These are cross-appeals filed by the assessee and the Revenue respectively, directed against the orders of the Commissioner of Income-tax (Appeals)-I, Madurai, for respective assessment years. The appeals of the Revenue are taken up first for disposal.
There is only one effective ground taken by the Revenue for all these years. Such ground for the assessment years 2002-03, 2003-04, 2005-06 and 2006-07 assails allowance given to the assessee under section 80- IB of the Act, despite its income being in the negative after set-off of the losses of other units. The ground taken by the Revenue for the assessment years 2007 -08 and 2008-09 assails the direction given by the Commissioner of Income-tax (Appeals) to allow the assessee deduction under section 80- IA on windmills, treating it as only source of income, without adjusting earlier year's losses. The ground relating to appeals for the assessment years 2002- 03, 2004-05 and 2006-07 are taken up first.
The facts apropos are that the Assessing Officer denied the assessee deduction claimed under section 80- IA for a reason that once inter se adjustment with losses in units, on which there was no 80- IA claim was done, there was nothing left for granting such deduction. Though the assessee relied on the decision of the hon'ble apex court in the case of CIT v. Canara Workshops P. Ltd. [1986] 161 1TR 320 (SC), the Assessing Officer was not impressed. According to the Assessing Officer, the assessee had incurred loss in aluminium alloy h"1got plant and such loss had to be adjusted against profits of pyrotechnic aluminium powder unit and once the adjustment was carried out, the result was still a loss and hence deduction under section 80- IA could not be allowed.
In its appeal before the Commissioner of Income-tax (Appeals), argument of the assessee was that separate accounts were maintained for various units and, each unit had to be considered as a separate undertaking. According to the assessee, deduction under sections 80- IA and 80- IB were available for the undertaking as a whole and there was no requirement for setting off of losses with profits of various units. The Commissioner of Income-tax (Appeals) agreed to this submission of the assessee. According to him though the honlble jurisdictional High Court in the case of CIT v. Sundaravel Match Industries P. Ltd. [2000] 245 ITR 605 (Mad) had held that loss in one undertaking was to be adjusted against profits of another undertaking and net amount alone was to be considered for deduction under section 80HH of the Act, in a later decision in the case of CIT v. MEPCO Industries Ltd. [2007] 294 ITR 121 (Mad) it was held that such deduction could be worked out independently without effecting any inter se adjustment of losses and profit between various units.
5 Now before us, the learned Departmental representative, assailing the orders of the Commissioner of Income-tax (Appeals) for these assessment years, submitted that deduction could be allowed only after setting off of profits and losses of various undertakings of the assessee. According to him, if the assessee had profits in an undertaking, which was eligible for deduction under section 80-lA or 80- IB of the Act, then before allowing such deduction, losses of other undertakings, if any, had to be set off and only if there was any balance profits availablel such a deduction could be claimed. Reliance was placed on the decision of the hon'ble apex court in the case of Synco Industries Ltd. v. Assessing Officer (Income-tax) [2008] 299 ITR 444 (SC).
6 Per contra, the learned authorised representative supported the orders of the Commissioner of Income-tax (Appeals).
7 We have perused the orders and heard the rival submissions. For all the impugned years, what we note specifically from the orders of the learned the Commissioner of Income-tax (Appeals) is that gross total income of the assessee was positive. The assessee had no carried forward loss of earlier years as well. That gross total income for all the impugned assessment years was positive, was not disputed by the learned Departmental representative. Further, the assessee had returned positive total income for all the impugned assessment years, and therefore, by necessary implication its gross total income, before deductions claimed under Chapter VI-A, whatever be that amount, would have only been positive. So, the only question that remains is, when the gross total income is positive, a deduction under sections 80-lA and 80- IB can be worked out independently without setting off losses of units on which such deduction was not being claimed. In our opinion, this question stands already answered by the hon'ble jurisdictional High Court in their decision in the case of Chamundi Textiles (Silk Mills) Ltd. v. CIT [2012] 341 ITR 488 (Mad). There the question was regarding claim of deduction under section 80HHC and whether such deduction could be allowed without considering the results of a unit, which was not having any profits. It was held by their Lordships that by virtue of the decision of the hon'ble apex court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (sq, undisputedly only an assessee having positive profits could claim such a deduction. Their Lordships also held that for arriving at such profit, income from various units had to be calculated and if one of the units was running at a loss, gross total income had to be arrived considering such loss also. ultimately, if the gross total income was a loss, claim for deduction was to be rejected. Section 80HHC or 80-lA or 80- IB for that matter, are all controlled by section 80AB of the Act. The II gross total income" means the gross total income computed as per the