Low profitability of recipient cannot be the criteria for Business disallowance u/s 40A(2)(b) being excessive or unreasonable payment

In absence of any comparables from market to make out that the case that impugned payment was excessive or unreasonable within the meaning of section 40A(2)(b) and based his conclusion merely on low profitability of recipient firm was not relevant consideration for applying section 0A(2)(b). Therefore, addition was deleted.

Decision:

 In assessee’s favour

IN THE ITAT PUNE BENCH

D.KARUNAKARA RAO & VIKAS AWASTHY, JM

Sharp Designers and Engineers India Pvt. Ltd. (Formerly Khinvasara Investments Pvt. Ltd.) v. ACIT

ITA Nos. 2263, 2283 & 1262/PUN/2014

29 January, 2018

Assessee by: Kishor Phadke

Revenue by: Ajay Modi, JCIT

Karunakara Rao, AM

There are 3 appeals under consideration. ITA No. 2263/PUN/2014 is filed by the assessee against the order of Commissioner (Appeals)-V, Pune, dated 12-9-2014. ITA No. 2283/PUN/2014 and ITA No.1262/PUN/2015 are filed by the Revenue against the orders of Commissioner (Appeals)-V, Pune and Commissioner (Appeals)-6, Pune, dated 12-9-2014 and 15-6-2015 respectively.

2. In all these 3 appeals, the issue of allowability of (1) the deduction under section 80IA of the Act claimed through filing of the revised return of income, (2) the correctness of the disallowance made by the assessing officer under section 40A(2)(b) of the Act and (3) the correctness of the disallowance made under section 14A of the Act read with Rule 8D(2) of the Income Tax Rules, are involved. Considering the commonality of the issues, we proceed to adjudicate all the grounds in this composite order.

ITA No.2263/PUN/2014

(By Assessee — assessment year 2010-11)

3. We shall first take up the assessee’s appeal first. Grounds raised by the assessee in this appeal read as under :

“1. The lower authorities erred in law and on facts in disallowing assessee’s claim for deduction under section 80IA(4) of the Income Tax Act amounting to Rs. 77,62,555.

2. The lower authorities erred in law and on facts by disagreeing with assessee companies claim that no interest bearing funds were utilized for making investments in shares and securities and further more in disallowing interest expenditure amounting to Rs. 8,43,096 by applying provisions under section 14A of the Income Tax Act, 1961.

Without prejudice to above :

3. The lower authorities erred in law and on facts in taking depreciated value of Fixed assets instead of Gross Block of assets as appearing in audited financial results while arriving at the interest disallowance under rule 8D.”

4. Briefly stated relevant facts are that the assessee is a company engaged in the manufacturing of Engineering goods and Generation of electricity through windmill. Assessee made a claim of deduction under section 80IA(4) of the Act amounting to Rs. 77,62,555 by way of filing the revised return of income under section 139(5) of the Act. Admittedly, the assessee could not claim the same in the original return filed under section 139(1) of the Act. Considering the omissions, assessee made use of the provisions of section 139(5) of the Act and filed the revised return well in time. Without appreciating the same, in the assessment proceedings, the assessing officer denied the said benefit of claim of deduction under section 80IA(4) of the Act. Contents of Para No.5 onwards of the assessment order are relevant in this regard. Assessing officer relied on the literal interpretation of the provisions of section 80AC of the Act relating to “Deduction not to be allowed unless return furnished”. This section mandates for allowing the claims of deductions only when the condition of filing of return of income under section 139(1) in time are fulfilled by the assessee. Assessee relied on various decisions in support of his claim of deduction through the filing of valid revised return of income and explained that the said time specified for filing return of income includes the time provided for revised return of income under section 139(5) of the Act. Ignoring the same, the Assessing Officer/Commissioner (Appeals) proceeded to deny the claim of deduction. The discussion given in Para No.5 to 15 of the Commissioner (Appeals) order is relevant.

5. Before us, on this issue, learned Authorised Representative for the assessee relied on the literal interpretation of the provisions of section 80AC with special reference to the condition that revolves around the provisions of section 139(1) of the Act. Bringing our attention to the decision of Pune Bench of the Tribunal in the case of M/s. Anand Shelter, Developers and Builders Pvt. Ltd. v. ACIT in ITA No.1606/PUN/2015 for the assessment year 2011-12, order dated 20-10-2017 and various High Court judgments read with Hon’ble Supreme Court judgment in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC).

