Appeal Details
Counselvise Citation
[2013] 140 COUNSELVISE.COM (IT) 68075 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
5 year(s) 10 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-12-2013
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
28-11-2013
Assessment Year
2005-2006
Appeal Filed On
15-02-2008
Judgement Text
, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BENCH, AHMEDABAD .., ! ! ! ! ' #$, BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER APPEAL(S) BY APPELLANT VS. RESPONDENT SL. NO(S) ITA NO(S) ASSESSMENT YEAR(S) APPELLANT RESPONDENT 1. 610/AHD/2008 2005-06 SADBHAV ENGINEERING LTD. SADBHAV HOUSE OPP.LAW GARDEN POLIC CHAWKI ELLISBRIDGE, AHMEABAD PAN: AADCS 0852 Q DY.CIT CIRCLE-8 AHMEDABAD 2. 1834/AHD/2009 2006-07 ASSESSEE REVENUE 3. 2054/AHD/2009 2006-07 REVENUE ASSESSEE 4. 1835/AHD/2009 2007-08 ASSESSEE REVENUE 5. 2055/AHD/2009 2007-08 REVENUE ASSESSEE 6. 2053/AHD/2009 2005-06 REVENUE ASSESSEE ASSESSEE BY : SHRI MEHUL K.PATEL & SHRI TUSHAR P.HEMANI, ARS REVENUE BY : MS.ILA VARSHI SR.D.R. ' % & $' / / / / DATE OF HEARING : 28/11/2013 )*+ & $' / DATE OF PRONOUNCEMENT : 19/12/2013 , / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: ITA NO.610/AHD/2008 FOR AY 2005-06 IS THE APPEAL F ILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(APPEALS)-XIV, AHMEDABAD DATED 1/12/2007. ITA NOS.1834 & 2054/AHD/2009 ARE THE CR OSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT(A)-XIV, ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 2 - AHMEDABAD DATED 13/04/2009 FOR AY 2006-07. ITA NOS .1835 & 2055/AHD/2009 ARE THE CROSS APPEALS FILED BY THE AS SESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A)-XIV, AHMEDABAD DATED 13/04/2009 FOR AY 2007-08. ITA NO.2053/AHD/2009 IS THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-XIV, AHMEDA BAD DATED 22/04/2009 FOR AY 2005-06. 2. IN ALL ASSESSEES APPEALS, THE FIRST COMMON ISSU E INVOLVED IS THAT THE LD.CIT(A) ERRED IN DISALLOWING THE ASSESSEES C LAIM FOR DEDUCTION U/S.80-IA(4) OF THE ACT OF RS.3,39,44,245/- (FOR AY 2005-06), RS.9,11,193/- (FOR AY 2006-07) & RS.59,98,462/- (F OR AY 2007-08). 3. AT THE TIME OF HEARING, THE LD.ARS FOR THE ASSES SEE SUBMITTED THAT EXCEPT FOR CHANGE IN FIGURE THE FACTS OF THE CASE A RE SAME IN ALL THE YEARS AND, THEREFORE, THERE ARE BEING ARGUED TOGETHER FOR THE SAKE OF CONVENIENCE. THE FACTS OF THE CASE AS STATED BY TH E CIT(A) IN THE ASST.YEAR 2005-06 ARE AS UNDER:- 6.1. GROUNDS NO.4, 5 & 7 ARE AGAINST RESTRICTING T HE APPELLANTS CLAIM OF DEDUCTION OF RS.4,81,64,760/- U/S.80IA TO RS.1,42,25,550/-. THE A.O. WHILE COMPUTING THE DED UCTION U/S.80IA, HAS FIRST ALLOCATED THE COMMON EXPENSES I NCLUDING GROSS EXPENDITURE ON ACCOUNT OF INTEREST TO DIFFERENT UNI TS AND THEN ALLOCATED THE LOSSES OF VARIOUS LOSS MAKING UNITS T O VARIOUS UNITS EARNING PROFITS AND AFTER SETTING OFF THE LOSSES OF UNITS WITH PROFITS OF OTHER UNITS, DEDUCTION HAS BEEN CALCULATED. THE AO HAS ALSO INVOKED THE PROVISIONS OF SEC.80IA(5) OF THE I.T.AC T AND MADE THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 3 - COMPUTATION OF DEDUCTION U/S.80IA AFTER DISCUSSING IN DETAIL THE FACTS OF THE CASE, PROVISIONS OF THE I.T.ACT AND VA RIOUS CASE LAWS IN THE ASST.ORDER, VIDE PARA 5 PAGES 8 TO 44. 6.2. THE APPELLANT, DURING THE COURSE OF APPELLATE PROCEEDINGS, HAS SUBMITTED THAT THE LOSSES OF LOSS MAKING UNITS SHOULD BE IGNORED AND IT SHOULD NOT BE ALLOCATED TO THE PROFI TS OF THE PROFIT MAKING UNITS. IT WAS FURTHER SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ALLOCATING THE GROSS EXPENDITURE ON AC COUNT OF INTEREST, BUT THE EXPENDITURE SHOULD BE ALLOWED AND ONLY THE NET AMOUNT OF INTEREST SHOULD BE ALLOCATED. IT HAS FURTHER SUBMI TTED THAT IT RECEIVED THE INTEREST ON FD WITH BANK ETC., WHICH I S DIRECTLY CONNECTED WITH THE BUSINESS OF THE APPELLANT, AS TH E AMOUNT WAS SPENT FOR OBTAINING GUARANTEES, AS PER THE TERMS OF THE AGREEMENT ENTERED WITH THE GOVT.AUTHORITIES. THEREFORE, SUCH INCOME IS THE INCOME OF INDUSTRIAL UNDERTAKING AND ONLY NET INTER EST EXPENDITURE SHOULD BE TAKEN INTO CONSIDERATION. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SEC.80IA(5) OF THE ACT FOR THE PURPOSE OF DEDUCTION U/S.80IA, BY IGNORING THE FACT THAT THE DEPTT.HAS IN APPELLANTS OWN CASE HAS EARLIER COMPUTED THE DEDUCTION U/S.80IA WITHOUT APP LYING THE PROVISIONS OF SEC.80IA(5)OF THE ACT. IN SUPPORT OF ITS CONTENTION, THE APPELLANT PLACED ITS RELIANCE ON VARIOUS JUDICI AL DECISIONS AS UNDER:- I) CIT V. DELHI IRON AND STEEL CO.LTD., 85 TTJ 10 3 II) CANARA WORKSHOPS PVT.LTD. 161 ITR 320 (SC) III)M.PALLONJI & CO. PVT.LTD. V. JCIT, (ITAT MUM.) IV) INDIAN TRANSFORMERS LTD. VS. CIT 86 ITR 192 V) CIT V. L.M. VAN MOPPS DIAMOND TOOLS (INDIA) LTD . 107 ITR 386 VI) ITO V. KANCHAN OIL INDUS. LTD., 92 TTJ 739 VII)HCL INFO-SYTEMS LTD., V. DY.CIT, 81 TTJ 922 VIII)JCIT V. DR.REDDYS LAB.LTD., INDLAW ITAT 66 IX) ITC HOTELS V. DY.CIT 107 TTJ 955 X) CIT VS. SIDDHGANGA OIL EXTRACTION PVT.LTD., 109 CTR 119 XI) WIPRO INFORMATION TECHNOLOGY LTD. V.DY.CIT 88 TTJ 778 ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 4 - XII)MITSUI INDUSTRIES LTD. (ITAT ABAD) 1038/AHD/2 000 & 1071/AHD/2000. 6.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS ALONG WITH VARIOUS CASE LAWS AS RELIED UPON BY THE APPELLANT. I AM NOT INCLINED TO AGREE WITH THE VIEWS OF THE APPELLA NT. THE ISSUE OF ALLOCATING THE LOSSES OF LOSS MAKING UNITS TO THE P ROFITS OF PROFIT MAKING UNITS AND ALSO ALLOCATING THE GROSS INTEREST EXPENDITURE IN PLACE OF NET INTEREST EXPENDITURE FIRST AROSE IN TH E A.Y. 2003-04 AND 2004-05, WHEREIN IT HAS BEEN DECIDED AGAINST TH E APPELLANT VIDE CIT(A)S ORDER NO.ACIT C.8/60/2006-07 & ACIT C.8/59/2006-07 BOTH DATED 03/01/2007 RESPECTIVELY. WHILE DECIDING THE APPEALS, IT WAS OBSERVED THAT AFTER TH E INTRODUCTION OF SEC.80AB, THE LOSS IN OTHER UNITS HAS TO BE CONSIDE RED BEFORE ARRIVING THE FIGURE FOR CALCULATING THE DEDUCTION A ND THIS VIEW IS SUPPORTED BY THE MADRAS HIGH COURT IN THE CASE OF C IT V. MACMILLAN CO. OF INDIA LTD. 243 ITT 4031 AND MOTILA L PESTICIDES (I) PVT.LTD. V. CIT., 243 ITR 26 (SC). AS THE FACT S ARE SIMILAR IN THIS YEAR, FOLLOWING THE ORDER OF CIT(A), SUPRA, I HOLD THAT THE ACTION OF AO IN COMPUTING THE DEDUCTION U/S.80IA WA S QUITE JUSTIFIED AND THE SAME IS UPHELD. 