M/s. Gujarat Guardian Ltd., New Delhi V. DCIT, New Delhi

ITA 5794/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8823 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 10-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; Earning of tax free income; Onus to prove; Rule 8D; Set aside
• Section: 14A; 80IA; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) (THROUGH VIDEO CONFERENE) SHRI R.K. PANDA, ACCOUNTANT MEMBER AND BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5794/DEL./2016 (ASSESSMENT YEAR : 2012-13) M/S. GUJARAT GUARDIAN LTD., VS. DCIT, CIRCLE 10(2 ), 4-7/C, DDA SHOPPING CENTRE, NEW DELHI. NEW FRIENDS COLONY, NEW DELHI 110 065. (PAN : AAACG1622K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ JAIN, ADVOCATE MRS. SHAILY GUPTA, CA SHRI AKSHAY UPPAL, CA REVENUE BY : MS. SUNITA SINGH, CIT DR DATE OF HEARING : 21.07.2020 DATE OF ORDER : 27.07.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, GUJARAT GUARDIAN LTD. (HEREINAFTER REFE RRED TO AS THE APPELLANT) BY FILING THE PRESENT APPEAL SOUGH T TO SET ASIDE THE IMPUGNED ORDER DATED 05.09.2016 PASSED BY THE COMMI SSIONER OF INCOME - TAX (APPEALS)-35, NEW DELHI ON THE GROUND S INTER ALIA THAT :- ITA NO.5794/DEL./2016 2 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ['CIT(A)'] ERRED ON FACTS AND IN LAW IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN DISALLOWING EXPENSES OF RS.1,1 4,00,524/-, AGAINST RS.4,86,374 SUO MOTO DISALLOWED BY THE APPE LLANT, ALLEGING THE SAME TO BE INCURRED FOR EARNING EXEMPT DIVIDEND INCOME OF RS.15,44,59,467/- FROM INVESTMENT IN MUTU AL FUNDS, INVOKING PROVISIONS OF SECTION 14A OF THE INCOME TA X ACT, 1961 ('THE ACT') READ WITH RULE 80 OF THE INCOME TAX RUL ES, 1962 ('THE RULES'). 1.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN U PHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING DISAL LOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 80 OF THE RUL ES BY MERELY FOLLOWING THE DIRECTIONS ISSUED BY THE DISPUTE RESO LUTION PANEL FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12. 1.2 THAT THE CIT(A)/ AO ERRED ON FACTS AND IN LAW IN HOLDING THAT INVESTMENT ACTIVITY WAS NOT PASSIVE ACTIVITY B UT WAS WELL INFORMED AND CO-ORDINATED ACTIVITY INVOLVING INPUT FROM THE VARIOUS SOURCES AND ACUMEN OF SENIOR MANAGEMENT FUN CTIONARY AND HENCE THERE WAS COST IN-BUILT INTO SUCH INVESTM ENT ACTIVITY. 1.3 THAT THE CIT(A)/ AO ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPROPRIATE COST OF COMPOSITE FUNDS NEEDED TO BE ALLOCATED TOWARDS EARNING OF EXEMPT INCOME. 1.4 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT UNDER SECTION 14A OF THE ACT AND ONLY EXPENSES HAVING DIRECT! PROXIMATE NEXUS WITH EARNING OF THE DIVIDEND INCOME COULD BE DISALLOWED. 