DCIT CEN CIR 10, MUMBAI V. CHAWLA BROTHERS P.LTD, MUMBAI

ITA 5490/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79080 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 02-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HOLDER
• Assessee Lawyers: A V SONDE
• Keywords: Depreciation; Additional evidence; Fair market value; Unabsorbed depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH, MUMBAI . . , , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAI YA, AM ./ I.T.A. NO.5490/MUM/2012 ( & & & & / ASSESSMENT YEAR :2009-10 THE ACIT, CENTRAL CIRCLE-10, OLD CGO ANNEXE BLDG., MUMBAI-400 020 / VS. M/S. CHAWLA BROTHERS PVT. LTD., POORAN ASHA BLDG., 317, NARSI NATHA STREET, MASJID, MUMBAI-400 009 C.O. NO. 227/MUM/2013 ./ I.T.A. NO.5490/MUM/2012 ( & & & & / ASSESSMENT YEAR :2009-10 M/S. CHAWLA BROTHERS PVT. LTD., POORAN ASHA BLDG., 317, NARSI NATHA STREET, MASJID, MUMBAI-400 009 / VS. THE ACIT, CENTRAL CIRCLE-10, OLD CGO ANNEXE BLDG., MUMBAI-400 020 ' $ ./ () ./ PAN/GIR NO. : AAACC 5084F ( '* / APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY: SHRI ABHIJIT HOLDER +,'* . - / RESPONDENT BY: SHRI A.V. SONDE . /0$ / DATE OF HEARING : 02.06.2014 12& . /0$ / DATE OF PRONOUNCEMENT :04.06.2014 M/S. CHAWLA BROTHERS PVT. LTD. 2 3 / O R D E R PER N.K. BILLAIYA, AM: THIS IS AN APPEAL BY THE REVENUE AND THE CROSS OBJE CTION BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-37, MU MBAI DT.11.11.2012 PERTAINING TO A.Y. 2009-10. AS BOTH THESE WERE HEA RD TOGETHER, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. ITA NO. 5490/M/2012- REVENUES APPEAL 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELI EF TO THE ASSESSEE TO THE EXTENT IMPUGNED IN THE GROUNDS ENUM ERATED BELOW: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, WHETHER THE LD. CIT(A) ERRED IN RESTRICTING D ISALLOWANCE OF RS.39,363,520/- TO RS.818,337/- ON THE ALV @ 8% IGN ORING FAIR MARKET VALUE OF THE PROPERTY ON THE BASIS OF STAMP DUTY RATE (PROPERTY INDEX RATE) AS WORKED OUT AT RS/547,610,0 00/- AND RELYING ON THE DECISION IN THE CASE OF EMTICI ENGIN EERING LTD. WHEREIN THE FACTS WERE ENTIRELY DIFFERENT TO THAT O F THE FACTS OF THE INSTANT CASE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S . 8OIA(4) WITHOUT CONSIDERING THE FACT THAT AFTER SETTING OFF ALL EXPENSES AND DEPRECIATION, THE ASSESSEE DID NOT HAVE ANY ELIGIBL E PROFIT TO CLAIM DEDUCTION. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S .8OA(4) ON GUARANTEE COMMISSION HELD AS NON ELIGIBLE RECEIPT I N ASSESSMENT M/S. CHAWLA BROTHERS PVT. LTD. 3 IGNORING THE PROVISIONS OF SECTION 8O1A(4) AND THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.483,318/- REPRESENTING PAYMENT OF INTEREST NOT INCURRED FOR T HE PURPOSE OF BUSINESS ADMITTING ADDITIONAL EVIDENCE UNDER RULE 4 6A OF THE INCOME TAX RULES WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER. 3. THE ASSESSEE BELONGS TO ONE CHAWLA GROUP, ENGAGE D IN THE BUSINESS OF OIL MANUFACTURING AND TRADING AND EARNING INCOME FROM GENERATION & SALE OF POWER MILL. THE RETURN OF INCOME WAS FILED ON 30.9.2009 DECLARING GROSS INCOME AT RS. 35,95,900/- FROM WHIC H DEDUCTIONS UNDER CHAPTER-VI-A AMOUNTING TO RS. 35,25,438/- WAS CLAIM ED RETURNING TOTAL TAXABLE INCOME AT RS. 70,462/-. THE RETURN WAS SEL ECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTICES WERE ISSUED AND SE RVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY WAS INITI ALLY ENGAGED IN MANUFACTURING AND TRADING OF EDIBLE OIL. IN THE FI NANCIAL YEAR 2006-07, THE ASSESSEE PURCHASED ONE WINDMILL FROM M/S. SUZLO N INDUSTRIES LTD. THE SAME WAS INSTALLED AT DHULE (MAHARASHTRA). THE OIL BUSINESS WAS DEMERGED WITH ANOTHER GROUP COMPANY NAMELY M/S. KAM ANI OIL INDUSTRIES (P) LTD. AS PER THE DEMERGER APPROVED BY THE HONBLE HIGH COURT, ALL THE MOVABLE AND IMMOVABLE ASSETS OF THE DEMERGED COMPANY PERTAINING TO OIL UNDERTAKING WERE TO BE DEMERGED WITH M/S. KAMANI OIL INDUSTRIES (P) LTD. THE AO FURTHER OBSERVED TH AT AFTER THE DEMERGER SCHEME, THE ASSESSEE WAS LEFT WITH ONLY ONE INCOME GENERATING ASSET WHICH WAS WINDMILL FROM WHICH THE ASSESSEE HAS SHOW N POWER M/S. CHAWLA BROTHERS PVT. LTD. 4 GENERATION AND SALE INCOMES. THE ASSESSEE HAS ALSO RECEIVED GUARANTEE COMMISSION. 4.1. THE AO FURTHER OBSERVED THAT AS PER THE DEMERG ER SCHEME, ALL THE ASSETS AND LIABILITIES OF THE ASSESSEE COMPANY PERT AINING TO THE OIL BUSINESS WERE TO BE TRANSFERRED TO M/S. KAMANI OIL INDUSTRIES (P) LTD. HOWEVER, THE AO FOUND THAT THE ASSESSEE HAS HELD BA CK THE PLANT AND MACHINERY OF CHANDIVALI INDL. ESTATE AND THE SAME WAS GIVEN ON RENT TO M/S. KAMANI OIL INDUSTRIES (P) LTD. ON A MONTHLY R ENT OF RS. 10,000/- I.E. RS. 1,20,000/- PER ANNUM. THE AO WAS OF THE FIRM B ELIEF THAT THE RENTAL INCOME SHOWN FOR SUCH A LARGE INDUSTRIAL UNIT WAS H IGHLY UNREASONABLE AND UNACCEPTABLE. THE MATTER WAS REFERRED TO THE D VO TO ASCERTAIN THE FAIR MARKET VALUE AND FAIR RENT. SINCE THE ASSESSM ENT WAS GETTING BARRED BY LIMITATION, THE AO PROCEEDED WITHOUT THE REPORT OF THE DVO. THE AO ADOPTED THE STAMP DUTY RATE AS REASONABLE FOR DETER MINING THE FAIR RENTAL VALUE OF THE UNIT. 4.2. TAKING A LEAF OUT OF THE STAMP DUTY READY RECK ONER, 2008, THE AO WENT ON TO COMPUTE THE ALV ON THE BASIS OF THE STAM P DUTY RECKONER RATES. THUS THE VALUE OF LAND WAS TAKEN AT RS. 36, 23,90,000/- AND THE VALUE OF BUILDING WAS TAKEN AT RS. 18,52,20,000/-. DRAWING SUPPORT FROM THE DECISION OF THE EMITICI ENGINEERING LTD. VS ACI T 58 TTJ 27, THE ALV FOR WORKING OUT DEEMED RENT WAS TAKEN AT 8% OF THE VALUE AS PER STAMP DUTY RATE. THUS THE ALV ON LAND WAS COMPUTED AT RS. 