISION O F HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CE NTRAL EXCISE VS. VALSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) WHEREI N THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD IN A CASE OF EXCISE MATTER THAT TRIBUNAL IS BOUND PAGE 7 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 BY THE DECISION OF HIGH COURT , EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT. THE HON BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLLOW THE JUDGMENT OF THE MADRAS HIGH COURT. AN AUTHORITY LI KE AN INCOME TAX TRIBUNAL ACTING ANYWHERE IN THE COUNTRY HAS TO RESPECT THE L AW 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 RESPECT FULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VAKSON DYEING, BLEACHING AND PRI NTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DECISION OF THE H ONBLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY S PINNING MILLS (P) LTD VS. ACIT (SUPRA). WE THUS RESPECTFULLY FOLLOWING THE DECISI ON TAKEN BY THE HONBLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTICAL ISSU E UNDER ALMOST SIMILAR FACTS, HOLD THAT WHEN THE ASSESSEE EXERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINS T THE OTHER INCOME OF THE ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FOR WARD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER IN COME OF THE ASSESSEE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIG IBLE BUSINESS. WE THUS SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRE CT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.LTD. VS. ITO (SUP RA) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SINCE FIRSTLY THE D ECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENC H AND SECONDLY THE LD. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGA INST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. G OLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. TH E LD. AR THEREIN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAI NST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF A CIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS THE LEGAL POSITION ON THE SUBJEC T IS YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSES SEE. 6. WE THEREFORE FIND THAT THE FIRST ISSUE WHICH IS ONE OF THE REASONS FOR EXERCISING POWER BY LD. CIT IS IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. (SUPRA), AS WELL AS DECISION OF THE ITAT PUNE BENCH IN SERUM INTERNATIO NAL LTD. (SUPRA) HENCE ON THAT ISSUE, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ER RONEOUS. 7. THE NEXT ISSUE IS WHETHER THE SALES-TAX BENEFIT AVAILED BY THE ASSESSEE IN RESPECT OF WINDMILL UNDER THE PACKAGE SCHEME OF INC ENTIVES IS THE INCOME ACCRUED TO THE ASSESSEE ON NOTIONAL BASIS. IN OUR OPINION, THE ANSWER IS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. APPARENTLY, AS PER THE FA CTS ON RECORD, THE ASSESSEE HAS NOT COLLECTED ANY SALES-TAX ON ITS SALES. WE THEREFORE , FIND THAT AS PER THE PROVISIONS OF MAHARASHTRA SALES-TAX ACT, THE ASSESSEE CAN COLLECT THE SALES TAX AT THE TIME OF SALE OF THE GOODS AND HE CAN DEPOSIT THE SAME TO THE GOVERN MENT WITHIN THE SPECIFIED TIME. IN PAGE 8 OF 8 ITA NO. 322/PN/2010 DHUMAL INDUSTRIES A.Y. 2005-06 CASE, IF THE ASSESSEE HAS COLLECTED THE SALES-TAX, THEN LD. CIT WOULD HAVE BEEN RIGHT IN SAYING THAT THE SALES-TAX COLLECTED FORMED PART OF THE INCOME OF THE ASSESSEE. AS PER THE PACKAGE SCHEME OF INCENTIVE, THE ASSESSEE IS EX EMPTED FROM PAYMENT OF SALES-TAX IN THREE YEARS THOUGH THE DETAILS ARE NOT AVAILABLE ON RECORD AS TO HOW THE QUANTIFICATION IS MADE. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS NOT COLLECTED ANY SALES-TAX AND ASSESSEE IS WAIVED FROM THE PAYMENT OF SALES-TAX BY THE GOVERNMENT BY ISSUING ELIGIBILITY CERTIFICATE. IN OUR OPINION, THERE CAN NOT BE NOTIONAL INCOME FOLLOWING THE THEORY OF REAL INCOME. ON THIS REASON ALSO, THE ORDER OF THE A.O CANNOT BE SAID TO BE ERRONEOUS. 8. AS DISCUSSED HEREINABOVE, THE MANDATE OF SECTION 263 SAYS THE ORDER MUST BE ERRONEOUS AND IT SHOULD ALSO BE PREJUDICIAL TO THE INTEREST OF REVENUE. IN OUR OPINION, THE ORDER WHICH IS THE SUBJECT MATTER OF REVISION U/S 2 63 IS NOT ERRONEOUS, AS BOTH THE MANDATES OF SEC. 263 ARE NOT FULFILLED. WE HAVE NO HESITATION TO QUASH THE ORDER PASSED BY LD. CIT NASIK U/S 263. WE ACCORDINGLY DO SO. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2013. SD/- SD/- (R.K. PANDA) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 31 ST MAY 2013 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- I NASIK 4. THE D.R, B BENCH, PUNE BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE