Jagadamba Auto-Components Ltd., Pune V. Dy. CIT, Circle 11(1), Pune

ITA 885/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6769 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS S PRAVEENA
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Business income; Depreciation; Opportunity of being heard; Earning of tax free income; Unabsorbed depreciation
• Section: 143(3); 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.885/PN/2013 (ASSESSMENT YEAR : 2008-09) JAGDAMBA AUTO-COMPONENTS PVT. LTD., C/O- M/S MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411 001. PAN : AAACJ7019H . APPELLANT VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE- 11(1), PUNE. . RESPONDENT ITA NO.967/PN/2013 (ASSESSMENT YEAR : 2008-09) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 11(1), PUNE. . APPELLANT VS. M/S JAGDAMBA AUTO-COMPONENTS PVT. LTD., GAT NO.151, 52 KOREGAON BHIMA, TAL.- SHIRUR, PUNE 412 216. PAN : AAACJ7019H . RESPONDENT ASSESSEE BY : MR. NILESH KHANDELWAL DEPARTMENT BY : MRS. S. PRAVEENA DATE OF HEARING : 24-07-2014 DATE OF PRONOUNCEMENT : 25-07-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED CROSS-APPEALS, EACH BY THE ASSESSEE A ND THE REVENUE, PERTAINING TO THE ASSESSMENT YEAR 2008-09, WERE HEA RD TOGETHER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE AND BREVITY. BOTH THE CAPTIONED CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 25.02.2013 ITA NO.885/PN/2013 ITA NO.967/PN/2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 31/1 2/2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. FIRST, WE TAKE-UP THE APPEAL OF THE ASSESSEE IN ITA NO.885/PN/2013. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL :- 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CA SE AND AS PER PROVISIONS & SCHEME OF THE ACT, IT BE HELD THAT DIS ALLOWANCE OF EXPENSES AT RS.3,76,801/- IN TERMS OF PROVISIONS OF SECTION 14A OF THE ACT MADE BY THE AO AND CONFIRMED BY THE 1 ST APPELLATE AUTHORITY IS UNWARRANTED, UNJUSTIFIED, IMAGINARY AND CONTRARY TO THE PROVISIONS AND SCHEME OF THE ACT. IT FURTHER BE HELD THAT NO DISALLOWANCE IS WARRANTED IN THE CA SE OF THE APPELLANT ON FACTS PREVAILING IN THE CASE AND AS PER PROVISIONS OF LAW. THE DISALLOWANCE MADE BE DELETED. JUST AND PROPER RELIEF BE GRANTED TO THE APPELLANT. 2. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CAS E AND AS PER PROVISIONS & SCHEME OF THE ACT, IT BE HELD THAT DIS ALLOWANCE OF CLAIM OF LOSS DUE TO THEFT OF CASH AMOUNTING TO RS.45,890/- MADE BY THE AO & CONFIRMED BY THE 1 ST APPELLATE AUTHORITY IS UNJUSTIFIED, UNWARRANTED AN D CONTRARY TO THE PROVISIONS AND SCHEME OF THE ACT ON FACTS PREVAILIN G IN THE CASE. IT FURTHER BE HELD THAT SUCH LOSS SHOULD HAVE BEEN ADMITTED AN D ALLOWED AS DEDUCTION AS CLAIMED BY THE APPELLANT. JUST AND PRO PER RELIEF BE GRANTED TO THE APPELLANT. 3. THE FIRST ISSUE IS WITH REGARD TO THE DISALLOWAN CE OF RS.3,76,801/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 14A OF THE ACT. IT WAS NOTICED THAT ASSESSEE HAD DECLARED AN EXEMPT INCOME OF RS.2 0,09,132/- WHEREAS NO EXPENDITURE WAS STATED TO HAVE BEEN INCURRED IN RES PECT OF SUCH INCOME. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY NOT THE EXPENDITURE INCURRED IN RELATION TO THE EXEMPT INCOME BE NOT DISALLOWED. A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER WAS NOT SATISFIED AND HE COMPUTED THE DISALLOWANCE U/S 14A OF THE ACT AT RS. 3,76,801/- BY APPLYING RULE 8D OF THE INCOME TAX RULES, 1961 (IN SHORT TH E RULES). THE SAID DISALLOWANCE COMPRISES OF RS.3,04,418/- AS PER SUB- CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF THE RULES AND RS.72,383/- AS PER SUB- CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES THEREBY TOTALING TO RS.3,76,80 1/-. SUCH DISALLOWANCE HAS BEEN AFFIRMED BY THE CIT(A) AND THEREFORE THE ASSES SEE IS IN APPEAL BEFORE US. ITA NO.885/PN/2013 ITA NO.967/PN/2013 4. BEFORE US, THE LEARNED REPRESENTATIVE FOR THE AS SESSEE VEHEMENTLY POINTED OUT THAT THERE WAS NO JUSTIFICATION FOR THE AFORESAID DISALLOWANCE BECAUSE ASSESSEE HAD POINTED OUT BEFORE THE LOWER A UTHORITIES THAT THERE WAS NO INTEREST EXPENDITURE INCURRED ON THE INVESTMENTS MADE WHICH HAVE YIELDED THE IMPUGNED EXEMPT INCOME. IT HAS POINTED OUT THA T ASSESSEE HAD ENOUGH NON-INTEREST BEARING FUNDS BY WAY OF RESERVES AND S URPLUS AS AT THE BEGINNING OF THE YEAR OF RS.34,00,01,769/- AND ALSO PROFITS D URING THE YEAR OF RS.13,14,55,156/-. THE AFORESAID SUM WAS ENOUGH TO COVER THE INVESTMENTS MADE WHICH HAVE GENERATED THE IMPUGNED EXEMPT INCOM E AND