6. Learned Authorised Representative for the assessee filed the following written submissions on this issue and the same reads as under :

“(Ground No. 1- Regarding eligibility to claim deduction under section 80-IA(4) in respect of profits from the WINDMIILL project, by filing a revised return under section 139(5) of the Income Tax Act, 1961).

1. Facts — Key dates position is as under :

29-9-2010 – Original return of income filed without claiming 80-IA(4) deduction(due date for assessment year 2009-10 was 30-9-2010)

6-1-2012 – Revised return of income filed after claiming 80-IA(4) deduction of Rs. 77,62,555 on profits from Windmill project (last date of revised return time limit was 31-3-2012)

2. Decision of learned assessing officer-Learned assessing officer, vide Para-5 of the 143(3) order dated 18-3-2013, disallowed the said deduction and made addition. Reason cited was position absence of claim in the original return and absence of filing of form no. 10CCB.

3. Decision of learned Commissioner (Appeals)-Learned assessing officer’s order was challenged before the learned Commissioner (Appeals). Learned Commissioner (Appeals), vide appellate order dated 12-9-2014, dismissed the key objection of the Appellant. Form no. 10CCB was filed by the Appellant during appellate proceedings and the same was accepted by the learned Commissioner (Appeals). But as regards claim of deduction under section 80-IA(4), learned Commissioner (Appeals) construed provisions of section 80-AC read with section 139(1) and held that, if the same is not claimed in the original return of income, the said deduction is not permissible though claimed in a revised return thereafter. While so deciding, learned Commissioner (Appeals) kept reliance on the decision of Bal Kishan Dhawan HUF v. ITO – 18 taxman.com 234 (Amrtisar). Appellant’s reliance on the decision of Yash Developers v. ITO – ITA No. 809/MUM/2011 was held as misplaced by observing that 4th proviso to section 139(1) was introduced from assessment year 2006-07 while the decision of Mumbai ITAT related to assessment year 1972-73. Various other issues were also involved in the appeal before the learned Commissioner (Appeals) and all have been deliberated.

4. Appeal before the Honorable ITAT – Learned Commissioner (Appeals) order dated 12-9-2014 is challenged before the Honorable “A” Bench of Pune ITAT by the Appellant as well as by the I-T department. A detailed paperbook containing 163 pages has already been placed before the Honorable “A” Bench of the ITAT.

5. Submissions – Appellant justifies the claim of deduction on following points.

(a) Provision of section 80-AC – The text of section 80-AC reads as under

“Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1-4-2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.”

(b) No stipulation to make a claim in original return – A close look at section 80-AC reveals that, there is no any stipulation that, deduction ought to be claimed in the 139(1) return. On the contrary, the only condition revealing from section 80-AC is that, whenever, a deduction is claimed under section 80-AC, the return must be furnished before the due date under section 139(1). As the Appellant company has filed return on 29-9-2010 (i.e. one day before 30-9-2010)’ Appellant’s claim made in the revised return is valid and correct.

(c) Reliance on the decision of Anand Shelters v. Addl. CIT, Range-1, Pune – ITA No. 1606/PUN/2015 – Appellant relied upon the recent decision of the Honorable Pune ITAT in the said case of Anand Shelters (supra). As per facts of the said case, deduction under section 80-IB(10) was claimed for assessment year 2011-12 in the belated return filed under section 139(4) and filed on 30-9-2012. As the return was not filed in time, the said deduction was denied by I-T authorities. While deciding the matter, Honorable ITAT first dealt with various situations and various High Court decisions, wherein, belated returns filed under section 139(4) were held as been filed under section 139(1). In particular, decision of Yash Developers (supra) was referred considering similar factual matrix. Various contrary decisions were also considered by the Honorable Bench in this regard. Finally, considering possible two views, placing reliance on the apex court decision in the case of CIT v. Vegetable Products (1973) 88 ITR 192, the matter was decided in favour of the Appellant therein.

(d) Present case of Appellant on a better footing – Compared to the decision in the case of Anand Shelters (supra), Appellant submits that, his case stands on an elevated footing. As per facts, Appellant did file a return in due time under section 139(1). As such, even on a literal construction of section 80-AC, Appellant does not suffer from any rigors per se.

(e) Further reliance on decision in ACIT v. Precot Meridian Limited ITA 1214/Mds/2012 (Chennai Tribunal)- In a similar factual matrix, the Honorable Chennai ITAT has observed as under-

Para 9.