provisions of the Act. This was clearly reiterated by the hon'ble apex court in the case of Synco Industries Ltd. v. Assessing Officer (Income-tax) [2008] 299 ITR 444 (SC). The hon'ble apex court held that the gross total income had to be arrived at after making deductions as per appropriate computation provisions, including income under sections 60 to 641 adjustment of inter se losses and after setting off brought forward losses and unabsorbed depreciation. Only if resultant gross total income was positive, an assessee was entitled for deduction under Chapter VI-A of the Act. However, where the assessee is having more than one unit, where one unit is eligible for deduction and other unit or units are not eligible for deduction and if the gross total income is positive, despite the loss in one of such units, decisions of the hon'ble apex court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (sq and Synco Industries Ltd. v. Assessing Officer (Income-tax) [2008] 299 ITR 444 (SC) would have not much applicability. In such cases, where an assessee is carrying on various activities, even if centralised accounts are maintained, so long as interlacing, interconnectivity or interdependence of various units was not there, various activities have to be treated as separate and distinct, as held by the hon'ble apex court in the case of Waterfall Estates Ltd. v. CIT [1996] 219 ITR 563 (SC). The hon'ble apex court in the case of 1. M. Chhabda and Sons v. CIT [1967] 65 ITR 638 (SC) has also held that where an assessee carried on business ventures at different places, there was no general principle that they should all be considered as part of single business. Thus, if an assessee had different units resulting in positive gross total income, in view of decisions of the hon'ble jurisdictional High Court in the case of CIT v. Macmillan India Ltd. [2007] 295 ITR 67 (Mad), CIT v. Rathore Brothers [2002] 254 ITR 656 (Mad), CIT v. Suresh B. Mehta [2007] 291 ITR 462 (Mad) and CIT v. M. Gani and Co. [2008] 301 ITR 381 (Mad), each of the unit had to be separately considered for working out deduction under sec tion 80-IA or 80-IB or 80HHC of the Act, once separate accounts were being maintained and there was no interlacing and interdependence. In the given case before us, the assessee had positive gross total income. Therefore, each undertaking had to be considered separately for working out deduction under section 80-IA of the Act, since the gross total income was positive. We are of the opinion that the Commissioner of Income-tax (Appeals) was justified in giving such directions.
8 The ground raised by the Revenue for the assessment years 2007-08 and 2008-09 is with regard to the Commissioner of Income-tax (Appeals) allowing deduction under section 80- IA for windmills, without adjusting notional losses of years prior to the initial year of such claim. The assessee was captively consuming the electricity generated by its own power plant. The assessee was engaged in manufacturing and sale of metal powders. The Assessing Officer held that the assessee could not claim deduction under section 80- IA of the Act on electricity supplied by its windmills for captive generation. However, the Commissioner of Income-tax (Appeals), on the assessee's appeal, held in its favour, relying on the decision of the hon'ble jurisdictional High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. v. Asst. CIT [2012] 340 ITR 477 (Mad).
9 Now before us, the learned Departmental representative admitted that this issue stood decided in favour of the assessee.
10 The learned authorised representative supported the orders of the Commissioner of Income-tax (Appeals).
11 We have perused the orders and heard the submissions. The Commissioner of Income-tax (Appeals) had directed the Assessing Officer to treat the windmills as a separate undertaking fo.! the purpose of calculating deduction under section 80- IA of the Act'though the power generated was captively consumed. The question of set-off of notional losses prior to the ini tial year of claim does not arise in view of the hon'ble jurisdictional High Court's decision in the case of Velayudhaswamy Spinning Mills P. Ltd. v. Asst. CIT [2012] 340 ITR 477 (Mad). The Commissioner of Income-tax (Appeals) had rightly relied on this decision for taking a view in favour of the assessee. The learned Departmental representative was unable to produce order of any higher authority which could disturb the view taken by the hon'ble jurisdictional High Court.
12 In the result, the Revenue's appeals for all the years are dismissed.
13 Now we take up the cross-appeals of the assessee. In its appeals for the assessment years 2002-03 and 2003-04, one of the grievances raised by the assessee is regarding levy of interest under section 234 of the Act.
The assessee's grievance regarding levy of interest under section 234D cannot be accepted in view of the hon'ble jurisdictional High Courfs decision in the case of CIT v. Infrastructure Development Ffnance Co. Ltd. [2012] 340 I1R 580 (Mad), assessments having been completed after first of June, 2003.
In its appeals for the assessment years 2002-03, 2005-06, 2006-07 and 2007-08, one of the grievances taken by the assessee is on disallowance made by the Assessing Officer under section 14A of the Act, which was confirmed by the Commissioner of Income-tax (Appeals).
The learned authorised representative submitted that for the impugned assessment years rule 8D would not apply at alL The Assessing Officer had simply made an addition relying on section 14A without giving any finding that the assessee had incurred any expenditure in relation to dividend income on which the assessee had claimed exemption.