THEREFORE FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD., (2009) 313 ITR 340 (BOM) IT WOULD LEAD TO A PRESUMPTION THAT SUCH INVESTMENTS H AVE BEEN MADE OUT OF INTEREST FREE FUNDS AND NOT OUT OF INTEREST BEARING FUNDS. THEREFORE, NO INTEREST EXPENDITURE CAN BE SAID TO BE RELATABLE TO THE EARN ING OF THE IMPUGNED EXEMPT INCOME. APART THEREFROM, IT HAS BEEN SUBMITTED THA T THE INTEREST EXPENDITURE OF RS.1,99,33,355/- DEBITED IN THE PROFIT & LOSS AC COUNT AND WHICH HAS BEEN CONSIDERED BY THE ASSESSING OFFICER FOR COMPUTING T HE DISALLOWANCE IN TERMS OF SUB-CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF TH E RULES, RELATES TO THE LOANS WHICH HAVE BEEN UTILIZED FOR ACTIVITIES OTHER THAN EARNING OF EXEMPT INCOME. IN THIS CONTEXT, REFERENCE HAS BEEN MADE TO THE BALANC E-SHEET, WHICH ENUMERATES THE DETAIL OF LOANS RAISED. IT WAS, THE REFORE, CONTENDED THAT THERE WAS NO JUSTIFICATION TO INCLUDE A PORTION OF INTERE ST EXPENDITURE WHILE COMPUTING DISALLOWANCE U/S 14A OF THE ACT. SECONDLY, IT IS A LSO POINTED OUT THAT THE EXEMPT INCOME HAS BEEN EARNED PRIMARILY ON ACCOUNT OF DIVIDEND INCOME OF RS.5,400/- ON SHARES AND ON EQUITY ORIENTED MUTUAL FUNDS OF RS.20,09,132/-. THE INVESTMENT IN MUTUAL FUNDS/SHARES WERE MADE THR OUGH SHARE/FINANCE BROKERS AND THERE IS NO EXPENDITURE INCURRED IN REL ATION TO SUCH ACTIVITY. IT WAS POINTED OUT THAT SO FAR AS THE INVESTMENT IN EQUITY SHARES, IS CONCERNED THE SAME WAS MADE IN THE PAST YEARS AND NO FURTHER INVE STMENT IS MADE DURING THE YEAR UNDER CONSIDERATION. IT IS ONLY INVESTMEN T IN MUTUAL FUNDS WHICH HAVE ITA NO.885/PN/2013 ITA NO.967/PN/2013 BEEN FRESHLY MADE DURING THE YEAR. BY REFERRING TO SCHEDULE V OF THE BALANCE SHEET CONTAINING DETAILS OF INVESTMENTS, IT IS SOUG HT TO BE POINTED OUT THAT DURING THE YEAR UNDER CONSIDERATION THE INVESTMENT IN MUTUAL FUNDS HAVE INDEED REDUCED FROM RS.1,51,51,450/- TO RS.1,38,01, 619/-. IT WAS POINTED OUT THAT THE DISALLOWANCE OF OVERHEADS MADE OF RS.72,38 3/- AS PER SUB-CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES IS ALSO EXC ESSIVE. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS DEFENDED THE ORDERS OF THE AUTH ORITIES BELOW BY PLACING RELIANCE ON THE SAME. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. SECTION 14A OF THE ACT CONTEMPLATES THAT FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF AN EXPENDI TURE INCURRED IN RELATION TO AN INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. SUB- SECTION (2) OF SECTION 14A OF THE ACT PRESCRIBES TH AT THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME IN ACCORDANC E WITH SUCH METHOD, AS MAY BE PRESCRIBED, SUCH METHOD BEING CONTAINED IN R ULE 8D OF THE RULES. NEVERTHELESS, THE AFORESAID POWER OF THE ASSESSING OFFICER TO INVOKE RULE 8D OF THE RULES IS SUBJECT TO FULFILLMENT OF A CONDITI ON PRESCRIBED IN SUB-SECTION (2) OF SECTION 14A OF THE ACT, WHICH IS TO THE EFFECT T HAT THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NO T SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THEREFORE, INVOKING OF RULE 8D OF THE RULES IN ORDER TO COMPUT E THE DISALLOWANCE U/S 14A OF THE ACT IS NEITHER AUTOMATIC AND NOR CAN BE TRIG GERED MERELY BECAUSE ASSESSEE HAS EARNED AN EXEMPT INCOME. THE AFORESAI D POSITION HAS BEEN SUCCINCTLY BROUGHT OUT BY PUNE BENCH OF THE TRIBUNA L IN THE CASE OF KALYANI STEELS LTD. VS. ADDL.CIT VIDE ITA NO.1733/PN/2012 D ATED 30.01.2014 WHEREIN ITA NO.885/PN/2013 ITA NO.967/PN/2013 RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. V S. DCIT, 328 ITR 81 (BOM) AS WELL AS THAT OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF MAXOPP INVESTMENT LTD. & ORS. VS. CIT, (2012) 247 CTR 162 (DEL). 7. IN THIS BACKGROUND, WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE. IN THIS CASE, ASSESSEE HAS EARNED DIVIDEND ON EQUIT Y SHARES OF RS.5,400/- AND ON INVESTMENT IN MUTUAL FUNDS OF RS.20,09,132/- TOT ALING TO RS.20,14,532/- WHICH IS EXEMPT FROM TAX. IN THE COMPUTATION OF IN COME, ASSESSEE DID NOT IDENTIFY ANY INCOME EXPENDITURE INCURRED IN RELATIO N TO SUCH INCOME AND THUS NO DISALLOWANCE WAS MADE IN TERMS OF SECTION 14A OF THE ACT. THE ASSESSING OFFICER DID NOT FIND IT ACCEPTABLE AND INSTEAD DETE RMINED THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME BY APPLYING RULE 8D OF THE RULES. BY APPLYING RULE 8D OF THE RULES, THE ASSESSING OFFICE R HAS DISALLOWED INTEREST EXPENDITURE AS PER SUB-CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF THE RULES AND OTHER EXPENDITURE AS PER SUB-CLAUSE (III) OF SUB-RU LE (2) OF RULE 8D OF THE RULES. 