Case Law Details

Case Name : Sharp Designers and Engineers India Pvt. Ltd. Vs ACIT (ITAT Pune)
Appeal Number : ITA No.2263/PUN/2014
Date of Judgement/Order : 29/01/2018
Related Assessment Year : 2010-11
Courts : All ITAT (6387) ITAT Pune (216)

Sharp Designers and Engineers India Pvt. Ltd. Vs ACIT (ITAT Pune)

Core issue relates to the allowability of deduction under section 80IA(4) of the Act through filing of revised return of income u/s 132(5) of the Act. The present litigation arose in view of the stipulation for validly claiming of said deduction if any only through filing of return u/s 139(1) of the Act. The said condition was provided in section 80AC of the Act. On perusal of the above submissions of Ld. AR, we find the Chennai Bench of the Tribunal decided the issue in favour of the assessee on the facts similar to that of the assessee, i.e. involving the provisions of section 139(1) of the Act. This decision relied on the logic developed by the Pune Tribunal in the case of Anand Shelters (supra). Similar liberal interpretation of section 80AC of the Act is affirmed by the Tribunal of Allahabad Bench in the case of Parmeshwar Cold Storage Pvt. Ltd. Vs. ASCIT (supra). All these decisions are pronounced on the factual matrix of filing return of income u/s 139(4) of the Act and in the absence of return filed u/s 139(1) of the Act. On examining the facts of the present case and its facts, we find the Assessee’s case, with both original and revised returns filed in time, is placed in a better position. Therefore, in our opinion the claim of the Assessee’s claim of deduction u/s 80IA of the Act is allowable despite the provisions of section 80AC of the Act due to the judgmental laws in favour of their liberal interpretation. Therefore, the ground raised by the assessee should be allowed.

FULL TEXT OF THE ITAT JUDGMENT

There are 3 appeals under consideration. ITA No. 2263/PUN/2014 is filed by the assessee against the order of CIT(A)-V, Pune, dated 12-09-2014. ITA No. 2283/PUN/2014 and ITA No.1262/PUN/2015 are filed by the Revenue against the orders of CIT(A)-V, Pune and CIT(A)-6, Pune, dated 12-09-2014 and 15-06-2015 respectively.

2. In all these 3 appeals, the issue of allowability of (1) the deduction u/s.80IA of the Act claimed through filing of the revised return of income, (2) the correctness of the disallowance made by the AO u/s.40A(2)(b) of the Act and (3) the correctness of the disallowance made u/s.14A of the Act r.w. Rule 8D(2) of the IT Rules, are involved. Considering the commonality of the issues, we proceed to adjudicate all the grounds in this composite order.

ITA No.2263/PUN/2014
(By Assessee – A.Y. 2010-11)

3. We shall first take up the assessee’s appeal first. Grounds raised by the assessee in this appeal read as under :

“1. The lower authorities erred in law and on facts in disallowing assessee’s claim for deduction u/s.80IA(4) of the I.T. Act amounting to Rs.77,62,555/-.

2. The lower authorities erred in law and on facts by disagreeing with assessee companies claim that no interest bearing funds were utilized for making investments in shares and securities and further more in disallowing interest expenditure amounting to Rs.8,43,096/- by applying provisions u/s.14A of the I.T. Act, 1961.

Without prejudice to above :

3. The lower authorities erred in law and on facts in taking depreciated value of Fixed assets instead of Gross Block of assets as appearing in audited financial results while arriving at the interest disallowance under rule 8D.”

4. Briefly stated relevant facts are that the assessee is a company engaged in the manufacturing of Engineering goods and Generation of electricity through windmill. Assessee made a claim of deduction u/s.80IA(4) of the Act amounting to Rs.77,62,555/-by way of filing the revised return of income u/s.139(5) of the Act. Admittedly, the assessee could not claim the same in the original return filed u/s.139(1) of the Act. Considering the omissions, assessee made use of the provisions of section 139(5) of the Act and filed the revised return well in time. Without appreciating the same, in the assessment proceedings, the AO denied the said benefit of claim of deduction u/s.80IA(4) of the Act. Contents of Para No.5 onwards of the assessment order are relevant in this regard. AO relied on the literal interpretation of the provisions of section 80AC of the Act relating to “Deduction not to be allowed unless return furnished”. This section mandates for allowing the claims of deductions only when the condition of filing of return of income u/s.139(1) in time are fulfilled by the assessee. Assessee relied on various decisions in support of his claim of deduction through the filing of valid revised return of income and explained that the said time specified for filing return of income includes the time provided for revised return of income u/s.139(5) of the Act. Ignoring the same, the AO/CIT(A) proceeded to deny the claim of deduction. The discussion given in Para No.5 to 15 of the CIT(A) order is relevant.