The learned Departm~tal representative fairly admitted that the matter should go back to the file of the Assessing Officer for proper verification of the issue.
We have perused the orders and heard the submissions. The Assessing Officer had disallowed 6 per cent. of the expenditure incurred by the assessee under the head printing and stationery, postage and telegram, professional and other services and payment to auditors, considering it to be expenses incurred by the assessee for earning dividend income. The Assessing Officer had made such disallowance since the assessee was holding shares which resulted in substantial dividend income. On appeal by the assessee, the learned Commissioner of Income-tax (Appeals) confirmed such disallowance relying on the decision of the Special Bench of this Tribunal in the case of ITO v. Daga Capital Management P. Ltd. [2009] 312 I1R (AT) 1 (Mum) [SB] taking a view that rule 8D applied retrospectively. Now we find that the hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT [2010] 328 I1R 81 (Born) has held that rule 8D had no retrospective applicability. Nevertheless, a disallowance under section 14A might still be required depending on the facts and circumstances. However, we do not find any discussion on any claim made by the assessee with regard to expenses incurred or not incurred by it for earning the dividend income, in the assessment order. The Assessing Officer had simply made a disallowance taking 6 per cent. of the income as expenditure. We are, therefore, of the opinion that the matter requires a re-visit by the Assessing Officer. We, therefore, set aside the orders of authorities below and remit the issue regarding disallowance under section 14A back to the file of the Assessing Officer for consideration afresh and decide in accordance with law.
19 For the assessment years 2003-04 and 2005-06, the assessee has in one of its grounds assailed the disallowance of its claim for additional depreciation under section 32(1)(iia) of the Act. As per the assessee, the decision of the hon'ble apex court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (sq placed restrictions in considering a fresh claim of the assessee without a revised return, only on an assessing authority and not an appellate authority.
20 The facts apropos are that the assessee in its returns filed originally, had not claimed additional depreciation on windmills. However, such a claim was made before the Assessing Officer during the course of assessment proceedings. The matter had travelled up to this Tribunal for the assessment year 2003-04 and this Tribunal in its order dated December 30, 2008 in I.T.A. No. 423/Mds/2007 had remitted the issue back to the Commissioner of Income-tax (Appeals) for fresh consideration. In such fresh proceedings for the assessment year 2003-04 and also the regular appellate proceedings for the assessment year 2005-06, the Commissioner of Income-tax (Appeals) again rejected the claim of the assessee citing a reason that the assessee could not be allowed to amend a return filed by it, otherwise than through a revised return. For this, once again reliance was placed on the decision of the hon'ble apex court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC).
21 Now before us, the learned authorised representative submitted that the powers of the appellate authority was wide enough to consider a fresh claim even where the assessee had not filed a revised return.
22 The learned Departmental representative strongly supported the order of the Commissioner of Income-tax (Appeals).
23 We have perused the orders and heard the rival submissions. There is no dispute that the assessee had not made any claim for additional depreciation on windmills under section 32(1)(iia) in its original return. The assessee had not even filed a revised return but had staked such claim during the course of assessment proceedings. The Assessing Officer, relying on the decision of the hon'ble apex court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (sq, denied the claim of the assessee and the Commissioner of Income-tax (Appeals) affirmed the view of the Assessing Officer. Before us also, nothing was brought on record by the learned authorised representative as to why the fresh claim should be considered. The hon'ble jurisdictional High Court in the case of CIT v. Shriram Investments (f)(A) No. 344 of 2005 dated June 16, 2012) held that section 139(5) of the Act had prescribed a time limit for revision of return. Their Lordships observed that anything which was done beyond such time limit, lost the statutory protection. In the case before their Lordships, the assessee had failed to claim deferred revenue expenditure, but, had preferred such a claim through a revised return, which was filed out of time. The Tribunal had held in favour of the assessee holding that by the scheme of the Act, the assessee was entitled to claim it, though it had omitted to do so in the original return. Their Lordships held that reliance placed by the Tribunal on the decision of the hon'ble apex court in the case of CIT v. Shelly Products [2003] 261l1R 367 (sq was not correct. In the latter case, it was held that the assessee, if by mistake or inadvertence or on account of ignorance, included in its income any amount, which is exempt from payment of tax, when such tax is not payable, such assessee is entitled to bring it to the notice of the Assessing Officer and the Assessing Officer was bound to consider the same to grant the relief. Their Lordships applied the law laid dDwn by the hon'ble apex court in Goetze (India) Ltd.'s case [2006] 284 ITR 323 (SC). In the case before us also, it is not the question of any amount being included as income by inadvertence. The assessee had not chosen to make additional depreciation under section 32(1)(iia) of the Act. Therefore, in our opinion, in the given facts and circumstances, by virtue of the decision of the hon'ble jurisdictional High Court in the case of Shriram Investments, claim having not been made through a revised return cannot be accepted. We are, therefore, of the opinion that the Commissioner of Income-tax (Appeals) was justified in not considering such claim raised by the assessee.