8. NOTABLY, ONE OF THE POINTS RAISED BY THE ASSESSE E IS THAT THE ENTIRE INTEREST EXPENDITURE HAS BEEN INCURRED TOWARDS ACTI VITY OTHER THAN THE ACTIVITY OF MAKING INVESTMENTS WHICH HAVE GENERATED THE IMPU GNED EXEMPT INCOME. IN THIS CONTEXT, THE TOTAL OF THE LOANS RAISED BY T HE ASSESSEE AS ON 31.03.2008 STANDS AT RS.23,64,81,852/- AS PER SCHEDULE III OF THE BALANCE-SHEET. THE SECURED LOAN COMPRISED OF RS.11,89,47,848/- AND UNS ECURED LOANS AT RS.11,75,34,004/-. THE AMOUNT OF INTEREST EXPENDIT URE DEBITED TO THE PROFIT & LOSS ACCOUNT IS RS.1,99,33,555/-. IN SO FAR AS THE SECURED LOANS ARE CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THEY ARE SPECIFIC MEANT FOR THE ACTIVITIES, WHICH ARE OTHER THAN THE ACTIVITY OF MAKING INVESTMENTS. THE TERM LOANS RAISED FROM STATE BANK OF INDIA IS STATED TO BE FOR ACQUISITION OF LAND, BUILDING AND PLANT & MACHINERY WHICH IS BEING BROUGHT FORWARD FROM THE PAST YEARS. SIMILARLY, THE STANDA RD CHARTERED BANK HAS ALSO ITA NO.885/PN/2013 ITA NO.967/PN/2013 ADVANCED A TERM LOAN WHICH IS AGAINST SECURED PLANT & MACHINERY OF THE ASSESSEE. THE OTHER LOAN IS A CAR LOAN WHICH IS AG AIN A SPECIFIC LOAN. FROM THE DETAILS ON RECORD, IT IS QUITE EVIDENT THAT SO FAR AS THE INTEREST EXPENDITURE RELATING TO THE SECURED LOANS ARE CONCERNED, THE SA ME ARE FOR SPECIFIED PURPOSES, OTHER THAN THE PURPOSE OF MAKING INVESTME NTS. IN-FACT, THERE IS NO MATERIAL TO DISAGREE WITH ASSESSEES ASSERTIONS THA T INTEREST RELATING TO THE SECURED LOANS HAVE BEEN SPENT ON ACTIVITIES OTHER T HAN MAKING ANY INVESTMENTS. HOWEVER, IN SO FAR AS THE UNSECURED L OANS TOTALING TO RS.11,75,34,004/- IS CONCERNED, THERE IS NO MATERIA L TO ESTABLISH THEIR ULTIMATE UTILIZATION. THOUGH THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE INVESTMENTS HAVE MADE OUT OF A CURRENT ACC OUNT MAINTAINED WITH THE BANK, YET IN THE ABSENCE OF ANY SPECIFIC UTILIZATIO N BROUGHT OUT WITH RESPECT TO UNSECURED LOANS, SOME OF WHICH ARE INTEREST BEARING , IT CANNOT BE DEFINITELY SAID THAT SUCH INTEREST EXPENDITURE IS IN RELATION TO ACTIVITIES OTHER THAN THE IMPUGNED INVESTMENT ACTIVITY. THEREFORE, FOR THE P URPOSE OF RE-COMPUTING THE AMOUNT OF INTEREST RELATING TO THE IMPUGNED INVESTM ENTS, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER WHO SHALL RE-COMPUTE THE DISALLOWANCE, IF ANY, UNDER SUB-CLAU SE (II) OF SUB-RULE (2) OF RULE 8D OF THE RULES RELATING TO THE INTEREST EXPEN DITURE. NOTABLY, THE ASSESSING OFFICER SHALL ONLY CONSIDER INTEREST EXPE NDITURE RELATING TO INTEREST BEARING UNSECURED LOANS WHILE CONSIDERING THE ISSUE AFRESH. THE ASSESSEE SHALL BE REQUIRED TO EXPLAIN AND JUSTIFY AS TO WHET HER ANY AMOUNT OF SUCH LOANS HAVE BEEN UTILIZED FOR ACTIVITIES OTHER THAN INVEST MENT ACTIVITY. IF THE ASSESSING OFFICER IS SATISFIED THAT THE LOAN FUNDS HAVE BEEN UTILIZED FOR THE ACTIVITIES OTHER THAN INVESTMENT THEN NO DISALLOWANCE SHALL BE PERMI SSIBLE IN TERMS OF SUB- CLAUSE (II) OF SUB-RULE (2) OF RULE 8D OF THE RULES . IF THE ASSESSING OFFICER IS NOT SATISFIED, HE SHALL BE FREE TO PROCEED AS PER LAW. NEEDLESS TO MENTION, THE ASSESSING OFFICER SHALL CARRY OUT THE AFORESAID EXE RCISE AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND ONLY THE REAFTER HE SHALL PASS ORDER AFRESH ON THIS ASPECT AS PER LAW. ITA NO.885/PN/2013 ITA NO.967/PN/2013 9. IN SO FAR THE DISALLOWANCE IN TERMS OF SUB-CLAUS E (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES IS CONCERNED, THE ASSESSEE ITS ELF HAS ADMITTED THAT THE INVESTMENTS HAVE BEEN MADE THROUGH FINANCE/SHARE BR OKERS, WHICH SHOWS THAT SOME EXPENDITURE OUGHT TO HAVE BEEN INCURRED. IN THIS CONTEXT, APPLICATION OF SUB-CLAUSE (III) OF SUB-RULE (2) OF RULE 8D OF THE RULES TO COMPUTE THE DISALLOWANCE IS QUITE JUSTIFIED, IN THE ABSENCE OF ANY MATERIAL LEAD BY THE ASSESSEE OR TO IDENTIFY SUCH EXPENDITURE. THUS, ON THIS ASPECT, ASSESSEE FAILS. THUS, GROUND OF APPEAL NO.1, IS HEREBY TREATED AS P ARTLY ALLOWED. 10. THE SECOND GROUND RAISED BY THE ASSESSEE IS WIT H REGARD TO A DEDUCTION ON ACCOUNT OF LOSS DUE TO THEFT OF CASH A MOUNTING TO RS.45,890/-. 