Serum International Ltd., Pune v. ACIT, Range-6,, Pune

ITA 290/PUN/2010 | 2004-2005
Pronouncement Date: 28-09-2011 | Result: Allowed

Appeal Details

RSA Number 29024514 RSA 2010
Assessee PAN EMBER2010I
Bench Pune
Appeal Number ITA 290/PUN/2010
Duration Of Justice 1 year(s) 7 month(s) 6 day(s)
Appellant Serum International Ltd., Pune
Respondent ACIT, Range-6,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-09-2011
Date Of Final Hearing 21-07-2011
Next Hearing Date 21-07-2011
Assessment Year 2004-2005
Appeal Filed On 22-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NOS. 290 TO 292/PN/2010 (ASSTT. YEARS: 2004-05 TO 2006-07) SERUM INTERNATIONAL LTD. ... APPELLANT SAROSH BHAVAN 16-B/1 DR AMBEDKAR ROAD PUNE 411 001 PAN : NOT AVAILABLE V. ADDL. CIT RANGE-6 PUNE RESPONDENT APPELLANT BY : SHRI. R.D. ONKAR RESPONDENT BY : SHRI SANJAY SINGH DATE OF HEARING : 21.7 .2011 DATE OF PRONOUNCEMENT :28.9.2011 ORDER PER I.C. SUDHIR JM IN ALL THESE APPEALS THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING COMMON GROUNDS : 1. TREATING THE YEAR OF FIRST GENERATION OF POWER FROM THE WINDMILL UNDERTAKING I.E. AY.02-03 AS THE INITIAL ASSESS MENT YEAR FOR THE PURPOSES OF SECTION-80IA(5); AND 2. ACCORDINGLY REDUCING THE AMOUNT OF PROFITS DERI VED BY THE APPELLANT FROM THE SAID UNDERTAKING IN THE YEAR UNDER APPEAL BY THE AMOUNT OF UNABSORBED LOSSES AND DEPRECIATION RELATING TO ALL THE ASSESSMENT YEARS BEGINNING AY 2002-03 IGNORING APPELLANTS CONTENTIO N THAT FOR THE PURPOSES OF SECTION 80-IA(5) INITIAL ASSESSMENT YEAR WOULD BE THE YEAR WHEN THE APPELLANT FIRST CLAIMED DEDUCTION U/S. 80-IA IN RE SPECT OF THE SAID UNDERTAKING IN TERMS OF THE OPTION GRANTED U/S 80- IA(2) AND UNABSORBED LOSSES AND DEPRECIATION IN RESPECT OF THE PERIOD B EGINNING WITH SUCH INITIAL ASSESSMENT YEAR ALONE AT THE HIGHEST COULD BE SO S ET OFF. THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80-IA BE ALLOWED UNDIMI NISHED BY SUCH UNABSORBED LOSSES AND DEPRECIATION. ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 2 2. WE FIND THAT THE LD CIT(A) HAS DECIDED THE ISSU ED INVOLVED IN THE GROUNDS IN THE A.Y. 2005-06 AND HAS FOLLOWED HIS DECISION T AKEN THEREIN IN THE REMAINING APPEALS FOR THE A.YS. 2004-05 AND 2006-07. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF IMPORT/EXPORT AND TRADING IN MEDICINES AND DRUGS AND HAVING A SIS TER CONCERN OF SERUM INSTITUTE OF INDIA (P) LTD. MANUFACTURER OF VACCINES. IT SE T UP A WIND MILL UNIT IN F.Y. 2001- 02 IN SATARA. IT CLAIMED LOSS OF RS. 3.39 CRORES I N THE A.Y. 2002-03 FOR THIS UNIT WHICH IT SET OFF AGAINST THE INELIGIBLE MAIN BUSINE SS. IT CLAIMED DEDUCTION U/S. 80IA FOR THE A.YS. 2004-05 TO 2006-07 IGNORING THE LOS SES OF A.Y. 2002-03. IN THE A.Y. 2005-06 IT CLAIMED DEDUCTION U/S. 80 IA OF RS. 51 72 296/-. IN A NOTE APPENDED WITH THE COMPUTATION OF INCOME IT SUBMITTED THAT D URING THE A.Y. UNDER CONSIDERATION I.E. 2005-06 THE COMPANY HAD EXERCIS ED THE OPTION OF CLAIMING DEDUCTION U/S. 80IA WITHOUT TAKING COGNIZANCE OF L OSSES INCURRED PRIOR TO THE YEAR FOR WHICH THE OPTION OF CLAIMING RELIEF U/S. 80IA I S EXERCISED. THE A.O OBSERVED THAT ACCORDING TO THE PROVISIONS OF SEC. 80IA(5) FOR T HE PURPOSE OF DETERMINATION OF QUANTUM OF DEDUCTION U/S. 80IA FOR THE A.Y. IMMEDIA TELY SUCCEEDING THE INITIAL A.Y. OR ANY SUBSEQUENT A.Y THE PROFIT AND GAINS FROM T HE ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO INITIAL A.Y AN D TO EVERY SUBSEQUENT YEAR UP-TO AND INCLUDING THE A.Y. FOR WHICH DETERMINATION IS TO BE MADE. HE CALLED FOR EXPLANATION OF THE ASSESSEE AS TO WHY ITS CLAIM O F DEDUCTION U/S. 80IA BE NOT CONSIDERED IN THE LIGHT OF THE PROVISIONS OF SEC. 8 0IA (5). 