3.1. THE LD.ARS FOR THE ASSESSEE SUBMITTED THAT DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEDUCTION U /S.80-IA(4) OF THE ACT IN RESPECT OF UDAIPUR UNDERTAKING, VIRAMGAM UNDERT AKING, MALVAN UNDERTAKING AND BANAS SYPHON UNDERTAKING. THE AO H AS INVOKED PROVISIONS OF SECTION 80-IA(5) OF THE ACT. IT WAS SUBMITTED THAT REGARDING THE CLAIM MADE IN RESPECT OF MALVAN UNDER TAKING AND BANAS SYPHON UNDERTAKING, SINCE NO LOSS WERE INCURRED IN EARLIER YEARS, THE AO HAS ALLOWED THE CLAIM MADE FOR THE YEAR UNDER CONSI DERATION. HOWEVER, IN RESPECT OF UDAIPUR UNDERTAKING AND VIRAMGAM UNDE RTAKING THE AO HAS BROUGHT FORWARD LOSSES OF EARLIER YEARS NOTIONA LLY AND SET OFF THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 5 - SAME AGAINST THE ELIGIBLE PROFIT OF THE SAID UNDERT AKING AND, ACCORDINGLY, DID NOT ALLOW THE DEDUCTION U/S.80IA(4) OF THE ACT TO THE EXTENT OF SUCH NOTIONAL BROUGHT FORWARD LOSSES. HE SUBMITTED TH AT THE TWO UNDERTAKINGS HAD CLAIMED DEDUCTION U/S.80IA(4) OF T HE ACT IN THIS YEAR FOR THE FIRST TIME AND, THEREFORE, THE YEAR UNDER CONSIDERATION IS THE AY 2005-06 WHICH IS INITIAL ASSESSMENT YEAR. IT WAS S UBMITTED THAT IN THE AYS 2003-04 & 2004-05 THE AO HAS NOTED THAT THESE U NDERTAKINGS HAD NOT CLAIMED DEDUCTION U/S.80-IA(4) IN THOSE YEARS. IT WAS FURTHER SUBMITTED THAT FOR THE PURPOSE OF SECTION 80IA(4), THE INITIAL ASSESSMENT YEAR IS THE YEAR IN WHICH FOR THE FIRST TIME CLAIM WAS MADE AND NOT THE YEAR OF COMMENCEMENT FOR WHICH THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HERCULES HOISTS LTD. VS. ACIT REPORTED IN 22 ITR 527 (MUM.TRIB). FURTHER, IT WAS ARGUED THAT THE HONBL E MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS VS. AC IT REPORTED IN 340 ITR 463 HAS DECIDED A SIMILAR ISSUE. THE SUBSTANTI AL QUESTION OF LAW DECIDED BY THE HONBLE HIGH COURT WAS AS UNDER:- (B) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT INITIA L ASSESSMENT YEAR IN SECTION 80IA(5) WOULD ONLY MEAN THE YEAR OF COMM ENCEMENT AND NOT THE YEAR OF CLAIM? THE HONBLE MADRAS HIGH COURT ANSWERED THIS QUESTI ON IN FAVOUR OF ASSESSEE AT PAGE NO.493 OF THE INCOME TAX REPORT . IT WAS FURTHER HELD BY THE HONBLE HIGH COURT THAT LOSS IN THE YEAR EAR LIER TO THE INITIAL ASSESSMENT YEAR CANNOT BE NOTIONALLY BROUGHT FORWAR D AND SET OFF AGAINST ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 6 - THE PROFITS OF THE ELIGIBLE BUSINESS AS NO SUCH MAN DATE IS PROVIDED IN SECTION 80IA(5) OF THE ACT. IT WAS FURTHER SUBMITT ED THAT THE TRIBUNAL IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (SUPRA) H AD FOLLOWED THE DECISION OF AHMEDABAD TRIBUNAL SPECIAL BENCH IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. REPORTED AT 302 ITR (AT) 208. THE HONBLE MADRAS HIGH COURT REVERSED THE ORDER OF THE TRIBUNAL WHICH SHOWS THAT THE HONBLE HIGH COURT OVERRULED THE ORD ER OF THE SPECIAL BENCH. ONCE THE ORDER OF THE SPECIAL BENCH IS OVER RULED BY THE HIGH COURT, THE SPECIAL BENCH ORDER IS NO MORE A GOOD LA W AND, THEREFORE, CANNOT BE APPLIED IN THE PRESENT CASE. IT WAS FURT HER SUBMITTED THAT REGARDING THE CONTROVERSY WHETHER NON-JURISDICTIONA L HIGH COURT DECISION WOULD PREVAIL OR THE SPECIAL BENCH ORDER ON THE SAM E ISSUE WHERE BOTH THE AUTHORITIES HAVE TAKEN A CONTRARY VIEW IS CONC ERNED, IT IS MOST RESPECTFULLY SUBMITTED THAT SUCH CONTROVERSY WOULD NOT TAKE PLACE IN THE PRESENT CASE. THE REASON IS THAT THE HONBLE MADRA S HIGH COURT HAS RENDERED THE DECISION AFTER DULY TAKING THE COGNIZA NCE OF THE SPECIAL BENCH ORDER. HAD IT BEEN THE CASE WHERE THE HIGH C OURT WOULD HAVE RENDERED THE DECISION WITHOUT TAKING INTO COGNIZANC E OF THE SPECIAL BENCH ORDER, THE CONTROVERSY COULD HAVE BEEN ARISEN . IT WAS FURTHER SUBMITTED THAT IN THE CASE OF KANEL OIL (AHMEDABAD BENCH THIRD MEMBER) REPORTED IN 121 ITD 596, IT WAS HELD THAT T HE VIEW OF THE HIGH COURT IS ABOVE THE TRIBUNAL IN THE JUDICIAL HIERARC HY AND THAT THE JUDGEMENT OF A NON-JURISDICTIONAL HIGH COURT WOULD PREVAIL OVER THAT OF THE SPECIAL BENCH IS SUBJECT TO THE EXCEPTION THAT WHERE THERE IS ONLY ONE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 7 - JUDGEMENT OF THE HIGH COURT ON THE ISSUE AND NO CON TRARY VIEW HAS BEEN EXPRESSED BY ANY OTHER HIGH COURT AND THAT WHERE TH E JUDGEMENT OF THE NON-JURISDICITONAL HIGH COURT, THOUGH THE ONLY JDUG EMENT ON THE POINT IS PER INCURIAM I.E. WHICH IS RENDERED WITHOUT HAVI NG BEEN INFORMED ABOUT CERTAIN STATUTORY PROVISIONS OR BINDING PRECE DENTS THAT ARE DIRECTLY RELEVANT. IT WAS SUBMITTED THAT IN THE PRESENT CAS E THE DECISION OF HONBLE MADRAS HIGH COURT IS THE SOLITARY DECISION ON THE ISSUE AND NO CONTRARY VIEW HAS BEEN EXPRESSED BY ANY OTHER HIGH COURT BUT ALSO THE JUDGEMENT OF THE MADRAS HIGH COURT HAS BEEN RENDERE D TAKING INTO COGNIZANCE OF THE SPECIAL BENCH DECISION. IT WAS AL SO SUBMITTED THAT THE HONBLE HIGH COURT HAS ALSO OBSERVED THAT THE DECIS ION OF THE SPECIAL BENCH WAS RENDERED IN THE CONTEXT OF OLD PROVISION OF SECTION 80IA OF THE ACT, WHEREAS THE ISSUE BEFORE THE HONBLE MADRAS HI GH COURT WAS IN THE CONTEXT OF AMENDED PROVISION OF SECTION 80IA(5) OF THE ACT. THEREFORE, IT WAS THE SUBMISSION THAT IN VIEW OF THE THIRD MEM BER ORDER OF KANEL OIL (SUPRA), THE DECISION OF THE HONBLE MADRAS HIG H COURT WOULD PREVAIL OVER THE SPECIAL BENCH DECISION. FURTHER, IT WAS ALSO SUBMITTED THAT A SIMILAR CONTROVERSY HAS BEEN ADDRESSED BY TH E PUNE TRIBUNAL IN THE CASE OF SERUM INTERNATIONAL LTD. VS. ACIT IN ITA NO S.290 TO 292/PN/2010, WHEREIN IT WAS HELD THAT AN AUTHORITY SUCH AS INCOME TAX APPELLATE TRIBUNAL ACTING ANYWHERE IN THE COUNTRY H AS TO RESPECT THE LAW LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON THAT QUESTION. THE LD.AR FOR THE ASSESSEE FURTHER RELIED ON THE DECIS ION OF THE HONBLE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 8 - MADRAS HIGH COURT IN THE CASE OF M/S.EMERALD JEWEL INDUSTRY P.LTD. IN TAX CASE (APPEAL) NO.715 OF 2010, WHEREIN THE HONB LE HIGH COURT FOLLOWED ITS DECISION IN THE CASE OF VELAYUDHASWAM Y SPINNING MILLS(SUPRA). 4. ON THE OTHER HAND, LD.DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND ADMITTED THAT THERE WAS N O CONTRARY DECISION OF ANY HIGH COURT ON THE ISSUE. THE DECISION OF THE H ONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS( SUPRA) WAS THE ONLY ISSUE ON THE SUBJECT. HOWEVER, HE RELIED ON THE DECISION OF AHMEDABAD SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES & FINANCE (P) LTD.