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TMI Blog2017 (9) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... he certificate of registration and eligibility certificate that the assistance was to be made available after the commencement of commercial production without any financial cap and was to be adjusted against the sales tax liability of the year of claim. The industrial promotion assistance was clearly not used directly or indirectly to acquire the assets nor any part of the cost of the assets was met directly or indirectly from the industrial promotion assistance. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee’s own case for Asst Year 2007-08 wherein held IPA received by the assessee would have to be construed as a Capital Receipt and the same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed. Adopting of price for working out the amount eligible for deduction u/s 80IA - Held that:- We find that during the previous year relevant to the Asst Year 2009-10, the assessee infact sold electricity at rates higher than that charged from it by the State Electricity Board. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unabsorbed depreciation of earlier years before the 1st year of claim of deduction u/s 80IA - Held that:- We find that the CBDT had clearly issued a Circular No. 1/2016 dated 15.2.2016 explaining the meaning of ‘Initial Assessment Year’ in the light of decisions rendered by the Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills P Ltd [2010 (3) TMI 860 - Madras High Court]. In view of the aforesaid decisions and CBDT Circular, we hold that the unabsorbed depreciation of earlier years from the eligible unit cannot be set off from the profits of the eligible unit entitled for deduction u/s 80IA of the Act in the years under appeal. We further hold that once the deduction u/s 80IA of the Act is claimed by the assessee from the ‘Initial Assessment Year’ (as chosen by it), then any loss incurred thereon would have to be set off against the profits of the said eligible unit in the subsequent years while claiming deduction u/s 80IA of the Act in subsequent years. Accordingly the additional ground raised by the assessee is allowed. - I.T.A Nos. 971/Kol/2012, I.T.A Nos. 942/Kol/2013, I.T.A Nos. 298/Kol/2013, I.T.A Nos. 329/Kol/2013 - - - Dated:- 25-8-2017 - A. T. Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of acquisition of the leasing right over and above the fees paid to Government. He observed that the expenditure, if not made, the assessee would not be able to access the land acquired under lease. The situation is analogous to a case when a person buys a tenanted house and then pays off the tenants to get the property vacant. Therefore he concluded that the expense is capital in nature. 2.1. The assessee submitted that compensation was paid in connection with the mining activity for obtaining limestone used as raw material for manufacture of cement. Compensation of ₹ 17,11,027/- relates to the assessee s Satna Cement Works and ₹ 5,16,632/- relates to its Birla Cement Works. The ld CITA allowed the claim of the assessee by placing reliance on the order of this tribunal in assessee s own case for Asst Year 2006-07 in ITA No. 1936(Kol) of 2010 dated 29.7.2011 and also placing reliance on the order of his predecessor for Asst Year 2007-08. Aggrieved, the revenue is in appeal before us. 2.2. We have heard the rival submissions. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee s own case for the Asst Year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure disallowable u/s 14A of the Act. It was contended that assessee is engaged in manufacturing and sale of cement, jute goods, vinoleum and auto trims part etc and the investment made by the assessee was out of its own funds and it had not borrowed any money for buying shares or units of Mutual Funds. It was also submitted that the dividend in respect of units of mutual funds is usually reinvested in the respective schemes without being actually received by the assessee. The dividend warrants received from companies are required to be deposited in the assessee s bank account for which practically no expenditure was incurred. However, there are persons who are looking after the investment portfolio of the company including day to day operation related to it. The expenses related thereto including other incidental expenses have been computed at ₹ 4,00,096/-. The ld AO observed that the disallowance made by the assessee had no relation with the investment made by the assessee and does not take into consideration, the huge infrastructure facility utilized by the assessee, which cannot be restricted to the salary of few persons estimated by the assessee. Accordingly, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20266.97 52538.79 36402.88 69.07% In course of the assessment proceedings, the assessee had submitted to the Assessing Officer a statement in respect of the expenditure incurred by it in connection with its investments. In the said statement, the assessee had included the entire remuneration of Shri M.K.Sharma, Officer(Accounts) and 15% of the remuneration of Shri R.C. Jha, Manager (Finance Accounts), who was required to spend only a part of his time in managing/maintenance of the assessee s investment portfolio. The assessee had also included in the said statement the other expenses incurred by it for managing/maintenance of its investment portfolio such as bank charges, telephone charges, stationery and printing charges and conveyance and other expenses. The aggregate expenditure as per the said statement submitted in course of the assessment proceedings was ₹ 4,00,096/-. However, upon reconsideration