11. IN THIS CONTEXT, THE BRIEF FACTS ARE THAT THE A SSESSING OFFICER DISALLOWED A SUM OF RS.3,40,300/- WHICH REPRESENTED LOSS DUE T O THEFT OF MATERIAL AND CASH AT THE FACTORY PREMISES OF THE ASSESSEE. THE LOSS IN RESPECT OF THEFT OF MATERIAL WAS RS.2,91,410/- AND RS.45,890/- ON ACCOU NT OF CASH. THE CIT(A) NOTED THAT SO FAR AS THE LOSS OF MATERIAL AMOUNTING TO RS.2,91,410/- IS CONCERNED THE SAME IS ALLOWABLE BECAUSE THE SAME WA S TAKEN COGNIZANCE BY THE POLICE DEPARTMENT WHEREAS IT WAS NOT SO WITH RE SPECT TO THE OTHER AMOUNT OF RS.45,890/- ON ACCOUNT OF CASH. THE CIT(A) HAS ALLOWED DEDUCTION TO THE EXTENT OF RS.2,91,410/- AND SUSTAINED THE BALANCE O F RS.45,890/- AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 12. AS PER THE ORDERS OF THE AUTHORITIES BELOW, THE PRIMARY REASON FOR REJECTING THE LOSS ON ACCOUNT OF CASH THEFT IS THAT THE ASSESSEE HAS NOT BEEN ABLE TO FILE NECESSARY DOCUMENTARY EVIDENCE TO PROV E THE INCURRENCE OF LOSS. AS PER THE REVENUE, THE LOSS OF CASH WAS NOT TAKEN COGNIZANCE BY THE POLICE ON BEING APPROACHED BY THE ASSESSEE AND THEREFORE S UCH LOSS CANNOT BE SAID TO HAVE BEEN ACTUALLY INCURRED. ITA NO.885/PN/2013 ITA NO.967/PN/2013 13. THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTE D OUT THAT ASSESSEE HAD INFORMED THE POLICE REGARDING THE CASH LOSS BUT THE POLICE DID NOT TAKE COGNIZANCE, ALTHOUGH EMPLOYEES OF THE ASSESSEE WERE INTERROGATED BECAUSE AS PER THE POLICE DEPARTMENT, IT WAS AN INTERNAL AC T OF BREAKING OF CASH BOX. ACCORDING TO THE ASSESSEE, THE FACTUM OF THE ASSESS EE HAVING APPROACHED THE POLICE WITH A COMPLAINT OF LOSS OF CASH AND THE EMP LOYEES HAVING BEEN PUT TO INTERROGATION ITSELF SHOWS THE LOSS WAS INDEED INCU RRED. FURTHER, IT HAS ALSO BEEN POINTED OUT THAT THE ASSESSEE HAS ALSO TOOK AC TION BY DEDUCTION THE AMOUNT FROM THE DUES OF THE SECURITY AGENCY, WHICH WAS RESPONSIBLE FOR THE SECURITY OF THE PREMISES. IT WAS, THEREFORE, POINT ED OUT THAT THE LOSS WAS ACTUALLY INCURRED AND IS AN ALLOWABLE EXPENDITURE. 14. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS REITERATED THE STAND OF THE REVENUE WHICH WE HAVE A LREADY NOTED IN THE EARLIER PARAGRAPHS AND IS NOT BEING REPEATED FOR THE SAKE O F BREVITY. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN OUR CONSIDERED OPINION, THE BONA-FIDES OF THE CLAIM OF LOSS DO EME RGE FROM THE MATERIAL ON RECORD INASMUCH AS THE ASSESSEE DID APPROACH THE PO LICE WITH THE RELEVANT DETAILS. IT IS ALSO ASSERTED THAT THE POLICE DID I NTERROGATE SOME OF THE EMPLOYEES BUT DID NOT PURSUE FURTHER, AS ACCORDING TO THE POLICE, IT WAS AN INTERNAL INCIDENT OF BREAKING OF CASH BOX. BE THAT AS IT MAY, THERE IS NOTHING TO SUGGEST THAT COMPLAINT OF THE ASSESSEE WITH THE POL ICE HAS BEEN FOUND TO BE FALSE OR BOGUS. THEREFORE, IN OUR CONSIDERED OPINI ON, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO JUSTIFICATIO N FOR REQUIRING THE ASSESSEE TO PROVE THE INCIDENT OF LOSS TO THE HILT; AND IN A NY CASE, THE MATERIAL ON RECORD IS SUFFICIENT TO ESTABLISH INCURRENCE OF LOSS. THE REFORE, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO A LLOW THE ASSESSEES CLAIM OF LOSS DUE TO THEFT OF CASH OF RS.45,890/-. ON THIS GROUND, ASSESSEE SUCCEEDS. ITA NO.885/PN/2013 ITA NO.967/PN/2013 16. IN THE RESULT, APPEAL OF THE ASSESSEE VIDE ITA NO.885/PN/2013 IS PARTLY ALLOWED. 17. NOW, WE MAY TAKE-UP THE APPEAL OF THE REVENUE I N ITA NO.967/PN/2013. IN THIS APPEAL, THE REVENUE IS RAI SED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AN D CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN DELETING THE ADDITION OF RS.13,46,816/- MA DE IN THE ASSESSMENT ON ACCOUNT OF DISALLOWANCE OF U/S 80IA(4) ONLY ON THE BASIS OF THE PRINCIPLE OF BINDING PRECEDENT EVEN WHILE SHE CATEGORICALLY STAT ED THAT SHE FINDS HERSELF STRONGLY ON THE SIDE OF THE ASSESSING OFFICER SO FA R AS THE INTERPRETATION TO BE GIVEN TO SECTION 80-IA(5) IS CONCERNED. 3. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT ON AN APPLICATI ON OF SECTION 80-IA(5), THE ASSESSEE DOES NOT HAVE ANY PROFIT FROM THE ELIGIBLE BUSINESS DURING THE RELEVANT PREVIOUS YEAR AND, ON THE CONTRARY, HAS H UGE LOSS; AND, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO ANY DEDU CTION U/S.80-IA(4) OF THE INCOME-TAX ACT, 1961. 4. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN NOT FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN A CASE OF LIBERTY INDIA VS. CIT, (2009) 317 ITR 218 WHEREI N THE APEX COURT HELD THAT U/S.80-IA(5) PROFITS ARE TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. 5. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN DELETING THE ADDITION BY HOLDING THAT WHEN THE ASSESSEE EXERCISES THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING F ROM THE INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD AND NOT T HE LOSSES OF EARLIER YEARS. SUCH AN INTERPRETATION IS ALIEN TO SECTION 80-IA(5). 6. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT OF LO SS DUE TO THEFT AMOUNTING TO RS.2,94,410/- INSTEAD OF CONFIRMING TH E SAME. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN NOT CONSIDERING THE FACT THAT ASSESSEE COU LD NOT PRODUCE ANY DOCUMENTARY EVIDENCES REGARDING THEFT OF MATERIAL B EFORE THE ASSESSING OFFICER OR THE APPELLATE AUTHORITY TO SUBSTANTIATE ITS CLAIM. 8. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) GROSSLY ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE 'S INSURANCE CLAIM WAS ALSO REJECTED BY THE INSURANCE COMPANY DUE TO FAILU RE TO SUBMIT SUPPORTING DOCUMENTS SUCH AS FIR, PANCHNAMA, FINAL REPORT, BAN K STOCK STATEMENT ETC. AND THEREFORE THE ASSESSING OFFICER CORRECTLY HELD THE ASSESSEE'S CLAIM UNTENABLE. 9. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LD. COMMISSIO NER OF INCOME- ITA NO.885/PN/2013 ITA NO.967/PN/2013 TAX(APPEALS) MAY BE VACATED AND THAT OF THE ASSESSI NG OFFICER BE RESTORED. 10. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURS E OF THE APPELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 18. ALTHOUGH, THE REVENUE HAS RAISED MULTIPLE GROUN DS OF APPEAL BUT THE SOLITARY DISPUTE IS WITH REGARD TO DEDUCTION CLAIME D U/S 80IA OF THE ACT AMOUNTING TO RS.13,43,816/- ON THE PROFITS DERIVED FROM THE BUSINESS OF WINDMILL. THE CLAIM WAS DENIED BY THE ASSESSING OF FICER, WHICH HAS SINCE BEEN UPHELD BY THE CIT(A). 19. THE CONTROVERSY CAN BE UNDERSTOOD AS FOLLOWS. THE ASSESSEE COMPANY, BESIDES ENGAGED IN MANUFACTURING OF AUTO C OMPONENTS, IS ALSO IN THE BUSINESS OF POWER GENERATION BY INSTALLATION OF WINDMILLS. FOR THE A.Y. 2008-09, ASSESSEE FILED A RETURN OF INCOME DECLARIN G TOTAL INCOME OF RS.10,80,32,470/- WHICH, INTER ALIA, INCLUDED A CLA IM FOR DEDUCTION U/S 80-IA OF THE ACT AMOUNTING TO RS.13,43,816/- IN RELATION TO THE PROFITS EARNED FROM THE ACTIVITY OF POWER GENERATION IN THE WINDMILL. THE UNDERTAKING OF THE ASSESSEE GENERATING POWER (VIZ. WINDMILL) WAS SET UP IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03. IN TERMS OF SECTION 80-IA OF THE ACT, THE PROFITS DERIVED BY SUCH UNDERTAKING OF THE ASSESSEE WAS ELI GIBLE FOR THE BENEFIT OF DEDUCTION TO THE EXTENT OF 100% OF SUCH PROFITS. T HIS DEDUCTION WAS AVAILABLE FOR A PERIOD OF TEN CONSECUTIVE YEARS AT THE OPTION OF THE ASSESSEE OUT OF THE FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING I.E. WINDMILL STARTED GENERATING POWER. THE ASSESSEE ASSERTED BE FORE THE LOWER AUTHORITIES THAT SUCH AN OPTION WAS EXERCISED BY THE ASSESSEE W .E.F. 2007-08. 20. THE BONE OF CONTENTION BETWEEN THE ASSESSEE AND THE REVENUE IS WITH REGARD TO THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. SECTION 80-IA(5) OF THE ACT CREATES A FICTION THAT FOR THE PURPOSE OF COMPU TING DEDUCTION U/S 80-IA OF THE ACT, IT WAS TO BE PRESUMED THAT THE ELIGIBLE UN IT WAS ONLY THE SOURCE OF ITA NO.885/PN/2013 ITA NO.967/PN/2013 INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR REL EVANT TO INITIAL ASSESSMENT YEAR AND ALSO TO EVERY SUBSEQUENT YEAR UPTO AND INC LUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. HA VING SET UP THE WINDMILL UNIT IN THE A.Y. 2002-03, ASSESSEE INCURRED BUSINES S LOSSES AND UNABSORBED DEPRECIATION IN A.Y. 2002-03 AS WELL AS 2003-04 FOR RS.87,26,335/- AND RS.55,72,484/- RESPECTIVELY. SUCH LOSSES WERE SET- OFF AGAINST INCOME FROM OTHER BUSINESS AND INCOMES FROM HEADS OTHER THAN TH E BUSINESS INCOME. FROM A.Y. 2004-05 ONWARDS, THERE IS PROFIT IN THE W INDMILL ACTIVITY. IN THE YEAR UNDER CONSIDERATION I.E. 2008-09, THE ASSESSEE HAD PROFITS FROM WINDMILL ACTIVITY AT RS.13,43,816/- WHICH WAS CLAIMED TO BE EXEMPT IN TERMS OF SECTION 80-IA OF THE ACT. HOWEVER, AS PER THE REVENUE, THE LOSSES INCURRED BY THE ASSESSEE FOR A.Y. 2002-03 AND 2003-04 FROM THE ACTI VITY OF WINDMILL HAVE TO BE REDUCED FROM THE CURRENT YEARS PROFITS OF THE W INDMILL ACTIVITY IN ORDER TO COMPUTE THE AMOUNT ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE ACT, HAVING REGARD TO THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT. PERTINENTLY, IT IS NOT DISPUTED THAT THE LOSSES OF A.Y. 2002-03 AND 2003-04 FROM WI NDMILL ACTIVITY ARE OTHERWISE LYING ABSORBED AGAINST ASSESSABLE INCOMES IN THE PAST YEARS. AS PER THE REVENUE, SECTION 80-IA(5) OF THE ACT REQUIR ES THAT THE PROFITS OF THE ELIGIBLE UNITS I.E. WINDMILL ARE TO BE COMPUTED FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION U/S 80-IA(1) OF THE ACT, I N A MANNER AS IF SUCH ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT Y EAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR THEREOF. AS PER THE REVENUE, INIT IAL ASSESSMENT YEAR IN THIS CASE WAS 2002-03 BEING THE