(SUPRA), THE DECISION OF T HE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PIDILITE INDUSTRIES VS. DCIT (2011) 46 SOT 263 (MUM.) AND THE DECISION OF HYDERABAD BENCH OF T HE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICAL SUPPLIES LTD. VS. ACIT ( 2011) 137 TTJ 732 (HYD.TRIB.). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEDUCTION U/S.80IA(4) OF THE ACT FOR ALL THE YEARS WHICH WERE DISALLOWED BY THE AO O N THE GROUND THAT AS PER PROVISIONS OF SECTION 80IA(5) OF THE ACT THE CO MPUTATION OF DEDUCTION HAS TO BE DONE BY SETTING OFF OF BROUGHT FORWARD LOSSES AND DEPRECIATION OF ELIGIBLE BUSINESS AGAINST THEIR RES PECTIVE ELIGIBLE INCOMES. AFTER DOING SO, DEDUCTION U/S.80IA(4) OF THE ACT, A LLOWABLE TO THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 9 - ASSESSEE WORKS OUT TO RS.1,42,20,515 IN AY 2005-06. ACCORDINGLY, THE AO DISALLOWED THE CLAIM FOR DEDUCTION U/S.80IA OF R S.3,39,44,245/- TO THE ASSESSEE. SIMILARLY, THE AO DISALLOWED U/S.80- IA(4) OF THE ACT RS.9,11,193/- (FOR AY 2006-07) & RS.59,98,462/- (F OR AY 2007-08). 6. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO ON THE VERY SAME REASON. WE FIND THAT THE ASSESSEE HAD SE T UP UDAIPUR UNDERTAKING AND VIRAMGAM UNDERTAKING IN AY 2003-04. THE ASSESSEE INCURRED LOSSES FROM THESE TWO ELIGIBLE UNITS FOR D EDUCTION U/S.80-IA AND, THEREFORE, NO DEDUCTION WAS CLAIMED IN THE SAID AY U/S.80-IA OF THE ACT. IN THE AY 2005-06, THE ASSESSEE EARNED PROFIT FROM THESE PROJECTS AND ACCORDINGLY CLAIMED DEDUCTION U/S.80-IA BY TREATING THE AY 2005-06 AS INITIAL ASSESSMENT YEAR. THE AO WHILE COMPUTING TH E DEDUCTION FOR AY 2005-06 U/S.80-IA REDUCED THE DEDUCTION CLAIMED BY THE ASSESSEE BY ADJUSTING THE LOSSES OF PREVIOUS ASSESSMENT YEARS 2 003-04 & 2004-05 FROM THE ELIGIBLE PROFIT FROM THE UNDERTAKINGS. TH E LD.DR HAS RELIED ON THE DECISION OF THE AHMEDABAD SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. REP ORTED AT 302 ITR (AT) 208 AND SUBMITTED THAT WHILE COMPUTING THE DED UCTION ALLOWABLE TO THE ASSESSEE U/S.80IA LOSSES AND DEPRECIATION OF TH E EARLIER ASSESSMENT YEARS SHOULD BE NOTIONALLY BROUGHT FORWARD AND DEDU CTED FROM THE ELIGIBLE PROFIT OF THE ASSESSEE FROM THE SAID UNDER TAKINGS. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE HAS RELIED ON THE J UDGEMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPI NNING MILLS (P.) ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 10 - LTD. VS. ACIT (2012) 340 ITR 477 AND THE DECISION O F HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. EMERALD JEWEL IN DUSTRY (P) LTD. (2011) 53 DTR (MAD) 262. REGARDING THE SPECIAL BEN CH DECISION OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES & FINANCE ( P) LTD.(SUPRA), THE LD.AR SUBMITTED THAT THIS DECISION WILL NOT BE APPL ICABLE AS THE SAME WAS RELEVANT FOR THE PROVISIONS APPLICABLE IN THE ASSES SMENT YEARS 1996-97 AND 1997-98, WHICH WAS PRIOR TO THE AMENDMENT BROUG HT IN THE STATUTE BY THE FINANCE ACT, 1999. 6.1. WE FIND THAT SECTION 80IA OF THE ACT WHICH HAS BEEN SUBSTITUTED WITH EFFECT FROM 01/04/2000 PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIV ED BY AN UNDERTAKING FROM ANY ELIGIBLE BUSINESS REFERRED TO IN SUB-SECTI ON 4, THERE SHALL, IN ACCORDANCE WITH AN SUBJECT TO THE PROVISIONS OF THI S SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME, THE DEDUCTION OF AN AMO UNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FO R 10 CONSECUTIVE YEARS. SUBSTITUTED SUB-SECTION (2) OF SECTION 80IA , PROVIDES THAT AN OPTION IS GIVEN TO THE ASSESSEE FOR CLAIMING ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGIN TO OPERATE. THE 15 YEARS IS THE OUTER LIMIT WITHIN WHICH THE ASSESSEE CAN CHOOSE THE PERIOD OF CLAIMING THE DEDUCTION. SUB-SECTION (5) IS A NON-O BSTANTE CLAUSE WHICH DEALS WITH THE QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE RELEVANT PROVISIONS OF SUB-SECTION (5) OF SECTION 8 0IA, READS AS UNDER:- (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTH ER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSI NESS TO WHICH THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 11 - 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 INIT IAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL AS SESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO AND INCLU DING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE. 6.2 FROM A PLAIN READING OF THE ABOVE, IT CAN BE G ATHERED THAT IT IS A NON-OBSTANTE CLAUSE WHICH OVERRIDES THE OTHER PROVI SIONS OF THE ACT AND IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DE DUCTION UNDER SECTION 80IA, FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDIN G THE INITIAL ASSESSMENT YEAR AND ANY SUBSEQUENT ASSESSMENT YEAR TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME. THUS, THE FICTION CREATED IS THAT THE ELIGIBLE BUSINESS IS THE ONLY S OURCE OF INCOME AND THE DEDUCTION WOULD BE ALLOWED FROM THE INITIAL ASSESSM ENT YEAR OR ANY SUBSEQUENT YEAR. IT NOWHERE DEFINES AS TO WHAT IS THE INITIAL ASSESSMENT YEAR. PRIOR TO 1 ST APRIL 2000, THE INITIAL ASSESSMENT YEAR WAS DEFINE D FOR VARIOUS TYPES OF ELIGIBLE ASSESSEES UNDER SECTION 8 0IA(12). HOWEVER, AFTER THE AMENDMENT BROUGHT IN STATUTE BY THE FINAN CE ACT, 1999, THE DEFINITION OF INITIAL ASSESSMENT YEAR HAS BEEN S PECIFICALLY TAKEN AWAY. NOW, WHEN THE ASSESSEE EXERCISES THE OPTION OF CHOO SING THE INITIAL ASSESSMENT YEAR AS CULLED OUT IN SUB-SECTION(2) OF SECTION 80IA FROM WHICH IT CHOOSES ITS 10 YEARS OF DEDUCTION OUT OF 1 5 YEARS, THEN ONLY THE LOSSES OF THE YEARS STARTING FROM THE INITIAL ASSES SMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AS STIPULATED IN SECTION 80IA(5) . THE LOSS PRIOR TO ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 12 - THE INITIAL ASSESSMENT YEAR WHICH HAS ALREADY BEEN SET OFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO THE PERIOD OF 10 YEARS FROM THE INITIAL ASSESSMENT YEAR AS CONTEMPLATED OR CHOSEN BY THE AS SESSEE. 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 A SSESSMENT YEARS AND IT HAS TO BE COMPUTED AS IF ELIGIBLE BUSINESS IS THE O NLY SOURCE OF INCOME AND THEN ONLY DEDUCTION UNDER SECTION 80IA CAN BE D ETERMINED. THIS IS THE TRUE IMPORT OF SECTION 80IA(5). 6.3. 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 1996- 97 ONWARDS AND THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA S TARTING FROM THE FIRST YEAR ITSELF I.E., ASSESSMENT YEAR 1996-97. THUS, T HE SPECIAL BENCH WAS DEALING WITH THE OPERATION OF SECTION 80IA(5) WHERE THE ASSESSEE HAD FIRST CLAIMED THE DEDUCTION IN THE ASSESSMENT YEAR 1996-9 7 AND FOR SUBSEQUENT ASSESSMENT YEARS. THIS ASPECT OF THE MATTER HAS BE EN VERY WELL ELABORATED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT.LTD.