5. Before us, on this issue, Ld. AR for the assessee relied on the literal interpretation of the provisions of section 80AC with special reference to the condition that revolves around the provisions of section 139(1) of the Act. Bringing our attention to the decision of Pune Bench of the Tribunal in the case of M/s. Anand Shelter, Developers and Builders Pvt. Ltd. Vs. ACIT in ITA No.1606/PUN/2015 for the A.Y. 2011-12, order dated 20-10-2017 and various High Court judgments read with Hon’ble Supreme Court judgment in the case ofCIT vs. Vegetable Products Ltd . (1973) 88 ITR 192 (SC).

6. AR for the assessee filed the following written submissions on this issue and the same reads as under :

“[Ground No. 1- Regarding eligibility to claim deduction u/s 80-IA(4) in respect of profits from the WINDMIILL project, by filing a revised return u/s 139(5) of the ITA, 1961].

1. Facts – Key dates position is as under :

29-09-2010 – Original return of income filed without claiming 80-IA(4) deduction(due date for AY 2009-10 was 30/9/2010) 06-01-2012 – Revised return of income filed after claiming 80-IA(4) deduction of Rs. 77,62,555 on profits from Windmill project (last date of revised return time limit was 31/3/2012)

2. Decision of learned AO– Learned AO, vide Para-5 of the 143(3) order dated 18/3/2013, disallowed the said deduction and made addition. Reason cited was position absence of claim in the original return and absence of filing of form no. 10CCB.

3. Decision of learned CIT(A)-Learned AO’s order was challenged before the learned CIT(A). Learned CIT(A), vide appellate order dated 12/9/2014, dismissed the key objection of the Appellant. Form no. 10CCB was filed by the Appellant during appellate proceedings and the same was accepted by the learned CIT(A). But as regards claim of deduction u/s 80-IA(4), learned CIT(A) construed provisions of section 80-AC read with section 139(1) and held that, if the same is not claimed in the original return of income, the said deduction is not permissible though claimed in a revised return thereafter. While so deciding, learned CIT(A) kept reliance on the decision of Bal Kishan Dhawan HUF V. ITO – 18 taxman.com 234 (Amrtisar). Appellant’s reliance on the decision of Yash Developers V. ITO – ITA No. 809/MUM/2011 was held as misplaced by observing that 4th proviso to section 139(1) was introduced from AY 2006-07 while the decision of Mumbai ITAT related to AY 1972-73. Various other issues were also involved in the appeal before the Ld.CIT(A) and all have been deliberated.

4. Appeal before the Honorable ITAT– Learned CIT(A) order dated 12/9/2014 is challenged before the Honorable “A” Bench of Pune ITAT by the Appellant as well as by the I-T department. A detailed paper-book containing 163 pages has already been placed before the Honorable “A” Bench of the ITAT.

5. Submissions– Appellant justifies the claim of deduction on following points.

6. Provision of section 80-AC – The text of section 80-AC reads as under

“Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.”

b. No stipulation to make a claim in original return – A close look at section 80-AC reveals that, there is no any stipulation that, deduction ought to be claimed in the 139(1) return. On the contrary, the only condition revealing from section 80-AC is that, whenever, a deduction is claimed u/s 80-AC, the return must be furnished before the due date u/s 139(1). As the Appellant company has filed return on 29/9/2010 (i.e. one day before 30/9/2010)’ Appellant’s claim made in the revised return is valid and correct.

c. Reliance on the decision of Anand Shelters V. Addl. CIT, Range-1, Pune – ITA No. 1606/PUN/2015 – Appellant relied upon the recent decision of the Honorable Pune ITAT in the said case of Anand Shelters (supra). As per facts of the said case, deduction u/s 80-IB(10) was claimed for AY 2011-12 in the belated return filed u/s 139(4) and filed on 30/9/12. As the return was not filed in time, the said deduction was denied by I-T authorities. While deciding the matter, Honorable ITAT first dealt with various situations and various High Court decisions, wherein, belated returns filed u/s 139(4) were held as been filed u/s 139(1). In particular, decision of Yash Developers (supra) was referred considering similar factual matrix. Various contrary decisions were also considered by the Honorable Bench in this regard. Finally, considering possible two views, placing reliance on the apex court decision in the case of CIT V. Vegetable Products – 88 ITR 192, the matter was decided in favour of the Appellant therein.

