DCIT, CHENNAI V. Global Calcium Limited, Hosur

ITA 81/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90405 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: M VISWANATHAN
• Keywords: Earning of tax free income
• Section: 14A; 2

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHE NNAI , . !' !' !' !' , # # # # $% $% $% $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.81/MDS/2015 # ' &' / ASSESSMENT YEAR :2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI 600 034. VS. M/S. GLOBAL CALCIUM LIMITED, 125 & 126, SIPCOT INDUSTRIAL COMPLEX, HOSUR 635 126. [PAN: AAACG2998N] ( '( '( '( '( /APPELLANT ) ( )*'( )*'( )*'( )*'( / RESPONDENT ) '( + , / APPELLANT BY : SHRI S. DASGUPTA, JCIT )*'( + , / RESPONDENT BY : SHRI M. VISWANATHAN, C.A. + - / DATE OF HEARING : 22.04.2015 ./ & + - /DATE OF PRONOUNCEMENT : 29.05.2015 0 0 0 0 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) II, CHENNA I, DATED 05.09.2014 RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF BULK DRUG MANUFACTURER AND FILED ITS RE TURN OF INCOME ADMITTING TOTAL INCOME OF .3,42,72,540/- AFTER CLAIMING DEDUCTION OF .59,76,812/- UNDER CHAPTER VIA, WHICH INCLUDED AN AMOUNT OF .54,94,886/- CLAIMED I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 2 UNDER SECTION 80IA OF THE INCOME TAX ACT. THE RETUR N FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND T HE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ALSO ISSUED. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT BY M AKING VARIOUS ADDITIONS. 3. THE FIRST GROUND OF APPEAL RAISED BY THE REVENU E RELATES TO DELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE ACT. THE ASSESSEE HAS INVESTED AN AMOUNT OF .2,59,67,698/- IN SHARES AS ON 31.03.2010 AND EARNED DIVIDEND INCOME OF .4,74,257/-, WHICH THE ASSESSEE HAS CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE A CT. HOWEVER, THE ASSESSEE HAS NOT SEGREGATED ANY EXPENDITURE ATTRIBU TABLE TO EARNING SUCH EXEMPT INCOME. THUS, THE ASSESSING OFFICER HAS INVO KED THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D AND DETERM INED THE EXPENDITURE ATTRIBUTABLE FOR EARNING SUCH EXEMPT INCOME AT .11,56,970/- AND DISALLOWED THE SAME. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT(A) AND SUBMITTED THAT SIMILAR ISSUE HAS CAME UP FOR HEARIN G BY THE ITAT AND THE ITAT DELETED THE ADDITION MADE BY THE ASSESSING OFF ICER. THE LD. CIT(A), BY CONSIDERING THE EXPLANATION OF THE ASSESSEE, HAS OB SERVED AND HELD AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 3 4.1.2 I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS CAREFULLY. AS EXPLAINED BY THE ASSESSEE COMPANY, THE ISSUE OF DIS ALLOWING THE EXPENSES U/S.14A OF THE INCOME TAX ACT R.W.R.8D IS A RECURRING ISSUE COMING FROM THE EARLIER YEARS. A SIMILAR DISALLOWAN CE WAS MADE IN THE ASSESSMENT OF A.Y.2009-10, WHERE THE HON'BLE ITAT O F CHENNAI 'A' BENCH, VIDE ITS ORDER IN ITA NO.2255/MDS/2013 DATED 22.07.2014, HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER. THE RELEVANT PORTION OF THE ORDER OF THE ITAT IS AS UNDER: 6. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. ADMITTED FACTUAL POSITION IS THAT THE ASSESSE E HAS EARNED 'EXEMPT' INCOME FROM DIVIDENDS AMOUNTING TO 93,403/ -. IT HAS NOT ATTRIBUTED ANY EXPENDITURE RELATING TO EARNING OF THIS 'EXEMPT' INCOME IN THE PROFIT & LOSS ACCOUNT. IN AS SESSMENT ORDER, THE ASSESSING OFFICER HAS NOT RECORDED ANY D ISSATISFACTION TOWARDS THE ASSESSEE'S CLAIM BASED ON ITS BOOKS TO THIS EFFECT. HE SEEMS TO HAVE PROCEEDED ON A MERE INFERENCE THAT SO ME INDIRECT EXPENDITURE IS EMBEDDED TOWARDS MAINTAINING SUCH IN VESTMENTS AMOUNTING TO CRORES OF RUPEES. COUPLED WITH THIS, T HE ASSESSING OFFICER REFERS TO ASSESSEE'S COMMON POOL OF INTERES T AND INTEREST FREE FUNDS WITHOUT ANY DETAILS THEREOF. WE FIND SEC TION 14A(2) THAT IN ARRIVING AT SUCH A DISSATISFACTION OVER AN ASSESSEE'S CLAIM OF NOT HAVING INCURRED ANY EXPENDITURE RELATABLE TO ITS 'EXEMPT' INCOME IN BOOKS OF ACCOUNT, THE CONCERNED ASSESSING OFFICER HAS TO TAKE INTO ACCOUNT THE SAID BOOKS AND THEN ONLY, HE CAN RESORT TO COMPUTATION OF SUCH EXPENSES UNDER RULE 8D. IN T HIS CASE, THE ASSESSING OFFICER HAS ONLY DRAWN AN INFERENCE THAT SOME INDIRECT EXPENDITURE IS ALWAYS INVOLVED IN SUPERVISION OF SU CH HUGE INVESTMENTS. AND THAT TOO, WITHOUT EVEN SPECIFICALL Y STATING ANYTHING REGARDING THE ENTRIES IN THE ASSESSEE'S BO OKS. IN OUR VIEW, THIS APPROACH IS NOWHERE A PART OF THE RELEVA NT STATUTORY PROVISION IN SECTION 14A(2) OF THE ACT. SO, BOTH TH E LOWER AUTHORITIES HAVE WRONGLY MADE THE DISALLOWANCE IN Q UESTION OF RS.11,92,282/ - U/ S 14A R. W. RULE 8D. THE SAME ST ANDS DELETED. 4.1.3 IN THE PRESENT A.Y.2010-11 ALSO THE FACTS ARE IDENTICAL. IN-FACT MOST OF THE INVESTMENTS ARE THE CONTINUATION FROM T HE A.Y. 2009-10. HENCE THE ABOVE DECISION OF THE ITAT FOR A.Y.2009-1 0 IS ALSO EQUALLY APPLICABLE TO THE PRESENT A.Y. 2010-11 UNDER CONSID ERATION. THEREFORE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE IT AT, I DELETE THE DISALLOWANCE OF RS.11,56,970/- MADE BY THE ASSESSIN G OFFICER UJS.14A R.W.R.8D. THE ASSESSEE SUCCEEDS IN ITS APPEALS IN T HIS REGARD. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 4 5. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL AND THE LD. DR HAS SUBMITTED THAT THE ASSESSMENT YEAR 2 010-11 IS DIFFERENT FROM ASSESSMENT YEAR 2009-10 AND THEREFORE, RULE 8D TO S ECTION 14A OF THE ACT APPLIES TO ASSESSEES CASE. HE STRONGLY SUPPORTED T HE ORDER OF THE ASSESSING OFFICER. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE ASS ESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HA S MADE CERTAIN TRANSACTIONS WITH RESPECT TO LOANS AND ADVANCES DUR ING THE YEAR. IN THE ABSENCE OF ANY MECHANISM TO DISTINGUISH THE AMOUNTS THAT MIGHT HAVE GONE INTO THE INVESTMENTS, IN VIEW OF THE FACT THAT ALL THE AMOUNTS ARE POOLED INTO A SINGLE BASKET, UTILIZATION OF ITS OWN FUNDS FOR THE PURPOSE OF INVESTMENTS CANNOT BE AMPLY DEMONSTRATED BY THE ASSESSEE COMPAN Y. WITH THE ABOVE OBSERVATIONS, THE ASSESSING OFFICER HAS CALCULATED THE EXPENDITURE INCURRED IN RELATION TO EARN EXEMPT INCOME AT .11,56,970/-. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF THE TRIBUNAL ORDER PASSED FOR THE EARLIER ASSESSMENT YEAR. WE FIND THA T THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR THE INVES TMENT OF HIS OWN FUNDS AND BORROWED FUNDS. IT IS NOT CLEAR FROM THE BOOKS OF ACCOUNTS THAT WHAT ARE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 5 THE FUNDS USED FOR THE PURPOSE OF INVESTMENT, WHETH ER IT IS BORROWED FUNDS OR OWN FUNDS. UNDER THESE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER HAS NO OPTION EXCEPT TO INVOKE SECTION 14A OF THE A CT READ WITH RULE 8D. IN SO FAR AS THE ORDER PASSED BY THE LD. CIT(A) IS CON CERNED, IN THE ASSESSMENT ORDER 2010-11, RULE 8D SQUARELY APPLIES. THEREFORE, THE LD. CIT(A) IS NOT CORRECT IN FOLLOWING THE ORDER PASSED BY THE ASSESS MENT YEAR 2009-10. FURTHER, IN THE PRESENT CASE, THE EXEMPT INCOME EAR NED BY THE ASSESSEE WAS ONLY .4,74,257/- AND THE DISALLOWANCE DETERMINED BY THE ASSESSING OFFICER TO EARN SUCH EXEMPT INCOME IS .11,56,970/-. THE MAIN CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE DISALL OWANCE OF EXPENDITURE SHOULD NOT CROSS MORE THAN THE DIVIDEND INCOME RECE IVED BY HIM. SO FAR AS HIS ARGUMENT IS CONCERNED, THE DELHI BENCH OF THE T RIBUNAL IN THE CASE OF REXCEL PHARMACEUTICALS LTD. V. CIT IN I.T.A. NO. 16 25/DEL/2013 ORDER DATED 29.04.2015 HAS CONSIDERED SIMILAR ARGUMENT AND REMI TTED THE MATTER BACK TO THE ASSESSING OFFICER TO EXAMINE ALL THE DETAILS AN D DIRECTED THE ASSESSING OFFICER TO CONSIDER AFRESH. IN ANOTHER CASE, THE MU MBAI BENCH OF THE TRIBUNAL IN THE CASE OF DAGA GLOBAL CHEMICALS PVT. LTD. V. ACIT IN I.T.A. NO. 5592/MUM/2012 VIDE ORDER DATED 01.01.2015 HAS OBSER VED THAT THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME. KEEPING IN VIEW OF THE ABOVE TWO DECISIONS OF THE TRIBUNAL, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MAT TER BACK TO THE ASSESSING I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 6 OFFICER TO CONSIDER THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THUS, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSES. 8. THE NEXT GROUND OF APPEAL OF THE REVENUE RELATE S TO DELETION OF DISALLOWANCE MADE UNDER SECTION 80IA OF THE ACT OF .54,94,886/-. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AS COMPUTED THE NET PROFITS OF THE WIND MILL SEPARATELY AND CLAIMED THE ENTIRE INCOME AS DEDUCTION UNDER SECTION 80IA OF THE ACT. HOWEVER, T HE ASSESSING OFFICER HAS NOT ACCEPTED THE ASSESSEES METHOD OF COMPUTATION A ND DISALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A), B Y FOLLOWING ITAT ORDER IN I.T.A. NO. 528 TO 530/MDS/2012 DATED 04.06.2012 IN THE CASE OF M/S. GRT FIRM, WHEREIN, THE TRIBUNAL HAS FOLLOWED THE DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS & OTHERS V. ACIT 231 CTR 368, DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. O N APPEAL BEFORE THE TRIBUNAL, THE REVENUE HAS RAISED THE ISSUE ONLY ON THE GROUND THAT THE DEPARTMENT HAS FILED SLP BEFORE THE HONBLE SUPREME COURT CHALLENGING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF VELAYUDHASWAMY SPINNING MILLS P. LTD. V. ACIT 231 C TR (MAD) 368): [2012] 340 ITR 477. 9. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE INVOLVED IS WHETHER THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 7 ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER S ECTION 80IA OF THE ACT OR NOT. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECID ED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASAMY SPINNING MI LLS P. LTD. V. ACIT (SUPRA) AND THE TRIBUNAL IS CONSISTENTLY FOLLOWED T HE ABOVE DECISION IN VARIOUS CASES. THE HONBLE HIGH COURT HAS HELD AS U NDER:- 13. SEC.80-IA READS AS FOLLOWS: [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAF TER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS.] (2) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRA STRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLA USE (III) OF SUB-SECTION (4)] OR GENERATES POWER OR COMMENCES TRANSMISSION O R DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISA TION OF THE EXISTING TRANSMISSION OR DISTRIBUTION LINES ): (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I ) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULF ILS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTI TUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY O THER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW I NFRASTRUCTURE FACILITY;] I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 8 (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: 5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB- SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERM INING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT 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 I NITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLU DING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. FROM READING OF SUB-S (1), IT IS CLEAR THAT IT PROV IDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AN D GAINS DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE FROM ANY BUSINESS REF ERRED TO IN SUB-S(4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWE D, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQ UAL TO 100 PERCENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TE N CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB- S (4). SUBS-S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BEN EFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WH ICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRA STRUCTURE ACTIVITY ETC. SUB- S(5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBL E BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB-S(5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB-S(5) IS DIFFERENT FROM THE WORDS BEGINNING FRO M THE YEAR REFERRED TO IN SUB-S(2) IMPORTANT FACTORS ARE TO BE NOTED IN SUB-S (5) AND THEY ARE AS UNDER:- (1) IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEAN S IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO B E IGNORED. (2) IT IS FOR THE PURPOSE OF DETERMINING THE QUANT UM OF DEDUCTION; (3) FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR; (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS T HE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIA L ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR. FROM READING THE ABOVE, IT IS CLEAR THAT THE ELIGIB LE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE AS SESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 9 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 CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINS T 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 RE WORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB-SEC TION DOES NOT CONTEMPLATE TO BRING SET OFF AMOUNT NOTIONALLY. FICTION IS CRE ATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 10. BEFORE US, THE REVENUE COULD NOT CONTROVERT TH E ABOVE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT OR FILED ANY HIGH ER COURT DECISION HAVING MODIFIED OR REVERSED THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT. THE LD. CIT(APPEALS) HAS RIGHTLY FOLLOWED TH E ABOVE JUDGEMENT AND WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(APPEALS) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 29 TH OF MAY, 2015 AT CHENNAI. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 29.05.2015 VM/- I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .81 8181 81/M/ /M/ /M/ /M/1 11 15 55 5 10 0 + )#-12 32&- /COPY TO: 1. '( / APPELLANT, 2. )*'( / RESPONDENT, 3. 4 ( ) /CIT(A), 4. 4 /CIT, 5. 25! )#-# /DR & 6. !6' 7 /GF.