TMI Blog2023 (11) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sales tax incentive availed by the units located at Tikaria, Wadi, Chaibasa Damodar of the appellant under various schemes aggregating being capital in nature, in computing total income under the normal provisions of the Act. TDS u/s 194A - interest payment made to SBI Bank- Bahrain Branch - disallowance u/s.40(a) - HELD THAT:- As decided in own case AY 2005-06 [ 2023 (2) TMI 1210 - ITAT MUMBAI] CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Deduction u/s 80IA on TG-3 Power-Plant allowed - As deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. Addition of provision for gratu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the coordinate bench in the group concern s case of the assessee. We uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act. Capital gain computation - reference made by the A.O. to the Government Valuation Cell, New Delhi for determining fair market value of Okhla Land as on 01-04-1981 - HELD THAT:- AO was not justified in considering fair market value of land based upon DVO s report obtained u/s 55A of the Act. This ground of appeal is accordingly allowed. Apportionment of the indirect Head Office expenses in computing deduction u/s 80IA/ 80IB/80IC - Assessing Officer is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis- -vis overall expenditure. Deduction u/s 80IA on infrastructure facility, being rail systems at Kymore, Tikaria, Wadi I Wadi II - only dispute of Assessing Officer for not allowing such deduction is that necessary form 10CCB was not filed along with return of income and claim was not quantified in such return of income - HELD THAT:- Claim of assessee is found to be correct and AO is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR of the Assessee has extensively relied upon decision of Coordinate Bench in the case of Ambuja Cement Limited, holding company of Assessee for AY 2005-06 to 2012-13 and same are summarised herein below. SR No ITA No Date of order 1 5883/Mum/2012 5927/Mum/2012 for AY. 2005-06 30/10/2022 2 2848/Mum/2013 and 2366/Mum/2013 for AY 2006-07 03/11/2022 3 6375/Mum/2013 6405/Mum/2013 for AY 2007-08 07/11/2022 4 2968/Mum/2015 3307/Mum/2015 for AY 2008-09, 1665/Mum/2019 2428/Mum/2019 for AY 2009-10 07/11/2022 5 2384/Mum/2019 for AY 2010-11, 3475/Mum/2018 for AY 2011-12 1241/Mum/2018 for AY 2012-13 07/11/2022 6 2384/Mum/2019 2958/Mum/2019 for AY 2010-11, 3843/Mum/2019 3475/Mum/2019 for AY 2011-12, 1241/Mum/2018 1889/Mum/2018 for 2012-13 07/11/2022 3. First we take up, Revenue Appeal in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit could not have been directly added to the closing stock. The Tribunal has not committed any error. (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra), we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made on account of unutilised MODVAT credit. This Ground of appeal is accordingly allowed. 19. It is observed that on identical issue, Coordinate bench in Para No. 32 to 34 in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 5927/Mum/2012 (for A.Y. 2005-06) vide order dated 31/10/2022 has dismissed revenue s appeal. Respectfully following decisions of Coordinate as discussed herein above, the ground raised in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores, being sales tax exemption/incentives received by it, as capital receipt, and hence not liable to tax. The Assessing Officer declined this claim, primarily on the basis of certain observations in the judgments in the cases of Tamilnadu Sugar Corporation Ltd Vs CIT [(2001) 251 ITR 843 (Mad)], CIT Vs Rajaram Maize Products [(2001) 251 ITR 427 (SC)], CIT Vs S Kumars Tyre Manufacturing Co [(2004) 266 ITR 325 (MP)], and CIT Vs Abhishek Industries Ltd [(2006) 286 ITR 1 (P H)]. The entire amount of Rs 1169.93 crores was added to income of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) took note of the fact that these amounts pertained to five different units under four schemes- namely Maharashtra s Dispersal of Industries Package Scheme of Incentives 1993 (Maratha Unit), Punjab s Industrial Incentives Code under the Industrial Policy, 1996 (Ropar and Bhatinda Units), Rajasthan s Sales Tax New Incentives Scheme for Industries, 1989 (Rabriyawas Unit), and Exemptions/ Concessions to Industries Excise Taxation Department Notification No EXN C(9)2/9- dated 31-01-02-1994 (Himachal Unit). He discussed these schemes in quite a bit of deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, in our considered view, the approach of discerning the purpose of the subsidy, solely from the specific words used in the preamble of the scheme and without examining the overall scheme of the Act- which is admittedly to promote the growth of industry, is incorrect and superficial. The subsidies so received can be said to be revenue in nature unless these subsidies are for augmenting the profits of the assessee, and that is not even the case of the revenue. The CIT(A) is simply swayed by the wording of the preamble of the scheme- something clearly impermissible. These subsidy schemes are materially similar in nature, and there are, by now, a number of decisions of the coordinate benches, as also Hon ble Courts above, dealing with these schemes. It is also important to bear in mind the fact that the subsidies received by the assessee are in the nature of sales tax subsidies, and dealing with sales tax subsidies, Hon ble Gujarat High Court, in the case of CIT Vs Nirma Ltd [(2017) 397 ITR 49 (Guj)], has observed as follows: 7. So far as second issued as to Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) and in directing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having potential, to spur industrial growth in ancillary, tertiary and secondary sector of the economy. The other scheme announced by the Government of Gujarat as Capital Investment Incentive Scheme on 11th September 1995 was intended to attract investments to generate greater employment in less industrially developed areas of Gujarat and also to secure balanced development of industries in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attract such investment was, inter alia, through exemption from payment of sales tax. 9. He further contended that in view of decisions of this Court in CIT v. Birla VXL Ltd. [2013] 32 taxmann.com 330/215 Taxman 117 (Guj.) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the subsidy is given. The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. But, if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax Appeals are therefore dismissed.' 10. In the case of Munjal Auto Industries Ltd. (supra), this Court has observed as under:- 7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for augmenting the profits of the assessee. Effectively, the schemes of various State Governments envisaged the rapid industrialisation, growth and new employment generation in the respective areas which would in turn promote the growth of the State. Hence, it could be safely concluded that subsidy / incentive granted is only for setting up of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit already fixed under the respective schemes. Though the quantification of the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the form of subsidy / incentive for meeting the working capital requirements of the assessee company post commencement of business. Hence, by applying the purpose test, apparently, the subsidy / incentive received in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains for the year in which they were received. 15. In the case before us, the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing but supplementary trade receipts. It is true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a Canadian case St. John Dry Dock Ship Building Co. Ltd. v. Minister of National Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co.'s case (supra). In that case it was held that where subsidies were given under statutory authority, the statutory purpose for which they are authorised is relevant and may even be decisive in determining whether it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co.'s case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 19. Sahney Steel was distinguished, in para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. 20. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in nature. 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the purpose test . It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. 22. Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting out both the Supreme Court judgments referred to herein above, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. 5.3.7. We further find that the Hon ble Gujarat High Court in CIT vs. Munjal Auto Industries Ltd., in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch decision was considered in case of Ponni Sugars and Chemicals Ltd.(supra) and the Apex Court held and observed as under : 13. The main controversy arises in these cases because of the reason that the incentives were given through the mechanism of price differential and the duty differential. According to the Department, price and costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given through price and duty differentials, the character of the impugned incentive in this case was revenue and not capital in nature. On the other hand, according to the assessee, what was relevant to decide the character of the incentive is the purpose test and not the mechanism of payment. 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 10. In a recent judgement dated 8.1.2013 in case of DCIT-Circle 1(2)-Baroda v. Inox Leisure Ltd., we had an occasion to consider somewhat similar question in the backdrop of entertainment tax waiver scheme of State of Gujarat as well as State of Maharashtra. Even in such a case, the entertainment tax waiver which was granted in terms of sale of tickets was treated as capital in nature when it was found that same was relatable to the capital investment made by the assessee. It was held as under : 10. From the above noted provisions of the scheme it can be clearly seen tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts have been mindful of the fact that the subsidy has to be received after commencement of business and to be availed within 9,10 12 years, as the case may be, and yet by applying purpose test, it was held that subsidy was on capital account. 5.4. Applicability of Special Bench decision of Mumbai Tribunal in the case of Reliance Industries reported in 88 ITD 273. The ld. Special Counsel for the Revenue vehemently submitted that the decision of the Hon ble Special Bench has been reversed by the Hon ble Supreme Court by remitting the matter back to the Hon ble Bombay High Court. First of all, it would be relevant to bring on record the crux of the decision of the Special Bench in the case of Reliance Industries Ltd. In case of Special Bench decision of Reliance Industries Ltd, the scheme dealt with sales tax exemption under the scheme of Government of Maharashtra, 1979. Further the said scheme was implemented by SICOM. The following question was referred by the Hon ble President, Tribunal to the Special Bench: Whether, on the facts and in the circumstances of the case and in law the assessee company is justified in its claim that the sales- tax incentive all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose and object of the Scheme under which the subsidy is given is of more fundamental importance than the fact that the subsidy was received after the commencement of production or conditional upon it. Therefore, in our view and with respect, the Tribunal in the case of Reliance Industries Ltd. ( supra) had correctly interpreted and understood the ratio of the judgment of the Supreme Court in Sahney Steel Press Works Ltd. s case (supra). 