“ A plain reading of section 80AC makes it clear that from the assessment year 2006-07, deduction claimed under section 80IA / 80-IB / 80-IC / 80-ID / 80-IE shall not beallowed unless the assessee furnishes a return on or before due date specified under sub-section (1) of section 139. Nowhere in the section it was provided that unless the assessee makes a claim in its return filed under section 139(1), the said claim is allowable. The section does not speak of a claim to be made in the return filed under section 139(1). The section speaks of filing a return within the time specified under section 139(1) and nothing else. Here the assessee filed a return under section 139(1) within due date specified but no claim was made under section 80IA in such return. However, a revised return was filed under section 139(5) on 30-3-2010 claiming deduction under section 80IA at 37,27,928. The section says unless the assessee files a return under section 139(1) within the due date, deduction under section 80IA / 80-IB / 80-IC /80- ID / 80-IE shall not be allowed and at the same time section 139(5) provides for filing a revised return, when the assessee discovers any omission or any wrong statement made in the return already filed under sub-section (1) of section 139 or return filed under subsection (1) of section 142. This revised return can be filed at any time before expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.”

(f) Further reliance on decision in Parmeshwar Cold Storage (P) Limited v. ASCIT ITA No. 1198/AHD./2009 (A.Y. 2006-07), July 3, 2009- In a similar factual matrix, the Honorable Ahmedabad ITAT has observed as under-

Para 9

“Section 80AC does not require that the claim under section 80-IB should be made only through the original return in time. It only prescribes the condition that the original return filed should be in time for enabling the assessee to make a claim. In other words, it is not a requirement to make the claim in the original return itself, which is to be filed within the time. ft was further explained that for claiming deduction under section 80-IB, the only condition is that the original return should be filed in time, but the claim need not necessarily be made in the original return, it can be made subsequent thereto also.”

Copies of the above decisions are enclosed herewith and marked as Annexure-1 and Annexure-2. Appellant, relying on the above judgments, requests that its claim for deduction 80IA(4) may please be allowed.”

7. Learned Departmental Representative for the Revenue relied on the findings of the Assessing Officer/Commissioner (Appeals). Learned Departmental Representative relied on the literal interpretation of relevant provisions of section 80AC of the Act.

8. We heard both the sides and perused the orders of the revenue authorities. Core issue relates to the allowability of deduction under section 80IA(4) of the Act through filing of revised return of income under section 132(5) of the Act. The present litigation arose in view of the stipulation for validly claiming of said deduction if any only through filing of return under section 139(1) of the Act. The said condition was provided in section 80AC of the Act. On perusal of the above submissions of learned AR, we find the Chennai Bench of the Tribunal decided the issue in favour of the assessee on the facts similar to that of the assessee, i.e. involving the provisions of section 139(1) of the Act. This decision relied on the logic developed by the Pune Tribunal in the case of Anand Shelters (supra). Similar liberal interpretation of section 80AC of the Act is affirmed by the Tribunal of Allahabad Bench in the case of Parmeshwar Cold Storage Pvt. Ltd. v. ASCIT (supra). All these decisions are pronounced on the factual matrix of filing return of income under section 139(4) of the Act and in the absence of return filed under section 139(1) of the Act. On examining the facts of the present case and its facts, we find the Assessee’s case, with both original and revised returns filed in time, is placed in a better position. Therefore, in our opinion the claim of the Assessee’s claim of deduction under section 80IA of the Act is allowable despite the provisions of section 80AC of the Act due to the judgmental laws in favour of their liberal interpretation. Therefore, the ground raised by the assessee should be allowed. Accordingly, Ground No.1 raised by the assessee is allowed.

9. The second issue raised in this appeal of the assessee relates to correctness of disallowance under section 14A of the Act.

10. Before us, learned Authorised Representative for the assessee submitted that there is no issue regarding the disallowance made by the assessing officer amounting to Rs. 1,26,880 under clause (ii) of Rule 8D(2) of Income Tax Rules, 1962. It is part of the total disallowance of Rs. 9,69,976 under section 14A read with Rule 8D of the Income Tax Rules, 1961. The dispute mainly revolves around the applicability of clause (ii) of Rule 8D(2) is with regard to disallowance on account of interest and the same worked out to Rs. 8,43,096.