2,89,91,200/- AND ON BUILDING AT RS.1,48,17,600/- A FTER DEDUCTING 30% BEING STATUTORY DEDUCTION, TOTAL RENTAL INCOME WAS COMPUTED AT RS. 3,93,63,520/- AND AFTER REDUCING THE INCOME RETURNE D BY THE ASSESSEE AT RS. 1,20,000/-. THE NET RENTAL INCOME WAS ADDED AT RS. 3,92,43,520/-. M/S. CHAWLA BROTHERS PVT. LTD. 5 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS GRIEVAN CE AT PARA 6.3 ON PAGE-25 OF HIS ORDER AND AFTER CONSIDERING THE FACT S AND THE SUBMISSIONS AT PARA 6.6, THE LD. CIT(A) WAS OF THE OPINION THAT TH E ALV SHOULD HAVE BEEN COMPUTED ON THE COST OF THE LAND AND BUILDING AND NOT ON THE STAMP DUTY VALUATION AND DIRECTED THE AO TO RECOMPUTE THE ALV TAKING THE COST OF LAND AND BUILDING RECORDED IN THE BOOKS OF THE A SSESSEE. 6. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE AO. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD. AR FURTHER POINTED OUT THAT THE AO HAS NOT APPRECIATED THE DECISION OF THE EMITICI ENGINEERING LTD. (SUPRA) IN THE RIGHT PERSPECTIVE. 9. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOW ER AUTHORITIES. IT IS NOT IN DISPUTE THAT THE AO HAS BASED HIS FINDINGS D RAWING SUPPORT FROM THE DECISION OF THE TRIBUNAL AHMEDABAD BENCH IN THE CASE OF EMITICI ENGINEERING LTD.(SUPRA). WE FIND FORCE IN THE CONT ENTION OF THE LD. AR THAT THE AO HAS NOT APPRECIATED THE DECISION IN THE RIGHT PERSPECTIVE. THE CO ORDINATE BENCH OF AHMEDABAD HAS UPHELD THE FIXIN G OF THE ALV AT 8% ON THE COST. THAT BEING THE CLEAR RATIO OF THE DECISION AND THE LD. CIT(A) HAS RIGHTFULLY DIRECTED THE AO TO COMPUTE TH E ALV AT 8% OF THE COST, WE DO NOT FIND ANY REASON TO INTERFERE WITH T HE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS DISMISSED. M/S. CHAWLA BROTHERS PVT. LTD. 6 10. WHILE SCRUTINIZING THE CLAIM OF DEDUCTION U/S. 80IA( 4) OF THE ACT, THE AO NOTICED THAT DURING THE YEAR THE ASSESSEE HA S SHOWN THE FOLLOWING INCOMES. A) FROM SALE OF ELECTRICITY. B) FROM GUARANTEE COMMISSION. 10.1. THE AO OBSERVED THAT THE ASSESSEE HAD PURCHAS ED WIND TURBINE GENERATOR (WTG) FROM SUZLON ENERGY LTD IN THE FINAN CIAL YEAR 2005-06. DRAWING SUPPORT FROM THE PROVISIONS OF SEC. 80IA(2) OF THE ACT WHEREIN AN OPTION IS GIVEN TO THE ASSESSEE TO CLAIM DEDUCTI ON UNDER THIS SECTION FOR ANY TEN CONSECUTIVE YEARS OUT OF FIFTEEN YEARS BEGI NNING FROM THE YEAR IN WHICH THE UNDERTAKING BEGINS TO GENERATE POWER, TH E ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IA(4)(IV) IN RESPECT OF PR OFIT EARNED FROM ITS POWER WIND FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION WHICH MEANS THE OPTION HAS BEEN EXERCISED FROM FINANCIAL YEAR 2008-09 RELEVANT TO A.Y. 2009-10. 