M/s Karnataka Power Corporation Limited, Bangalore v. ACIT, Bangalore

ITA 711/BANG/2011 | 2007-2008
Pronouncement Date: 11-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 71121114 RSA 2011
Assessee PAN AAACK8032D
Bench Bangalore
Appeal Number ITA 711/BANG/2011
Duration Of Justice 2 year(s) 3 month(s) 5 day(s)
Appellant M/s Karnataka Power Corporation Limited, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 11-10-2013
Date Of Final Hearing 08-08-2013
Next Hearing Date 08-08-2013
Assessment Year 2007-2008
Appeal Filed On 06-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI JASON P. BOAZ ACCOUNTANT MEMBER I.T. A. NO.711/BANG/2011 (ASSESSMENT YEAR : 2007-08) M/S. KARNATAKA POWER CORPORATION LIMITED SHAKTHI BHAVAN 82 RACE COURSE ROAD BANGALORE-560 001 . APPELLANT. PAN AAACK 8032D VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE 11(5) BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI A. SHANKAR. RESPONDENT BY : SMT. PRISCILLA SINGSIT. DATE OF HEARING : 08.08.2013. DATE OF PRONOUNCEMENT : 11.10.2013. O R D E R PER SHRI JASON P. BOAZ A.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I BANGALORE DT.11.3.2011 FOR ASSESSMENT YEAR 2007-08. 2. THE FACTS OF THE CASE IN BRIEF ARE AS UNDER : 2.1 THE ASSESSE COMPANY IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER. FOR ASSESSMENT YEAR 2007-08 THE ASSESSEE FILED THE RETURN OF INCO ME ON 30.10.2007 DECLARING AN INCOME OF RS.2 17 94 41 126 UNDER THE REGULAR PROVISIONS OF T HE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') AND BOOK PROFITS UNDER SE CTION 115JB OF THE ACT AT RS.378 34 46 532. 2 ITA NO.711/BANG/2011 THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF TH E ACT AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED BY A N ORDER UNDER SECTION 143(3) OF THE ACT DT.24.12.2009 WHEREIN THE INCOME OF THE ASSESSEE WA S DETERMINED AT RS.299 92 41 419 AS AGAINST THE RETURNED INCOME OF RS.217 94 41 126 UND ER THE REGULAR PROVISIONS OF THE ACT BY MAKING CERTAIN ADDITIONS / DISALLOWANCES THERETO WH ICH ARE AS UNDER :- GROSS TOTAL INCOME AS PER THE ASSESSEE : RS.410 35 84 105 ADD : (1) DISALLOWANCE OF PROVISION FOR GRATUITY : RS.5 68 29 195. (2) DISALLOWANCE OF EXCHANGE LOSS : RS.38 21 630 (3) LOSS ON OBSOLESCENCE OF ASSETS : RS.27 000 ASSESSED GROSS TOTAL INCOME : RS.416 42 61 930 LESS : DEDUCTION U/S.80IA : RS.16 50 20 511 TOTAL INCOME : RS.299 92 41 419 THE ASSESSING OFFICER ALSO MADE CERTAIN ADJUSTMENTS TO THE BOOK PROFITS OF RS.378 34 46 532 DECLARED BY THE ASSESSEE THEREBY DETERMINING THE SAME AT RS.478 64 56 372 WHICH ARE AS UNDER : NET PROFIT AS PER PROFIT & LOSS ACCOUNT RS.370 68 64 153 ADD : RS. I) PROVISION FOR EX - GRATIA. 1 68 51 550 II) PROVISION FOR DA ARREARS 8 01 50 750 III) PROVISION FOR LOSS / OBSOLESCENCE OF ASSETS 15 20 432 IV) PROVISION FOR GRATUITY 5 68 29 195 V) PROVISION FOR PENSION 85 47 82 708 VI) PROVISION FOR LEAVE ENCASHMENT 19 65 13 366 VII) PROVISION FOR OBSOLESCEN C E OF ASSETS 17 16 048 VIII) PROVISION FOR DOUBTFUL DEBTS 31 68 523 RS.491 83 96 725 LESS : RS. I) DISPOSAL OF OBSOLE S C E N T OF ASSETS 4 29 526 II) EX - GRATIA 1 58 12 633 III) DA ARREARS 56 98 194 BOOK PROFITS : RS.489 64 56 372 3 ITA NO.711/BANG/2011 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2007-08 DT.24.12.2009 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT (APPEALS)-I BANGALORE. THE LEARNED CIT (APPEALS) VIDE ORDER DT.11.3.2011 ALLOWED THE ASSES SEE PARTIAL RELIEF AS UNDER : (I) IN RESPECT OF THE DISALLOWANCE OFRS.5 68 29 195 UNDER SECTION 43B OF THE ACT IN THE ASSESSMENT ORDER RELIEF OF RS.2 50 23 403 WAS ALLO WED TO THE ASSESSEE. (II) IN RESPECT OF LOSS ON EXCHANGE FLUCTUATION TH E LEARNED CIT (APPEALS) ALLOWED THE ASSESSEE'S ALTERNATE CLAIM FOR DEPRECIATION AND CONFIRMED THE BALANCE ADDITIONS / DISALLOWANCE MADE BY THE A.O. UNDER REGULAR PROVISIONS OF THE ACT. (III) IT IS SEEN FROM THE ORDER THAT THE LEARNED C IT (APPEALS) HAS NOT ADJUDICATED ON THE ISSUES OF DISALLOWANCES / ADDITIONS MADE WHILE COMPUTING T HE BOOK PROFITS UNDER SECTION 115JB OF THE ACT THOUGH THE ASSESSEE HAD RAISED SPECIFIC GROUND S OF APPEAL AT S.NOS.3 9 AND 11 BEFORE HIM IN THIS REGARD. 3. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPEA LS) I BANGALORE FOR ASSESSMENT YEAR 2007-08 DT.11.3.2011 THE ASSESSEE IS NOW IN APPEAL BEFORE US RAISING VARIOUS GROUNDS. IN ADDITION THERETO THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL ONCE ON 15.10.2012 CHALLENGING THE NON-ADJUDICATION OF GROUNDS RAISED BY THE ASSESSEE BEFORE THE LEARNED CIT (APPEALS) ON THE ADDITIONS AND DISALLOWANCES MADE T O THE BOOK PROFITS DECLARED BY THE ASSESSEE FOR THE PURPOSES OF COMPUTING THE BOOK PROFITS UNDE R SECTION 115JB OF THE ACT. ON 5.8.2013 THE ASSESSEE HAS FILED A CONSOLIDATED CONCISE GROUN DS OF APPEAL CONSISTING ALL THE GROUNDS OF APPEAL AND ALSO THE ADDITIONAL GROUNDS OF APPEAL RA ISED BY THE ASSESSEE AS WELL AS ANOTHER SET OF 4 ITA NO.711/BANG/2011 ADDITIONAL GROUNDS REGARDING THE APPLICABILITY OF T HE PROVISIONS OF SECTION 115JB OF THE ACT. THESE ARE AS UNDER : CONSOLIDATED CONCISE GROUNDS OF APPEAL 1. THE ORDER PASSED BY THE AUTHORITIES BELOW IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW EQUITY WEIGHT OF EVIDENCE PROB ABILITIES AND THE FACTS AND CIRCUMSTANCES IN THE APPELLANTS CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSED A T RS. 299 92 41 419/- AS AGAINST THE RETURNED TOTAL INCOME OF RS. 217 94 41 126/- ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT[A] WAS NOT JUSTIFIED IN LAW IN CONF IRMING THE DISALLOWANCE OF AN AMOUNT OF RS. 38 21 630/- BEING LOSS INCURRED ON AC COUNT OF FOREIGN EXCHANGE FLUCTUATION UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE. 4. THE LEARNED CIT[A] WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS. 3 18 05 492/- [RS. 5 68 29 195/- MINUS RS. 2 50 23 703/-] UNDER SECTION 43B OF THE ACT INSTEAD OF ALLOWING THE ENTIRE AMOUNT OF PROVISIONS FOR PAYMENT OF GRATUITY OF RS. 5 68 29 195/- UNDER THE FACTS AND C IRCUMSTANCES OF THE CASE. 5. THE LEARNED CIT[A] WAS NOT JUSTIFIED IN LAW IN CONF IRMING THE DISALLOWANCE OF A SUM OF RS. 27 000/- BEING THE LOSS ON OBSOLESCENCE OF ASSETS UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED CIT[A] WAS NOT JUSTIFIED IN LAW IN REST RICTING THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT TO THE EXTENT OF RS. 116 50 20 511/- AS AGAINST THE ACTUAL CLAIM OF DEDUCTION BY THE APPELLANT UNDER SE CTION 80IA OF THE ACT OF RS. 192 41 42 979/- UNDER THE FACTS AND CIRCUMSTANCES O F THE CASE. FURTHER THE OBSERVATION BY THE LEARNED CIT[A] IS AGAINST THE PR INCIPLES OF JUDICIAL DISCIPLINE. WITHOUT PREJUDICE THE REDUCTION OF THE EXTENT OF DE DUCTION AMOUNTS TO DOUBLE DEDUCTION ONCE IN THIS IMPUGNED ASSESSMENT YEAR AND ONCE IN THE ASSESSMENT YEAR 2005-06. 7. [I] THE LEARNED CIT[A] FAILED TO APPRECIATE THAT L EVYING OF INTEREST UNDER SECTION 234 C OF THE ACT OF RS. 2 47 91 930/- IS NOT IN ACC ORDANCE WITH LAW SINCE THE INTEREST UNDER SECTION 234C OF THE ACT CAN ONLY BE LEVIED ON THE BASIS OF RETURNED INCOME. [II] WITHOUT PREJUDICE THE CALCULATION OF INTEREST UNDER SECTION 234C OF THE ACT SHOULD BE CALCULATED AFTER GIVING MAT CREDIT AS PER THE RATIO OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. TULSYAN NEC LTD. REPORTED IN 330 ITR 226. 5 ITA NO.711/BANG/2011 ADDITIONAL GROUNDS OF APPEAL 8. WITHOUT PREJUDICE THE APPELLANT DENIES ITSELF LIABL E TO BE TAXED UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT SINCE THE AP PELLANT IS AN ELECTRICITY COMPANY AND THE PROVISIONS OF PARTS II AND III OF SC HEDULE VI TO THE COMPANIES ACT 1956 ARE NOT APPLICABLE TO THE APPELLANT. 9. THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THA T THE PROVISIONS OF MAT IS NOT APPLICABLE TO THE APPELLANT SINCE THE APPELLANT IS ENGAGED IN THE GENERATION OR SUPPLY OF ELECTRICITY AND UNDER PROVISO TO SECTI ON 211[2] OF THE ACT THE APPELLANT IS EXEMPTED FROM PREPARING ITS BOOKS OF A CCOUNT IN TERMS OF REQUIREMENTS UNDER SCHEDULE VI TO THE COMPANIES ACT . 10. WITHOUT PREJUDICE THE APPELLANT DENIES ITSELF LIABL E TO BE ASSESSED AT RS. 489 64 56 372/- AS AGAINST THE REPORTED BOOK PROFIT S OF RS. 378 34 46 532/- UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. WITHOUT PREJUDICE THE LEARNED CIT[A] FAILED TO ADJU DICATE THE GROUND RAISED BY THE APPELLANT ON THE ISSUE OF ADDING BACK THE PROVI SIONS MADE BY THE APPELLANT TOWARDS GRATUITY OF RS. 5 68 29 195/-; LEAVE ENCASH MENT OF RS. 19 65 13 366/- AND PENSION OF RS. 85 47 82 708/- BEING ASCERTAINE D LIABILITY AND BASED ON ACTUARIAL VALUATION FOR THE PURPOSE OF COMPUTING TA X LIABILITY UNDER SECTION 115JB OF THE ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 12. THE APPELLANT CRAVES LEAVE TO ADD ALTER DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 13. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AND EQUITY. 4. THE GROUNDS RAISED AT S.NOS.1 2 12 AND 13 ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 5.0 LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION . 5.1 THE GROUND RAISED AT S.NO.3 IS WITH REGARD TO THE DISALLOWANCE OF AN AMOUNT OF RS.38 21 630 BEING LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THA T THE ASSESSEE HAD INCURRED LOSS ON ACCOUNT OF EXCHANGE FLUCTUATION IN RESPECT OF PAYME NT OF INTEREST TO THE BANK IN CONNECTION WITH 6 ITA NO.711/BANG/2011 THE LOAN TAKEN FOR SETTING UP OF DIESEL GENERATING STATION AT YELAHANKA WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. IN THIS REGARD THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V WOODWARD GOVERNOR INDIA (P) LTD. REPORTED IN 312 ITR 254. T HE LEARNED AUTHORISED REPRESENTATIVE CONTENDED THAT THE AUTHORITIES BELOW WERE NOT CORRE CT IN HOLDING THAT THE LOSS ON EXCHANGE FLUCTUATION BE CAPITALISED AND NOT BE TREATED AS RE VENUE EXPENDITURE. HE SUBMITTED THAT THE EXCHANGE LOSS WAS ON ACCOUNT OF REPAYMENT OF INTERE ST ON BANK LOAN TAKEN BY THE ASSESSEE AND THEREFORE NECESSARILY OUGHT TO BE TREATED AS REVENU E EXPENDITURE SINCE THERE IS NO ENDURING BENEFIT OBTAINED BY THIS TO THE ASSESSEE. 5.2 PER CONTRA THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THE ORDERS OF THE AUTHORITIES BELOW ARE IN ORDER SINCE THE LOSS ON EX CHANGE FLUCTUATION IS RESULTANT UPON THE PURCHASE OF ASSETS AND THEREFORE ANY LOSS OR GAIN O N ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION REQUIRES TO BE CAPITALISED. THE LEARNED DEPARTMENT AL REPRESENTATIVE FURTHER POINTED OUT THAT THE LEARNED CIT (APPEALS) HAS DIRECTED THE ASSESSIN G OFFICER TO ALLOW DEPRECIATION ON SUCH INCREASE IN THE VALUE OF ASSET. THE LEARNED DEPART MENTAL REPRESENTATIVE RELIED UPON AND PRAYED FOR CONFIRMATION OF THE ORDER OF THE LEARNED CIT (A PPEALS) ON THIS ISSUE. 5.3 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CARE FULLY CONSIDERED THE MATERIAL ON RECORD. ON AN APPRECIATION OF THE SAME WE FIND THAT THE FA CTS ARE NOT CLEAR AS TO WHETHER THE SAID EXCHANGE FLUCTUATION LOSS IS ON ACCOUNT OF PRE-SET UP EXPENDITURE OF THE YELAHANKA DIESEL GENERATING STATION OR IS IT A LOSS OF EXCHANGE FLUC TUATION ON ACCOUNT OF THE INTEREST PAYMENT ON THE LOAN TAKEN BY THE ASSESSEE ON SUCH INSTALLATION OF DIESEL GENERATION PLANT AT YELAHANKA. IN 7 ITA NO.711/BANG/2011 CASE THE EXCHANGE FLUCTUATION IS ON ACCOUNT OF PRE- SET UP EXPENDITURE THEN THE SAME REQUIRES TO BE CAPITALISED AND DEPRECIATION ALLOWED. IN THE EV ENT THE SAID EXCHANGE FLUCTUATION IS ON ACCOUNT OF PAYMENT OF INTEREST THEN THE SAME IS IN THE NATU RE OF REVENUE EXPENDITURE AND IS TO BE ALLOWED TO BE CHARGED TO THE PROFIT AND LOSS ACCOUN T. SINCE THE FACTUAL MATRIX IS NOT CLEARLY ASCERTAINABLE WE ARE OF THE VIEW THAT IT WOULD BE IN THE FITNESS OF THINGS TO REMAND THIS ISSUE TO THE FILE OF THE A.O. FOR PROPER EXAMINATION AND VER IFICATION THEREOF AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS / DOCUMENTS IN SUPPORT OF ITS CLAIM AND AS CALLED FOR BY THE A.O. IN THIS REGARD. IT IS ORDERED ACCORDINGLY. 6.0 DISALLOWANCE U/S.43B OF THE ACT. 6.1.1 GROUND NO.4 OF THIS APPEAL BY THE ASSESSEE IS IN RESPECT OF TH E UPHOLDING OF THE DISALLOWANCE U/S. 43B OF THE ACT TO THE EXTENT OF R S.3 18 05 492 BY THE LEARNED CIT (APPEALS) AS AGAINST THE ORIGINAL DISALLOWANCE OF RS.5 68 29 195 BY THE A.O. BEING THE PROVISION MADE BY THE ASSESSEE TOWARDS PAYMENT OF GRATUITY. THE LEAR NED AUTHORISED REPRESENTATIVE SUBMITTED THAT THOUGH TECHNICALLY THE LEARNED CIT (APPEALS) H AD ALLOWED THE ASSESSEE'S GROUND PARTLY TO THE EXTENT OF RS.2 50 23 703 (I.E. RS.5 68 29 195 L ESS RS.3 18 05 492) IT WAS DUE TO THE ASSESSEE'S ALTERNATE CLAIM THAT ATLEAST THE DEDUCTI ON U/S.43B OF THE ACT BE ALLOWED TO THE EXTENT OF ACTUAL PAYMENT OF GRATUITY MADE WITHIN TH E DUE DATE FOR FILING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. IN THIS REGARD T HE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE ORDER DT.30.3.2012 GIVING EFFE CT TO THE CIT(A)S ORDER DT.11.3.2011 (A COPY OF WHICH HAS BEEN PLACED BEFORE US). IN THIS ORDER THE ASSESSING OFFICER STATES THAT HE 8 ITA NO.711/BANG/2011 CANNOT GIVE EFFECT TO THE DIRECTIONS OF THE LEARNED CIT (APPEALS) SINCE NO ORDER FOR FRESH ASSESSMENT CAN BE MADE AS PER THE PROVISIONS OF SEC TIONS 250 AND 153 (2A) OF THE ACT. 6.1.2 THE LEARNED AUTHORISED REPRESENTATIVE CONTEND ED THAT SINCE THE ASSESSEE HAD MADE PROVISION TOWARDS PAYMENT OF GRATUITY AMOUNTING TO RS.5 68 29 195 AS PER THE PROVISIONS OF SECTION 40A(7)(B) OF THE ACT ON ACCRUAL BASIS THE ASSESSING OFFICER COULD NOT HAVE APPLIED THE PROVISIONS OF SECTION 43B OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE PROVISIONS OF SECTION 40A(7) OF THE ACT STATES THAT IF ANY CONTRIBUTION IS MADE TO AN APPROVED GRATUITY FUND AND THE SAME IS SHOWN AS A P ROVISION THEN BY VIRTUE OF THE PROVISIONS THEREOF THE SAME SHOULD BE ALLOWED AS A DEDUCTION. IN THIS CONTEXT THE PROVISIONS OF SECTION 43B OF THE ACT IS NOT OF ANY RELEVANCE. THE LEARNE D AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT V COMMON WEALTH TRUST (P) LTD REPORTED IN 269 ITR 290. 6.1.3 THE LEARNED AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT ALTERNATIVELY THE ASSESSEE HAS TO BE ALLOWED A DEDUCTION OF A SUM OF RS.2 50 23 402 UNDER SECTION 43B OF THE ACT BEING THE ACTUAL PAYMENT MADE BY THE ASSESSEE WITHI N THE DUE DATE FOR FILING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. THIS RELIE F IT IS SUBMITTED HAS BEEN REFUSED BY THE ORDER OF THE ASSESSING OFFICER DT.31.3.2012 GIVING EFFECT TO THE CIT(A)S ORDER IN SPITE OF THE LEARNED CIT (APPEALS)S DIRECTION TO THIS EFFECT. IN VIEW OF THE SUBMISSIONS MADE THE LEARNED AUTHORISED REPRESENTATIVE PLEADED THAT THE DISALLOW ANCE OF RS.5 68 29 195 UNDER SECTION 43B OF THE ACT ON ACCOUNT OF PROVISION TOWARDS GRATUITY BE DELETED. 9 ITA NO.711/BANG/2011 6.2 PER CONTRA THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THE PROVISIONS OF SECTION 43B OF THE ACT OVERRIDES THE PROVISIONS OF SECTION 40A(7)(B) OF THE ACT AND THEREFORE THE BENEFIT OF THE SAME BEING ALLOWED TO THE ASSESS EE CANNOT BE GRANTED. THE PROVISIONS OF SECTION 43B OF THE ACT ARE VERY CLEAR THAT CERTAIN EXPENDITURES ARE ALLOWED ONLY BASED ON ACTUAL PAYMENTS MADE WITHIN THE DUE DATE FOR FILING THE RE TURN OF INCOME AND WHICH HAS BEEN ALLOWED BY THE ORDER OF THE LEARNED CIT (APPEALS). THE LEARNE D DEPARTMENTAL REPRESENTATIVE PLACED SUPPORT ON THE ORDER OF THE LEARNED CIT (APPEALS) O N THIS ISSUE. 6.3.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS NOT DISPUTED THAT THE GRATUITY FUND OF THE ASSESSEE IS ONE APPROVED BY THE SCHEME OF THE ACT. IT IS SUBMITTED THAT THE ASSESSEE HAS MADE THE PROVISION FOR GRATUITY BASED ON THE ACTUAL VALUATION REPORT. AS CONTENDED BY THE ASSES SEE WE FIND THAT THE PROVISIONS OF SECTION 40A(7)(B) OF THE ACT IS APPLICABLE TO THE FACTS OF THE CASE ON HAND AS IS THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF COMMON WEA LTH TRUST (P) LTD. (SUPRA) WHICH IS SQUARELY APPLICABLE TO THE ASSESSEE'S CASE. THE AFORECITED CASE (SUPRA) ALSO MANDATES THAT A HARMONIOUS CONSTRUCTION OF SECTION 40A(7)(B) AND 43B OF THE AC T INDICATE THAT THE LEGISLATURE NEVER INTENDED THAT THE PROVISIONS OF SECTION 43B OF THE ACT OVERRIDE THE PROVISIONS OF SECTION 40A(7)(B) OF THE ACT. THE RELEVANT OBSERVATIONS OF THE HONBLE KERALA HIGH COURT IN THE CASE OF COMMON WEALTH TRUST (P) LTD (SUPRA) AT PAGE 308 IS EXTRACTED AND REPRODUCED HEREUNDER : AS ALREADY NOTED SECTION 40A(7) CLAUSE (B) SUB- CLAUSE (I) THEREOF IS A SPECIAL PROVISION IN REGARD TO A CLAIM FOR DEDUCTION BASED ON A PROVISION MADE FOR PAYMENT TOWARDS AN APPROVED GRATUITY FUND. GOING BY THE P RINCIPLES LAID DOWN BY THE SUPREME COURT IN THE DECISIONS DISCUSSED ABOVE WE ARE OF T HE VIEW THAT THERE IS NO CLEAR INCONSISTENCY BETWEEN THE TWO PROVISIONS VIZ. SEC TION 40A(7) AND SECTION 43B. SECTION 40A(7) IS IN NEGATIVE TERMS AND SECTION 43B IS IN POSITIVE TERMS THE EFFECT 10 ITA NO.711/BANG/2011 OF BOTH THESE PROVISIONS IS THAT IN ORDER TO CLAIM DEDUCTION IN RESPECT OF PAYMENT TO A GRATUITY FUND THERE MUST BE ACTUAL PAYMENT AND TH AT DEDUCTION CANNOT BE ALLOWED ON THE BASIS OF ANY PROVISION. THE ONLY EXCEPTION TO THE ABOVE RULE IS WITH REGARD TO THE PROVISION FOR PAYMENT TO AN APPROVED GRATUITY F UND. IT CANNOT BE INTERPRETED THAT THE LATER PROVISION IN SECTION 43B BY INTRODUC ING THE NON-OBSTANTE CLAUSE WOULD ABROGATE THE SPECIAL PROVISION WITH REGARD TO THE P ROVISION MADE FOR PAYMENT TO AN APPROVED GRATUITY FUND CONTAINED IN SECTION 40A(7)( B)(I). THIS IS ALL THE MORE SO SINCE NO PATENT CONFLICT OR INCONSISTENCY CAN BE SPELT OU T. BOTH THE PROVISIONS CAN CO-EXIST. A HARMONIOUS CONSTRUCTION OF THE AFORESAID TWO PROV ISIONS WOULD CLEARLY INDICATE THAT THE LEGISLATURE NEVER INTENDED TO TAKE AWAY THE BEN EFIT CONFERRED UNDER CLAUSE (B) OF SECTION 40A(7) BY THE PROVISIONS OF SECTION 43B( B) OF THE ACT. 6.3.2 FOLLOWING THE AFORECITED DECISION OF THE HON BLE KERALA HIGH COURT (SUPRA) AND THE OBSERVATIONS THEREIN WE ARE OF THE CONSIDERED OPIN ION THAT THE PROVISION OF RS.5 68 29 195 MADE BY THE ASSESSEE IS TO BE ALLOWED SINCE THE SAME ARE GOVERNED BY THE PROVISIONS OF SECTION 40A(7)(B) OF THE ACT. THE A.O. IS DIRECTED TO ALLO W THE ASSESSEE'S CLAIM OF PROVISION FOR GRATUITY AFTER VERIFYING WHETHER THE PROVISION MADE BY THE ASSESSEE IS TO AN APPROVED GRATUITY FUND OR NOT. IN CASE THE SAID GRATUITY IS APPROVED THEN THE PROVISION IS TO BE ALLOWED. IN THE EVENT THE SAID GRATUITY FUND IS NOT AN APPROVED ONE THEN AS PER THE PROVISOS TO SECTION 43B OF THE ACT DEDUCTION IS TO BE ALLOWED TO THE EXTENT O F ACTUAL PAYMENTS TOWARDS GRATUITY UP TO THE DUE DATE FOR FILING THE RETURN OF INCOME U/S.139(1) OF THE ACT I.E. RS.2 50 23 703. IN THIS VIEW OF THE MATTER THIS GROUND / ISSUE IS REMANDED TO T HE FILE OF THE A.O. FOR EXAMINATION AND VERIFICATION IN THE LIGHT OF OUR OBSERVATIONS AND T O PASS ORDERS ACCORDINGLY AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS IN THIS REGARD. THUS GROUND NO.4 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSES. 11 ITA NO.711/BANG/2011 7. DISALLOWANCE OF LOSS ON OBSOLESCENCE OF ASSETS RS.27 000 . 7.1 GROUND NO.5 IS RAISED IN RESPECT OF THE DISALLOWANCE OF AN AMO UNT OF RS.27 000 ON ACCOUNT OF LOSS ON OBSOLESCENCE OF ASSETS. IN THIS REGARD THE LEARNED AUTHORISED REPRESENTATIVE QUESTIONED THE JUSTIFICATION OF THE AUTHORITIES BEL OW IN DISALLOWING AND SUSTAINING THE DISALLOWANCE ON ACCOUNT OF LOSS ON OBSOLESCENCE OF ASSETS. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THIS LOSS AROSE ON A CCOUNT OF RENOVATION OF THE INSPECTION BUNGALOW AT GANESHGUDI HYDRO GENERATING SYSTEM WHIC H WAS DEBITED IN THE BOOKS OF THE ASSESSEE AS OBSOLESCENCE OF ASSETS. IT IS SUBMITTE D THAT IN SUCH A HUGE ORGANIZATION AS THAT OF THE ASSESSEE SUCH LOSSES ON OBSOLESCENCE OF ASSETS IS VERY COMMON AND THEREFORE PLEADED THAT THE ASSESSEE'S CLAIM BE ALLOWED. 7.2 PER CONTRA THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOT ALLOWED THE ASSESSEE'S CLAIM FOR DEDUCTION OF THE LOSS ON OBSOLESCENCE OF ASSETS UNDER SECTION 37(1) OF THE A CT HOLDING IT TO BE CAPITAL IN NATURE. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE WAS UNABL E TO BRING ON RECORD ANY COGENT EVIDENCE TO SUBSTANTIATE ITS CLAIM AND CONTROVERT THE FINDING O F THE ASSESSING AUTHORITY. IN THIS VIEW OF THE MATTER WE DISMISS GROUND NO.5 RAISED BY THE ASSESS EE. 8.0 DEDUCTION U/S.80-IA OF THE ACT . 8.1.1 GROUNDNO.6 RAISED BY THE ASSESSEE CHALLENGES THE ACTION OF THE AUTHORITIES BELOW IN RESTRICTING THE DEDUCTION U/S.80-IA OF THE ACT TO R S.1 16 50 20 511 AS AGAINST THE ASSESSEE'S 12 ITA NO.711/BANG/2011 CLAIM OF RS.1 92 41 42 979. THE LEARNED AUTHORISED REPRESENTATIVE CONTENDED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN RESTRICTING THE ASSESSEE'S CLAIM FOR DEDUCTION U/S.10A OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE SUB MITTED THAT THE ASSESSEE HAS SEVEN ELIGIBLE UNITS / UNDERTAKINGS CLAIMING DEDUCTION U/S.10A OF THE ACT NAMELY; KADRA KODASALLI BADHRA RIGHT BANK CANAL POWER HOUSE (BRBCPH) RAICHUR THER MAL POWER STATION UNITS 5 6 & 7 GERUSOPPA & ALMATTI DAM POWER HOUSE (ADPH). IT IS SUBMITTED THAT EACH OF THESE UNITS HAD COMMENCED GENERATION OF POWER ON DIFFERENT DATES; E ACH OF THESE UNITS / UNDERTAKINGS IS A SEPARATE UNIT / UNDERTAKING ELIGIBLE FOR DEDUCTION U/S.80-IA OF THE ACT AND THAT SEPARATE BOOKS OF ACCOUNT AND AUDIT REPORT IS FURNISHED FOR EACH O F THEM IN RESPECT OF WHICH THE SAID DEDUCTION IS CLAIMED. 8.1.2 THE LEARNED AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT ALL THE SEVEN ELIGIBLE UNITS HAD GENERATED PROFITS TO THE EXTENT OF RS.218 49 77 640 IN THE PERIOD UNDER CONSIDERATION OUT OF WHICH RS.26 08 34 661 HAS BEEN SET OFF AGAINST B ROUGHT FORWARD LOSSES OF THE RESPECTIVE INDIVIDUAL UNITS I.E. KADRA KODISALLI AND BRBCPH AND THE BALANCE UNABSORBED LOSSES OF THE SE THREE UNITS AMOUNTING TO RS.75 91 22 468 HAS BEEN C ARRIED FORWARD. THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR WHEREIN THE DETAILS OF THE COMPUTATION OF THE ASSESSEE'S CLAIM FOR DEDUCTION U/S.80-IA OF THE ACT WHICH WAS ALSO PLAC ED BEFORE THE AUTHORITIES BELOW AND ARE AS UNDER : 13 ITA NO.711/BANG/2011 ELIGIBLE UNITS B/F LOSS CURRENT YEAR PROFIT C/F LOSS DEDUCTION U/S.80 IA KADRA (66 19 71 846) 13 37 41 673 (52 82 30 173) KODASALLI (35 26 78 849) 12 17 86 554 (23 08 92 295) BRBCPH (53 06 434) 1 89 49 527 0 1 36 43 093 RTPS UNIT 5 & 6 0 46 65 07 988 0 46 65 07 988 RTPS 7 0 7 62 24 166 0 7 62 24 166 GERUSOPPA 0 94 40 82 822 0 94 40 82 822 ADPH 0 4 236 84 910 0 42 36 84 910 TOTAL : (101 99 57 129) 2 18 49 77 640 (75 91 22 468) 1 92 41 42 979 IN THIS REGARD THE LEARNED AUTHORISED REPRESENTATI VE CONTENDED THAT THE AUTHORITIES BELOW ERRED IN SETTING OFF THE ENTIRE LOSSES OF KADRA AND KODASALLI UNITS WITH THE PROFITS OF OTHER ELIGIBLE UNITS AND IN HOLDING THAT OUT OF THE SEVEN UNITS THE ASSESSEE HAD PROFITS IN FIVE UNITS AND LOSSES IN TWO UNITS. IT IS CONTENDED BY THE LEARNE D AUTHORISED REPRESENTATIVE THAT THE VIEW OF THE AUTHORITIES BELOW THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80-IA OF THE ACT IN RESPECT OF ONLY THE PROFITS OF FIVE UNITS AND HAS IGNORED T HE LOSSES OF OTHER TWO UNITS TO THE TUNE OF RS.75 91 23 468 IS AN INCORRECT APPRECIATION OF TH E PROVISIONS OF THE STATUTE AND METHOD PRESCRIBED THEREIN FOR COMPUTING THE ELIGIBLE DEDUC TION U/S.80-IA OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT TH E JUDICIAL DECISIONS RELIED ON BY THE LEARNED CIT (APPEALS) ARE NOT APPLICABLE TO THE FACTS OF TH E CASE ON HAND AND ARE RATHER WITH REGARD TO THE COMPUTATION OF THE GROSS TOTAL INCOME OF A BUSI NESS; WHICH HAS ALSO BEEN FOLLOWED BY THE ASSESSEE WHILE ARRIVING AT ITS OWN GROSS TOTAL INCO ME. 8.1.3 THE LEARNED AUTHORISED REPRESENTATIVE SUBMITS THAT THE A.O. AND LEARNED CIT (APPEALS) HAD TOTALLY MISGUIDED THEMSELVES IN RESPECT OF THE CORE ISSUE OF COMPUTATION OF THE ELIGIBLE DEDUCTION U/S.80-IA OF THE ACT. IN SUPPORT OF THE PROPOSITION PUT FORTH THAT IN CASE THERE IS A 14 ITA NO.711/BANG/2011 LOSS IN A UNIT / UNDERTAKING THEN IT WILL NOT BE S ET OFF AGAINST THE PROFIT OF ANOTHER UNDERTAKING THOUGH THE SAID LOSS OF THE UNIT / UNDERTAKING WILL BE ADJUSTED AGAINST THE PROFIT OF THAT UNIT / UNDERTAKING IN THE SUBSEQUENT YEAR IN CASE DEDUCTIO N U/S.80-IA OF THE ACT IS CLAIMED IN RESPECT OF THAT UNIT; THE LEARNED AUTHORISED REPRESENTATIVE RELIED ON THE FOLLOWING JUDICIAL DECISIONS :- I) CIT V MODI XEROX LTD. (41 DTR 53) (ALL) II) CIT V SONA KOYO STEERING SYSTEMS LTD. (35 DTR 2 73) (DEL) III) SYNCO INDUSTRIES LTD. (299 ITR 444) (SC) IV) CIT V DEWAN KRAFT SYSTEMS (P) LTD (279 ITR 305) (DEL) V) ITAT SPECIAL BENCH DECISION IN THE CASE OF CIT V GOLDMINE SHARES & FIN (P) LTD (113 ITD 209); AND VI) THE DECISION OF A CO-ORDINATE BENCH OF THIS TRI BUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2005-06 (ITA NO.294/BANG/2009 DT.10 .7.2009). THUS THE LEARNED AUTHORISED REPRESENTATIVE SUBMITS THAT THE ASSESSEE HAS CORRECTLY CLAIMED THE DEDUCTION U/S.80-IA OF THE ACT WITHOUT ADJUSTI NG THE BROUGHT FORWARD LOSSES OF THE ELIGIBLE UNDERTAKINGS AGAINST THE PROFITS OF OTHER ELIGIBLE UNDERTAKINGS. 8.1.4 THE LEARNED AUTHORISED REPRESENTATIVE ALSO ST RONGLY OBJECTED TO THE OBSERVATIONS OF THE AUTHORITIES BELOW [PARA 8.1 OF THE ORDER OF THE CIT (A)] THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL WAS MISGUIDED ON FACTS WHILE RENDERING ITS DECISION IN THE ASSESSEE'S CASE FOR ASSESSMENT YEAR 2005-06 (SUPRA). IT IS SUBMITTED T HAT ALL THE FACTS WERE PART OF THE RECORD OF THE AUTHORITIES BELOW AND THAT THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL FOR 15 ITA NO.711/BANG/2011 ASSESSMENT YEAR 2005-06 IN THE ASSESSEE'S OWN CASE WAS RENDERED ONLY AFTER A PROPER APPRECIATION OF THE FACTS OF THE CASE. 8.1.5 THE LEARNED AUTHORISED REPRESENTATIVE SUBMITT ED THAT IF THE VIEW OF THE REVENUE AS REGARDS THE METHOD AND COMPUTATION OF DEDUCTION U/S .80-IA OF THE ACT HAD BEEN CONSIDERED BY THE AUTHORITIES BELOW THEN FOR ASSESSMENT YEAR 200 7-08 THE AUTHORITIES BELOW OUGHT TO HAVE GRANTED THE ENTIRE AMOUNT OF RS.218 49 77 640 AS DE DUCTION U/S.80-IA OF THE ACT SINCE THE ENTRIES CARRY FORWARD LOSSES OF THE ELIGIBLE UNITS HAD ALREADY BEEN ADJUSTED BY THE AUTHORITIES BELOW IN ASSESSMENT YEAR 2005-06 ITSELF. IT WAS FU RTHER CONTENDED THAT IN COMPUTING THE DEDUCTION FOR ASSESSMENT YEAR 2006-07 THE AUTHORIT IES BELOW TAKING ASSESSMENT YEAR 2005- 06 AS THE BASE HAD ERRONEOUSLY ADJUSTED A SUM OF RS .101 99 57 129 WHICH HAD ALREADY BEEN ADJUSTED IN EARLIER ASSESSMENT YEARS THEREBY LEADI NG TO ADJUSTMENT / SET OFF OF THE SAME LOSSES TWICE. 8.1.6 THE LEARNED AUTHORISED REPRESENTATIVE SUBMITT ED THAT THE RATIO OF THE DECISIONS CITED AND THE PRINCIPLES INVOLVED THEREIN ARE ALL APPLICA BLE TO THE FACTS OF THE CASE ON HAND. FURTHER THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THA T FOR THE PURPOSES OF COMPUTING THE GROSS TOTAL INCOME THE LOSSES OF OTHER UNITS ARE TO BE T AKEN INTO ACCOUNT BUT FOR THE PURPOSES OF CALCULATING THE DEDUCTION U/S.80-IA OF THE ACT OF A N ELIGIBLE INDUSTRIAL UNDERTAKING THE LOSS SUSTAINED IN ANOTHER UNIT CANNOT BE CONSIDERED AND ONLY THE PROFIT SHOULD BE TAKEN INTO ACCOUNT AS IF IT IS THE ONLY SOURCE OF INCOME OF THAT ELIGI BLE UNIT / UNDERTAKING. IN VIEW OF THE ABOVE THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT T HE CARRY FORWARD OF LOSSES OF OTHER ELIGIBLE UNITS IN THE CASE ON HAND I.E. THE UNADJUSTED BROU GHT FORWARD LOSSES OF KADRA KODASALLI AND 16 ITA NO.711/BANG/2011 BRBCPH UNITS AMOUNTING TO RS.75 91 22 468 SHOULD NO T BE CONSIDERED FOR THE PURPOSES OF CALCULATING THE DEDUCTION U/S.80-IA OF THE ACT FOR THE OTHER ELIGIBLE UNDERTAKINGS. IN KEEPING WITH THE ARGUMENTS PUT FORTH ABOVE THE LEARNED AUT HORISED REPRESENTATIVE PRAYED FOR ALLOWING THE ENTIRE CLAIM OF THE ASSESSEE'S DEDUCTION U/S.8 0-IA OF THE ACT I.E. RS.192 41 42 979 AS AGAINST THE DEDUCTION OF RS.116 50 20 511 ALLOWED B Y THE AUTHORITIES BELOW. 8.2 PER CONTRA THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUPPORTED THE ORDERS OF THE LEARNED CIT (APPEALS) AND SUBMITTED THAT THE METHOD OF COMPUTATION OF THE ALLOWABLE DEDUCTION U/S.80-IA OF THE ACT IS IN ACCORDANCE WITH LAW. TH E LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THE HONBLE KARN ATAKA HIGH COURT IN THE CASE OF CIT V R.P.G TELECOM LTD. REPORTED IN 160 TAXMAN 365 (KAR) IN SU PPORT OF THE CONTENTION THAT WHILE CALCULATING THE GROSS TOTAL INCOME OF THE COMPANY ONE HAS TO ADJUST THE LOSSES OF ONE PRIORITY UNIT AGAINST THE PROFITS OF THE OTHER PRIORITY UNIT AND IF THE RESULTANT GROSS TOTAL INCOME IS NIL THEN THE ASSESSEE CANNOT CLAIM DEDUCTION UND ER CHAPTER VI-A. THUS THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED AND PLACED RE LIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 8.3 IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE SAID CASE CITED BY REVENUE (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE ON HAND AND PLACED RELIANCE ON THE VARIOUS JUDICIAL DECISIONS CITED BY HIM IN HIS EARL IER SUBMISSIONS; MORE SO ON THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2005-06 (SUPRA) WHICH WAS HELD IN FAVOUR OF THE ASSESSEE BY A CO-ORDINATE BENCH OF THIS TRIBUNAL. 17 ITA NO.711/BANG/2011 8.4.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE ISSUE BEFORE US FOR ADJUDICATION IS WH ETHER IN COMPUTING THE ELIGIBLE DEDUCTION U/S.80-IA OF THE ACT THE ASSESSEE HAS TO FIRST SET OFF BROUGHT FORWARD LOSSES OF AN ELIGIBLE UNDERTAKING AGAINST THE PROFITS OF THE OTHER ELIGIB LE UNITS / UNDERTAKINGS. THERE IS NO DISPUTE THAT IT IS A SETTLED PRINCIPLE OF LAW AS LAID DOWN BY VARIOUS JUDICIAL PRONOUNCEMENTS THAT THE GROSS TOTAL INCOME OF THE ASSESSEE HAS TO BE FIRST DETERM INED AFTER ADJUSTING / SETTING OFF OF LOSSES ETC. AND IF AFTER THAT THE GROSS TOTAL INCOME OF T HE ASSESSEE IS NIL THEN THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTION UNDER CHAPTER VIA OF T HE ACT. THE ASSESSEE IN THE CASE ON HAND DOES NOT DISPUTE THIS PROPOSITION OF LAW AND THE O NLY GRIEVANCES OF THE ASSESSEE IN THE PRESENT APPEAL IS WITH REGARD TO THE COMPUTATION OF THE CLA IM OF ELIGIBLE DEDUCTION U/S.80-IA OF THE ACT. 8.4.2 IT IS SEEN FROM THE AFORESAID JUDICIAL PRONOU NCEMENTS RELIED ON BY THE LEARNED AUTHORISED REPRESENTATIVE THAT IT IS CLEAR THAT FOR THE PURPOS E OF COMPUTATION OF GROSS TOTAL INCOME THE LOSSES OF OTHER UNITS ARE TO BE TAKEN INTO ACCOUNT. HOWEVER FOR THE PURPOSES OF CALCULATING THE DEDUCTION OF AN ELIGIBLE UNIT / UNDERTAKING U/S.80- IA OF THE ACT THE LOSS SUSTAINED IN ANOTHER UNIT / UNDERTAKING CANNOT BE TAKEN INTO ACCOUNT AND IT IS ONLY THE PROFIT THAT SHALL BE TAKEN INTO ACCOUNT AS IF IT WAS THE ONLY SOURCE OF INCOME OF T HAT UNIT. IN THE CASE ON HAND WE FIND FROM THE COMPUTATION OF TOTAL INCOME THAT THE ASSESSEE HAS A GROSS TOTAL INCOME OF RS.410 35 84 105 WHICH IS PARA MATERIA WITH THE DECISION OF THE HON' BLE APEX COURT IN THE CASE OF SYNCO INDUSTRIES LTD (299 ITR 444). IN VIEW OF THE FACT THAT THERE IS POSITIVE GROSS TOTAL INCOME THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S.80-IA O F THE ACT. FOR THIS PURPOSE THE ASSESSEE HAS TO COMPUTE THE CLAIM OF DEDUCTION OF EACH ELIGIBLE UNIT / UNDERTAKING AS IF IT IS THE ONLY SOURCE 18 ITA NO.711/BANG/2011 OF INCOME FROM SUCH ELIGIBLE UNDERTAKING AND WITHOU T ANY SETTING OFF OF UNADJUSTED BROUGHT FORWARD LOSSES OF OTHER ELIGIBLE UNDERTAKINGS. WE FIND FROM THE RECORD THAT THE COMPUTATION OF THE ELIGIBLE DEDUCTION U/S.80-IA OF THE ACT BY THE ASSESSEE IS IN ACCORDANCE WITH THE PROCEDURE LAID DOWN AND IS THEREFORE ENTITLED TO CLAIM AND BE ALLOWED DEDUCTION U/S.80-IA OF THE ACT TO THE EXTENT OF RS.192 41 42 979 CLAIMED BY IT AS AGA INST RS.116 50 20 511 ALLOWED BY THE AUTHORITIES BELOW. EVEN OTHERWISE IF AT ALL FOR A RGUMENTS SAKE REVENUES VIEW / FINDING IS TO BE CONSIDERED AS CORRECT THEN AS POINTED OUT BY THE L EARNED AUTHORISED REPRESENTATIVE THE ENTIRE BROUGHT FORWARD LOSSES OF THE ELIGIBLE UNITS HAVE A LREADY BEEN FULLY ADJUSTED IN ASSESSMENT YEAR 2005-06 AND THEREFORE THE SET OF THE LOSSES OF ELIG IBLE UNITS CANNOT BE ONCE AGAIN SET OFF OF IN ASSESSMENT YEAR 2007-08; I.E. THE YEAR UNDER CONSID ERATION. WE ARE IN AGREEMENT WITH THE FINDING OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2005-06 IN ITA NO.294/BANG/2009 DT.10.7.2009 AND AC CORDINGLY DIRECT THE A.O. TO ALLOW THE ASSESSEE'S CLAIM FOR DEDUCTION U/S.80-IA OF THE ACT AMOUNTING TO RS.192 41 42 979. IT IS ORDERED ACCORDINGLY. CONSEQUENTLY GROUND NO.6 RAIS ED BY THE ASSESSEE IS ALLOWED. 9.1 THE GROUNDS AT S.NOS.7(I) AND 7(II) IS IN RESPECT OF THE CHARGING OF INTEREST UNDER SE CTION 234C OF THE ACT. THE CHARGING OF INTEREST IS CONSE QUENTIAL AND MANDATORY AND THE ASSESSING OFFICER HAS NO DISCRETION IN THE MATTER. THE ASSES SING OFFICER IS DIRECTED TO RECOMPUTE THE INTEREST CHARGEABLE IF ANY UNDER SECTION 234C OF THE ACT WHILE GIVING EFFECT TO THIS ORDER AFTER TAKING INTO ACCOUNT THE DECISIONS OF THE HON' BLE APEX COURT IN CIT V TULSYAN NEC LTD. (330 ITR 226) AND ROLTA INDIA LTD. (320 ITR 470) ON THE ISSUE OF MAT CREDIT. 19 ITA NO.711/BANG/2011 ADDITIONAL GROUNDS OF APPEAL 10.1 IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE ASSESSEE FILED A PETITION FOR ADMISSION OF ADDITIONAL GROUNDS SUBMITTING THAT THE Y DO NOT INVOLVE THE INVESTIGATION OF ANY FACTS OTHER THAN THOSE ON THE RECORD OF THE DEPARTMENT AN D ARE ALSO PURE QUESTIONS OF LAW. IT IS PRAYED BY THE LEARNED AUTHORISED REPRESENTATIVE THA T THE ADDITIONAL GROUNDS BE ADMITTED AND DISPOSED OFF ON MERITS FOR THE ADVANCEMENT OF SUBST ANTIAL CAUSE OF JUSTICE. IN THIS REGARD THE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE O N THE FOLLOWING JUDICIAL DECISIONS :- (I) NTPC LTD. V CIT (229 ITR 383) (SC) (II) GUNDATHUR THIMMAPPA & SONS V CIT (70 ITR 70) ( MYSORE) 10.2 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE. WE FIND THAT THE ADDITIONAL GROUNDS RAI SED ARE PURELY LEGAL IN NATURE AND PRIMA FACIE WOULD NOT INVOLVE THE INVESTIGATION OF FACTS OTHER THAN THOSE ON THE RECORDS OF REVENUE. IN THIS VIEW OF THE MATTER AND IN THE INTEREST OF EQUITY A ND JUSTICE THE ADDITIONAL GROUNDS BY THE ASSESSEE AND LISTED AT S. NOS.8 TO 13 OF THE CONCIS E GROUNDS OF APPEAL ARE ADMITTED FOR ADJUDICATION. THESE GROUNDS WILL NOW BE DISPOSED H EREUNDER IN SERIATIM. 11.1 GROUND NOS.8 AND 9 RAISED BY THE ASSESSEE IS IN RESPECT OF THE VERY A PPLICABILITY OF THE PROVISIONS OF SECTION 115JB OF THE ACT TO THE ASSE SSEE SINCE THE ASSESSEE BEING AN ELECTRIC COMPANY THE PROVISIONS OF PARTS II AND III OF SCHE DULE VI TO THE COMPANIES ACT 1956 ARE NOT APPLICABLE. IN THIS REGARD THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE NEWLY INSERTED EXPLANATION 3 TO SECTION 115JB(2) OF THE A CT (INSERTED BY FINANCE ACT 2012 W.E.F. 1.4.2013) IS VERY CLEAR THAT THE PROVISIONS OF SECT ION 115JB OF THE ACT IS NOT APPLICABLE TO 20 ITA NO.711/BANG/2011 COMPANIES ENGAGED IN THE GENERATION OF POWER PRIOR TO 1.4.2013. THIS MEANS THAT THE ASSESSEE BEING IN THE BUSINESS OF GENERATION OF POWER PRIOR TO ASSESSMENT YEAR 2013-14 THE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPLICABLE TO I T AND SINCE THE ASSESSEE BEING A COMPANY TO WHICH THE PROVISO TO SECTION 211(2) OF THE COMPANIE S ACT 1956 APPLIES IT WILL NOT BE LIABLE TO TAX UNDER SECTION 115JB OF THE ACT. IN THIS CONTEXT T HE LEARNED AUTHORISED REPRESENTATIVE PLACED RELIANCE ON THE PARITY OF REASONING OF THE FOLLOWIN G TRIBUNAL DECISIONS :- I) STATE BANK OF HYDERABAD V DCIT (ITA NO.578 & 579 /HYD/2010 DT.7.9.2012); AND II) DECISION OF THE CO-ORDINATE BENCH OF ITAT BANG ALORE IN THE CASE OF SYNDICATE BANK V DCIT (ITA NOS.668 AND 669/BANG/2010 AND 708 & 709/BANG/2 010 DT.19.6.2013.) 11.2.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IN THE CASE ON HAND IS AN ELECTRIC COMPANY ENGAGED IN THE GENERATION OF POWER. THE PROVISIONS OF SECTION 115 JB(2) READ AS UNDER : EVERY ASSESSEE BEING A COMPANY SHALL FOR THE PU RPOSES OF THIS SECTION PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS Y EAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO TH E COMPANIES ACT 1956 (1 OF 1956). THE ASSESSEE IN THE CASE ON HAND HOWEVER DOES NO T HAVE TO PREPARE ITS ACCOUNTS IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT 1956 BY VIRTUE OF PROVISO TO SECTION 211(2) THERETO. THE PROVISO TO SECTION 211 (2) OF THE COMPANIES ACT 1956 READS AS UNDER : PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTIO N SHALL APPLY TO ANY INSURANCE OR BANKING COMPANY OR ANY COMPANY ENGAGED IN THE GENER ATION OR SUPPLY OF ELECTRICITY OR TO ANY OTHER CLASS OF COMPANY FOR WHICH THE FORM OF PROFIT AND LOSS ACCOUNT HAS BEEN SPECIFIED IN OR UNDER THE ACT GOVERNING SUCH CLASS OF COMPANY. 21 ITA NO.711/BANG/2011 11.2.2. AS CONTENDED BY THE LEARNED AUTHORISED REP RESENTATIVE THE NEWLY INSERTED EXPLANATION - 3 TO SECTION 115JB OF THE ACT IS CLEA R THAT THE ASSESSEE IS GIVEN AN OPTION TO PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVAN T PREVIOUS YEAR EITHER IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI OF T HE COMPANIES ACT 1956 OR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPA NY W.E.F. 1.4.2013. SINCE THERE IS NO DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE GENERATION OF P OWER AND IN AN ELECTRICITY COMPANY IT IS GOVERNED BY AND BOUND TO FOLLOW THE RELEVANT ELECTR ICITY ACT AND RULES THERETO IN PREPARATION OF ITS FINANCIAL STATEMENTS. IN THIS VIEW OF THE MATT ER AND TAKING INTO CONSIDERATION THE JUDICIAL DECISIONS CITED AND RELIED UPON BY THE ASSESSEE WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ARE NOT APPL ICABLE TO THE ASSESSEE WHICH IS AN ELECTRIC COMPANY IN THE BUSINESS OF GENERATION OF POWER. IN THIS VIEW OF THE MATTER THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE ON THE NON -APPLICABILITY OF THE PROVISIONS OF SECTION 115JB OF THE ACT IS ALLOWED. 12. IN GROUND NOS.10 AND 11 THE ISSUE RAISED IS IN RESPECT TO THE NON-ADJUDIC ATION BY THE LEARNED CIT (APPEALS) OF THE GROUND RAISED BY THE A SSESSEE ON THE ISSUE OF ADDING BACK THE PROVISIONS MADE BY THE ASSESSEE TOWARDS GRATUITY OF RS.5 68 29 195 LEAVE ENCASHMENT OF RS.19 65 13 366 AND PENSION OFRS.85 47 82 708 BEING ASCERTAINED LIABILITY AND BASED ON ACTUARIAL VALUATION FOR THE PURPOSE OF COMPUTING TAX LIABILIT Y UNDER SECTION 115JB OF THE ACT. IN THE PRESENT CONTEXT OF THE CASE THIS ISSUE BECOMES ACA DEMIC IN NATURE SINCE WE HAVE HELD THAT THE PROVISIONS OF SECTION 115JB OF THE ACT ITSELF IS NO T APPLICABLE TO THE INSTANT CASE. IN THE EVENT OF THE ISSUE OF THE APPLICABILITY OF MAT IS REVERSE D BY ANY HIGHER JUDICIAL FORUM THEN THIS ISSUE 22 ITA NO.711/BANG/2011 HAS TO BE LOOKED INTO BY THE CIT (APPEALS) AND HENC E IN SUCH CONTINGENCY THE MATTER IS RESTORED TO THE FILE OF THE CIT (APPEALS) WITH ALL CONTENTIO NS OPEN AS TO WHETHER THE PROVISIONS FOR GRATUITY LEAVE ENCASHMENT AND PENSION ARE ASCERTAI NED LIABILITY OR NOT. THIS ISSUE IS THEREFORE RESTORED TO THE FILE OF THE CIT (APPEALS) AS INDICA TED ABOVE. 13. IN THE RESULT THE ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 1 TH OCTOBER 2013. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE. (TRUE COPY ) BY ORDE R ASST. REGISTRAR ITAT BANGALORE