1.5 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT ONLY EXPENSES TO THE EXTENT OF RS .4,86,374 WERE INCURRED FOR EARNING THE AFORESAID DIVIDEND INCOME FROM THE INVESTMENT MADE IN MUTUAL FUNDS. 1.6 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN N OT APPRECIATING THAT THE ONUS TO PROVE THAT THE EXPEND ITURE WAS INCURRED IN THE TAXABLE BUSINESS OPERATIONS AND NOT THE EXEMPT INCOME IS UPON THE REVENUE AND NOT OF THE APPELLANT . 1.7 WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FA CTS AND IN LAW IN NOT APPRECIATING THAT SUB-SECTION (2) OF SEC TION 14A CANNOT BE APPLIED WITHOUT RECORDING SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE APPELLANT IN RESPECT OF THE EXPEND ITURE INCURRED FOR EARNING THE SAID INCOME. 1.8 WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FA CTS AND IN LAW IN NOT APPRECIATING THAT THE ASSESSING OFFICER HAD ERRONEOUSLY COMPUTED RS.12,24,497 AS EXPENSES DISALLOWABLE UNDE R SECTION ITA NO.5794/DEL./2016 3 14A OF THE ACT BY APPLYING RULE 8D OF THE RULES BY CONSIDERING THE AGGREGATE VALUE OF FIXED ASSETS AND GROSS CURRE NT ASSETS INSTEAD OF AGGREGATE OF FIXED ASSETS AND NET CURREN T ASSETS. 1.9 WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON FA CTS AND IN LAW IN NOT APPRECIATING THAT THE ASSESSING OFFICER HAD ERRONEOUSLY COMPUTED RS.12,24,497 AS EXPENSES DISALLOWABLE UNDE R SECTION 14A OF THE ACT BY APPLYING SUB-RULE (2)(II) OF RULE 8D OF THE RULES AS AGAINST RS.10,05,522 AS EXPENSES DISALLOWA NCE UNDER SUB-RULE (2)(II) OF RULE 8D. 1.10 WITHOUT PREJUDICE, THAT THE CIT(A) ERRED ON F ACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT HAD RECO RDED DIVIDEND INCOME IN THE BOOKS OF ACCOUNTS NET OF ADMINISTRATI VE CHARGES LEVIED BY THE MUTUAL FUNDS. 2. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEDUCTION UNDER SECTION 80IA OF RS.21,57,22,785 AS CLAIMED BY THE A PPELLANT IN THE RETURN OF INCOME. 2.1 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN A RBITRARILY HOLDING THAT NO BOOKS OF ACCOUNTS WERE MAINTAINED N OR THE REQUIREMENT OF AUDIT AS CONTAINED IN SECTION 80IA( 7) WAS FULFILLED IN THE PRESENT CASE, NOT APPRECIATING THA T PROPER RECORD AND BOOKS OF ACCOUNT WERE MAINTAINED AND WERE PLACE D ON RECORD IN THE COURSE OF ASSESSMENT PROCEEDINGS. 2.2 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN H OLDING THAT THE APPELLANT HAS NOT COMPLIED WITH THE REQUIREMENT OF SECTION 80IA(7) OF THE ACT ON THE GROUND THAT THE CHARTERED ACCOUNTANT WHO ISSUED THE AUDIT REPORT IN FORM 10CCB HAD NOT A UDITED THE ACCOUNTS OF THE UNDERTAKING WITHOUT APPRECIATING TH AT THERE IS NO SUCH REQUIREMENT IN LAW. 2.3 THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN A RBITRARILY HOLDING THAT THE AUDITOR HAS NOT TAKEN RESPONSIBILI TY OF CORRECTNESS OF THE CLAIM OF THE APPELLANT ON THE GR OUND THAT THE AUDITED FINANCIAL STATEMENTS CONSISTED ONLY TRIAL B ALANCE, BALANCE SHEET AND PROFIT AND LOSS ACCOUNT WITHOUT A NY NOTES TO ACCOUNTS OR ANY REMARKING REGARDING THE MAINTENANCE OF ACCOUNTS, REVENUE RECOGNITION, ETC. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSEE COMPANY IS IN THE BUSI NESS OF MANUFACTURING AND SELLING OF FLOAT GLASS. DURING T HE YEAR UNDER ITA NO.5794/DEL./2016 4 ASSESSMENT, ASSESSEE EARNED DIVIDEND INCOME OF RS.1 5,44,59,467/-. ASSESSING OFFICER (AO) BY INVOKING THE PROVISIONS C ONTAINED UNDER SECTION 14A THE INCOME-TAX ACT, 1961 (FOR SHO RT THE ACT) READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962 (FO R SHORT THE RULES) MADE A DISALLOWANCE OF RS.1,18,86,898/- MIN US RS.4,86,374/- SUO MOTU DISALLOWANCE MADE BY THE AS SESSEE = RS.1,14,00,524/- AND ADDED THE SAME TO THE INCOME O F THE ASSESSEE ON THE GROUND THAT EARNING OF EXEMPT INCOME IS NOT IN THE NATURE OF PASSIVE ACTIVITY HAVING NO INPUT; THAT INVESTMENT M ADE BEING A CAUTIONS DECISION AND HAVING DEPLOYMENT OF FUNDS CL EARLY BRINGS INTO PICTURE EXPENDITURE BY WAY OF COST OF FUNDS IN VESTED. AO ALSO MADE DISALLOWANCE OF RS.21,57,22,785/- CLAIMED BY T HE ASSESSEE AS DEDUCTION U/S 80IA(4)(IV) OF THE ACT AND ASSESSED T HE TOTAL INCOME OF THE ASSESSEE AT RS.28,36,87,040/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS PARTLY ALLOWED THE APPEAL. FEE LING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.5794/DEL./2016 5 GROUNDS NO.1 TO 1.10 5. UNDISPUTEDLY, LD. CIT (A) CONFIRMED THE ADDITION / DISALLOWANCE BY FOLLOWING HIS OWN ORDER PASSED FOR AY 2010-11 IN ASSESSEES OWN CASE. ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.15,44,59,467/- BY MAKING INVESTMENT OF RS.1,06,6 2,402/- AND MADE SUO MOTU DISALLOWANCE OF RS.4,86,374/- TOWARDS 25% OF THE SALARY OF ONE ACCOUNTING PERSON ALONG WITH 5% REMUN ERATION OF FINANCE DIRECTOR. IT IS ALSO NOT IN DISPUTE THAT A SSESSEE HAS MADE INVESTMENT IN THE DEBT MUTUAL FUND. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE IS HAVING INTEREST FREE SURPLUS FUNDS OF R S.4,54,99,30,057/- 6. IN THE LIGHT OF THE AFORESAID UNDISPUTED FACTS, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE ISSUE IN CONTROVERS Y IS COVERED BY THE ORDER DATED 16.089.2018 PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 , WHICH HAS BEEN CONFIRMED BY THE HONBLE DELHI HIGH COURT. 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDERS PASSED BY THE AO/CIT (A). 8. WHEN UNDISPUTEDLY ASSESSEE HAS EARNED EXEMPT DIV IDEND INCOME OF RS.15,44,59,467/- BY MAKING INVESTMENT IN DEBT MUTUAL FUND OUT OF ITS OWN TAX FREE SURPLUS FUNDS OF RS.4, 54,99,30,057/- DURING THE YEAR UNDER ASSESSMENT AND HAS MADE SUO M OTU DISALLOWANCE OF RS.4,86,374/- TOWARDS 25% OF THE SA LARY OF ONE ITA NO.5794/DEL./2016 6 ACCOUNTING PERSON ALONG WITH 5% REMUNERATION OF THE FINANCE DIRECTOR BY MAKING SPECIFIC WORKING OF THE AFORESAI D