d. Present case of Appellant on a better footing – Compared to the decision in the case of Anand Shelters (supra), Appellant submits that, his case stands on an elevated footing. As per facts, Appellant did file a return in due time u/s 139(1). As such, even on a literal construction of section 80-AC, Appellant does not suffer from any rigors per se.

e. Further reliance on decision in ACIT Vs. Precot Meridian Limited ITA 1214/Mds/2012 (Chennai Tribunal)- In a similar factual matrix, the Honorable Chennai ITAT has observed as under-

Para 9.

” A plain reading of section 80AC makes it clear that from the assessment year 2006-07, deduction claimed under section 80IA / 80-IB / 80-IC / 80-ID / 80-IE shall not beallowed unless the assessee furnishes a return on or before due date specified under sub-section (1) of section 139. Nowhere in the section it was provided that unless the assessee makes a claim in its return filed under section 139(1), the said claim is allowable. The section does not speak of a claim to be made in the return filed under section 139(1). The section speaks of filing a return within the time specified under section 139(1) and nothing else. Here the assessee filed a return under section 139(1) within due date specified but no claim was made under section 80IA in such return. However, a revised return was filed under section 139(5) on 30.3.2010 claiming deduction under section 80IA at 37,27,928/-. The section says unless the assessee files a return under section 139(1) within the due date, deduction under section 80IA / 80-IB / 80-IC /80-ID / 80-IE shall not be allowed and at the same time section 139(5) provides for filing a revised return, when the assessee discovers any omission or any wrong statement made in the return already filed under sub-section (1) of section 139 or return filed under subsection (1) of section 142. This revised return can be filed at any time before expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.”

f. Further reliance on decision in Parmeshwar Cold Storage (P) Limited Vs. ASCIT (2011) 16 com88(Ahd.)- In a similar factual matrix, the Honorable Ahmedabad ITAT has observed as under-

Para 9

“Section 80AC does not require that the claim under section 80-IB should be made only through the original return in time. It only prescribes the condition that the original return filed should be in time for enabling the assessee to make a claim. In other words, it is not a requirement to make the claim in the original return itself, which is to be filed within the time. ft was further explained that for claiming deduction under section 80-IB, the only condition is that the original return should be filed in time, but the claim need not necessarily be made in the original return, it can be made subsequent thereto also.”

Copies of the above decisions are enclosed herewith and marked as Annexure-1 and Annexure-2. Appellant, relying on the above judgments, requests that its claim for deduction 80IA(4) may please be allowed.”

7. DR for the Revenue relied on the findings of the AO/the CIT(A). Ld DR relied on the literal interpretation of relevant provisions of section 80AC of the Act.

8. We heard both the sides and perused the orders of the revenue authorities. Core issue relates to the allowability of deduction under section 80IA(4) of the Act through filing of revised return of income u/s 132(5) of the Act. The present litigation arose in view of the stipulation for validly claiming of said deduction if any only through filing of return u/s 139(1) of the Act. The said condition was provided in section 80AC of the Act. On perusal of the above submissions of Ld. AR, we find the Chennai Bench of the Tribunal decided the issue in favour of the assessee on the facts similar to that of the assessee, i.e. involving the provisions of section 139(1) of the Act. This decision relied on the logic developed by the Pune Tribunal in the case of Anand Shelters (supra). Similar liberal interpretation of section 80AC of the Act is affirmed by the Tribunal of Allahabad Bench in the case of Parmeshwar Cold Storage Pvt. Ltd. Vs. ASCIT (supra). All these decisions are pronounced on the factual matrix of filing return of income u/s 139(4) of the Act and in the absence of return filed u/s 139(1) of the Act. On examining the facts of the present case and its facts, we find the Assessee’s case, with both original and revised returns filed in time, is placed in a better position. Therefore, in our opinion the claim of the Assessee’s claim of deduction u/s 80IA of the Act is allowable despite the provisions of section 80AC of the Act due to the judgmental laws in favour of their liberal interpretation. Therefore, the ground raised by the assessee should be allowed. Accordingly, Ground No.1 raised by the assessee is allowed.

9. The second issue raised in this appeal of the assessee relates to correctness of disallowance u/s.14A of the Act.

10. Before us, Ld. AR for the assessee submitted that there is no issue regarding the disallowance made by the AO amounting to Rs.1,26,880/- under clause (ii) of Rule 8D(2) of I.T. Rules, 1962. It is part of the total disallowance of Rs.9,69,976/- u/s.14A r.w. Rule 8D of the I.T. Rules, 1961. The dispute mainly revolves around the applicability of clause (ii) of Rule 8D(2) is with regard to disallowance on account of interest and the same worked out to Rs.8,43,096/-.

11. On this issue, the claim of the assessee before us revolves around the fact of existence of “interest free own funds” of the assessee and also the presumption laid down by the Hon’ble jurisdictional High Court in the case of CIT Vs. HDFC Bank Ltd. reported in 368 ITR 377 and CIT Vs. Reliance Utilities and Power Ltd. 313 ITR 340. Bringing our attention to the financial statements placed at page 72 of the paper book, Ld. AR for the assessee submitted that assessee has excess interest free funds. Further, Ld. AR submitted that assessee has the capital and reserves of Rs.8.23 crores (rounded off) against which the assessee invested only Rs.2.91 crores (rounded off). The interest free own funds are far more than the investments of Rs.2.91 crores.

12. Responding to the AO’s grievance regarding the non-furnishing of the fund flow statement, Ld. AR submitted the same is available before the AO in the form of financial statements (i.e. Balance Sheet and its Schedules). However, to comply with the said requirement, Ld. AR filed the same before us stating the above position of availability of the Interest free funds vs. Investments. Ld. AR also filed written submissions on this issue and the same are extracted as under :

“Submission -Appellant has relied upon the jurisdictional High Court’s decision in the case of CIT v. HDFC Bank (2014) 49 taxmann.com 335 (Bombay). It was submitted before the learned CIT(A) that, considering the presence of about Rs. 8.22 CR of own funds as against Investments of Rs. 2.91 CR, presumption ought to have been drawn that, the investments are made from own funds. However, the said contention was rejected by the learned CIT(A) by observing that no any fund-flow is submitted on record, etc. Appellant has prepared a fund-flow showing movement of funds in AY 2010-11. The same is marked as Annexure-a and enclosed herewith. Kindly consider the same and oblige.”

13. Considering the same, we are of the opinion that the assessee’s claim should be allowed in view of the binding judgments of the Hon’ble Bombay High Court in the case of HDFC (supra) and Reliance Utilities and Power Ltd., cited (supra). Accordingly, the assessee should be given relief on the amount of Rs.8,43,096/-. Thus, Ground No.2 raised by the assessee is allowed.

14. Considering the relief given by us in Ground No.2, we are of the opinion that adjudicating of Grounds Nos. 3 and 4 raised by the assessee without prejudice to Ground Nos. 1 and 2, becomes an academic exercise. Accordingly, the same are dismissed as academic.

15. In the result, appeal of the assessee for A.Y. 2010-11 is partly allowed.

ITA Nos. 2283/PUN/2014 and 1262/PUN/2015
(By Revenue – A.Yrs. 2010-11 and 2011-12) 

16. Grounds raised by the revenue in these 2 appeals are identical and they relate to the common issue of disallowance u/s.40A(2)(b) of the Act amounting to Rs.40 lakhs for A.Y. 2010-11 and Rs.15 lakhs for A.Y. 2011-12.

17. In the A.Y. 2011-12, the revenue raised an additional issue relating to relief granted by the CIT(A) with reference to the applicability of provisions of section 80IA(5) of the Act.

18. Regarding the grounds raised with regard to the common issue of attracting the provisions of section 40A(2)(b) of the Act, Ld. AR narrated relevant facts. Referring to the discussion in Para 6 of the assessment order, Ld. AR mentioned that the assessee made payment of Rs.1,68,65,000/- to M/s. Project Engineering Services towards job work charges. Considering the fact that the said firm is covered under the provisions of section 40A(2)(b) of the Act the assessee was asked to justify the payments in quantitative terms. In response, assessee submitted that the said firm is providing manpower assistance and is maintaining/retaining the gross margin of 15% of the amount paid by the assessee and the net profit of the firm is only 2%. On considering the fact that the said firm is receiving the job work charges in crores for the number of years and the same is declaring the meager income of Rs.3 to 5 lakhs in their returns, the AO proceeded to make addition of Rs.40 lakhs on adhoc basis as per the discussion given as under :

“From the details furnished, it is clear that the assessee could furnish independent evidence of nearly 40% of expenses whereas payment to the related party has been made is Rs.1,68,65,000/-.

Considering overall facts and circumstances of the case, a disallowance of Rs.40 lakhs is made on account of excessive payment made to the related party for services rendered due to the following reasons :

1. The assessee company has not been able to establish justifiable reason for hiring services from the sister concern specially when it is seen that the said party is doing nothing except labour supply which the assessee could have done independently.

2. The said party is not engaged in any other business and is not engaged in dealing with any other party except the assessee company. Hence, various expenses shown by it in its P&L A/c. Are not commensurate with its activities.

3. It is declaring only a meagre amount of income and is claiming a major portion of the Tax Deducted by the assessee company as refund,

4. The expenses debited by the said firm are excessive as seen above.

Hence, an amount of Rs.40 lacs u/s.40A(2)(b) is disallowed and added back to the total income of the assessee.. ”

19. During the First Appellate proceedings, the CIT(A) considered the submissions of the assessee and disapproved the AO’s manner of making disallowance. Contents of Para 21 of his order are relevant and the same are extracted as under :

“21.It is seen from the facts of the case that the Assessing Officer has not tested the payments on the above yardstick and has based his conclusion on the technical competency and low profitability of the firm which is my view is not relevant consideration for applying the provisions of Sec. 40A(2)(b) of Income-tax Act. The Assessing Officer has not obtained any comparative rate to justify the disallowance. The appellant in it’s reply has categorically stated that M/s. Project Engineering Services retains gross margin of 15% only on the amount paid by the appellant. This being so, the gross margin allowed by the appellant on the payment of Rs.1,15,68,528/- comes to Rs.17,35,280/- only. The disallowance on 40 lacs is almost three times of gross margin allowed by the appellant. which cannot be held to be justified. The co-relation with PF deduction is also flawed as many contractors do not pay PF and other benefits to labourers due to less number of employees employed by them. Therefore, on the totality of facts, it is held that the Assessing Officer has made disallowance u/s. 40A(2)(b) of Income-tax Act without bringing sufficient evidence on record. Accordingly, he is directed to delete the addition of Rs. 40 lacs. Thus, the ground is allowed.”

20. From the above, it is evident that the CIT(A) granted relief mainly underlying the unfairness in the order of the AO on this issue. CIT(A) held that the disallowance of Rs.40 lakhs is almost three times of gross margin allowed by that assessee which cannot be held to be justified. The correlation drawn by the AO to the PF deductions was also not approved by the CIT(A). For want of comparable cases to be brought on record by the AO, the CIT(A) deleted the addition. We find the order of the CIT(A) is fair and reasonable and it does not call for any interference. The same is the finding of CIT(A) for A.Y. 2011-12. In both the assessments, AO has not brought any comparables from the market to make out that the current payment is excessive and unreasonable within the meaning of section 40A(2)(b) of the Act. We therefore uphold the order of CIT(A) for both the years and dismiss the relevant grounds raised by the revenue for both the assessment years, i.e. A.Yrs. 2010-11 and 2011-12.

21. Another issue specific to A.Y. 2011-12 relates to relief granted by the CIT(A) with reference to invoking the provisions of section 80IA(5) of the Act.

22. Relevant facts on this issue include that assessee had 3 wind mills at Satara, Coimbatore and Ambheri. After analyzing the profit and loss statements from each of the units the AO proceeded to examine the admissibility of deduction u/s.80IA(5) of the Act. He noted that after setting off the losses of earlier years, there will be no profit available to the assessee and AO considered the units on standalone basis as per the provisions of section 80IA(5) of the Act. Relying on the Special Bench decision of the Tribunal in the case of Goldmine Shares and Finance Pvt. Ltd., the AO disallowed the claim of the assessee amounting to Rs.1,15,63,288/-.