(SUPRA) AFTER CONSIDERING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. REPORTED AT 302 ITR (AT) 208 AND THE RELEVANT PROVISIONS OF THE ACT, I.E., PRE-AMENDMENT AND POST -AMENDMENT HAVE COME TO THE SAME 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 ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 13 - AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASS ESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EA RLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMP LATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS LOSS OF EARLIER 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 PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BR ING IT NOTIONALLY. FICTION CREATED IN SUB- SECTION DOES NOT CONTEMPLATES TO BR ING SET OFF AMOUNT 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 AGAINST THE PROFI TS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISE D THE OPTION UNDER S. 80-IA(2). IN TAX CASE NOS. 909 OF 2009 AS WELL AS 940 OF 2009 , THE ASSESSMENT YEAR WAS 2005-06 AND IN THE TAX CASE NO. 918 OF 2008 THE ASS ESSMENT YEAR WAS 2004-05. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBE D DEPRECIATION OR LOSS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABS ORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING THE YEAR. THE UNR EPORTED JUDGMENT OF THIS COURT CITED SUPRA CONSIDERED THE SCOPE 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 AGREE ENTIRELY WITH THE DIVISION BENCH JUDGMENT OF THIS COURT CITED SUPRA. IN THE CASE OF CIT VS. MEWAR OIL & GENERAL M ILLS LTD. (2004) 186 CTR (RAJ) 141 : (2004) 271ITR 311 (RAJ), THE RAJASTHAN HIGH COURT ALSO CONSIDERED 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 FA CT THAT THERE WAS NO CARRY FORWARD LOSSES OF 1983-84, WHICH COULD BE SET OFF A GAINST THE INCOME OF THE CURRENT ASST. YR. 1984-85, THE RECOMPUTATION OF INC OME FROM THE NEW INDUSTRIAL UNDERTAKING BY SETTING OFF THE CARRY FOR WARD OF UNABSORBED DEPRECIATION OR DEPRECIATION ALLOWANCE FROM PREVIOU S YEAR DID NOT SIMPLY ARISE AND ON THE FINDING OF FACT NOTICED BY THE CIT (A), WHICH HAS NOT BEEN DISTURBED BY THE TRIBUNAL AND CHALLENGED BEFORE US, THERE WAS NO ERROR MUCH LESS ANY ERROR APPARENT ON THE M/S. SHEVIE EXP ORTS FACE OF THE RECORD WHICH COULD BE RECTIFIED. THAT Q UESTION WOULD HAVE BEEN GERMANE ONLY IF THERE WOULD HAVE BEEN CARRY FORWARD OF UNABSORBED ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 14 - DEPRECIATION AND UNABSORBED DEVELOPMENT REBATE OR A NY OTHER UNABSORBED LOSSES OF THE PREVIOUS YEAR ARISING OUT OF THE PRIO RITY INDUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR. IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHI CH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER S. 8O-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRI BUNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFICATION POSSIBLE UNDER S. 8 O-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 UNDE R THE HEAD DEPRECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAI NST THE INCOME OF THE CURRENT YEAR AND, THEREFORE, RECOMPUTATION OF INCO ME FOR THE PURPOSE OF COMPUTING PERMISSIBLE DEDUCTION 1UNDER S. 80-1 FOR THE NEW INDUSTRIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. A CCORDINGLY, THIS APPEAL FAILS AND 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. 80-1 FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. WE ALSO AGREE WIT H THE SAME. WE SEE NO REASON TO TAKE A DIFFERENT VIEW.' 6.4. THIS JUDGEMENT HAS BEEN FOLLOWED BY THE SAME H IGH COURT IN THE CASE OF CIT VS. EMERALD JEWEL INDUSTRY (P) LTD. (20 11) 53 DTR 262 (MAD.). FROM THE ABOVE RATIO OF THE HIGH COURT, IT IS AMPLY CLEAR THAT SUB-SECTION (5) OF SECTION 80IA WILL COME INTO OPER ATION ONLY FROM THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMEN T YEAR. THE OPTION OF CHOOSING 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). ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 15 - 7. COMING TO THE DECISION OF THE MUMBAI BENCH OF TH E TRIBUNAL IN THE CASE OF PIDILITE INDUSTRIES VS. DCIT (2011) 46 SOT 263 (MUM.) AS RELIED UPON BY THE LD.DEPARTMENTAL REPRESENTATIVE I N THIS CASE, THE TRIBUNAL WAS DEALING WITH REGARD TO TWO ELIGIBLE UN ITS, ONE GUJARAT UNIT WHICH WAS SET UP IN THE YEAR 1995-96 AND SECOND MAH ARASHTRA UNIT IN THE YEAR 2000-01. WITH REGARD TO GUJARAT UNIT, THE TRI BUNAL HELD THAT PRE- AMENDMENT DEFINITION OF INITIAL ASSESSMENT YEAR WOU LD BE APPLICABLE, IE.. PROVISIONS WHICH WERE PRIOR TO 1 ST APRIL, 1999 WILL APPLY BECAUSE THE ASSESSEE HAD STARTED COMMERCIAL PRODUCTION IN THE F INANCIAL YEAR 1996- 97. REGARDING SECOND UNIT, THE TRIBUNAL HELD THAT THE JUDGEMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS PVT.LTD.(SUPRA) WILL NOT BE APPLICABLE BECAUS E THE INCOME FROM NON-ELIGIBLE BUSINESS WAS SET OFF FROM THE LOSS OF ELIGIBLE BUSINESS IN THE YEAR OF COMMENCEMENT. IN THIS CASE, IT WAS NOT A N ISSUE AS TO WHETHER THE LOSSES PERTAINED TO PRIOR TO INITIAL ASSESSMENT YEAR OR AFTER THE INITIAL ASSESSMENT YEAR. IF THE LOSSES HAVE BEEN INCURRED IN THE ELIGIBLE UNIT AND HAS BEEN SET OFF AGAINST THE NON-ELIGIBLE UNIT AFTE R THE INITIAL ASSESSMENT YEAR, THEN THE RATIO LAID DOWN BY THE TRIBUNAL IS I N FULL CONSONANCE WITH THE LAW. HOWEVER, THIS IS NOT THE CASE IN THE INST ANT CASE BECAUSE THE LOSS PERTAINED TO PRIOR TO INITIAL ASSESSMENT YEAR WHICH HAVE BEEN SET OFF AGAINST THE PROFITS OF NON-ELIGIBLE UNITS. THE BEG INNING OF THE INITIAL ASSESSMENT YEAR AS ADOPTED BY THE ASSESSEE IS ASSES SMENT YEAR 2005-06 ONLY AND, THEREFORE, THE LOSSES OF ASSESSMENT YEARS 2003-04 & 2004-05 CANNOT BE NOTIONALLY CARRIED FORWARD WITHIN THE MEA NING OF SECTION ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 16 - 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. 