DISALLOWANCE, THE AO WAS REQUIRED TO RECORD HIS CATEGORIC DISSATI SFACTION AS TO THE WORKING OF DISALLOWANCE GIVEN BY THE ASSESSEE THAT THE SAME IS NOT CORRECT. RATHER AO HAS INVOKED THE PROVISIONS CONT AINED U/S 14A READ WITH RULE 8D ON THE BASIS OF GENERAL PRINCIPLE S INTER ALIA THAT THE EARNING OF EXEMPT INCOME IS NOT IN THE NATURE O F PASSIVE ACTIVITY HAVING NO INPUT; THAT INVESTMENT BEING A C ONSCIOUS DECISION AND HAVING DEPLOYMENT OF FUNDS CLEARLY BRI NGS INTO PICTURE EXPENDITURE BY WAY OF COST OF FUNDS AND THAT ASSESS EES CLAIM THAT HE HAS NOT INCURRED ANY EXPENDITURE TO EARN DIVIDEN D INCOME IS NOT ACCEPTABLE. 9. HONBLE DELHI HIGH COURT IN CASE OF MAXOPP INVESTMENT LTD. VS. CIT (2012) 347 ITR 272 (DEL.) HELD THAT AO IN ORDER TO INVOKE PROVISIONS CONTAINED U/S 14A READ WITH RULE 8D IS REQUIRED TO RETURN A FINDING THAT, HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPEND ITURE . EVEN OTHERWISE EXPENDITURE INCURRED DOES NOT INCLUDE IMAGINED EXPENDITURE . 10. FURTHERMORE, WHEN ASSESSEE IS HAVING ITS OWN HU GE INTEREST FREE SURPLUS FUNDS OF RS.4,54,99,30,057/-, THERE IS NO QUESTION OF INCURRING EXPENDITURE BY WAY OF INTEREST. ITA NO.5794/DEL./2016 7 11. THE ASSESSEE HAS COME UP WITH SPECIFIC ARGUMENT THAT ITS ENTIRE INVESTMENT ON WHICH EXEMPT DIVIDEND INCOME O F RS.15,44,59,467/- HAS BEEN EARNED IS IN THE DEBT MU TUAL FUND AND THE INVESTMENT ACTIVITY ONLY REQUIRES FILLING OF M UTUAL FUND STANDARD PRINTED FORMS AND ISSUE OF CHEQUE OR DEBI T INSTRUMENTS TO THE BANK. THEREAFTER, DIVIDEND/MUTUAL FUND PROC EEDS ARE DIRECTLY CREDITED TO THE ASSESSEES BANK ACCOUNT. IT IS ALS O CONTENDED THAT ASSESSEE HAS NOT DEPLOYED ANY SPECIFIC PERSON TO LO OK AFTER ITS INVESTMENT ACTIVITIES, BUT IT HAS SUO MOTU DISALLOW ED A SUM OF RS.4,86,374/- TOWARDS 25% OF THE SALARY OF ONE ACCO UNTING PERSON ALONG WITH 5% REMUNERATION OF THE FINANCE DIRECTOR HAVING BEEN INCURRED FOR EARNING SUCH DIVIDEND INCOME. 12. SO, WE ARE OF THE CONSIDERED VIEW THAT WHEN AO HAS FAILED TO COMPLY WITH THE MANDATORY REQUIREMENT OF SECTION 14 A(2) READ WITH RULE 8D (IA) TO RECORD HIS SATISFACTION, QUEST ION OF APPLYING RULE 8D(2)(III) DOES NOT ARISE. 13. HONBLE APEX COURT IN GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT 394 ITR 449 (SC) THRASHED THE ISSUE IN CONTROVERSY AS TO INVOKING OF THE PROVISIONS CONTAI NED UNDER RULE 8D OF THE RULES BY OBSERVING AS UNDER :- 37. WE DO NOT SEE HOW IN THE AFORESAID FACT SITUAT ION A DIFFERENT VIEW COULD HAVE BEEN TAKEN FOR THE ASSESS MENT YEAR 2002-2003. SUB-SECTIONS (2) AND (3) OF SECTION 14A OF THE ACT ITA NO.5794/DEL./2016 8 READ WITH RULE 8D OF THE RULES MERELY PRESCRIBE A F ORMULA FOR DETERMINATION OF EXPENDITURE INCURRED IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT IN A SITUATION WHERE THE ASSESSING OFFICER IS NOT SATI SFIED WITH THE