4. THE ASSESSEE EXPLAINED THAT SECTION 80IA(1) REA D WITH SUB-SECTION (2) GRANTS TAKEN OF 100% OF PROFIT OF SPECIFIED BUSINES S FOR ANY 10 CONSECUTIVE YEARS WITHIN A BLOCK OF 15 YEARS BEGINNING WITH THE YEAR IN WHICH THE SPECIFIED BUSINESS COMMENCES AND THOUGH THE STRESS IN SUB-SECTION (5) IS WHY WORDS INITIAL ASSESSMENT YEAR IN THE ABSENCE OF ITS DEFINITION IT NEEDS TO BE INTERPRETED ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 3 REASONABLY IN SUCH A MANNER THAT IT SERVES THE OPT ION PRESCRIBED U/S. 80IA (2) OTHERWISE SUCH PURPOSE WILL BE DEFEATED. IT WAS S TATED THAT SECTION 80IA(5) GETS FORCE OF LAW ONLY WHEN DEDUCTION U/S. 80IA(1) IS C LAIMED AND NOT OTHERWISE BECAUSE IF AN ASSESSEE HAS NOT LODGED ANY CLAIM FOR DEDUCTION U/S. 80IA FROM THE A.Y. WHEN THE UNDERTAKING BEGINS OPERATION THEN T HERE IS NO OCCASION TO INVOKE PROVISIONS OF SECTION 80IA FOR THE INITIAL A.Y. AL TERNATIVELY IT WAS PLEADED BY THE ASSESSEE THAT THE PROVISIONS OF SECTION 80IA(5) ARE APPLICABLE FOR A.Y. IMMEDIATELY SUCCEEDING THE INITIAL A.Y. OR ANY SUBSEQUENT A.Y. ACCORDINGLY THE PROVISIONS OF SECTION 80IA(5) TREATING THE ELIGIBLE INDUSTRIAL UN DERTAKING AS THE ONLY SOURCE OF INCOME OF THE ASSESSEE FOR COMPUTATION OF DEDUCTION U/S. 80IA(1) WAS APPLICABLE TO A.Y. 2003-04 (AS INITIAL YEAR OF SUCH ACTIVITY WAS A.Y. 2002-03) AND SUBSEQUENT YEARS. IN THAT VIEW OF THE MATTER DEPRECIATION OF RS.3.5 CRORES ALLOWED FOR A.Y. 2002-03 COULD WELL BE SET OFF AGAINST THE PROFIT OF ASSESSEE FROM OTHER UNITS IN A.Y. 2002-03 AS THE AFORESAID DEEMING PROVISION WERE NOT APPLICABLE IN A.Y. 2002-03 AND THUS A NOTIONAL UNABSORBED DEPRECIATION SHOUL D NOT BE CARRIED FORWARD IN A.Y. 2003-04 SO AS TO REDUCE THE DEDUCTION ALLOWABLE U/S . 80IA. 5. THE A.O DID NOT AGREE WITH THE ABOVE EXPLANATION OF THE ASSESSEE. THE A.O. HELD THAT IN ORDER TO DETERMINE THE QUANTUM OF DEDU CTION THE ASSESSEES INCOME NEEDED TO BE COMPUTED AS IF IT WAS THE ONLY SOURCE OF INCOME AND TO KNOW WHETHER THERE ARE CARRIED FORWARD LOSSES OF THE ELIGIBLE BU SINESS BY TREATING IT AS THE ONLY SOURCE OF INCOME ONE HAS TO COMPUTE ASSESSEES IN COME AS ELIGIBLE BUSINESS RIGHT FROM THE BEGINNING YEAR. HE HELD THAT AS PER THE P ROVISIONS OF SECTION 80IA(5) THE PROFIT OF WIND MILL ACTIVITY SHOULD BE SEPARATELY C OMPUTED AND THE DEDUCTION U/S. 80IA SHOULD BE WORKED OUT FROM SUCH PROFIT OF WIND MILL ACTIVITY. SINCE IN THE YEAR UNDER CONSIDERATION THE INCOME EARNED FROM WIND M ILL ACTIVITY IS EATEN AWAY BY THE EXPENSES AND UNABSORBED DEPRECIATION OF EARLIE R YEARS NO PROFIT FROM ELIGIBLE BUSINESS IS LEFT AND THEREFORE THE A.O CAME TO THE CONCLUSION THAT NO DEDUCTION U/S. 80IA IS ALLOWABLE TO THE ASSESSEE. ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 4 6. BEFORE THE LD CIT(A) THE CONTENTION OF THE ASS ESSEE REMAINED THAT THE DEPRECIATION CLAIMED BY IT ON WIND MILLS IN EARLIER YEARS STANDS SET OFF AGAINST THE ASSESSEES INCOME FROM SOURCES OTHER THAN WIND MILL ACTIVITIES AND THEREFORE THERE REMAINS NOTHING TO BE CARRIED FORWARD TO THE YEAR U NDER CONSIDERATION WHICH COULD HAVE EFFECT OF REDUCING THE PROFIT FROM ELIGIBLE BU SINESS OR THE ALLOWABLE DEDUCTION. IN SUPPORT THE ASSESSEE PLACED RELIANCE ON THE DEC ISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M. PALLONJI & CO. (P) LTD. V/S. JCIT (2006) 6 SOT 287 (MUM). 7. THE LD CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE. HE DID NOT AGREE ABOUT THE APPLICABILITY OF DECISION OF MUMBA I BENCH OF THE TRIBUNAL IN THE CASE OF M. PALLONJI & CO.(P) LTD. (SUPRA) ON THE B ASIS THAT THE PROVISIONS OF SUB- SEC.(5) OF SEC. 80IA WERE NOT BROUGHT TO THE NOTIC E OF THE TRIBUNAL. THE LD CIT(A) HAS ACCORDINGLY UPHELD THE ACTION OF THE A.O IN DIS ALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION U/S. 80IA IN THE A.Y. 2005-06. HE HAS FOLLOWED SIMILAR DECISION IN THE APPEALS FOR THE REMAINING A.YS. 2004-05 AND 2006-0 7. 8. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW AND MATER IAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON BY THEM. 9. THE LD. A.R HAS BASICALLY REITERATED THE SUBMIS SIONS MADE ON BEHALF OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW ON THE ISSUE . IN SUPPORT HE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS : 1) VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (201 0) 38 DTR (MAD.) 57. 2) PONNAWALLA ESTATE STUDE AND AGRO FARM PVT. LTD. VS . ACIT ITA 92/PN/2008 (A.Y. 2004-05) ORDER DT. 29 SEPTEMBER 2010 ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 5 3) G.B. RUBBER PRODUCTS V/S. DCIT ITA NO. 1466/PN/200 9 (A.Y. 2005-06) ORDER DATED 25 TH MAY 2011. 4) ACIT VS. AURANGABAD HOLIDAY RESORTS (P) LTD (2009) 118 ITD 1 (PUNE) 5) COMMISSIONER OF CENTRAL EXCISE VS. M/S. VALSON DYEI NG BLEACHING AND PRINTING WORKS 2010 TIOL 710 HC MUM CX. 10. THE LD. D.R. ON THE OTHER HAND TRIED TO JUSTI FY THE ORDERS OF THE AUTHORITIES BELOW AND PLACED RELIANCE ON THE FOLLOWING DECIS IONS IN SUPPORT THERETO : 1) ACIT VS. GOLDMINE SHARES AND FINANCE (P) LTD. (2008 ) 116TTJ (AHD.)(SB) 705 2) PRIMA PAPER ENGG (P) LTD. VS. ITO ITA NO. 1755 & 1205/PN/2007 (A.YS. 2002-03 AND 2003-04) ORDER DT. 31 ST JANUARY 2011. 3) LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC) 4) JCIT VS. CIPLA LTD. (2005) 2 SOT 617 (MUM) 5) ADDL. CIT VS. ASHOK ALCO CHEM LTD. (2005) 96 ITD 1 60 (MUM). 6) HYDERABAD CHEMICALS VS. ACIT ITA NO. 352/HYD/2005 & OTHERS (A.YS. 2001-02 TO 2003-04 & 2005-06) ORDER DT. 21 ST JANUARY 2011. 11. THE ISSUE RAISED BEFORE THE BENCH IS AS TO WHET HER IN VIEW OF THE PROVISIONS OF SEC. 80IA(5) OF THE I.T. ACT 1961 THE PROFIT FR OM THE ELIGIBLE BUSINESS FOR THE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT HAS TO B E COMPUTED AFTER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATIO N OF ELIGIBLE BUSINESS EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER NON-ELIGIBLE BUSINESS INCOME IN EARLIER YEARS. THE SUBMISSION OF THE LD A.R. REMA INED THAT ON THE WIND MILLS SET UP IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2002-03 THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 100% THEREON I.E. RS. 3 .54 CRORES WHICH WAS FULLY SET OFF AGAINST