10.2. THE ASSESSEE SUCCESSFULLY COMPLIED WITH THE M ANDATORY CONDITION FOR THE CLAIM OF DEDUCTION TO THE SATISFACTION OF T HE AO. THOUGH THE AO WAS NOT SATISFIED WITH THE COMPUTATION OF THE CLAIM OF DEDUCTION, THE AO WAS OF THE FIRM BELIEF THAT LOSSES OF EARLIER YEARS HAVE TO BE SET OFF AGAINST THE INCOME OF THE ELIGIBLE UNIT. THEREFORE, THE AS SESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IA(4) AFTER TAKING INTO ACCOUNT TH E NEGATIVE INCOME COMING IN THE PRECEDING YEARS AT NEGATIVE FIGURE. T HE CLAIM OF DEDUCTION U/S. 80IA(4) WAS DENIED. 11. THE ASSESSEE STRONGLY AGITATED THIS ISSUE BEFOR E THE LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THIS GRIEVANCE AT PAR A 6.7 ON PAGE-28 OF M/S. CHAWLA BROTHERS PVT. LTD. 7 HIS ORDER. AFTER CONSIDERING THE FACTS AND THE SUB MISSIONS, THE LD. CIT(A) OBSERVED THAT DEPRECIATION AND EXPENSES OF E ARLIER YEAR RELATING TO WINDMILL HAS ALREADY BEEN SET OFF IN EARLIER YEARS THEREFORE THE ACTION OF THE AO TO SET OFF NOTIONAL BROUGHT FORWARD LOSSES W AS AGAINST THE PROVISIONS OF THE ACT. THE LD. CIT(A) RELIED UPON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF 340 ITR 477 AND F URTHER ON THE DECISION OF THE TRIBUNAL CHENNAI BENCH 116 ITD 241. 12. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 13. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE AO. 14. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY RELIE D UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VEL AYUDHASWAMY SPINNING MILLS PVT. LTD. 340 ITR 477. THE LD. COU NSEL ALSO RELIED UPON THE DECISION IN THE CASE OF CIT VS EMERALD JEWEL IN DUSTRY (P) LTD 53 DTR 262 (MAD), MEWAR OIL AND GENERAL MILLS LTD. 2 71 ITR 311 (RAJ). THE LD. COUNSEL SHRI A.V. SONDE WAS KIND ENOUGH TO POINT OUT THE DECISION OF THE TRIBUNAL MUMBAI BENCHES IN THE CASE OF HERCULES HOISTS LTD VS ACIT 22 ITR (TRIB)527 AND POINTED OUT THAT T HE TRIBUNAL HAS TAKEN A CONTRARY VIEW WHICH IS IN FAVOUR OF THE REV ENUE AND AGAINST THE ASSESSEE. 15. 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(4). THE ONLY DISPUTE RELATES TO THE LOSSES WHICH WERE ALREADY SE T OFF AGAINST OTHER M/S. CHAWLA BROTHERS PVT. LTD. 8 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: '(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 ?' 16. 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 M/S. CHAWLA BROTHERS PVT. LTD. 9 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 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. 17. 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. 18. THOUGH THE TRIBUNAL MUMBAI BENCHES IN THE CASE OF HERCULES HOISTS LTD (SUPRA) HAS TAKEN A CONTRARY VIEW BUT WE FIND THAT SUBSEQUENT TO THE DECISION OF THE TRIBUNAL MUMBAI BENCH, THE H ONBLE 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 MADRAS IN THE CAS E 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. M/S. CHAWLA BROTHERS PVT. LTD. 10 19. 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: 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. 