CLAIM OF THE ASSESSEE. WHETHER SUCH DETERMINATI ON IS TO BE MADE ON APPLICATION OF THE FORMULA PRESCRIBED UNDER RULE 8D OR IN THE BEST JUDGMENT OF THE ASSESSING OFFICER, W HAT THE LAW POSTULATES IS THE REQUIREMENT OF A SATISFACTION IN THE ASSESSING OFFICER THAT HAVING REGARD TO THE ACCOUNTS OF THE A SSESSEE, AS PLACED BEFORE HIM, IT IS NOT POSSIBLE TO GENERATE T HE REQUISITE SATISFACTION WITH REGARD TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IT IS ONLY THEREAFTER THAT THE PROVISIONS OF SECTION 14A(2) AND (3) READ WITH RULE 8D OF THE RULES OR A BEST JUDGMENT DETERMINATION, AS EARLIER PREVAILING, WOUL D BECOME APPLICABLE. 14. MOREOVER, IT IS UNDISPUTED FACT ON RECORD THAT THE ASSESSEE HAS MADE NO INVESTMENT IN THE EQUITY ORIENTED MUTU AL FUND. EVEN OTHERWISE, UNDER THE SEBI GUIDELINES, MUTUAL F UNDS CHARGE FUND MANAGEMENT CHARGES OUT OF THE INCOME EARNED BY THE FUND, WHICH ARE DEDUCTED AND NET INCOME IS MADE AVAILABLE FOR THE DISTRIBUTION OF THE UNIT HOLDERS. EVEN TAX AUDITOR IN ITS TAX AUDIT REPORT, AVAILABLE AT PAGE 181 OF THE PAPER BOOK, QU ANTIFIED THE DISALLOWANCE U/S 14A OF THE ACT AT RS.4,86,374/-. APART FROM THIS, THE ASSESSEE HAS SUO MOTU REASONABLY APPORTIONED TH E SALARY PART OF THE EMPLOYEE AND FINANCE DIRECTOR LOOKING AFTER INV ESTMENT MADE FOR EARNING DIVIDEND INCOME. 15. WE HAVE PERUSED THE ORDER PASSED BY THE COORDIN ATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2009 -10 & 2010- 11, AVAILABLE AT PAGES 2.1 TO 2.29 AND 3 TO 46 RESP ECTIVELY OF THE PAPER BOOK, HAVING IDENTICAL FACTS DELETING SIMILAR ADDITION MADE ITA NO.5794/DEL./2016 9 BY THE AO/CIT(A), WHICH ORDER HAS BEEN AFFIRMED BY THE HONBLE DELHI HIGH COURT VIDE ORDER DATED 05.12.2017 PASSED IN ITA 1106/2017, AVAILABLE AT PAGES 1 & 2 OF THE PAPER BO OK. 16. WE ARE FURTHER OF THE CONSIDERED VIEW THAT SINC E THERE IS NO CHANGE IN THE SUO MOTU DISALLOWANCE BY THE ASSESSEE AS HAS BEEN MADE IN AYS 2010-11 & 2011-12, WHICH HAS BEEN CONFI RMED BY THE HONBLE DELHI HIGH COURT, MAKING DISALLOWANCE B Y THE AO WITHOUT RECORDING SATISFACTION MANDATORY U/S 14A(2) , IS NOT SUSTAINABLE. 17. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AN D FOLLOWING THE ORDERS PASSED BY THE COORDINATE BENCH OF THE TR IBUNAL FOR AYS 2010-11 & 2011-12, AFFIRMED BY THE HONBLE DELHI HI GH COURT, WE ARE OF THE CONSIDERED VIEW THAT DISALLOWANCE MADE B Y THE AO AND CONFIRMED BY THE LD. CIT (A) IS NOT SUSTAINABLE, HE NCE ORDERED TO BE DELETED. GROUNDS NO.1 TO 1.10 ARE DETERMINED IN FAVOUR OF THE ASSESSEE. GROUNDS NO.2 TO 2.3 18. AO DISALLOWED DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA TO THE TUNE OF RS.21,57,22,785/- WHICH HAS BEEN CON FIRMED BY THE LD. CIT(A) ON THE GROUND THAT NO BOOKS OF ACCOUNT W ERE MAINTAINED NOR REQUIREMENT OF AUDIT AS CONTAINED U/S 80IA (7) WAS FULFILLED IN THE PRESENT CASE. ITA NO.5794/DEL./2016 10 19. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNE D ORDER PASSED BY THE LD. CIT (A) CONTENDED INTER ALIA THAT LD. CIT (A) HAS PROCEEDED ON THE WRONG FACTS AND LAW THAT THE CHART ERED ACCOUNTANT WHO HAS ISSUED THE AUDIT REPORT AND FORM 10CCB HAD NOT AUDITED THE ACCOUNTS OF UNDERTAKING BECAUSE THE RE IS NO SUCH REQUIREMENT OF LAW; THAT THE ISSUE IN CONTROVERSY I S COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010- 11 IN ITA NO.973/DEL/2015 SETTING ASIDE THIS ISSUE BACK TO THE FILE OF THE AO WITH SPECIFIC DIRECTION TO GRANT DEDUCTIO N U/S 80IA OF THE ACT AFTER VERIFYING THE ASSESSEES CLAIM ON EXAMINA TION OF THE AUDITED ACCOUNTS OF THE ELIGIBLE UNDERTAKING. 20. UNDISPUTEDLY, THIS IS NOT FIRST YEAR OF THE ASS ESSEE CLAIMING DEDUCTION U/S 80IA AND OTHERWISE ELIGIBILITY OF ASS ESSEE CLAIMING DEDUCTION U/S 80IA HAS ALSO NOT BEEN DISPUTED BY TH E AO. IT IS ALSO NOT IN DISPUTE THAT PURSUANT TO THE ORDER PASSED BY THE TRIBUNAL DATED 16.08.2018 PASSED IN ITA NO.973/DEL/2015 (ASS ESSEES APPEAL) & ITA NO.1106/DEL/2015 (REVENUES APPEAL) FOR AY 2010-11 QUA IDENTICAL ISSUE, AO HAS GIVEN EFFECT TO THE OR DER OF THE TRIBUNAL BY PASSING ORDER U/S 254/143(3) ALLOWING D EDUCTION CLAIMED BY THE ASSESSEE U/S 80IA OF THE ACT. 21. WE HAVE PERUSED THE ORDER PASSED BY THE COORDIN ATE BENCH OF THE TRIBUNAL FOR AY 2010-11 IN WHICH IDENTICAL I SSUE QUA ITA NO.5794/DEL./2016 11 DISALLOWANCE CLAIMED BY THE ASSESSEE U/S 80IA HAS B EEN SET ASIDE TO THE AO WHO HAS GIVEN EFFECT TO THE ORDER OF THE TRI BUNAL. IN AY 2010-11, AO DISALLOWED THE DEDUCTION CLAIMED U/S 80 IA ON THE IDENTICAL GROUNDS AS IN THE CASE UNDER CONSIDERATIO N. OPERATIVE FINDINGS RETURNED BY THE COORDINATE BENCH OF THE TR IBUNAL QUA THE ISSUE IN CONTROVERSY ARE EXTRACTED FOR READY PERUSA L AS UNDER :- 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT ION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE B RIEF BACKGROUND OF THE ISSUE SHOWS THAT ASSESSEE HAS SET UP TWO WINDMILLS FOR ITS CAPTIVE CONSUMPTION. ON THE SAME ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80 IA. BEFORE THE A SSESSING OFFICER THE ASSESSEE SUBMITTED THE AUDIT REPORT IN FORM NO. 10 CCB. THE ASSESSEE STARTED GENERATING POWER FROM ASS ESSMENT YEAR 2004 05 ONWARDS. FOR BOTH THE WINDMILLS THE A SSESSEE ENTERED INTO A POWER PURCHASE AGREEMENT, SUCH POWER GENERATED AT THE WINDMILL WHEELED BY THAT AGREEMENT TO THE MA NUFACTURING UNIT OF THE ASSESSEE, AND NUMBER OF UNITS GENERATED AFTER DEDUCTION OF THE BILLING CHARGES IS GRANTED AS SET- OFF IN THE ELECTRICITY BILL OF THE ASSESSEE. BASED ON THIS ASS ESSEE BOOKED THE REVENUE AND BURNOUT PROFIT THEREON TO DERIVE AT THE PROFIT GENERATED FROM THE INDUSTRIAL UNDERTAKING. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DIRECTED T O PRODUCE THE BOOKS OF ACCOUNTS MAINTAINED IN RESPECT OF WINDMILL UNITS, WHICH WAS PRODUCED BY THE ASSESSEE ALONG WITH THE METHODO LOGY BY WHICH THE INCOME IS BOOKED AND EXPENDITURE INCURRED OF THE WINDMILL. THE LD. ASSESSING OFFICER REJECTED IT ON THE GROUND THAT THE APPELLANT IS COMPUTING SALES BASED ON THE CREDI T NOTES AND THE APPELLANT FAILED TO PRODUCE ANY DOCUMENT VOUCHERS, WHICH COULD HAVE ASSERTED THAT THE APPELLANT HAS MAINTAINED ITS ACCOUNTS SEPARATELY. APPARENTLY THE ASSESSEE IS BOOKING REVE NUE IS BASED ON THE CREDIT NOTE ISSUED BY THE POWER PURCHASE COM PANY WHEREIN THE SPECIFIED NUMBER OF UNITS GENERATED ARE SHOWN. BASED ON THAT THE ASSESSEE SHOWS THE REVENUE AND FU RTHER THE RESPECTIVE EXPENDITURE INCURRED FOR THE WINDMILL AR E ALSO RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS CLAIMED THAT IT IS MAINTAINING SEPARATE BOOKS OF ACCOUNTS WITH R ESPECT TO BOTH THE WINDMILL UNDERTAKINGS AND SUCH BOOKS OF ACCOUNT S ARE DULY BEEN AUDITED BY AN INDEPENDENT AUDITOR AND SUCH REP ORT OF THE AUDITOR HAS BEEN FILED BEFORE THE LD. ASSESSING OFF ICER. THE MAIN REASON FOR THE REJECTION OF THE DEDUCTION OF THE AS SESSEE BY THE LD. ASSESSING OFFICER IS THAT THAT ASSESSEE IS BOOK ING REVENUE BASED ON THE CREDIT NOTES. LOOKING AT THE NATURE OF THE ACTIVITIES ITA NO.5794/DEL./2016 12 CARRIED OUT BY THE ASSESSEE WHEREIN IT HAS SET UP I NDUSTRIAL UNDERTAKING FOR THE PURPOSE OF CAPTIVE CONSUMPTION OF POWER. FOR ITS MAJOR REQUIREMENT, IT BUYS THE POWER FROM G UJARAT ELECTRICITY BOARD. HOWEVER TO GET THE BENEFIT OF IT S DIFFERENT INDUSTRIAL UNDERTAKING WHICH GENERATES THE POWER, T HE ASSESSEE ENTERED INTO AN AGREEMENT WITH A POWER TRANSMISSION COMPANY WHICH GIVES THE CREDIT OF UNITS GENERATED BY THE WI NDMILL PROJECT AGAINST THE ELECTRICITY BILL OF THE MANUFACTURING U NIT OF THE ASSESSEE. THEREFORE, THE ASSESSEE IS RECORDING THE NUMBER OF UNITS GENERATED BY THE WINDMILL AS UNIT REVENUE GENERATED FROM THE INDUSTRIAL UNDERTAKING. WHILE PAYING THE ELECTRICIT Y BILL OF THE MANUFACTURING UNIT, SUCH NUMBER OF UNITS, WHICH WER E GENERATED BY THE INDUSTRIAL UNDERTAKING SUCH AS WINDMILL, WAS GRANTED AS DEDUCTION AND ONLY THE NET UNITS CHARGED TO THE ASS ESSEE. THE ASSESSEE HAS RECORDED THE REVENUE INVOLVED IN THOSE UNITS GENERATED BY THE WINDMILL BASED ON THE RATE AT WHIC H POWER THAT IS SUPPLIED TO THE ASSESSEE FOR THE MANUFACTURING U NIT. ACCORDING TO THE SUBSECTION 7OF SECTION 80 IA THE ONLY REQUIR EMENT IS THAT, THE ACCOUNTS OF THE UNDERTAKING ARE REQUIRED TO BE AUDITED. IN THE PRESENT CASE, THE ASSESSEE HAS SUBMITTED THE AUDITE D ACCOUNTS. IF THE AUDITOR HAS NOT QUALIFIED THOSE AUDITED ACCOUNT S, THERE IS NO REASON TO REJECT THEM AT THE THRESHOLD WITHOUT MAKI NG FURTHER VERIFICATION. THE LD. ASSESSING OFFICER SHOULD HAVE VERIFIED WHETHER THE ASSESSEE HAS PROPERLY COMPUTED