THE ANOTHER INCOME IN THE SAID A.Y. 2002-03 ITSELF. IN THE A.Y. 2004-05 THE ASSESSEE HAD POSITIVE INCOME FROM THE SAID GENERATI ON ACTIVITY AND THERE WERE NO ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 6 BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIATION OF THE PRECEDING YEAR WHICH HAD REMAINED TO BE SET OFF IN THE A.Y. 2004-05. THE A. O. NOTIONALLY BROUGHT FORWARD UNABSORBED DEPRECIATION FOR THE A.Y. 2003-04 TO THE IMPUGNED A.Y. 2004-05 AND DENIED THE CLAIM FOR DEDUCTION MADE BY THE ASSESSEE U/S. 80IA IN RESPECT OF THE PROFIT EARNED BY IT IN A.Y. 2004-05. THE LD. A.R. SUBMITTED THAT SUB-SECTION (2) OF SECTION 80IA PROVIDES AN OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE A.YS. OUT OF 15 YEARS FOR CLAIMING THE DEDUCTION. HE SUBMITT ED THAT THE TERM INITIAL YEAR IN SUB-SECTION (5) OF 80IA IS NOT DEFINED AND IS USED IN CONTRADICTION TO THE WORDS BEGINNING FROM THE YEAR USED IN SUB-SECTION (2). HE SUBMITTED THAT THE ASSESSEE CHOSE A.Y. 2004-05 AS INITIAL A.Y BEING THE FIRST YEAR IN WHICH IT CLAIMED DEDUCTION U/S. 80IA AND THEREFORE LOSSES/DEPRECIATION BEGINN ING FROM A.Y. 2004-05 ALONE COULD ONLY BE BROUGHT FORWARD AND SET OFF. DEPRECIA TION OF THE PRECEDING A.Y. 2002- 03 COULD NOT HAVE BEEN NOTIONALLY BROUGHT FORWARD A ND SET OFF AGAINST PROFIT FOR THE A.Y. 2004-05. THE LD. A.R. PLACED HEAVY RELIANCE O N THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY S PINNING MILLS (P) LTD VS. ACIT (SUPRA). HE SUBMITTED THAT THE DECISION OF HONBLE MADRAS HIGH COURT WILL PREVAIL UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF ACIT VS. GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) FOLLOW ED BY THE PUNE BENCH OF THE TRIBUNAL IN ITS RECENT DECISION IN THE CASE OF PRIM A PAPER ENGG (P) LTD. VS. ITO (SUPRA) AND THERE THE ASSESSEE DID NOT DISPUTE THE FACT THAT THE AUTHORITIES BELOW HAVE DECIDED THE ISSUE FOLLOWING THE DECISION OF SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES.. THE LD. A.R. PO INTED OUT THAT DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHA SWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) WAS NOT CITED BEFORE THE PUNE BENC H IN THE CASE OF PRIMA PAPER ENGG (P) LTD. VS. ITO (SUPRA). THE LD. A.R. HAS AL SO CITED THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. AURAN GABAD HOLIDAY RESORTS (P) LTD. (SUPRA) HOLDING THAT EVEN A DECISION OF NON-JURISDI CTIONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISI ON IS GIVEN BY ANY OTHER COMPETENT HIGH COURT. SIMILAR VIEW HAS BEEN EXPRESS ED BY THE HONBLE BOMBAY ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 7 HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S. VALSON DYEING BLEACHING AND PRINTING WORKS (SUPRA). 12. THE CONTENTION OF THE LD. D.R. ON THE OTHER HAN D REMAINED THAT DEDUCTION U/S. 801 AND 801A COVERED INTER ALLIA INDUSTRIAL UNDERTAKINGS. THE POWER GENERATION UNITS FOUND A SPECIFIC MENTION FOR THE FIRST TIME W.E.F. 1.4.1993. IN ALL THE YEARS FROM 1.4.1981 TO 31 TO 31 ST MARCH 2000 IN BOTH U/S. 80I AND 80IA THE TERM INITIAL A.Y WAS DEFINED AND MEANT THE FIRST A. Y. RELEVANT TO THE PREVIOUS YEAR IN WHICH THE ELIGIBLE UNIT COMMENCES PRODUCTION/POWER GENERATION. ONLY FROM 1.4.2000 WHEN SECTIONS 80IA WAS REPLACED WITH SECT ION 80IA AND 80IB THE