20. 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 CONFIRMED. GROUND NO. 2 IS ACCORDINGLY DISMISSED. 21. GROUND NO. 3 RELATES TO THE GRIEVANCE THAT THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION U/S. 80IA(4) ON GUARANTEE COMMIS SION. 22. AS MENTIONED ELSEWHERE, THE ASSESSEE HAS SHOWN INCOME FROM GUARANTEE CLAIM AT RS. 29,23,000/-, THE SAID GUARA NTEE CLAIM WAS RECEIVED FROM M/S. SUZLON ENERGY LTD. IN PURSUANCE M/S. CHAWLA BROTHERS PVT. LTD. 11 OF A TACIT AGREEMENT BETWEEN THE ASSESSEE AND THE SAID COMPANY WHEREIN M/S. SUZLON ENERGY LTD. HAS ASSURED THE ASSESSEE TH AT IT WILL GET A TOTAL GENERATION OF 28 LAKHS UNIT BY WINDMILL IN THE FIRS T YEAR OF OPERATION AND 56 LAKH UNITS IN FIRST TWO YEARS OF OPERATIONS AT CONTROLLER AT 100% GRID AVAILABILITY. ANY SHORTFALL DUE TO NON-AVAILABILIT Y OF GRID WOULD BE COMPENSATED BY M/S. SUZLON ENERGY LTD. AS PER THE P OWER PURCHASE RATES AS APPLICABLE FROM TIME TO TIME. THERE BEING SHORTF ALL DURING THE YEAR UNDER CONSIDERATION, M/S. SUZLON ENERGY LTD. COMPEN SATED THE ASSESSEE BY PAYING GUARANTEE CLAIM OF RS. 29,23,000/-. THE AO WAS OF THE FIRM BELIEF THAT THIS INCOME HAS NO NEXUS WITH THE WINDM ILL INCOME OF THE ASSESSEE AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U /S. 80IA(4) OF THE ACT. 23. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) WAS CONVINCED THAT THE GUARANTEE CLAIM HAS D IRECT NEXUS WITH BUSINESS OF GENERATION AND DISTRIBUTION OF POWER. DRAWING SUPPORT FROM THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS E.A. INFRASTRUCTURE (P) LTD. 41 SOT 268 DIRECTED THE AO TO ALLOW THE CLAIM OF DEDUCTION U/S. 80IA(4) IN RESPECT OF GUARANTEE CLAIM. 24. AGGRIEVED BY THIS, REVENUE IS BEFORE US. 25. THE LD. DEPARTMENTAL REPRESENTATIVE SIMPLY RELI ED UPON THE ORDER OF THE AO. 26. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GUARANTEE CLAIM WAS IN PURSUANCE TO THE CONTRACT BETWEEN THE ASSESSEE AND M/S. SUZLON ENERGY LTD. AND HAS A DIRECT NEXUS WITH THE BUSINESS OF WINDMILL POWER GENERATION AND THEREFORE THE CLAIM OF DEDUCTI ON DESERVES TO BE ALLOWED. 27. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE . IT IS NOT IN DISPUTE THAT THERE WAS A TACIT AGREEMENT BETWEEN THE ASSESS EE AND THE M/S. SUZLON M/S. CHAWLA BROTHERS PVT. LTD. 12 ENERGY LTD. BY WHICH IT WAS CLEARLY UNDERSTOOD BY T HE PARTIES THAT ANY SHORTFALL IN POWER GENERATION WOULD BE COMPENSATED BY M/S. SUZLON ENERGY LTD. AS PER THE RATES PREVAILING AT THAT POI NT OF TIME. SINCE THERE WAS A SHORTFALL IN THE POWER GENERATION AS PER THE AGREEMENT, M/S. SUZLON ENERGY LTD. COMPENSATED THE ASSESSEE. THUS, IT CAN BE SEEN THAT THERE IS A DIRECT FIRST DEGREE NEXUS BETWEEN THE GUARANTEE CLA IM AND THE SALES OF THE ASSESSEE FROM THE ELIGIBLE UNIT. WE, THEREFORE, CON FIRM THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE IS ENTITLED FOR DEDUCT ION U/S. 80IA(4) IN RESPECT OF GUARANTEE CLAIM OF RS. 29,23,000/-. GRO UND NO. 3 IS ACCORDINGLY DISMISSED. 