8. THE OTHER DECISION HEAVILY RELIED UPON BY THE LE ARNED DEPARTMENTAL REPRESENTATIVE IN THE CASE OF HYDERABA D CHEMICAL SUPPLIES LTD. VS. ACIT REPORTED IN (2011) 137 TTJ 7 32 (HYD.TRIB.) WILL ALSO NOT APPLY TO THE FACTS OF THE PRESENT CASE, A S IN THAT CASE, THE WIND MILL STARTED ITS OPERATION ON 31/03/1999 AND THE FI RST YEAR OF OPERATION WAS ASSESSMENT YEAR 1999-2000. THUS, IN THE ASSESS MENT YEAR 1999- 2000, THE DEFINITION OF INITIAL ASSESSMENT YEAR W AS ALREADY THERE IN THE ACT AND THERE WAS NO PROVISION THROUGH WHICH THE AS SESSEE COULD HAVE CHOSEN ITS INITIAL ASSESSMENT YEAR. THIS PROVISION WAS BROUGHT IN STATUTE W.E.F. 1/04/2000, BY VIRTUE OF SECTION 80IA. THUS, THIS DECISION ALSO WILL NOT HELP THE DEPARTMENT. IN THE ASSESSEES CASE, AS SPECIFICALLY STATED IN THE FOREGOING PARAGRAPHS, THE ASSESSEES CLAIM FOR INITIAL ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2005-06 AND ITS CLAIM F OR DEDUCTION UNDER SECTION 80IA MADE FOR THE FIRST TIME FROM ASSESSMEN T YEAR 2005-06, HAS NOT BEEN DISPUTED. THUS, THE AFORESAID JUDGEMENT R ELIED UPON BY THE LD.DR FOR THE ASSESSEE WILL NOT BE APPLICABLE TO TH E FACTS OF THE PRESENT CASE. 9. WE REITERATE THAT IN THE INSTANT CASE, IT IS NO T IN DISPUTE THAT INITIAL ASSESSMENT YEAR IS THE ASSESSMENT YEAR 2005-06 AND SUBSEQUENT YEARS THERETO INVOLVED IN THE PRESENT APPEALS ARE ASSESSM ENT YEARS 2006-07 & ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 17 - 2007-08 AND IT IS ALSO NOT IN DISPUTE THAT THE ASSE SSEE HAS NOT SUFFERED ANY LOSS IN THE SAID THREE ASSESSMENT YEARS. THEREFORE , IN OUR CONSIDERED OPINION, NO BROUGHT FORWARD LOSS OR DEPRECIATION CO ULD BE REDUCED FOR DETERMINING THE AMOUNT FOR WHICH DEDUCTION IS TO BE ALLOWED U/S.80-IA OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE. 10. THE OTHER ISSUE INVOLVED IN ALL THE APPEALS OF THE ASSESSEE UNDER CONSIDERATION IS THAT THE LD.CIT(A) ERRED IN CONFIR MING THE ACTION OF THE AO IN ALLOCATING THE LOSSES SUFFERED BY THE OTHER UNDERTAKINGS AGAINST THE ELIGIBLE INCOME OF THE UNDERTAKINGS WHILE COMPU TING THE DEDUCTION U/S.80IA OF THE ACT. 10.1. THE BRIEF FACTS OF THE CASE ARE THAT THE AO W HILE COMPUTING THE DEDUCTION U/S.80IA ALLOCATED THE LOSS OF VARIOUS L OSS MAKING UNITS TO VARIOUS UNITS EARNING PROFITS AND AFTER SETTING OFF THE LOSSES OF UNITS WITH PROFITS OF OTHER UNITS, DEDUCTION WAS COMPUTED BY T HE AO. 10.2. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT LOSSES OF LOSS MAKING UNITS SHOULD BE IGNORED AND NOT BE A LLOCATED TO THE PROFITS OF THE PROFIT MAKING UNITS. THE LD.CIT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT THE ISSUE OF ALL OCATING THE LOSSES OF LOSS MAKING UNITS TO THE PROFITS OF PROFIT MAKING UNITS AROSE IN THE AYS 2003- 04 & 2004-05 AND THE SAME WAS DECIDED AGAINST THE A SSESSEE VIDE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 18 - CIT(A)S ORDER NO.ACIT C.8/60/2006-07 & ACIT C.8/59 /2006-07 BOTH DATED 03/01/2007 RESPECTIVELY. WHILE DECIDING THE APPEALS, IT WAS OBSERVED THAT AFTER THE INTRODUCTION OF SEC.80AB, T HE LOSS IN OTHER UNITS HAS TO BE CONSIDERED BEFORE ARRIVING THE FIGURE FOR CALCULATING THE DEDUCTION AND THIS VIEW IS SUPPORTED BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS. MACMILLAN CO. OF INDIA LTD. 243 ITR 4031 AND MOTILAL PESTICIDES (I) PVT.LTD. VS. CIT 243 ITR 26 (SC). AS THE FACTS IN THE PRESENT YEAR OF APPEAL WERE SAME, FOLLOWING THE OR DER OF EARLIER AYS 2003-04, 2004-05, THE CIT(A) CONFIRMED THE ACTION O F THE AO. 11. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT SECTI ON 80AB OF THE ACT DO NOT HAVE ANY SUCH ENABLING PROVISIONS WHEREBY LO SSES OF ALL THE UNITS CAN BE REDISTRIBUTED IN THE RATIO OF TURNOVER AMONG ST ALL THE UNITS. THIS AMOUNTS TO RE-WRITING BOOKS OF ACCOUNTS WHICH IS NO T PERMISSIBLE. UNDER THE SCHEME OF THE ACT, ONLY SECTION 80IA(5) ENABLE SUCH ADJUSTMENT. WHEN SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED, AUD ITED AND PLACED ON RECORD, IT IS NOT OPEN TO AO TO ARBITRARILY RE-QUAN TIFY AND RE-DISTRIBUTE LOSSES OF VARIOUS UNITS IN THE RATIO OF TURNOVER. HE PLACED RELIANCE ON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN TH E CASE OF M/S.SHRIRAM PROPERTIES PVT.LTD. VS. ACIT REPORTED IN 36 TAXMANN .COM 398 (CHENNAI), WHEREIN IT WAS HELD THAT THE AO DISALLOWED CLAIM OF DEDUCTION U/S.80-IB OF THE ACT IN RESPECT OF TWO ELIGIBLE PROJECTS, AS LOSS ON TWO OTHER ELIGIBLE PROJECTS WAS MORE THAN SUCH PROFIT. THE TRIBUNA L HELD THAT PROFIT DERIVED FROM A PARTICULAR ELIGIBLE INDUSTRIAL UNDER TAKING IS QUALIFIED FOR ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 19 - DEDUCTION U/S.80IB WITHOUT REDUCTION OF LOSS SUFFER ED BY ANY OTHER ELIGIBLE INDUSTRIAL UNDERTAKING, SUBJECT TO GROSS T OTAL INCOME OF ASSESSEE. THUS, WHERE GROSS TOTAL INCOME OF THE ASSESSEE, AFT ER ADJUSTING LOSSES SUFFERED BY ASSESSEE IN OTHER PROJECTS WAS MORE THA N CLAIM OF DEDUCTION U/S.80IB, DEDUCTION COULD NOT BE DISALLOWED. WITH REGARD TO THE AYS 2003-04 & 2004-05, THE LD.AR OF THE ASSESSEE SUBMIT TED THAT DUE TO SMALLNESS OF THE AMOUNT INVOLVED, APPEALS FILED BEF ORE THE TRIBUNAL IN ITA NOS.762 & 763/AHD/2007 WERE WITHDRAWN BY THE AS SESSEE, THEREFORE THE SAME WERE DISMISSED AS WITHDRAWN BY THE TRIBUNA L VIDE ORDER DATED 12/08/2010. THUS, IT CANNOT BE HELD THAT THE DECISI ON OF THE TRIBUNAL IN AYS 2003-04 & 2004-05 WAS AFTER CONSIDERING THE MER ITS OF THE ISSUE AND, THEREFORE, APPLICABLE TO THE ASSESSEE IN THE S UBSEQUENT ASSESSMENT YEAR. 12. ON THE OTHER HAND, THE LD.DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACTS OF THE CASE IN THE YEARS UNDER APPEAL IS THAT THE ASSESSEE CLAIMED DEDUCTION U/S.80-IB OF THE ACT. T HE AO COMPUTED THE CLAIM FOR DEDUCTION ALLOWABLE U/S.80-IA TO THE ASSE SSEE BY ALLOCATING THE LOSSES OF OTHER UNITS AGAINST THE PROFITS OF THE EL IGIBLE UNITS IN PROPORTION TO THE TURNOVER OF THE ASSESSEE. ON APPEAL, THE CI T(A) CONFIRMED THE ACTION OF THE AO ON THE GROUND THAT IN THE APPEAL F OR AYS 2003-04 & 2004-05, THE CIT(A) HAS CONFIRMED THE ACTION OF THE AO. THE LD.AR HAS ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 20 - SUBMITTED THAT DUE TO SMALLNESS OF THE AMOUNT INVOL VED, THE ASSESSEE THOUGH FILED THE APPEAL BEFORE THE TRIBUNAL IN AYS 2003-04 & 2004-05 BUT HAD WITHDRAWN THE SAME AND, THEREFORE, THE APPE ALS OF THE ASSESSEE WERE DISMISSED AS WITHDRAWN. THUS, AS THE TRIBUNAL HAS DISMISSED THE APPEALS OF THE ASSESSEE FOR WANT OF PROSECUTION, IT CANNOT BE A DECISION ON MERITS WHICH CAN BE APPLIED IN THE SUBSEQUENT YEARS IN THE CASE OF THE ASSESSEE. WE FIND FORCE IN THE ARGUMENT OF THE LD. AR OF THE ASSESSEE SINCE THE APPEAL OF THE ASSESSEE FOR AYS 2003-04 & 2004-05 WAS DISMISSED IN LIMINE BY THE TRIBUNAL, THEREFORE THE RATIO IN THE SAID DECISION IS NOT A BINDING PRECEDENT TO BE APPLIED T O THE ASSESSEE FOR THE SUBSEQUENT YEARS ON THE SAME ISSUE. WE FIND THAT T HE ISSUE AS POINTED OUT BY THE LD.AR OF THE ASSESSEE IS COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE C ASE OF M/S.SHRIRAM PROPERTIES PVT.LTD. VS. ACIT (SUPRA), WHEREIN IT WA S HELD THAT THE PROFIT DERIVED FROM A PARTICULAR ELIGIBLE INDUSTRIAL UNDER TAKING IS QUALIFIED FOR DEDUCTION U/S.80IB WITHOUT REDUCTION OF LOSS SUFFER ED BY ANY OTHER ELIGIBLE INDUSTRIAL UNDERTAKING, SUBJECT TO GROSS T OTAL INCOME OF ASSESSEE. THUS, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR ALL THE YEARS UNDER APPEAL. 