DEFINITION OF INITIAL A.Y. DID NOT FIND A MENTI ON. BUT NOWHERE IN THE PARLIAMENT SPEECH OF MEMORANDUM EXPLAINING THE FINANCE BILL H AS ANY MENTION THAT THERE WAS ANY INTENTION TO IGNORE LOSSES AND DEPRECIATION F ROM FIRST YEAR OF POWER GENERATION/PRODUCTION AND THAT SUCH LOSSES TILL FIR ST YEAR OF CLAIM OF DEDUCTION IS TO BE IGNORED. THE VIEW CANVASSED BY THE ASSESSEE DO ES NOT FIND ANY SUPPORT. HE SUBMITTED THAT THERE IS NO DISCERNIBLE CHANGE IN LA W OR INTENTION OF PARLIAMENT W.E.F. 1.4.2000. THE LD. D.R. SUBMITTED THAT THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (SUPRA) IS FULLY APPLICABLE IN THE PRESENT CASE. HE POINTED OUT THAT IN ITS RECENT DE CISION DT. 21 ST JANUARY 2011 THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDE RABAD CHEMICAL SUPPLIES LTD. VS. ACIT (SUPRA) HAS ALSO DECIDED AN IDENTICAL DECI SION IN FAVOUR OF THE REVENUE FOLLOWING THE DECISION OF SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF ACIT VS. GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). HE SUBM ITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE HA S ALSO DISCUSSED THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHA SWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). THE LD. D.R. SUBMITTED THAT EVEN IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) THE HONBLE SUPREME COURT HAS BEEN PLE ASED TO EXPLAIN THE INTENTION OF PARLIAMENT AND SCOPE OF DEDUCTION U/S. 80IA AND 80I B OF THE ACT. THE HONBLE SUPREME COURT HAS BEEN PLEASED TO HOLD THAT SUCH P ROFITS ARE TO BE COMPUTED AS IF ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 8 SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THE DEVICES ADOPTED TO REDUCE OR INFLATE THE PROFIT OF ELIGIBLE BUSINESS HAS GOT TO BE REJECTED IN VIEW OF THE OVERRIDING PROVISIONS OF SUB-SECTION (5) OF SECTION 80IA OF THE ACT. 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS W E FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WHAT WOULD BE THE INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA(5) OF THE ACT HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALLA STUD AND AGR O FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DISCUSSING THE ISSUE I N DETAIL THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE INITIAL A.Y FOR THE PURPO SE OF CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED TH E DEDUCTION U/S. 80IA (1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF 80I A (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A) HAS ERRED IN HOLDING THAT THE INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA(2) R.W.S. 80IA (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENERATING ELECTRICITY FROM THE WIND MILL ACTIVITY. WE ALSO F IND THAT THE ISSUE RAISED IN GROUND NO. 2 REGARDING THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINISHED BY UNABSORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME IS FULLY COVERED BY THE D ECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80I A PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INC OME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTION ONLY THE LOSSES OF T HE YEARS BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES O F THE EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAINST THE INCOME OF