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TMI Blog2016 (9) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 80IA, losses incurred prior to commencement of initial year should not be reckoned. We hold that since loss incurred prior to the initial year of eligible business need not be deducted for the purpose of computing amount of allowance under section 80IA(5) - ITA No.1004/Bang/2015, ITA No.1029/Bang/2015 - - - Dated:- 27-7-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Assessee : Shri C.R.Nulvi, CA For The Revenue : Shri C.N.Bipin, JCIT(DR) ORDER Per INTURI RAMA RAO, AM : These are cross appeals filed by the assessee as well as the revenue directed against the order of the CIT(A), Hubli, dated 26/02/2015 for the assessment year 2010-11. 2. Briefly facts of the case are as under: The assessee-firm is engaged in the business of dealers in HMT Tractors, spares, Hero Honda Motors-cycles and dealing in Sony products and also in the business of generation of power through Wind Mills. Return of income for the assessment year 2010-11 was filed on 30/09/2010 declaring income of ₹ 51,74,070/-. Against said return of income, assessment was completed by the ACIT, Circle 1(1), Hubli, vide orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. 6. Ground No.2 relates to disallowance of a sum of ₹ 1 lakhs under section 40(a)(ia) of the Act. Ground No.3 challenges the disallowance under section 43B of ₹ 4,62,107/-. These two grounds of appeal were raised for the first time before this Tribunal. No application was made for admission of the additional grounds of appeal before us. Hence, we dismiss the same without admitting the same for adjudication. 7. Ground No.4 relates to disallowance of expenditure incurred on renovation of showroom of ₹ 17,18,671/-. The assessee claimed the same as revenue expenditure. It is claimed that expenditure was incurred on repairs and renovation such as false ceiling, floor, wooden partitioning, painting etc. The said expenditure was incurred in respect of premises taken on lease. The AO treated it as capital expenditure and allowed depreciation at the rate of 10% as applicable to furniture and fixtures. On appeal before the CIT(A), the CIT(A) has confirmed the addition that expenditure resulted in an enduring benefit to the assessee irrespective of the fact that expenditure was incurred in respect of lease or own premises. 8. Being aggrieved, assessee is in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat expenditure was not incurred on any capital outlay. Therefore, the expenditure is revenue in nature. Even the provisions of Explanation 1 to section 32 cannot be invoked in the present case as there was no construction of any structure, extension, improvement to the building as involved. Therefore, we direct the AO to allow the same as revenue expenditure. 8.4 The reasoning given above is equally applicable in respect of fencing expenditure. Accordingly ground Nos.4 and 5 are allowed in favour of the assessee. 9. In the result, the assessee s appeal is partly allowed for statistical purposes. 10. Now we shall take up the revenue s appeal for assessment year 2010-11 in ITA No.2029/Bang/2015. The revenue raised the following grounds of appeal: 1. The order of ClT(A) is opposed to law and facts of the case. 2. Whether, on facts circumstances of the case, the learned CIT(A) is correct in relying on the Hon'ble Delhi High Court judgment in the case of CIT Vs. Ankitech Pvt. Ltd., reported in 340 ITR 14 and held that the advance received by the assessee firm from its sister concern (M/s Bellad Company Pvt. Ltd.) should not be treated as deemed dividend U/s. 2(22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Del/2013 dated 10/06/2015 in the case of IAG Promoters and Developers Pvt. Ltd., Vs. ACIT , to which one of us is the author, held as follows: 5. We have heard the rival submissions and perused the material on record. Undisputedly, the appellant is not a shareholder of M/s Countrywide Promoters Pvt. Ltd. It is trite law that the provisions of Section 2(22)(e) have no application to non-registered shareholders. The Hon'ble Apex Court in the case of CIT Vs. C.P. Sarathy Mudaliar (1972) 83 ITR 170 (SC) while construing the provisions of Section 2(6A)(e) of the Act, 1922 which are in pari materia with the provisions of Section 2(22)(e) of the Income-tax Act, 1961, held that the provisions governing the deemed dividend can be made applicable only in the hands of the registered shareholders. Since, admittedly, in the present case, the appellant is not a shareholder of M/s Countrywide Promoters Pvt. Ltd. the amount of ₹ 1,73,262/- cannot be taxed in the hands of the appellant company. Hence the appeal filed by the assessee is allowed. The Hon ble jurisdictional High Court in the case of Bagmane Constructions (P) Ltd. vs. CIT (2015) (277 CTR 338)(Kar) held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee-firm are as under: Assessee has filed the written submissions where it is mentioned that The appellant had installed Wind Mill during the FY 2004-05 and had entered into an agreement with BESCOM for distribution of power in June 2005. Deduction u/s 801A was not claimed for the assessment years 2006-07 to 2008-09 as there was loss from the Wind Mill, From AY 2009-10 the appellant has been claiming the deduction u/s 801A. This issue was discussed at length during the course of assessment proceedings and when it was proposed to disallow the claim for the year under appeal, it was submitted by the appellant that as per section 801A 100% of the profit from generation and distribution of power is deductible for 10 years commencing from the initial assessment year. The initial assessment year means the assessment year specified by the assessee at his option to be the initial year not falling beyond fifteen assessment years starting from the previous year in which the under taking generates power or commencing transmission or distribution of power. The appellant has opted the financially irrelevant to AY 2009-10 as initial assessment year. It was also brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmining the profits eligible for deduction under Section 801A of the Act and set off losses from other sources under the same head is not permissible. However, it should not forgotten that section 80IA of the Act is a beneficial section permitting certain deduction in respect of certain income under Chapter VIA of the Act. A provision granting incentive for promotion of economic growth and development in taxing statues should be liberally construed and restriction placed on it by way of exception, should be construed in a reasonable and purposive manner so as to advance the objects of the provision. It is a generally accepted principle that deeming provision of a particular section cannot he breathed into another section. Therefore, the deeming provision contained in section 80IA(5) cannot override the section 70(1) of the Act. The assessee incurs loss after claiming eligible depreciation. Hence section 801A becomes insignificant since there is no profit from which this deduction can be claimed. Section 70(1) comes to the rescue of the assessee, whereby he is entitled to set off the losses from one source against income from another source under the same head of income. However, on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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