of the matter, it was realized that the assessee s Chief Financial Officer, Shri P.K. Chand was required to devote a very small part of his time in connection with the management/maintenance of the assessee s inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied by the Assessing Officer in respect of investments which provided for receipt for exempted dividend income. The investment on which exempted income is receivable amounts on averaging basis at ₹ 16301.78 lakhs only. The AR further stated that there should have been no disallowance of 0.5% in respect of investments which did not provide for payment of any dividend and disposal/redemption of such investments was liable to tax. It is held that Section 14A is applicable only to the exempted income and Rule 8D can be applied only on the investment yielding exempted income. In this case as per the details submitted by the appellant, the investments yielding exempted income are on the average of ₹ 16301.78 lakh only. The amount of disallowance under Rule 8D should have been only on an amount of ₹ 16301.78 lakh and 0.5% of ₹ 16301.78 lakh will amount to ₹ 81.51 lakh only. Considering the facts and circumstances and the details mentioned herein the disallowance is restricted to ₹ 81.51 lakhs only. The appellant gets relief of ₹ 1,82,00,918/-. The disallowance is restricted to ₹ 81.51. lakhs out of the disallowance made by Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered for making disallowance u/s 14A of the Act. In this regard, the reliance placed by the ld AR on the decision of this tribunal in the case of REI Agro Ltd reported in 144 ITD 141 (Kol) is very well founded wherein it was held that :- 8.1 Thus, not all investments become the subject-matter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2)(iii), which is issue in the assessee's appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14A read with rule 8D(2)(i) and (ii) can be made in this case. We also find lot of force in the argument of the ld AR that the investments made in subsidiaries would fall under the category of strategic investments as they are admittedly made only f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely a question of fact and does not involve any question of law much less a substantial question of law, as the Tribunal held that the expenses which have been claimed by the assessee were not towards the exempted income. The disallowance, therefore, was rightly limited to a sum of ₹ 40,556/-. The question of interpreting Rule 8-D is not in dispute and the only dispute is with regard to facts which have been settled by the Tribunal. In view of the aforesaid findings and respectfully following the judicial precedents relied upon, we deem it fit and appropriate to remand this issue to the file of the ld AO with the direction to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D of the Rules. Accordingly the grounds raised in this regard are partly allowed for statistical purposes. 4. Taxability of Industrial Promotion Assistance Ground Nos. 4 5 of Revenue Appeal for Asst Year 2008-09 Ground No. 5 of Assessee Appeal for Asst Year 2008-09 Ground No. 3 of Revenue Appeal for Asst Year 2009-10 Ground No. 5 of Assessee Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the West Bengal State Government is a capital receipt and cannot be subjected to tax. The said amount was received by the assessee in terms of the West Bengal Incentive Scheme, 2000 (hereinafter referred to as the 2000 Scheme ) (Page73 of the paper book) for expansion undertaken at the assessee's Durgapur Cement Works involving an investment of RS.100 crores. 5.2 The Assessing Officer has erroneously mentioned the figure of assistance as ₹ 2,55,27,1201- which is actually the amount of assistance pertaining to the preceding year. The correct amount of assistance for the assessment year 200809 is as mentioned in paragraph 5.1 hereinabove. The findings of the Assessing Officer for treating the amount of assistance as a revenue receipt are the same as those in respect of interest subsidy. Additionally, the Assessing Officer has observed that since the amount was not claimed in the return but by a letter in course of the assessment proceedings, in view of the judgment of the Hon 'ble Supreme Court in Goetze (India) Ltd. v CIT, (2006) 284 ITR 323 (SC), the claim cannot be allowed. 5.3 It is submitted that the decision of the Hon 'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not less than 25% of the net value of fixed assets (land, building and plant and machinery) as on January 1, 2000 or ₹ 50 lakhs, whichever was less. Industrial projects in the large and medium sectors were eligible for the incentives under the scheme provided such projects were covered by a detailed feasibility report/project report and the project had been approved and sanctioned by the financial institutions/banks. If the finance for the project was to come from the entrepreneur's own resources, the West Bengal Industrial Development Corporation Ltd. (hereinafter referred to as WBIDC ) had to be satisfied about the arrangement of such finance. Clause 18 of the 2000 Scheme dealt with Mega Projects and provided that the State Government would consider granting special package of incentives to a Mega Project having regard to the characteristics of the project on a case by case basis in the following areas:- (i) size of investment; (ii) special nature of industry; (iii) employment potentiality; (iv) down-stream effect of industry; (v) ancillarisation effect of the industry; (vi) export potentiality. 