THE ASSE SSEE. THE HONBLE MADRAS HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN S ET 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 HONBLE HIGH COURT. THE HONBLE MADRA S HIGH COURT IN THAT DECISION ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 9 HAS ALSO REFERRED THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) AND THE DECISION OF SPECIAL BENCH O F THE TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE (P) LTD. (SUPRA). THERE I S NO DISPUTE THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COURT IS A BIND ING 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 HONBLE J URISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VALS ON DYEING BLEACHING AND PRINTING WORKS (SUPRA) WHEREIN THE HONBLE BOMBAY H IGH COURT HAS BEEN PLEASED TO HOLD IN A CASE OF EXCISE MATTER THAT TRIBUNAL IS BO UND BY THE DECISION OF HIGH COURT EVEN OF A DIFFERENT STATE SO LONG AS THERE IS NO C ONTRARY DECISION OF ANY OTHER HIGH COURT. THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEAS ED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLLOW THE JUDGMENT O F THE MADRAS HIGH COURT. AN AUTHORITY LIKE AN INCOME TAX TRIBUNAL ACTING ANYWHE RE IN THE COUNTRY HAS TO RESPECT THE LAW LAID DOWN BY THE HIGH COURT THOUGH OF A DI FFERENT STATE SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT ON THA T QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VAKSON DYEING B LEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY THE DEC ISION OF THE HONBLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VELAYUD HASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). WE THUS RESPECTFULLY FOLLOWING T HE DECISION TAKEN BY THE HONBLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTICAL ISSU E UNDER ALMOST SIMILAR FACTS HOLD THAT WHEN THE ASSESSEE EXERCISING THE OPTION ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE OTHER I NCOME OF THE ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS O F EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME OF THE ASSESS EE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. WE TH US SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD A NY LOSS OR DEPRECIATION OF EARLIER ITA . NO 290 TO 292/PN/2010 SERUM INTERNATIONAL LTD. A.Y. 2004-05 TO 2006-07 PAGE OF 10 10 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. VS. ITO (SUPRA) CITED BY THE LD. DR IS ALSO NOT HEL PFUL TO THE REVENUE SINCE FIRSTLY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) ON THE IS SUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY THE LD. AR FAIRLY AGREED THAT THE ISSU E RAISED WAS COVERED AGAINST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CA SE OF ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORIT IES BELOW. THE LD. AR 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 O F ACIT VS. 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 I S YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSE. 14. IN RESULT THE APPEALS ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28TH SEPTEMBER 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 28TH SEPTEMBER 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -III PUNE 4. THE CIT(A)- III PUNE 5. THE D.R. A BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE