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TMI Blog2015 (1) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... n it has been held that assessee was enjoying the SSI status, therefore, it is entitled for deduction u/s 80IB in those years also. The facts remain same, hence, the assessee is entitled for deduction in this year also. As far as, the allowability of deduction u/s 80IB on the trading profit is concerned, the CIT (A) has not given any finding. Therefore, in the interest of justice and equity, we find it appropriate to remand the issue to the file of the CIT (A) - Decided in favour of revenue for statistical purposes. Addition u/s 80IA - CIT(A) deleted the addition - when the provision of section 80IA will become applicable upon the appellant? - Held that:- It is not at all required that losses or other deduction which have already been set off against the income of the previous year should be reopened again for the purpose of computing admissible deduction u/s 80IA of the Income Tax Act, 1961. The year from which option has been exercised is to be treated as the initial assessment year but after that the 10 years have in continuity. Thus no fault in the order of the CIT (A) - Decided against Revenue. Dis allowance section 14A of the Act read with Rule 8D - Held that:- Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of ₹ 24,62,950/- u/s 80IA. 5. The Department reserves its right to add, alter, modify, delete or amend all or any of the grounds of appeal before or at the time of hearing of appeal. The only Ground of appeal taken in the assessee s appeal in ITA No.988/JP/2011 reads as under :- That ld. assessing officer has erred in law as well as on the facts and circumstances of the case in applying the provision of sec. 14A of the I.Tax Act 1961 and also erred in making the disallowance of ₹ 2720886.00 by invoking the provision of rule 8D of the I.Tax Rules and ld. CIT (Appeals), erred in sustaining the same. 4. Ground No.1 of the revenue s appeal is against deleting the trading addition of ₹ 20 lacs as made by the AO. 5. The AO on the basis of findings in the order of the assessment year 2006- 07 has invoked provisions of section 145 (3) of the Act. The reason for addition was that assessee is not maintaining laboratory test reports for each lot of seeds purchased. CIT (A) in appellate proceedings held that section 145 (3) is not applicable. The AO has also distinguished the case from assessment year 2003- 04 where such addition made and the same was del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions were made for assessment years 2003-04 to 05-06 and they have been deleted by the Tribunal. The ld. CIT (A) by further observing that AO did not point out any defect in the books of account, stock register, purchase and consumable stock, therefore, he held that there is no justification in making lump sum addition of ₹ 50,00,000/-. Accordingly the same was deleted. Ld. AR also submitted that AO has rejected the books of accounts with similar observations for assessment years 2003-04, 2004-05 and 2005-06 also. The ITAT had deleted the addition in assessment year 2003-04 while deciding the appeal being ITA No.415/JP/2007 dated 27.06.2008. The relevant paras 5 6 are placed at pages 35 to 37 of the paper book. Ld. DR submitted that the AO has observed that the reason for invoking section 145(3) is for not maintaining of laboratory test reports and there is no finding in this regard of the ITAT in earlier years. In reply to that, ld. AR submitted that in the earlier year, the assessee has submitted every lot of seeds purchased containing different quantity of oil and after making laboratory test report, the payments are made to the supplier which is evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agrotech (P.) Ltd. and sold goods of ₹ 595.52 lacs to it. Against this purchases and sales, the assessee made payments and received payments. There was an opening credit balance of M/s. Saurabh Agrotech (P.) Ltd. in the books of assessee of ₹ 93,43,520/-. Ld. AR further submitted that nature of transaction between the assessee and M/s. Saurabh Agrotech (P.) Ltd. are business transactions. He also submitted that for invoking the provisions of section 2(22)(e), it is necessary that the payment should be either a loan or advance. He submitted that the word advance has not been defined. However, in the case of CIT vs. Raj Kumar 318 ITR 462 (Del.), the Hon ble Delhi High Court by applying the Rule of Noscitur a Sociis which means that the words in an Act of Parliament is to be construed with reference to the words found in immediate connection with them, the word advance has to be read in conjunction with the word loan . Usually, attributes of a loan are that it involves a positive act of lending coupled with acceptance by the other side of the money as loan; generally carries an interest; and obligation of repayment. In other words, the word advance which appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or consideration in the assessment year 2006-2007 in the assessee own case, wherein, while deciding the appeal 386/2008-09 dt. 10.02.2011, I have given the following finding:- 7.3 I have considered the submissions of the learned counsel thoroughly and perused the assessment order and annexure annexed thereto. The submissions of the learned counsel are found to be in order not only on one ground but on several grounds. Firstly and foremost among them, is that the assessee company is having the transaction with the Saurabh Agrotech (P) Ltd on regular and daily basis, wherein substantial transaction are being transacted through. The transaction entered into the account are transaction of purchase, sale, payment received and given from/to third parties, which have been accounted for in the account of Saurabh Agrotech (P) Ltd and also the payment received and payments made to Saurabh Agrotech (P) Ltd. Balance in the account have alternated between debit and credit. This fact have also been accepted by the Assessing Officer in his assessment order on page number l4 in para number (v) that at some point of time, the balance was debit and at some point of time the balance was credit. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot in any circumstances be treated as loans or advances received by the assessee from these two concerns . Decision of honourable Delhi High Court was again recently followed by the same high court in the case of CIT v/s Creative Dyeing Printing (P) Limited (2009) TIOL 532 (Del.) wherein it has been held that advances given for commercial purposes of expansion of business con not be treated as loan or dividend income in the hands of the shareholders of the assessee company. Income-Tax Appellate Tribunal, Bench - Mumbai in NH Securities Limited v/s Deputy Commissioner of Income-Tax, (2007) I1 SOT 302 (Mumbai), after considering the decision of P.K.Badiani, M.B.Stock Holding and Wal Chand Company, (Supra), have held that payments made by a company in the course of carrying on of its regular business through a mutual, open and current account to a related party do not come under purview of section 2(22)(e) of the Act. Therefore by following the above decision, I have no hesitation to come to the conclusion that the transaction entered into between the assessee company and the Saurabh Agrotech (P) Ltd, which have been considered by the Assessing Officer are in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic interest therefore, no finding thereupon have been given. After hearing both the sides and considering all the relevant facts and circumstances and the case laws. We find that ITAT in assessee s own case in ITA Nos.361 387/JP/2011 dated 21.10.2011 confirmed the findings of the CIT (A) and decided the issue in favour of the assessee vide order dated 21.10.2011. The relevant paras of the aforesaid order is reproduced as under :- 35. After considering the above findings of ld. CIT (A) and the written submissions of the assessee which are also reproduced somewhere above in this order, we find that ld. CIT (A) has examined the issue extensively and then found that the transaction does not relate to either loan or advances. Therefore, provisions of section 2(22)(e) are not attracted. While holding so, the ld. CIT (A) has taken into consideration various case laws relied upon before him which are also relied on here before the Tribunal and then only concluded that the addition made by AO was not justified. The ld. CIT D/R except placing reliance on the order of AO and placing reliance on the decision of Hon ble Madras High Court, could not controvert the finding of ld. CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been considered by ld. CIT (A) and found that they are in support of the case of the assessee. 35.2. The decisions relied upon by ld. CIT D/R are not applicable on the facts of the present case as these transactions of the assessee are of business in nature and, therefore, they do not fall within the ambit of section 2(22)(e). In view of these facts and circumstances and in view of the detailed reasoning given by ld. CIT (A) which is reproduced somewhere above in this order, we hold that ld. CIT (A) was justified in deleting this addition. Accordingly we confirm the order of ld. CIT (A) in this respect. Respectfully following the same, we dismiss ground no.2 of revenue s appeal. 11. Ground No.3 is regarding deletion of addition of ₹ 72,07,040/- made u/s 80IB of the Act. 12. The assessee has claimed deduction u/s 80IB of ₹ 72,07,040/-. The AO disallowed claim of such deduction in the assessment years 2005-06 and 2006- 07 also for the same reason that the assessee is not a small scale industrial undertaking as its investment in plant and machinery is more than the prescribed limit of ₹ 1 crore. For the year under consideration, alternatively, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the relief to the assessee by holding as under :- The decision of Goldmine s case as relied upon by the Assessing Officer, is no more a good source of law, in as much as in a subsequent decision of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Limited Vs. ACIT 231 CTR 368, as rightly relied upon by the counsel, the issue is decided in favour of the assessee after considering the decision of Goldmine s case. The main issue is as to when the provision of section 80IA will become applicable upon the appellant. The appellant has opted to claim the deduction u/s 80IA w.e.f. assessment year 2007-08, though the production commenced from the assessment year 2003-04, therefore provision is made applicable from the assessment year 2007-08. The option to claim the deduction u/s 80IA rests with the appellant to claim it in 10 years out of 15 years. The initial assessment year for the appellant is assessment year 2007-08 and from such assessment year, the eligible industrial undertaking will be considered as independent source of income of the appellant and not prior to that. The Assessing Officer has made applicable the provisions of section 80IA from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 340 ITR 477 (Mad.) (HC) As per sub-s (5) of s. 