11. On this issue, the claim of the assessee before us revolves around the fact of existence of “interest free own funds” of the assessee and also the presumption laid down by the Hon’ble jurisdictional High Court in the case of CIT v. HDFC Bank Ltd. reported in (2014) 368 ITR 377 and CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340. Bringing our attention to the financial statements placed at page 72 of the paper book, learned Authorised Representative for the assessee submitted that assessee has excess interest free funds. Further, learned Authorised Representative submitted that assessee has the capital and reserves of Rs. 8.23 crores (rounded off) against which the assessee invested only Rs. 2.91 crores (rounded off). The interest free own funds are far more than the investments of Rs. 2.91 crores.

12. Responding to the assessing officer’s grievance regarding the non-furnishing of the fund flow statement, learned Authorised Representative submitted the same is available before the assessing officer in the form of financial statements (i.e. Balance Sheet and its Schedules). However, to comply with the said requirement, learned Authorised Representative filed the same before us stating the above position of availability of the Interest free funds v. Investments. Learned Authorised Representative also filed written submissions on this issue and the same are extracted as under :

“Submission -Appellant has relied upon the jurisdictional High Court’s decision in the case of CIT v. HDFC Bank (2014) 366 ITR 505 (Bom). It was submitted before the learned Commissioner (Appeals) that, considering the presence of about Rs. 8.22 CR of own funds as against Investments of Rs. 2.91 CR, presumption ought to have been drawn that, the investments are made from own funds. However, the said contention was rejected by the learned Commissioner (Appeals) by observing that no any fund-flow is submitted on record, etc. Appellant has prepared a fund-flow showing movement of funds in assessment year 2010-11. The same is marked as Annexure-a and enclosed herewith. Kindly consider the same and oblige.”

13. Considering the same, we are of the opinion that the assessee’s claim should be allowed in view of the binding judgments of the Hon’ble Bombay High Court in the case of HDFC (supra) and Reliance Utilities and Power Ltd., cited (supra). Accordingly, the assessee should be given relief on the amount of Rs. 8,43,096. Thus, Ground No.2 raised by the assessee is allowed.

14. Considering the relief given by us in Ground No.2, we are of the opinion that adjudicating of Grounds Nos. 3 and 4 raised by the assessee without prejudice to Ground Nos. 1 and 2, becomes an academic exercise. Accordingly, the same are dismissed as academic.

15. In the result, appeal of the assessee for assessment year 2010-11 is partly allowed.

ITA Nos. 2283/PUN/2014 and 1262/PUN/2015

(By Revenue – assessment years 2010-11 and 2011-12)

16. Grounds raised by the revenue in these 2 appeals are identical and they relate to the common issue of disallowance under section 40A(2)(b) of the Act amounting to Rs. 40 lakhs for assessment year 2010- 11 and Rs. 15 lakhs for assessment year 2011-12.

17. In the assessment year 2011-12, the revenue raised an additional issue relating to relief granted by the Commissioner (Appeals) with reference to the applicability of provisions of section 80IA(5) of the Act.

18. Regarding the grounds raised with regard to the common issue of attracting the provisions of section 40A(2)(b) of the Act, learned Authorised Representative narrated relevant facts. Referring to the discussion in Para 6 of the assessment order, learned Authorised Representative mentioned that the assessee made payment of Rs. 1,68,65,000 to M/s. Project Engineering Services towards job work charges. Considering the fact that the said firm is covered under the provisions of section 40A(2)(b) of the Act the assessee was asked to justify the payments in quantitative terms. In response, assessee submitted that the said firm is providing manpower assistance and is maintaining/retaining the gross margin of 15% of the amount paid by the assessee and the net profit of the firm is only 2%. On considering the fact that the said firm is receiving the job work charges in crores for the number of years and the same is declaring the meager income of Rs. 3 to 5 lakhs in their returns, the assessing officer proceeded to make addition of Rs. 40 lakhs on adhoc basis as per the discussion given as under :

“From the details furnished, it is clear that the assessee could furnish independent evidence of nearly 40% of expenses whereas payment to the related party has been made is Rs. 1,68,65,000.

Considering overall facts and circumstances of the case, a disallowance of Rs. 40 lakhs is made on account of excessive payment made to the related party for services rendered due to the following reasons :

1. The assessee company has not been able to establish justifiable reason for hiring services from the sister concern specially when it is seen that the said party is doing nothing except labour supply which the assessee could have done independently.

2. The said party is not engaged in any other business and is not engaged in dealing with any other party except the assessee company. Hence, various expenses shown by it in its P&L A/c. Are not commensurate with its activities.