5.6 The assessee's unit fell unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government or its authorised agent at least sixty day prior to the event; (a) discontinues taking effective steps for establishing the manufacturing unit; (b) stops production within year of commencement of production/operation; (c) permanently closes the unit within a period of five years of commencement of production/operation; (d) sell or otherwise disposes off wholly or in part or leases out wholly or in part or an change in the ownership of the fixed assets is effected; (e) closes or shifts the unit to a new location, and/or (j) changes its name and/or its constitution; The amount of interest-free loans and other charges (if any) outstanding on the date of occurrence of such event and other benefit/benefits allowed under the 2000 Scheme shall be immediately recoverable from the unit. IV) In case of failure of payment of any amount of installment of loans sanctioned and disbursed under the 2000 Scheme by due date, the entire loan or the balance of the entire loan, shall be deemed to be due on the date of default and action may be taken for recovery thereof at once. 5.9 The amount of industrial promotion assistance to which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce (IPA) of the assessee being filed first time is accepted. He also accepted the plea of the assessee that the IPA would tantamount to capital receipt as the same was granted for expansion of an existing unit under the West Bengal Incentive Scheme 2000 by placing reliance on the decision of the Hon ble Calcutta High Court in the case of CIT vs Rasoi Ltd reported in (2011) 335 ITR 438 (Cal). However, he further held that the said IPA would go to reduce the cost of assets in terms of Explanation 10 to Section 43(1) of the Act and depreciation to be claimed on the reduced cost of assets thereon. Aggrieved, both the assessee as well as the revenue are in appeal before us. 4.3. We have heard the rival submissions and perused the materials available on record including the paper book containing the entire West Bengal Incentive Scheme 2000 and eligibility certificate issued by the competent authority approving the expansion of existing unit thereby approving the fact of assessee falling under the category of Mega Unit under the said scheme. We find that Subsidy could be reduced from the cost only if it is found that the cost for acquiring the asset was directly or indirectly met ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re for installation of plant and machinery and for eligible for fixed capital investment. Even the issue of assessee is covered in its favour by Tribunal's decision in assessee's own case all along from A Ys 2002-03 to 2006-07. It is not brought to our notice by the Revenue that the matter has been decided by Hon'ble Calcutta High Court, despite a query from the Bench, In such circumstances, and taking a consistent view, we hold that the CIT(A) has rightly treated the sales tax subsidy receipt as 'capital in nature' . 8. In respect to the issue of application of Explanation-10 to Sec.43(1) of the Act we find from the facts of the case that the Rajasthan Govt. has framed a incentive scheme i.e., R.S.T/C.S.T. Exemptions Scheme 1998 for encouragement of setting up of industrial project or expansion of existing industrial projects. It is also a fact that the maximum limit of the subsidy was restricted with reference to the value of fixed capital investment in land, building, plant machinery but no part of the subsidiary was specifically intended to subsidize the cost of the any fixed assets, therefore, it cannot be said that subsidy was to meet a portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. It is further, provided thereunder, that where such subsidy or grant or reimbursement of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. In order to invoke Explanation 10, it is necessary to show that the subsidy was directly or indirectly used for acquiring an asset. This is again a question of fact. The relatable subsidy to such asset can be reduced from the cost only if it is found that the cost for acquiring that asset was directly or indirectly met out of the subsidy. Likewise in the proviso, it is necessary to show that the subsidy has been directly or indirectly used to acquire an asset but it is not possible to exactly quantify the amount directly or indirectly used for acquiring the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee took into consideration the average rate charged by the State Electricity Board for the previous month. For the Asst Year 2009-10 also, the assessee took into consideration the average rate charged by the State Electricity Board in the previous month, even though the rates at which electricity was sold by the assessee to third parties were higher than the rate charged by the State Electricity Board. However, the ld AO reworked the profits of the power plants not only for the Asst Year 2008-09 but also for the preceding two years viz. Asst Years 2006-07 and 2007-08 by substituting the value of electricity adopted by the assessee with much lower figures. Such lower figures were taken by the ld AO mainly from orders passed by the concerned State Electricity Regulatory Commission for truing up of financial profits or losses or aggregate revenue requirement of electricity distribution companies and in some cases from orders passed by the Commission for determination of aggregate revenue requirement and generation tariff of electricity generation companies. For the State of Rajasthan, the ld AO also referred to an order dated April 30, 2007 passed by the Regulatory Commission of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Tariff Regulatory Commission for sale of electricity by a generating company to a distribution