38. In this view of the matter, we answer the question referred to us in the affirmative. 5.4.2. The ld. AR vehemently submitted that the department did not challenge the decision of the Special Bench before the Hon ble Bombay High Court. However, he fairly stated that there was a subsequent decision of the Division Bench of this Tribunal which followed the Special Bench and that Division Bench order was challenged by the Revenue before the Hon ble Bombay High Court. The Hon ble Bombay High Court while disposing of the said appeal did not reverse the decision of the Special Bench and accepted the same. When that appeal was further challenged by the Revenue before the Hon ble Supreme Court, the Hon ble Supreme Court remitted the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 1999- 2000 in case of this very assessee and restored the issue back to the Assessing Officer. In the earlier order, the Tribunal had remanded the issue to the file of the Assessing Officer to decide the issue afresh after considering the decision of Special Bench of the Tribunal in the case of Reliance Industries Ltd. (supra) . Thus, the Tribunal remanded the issue back to the Assessing Officer to be decided in the light of the Special Bench judgment in the case of Reliance Industries Ltd. The Revenue's grievance in this respect is two fold. It was contended that the issue was raised for the first time before the Tribunal and the same should not have been permitted. Secondly, the view of the Tribunal in case of Reliance Industries Ltd. was challenged before the High Court. The High Court in a judgment dated 15.04.2009 in Income Tax Appeal No. 1299 of 2008 had held that no question of law in this respect arises and thereby confirmed the judgment of the Tribunal. It was pointed out that against this judgment of the High Court, the Department had approached the Supreme Court and the Supreme Court had held that a question of law did arise. The Supreme Court fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08/2019 in SLP (Civil) Diary No.22929/2019. In other words, the Revenue while preferring SLP before the Hon ble Supreme Court did not even challenge this ground of subsidy and the decision of Special Bench of Tribunal in the case of Reliance Industries Ltd., Hence, the order of the Hon ble Jurisdictional High Court in assessee s own case for A.Y. 2001-02 had become final on the very same issue. Though the said decision has been rendered for subsequent assessment year as compared to the years under consideration before us, in view of identical facts and the same legal issue, and more especially, in order to address the fact of binding precedent of Special Bench decision in the case of Reliance Industries Ltd., this Bench deems it fit to place reliance on the said decision also of the Hon ble Jurisdictional High Court. Accordingly, we categorically hold that the decision of the Special Bench still holds the field and is a good law. The entire contentions raised by the ld. Special Counsel for the Revenue in this regard are hereby dismissed. 5.4.5. Further, we find that the Co-ordinate Bench of Ahmedabad Tribunal in the case of ACIT vs. Genus Electrotech Ltd., reported in 72 taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of a larger bench. It is this faith of judicial hierarchical system that is the strength of our functioning, and we must follow the same. We, therefore, regret our inability to follow the division bench in the case of Jindal Power, no matter how deeply we respect and admire the work of all our colleagues, and we would rather be guided by the special bench decision - which is exactly what another division bench, on the same set of facts as before us, did in the case of Ajanta Manufacturing Ltd. (supra). As for learned Commissioner (DR)'s suggestion that we should follow the jurisdictional High Court decision in the case off ColourmanDyechem Ltd. (supra), we find that Their Lordships, in this case, were dealing with an entirely different type of subsidy which was clearly dealing with an expansion situation. However, we would rather refrain from making any further detailed observations on this issue, as we are alive to the fact that Hon'ble jurisdictional High Court, in Tax Appeal No 358 of 2012, has admitted appeal against the decision of this Tribunal in Ajanta's Manufacturing Ltd. case (supra) and all these issues will now come up for consideration of Their Lordships. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and grossly erred in not allowing exclusion of Sales Tax Incentive availed of Rs. 1,69,93,34,752/-, being capital in nature, in computing Book Profit u/s 115JB of the Act. 13. That on the facts and in the circumstances of the case, necessary directions may please be given to the A.O. to exclude of Sales Tax Incentive availed by the appellant amounting to Rs. 1,69,93,34,752/-, being capital in nature, in computing Book Profit u/s 115JB of the Act. 50. Learned representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon ble Calcutta High Court s judgment in the case of PCIT Vs Ankit metal Power Ltd [(2019) 416 ITR 591 (Cal)], by Hon ble jurisdictional High Court s judgment in the case of CIT Vs Harinagar Sugar Mills Ltd [ITA No 1132 of 2014, dated 4th January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. 