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TMI Blog2013 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ry on the issue in question it is to be held that the assessee is eligible for claim of deduction u/s 80-IA for the year under consideration in a manner whereby the initial assessment year referred to in section 80-IA(5) is to be taken as the A.Y. 2006-07 and not the A.Y. 2001-02 as canvassed by the Revenue as the assessee has opted to claim this deduction only in this assessment year. Resultantly,set aside the order of the CIT(A) and direct the AO to recompute and allow the deduction to the assessee u/s 80-IA - in favour of assessee. Disallowance invoking section 40(a)(ia) - interest payment liable for deduction of tax at source u/s 194A - plea of assessee that the amount has been actually paid before 31-3-2006 and nothing was outstanding - Held that:- Sec. 40(a)(ia) mandates that the expenditure specified therein shall not be allowed as deduction in cases where the tax deductible at source as per Chapter XVII-B of the Act on such payment, has not been deducted by the assessee or after deduction has not been paid within the period prescribed. The case made out by the assessee is that sec. 40(a)(ia) refers to “amounts payable” and not to amount actually paid during the year. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hil Pathak Respondent Rep by: Smt Vinita Menon ORDER Per: G.S. Pannu: These appeals relating to the same assessee were heard together and are being disposed off by this consolidated order for the sake of convenience. ITA No. 912/PN/2011 for A.Y. 2006-07 2. This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-I Pune dated 24-11-2010 which, in turn, has arisen from order dated 29-12-2008 passed by the Assessing Officer, under section 143(3) of the Income-tax Act, 1961 (in short the Act ), pertaining to the assessment year 2006-07. 3. Grounds of Appeal No. 1 to 6 relate to deduction claimed u/s 80-IA of the Act amounting to Rs. 12,56,352/- on the profits derived from the business of windmill. The assessee firm derives income from blending and packing of tea, power generation and transport business. For the A.Y. 2006-07, the assessee filed a return of income declaring total income of Rs. 1,23,18,055/- which, inter alia, included a claim for deduction u/s 80-IA(4) of the Act amounting to Rs. 12,56,352/- in relation to the profits earned from windmill power generation activity. However, the Assessing Officer has dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of the preceding year, which had remained to be set off in the A.Y. 2004-05. The A.O., notionally 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 assessee 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 the 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 80IA 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 first year in which it claimed deduction u/s. 80IA and therefore, losses/depreciation beginning from A.Y. 2004-05 alone 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 against profit for the A.Y. 2004-05. The Ld. A.R. placed heavy reliance on the decision of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). He submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Supra) is fully applicable in the present case. He pointed out that in its recent decision dt. 21st January 2011, the Hyderabad Bench of the Tribunal in the case of Hyderabad Chemical Supplies Ltd. Vs. ACIT (Supra) has also decided an identical decision in favour of the Revenue following the decision 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 Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra). The Ld. D.R. submitted that even in the case of Liberty India Vs. CIT (Supra), the Hon ble Supreme Court has been pleased to explain the intention of Parliament and scope of deduction u/s. 80IA and 80IB of the Act. The Hon ble Supreme Court has been pleased to hold that such profits are to be computed as if such eligible business is the only source 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 overriding provisions of Sub-section (5) of Section 80IA of the Act. 13. Having been consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon ble Madras High court the issue was to be decided accordingly and not on the basis of decision of Special Bench of the 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 that 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 and set off on applying section 80-IA(5) of the Act and not the losses of earlier years which otherwise were lying set off against other income of the assessee. 6. At the time of hearing, the learned DR has not brought to the notice of the Bench any decision contrary to that of the Hon ble Madras High Court in the case of Velaydhaswamy Spinning Mills (P) Ltd. (supra) on the issue in question. Therefore, we find that the controversy before us is no longer res integra and is in fact covered in favour of the assessee by the decision of Pune Bench of the Tribunal in the case of Serum International Ld. (supra). 7. Before parting we may also refer to the decision of the Pune ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad entered into an agreement dated 18-8-2005 with one M/s. Kopargaon SSK Ltd., whereby the assessee transferred such sales-tax benefits of Rs. 29,16,666/-. In terms of the said agreement M/s. Kopargaon SSK Ltd., paid a consideration of Rs. 29,16,666/- to the assessee which was shown as advance/loans received by the assessee. The assessee was found to have paid Rs. 3,64,583/- representing 12.5% of Rs. 29,16,666/- without deduction of tax at source. As per the Assessing Officer, the said payment of Rs. 3,64,583/ fell in the category of interest payment liable for deduction of tax at source u/s 194A of the Act. Since there was a failure to deduct tax at source on such payment, the Assessing Officer disallowed the said amount of Rs. 3,64,583/- invoking section 40(a)(ia) of the Act. Before the CIT(A), the assessee made various submissions firstly, it was canvassed that the amount paid was not in the nature of interest as defined in section 2(28A) of the Act, so as to fall within the scope of deduction of tax envisaged u/s 194A of the Act. Secondly, it was canvassed based on the decision of Jaipur Bench of the Tribunal in the case of Jaipur Vidyut Vitran Nigam Ltd. (123 TTJ (JP) 888, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. 12. Following the aforesaid reasoning, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. 13. The last grievance raised by the assessee in Ground No. 9 has not been pressed by the learned counsel for the assessee. The same is accordingly dismissed as not pressed. 14. Resultantly, the appeal of the assessee is partly allowed as above. ITA No. 913/PN/2011 for A.Y. 2006-07 15. This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-I Pune dated 24-11-2010 which, in turn, has arisen from order dated 29-12-2008 passed by the Assessing Officer, under section 143(3) of the Income-tax Act, 1961 (in short the Act ), pertaining to the assessment year 2006-07. 16. The first dispute in Grounds no. 1 to 2 relates to disallowance of Rs. 28,72,917/- by invoking section 40(a)(ia) of the Act. Similar issue came up for consideration before us in the case of Malpani Tea Corporation in ITA No. 912/PN/2011 for A.Y.2006-07 and we have dealt with this issue in the preceding paragraphs. Facts being similar, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the stage-wise loss on account of raw material and therefore, loss of 14.57% was considered unsubstantiated. The Assessing Officer therefore, rejected the book results and concluded that a loss of 0.02% of the total processed quantity was excessive which came to Rs. 12,51,660/- in money terms. Accordingly, this resulted in an addition of Rs. 12,51,660/-. On appeal, the CIT(A) held that the addition is unjustified and directed the Assessing Officer to delete the same against which the Revenue is in appeal before us. 20. Before us, the learned DR appearing for the Revenue has contended that the CIT(A) has deleted the addition without appreciating that the assessee was not able to substantiate with weighment slips the quantitative records and therefore, the yield of finished production declared was un-substantiable. According to the learned DR, the aforesaid defect in the books of account maintained by the assessee rendered the same unreliable and the Assessing Officer was justified in invoking section 145(3) of the Act to reject the book results. 21. On the other hand, the learned counsel for the assessee vehemently pointed out that the CIT(A) made no mistake in deleting the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee i.e. raw tobacco leaf is processed and is thereafter subject to the blending process and then the final product is obtained. The difference in the input quantity of raw material purchased i.e. raw tobacco leaves and output quantity is considered as a process loss. For the assessment year under consideration, assessee has shown yield of 85.43% thereby reflecting a process loss of 14.57%. From the stage of purchase of raw leaves till the obtaining of final production, assessee incurs various process losses which would be on varied accounts viz. on account of storage, transit, handling and processing. The Assessing Officer has found the process loss declared by the assessee to be unsubstantiated and therefore, he invoked section 145(3) of the Act in order to reject the book results declared by the assessee. Pertinently, the assessee had filed its return of income which was accompanied by Ttrading, Profit and Loss account, Balance sheet and also the tax audit report. The accounts of the assessee were audited as per the requirements of section 44AB of the Act. 23. In terms of section 145(3) of the Act, the Assessing Officer is empowered to reject the book results declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehouse or when the GRN is prepared it contains the details of quantity received , number of bags indicating the name of farmers, etc. It is on the basis of such GRN, which is supported by transport challan, the assessee records its purchases. When the material is further transported from the warehouse to the processing units another GRN is prepared at the processing unit mentioning the above details. At the processing unit the raw tobacco leaf go through various stages of processing and thereafter the product is obtained from further blending. In the process from the stage of purchase of leaf till obtaining of final product there are various processes carried out and at each stage there is a loss in quantity. The first objection of the Assessing Officer is that the quantity mentioned in the Sauda Chitti and GRN do not tally at times. In our view, by the very nature of the two documents viz. Sauda Chitti and the GRN, there is bound to be a difference in quantity. The Sauda Chitti is prepared prior to harvesting and only reflects an adhoc estimate of total harvested crop which is likely to be available to the assessee for purchase. In the course of hearing before us, the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing has relied upon the decision of Bombay High Court in the case of Bastiram Narayandas Maheshwari 210 ITR 438 (Bom). According to the learned DR, as per the Hon ble High Court, when the assessee fails to produce records relating to its day-to-day manufacturing activity, the Assessing Officer is justifiably not satisfied with the fairness and correctness of the records, and estimation of profit can be resorted to. According to the Revenue, the ratio of the aforesaid judgment applies to the present case and therefore, the Assessing Officer was justified in invoking the provision of section 145(3) of the Act and in rejecting the book results declared with regard to the process loss. In our view, the ratio of judgment of Hon ble Bombay High Court in the case of Bastiram Narayandas Maheshwari (supra) is applicable in a situation where the assessee fails to establish records relating to the manufacturing activity. In the present case, as we have noted earlier, there is no dispute to the position that the accounts of the assessee clearly bring out the difference in the input quantity of raw material and output quantity of finished product. Considering the entirety of the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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