23. During the First Appellate Proceedings, the CIT(A) allowed the claim of the assessee u/s.80IA(5) of the Act. While doing so, he relied on the decisions of Pune Bench of the Tribunal in the case of Serum International Ltd. in ITA Nos. 290 to 292/PN/2010 order dated 28-09-2011 and M/s. Advik High Tech Ltd. of his predecessor for A.Y. 2008-09. Thus, the CIT(A) deleted the disallowance made by the AO applying the provisions of section 80IA(5) of the Act.

24. On hearing both the sides on this issue and on perusing the orders of the revenue, we find the CIT(A) relied on the decisions of Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT and Serum International Ltd. – ITA Nos. 290 to 292/PN/2010 order dated 28-09-2011 and granted relief to the assessee as per the discussion given in Para Nos. 7 and 8 of his order. For the sake of completeness of this order, we proceed to extract the said paragraphs as under :

“7. Further, the issue has been decided in favour of appellant in ITA No.290 to 292/PN/2010 in the case of Serum International Ltd. Dated 28-09-2011. The relevant portion of the order is as under :

“13. Having been considered the above submissions, we find that the issue raised in Ground No. 1 as to what would be the initial A.Y for the purposes of Section 80IA(5) of the Act has been decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT (Supra). In that case after discussing the issue in detail, the Tribunal has come to the conclusion that the initial ‘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 option 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 from 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 undiminished by unabsorbed losses and depreciation also set off in earlier years against the other income, is fully covered by the decision of Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra) 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 assessee. 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 of the earlier years which have been already set off against the income of the assessee. The Hon’ble 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 off against the correct income of the eligible business. Fiction created by Sub-section (5) of Section 80IA does not contemplate such notional set off, held the Hon’ble High Court. The Hon’ble Madras High Court in that decision has also referred the decision of Hon’ble Supreme Court in the case of Liberty India Vs. CIT (Supra) and the decision of Special Bench of the Tribunal in the case of Goldman Shares & Finance (P) Ltd. (Supra). There is no dispute that even a decision of non-jurisdictional High Court is a binding precedent for 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 Hon’ble jurisdictional Bombay High Court in the case of Commissioner of Central Excise Vs. Valson Dyeing, Bleaching and Printing Works (Supra) wherein the Hon’ble Bombay High Court has been pleased to hold in a case of excise matter that Tribunal 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 authority like an Income Tax Tribunal acting anywhere in the country has 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. We thus respectfully following the ratio laid down by the Hon’ble jurisdictional High Court in the case of Commissioner of Central Excise Vs. Vakson Dyeing, Bleaching and Printing Works (Supra) hold that the Tribunal is bound by the decision of the Hon’ble Madras High Court on an identical issue in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). We thus respectfully following the decision taken by the Hon’ble Madras High Court in that case on an identical issue under almost similar 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 income of the assessee. The revenue cannot notionally bring forward any loss of earlier years which has already been set off against any other income of the assessee and set off the same against the current income of the eligible business. We thus set aside the orders of the authorities below and direct 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.Ltd. Vs. ITO (Supra) cited by the Ld. DR is also not helpful to the revenue since firstly the decision of the Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (Supra) on the issue was not cited before the Bench and secondly the ld. AR fairly agreed that the issue raised was covered against the assessee by the decision of Special Bench in the case of ACIT Vs. Goldmine Shares & Finance (P) Ltd. (Supra) followed by the authorities 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 Tribunal 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 legal position on the subject is yet not settled. The Ground No. 2 is thus decided in favour of the assessee.”

8. Since facts being identical, I do not find any reason to differ from my earlier order. The Assessing Officer’s reliance on case laws cited pertain to cases prior to A.Y. 1999-2000 and therefore, the same are distinguishable as submitted by the appellant. Accordingly, following my appellate order in the case of M/s. Advik High Tech Ltd., A.Y. 2008-09 and also considering the binding precedent of jurisdictional Tribunal’s decision (supra), the Assessing Officer is directed to delete the addition of Rs.1,15,63,288/-. Thus, ground No.2 is allowed.”

25. From the above, it is evident that the order of CIT(A) maintained judicial discipline by following the binding decision of the Coordinate Bench in the case of Serum International Ltd. (supra). Considering the same, we are of the opinion that the order of CIT(A) does not call for any interference. Accordingly, relevant grounds raised by the Revenue are dismissed.

26. In the result, both the appeals of the Revenue are dismissed.

27. To sum up, appeal of the assessee for A.Y. 2010-11 is partly allowed and the appeals of the Revenue for A.Yrs. 2010-11 and 2011-12 are dismissed.

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