Related ground of the assessee is dismissed. 24 For the assessment years 2003-04 and 2005-06, one of the grounds 25 raised by the assessee assails the finding of the Commissioner of Income- tax (Appeals) that it had claimed deduction under section 80-IA for the assessment year 2004-05 and the audit report for that year in Form 10CCB mentioned assessment year 2003-04 as the initial year. As per the assessee, there was no claim for deduction under section 80-IA for the assessment year 2003-04.
The assessee had raised a claim before the learned Commissioner of Income-tax (Appeals) that the assessment year 2005-06 was the initial assessment year for claiming deduction under section 80- IA in respect of its Wind Farm Vestas. However, the Commissioner of Income-tax (Appeals) did not accept such a claim since according to him, in audit report in Form 10CCB, filed along with the return for the assessment year 2004-05, the assessee had mentioned the initial assessment year as 2003-04. As per the Commissioner of Income-tax (Appeals), once the claim was based on the return of income, it could not be changed or modified during the assessment proceedings.
27 Now before us, the learned authorised representative, assailing the order of the Commissioner of Income-tax (Appeals), submitted that an error made in the assessment year 2004-05 could not be a reason for changing the initial assessment year. According to him, there was no claim whatsoever under section 80-IA for Wind Farm Vestas for the assessment year 2003-04.
28 Per contra, the learned Departmental representative supported the order of the Commissioner of Income-tax (Appeals).
29 We have perused the orders and heard the rival submissions. It is not disputed that the assessee had filed the audit report in Form 10CCB for the assessment year 2004-05 in which the initial assessment year was declared as the assessment year 2003-04. Once an audit report is filed by the assessee, which is a report specified under section 80- IA of the Act, the assessee cannot tum back and say that the data furnished therein is wrong. We cannot find any fault with lower authorities relying on the audit report filed and considering the assessment year 2003-04 as the initial assessment year for Wind Farm Vestas. In any case, no such ground was taken by the assessee before the Commissioner of Income-tax (Appeals) for the assessment year 2005-06 at all. We, therefore, dismiss related grounds of the assessee for the assessment years 2003-04 and 2005-06.
30 Now we are left with one ground taken by the assessee for the assessment year 2008-09, which is non-exclusion of interest receivable from its Malaysian subsidiary company.
31 Facts apropos are that the assessee, during the course of assessment, claimed that a sum of Rs. 7,33,190 being interest from Sterling Metal Powder Company, a subsidiary of the assessee, incorporated in Malaysia, which was included under the head "Interest receipts-others" had to be excluded. As per the assessee, such sum was shown in the books of account only as provision and nothing was received. Even if the amount was paid by the Malaysian company, the said company was liable to deduct withholding tax and as per the Double Taxation Avoidance Agreement with Malaysia, such sum could not be considered as a part of income in India. However, the Assessing Officer was not impressed. According to him, this claim was a fresh one preferred by the assessee otherwise through a revised return. Relying on the decision of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC), he rejected the claim of the assessee. The assessee's appeal before the Commissioner of Income-tax (Appeals) was not successful.
Now before us, the learned authorised representative, assailing the orders of authorities below, submitted that the power of appellate authority would not be circumscribed by the decision of the hon'ble apex court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC). Therefore, according to him, the claim was unduly rejected by the learned Commissioner of Income-tax (Appeals).
Per contra, the learned Departmental representative supported the order of the Commissioner of Income-tax (Appeals).
We have perused the orders and heard the rival submissions. Without doubt, the assessee had included in its income, interest from its Malaysian subsidiary. The claim that it was not received and if received withholding tax would be deducted by the Malaysian company, were all new pleadings made during the course of assessment proceedings. The assessee never cared to file a revised return. In our opinion, for the same reasons, as said by us at paragraph 23 above, such a claim could not have been accepted. This was, therefore, rightly rejected by the Assessing Officer and confirmed by the leamed Commissioner of Income-tax (Appeals). We do not find any reason to interfere with the order of the Commissioner of Income-tax (Appeals).
In the result, the appeals of the assessee for the assessment years 2006-07 and 2007-08 are allowed for statistical purposes, the appeals for the assessment years 2003-04 and 2008-09 are dismissed, and the appeals for the assessment years 2002-03 and 2005-06 are partly allowed for statistical purposes.
The order was pronounced in the court on Thursday, the 21st of February, 2013, at Chennai.