51. We find that a coordinate bench of this Tribunal, in JSW Ltd s case (supra), has inter alia, observed as follows: 47. We further noted that Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all those case laws have been either considered by the Tribunal or High Court and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the came to the conclusion that, once particular receipt is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, then the same cannot be considered for the purpose of computation of book profit u/s 115JB of the I.T. Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. 36,15,49,828/- from book profits computed u/s 115JB of the I.T. Act, 1961. 52. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xternal commercial borrowings from Singapore branch and which is a main lender of the loan. Therefore, any interest payment to ICICI Bank Ltd., Singapore branch is not coming within the provisions of section 195 of the Act. No doubt, any payment made to a resident banking company is outside the purview of provision of section 195 of the Act. Similarly, any payment made to a non-resident including a banking company is coming within the provision of section 195 of the Act. The primary dispute is with regard to the residential status of payee in Singapore and the lender of external commercial borrowings. As per the letter of Jt. CIT(OSD)-3(1), Mumbai, the residential status of the ICICI Bank Ltd., has been clarified .. 46. It is observed that Ld.CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip. It is undisputed fact in present case that assessee has acquired both the units as a whole. It is not the case that assessee has set up two different power plant by purchasing only partial assets which were used by another assessee but entire undertaking itself is purchased as it is in year under consideration which clearly prove that assessee has not split any of its existing business for forming both the units. Hon ble Bombay High court in CIT v. Gaekwar Foam Rubber Co. Ltd. [1959] 35 ITR 662 explains that the concept of a reconstruction of a business implies that the original business is not to cease functioning and its identity is not lost. Reconstruction is of a business already in existence implies that there must be a continuation of the activities of business of the same industrial undertaking where the ownership of a business or undertaking changes hands that would not be regarded as reconstruction. This judgment has specifically been approved by the Supreme Court in Textile Machinery Corpn. Ltd. v. CIT [1997] 107 ITR 195. As regards the splitting up of a business, the relevant test is whether an undertaking is formed by splitting up of a business already in existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of the taxpayer. The Hon ble Madras High Court confirmed the decision of the Tribunal and observed as follows: A reading of the provision of sections 80HH and 80I of the Act, it is clear that the same has been incorporated to encourage the new industrial undertaking on fulfilment of certain conditions mentioned therein. If the conditions mentioned in the sections are complied with by the assessee, the benefit extended by the provisions has to be granted to the assessee. The amalgamation of one company with the other company cannot be regarded as a splitting up or reconstruction or by a transfer of a new business of the plant and machinery of the old business. With reference to the Companies Act, the amalgamation was also for the benefit of the two companies, i.e., amalgamating and amalgamated company and in the public interest and also in the interest of the shareholders. Viewed from any angle amalgamation cannot be regarded as a splitting up of the company for the purpose of negativing the claim under the Income-tax Act, which has been statutorily conferred on the company, if such companies fulfil the conditions stipulated therein. Hence, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Central Board of Direct Taxes issued a circular F. No.15/5/63-IT(A-1) dated 13th December, 1963 indicating that the benefit of Section 84 is attached to the undertaking and not to the owner thereof and, consequently, the successor would be entitled to the benefit for the unexpired period of 5 years provided the undertaking is taken over as a running concern. 12. The same principle is applicable in the instant case. Admittedly, the undertaking was in existence since 2002. The proprietorship concern changed into a partnership firm. The benefit under Section 80IB of the Act is available to the partnership firm and the conditions imposed under Section 80IB(2)(i) does not come in the way. 65. Thus, the sanctity of the CBDT Circular has been upheld in the context of section 80IB, confirming that the tax holiday moves along with the undertaking and the ownership has no relevance. Similar decision is also rendered by Hon ble Punjab Haryana High Court in the case of Mega Packages [2011] 203 Taxman 236 while considering the eligibility of deduction under section 80IC on conversion of proprietorship concern into a partnership firm and Hon ble Madras High court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed by Assessing Officer in assessment proceedings hence there is no reason for not allowing deduction u/s 80IA for TG-2 Wadi. The Hon ble Bombay High court in the case of Simple Food Products (P.) Ltd. [2017] 84 taxmann.com 239 has held that if deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. 68 In view of holistic discussion made herein above, assessee is entitled to deduction u/s 80IA on TG-2 and TG-3, Wadi unit. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee s appeal is allowed. 17. Respectfully following the above decision, we dismiss the ground raised by the revenue. 18. In the Ground No.5, Department has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of provision for normal and additional gratuity amounting to Rs. 3,02,43,263/- while computing the book profit u/s. 115JB of the I.T. Act. 19. Similar issue was considered by us in the Department Appeal Ground No 12 in AY 2005-06 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. 