28. GROUND NO. 4 RELATES TO THE DELETION OF ADDITIO N OF RS. 4,83,318/- BEING INTEREST ALLEGED TO BE NOT INCURRED FOR THE P URPOSE OF BUSINESS. 29. THE AO DISCUSSED THIS ISSUE AT PARA-10 OF HIS A SSESSMENT ORDER. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS CLAIME D INTEREST AMOUNTING TO RS. 43,38,778/- WHEN THE COST OF INTEREST PAYMEN T ON WINDMILL FOR THE YEAR UNDER CONSIDERATION WAS AT RS. 38,55,460/-. T HE AO DISALLOWED THE EXCESS CLAIM AT RS. 4,83,310/-. 30. IT WAS EXPLAINED BEFORE THE LD. CIT(A) THAT OUT OF RS. 4,83,310/-, RS. 4,59,543/- REPRESENT THE INTEREST ON UNSECURED LOANS TAKEN FROM THE DIRECTOR AND THE BALANCE RS. 23,775/- WAS ALSO INCU RRED BY THE ASSESSEE TOWARDS BANK CHARGES. THE LD. CIT(A) WAS CONVINCED WITH THIS SUBMISSION OF THE ASSESSEE AND ON FACTS WAS OF THE VIEW THAT IF THE EXPENSES OF ELIGIBLE UNITS ARE DISALLOWED THAT WOUL D INCREASE THE INCOME OF THE ELIGIBLE UNIT WHICH IS EXEMPT FROM TAX U/S. 80IA(4) THEREFORE, SUCH EXERCISE WOULD BE TAXE NEUTRAL. ON THAT NOTE THE L D. CIT(A) DELETED THE ADDITION. M/S. CHAWLA BROTHERS PVT. LTD. 13 31. THE AO HAS NOT CONSIDERED THE FACT THAT THE EXC ESS INTEREST WAS PAID TO THE DIRECTOR FROM WHOM UNSECURED LOANS WAS TAKEN WHICH ALSO INCLUDED BANK CHARGES. THAT BEING THE FACT OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE L D. CIT(A). GROUND NO. 4 IS ACCORDINGLY DISMISSED. 32. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. C.O. NO. 227/M/2013 33. THE CROSS OBJECTION OF THE ASSESSEE READS AS UN DER THE LD. CIT(A)-37 ERRED IN CONFIRMING THE ANNUAL LETTING VALUE (ALV) OF LAND AND BUILDING, MADE AVAI LABLE TO RESULTING COMPANY M/S. KAMANI OIL INDUSTRIES PVT. L TD. TO RS. 8,18,337/- I.E. @ 8% OF THE COST OF LAND AND BU ILDING TO THE APPELLANT. THE APPLICANT SUBMITS THAT THE LAND AND BUILDING A T SAKI NAKA, MUMBAI WAS MADE AVAILABLE BY THE APPELLA NT THE DEMERGED COMPANY, TO THE RESULTING COMPANY M/S. KAM ANI OIL INDUSTRIES PVT. LTD. AS PART OF THE SCHEME OF D EMERGER APPROVED BY THE BOMBAY HIGH COURT AS A STOP GAP ARRANGEMENT, AND ACTUAL RENT RECEIVED BY THE APPELL ANT SHALL BE CONSIDERED AS ALV U/S. 23 OF THE ACT. 34. THIS ISSUE HAS BEEN ELABORATELY DISCUSSED BY US IN ITA NO. 5490/M/2013 QUA GROUND NO. 1. IN VIEW OF OUR ELABO RATE FINDINGS IN ITA NO. 5490/M/2013, THE CROSS OBJECTION FILED BY THE A SSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE, 2014 . 3 . 2& $ 4 56 04.06.2014 2 . 7 SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 4 TH JUNE, 2014 . . ./ RJ , SR. PS M/S. CHAWLA BROTHERS PVT. LTD. 14 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