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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 ..... 7, 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 disallowed the same and added back to the total income the impugned sum of Rs. 12,56,352/-. The assessee had started its windmill in the A.Y. 2001-02, but the first year of assesee's claim for deduction u/s 80-IA was A.Y. 2006-07. The unabsorbed depreciation and losses in windmill unit for A.Y. 2001-02, 2002-03 and 2003-04 were set off against other business income of the respective assessment years. However, the Assessing Officer computed the deduction u/s 80-IA after reducing the notional brought forward losses and depreciation of windmill unit, even though the same were set off against the income in ealrlier years by applying the provisions of section 80- IA(5) of the Act. On appeal, the CIT(A) has also upheld the action of the Assessing Officer following the decision of Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares and Finance Pvt. Ltd. (2008) 116 TTJ (Ahd) (SB) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submitted that the decision of Hon'ble 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. (Supra) followed by the Pune Bench of the Tribunal in its recent decision in the case of Prima Paper Engg (P) Ltd. Vs. ITO (Supra) and there the assessee did not dispute the fact that the authorities below have decided the issue following the decision of Special Bench of the Tribunal in the case of ACIT Vs. Goldmine Shares.. The Ld. A.R. pointed out that decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra) 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 Bench of the Tribunal in the case of ACIT Vs. Aurangabad Holiday Resorts (P) Ltd., (Supra) holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectfully 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning 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 Bench of the Tribunal in the case of Prima Paper Engg. (P) Ltd. Vs. ITO in ITA No. 1755 and 1205/PN/2007 for A.Y. 2002-03 and 2003-04 vide order dated 31-1-2011 which is contrary to the aforesaid position. The said decision of the Tribunal has been explained in the case of Serum International Ltd (supra) wherein it has been clearly brought out as to how the said decision does not help the case of the Revenue. Following discussion in the order of the Tribunal is relevant. "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, 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, that no disallowance was permissible u/s 40(a)(ia) of the Act, inasmuch as, the impugned sum was not outstanding for payment at the close of the year but was actually paid during the year itself. Both the positions canvassed by the assessee did not find favour with the CIT(A) against which the assessee is in appeal before us. 10. Before us, the only plea raised by the assessee is to the effect that the amount of Rs. 3,64,583/ has been actually paid before 31-3-2006 and therefore, even if such amount was liable for deduction of tax at source, yet, it cannot be disallowed u/s 4-0(a)(ia) of the Act as nothing was outstanding for payment as on 31-3-206. 11. We have carefully considered the rival submissions. It was a common ground between the parties that similar issue came up for consideration before this Bench of the Tribunal in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,72,917/- 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 impugned addition. 17. the next dispute in Ground no. 3 relates to disallowance of Rs. 50,000/- made on adhoc basis. At the time of hearing, the assessee has not pressed this Ground of Appeal. The same is accordingly dismissed as not pressed. 18. Resultantly, this appeal of the assessee is allowed. ITA No. 933/PN/2011 (Revenue's appeal for A.Y. 2006-07) 19. In this appeal, the first Ground relates to deletion of an addition of Rs. 12,51,660/- made by the Assessing Officer. The brief facts of the case are that the assessee is engaged in manufacturing and trading of tobacco Jarda in the name of Gai Chhap Jarda. The assessee purchases raw tobacco from various parts of the country and such purchases are made from the farmers through brokers. The entire process of purchase of tobacco leaf till the final stage of process is explained in para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 addition, inasmuch as the yield of 85.43% declared by the assessee in this year was better than the yield of 81.68% declared in A.Y. 1997-98 in the past which was accepted by the Assessing Officer in scrutiny assessment u/s 143(3) of the Act. Apart therefrom it has also been pointed out that no defects in the books of account maintained by the assessee have been noticed by the Assessing Officer. It was further pointed out that the loss in weight of rawmaterial is on account of various factors which are on account of storage, transit, handling and processing. Merely because the loss at each of the aforesaid stages could not be quantified would not distract from the fact that the loss of yield has been accounted for on the basis of books of account. It was pointed out that the assessee made detailed submissions to the CIT(A) which have been repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 declared and make an assessment to the best of his judgment if he is not satisfied about the correctness or completeness of the accounts of the assessee where the method of accounting provided in sub-section (1) or the Accounting Standards notified under sub-section (2) of section 145 have not been regularly followed by the assessee. In the present case, the Assessing Officer is not satisfied about the correctness of the accounts of the assessee, inasmuch as according to him, the loss in process suffered by the assessee is not substantiated. Pertinently, the Assessing Officer does not doubt the quantity purchased and the production carried out, so however, he has found the process loss to be unsubstantiated in the absence of quantity of raw material at each stage after purchases i.e. at the stage of storage, transit, handing and processing separately. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew, 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 counsel had referred to pages 121 to 145 of the Paper Book wherein is placed illustrative Sauda Chitti and the corresponding weighment report on the basis of which the actual purchases have been effected and the corresponding transport challans showing the actual quantity transported which was the same as shown in the weighment reports. Having perused the aforesaid document, we find that in the GRN prepared vis-à-vis the corresponding Sauda Chitti, there was variation in quantity but no variation in the rates. Quite clearly, the Sauda Chitti is a pre -purchase contract entered with the farmers before actual harvesting showing estimated quantity at predetermined rates. The GRN is a document prepared on the basis of the actual quantity purchased on the pre-determined rate. Therefore, the difference in quantity between the two would have no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 circumstances which we have discussed above, we find that the ratio of the Bombay High Court is not attracted in the present case and therefore, the action of the Assessing Officer in the instant case cannot be justified on the basis of judgment of Hon'ble Bombay High Court in the case of Bastiram Narayandas Maheshwari (supra). Thus, on this ground, Revenue fails. 25. The last Ground in appeal of the Revenue relates to addition restricted by the CIT(A) to the tune of Rs. 50,000/-. The Assessing Officer has made the disallowance of Rs. 7,00,000/- on adhoc basis without pointing out any specific instance of discrepancy. According to the assessee, all details have been maintained and were also produced before the Assessing Officer. On appeal, the CIT(A) has restricted the addition to Rs. 50,000- considering the submissions made on behalf of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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