14. THE NEXT ISSUE INVOLVED IN ALL THE APPEALS OF T HE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN ALLOCATING THE GROSS INTEREST EXPENDITURE IN PLACE OF NET INTEREST EXPEN DITURE TO TWO DIFFERENT ELIGIBLE UNDERTAKINGS. ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 21 - 14.1. THE BRIEF FACTS OF THE CASE ARE THAT THE AO W HILE COMPUTING THE DEDUCTION ALLOWABLE U/S.80IA TO THE ASSESSEE ALLOCA TED THE GROSS INTEREST EXPENDITURE IN PLACE OF NET INTEREST EXPENDITURE TO TWO DIFFERENT UNITS. ON APPEALS, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO ON THE GROUND THAT IN THE AYS 2003-04 & 2004-05 VIDE CIT(A)S ORDER NO .ACIT C.8/60/2006-07 & ACIT C.8/59/2006-07 BOTH DATED 03/ 01/2007. 14.2. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THOU GHT HE ASSESSEE FILED THE APPEAL BEFORE THE TRIBUNAL FOR AYS 2003-04 & 20 04-05 AGAINST THE ORDER OF THE LD.CIT(A) IN ITA NOS.762 & 763/AHD/200 7, BUT WITHDREW THE SAME DUE TO SMALLNESS OF THE AMOUNT. THUS, AS THE APPEAL OF THE ASSESSEE WAS DISMISSED WITHOUT DECIDING THE SAME ON MERITS BY THE TRIBUNAL ON THE GROUND OF WANT OF PROSECUTION, THE SAID DECISION CANNOT BE A BINDING PRECEDENT TO BE APPLIED IN THE CASE OF THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEARS. HE FURTHER RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT.LTD. VS. CIT 343 ITR 89 (SC) AND SUBMITTED THAT THE HON BLE SUPREME COURT HAS HELD THAT ONLY NET EXPENDITURE ON ACCOUNT OF IN TEREST CAN BE TAKEN INTO CONSIDERATION WHILE WORKING OUT THE DEDUCTION U/S.8 0-IA OF THE ACT AND NOT THE GROSS AMOUNT OF INTEREST. HE FURTHER SUBMI TTED THAT IT IS NOT IN DISPUTE THAT THE INTEREST INCOME RECEIVED BY THE AS SESSEE HAS BEEN ASSESSED BY THE AO UNDER THE HEAD BUSINESS INCOME . THEREFORE, THE DECISION OF THE HONBLE SUPREME COURT IS APPLICABLE TO THE FACTS OF THE ASSESSEE IN THE YEARS UNDER CONSIDERATION. ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 22 - 14.3. ON THE OTHER HAND, LD.DR FOR THE REVENUE SUPP ORTED THE ORDERS OF THE AUTHORITIES BELOW. 15. WE FIND THAT IT IS NOT IN DISPUTE BEFORE US THA T INTEREST ON FDRS CANNOT BE HELD AS INCOME DERIVED FROM INDUSTRIAL UN DERTAKING IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF PANDIAN CHEMICALS LTD. VS COMMISSIONER OF INCOME-TAX, 262 I TR 278 (SC) IRRESPECTIVE OF THE PURPOSE FOR WHICH INVESTMENT IN FDR WAS MADE. THE ONLY CONTENTION BY THE ASSESSEE BEFORE US IS NETTIN G OF INTEREST INCOME WITH THE INTEREST EXPENDITURE OF THE ASSESSEE. IN OUR CONSIDERED VIEW, WHEN DEPOSIT IN FDRS IS MADE WITH THE BORROWED FUND S, THEN, ONLY NET INCOME CAN BE SAID TO BE THE INTEREST INCOME DERIVE D FROM FDRS. HOWEVER, WE FIND THAT IN THE INSTANT CASE, THE ASS ESSEE HAS BROUGHT NO MATERIAL BEFORE HIM TO SHOW THAT BORROWED FUNDS WER E UTILIZED FOR MAKING THE FDRS. WE FIND THAT ALSO THE ASSESSEE C OULD NOT BRING ANY MATERIAL TO SHOW THAT THERE WAS ANY NEXUS BETWEEN T HE INTEREST EXPENDITURE AND THE INTEREST INCOME EARNED ON FDRS. BY THE ASSESSEE. IN THE ABSENCE OF THE SAME, WE DO NOT FIND ANY GOOD RE ASONS TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES ON THIS IS SUE, WHICH IS CONFIRMED. 15.1. IN RESPECT OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA), WE FIND THAT THE SAME WAS RENDERED IN THE CONTEXT OF SECTION 80HHC OF THE ACT . AS PER THE EXPLANATION (BAA) TO SECTION 80HHC FOR COMPUTING THE PROFIT OF THE BUSINESS, 90% OF THE INTEREST INCOME WHICH HAS BEEN INCLUDED IN THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 23 - BUSINESS INCOME, IS REQUIRED TO BE EXCLUDED. IN TH IS CONTEXT, THE HONBLE SUPREME COURT HAS HELD THAT ONLY 90% OF NET AMOUNT I.E. AFTER SET OFF OF INTEREST EXPENDITURE, FROM SUCH INTEREST INCOME NEE DS TO BE EXCLUDED. THUS, THE SAID DECISION WAS NOT IN THE CONTEXT OF T HE ISSUE, WHICH IS INVOLVED IN THE PRESENT APPEAL, RELEVANT FOR DETERM INING THE INCOME, WHICH IS DERIVED FROM ELIGIBLE UNDERTAKING. THUS, THE SAID DECISION IS DISTINGUISHABLE AND NOT APPLICABLE IN THE INSTANT C ASE. WE, THEREFORE, DISMISS THIS PART OF THE GROUND OF THE APPEAL OF TH E ASSESSEE. 16. THE NEXT ISSUE INVOLVED IN APPEAL OF THE ASSESS EE IN AYS 2005-06 & 2007-08 IS THAT THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO OF RS.12,80,355/- IN THE AY 2005-06 AND RS.15,88,516/- IN THE AY 2007-08 ON ACCOUNT OF EMPLOYEES CONTRIBUT ION TO PF. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO FOLLOWING THE DECISION OF HONBLE KERALA HIG H COURT IN THE CASE OF CIT VS. SOUTH INDIA CORPORATION LTD. REPORTED IN 242 ITR 114 DISALLOWED THE DEDUCTION CLAIMED IN RESPECT OF EMPL OYEES CONTRIBUTION TO PF ON THE GROUND THAT THE SAME WAS PAID AFTER TH E DUE DATE PROVIDED UNDER THE PF ACT. ON APPEAL, THE LD.CIT(A) DIRECTE D THE AO TO ALLOW THE DEDUCTION FOR THE SAME IF IT WAS PAID WITHIN THE GR ACE-PERIOD ALLOWED UNDER THE RESPECTIVE ACT. ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 24 - 18. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSION LTD. (3 19 ITR 306)[SC] HAS HELD THAT IF THE EMPLOYEES PF CONTRIBUTION WAS DEP OSITED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U /S.139(1) OF THE ACT, THEN THE SAME SHOULD BE ALLOWED WHILE COMPUTING THE INCOME OF THE ASSESSEE. 19. RESPECTFULLY FOLLOWING THE DECISION OF HON BLE APEX COURT IN THE CASE OF ALOM EXTRUSION LTD. (SUPRA), WE MODIFY THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO ALLOW DEDUCTION FOR EMPLOYEES PF CONTRIBUTION TO THE ASSESSEE, AFTER VERIFICATION AN D IF IT IS FOUND THAT THE SAME HAS BEEN PAID BY THE ASSESSEE TO THE PF AUTHOR ITIES BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S.139(1) OF TH E ACT BY THE ASSESSEE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLO WED FOR THE YEARS UNDER CONSIDERATION. 20. THE NEXT ISSUE INVOLVED IN ALL THE APPEALS OF T HE ASSESSEE IS THE DISALLOWANCE OF EXPENDITURE U/S.40(A)(IA) OF THE AC T. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO HAS DISALLOWED THE CLAIM U/S.40(A)(IA) OF TH E ACT OF RS.55,61,431/- IN AY 2005-06 ON THE GROUND THAT THE PAYMENT OF TDS WAS PAID AFTER THE COMPLETION OF THE PREVIOUS YEAR. ON APPEAL, THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 25 - LD.CIT(A) CONFIRMED THE ACTION OF THE AO. THE LD.A R OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS NOW DECIDED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN CREATION IN G.A. NO.3200/2011, WHEREIN IT HAS BEEN HELD THAT AMENDMENT MADE BY THE FINANCE ACT, 2010 WAS APPLICA BLE RETROSPECTIVELY. THE AHMEDABAD BENCH OF THE TRIB UNAL FOLLOWING THE SAID DECISION IN THE CASE OF SHREEJI CORPORATION IN ITA NO.2823/AHD/2011 HAS ALLOWED THE APPEAL OF THE ASS ESSEE. 21.1. ON THE OTHER HAND, THE LD.DR SUPPORTED THE OR DER OF THE LD.CIT(A). 22. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD, WE FIND THAT THE DISALLOWANCE U/S.40(A)( IA) OF THE ACT MADE BY THE AO AS THE TDS ON THE EXPENDITURE IN QUESTION WA S NOT PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT BY THE ASSESSEE BE FORE THE COMPLETION OF THE PREVIOUS YEAR. WE FIND THAT THE ISSUE IS NO W DECIDED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN C REATION IN G.A. NO.3200/2011, WHEREIN IT HAS BEEN HELD THAT IF THE TDS WAS DEPOSITED TO THE CREDIT OF THE CENTRAL GOVERNMENT BEFORE DUE DAT E OF FILING OF RETURN OF INCOME U/S.139(1) OF THE ACT, THEN NO DISALLOWANCE SHALL BE MADE U/S.40(A)(IA) OF THE ACT. WE THEREFORE RESPECTFULL Y FOLLOWING THE SAID DECISION OF THE HONBLE CALCUTTA HIGH COURT, SET AS IDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE AO TO VERIFY WHETH ER THE TDS ON THE EXPENDITURE OF RS.515,61,431/- WAS DEPOSITED BY THE ASSESSEE BEFORE THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 26 - DUE DATE OF FILING OF RETURN OF INCOME U/S.139(1) O F THE ACT, AND IF SO, THEN ALLOW THE CLAIM FOR DEDUCTION TO THE ASSESSEE. THUS, THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. 23. THE OTHER ISSUES INVOLVED IN AYS 2006-07 & 2007 -08 IN THE APPEAL OF THE ASSESSEE IS THAT THE LD.CIT(A) ERRED IN CONF IRMING THE ACTION OF THE AO IN NOT ALLOWING THE CREDIT FOR TAX DEDUCTED AT S OURCE ON MOBILIZATION ADVANCE RECEIVED. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C LAIMED CREDIT FOR TDS OF RS.1,73,52,062/- FOR THE AY 2006-07 AND RS.2,25,09, 037/- IN AY 2007- 08 WHICH WAS NOT ALLOWED BY THE AO ON THE GROUND TH AT THE INCOME IN RESPECT OF THE SAID TDS WAS NOT SHOWN BY THE ASSESS EE IN VIEW OF THE PROVISIONS OF SECTION 199 OF THE ACT. THE LD.CIT(A ) ALSO CONFIRMED THE SAME. 25. THE AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE V ISAKHAPATNAM BENCH OF THE TRIBUNAL IN ITA NO.324/VIZAG/2009 FOR AY 200 6-07, DATED 03/03/2011 IN THE CASE OF ACIT VS. PEDDU SRINIVASA RAO. THE LD.DR FOR THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 27 - 26. WE FIND THAT THE VISAKHAPATNAM BENCH IN THE CASE OF PEDDU SRINIVASA RAO(SUPRA) HAS HELD AS UNDER:- 8. WE HAVE CAREFULLY PERUSED THE PROVISIONS OF SEC TION 199 OF THE ACT AND ACCORDING TO THE PRE-AMENDED PROVISIONS OF SECT ION 199, THE CREDIT OF DEDUCTION MADE IN ACCORDANCE WITH THE RELEVANT P ROVISIONS OF THIS CHAPTER AND PAID TO THE CENTRAL GOVERNMENT, SHALL B E GIVEN FOR THE AMOUNT SO DEDUCTED ON THE PRODUCTION OF THE CERTIFI CATE FURNISHED U/S 203 FOR THE ASSESSMENT MADE UNDER THIS ACT FOR THE ASSESSMENT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. BUT IN THE AMENDED PROVISIONS THE WORDS 'FOR THE ASSESSMENT YEAR FOR WHICH SUCH INCOM E IS ASSESSABLE' HAS BEEN OMITTED. MEANING THEREBY, THAT THE LEGISLA TURE WAS QUITE CONSCIOUS ABOUT THE FACTS AND HARDSHIPS FACED BY SO ME ASSESSEES, WHILE MAKING THE AMENDMENTS IN SECTION 199 AND IN AMENDED PROVISIONS NOTHING HAS BEEN STATED ABOUT THE YEAR IN WHICH THE CREDIT OF TDS IS TO BE CLAIMED. AS PER AMENDED PROVISIONS OF SECTION 19 9, IN SUB-SECTION 1, IT HAS BEEN STATED THAT ANY DEDUCTIONS MADE IN ACCO RDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER AND PAID TO TH E CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTION WAS MADE. THEREFORE , AS PER THE AMENDED PROVISIONS, ONCE THE TDS WAS DEDUCTED, A CR EDIT OF THE SAME TO BE GIVEN TO THE ASSESSEES, IRRESPECTIVE OF THE YEAR TO WHICH IT RELATES. THE PRE-AMENDED AND THE AMENDED PROVISIONS OF SECTI ON 199 ARE EXTRACTED HEREUNDER: 'SECTION 199: CREDIT FOR TAX DEDUCTED - (1) ANY DEDUCTION MADE IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTIO N WAS MADE, OR OF THE OWNER OF THE SECURITY, OR DEPOSITOR OR OWNER OF PROPERTY OR OF UNIT- HOLDER OR OF THE SHAREHOLDER, AS THE CASE MAY BE, A ND CREDIT SHALL BE GIVEN TO HIM FOR THE AMOUNT SO DEDUCTED ON THE PROD UCTION OF THE CERTIFICATE FURNISHED UNDER SECTION 203 IN THE ASSE SSMENT MADE UNDER THIS ACT FOR THE ASSESSMENT YEAR FOR WHICH SUCH INC OME IS ASSESSABLE: (3) THE BOARD MAY, FOR THE PURPOSES OF GIVING CREDI T IN RESPECT OF TAX DEDUCTED OR TAX PAID IN TERMS OF THE PROVISIONS OF THIS CHAPTER, MAKE SUCH RULES AS MAY BE NECESSARY, INCLUDING THE RULES FOR THE PURPOSES OF ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 28 - GIVING CREDIT TO A PERSON OTHER THAN THOSE REFERRED TO IN SUB-SECTION (1) AND SUB-SECTION (2) AND ALSO THE ASSESSMENT YEAR FO R WHICH SUCH CREDIT MAY BE GIVEN. SECTION 199. (1) ANY DEDUCTION MADE IN ACCORDANCE WITH THE FOREG OING PROVISIONS OF THIS CHAPTER AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTION WAS MADE, OR OF THE OWNER OF THE SECU RITY, OR OF THE DEPOSITOR OR OF THE OWNER OF PROPERTY OR OF THE UNI T-HOLDER, OR OF THE SHAREHOLDER, AS THE CASE MAY BE. (2) ANY SUM REFERRED TO IN SUB-SECTION (1A) OF SECT ION 192 AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS THE TAX PAID ON BEHALF OF THE PERSON IN RESPECT OF WHOSE INCOME SUCH PAYMENT OF T AX HAS BEEN MADE.' 26. THE LD. DR COULD NOT CITE ANY CONTRARY DECISION OR ANY OTHER GOOD REASON FOR WHICH THE AFORESAID DECISION OF THE CO-O RDINATE BENCH OF THE TRIBUNAL SHOULD NOT BE FOLLOWED BY US. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE SET ASIDE THE O RDERS OF THE LOWER AUTHORITIES AND DIRECT THE AO TO ALLOW CREDIT FOR T HE TDS TO THE ASSESSEE. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOW ED. 27. IN THE REVENUES APPEALS FOR AYS 2006-07 & 2007 -08 (IN ITA NOS.2054/AHD/2009 & 2055/AHD/2009 RESPECTIVELY) TH E FIRST ISSUE IS THAT THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALL OW DEDUCTION FOR EMPLOYEES CONTRIBUTION TO PF OF RS.16,05,271/- IN AY 2006-07 AND RS.15,88,516/- IN AY 2007-08. WE HAVE DECIDED THI S ISSUE ABOVE IN THIS ORDER IN ASSESSEES APPEAL, WHEREIN WE HAVE H ELD THAT DEDUCTION FOR EMPLOYEES PF CONTRIBUTION SHOULD BE ALLOWED TO THE ASSESSEE, WHERE THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 29 - SAME HAS BEEN DEPOSITED TO THE CREDIT OF THE PF AUT HORITIES BEFORE THE DUE DATE OF FILING OF THE RETURN U/S.139(1) OF THE ACT. IN VIEW OF OUR ABOVE FINDING IN THE APPEAL OF THE ASSESSEE, THE GROUND O F APPEAL RAISED BY THE REVENUE IS DISMISSED IN BOTH THE YEARS. 28. THE ONLY LAST ISSUE IN THE REVENUES APPEAL IS THAT THE LD.CIT(A) ERRED IN THE AYS 2006-07 & 2007-08 IN DIRECTING THE AO TO ALLOCATE THE ONLY NET INTEREST EXPENDITURE AMONGST AUTHORIZED UN ITS OF THE ASSESSEE, WHILE CALCULATING DEDUCTION U/S.80-IA(4) OF THE ACT . 29. WE HAVE DECIDED A SIMILAR ISSUE IN THE APPEAL O F THE ASSESSEE ABOVE IN PARA NO.15 OF THIS ORDER, WHEREIN WE HAVE DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE. FOR THE SAME REASON STA TED ABOVE, WE ALLOW THE GROUND OF APPEAL OF THE REVENUE. 30. THE APPEAL FOR THE REVENUE IN ITA NO.2053/AHD/2 009 IS AGAINST THE ORDER OF THE LD.CIT(A) DELETING THE PENALTY OF RS.1,24,21,048/- LEVIED U/S.271(1)(C) OF THE ACT IN THE AY 2005-06. THE PE NALTY U/S.271(1)(C) OF THE ACT WAS LEVIED BY THE AO ON THE GROUND OF CONCE ALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME ON THE GROUND THAT THE AO HAS MADE DISALLOWANCE OF RS. 3,39,44,245/- OUT OF THE CLAIM OF DEDUCTION U/S.80-IA(4) OF THE ACT. ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 30 - 30.1. THE BRIEF FACTS OF THE CASE ARE THAT THE AO W HILE FRAMING THE ASSESSMENT FOR AY 2005-06 DISALLOWED RS.3,39,44,245 /- OUT OF THE CLAIM FOR DEDUCTION U/S.80-IA(4) OF THE ACT AS IN HIS VI EW BROUGHT FORWARD LOSSES FOR AYS 2003-04 & 2004-05 WERE TO BE CARRIED FORWARD NOTIONALLY AND REDUCED FROM THE ELIGIBLE PROFITS OF THE UNDERT AKINGS IN THE AY 2005- 06 IN VIEW OF THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. 31. ON APPEAL, THE LD.CIT(A) DELETED THE LEVY OF PE NALTY BY OBSERVING AS UNDER:- 5. CONSIDERING THE ABOVE FACTS OF THE CASE AND TH E DETAILED SUBMISSION ALONG WITH JUDGMENTS AS RELIED UPON BY T HE A.R. OF THE APPELLANT, I AM OF THE OPINION THAT THE PENALTY FOR CONCEALMENT CANNOT BE LEVIED IN THE CASE OF THE APP ELLANT MERELY ON THE BASIS OF ADDITION MADE WHICH HAD BEEN CONFIRMED BY THE CIT(APPEALS), AS FULL PARTICULARS OF THE CLAIM HAVE BEEN DISCLOSED BEING FULLY SUPPORTED BY AUDIT REPORT AND CLAIM OF NETTING OF INCOME U/S.80IA AND APPLICABILI TY OF SECTION 80IA(4) R.W.S.(5) BEING DEBATABLE ISSUE, TH ERE BEING TWO VIEWS, NO MALAFIDE INTENTION CAN BE ATTRIBUTED TO THE APPELLANT. THE BONA FIDE OF THE APPELLANT IS FURTH ER ESTABLISHED BY THE FACT THAT IN THE RETURN OF INCOM E THOUGH IT HAS DISCLOSED INCOME OF RS.1,98,28,045/- UNDER THE NORMAL PROVISIONS OF THE ACT, THE APPELLANT HAD VOLUNTARIL Y OPTED TO PAY HIGHER AMOUNT OF TAX U/S.115JB ON THE BOOK PROF IT OF RS.7,47,72,995/-. HENCE, HAVING CONSIDERED THE TOT ALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF THE PENALTY U/S.271(1)(C). BEFORE PARTING, IT IS PERTINENT TO MENTION HERE THAT IN THE APPELLANTS O WN CASE PENALTY LEVIED U/S.271(1)(C) FOR AY 2003-04 WAS DEL ETED BY THE ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 31 - CIT(APPEALS) VIDE ORDER DATED 19/9/2008 AND ON APPE AL FILED BY THE REVENUE, THE ITAT HAD UPHELD THE ORDER OF TH E CIT(A) VIDE THE ORDER DATED 13/3/2009 IN ITA NO.3902/AHD/2 008 AS SIMILAR OBSERVATIONS OF THE AO WERE THAT HE WAS SAT ISFIED THAT THE APPELLANT HAS CONCEALED THE PARTICULARS OF ITS INCOME AND/OR FURNISHED INACCURATE PARTICULARS OF ITS INCO ME. THE HONBLE ITAT IN ITS APPELLATE ORDER DATED 13.02.200 9 HAS REFERRED TO DECISION OF GUJARAT HIGH COURT IN THE C ASE OF NEW SORATHIA ENGINEERING CO. VS. CIT 282 ITR 642 (GUJ.) WHEREIN IT HAS BEEN HELD THAT THE PENALTY ORDER AND THE ORD ER OF CIT(A) SHOW THAT NO CLEAR CUT FINDING HAS BEEN REACHED AND THE TRIBUNAL HAS FAILED TO APPRECIATE THIS LEGAL ISSUE AND IT IS APPARENT THAT THE ORDER OF PENALTY CANNOT BE SUSTAI NED AND THE TRIBUNAL COULD NOT HAVE SUSTAINED THE SAME. 31.1. WHILE DECIDING THE APPEAL OF THE ASSESSEE IN AY 2005-06 ABOVE IN THIS ORDER, WE HAVE HELD THAT DEDUCTION U/S.80-IA O F THE ACT IS TO BE ALLOWED TO THE ASSESSEE WITHOUT REDUCING THE NOTION AL BROUGHT FORWARD LOSSES FOR AYS 2003-04 & 2004-05 BECAUSE SECTION 80 -IA OF THE ACT WAS AMENDED BY THE FINANCE ACT-1999 AND, THEREFORE, THE LOSSES OF EARLIER YEARS WERE NOT TO BE ADJUSTED IN VIEW OF THE FACT T HAT THE ASSESSEE HAS SELECTED THE PRESENT AY 2005-06 AS INITIAL ASSESSME NT YEAR. IN VIEW OF OUR ABOVE FINDING IN THE QUANTUM APPEAL OF THE ASSE SSEE, THE VERY BASIS FOR LEVY OF PENALTY DOES NOT SURVIVE. THEREFORE, W E CONFIRM THE ORDER OF THE LD.CIT(A) IN DELETING THE PENALTY OF RS.1,24,21 ,048/- IN ITS ENTIRETY. THUS, THIS GROUND OF THE APPEAL OF THE REVENUE IS D ISMISSED. ITA NOS.610/AHD /2008, 1834&2054/AHD/2009, 1835&2055/AHD/2009 AND 2053/AHD/2009 SADBHAV ENGINEERING LTD. VS. DY.CIT AYS 2005-06, 2006-07, 2007-08 & 2005-06 RESPECTIVE LY - 32 - 32. IN THE COMBINED RESULT, ALL THE THREE APPEALS O F THE ASSESSEE IN ITA NO.610/AHD/08 FOR AY 2005-06, IN ITA NO.1834/AH D/2009 FOR 2006-07 & IN ITA NO.1835/AHD/2009 FOR AY 2007-08 AR E PARTLY ALLOWED, WHEREAS APPEAL OF THE REVENUE IN ITA NO.2 053/AHD/2009 FOR AY 2005-06 IS DISMISSED AND APPEALS OF THE REV ENUE IN ITA NOS.2054 & 2055/AHD/2009 FOR AYS 2006-07 & 2007-08 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- (' #$) ( .. ) ( KUL BHARAT ) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 19/12/2013 /'.., .../ T.C. NAIR, SR. PS , & 0 , & 0 , & 0 , & 0$1 21+$ $1 21+$ $1 21+$ $1 21+$/ COPY OF THE ORDER FORWARDED TO : 1. 34 / THE APPELLANT 2. 0534 / THE RESPONDENT. 3. !! $ '6 / CONCERNED CIT 4. '6() / THE CIT(A)-XIV, AHMEDABAD 5. 1 #7 0$ , , / DR, ITAT, AHMEDABAD 6. 789 :% / GUARD FILE. ,' ,' ,' ,' / BY ORDER, 51$ 0$ //TRUE COPY// ; ;; ;/ // / !< !< !< !< ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 28.11.13(DICTATION-PAD 75-P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.12.13 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.19.12.13 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 19.12.13 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER
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