YEAR OF SET-UP OF THE WI NDMILL. THEREFORE, THE PAST LOSSES STARTING FROM THE A.Y. 2002-03 HAVE TO BE SE T-OFF AGAINST THE PROFITS OF THIS YEAR IN ORDER TO ARRIVE AT THE DEDUCTION COMPU TABLE U/S 80-IA(1) OF THE ACT FOR THE YEAR UNDER CONSIDERATION. ON THE OTHER HAN D, THE PLEA OF THE ASSESSEE IS THAT THE INITIAL ASSESSMENT YEAR IN THIS CASE IS TO BE TREATED AS 2007-08 I.E. THE YEAR IN WHICH ASSESSEE EXERCISED THE OPTION CON TAINED IN SECTION 80-IA(2) OF THE ACT OF IDENTIFYING TEN CONSECUTIVE ASSESSMEN T YEARS OUT OF FIFTEEN YEARS ITA NO.885/PN/2013 ITA NO.967/PN/2013 FOR WHICH THE DEDUCTION IS TO BE AVAILED. IT IS CON TENDED THAT THE EXPRESSION INITIAL ASSESSMENT YEAR REFERRED TO IN SECTION 80 -IA(5) IS TO BE UNDERSTOOD WITH RESPECT TO A.Y. 2007-08 IN THIS CASE AND THEREFORE, THE LOSSES FOR ASSESSMENT YEAR PRIOR TO 2007-08 CANNOT BE CONSIDERED, WHICH O THERWISE ALSO WERE LYING ABSORBED IN THE RESPECTIVE YEARS. IT IS ONLY THE L OSSES WHICH HAVE BEEN INCURRED IN THE YEARS STARTING FROM A.Y. 2007-08 ON WARDS WHICH ARE TO BE SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS IN ORDER TO QUANTIFY THE DEDUCTION U/S 80-IA OF THE ACT. THE CIT(A) HAS UPHELD THE AF ORESAID STAND, AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. 21. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INT ERNATIONAL LTD. VS. ADDL. CIT RANGE 6, PUNE IN ITA NOS. 290 TO 292/PN/2010 FO R A.Y. 2004-05 TO 2006- 07 VIDE ORDER DATED 28.09.2011 HAS CONSIDERED AN ID ENTICAL CONTROVERSY AND AFTER FOLLOWING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT, (2 010) 38 DTR (MAD) 57 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FOLLO WING DISCUSSION IN THE ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD:- 11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHE THER IN VIEW OF THE PROVISIONS OF SEC. 80IA(5) OF THE I.T. ACT 1961, TH E PROFIT FROM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT HAS TO BE COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOS SES AND DEPRECIATION OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWE D SET OFF AGAINST OTHER NON-ELIGIBLE BUSINESS INCOME IN EARLIER YEARS. THE SUBMISSION OF THE LD A.R. REMAINED THAT ON THE WIND MILLS SET UP IN THE PR EVIOUS YEAR RELEVANT TO A.Y. 2002-03, THE ASSESSEE HAD CLAIMED DEPRECIATION AT T HE RATE OF 100% THEREON I.E. RS. 3.54 CRORES, WHICH WAS FULLY SET OFF AGAIN ST THE ANOTHER INCOME IN THE SAID A.Y. 2002-03 ITSELF. IN THE A.Y. 2004-05, THE ASSESSEE HAD POSITIVE INCOME FROM THE SAID GENERATION ACTIVITY AND THERE WERE NO BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIATION OF THE PRECEDING YE AR, WHICH HAD REMAINED TO BE SET OFF IN THE A.Y. 2004-05. THE A.O., NOTIONAL LY BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE A.Y. 2003-04 TO THE IMPUGNED A.Y. 2004-05 AND DENIED THE CLAIM FOR DEDUCTION MADE BY THE ASS ESSEE U/S. 80IA IN RESPECT OF THE PROFIT EARNED BY IT IN A.Y. 2004-05. THE LD . A.R. SUBMITTED THAT SUB- SECTION (2) OF SECTION 80IA PROVIDES AN OPTION TO T HE ASSESSEE TO CHOOSE 10 CONSECUTIVE A.YS. OUT OF 15 YEARS FOR CLAIMING THE DEDUCTION. HE SUBMITTED THAT THE TERM INITIAL YEAR IN SUB-SECTION (5) OF 80 IA IS NOT DEFINED AND IS USED IN CONTRADICTION TO THE WORDS BEGINNING FROM THE YEAR USED IN SUB-SECTION (2). HE SUBMITTED THAT THE ASSESSEE CHOSE A.Y. 2004-05 AS INITIAL A.Y BEING THE ITA NO.885/PN/2013 ITA NO.967/PN/2013 FIRST YEAR IN WHICH IT CLAIMED DEDUCTION U/S. 80IA AND THEREFORE, LOSSES/DEPRECIATION BEGINNING FROM A.Y. 2004-05 ALO NE COULD ONLY BE BROUGHT FORWARD AND SET OFF. DEPRECIATION OF THE PRECEDING A.Y. 2002-03 COULD NOT HAVE BEEN NOTIONALLY BROUGHT FORWARD AND SET OFF AG AINST PROFIT FOR THE A.Y. 2004-05. THE LD. A.R. PLACED HEAVY RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPI NNING MILLS (P) LTD VS. ACIT (SUPRA). HE SUBMITTED THAT THE DECISION OF HO NBLE MADRAS HIGH COURT WILL PREVAIL UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE (P) LTD. (S UPRA) FOLLOWED BY THE PUNE BENCH OF THE TRIBUNAL IN ITS RECENT DECISION I N THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA) AND THERE THE ASSESSE E DID NOT DISPUTE THE FACT THAT THE AUTHORITIES BELOW HAVE DECIDED THE ISSUE F OLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V S. GOLDMINE SHARES. THE LD. A.R. POINTED OUT THAT DECISION OF HONBLE MADRA S HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA) WAS NOT CITED BEFORE THE PUNE BENCH IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA). THE LD. A.R. HAS ALSO CITED THE DECISION OF PUNE BE NCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LT D., (SUPRA) HOLDING THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY AN Y OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE BOMB AY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. VA LSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAN D REMAINED THAT DEDUCTION U/S. 801 AND 801A COVERED INTER ALIA, IN DUSTRIAL UNDERTAKINGS. THE POWER GENERATION UNITS FOUND A SPECIFIC MENTION FOR THE FIRST TIME W.E.F. 1.4.1993. IN ALL THE YEARS FROM 1.4.1981 TO 31 TO 3 1 ST MARCH 2000 IN BOTH U/S. 80I AND 80IA, THE TERM INITIAL A.Y WAS DEFINED AND MEANT THE FIRST A.Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGIBLE UNIT COM MENCES PRODUCTION/POWER GENERATION. ONLY FROM 1.4.2000, WHEN SECTIONS 80IA WAS REPLACED WITH SECTION 80IA AND 80IB, THE DEFINITION OF INITIAL A .Y. DID NOT FIND A MENTION. BUT NOWHERE, IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL HAS ANY MENTION THAT THERE WAS ANY I NTENTION TO IGNORE LOSSES AND DEPRECIATION FROM FIRST YEAR OF POWER GENERATIO N/PRODUCTION AND THAT SUCH LOSSES TILL FIRST YEAR OF CLAIM OF DEDUCTION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSEE DOES NOT FIND ANY SUPPORT . HE SUBMITTED THAT THERE IS NO DISCERNIBLE CHANGE IN LAW OR INTENTION OF PARLIAMENT W.E.F. 1.4.2000. THE LD. D.R. SUBMITTED THAT THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (S UPRA) IS FULLY APPLICABLE IN THE PRESENT CASE. HE POINTED OUT THAT IN ITS RE CENT DECISION DT. 21 ST JANUARY 2011, THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CA SE OF HYDERABAD CHEMICAL SUPPLIES LTD. VS. ACIT (SUPRA) HAS ALSO DE CIDED AN IDENTICAL DECISION IN FAVOUR OF THE REVENUE FOLLOWING THE DEC ISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). HE SUBMITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE HAS ALSO DISCUSSED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). THE LD. D.R. SUBMITTED THAT EVEN IN THE C ASE OF LIBERTY INDIA VS. CIT (SUPRA), THE HONBLE SUPREME COURT HAS BEEN PLEASED TO EXPLAIN THE INTENTION OF PARLIAMENT AND SCOPE OF DEDUCTION U/S. 80IA AND 80IB OF THE ACT. THE HONBLE SUPREME COURT HAS BEEN PLEASED TO HOLD THA T SUCH PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY S OURCE OF INCOME OF THE ASSESSEE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF ELIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVER RIDING PROVISIONS OF SUB- SECTION (5) OF SECTION 80IA OF THE ACT. ITA NO.885/PN/2013 ITA NO.967/PN/2013 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS, W E FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WHAT WOULD BE THE INIT IAL A.Y FOR THE PURPOSES OF SECTION 80IA(5) OF THE ACT HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALL A STUD AND AGRO FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DIS CUSSING THE ISSUE IN DETAIL, THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE IN ITIAL A.Y FOR THE PURPOSE OF CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS O PTION AS PER THE PROVISIONS OF 80IA (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A ) HAS ERRED IN HOLDING THAT THE INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA(2) R. W.S. 80IA (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY F ROM THE WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDING THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINI SHED BY UNABSORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEA RS AGAINST THE OTHER INCOME, IS FULLY COVERED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80IA, PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. WHEN THE ASSESSEE EXERCISES THE OPTION, ONLY THE LOSSES OF THE YEARS BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES O F THE EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. THE HONBLE MADRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER INCOME OF ASSESSEE AND SET OF F AGAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED B Y SUB-SECTION (5) OF SECTION 80IA DOES NOT CONTEMPLATE SUCH NOTIONAL SET OFF, HE LD THE HONBLE HIGH COURT. THE HONBLE MADRAS HIGH COURT IN THAT DECISION HAS ALSO REFERRED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY IND IA VS. CIT (SUPRA) AND THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE C ASE OF GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). THERE IS NO DISPUTE THAT EVEN A DECISION OF NON- JURISDICTIONAL HIGH COURT IS A BINDING PRECEDENT FO R THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT HIGH COURT . IN THIS REGARD, WE