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 initial assessment year are to be brought forward and not the losses of earlier years which have been already set off against the income of the assessee. Revenue cannot notionally bring forward any loss of earlier years which has already been set off against other income of the assessee and set off the same against the current income of the eligible business. Fiction created by sub-s. (5) of s. 80IA does not contemplate such notional set off. In the instant case, admittedly, losses incurred by the assessee have already been set off and adjusted against the profits of the earlier years. There is a positive profit during the relevant year. Therefore, loss or depreciation in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business. All the authorities below have given a categorical finding that the first year of assessee s claim for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. In view of the finding that there was no carry forward of allowable deduction under the head depreciation or development rebate which needed to be absorbed against the income of the current assessment year 1984-85, recomputation of income for the purpose of computing permissible deduction under section 80I for the new industrial undertaking was not required. There was no error apparent on the face of the record which could be rectified. (iv) It may be noted that there is no contrary judgment of any other High Court. Hon ble ITAT Chennai Bench in a Third Member decision in case of Sanghvi Doshi Enterprise Vs. ITO 60 DTR 306/131 ITD 151 held that if there is no decision of jurisdictional High Court on the relevant issue, Tribunal is bound by the judgment of any other High Court which is available directly on the subject. Therefore, the above decision of Madras High Court has rightly been followed by CIT(A). 19. After hearing both the sides and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of ₹ 25,42,980/- deduction u/s 80IA on wind mills. 3. The Department reserves its right to add, alter, modify, delete or amend all or any of the grounds of appeal before or at the time of hearing of appeal. The grounds of appeal in the assessee s appeal in ITA No.65/JP/2012 read as under :- 1.0 That the learned assessing officer has erred in law as well as on the facts and circumstances of the case in applying the provision of section 14A of the Income-Tax Act'1961, in as much as the said provision has no applicability upon facts of the case since the assessee company does not have any dividend income during the year and also the a' co. has; not invested any interest bearing funds in the acquisition of shares and the learned Hon ble Commissioner of Income Tax (Appeals), Alwar has erred in sustaining the addition of ₹ 3711212.00 . 2.0 Deduction u/s 80IB on direct trading (a) That the learned assessing officer has erred in law as well as on the facts and circumstances of the case in giving a finding in the assessment order that the assessee is engaged in the trading of mustard oil, whereas the fact remains that the assessee is not enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration, therefore, these provisions are not applicable. Further, the assessee company has not invested any interest bearing funds in the acquisition of shares, therefore, the CIT (A) was not justified in sustaining the addition. For the year under consideration, the assessee had total investment in shares of ₹ 7,88,45,129/-. It was pleaded before us that these investments were made in earlier years except for investment of ₹ 10 lacs in Dhurva Enclave P. Ltd. Ld. AR also submitted before us that Rule 8D is not automatic. The assessee has claimed that it has not incurred any expenditure in relation to the income which is not forming part of the total income then there cannot be any disallowance. The AO had to satisfy himself with the correctness of the assessee s claim and if he is not satisfied then only he can invoke the provisions of sub-rule (2) of Rule 8D. It was also submitted before us that assessee has not incurred any expenditure by way of payment of interest or otherwise for making investment in shares. He pleaded that this fact can be substantiated from the books of accounts. He also pleaded that assessee has incurred interest expenses of ₹ 3,35, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee or when the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income but AO is not satisfied to such claim in that circumstances, the AO shall determine the amount of expenditure in relation to such income in accordance with the provisions of Rule 8D. The expenditure in relation to income which does not form part of the total income shall be the aggregate of the amount of expenditure directly relating to income which does not form part of the total income and interest expenditure during the previous year which is not directly attributable to any particular income or receipt, an amount computed according to the formula as provided in the Rules. This aspect of Rule requires AO to look deeper in the accounts of assessee. Therefore, in our considered view, this issue requires a fresh look at the level of AO prior to applying the Rule 8D. Accordingly, this issue is restored to the file of the AO. This ground is allowed for statistical purposes. 34. In the ground no.2 of the assessee s appeal in ITA No.65/JP/2012, the issue is with regard to the deduction u/s 80IB. This issue has been discussed by us above in para no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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