licensee can be taken into consideration for computing the benefit u/s 80IA of the Act. 5.3. The ld AR submitted that ITC s case decided by the Hon ble Calcutta High Court related to the Asst Year 2002-03 when the provisions of Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948 were in force. The Electricity Act, 2003 (hereinafter referred to as the 2003 Act ) which repealed the said legislation came into force on June 10, 2003. The 2003 Act was applicable and in force during the previous years relevant to the Asst Years 2008-09 and 2009-10 involved herein. He argued that having regard to the provisions of the 2003 Act and the regulations made in terms thereof by the States of Madhya Pradesh and Rajasthan, it was open to an assessee having a captive power plant to sell electricity even to a consumer at a mutually agreed rate. In other words, under the provisions of the 2003 Act and the regulations made thereunder it is not the position that a captive power plant can sell electricity only to a distribution company or a company which is engaged in both generation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(1)(d), may enter into an agreement with any person for supply or purchase of electricity on such terms and conditions (including tariff) as may be agreed upon by them . Section 62(1)(d) is the provision relating to determination of tariff by the appropriate Regulatory Commission in respect of retail sale of electricity. Section 62(1)(a) provides for determination of tariff by the appropriate Regulatory Commission in respect of supply of electricity by a generating company to a distribution licensee. (i) Section 61 of the 2003 Act provides for specification by the Regulatory Commission of the terms and conditions for determination of tariff. (j) Section 62 of the 2003 Act contains provisions relating to determination of tariff by the appropriate Regulatory Commission. (k) Section 63 of the 2003 Act provides that notwithstanding anything contained in section 62, the appropriate Regulatory Commission shall adopt the tariff if such tariff has been determined through transparent process of bidding in accordance with the guidelines issued by the Central Government. (l) The Madhya Pradesh Electricity Regulatory Commission (Terms and Conditions for Intra-State Open Access ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... captive power plant to sell electricity to distribution licensee within the state under different mode of commercial arrangements and balance to third party or to other than the distribution licensee within the state through open access. If the captive power plant is willing to sell power to the distribution licensee then it is required to give 10 days notice stating whether it will supply firm power or non-firm power. Regulation 5 contains provisions relating to tariff for sale by captive power plant to licensee under firm power supply and vide sub-regulation (2) provides option of determination of the tariff through transparent competitive bidding, which is to be adopted by the State Regulatory Commission. In such case, the provisions of the said Regulations for determination of tariff are not to apply. (p) The tariff determined by the Rajasthan Electricity Regulatory Commission on April 30, 2007 for sale of electricity from captive power plants to the distribution licensee (enclosed in page 90 of supplementary paper book I) was not found workable as noted by the Government of Rajasthan, Energy Department in a communication dated September 12, 2008 containing policy directives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the State Regulatory Commission. 5.5. Accordingly, he stated that the judgment of the Hon ble Calcutta High Court in ITC s case would have no application inasmuch as the law relating to electricity has undergone much change in so far as the Asst Years before this tribunal are concerned. He stated that ITC s case proceeded on the basis that the open market for the captive power plant was only a distribution company or a company engaged both in generation and distribution and that the rate at which electricity could be sold by the captive power plant was the one fixed by the tariff regulatory commission. However, such position has undergone sea change inasmuch as during the relevant previous years it was open to the assessee to sell even to a consumer and the price for sale to a distribution company or to a consumer could be mutually agreed upon notwithstanding the tariff fixed by the State Regulatory Commission. 5.6. We have heard the rival submissions and perused the materials available on record including the paper book and the relevant provisions of the Electricity Act, 2003 as detailed supra. We find that the main thrust of order of ld CITA was by placing reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance placed by the ld AR on the decision of the Hon ble Supreme Court in the case of Thiru Arooran Sugars Ltd. v CIT, (1997) 227 ITR 432 (SC) , wherein at page 441, it was held as under:- In view of the aforesaid, it is very difficult to uphold the contention of Mr. Nariman that in order to find out the market price, there has to be an actual market where there will be a concourse of buyers and sellers . This argument was specifically rejected by Lord Pearson L. J., in the case of Building and Civil Engineering Holidays Scheme Management Ltd. v. Post Office [1966] 1 QB 247 (CA), in the following words (page 268): What is meant by market value ? It is not reasonable to suppose that for the purposes of this proviso there is no market value unless there is a concourse of buyers and sellers. There is no need to infer that there must be an open market, or that there must be a price fluctuating according to the pressures of supply and demand. In that case Lord Denning also explained the concept of market value in the following words (page 264): What is the market value of these stamps ?. .. It does not connote a market where buyers and sellers congregate. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectricity Duty and Cess as directed by ld CITA Now coming to the decision of the ld CITA to exclude electricity duty and cess, we find that the same has been addressed by the Hon ble Gujarat High court in the case of CIT vs Shah Alloys Ltd in Tax Appeal No. 2092 of 2010 dated 22.11.2011, which approved the view taken by the Ahmedabad Tribunal in ITA Nos.844, 2072 and 2073/Ahd/2006 dated 8.1.2010, that the price charged by the Electricity Board inclusive of the amount of Electricity Duty represented the market value even though the assessee was not required to charge electricity duty. 5.6.6. In view of our aforesaid findings, we direct the ld AO to accordingly modify the earlier years profits also which were modified by him, in the same lines as directed for Asst Years 2008-09 and 2009-10 herein. Accordingly, the grounds raised by the assessee in this regard deserve to be allowed and that of the revenue deserve to be dismissed. 6. Treatment of Interest Subsidy Ground Nos. 3 4 of Assessee Appeal for Asst Year 2008-09 Ground Nos. 3 4 of Assessee Appeal for Asst Year 2009-10 The facts of Asst Year 2008-09 are taken up for adjudication and the decision ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible only if it borrows funds from banks/financial institutions etc. for investing in the new industry/expansion/modernization allowed under this scheme. The subsidy amount is calculated @ 5% of the funds borrowed for use in the projects as per this scheme. The subsidy is given only till the assessee pays interest on the borrowed funds. If no interest is payable then the subsidy will not be allowed to the assessee. There is a limit to which subsidy can be claimed which is decided on the basis of the Sales Tax paid in three earlier years. All these features of this scheme show that the subsidy is not given for meeting a part of the capital expenditure incurred by the assessee but for meeting a part of the interest which will be payable on the loan taken for investing in the capital assets. The subsidy granted is revenue receipts which has been granted after setting up of the new industries and after commencement of production. In Sahney Steel Press Works Ltd. vs. CIT (1997) 228 ITR 253/94 Taxman 368, the Hon'ble Supreme Court stated that the concept of a subsidy (generally) is a helping hand provided to industries in their early days to enable them to come to competitiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uhati in the case of CIT vs. Meghalaya Steels Ltd. reported in (2011) 12 Taxman.com 451(Gau) has held impliedly in para 14 that the subsidies i.e. interest subsidy and transport subsidy are revenue receipts and have granted after setting off of the new industries and commencement of the production. This grounds of appeal is rejected . 6.1.1. The ld CITA also observed in respect of alternate plea taken by the assessee that in case the said interest subsidy is treated as revenue receipt, the same would go to increase the deduction u/s 80IA of the Act to the assessee thereby becoming revenue neutral. This alternate plea was rejected by the ld CITA on the ground that the said interest subsidy was not derived from the industrial undertaking and hence not eligible for deduction u/s 80IA of the Act. Aggrieved, the assessee is in appeal before us. 6.2. We have heard the rival submissions and perused the materials available on record. The ld AR drew our attention to page 77 of Supplementary Paper Book Volume III to the order dated 7.6.2007 passed by the Commercial Taxes Officer, Special Circle Bhilwara, Government of Rajasthan, sanctioning a sum of ₹ 15,91,813/- towards Interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed. 7. Allowability of Initial Depreciation (balance 50%) on additions made in earlier years Ground No. 6 of Assessee Appeal for Asst Year 2008-09 Ground No. 6 of Assessee Appeal for Asst Year 2009-10 The facts of Asst Year 2008-09 are taken up for adjudication and the decision rendered thereon would apply with equal force to Asst Year 2009-10 also except with variance in figures. The ld AO observed that during the financial year 2006-07 (Assessment year 2007-08), the assessee had purchased installed new plant machinery for its manufacturing business. Some of such plant machinery were put to use for a period of less than 180 days during the said financial year and in respect of such plant machinery the assessee claimed only 50% of further depreciation (i.e. 10%) u/s 32(1)(iia) in view of the second proviso to Section 32(1) of the IT Act. Now during the year under reference, the assessee claimed further depreciation (balance 10%) on those plant machinery on the plea that it is entitled to get the balance dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on the ground that the Act does not have option where assessee can claim remaining depreciation in subsequent year. The CIT(A) confirmed the order of the AD. however, directed the AD to recalculate the amount of depreciation on writ/en down value (WDV). 5. The Ld AR before us submits that the case in hand is squarely covered by the decision of the Hon 'ble Karnataka High Court in the case of CIT Anr Vs. Rittal India Pvt. Lid reported in (2016) 380 ITR 423 (Karn). 6. The Ld. Sr. DR relied on the orders of the authorities ' below. 7. Heard both the parties and perused the relevant material on record. In this regard, we may refer to the decision of the Hon 'ble High Court of Karnataka in the case of CIT and another vs Rittal India Private Ltd (supra). The facts of the case therein are that the assessee being an existing industrial undertaking had acquired and installed new plant and machinery in the F. Y 2006-07 and claimed 50% of additional 20% depreciation i.e, 10% additional depreciation under section 32(1)(iia) of the Act in the corresponding assessment year 200708 for the reason that the new machinery was acquired after 01-10-2006. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to claim 20% of depreciation equal to the actual cost of plant and machinery, but, where as the 2 nd proviso to section 32(1) of the Act restrains the authority to allow depreciation to 50% of such 20% if the subjected plant and machinery acquired during the previous year and is put 10 use for a period of less than 180 days in that previous year. According to AO in his order at page no-4 referred that the assessee put to use new plant and machinery for less than 1BO days and confirmed by the CIT-A in para-8 of impugned order and it is a requirement under 2nd proviso to section 32(1) which lifts the restriction on AO allow the further depreciation of 10% of which remained unclaimed out of20% as referred in Clause (iia) to sub-section (1) of section 32 of the Act. The facts of the present are similar to the decision supra relied on by the assessee. Therefore, we are of the view that the law laid down by the Hon 'ble High Court of Karnataka in the case of CIT and another vs Rittal India Private Lid supra is applicable to the present case, thus we hold that the assessee is entitled to claim remaining 50% depreciation of such 20% which is equal to the actual cost of new plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clear that as far as the outstanding interest demand as of date is concerned, it would be open to the department to recover that amount in case Civil Appeal of the department is allowed. We further make it clear that the assessee would, during the pendency of this Civil Appeal, pay tax as if Section 43B(f) is on the statute book but at the same time it would be entitled to make a claim in its returns. Hence from the aforesaid Supreme Court judgement, it could be inferred that the Hon ble Supreme Court had not stayed the judgement of the Calcutta High Court during Leave proceedings. But the Hon ble Supreme Court had only passed an interim order on the impugned issue. Hence we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of the ld AO to pass orders based on the outcome of the main appeal on merits by the Hon ble Supreme Court as stated supra. Accordingly the ground raised by the assessee in this regard is allowed for statistical purposes. 9. Exclusion of unabsorbed depreciation of earlier years before the 1 st year of claim of deduction u/s 80IA of the Act The assessee had raised an additional groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the provisions of the section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100 per cent. of the profits and gains derived from such business for ten consecutive assessment years. Deduction is given to eligible business and the same is defined in sub-section (4). Sub-section (2) provides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised, if it is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity, etc. Sub-section (5) deals with quantum of deduction for an eligible business. The words initial assessment year are used in sub-section (5) and the same is not defined under the provisions. It is to be noted that initial assessment year employed in sub-section (5) is different from the words beginning from the year referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under : (1) It starts with a non obstante clause which means it overri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding provision of sub-section (5) of section 80-IA. Both are similarly worded and, therefore, we agree entirely with the Division Bench judgment of this court cited supra. 9.3 The Hon ble Madras High Court in the aforesaid case had categorically held that losses of earlier years prior to the initial assessment year which have already been set off against other income cannot be notionally brought forward for reducing the amount of deduction admissible from the initial assessment year onwards. The Special Leave Petition preferred by the revenue against this order was dismissed by the Hon ble Supreme Court vide its order dated 5.9.2016 reported in (2016) 76 taxmann.com 176 (SC) . Following the said order, subsequent special leave petition preferred by the revenue before the Hon ble Supreme Court were also dismissed in the case of CIT vs Best Corporation Ltd vide its order dated 21.10.2016 reported in (2016) 76 taxmann.com 295 (SC) . 9.4. We also find that the Central Board of Direct Taxes had issued a Circular in this regard vide Circular No. 1/2016 dated 15.2.2016 explaining the meaning of Initial Assessment Year . For the sake of convenience, the said Circular is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fifteen (or twenty) years. The matter has been examined by the Board. It is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80-IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80-IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfilment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80-IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 80-IA in accordance with this clarification and after being satisfied that all th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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