3. It is declaring only a meagre amount of income and is claiming a major portion of the Tax Deducted by the assessee company as refund,

4. The expenses debited by the said firm are excessive as seen above.

Hence, an amount of Rs. 40 lacs under section 40A(2)(b) is disallowed and added back to the total income of the assessee..”

19. During the First Appellate proceedings, the Commissioner (Appeals) considered the submissions of the assessee and disapproved the assessing officer’s manner of making disallowance. Contents of Para 21 of his order are relevant and the same are extracted as under :

“21. It is seen from the facts of the case that the assessing officer has not tested the payments on the above yardstick and has based his conclusion on the technical competency and low profitability of the firm which is my view is not relevant consideration for applying the provisions of section 40A(2)(b) of Income Tax Act. The assessing officer has not obtained any comparative rate to justify the disallowance. The appellant in it’s reply has categorically stated that M/s. Project Engineering Services retains gross margin of 15% only on the amount paid by the appellant. This being so, the gross margin allowed by the appellant on the payment of Rs. 1,15,68,528 comes to Rs. 17,35,280 only. The disallowance on 40 lacs is almost three times of gross margin allowed by the appellant. which cannot be held to be justified. The co-relation with PF deduction is also flawed as many contractors do not pay PF and other benefits to labourers due to less number of employees employed by them. Therefore, on the totality of facts, it is held that the assessing officer has made disallowance under section 40A(2)(b) of Income Tax Act without bringing sufficient evidence on record. Accordingly, he is directed to delete the addition of Rs. 40 lacs. Thus, the ground is allowed.”

20. From the above, it is evident that the Commissioner (Appeals) granted relief mainly underlying the unfairness in the order of the assessing officer on this issue. Commissioner (Appeals) held that the disallowance of Rs. 40 lakhs is almost three times of gross margin allowed by that assessee which cannot be held to be justified. The correlation drawn by the assessing officer to the PF deductions was also not approved by the Commissioner (Appeals). For want of comparable cases to be brought on record by the assessing officer, the Commissioner (Appeals) deleted the addition. We find the order of the Commissioner (Appeals) is fair and reasonable and it does not call for any interference. The same is the finding of Commissioner (Appeals) for assessment year 2011-12. In both the assessments, assessing officer has not brought any comparables from the market to make out that the current payment is excessive and unreasonable within the meaning of section 40A(2)(b) of the Act. We therefore uphold the order of Commissioner (Appeals) for both the years and dismiss the relevant grounds raised by the revenue for both the assessment years, i.e. assessment years 2010-11 and 2011-12.

21. Another issue specific to assessment year 2011-12 relates to relief granted by the Commissioner (Appeals) with reference to invoking the provisions of section 80IA(5) of the Act.

22. Relevant facts on this issue include that assessee had 3 wind mills at Satara, Coimbatore and Ambheri. After analyzing the profit and loss statements from each of the units the assessing officer proceeded to examine the admissibility of deduction under section 80IA(5) of the Act. He noted that after setting off the losses of earlier years, there will be no profit available to the assessee and assessing officer considered the units on standalone basis as per the provisions of section 80IA(5) of the Act. Relying on the Special Bench decision of the Tribunal in the case of Goldmine Shares and Finance Pvt. Ltd., the assessing officer disallowed the claim of the assessee amounting to Rs. 1,15,63,288.

23. During the First Appellate Proceedings, the Commissioner (Appeals) allowed the claim of the assessee under section 80IA(5) of the Act. While doing so, he relied on the decisions of Pune Bench of the Tribunal in the case of Serum International Ltd. in ITA Nos. 290 to 292/PN/2010 order dated 28-9-2011 and M/s. Advik High Tech Ltd. of his predecessor for assessment year 2008-09. Thus, the Commissioner (Appeals) deleted the disallowance made by the assessing officer applying the provisions of section 80IA(5) of the Act.

24. On hearing both the sides on this issue and on perusing the orders of the revenue, we find the Commissioner (Appeals) relied on the decisions of Pune Bench of the Tribunal in the case of Poonawalla Stud and Agro Farm Pvt. Ltd. v. ACIT and Serum International Ltd. — ITA Nos. 290 to 292/PN/2010 order dated 28-9-2011 and granted relief to the assessee as per the discussion given in Para Nos. 7 and 8 of his order. For the sake of completeness of this order, we proceed to extract the said paragraphs as under :

“7. Further, the issue has been decided in favour of appellant in ITA No.290 to 292/PN/2010 in the case of Serum International Ltd. dated 28-9-2011. The relevant portion of the order is as under :

“13. Having been considered the above submissions, we find that the issue raised in Ground No. 1 as to what would be the initial assessment year 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. v. 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 under section 80IA was the first year in which the assessee claimed the deduction under section 80IA (1) after exercising his option as per the provisions of 80IA (2) of the Act. It was held that the Ld Commissioner (Appeals) has erred in holding that the initial assessment year for the purposes of Section 80IA(2) read with section 80IA (5) was the year in which the assessee started generating electricity from the wind mill activity. We also find that the issue raised in Ground No. 2 regarding the eligibility of the assessee to claim deduction under section 80IA undiminished by unabsorbed losses and depreciation also set off in earlier years against the other income, is fully covered by the decision of Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd v. ACIT (Supra) holding that as per Sub-section (5) of Section 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 the years beginning from the initial assessment year are to be brought forward and not the losses of the earlier years which have been already set off against the income of the assessee. The Hon’ble Madras High Court has been further pleased to hold that revenue cannot notionally bring forward any loss of earlier years which had already been set off against the other income of assessee and set off against the correct income of the eligible business. Fiction created by Sub-section (5) of Section 80IA does not contemplate such notional set off, held the Hon’ble High Court. The Hon’ble Madras High Court in that decision has also referred the decision of Hon’ble Supreme Court in the case of Liberty India v. CIT (Supra) and the decision of Special Bench of the Tribunal in the case of Goldman Shares & Finance (P) Ltd. (Supra). There is no dispute that even a decision of non-jurisdictional High Court is a binding precedent for the Tribunal until a contrary decision is given by any other competent High Court. In this regard, we find strength from the recent decision of Hon’ble jurisdictional Bombay High Court in the case of CCE v. Valson Dyeing, Bleaching and Printing Works (Supra) wherein the Hon’ble Bombay High Court has been pleased to hold in a case of excise matter that Tribunal is bound by the decision of High Court, even of a different State, so long as there is no contrary decision of any other High Court. The Hon’ble Bombay High Court has been pleased to hold further that the Tribunal had no option but to follow the judgment of the Madras High Court. An authority like an Income Tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. We thus respectfully following the ratio laid down by the Hon’ble jurisdictional High Court in the case of CCE v. 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 v. 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 assessment year 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 assessing officer to allow the claimed deduction under section 80IA without bringing the notionally brought forward any loss or depreciation of earlier years which has already been set off against other income of the assessee. The decision of Pune Bench of the Tribunal in the case of Prima Paper Engineering P.Ltd. v. ITO (Supra) cited by the learned Departmental Representative 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. v. ACIT (Supra) on the issue was not cited before the Bench and secondly the learned Authorised Representative fairly agreed that the issue raised was covered against the assessee by the decision of Special Bench in the case of ACIT v. Goldmine Shares & Finance (P) Ltd. (Supra) followed by the authorities below. The learned Authorised Representative therein thus contended that though the issue may be decided against the assessee in view of the Special Bench of the Tribunal in the case of ACIT v. Goldmine Shares & Financial (P) Ltd., but it should not be construed as acquiescence from the side of the assessee as the legal position on the subject is yet not settled. The Ground No. 2 is thus decided in favour of the assessee.”

8. Since facts being identical, I do not find any reason to differ from my earlier order. The assessing officer’s reliance on case laws cited pertain to cases prior to assessment year 1999-2000 and therefore, the same are distinguishable as submitted by the appellant. Accordingly, following my appellate order in the case of M/s. Advik High Tech Ltd., assessment year 2008-09 and also considering the binding precedent of jurisdictional Tribunal’s decision (supra), the assessing officer is directed to delete the addition of Rs. 1,15,63,288. Thus, ground No.2 is allowed.”

25. From the above, it is evident that the order of Commissioner (Appeals) maintained judicial discipline by following the binding decision of the Coordinate Bench in the case of Serum International Ltd. (supra). Considering the same, we are of the opinion that the order of Commissioner (Appeals) does not call for any interference. Accordingly, relevant grounds raised by the Revenue are dismissed.

26. In the result, both the appeals of the Revenue are dismissed.

27. To sum up, appeal of the assessee for assessment year 2010-11 is partly allowed and the appeals of the Revenue for assessment years 2010-11 and 2011-12 are dismissed.