FIND STRENGTH FROM THE RECENT DECISION OF HONBLE JURISD ICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. V ALSON DYEING, BLEACHING AND PRINTING WORKS (SUPRA) WHEREIN THE HONBLE BOMB AY HIGH COURT HAS BEEN PLEASED TO HOLD IN A CASE OF EXCISE MATTER THAT TRI BUNAL IS BOUND BY THE DECISION OF HIGH COURT , EVEN OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT. THE HON BLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLLOW THE JUDGMENT OF THE MADRAS HIGH COURT. AN AUTHORIT Y LIKE AN INCOME TAX TRIBUNAL ACTING ANYWHERE IN THE COUNTRY HAS TO RESP ECT THE LAW LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE, SO LON G AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VAKSON D YEING, BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS B OUND BY THE DECISION OF THE HONBLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUP RA). WE THUS RESPECTFULLY FOLLOWING THE DECISION TAKEN BY THE HO NBLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTICAL ISSUE UNDER ALMOST SIMILA R FACTS, HOLD THAT WHEN THE ASSESSEE EXERCISING THE OPTION, ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE OTHER I NCOME OF THE ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOS S OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME O F THE ASSESSEE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. WE THUS SET ITA NO.885/PN/2013 ITA NO.967/PN/2013 ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIREC T THE A.O. TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST OTHER INCOME OF THE ASSESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER ENGINEERING P.L TD. VS. ITO (SUPRA) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVENUE SI NCE FIRSTLY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED B EFORE THE BENCH AND SECONDLY THE LD. AR FAIRLY AGREED THAT THE ISSUE RA ISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CA SE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE A UTHORITIES BELOW. THE LD. AR THEREIN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE SPECIAL BENCH OF THE TRIBUN AL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD., BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF THE ASSESSEE AS THE L EGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. THE GROUND NO. 2 IS THU S DECIDED IN FAVOUR OF THE ASSESSEE. 22. OSTENSIBLY, IN THE CASE OF SERUM INTERNATIONAL LTD. (SUPRA), THE TRIBUNAL HAS CONSIDERED AN IDENTICAL CONTROVERSY. ON BEHALF OF THE ASSESSEE, THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE O F VELAYDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) WAS BEING CITED WHE REAS THE REVENUE HAD RELIED UPON THE DECISION OF SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF ASSTT. CIT VS. GOLDMINE SHARES AND FINANCE (P) LTD., (2008 ) 116 TTJ (AHD) (SB) 705 TO THE CONTRARY. THE TRIBUNAL NOTICED THAT HAV ING REGARD TO THE DECISION OF THE HONBLE MADRAS HIGH COURT THE ISSUE WAS TO BE D ECIDED ACCORDINGLY AND NOT ON THE BASIS OF DECISION OF SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) WHICH WAS TO THE CONTRARY. IN THIS CONTEXT, THE TRIBUNAL CAME TO THE CONCLUSION T HAT WHEN THE ASSESSEE EXERCISED OPTION IDENTIFYING TEN CONSECUTIVE YEARS AS CONTAINED IN SUB-SECTION (2) OF SECTION 80-IA OF THE ACT, ONLY THE LOSSES OF THE YEAR BEGINNING FROM SUCH INITIAL ASSESSMENT YEAR ARE TO BE BROUGHT FORWARD A ND SET-OFF WHILE APPLYING THE PROVISIONS OF SECTION 80-IA(5) OF THE ACT AND N OT THE LOSSES OF EARLIER YEARS WHICH OTHERWISE WERE SET-OFF AGAINST OTHER INCOME O F THE ASSESSEE. 23. AT THE TIME OF HEARING, THE LEARNED DR HAS NOT BROUGHT TO OUR NOTICE ANY DECISION OF A HIGH COURT CONTRARY TO THAT OF THE HO NBLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MILLS (P) LTD. ( SUPRA) ON THE ISSUE IN ITA NO.885/PN/2013 ITA NO.967/PN/2013 QUESTION. THEREFORE, WE FIND THAT THE CONTROVERSY BEFORE US IS NO LONGER RES INTEGRA AND IS IN FACT COVERED IN FAVOUR OF THE ASSESSEE B Y THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SERUM INT ERNATIONAL LD. (SUPRA) WHICH HAS BEEN DECIDED FOLLOWING THE DECISION OF TH E HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYDHASWAMY SPINNING MILLS ( P) LTD. (SUPRA). 24. IN VIEW OF THE AFORESAID DISCUSSION, WE FIND TH AT THE CIT(A) MADE NO ERROR IN ALLOWING THE APPEAL OF ASSESSEE, WHICH WE HEREBY AFFIRM. 25. IN THE RESULT, APPEAL OF THE REVENUE VIDE ITA N O.967/PN/2013 IS DISMISSED. 26. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 25 TH JULY, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE