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TMI Blog2013 (12) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 2008-09 as the lead year for the purpose of discussion and adjudication, we also proceed to adjudicate the controversy considering the appeal for assessment year 2008-09 as the lead case. 3. The appellant is a company incorporated under the provisions of the Companies Act, 1956 and is inter-alia engaged in the business of finance, income from house property and Windmill business, etc.. For the assessment year 2008-09, assessee filed a return of income declaring total income of ₹ 7,82,14,997/- which was subjected to scrutiny assessment u/s 143(3) of the Act dated 30.12.2010 whereby the total income was determined at ₹ 2,26,11,168/-. The present appeal has arisen from the said assessment, which has since been affirmed by the CIT(A) also. In this context, assessee has raised the following Grounds of Appeal :- "1. In the facts and circumstances of the case and in law, the deduction of ₹ 77,34,533.00 as claimed by the appellant u/s 80IA of the Income Tax Act may please be allowed and the order of the learned C.I.T. (A) denying the said exemption be vacated. 2. The conclusion drawn by the learned Assessing Officer and as confirmed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) u/s 14A of the Income Tax Act, 1961 is patently illegal, bad in law, arbitrary, perverse and devoid of merits the same may please be deleted. 9. The disallowance of ₹ 7,20,650.00 as confirmed by the learned C.I.T.(A) out of foreign travel expenditure being arbitrary, unreasonable, unjustified and devoid of merits the same may please be deleted." 4. In the course of assessment, the Assessing Officer disallowed the deduction of ₹ 77,34,533/- claimed by the assessee u/s 80IA(4) of the Act with respect to the profits from the business of Windmill power generation. The Grounds of Appeal Nos. 1 to 3 and 5 relate to the manner of computing deduction u/s 80IA(4) of the Act with respect to the profits from the Windmill power generation business. The primary dispute on this aspect between the Revenue and the assessee is on account of interpretation and application of section 80IA(5) of the Act which provides that for the purpose of determining the quantum of deduction u/s 80IA of the Act, the profit of the eligible business is to be computed as if such eligible business was the only source of income of the assessee during the previous year relevant to the initial assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal upheld the stand of the assessee by following an earlier decision of the Pune Bench of the Tribunal in the case of Serum International Ltd., Pune vs. Addl.CIT in ITA Nos. 290 to 292/PN/2010 dated 28.09.2011 wherein the issue has been decided following the judgment of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT, (2010) 38 DTR 57 (Mad). At the time of hearing, no other decision of any High Court contrary to that of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. (supra) has been brought out by the Revenue. Therefore, in the aforesaid background, considering that an identical issue has been decided in the assessee's own case for assessment year 2006-07 (supra), the plea of the assessee is liable to be upheld and the Revenue has to fail. 6. So, however, before parting, we may deal with some of the points which have prevailed with the CIT(A) to adjudicate the issue against the assessee. Ostensibly, the order of the Tribunal dated 28.02.2012 (supra) in the assessee's own case for assessment year 2006-07 was not before the CIT(A) as he has passed the impugned order on an earlier dated of 25.01.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... af, (1978) 113 ITR 589 (Bom). Thus, in the case of Serum International Ltd. (supra) the Tribunal, following the judgment of the Hon'ble Bombay High Court, applied the law as understood by the Hon'ble Madras High Court in preference to what was decided by a Special Bench and/or a Division Bench of the Tribunal. Therefore, it was incorrect on the part of the CIT(A) to say that the matter was to be adjudicated on the basis of the decision of the Special Bench of the Tribunal and not on the basis of the judgment of the Hon'ble Madras High Court. Firstly, in our view, the exercise of choosing between the two contrary interpretations was not available with the CIT(A) since the same was addressed by the Pune Bench of the Tribunal in the case of Serum International Ltd. (supra), which was brought his notice, and the same was binding on him. Secondly, even otherwise we find that the CIT(A) has not correctly appreciated the legal position in coming to conclude that the view expressed by the Special Bench of the Tribunal is to be preferred than that expressed by the Hon'ble Madras High Court. According to the CIT(A), the decision of the Madras High Court is of a non-jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the