THE INCO ME DERIVED FROM THE INDUSTRIAL UNDERTAKING OR NOT. IF THE ASSE SSING OFFICER FINDS THAT SUCH WORKING IS NOT PROPER THEN ONLY HE CAN SAY THAT THAT THE AUDITED ACCOUNTS OF THE ASSESSEE ARE NOT R ELIABLE. IN THE PRESENT CASE THE REVENUE HAS BEEN RECORDED BY THE A SSESSEE BY DERIVING THE UNITS GENERATED BASED ON THE CREDIT NO TES ISSUED BY THE TRANSMISSION COMPANY, THE ASSESSEE MULTIPLIED T HOSE UNITS GENERATED WITH THE POWER RATES FOR WHICH THE MANUFA CTURING UNIT BUYS THE POWER FROM AN OUTSIDE AGENCY, REDUCED THE PROPER EXPENDITURE THEREFROM TO DERIVE AT THE PROFITS OF T HE INDUSTRIAL UNDERTAKING. IT IS FURTHER STATED THAT THIS IS NOT THE 1STYEAR OF THE CLAIM OF THE ASSESSEE UNDER SECTION 80 IA OF THE AC T. IN THE PAST YEARS, ALSO THE ASSESSEE WAS GRANTED DEDUCTION ON T HE SIMILAR FACTS AND CIRCUMSTANCES BY THE LD. ASSESSING OFFICE R. THE PRINCIPLE OF CONSISTENCY ALSO DEMANDS THE ASSESSEE MAY BE TREATED AS ELIGIBLE FOR DEDUCTION AND IT MAY NOT BE REJECTE D MERELY BASED ON NON-MAINTENANCE OF BOOKS OF ACCOUNTS. SAME IS AL SO NOT FOUND AS THE MANDATORY CONDITIONS FOR DEDUCTION. TH EREFORE, WE DO NOT APPROVE THE APPROACH OF THE ASSESSING OFFICE R IN REJECTING THE CLAIM OF THE ASSESSEE AT THE THRESHOLD MERELY O N THE BASIS THAT NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED EVEN W HEN THE ASSESSEE HAS SUBMITTED THE AUDIT REPORT OF THE ACCO UNTS OF THE INDUSTRIAL UNDERTAKING WHICH WAS THE REQUIREMENT OF SUBSECTION 7. FURTHER, THE CLAIM OF THE ASSESSEE HAS BEEN REJE CTED AT THE THRESHOLD ITSELF WITHOUT VERIFYING THAT WHAT IS THE AMOUNT OF PROFITS THAT IS DERIVED BY THE INDUSTRIAL UNDERTAKI NG DURING THE YEAR. THE ASSESSEE HAS SUBMITTED THAT THESE DETAILS WERE PLACED ITA NO.5794/DEL./2016 13 BEFORE THE LD. ASSESSING OFFICER, WHICH IS ALSO PLA CED BEFORE US AT PAGE NO. 78 ONWARDS OF THE PAPER BOOK. IN VIEW OF T HIS WE SET ASIDE THIS GROUND OF APPEAL BACK TO THE FILE OF THE LD. ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE ON EXAMINATION OF THE AUDITED ACCOUNTS OF THE INDUSTRI AL UNDERTAKING AND THEN GRANT DEDUCTION UNDER SECTION 80 IA OF THE INCOME TAX ACT IN ACCORDANCE WITH THE LAW. IN THE R ESULT GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION. 22. KEEPING IN VIEW THE FACT THAT THE IDENTICAL ISS UE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR AY 2010-11 (SUPRA), GROUNDS NO.2 TO 2. 3 RAISED BY THE ASSESSEE ARE REMITTED BACK TO THE AO TO VERIFY THE CLAIM OF THE ASSESSEE MADE ON THE BASIS OF THE AUDITED ACCOUNTS AND ACCORDINGLY GRANT THE DEDUCTION U/S 80IA IN ACCORDANCE WITH LAW . 23. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF JULY , 2020. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF JULY, 2019/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(E), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.