amount of ₹ 54,42,500/- included in the eligible receipts was not considered for computing the deduction of ₹ 77,34,533/- u/s 80IA(4) of the Act. The Assessing Officer has discussed the issue in para 3.3.9 and 3.4 of the assessment order without prejudice to his conclusion that there are no profits eligible for the claim of deduction u/s 80IA(4) of the Act on account of application of section 80IA(5) of the Act. The CIT(A) has also upheld the action of the Assessing Officer and dismissed the Ground raised by the assessee before him. The relevant discussion is contained in paras 4.2 to 4.3 of the order of the CIT(A), which reads as under :- "4.2. The appellant in their submission dated 19.01.2012 has stated regarding the above referred ground that in view of the decision of the Hon'ble Supreme Court given in the case of Liberty India vs. CIT reported in 317 ITR 218, this ground can be treated as failed. 4.3. As the appellant has accepted the finding of the Assessing Officer in respect of the above ground, there is not much to discuss on this issue and in view of the same, Ground No. 4 is treated as dismissed." 9. The CIT(A) dismissed the Ground raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income on the basis of the respective turnover. Accordingly, indirect expenditure related to the Windmill business was determined at ₹ 6,98,886/- and the same was deducted from the Windmill business profits which was accordingly determined at ₹ 70,35,647/-. Thus, the Assessing Officer noted that the deduction claimed by the assessee u/s 80IA(4) of the Act of ₹ 77,34,533/- was liable to be reduced by an amount of ₹ 6,98,886/-. However, as the entire deduction claimed by the assessee of ₹ 77,34,533/- was disallowed by the Assessing Officer by applying section 80IA(5) of the Act, no separate disallowance was made on this count. 12. Before the CIT(A), assessee contended that the disallowance of indirect expenses made by the Assessing Officer was on a higher side and submitted that a reasonable disallowance as per the appellant's working is of ₹ 2,99,312/-. The CIT(A) noticed that the assessee did not furnish any working for the disallowance of ₹ 2,99,312/- sought to be canvassed before him. The CIT(A) further noticed that since the assessee had agreed inprinciple to the proposition of the Assessing Officer that a part of indirect expenses are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest expenditure and the balance of ₹ 2,82,698/- was disallowed out of other expenditures in terms of Rule 8D of the Rules. The CIT(A) has also sustained the disallowance, against which the assesses is in appeal before us. 15. In this context, the learned counsel for the assessee vehemently pointed out that in the written submissions made to the Assessing Officer, which have been reproduced in the assessment order, assessee had pointed out that the interest debited to the P&L Account of ₹ 31,56,718/- was paid on deposits raised, which were not utilized for making the impugned investments. It was pointed out that interest was paid on five deposits, out of which four deposits were accepted in the preceding years and only one deposit of ₹ 60,00,000/- was accepted during the year under consideration and such deposit was used partly for payment of advance tax and partly for re-payment of inter-corporate deposit. In support, assessee furnished a copy of bank statement and on this basis it was sought to be demonstrated that interest expenditure was not relatable to the funds utilized to acquire shares/mutual funds, which have yielded the impugned exempt income. Even bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer is satisfied with the replies/material furnished by the assessee, then no disallowance shall be called for out of interest expenditure and if the Assessing Officer is not so satisfied, he may record his reasons and thereafter proceed as per law. Needless to say, the Assessing Officer shall allow a reasonable opportunity to the assessee of being heard before passing an order afresh on this aspect. Thus, on this aspect, assessee partly succeeds. 18. In the last Ground of Appeal No. 9, assessee has assailed the action of the CIT(A) in sustaining the disallowance of ₹ 7,20,650/- out of foreign travelling expenses. On this aspect, it was a common point between the parties that similar disallowance was a subject-matter of consideration by the Tribunal in the assessee's own case for assessment year 2006-07 (supra) wherein an identical circumstances that the disallowance was directed to be restricted 50% of the expenditure claimed. Following the aforesaid precedent, in this year also the Assessing Officer is directed to retain the disallowance accordingly. Thus, on this aspect, assessee partly succeeds. 19. In the result, appeal of the assessee for assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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