14.3.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in the case of the Assessee for the Assessment Year 1990- 91 (ITA No. 2361/Mum/1995), Assessment Year 2002-03 (ITA No. 4987/Mum/2007 others) and Assessment Year 2003-04 (ITA No. ITA. No. 5259 4895/Mum/2007 Assessment Year: 2004-05 4242/Mum/2007), we confirm the order of CIT(A), and hold that provision for Normal/Additional Gratuity of INR 5,86,82,751/- is in the nature of provision for an ascertained liability and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB (2) of the Act. Accordingly, Ground No. 9 raised by the Revenue is dismissed. 86. Respectfully following decision of coordinate bench referred supra, addition of provision for gratuity made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 20. Respectfully following the above decision, we dismiss the ground raised by the revenue. 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, dated 13.03.2019, passed in ITA No. 4242 4988/MUM/2007 for the Assessment Year 2003-04 reads as under: 44. Issue no. 15 is in connection with the deletion of addition in respect of provision of Wealth Tax in computing book profit u/s 115JB of the Act in sum of ₹. 80,00,000/-. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - 37.3 I have considered the submissions made on behalf of the appellant. Respectfully following the decision of the Hon ble Bombay High Court in the case of Echjyay Forgings Ltd. (supra) and the Hon ble Special Bench of Kolkata Tribunal in the case of Usha Martin Industries Ltd. (supra) as well as my own order in appeal no. CIT(A)-I/IT/232/04- 05 for AY 1998-99 stated herein above, the addition made by the Assessing Officer is deleted and this ground of appeal is allowed. . On appraisal of the said finding, we noticed that the claim of the assessee has been allowed in view of the decision of Bombay High Court in the case of CIT Vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 (Bom) and JCIT Vs. Usha Martin Industries Ltd. (2007) 104 ITD 249 (Kolkata Tribunal) SB. We also noticed that the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed. 90. Respectfully following decision of coordinate bench referred supra, addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 26. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 27. In the Ground No.8, Department has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of VRS expenditure amounting to Rs. 3,44,22,479/- pertaining to earlier years, capital expenditure debited and write down of value of assets while computing the book profit U/s. 115JB of the I. T. Income Tax Act, 1961. 28. Similar issue was considered by us in the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred supra, the addition made by Assessing Officer while computing book profit is deleted. This ground of appeal in departmental appeal is dismissed. 29. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 30. In the Ground No.9, Department has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the A.O. to exclude Rs. 13,00,000/- being amount withdrawn from share premium account while computing the book profit U/s. 115JB of the I.T. Act. 31. Similar issue was considered by us in the Department Appeal Ground No 19 in AY 2005-06 and held as under: 124. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in favour of assessee. The relevant finding is reproduced herein below: 21.3. Now, the Revenue is in appeal before us against the above finding of the CIT(A) on this issue. We note that CIT(A) has granted relief to the Assessee following decision of the Tribunal in the case of the Assessee in Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Clause (i) of Explanation to Section 115JB(2) of the Act. Accordingly, Ground No. 20 raised by the Revenue is dismissed. 125. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. This ground of appeal in Departmental Appeal is dismissed. 32. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 33. Ground no. 10 is general in nature and is thus dismissed. 34. In the result, the appeal of the department is dismissed in the terms indicated above. ITA NO. 4669/MUM/2012 (Assessee Appeal) 35. We now take up the appeal filed by the assessee in ITA No 4669/M/2012 36. In the Ground No.1, Assessee has raised the following grievance: 0.1 That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) [here-in-after referred to as Ld. CIT(Appeals)] erred in directing the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had deleted the addition made by the assessing officer under section 14A of the Act by observing that the interest-free fund available with the respondent - assessee was far in excess of the advance given. Tribunal further noted that the Revenue does not dispute the said finding and relying on the decision of this Court in CIT v. Reliance Utilities Power Ltd. [2009] 178 Taxman 135/313 ITR 340, affirmed the deletion made by the first appellate authority. 7. We have perused the decision of this Court in Reliance Utilities Power Ltd. (supra) wherein it has been held that if there are funds available with the assessee, both, interest-free and overdraft and/ or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the assessee if the interest-free funds were sufficient to meet the investments. In the facts of that case, it was noted that the said presumption was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion of Excise Duty Exemption availed of Rs. 1,58,95,36,380/-, being capital in nature, in computing total income under the normal provisions of the Act. 3.1 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in holding that Excise Duty Exemption availed by the appellant under General Exemption No. 51 as revenue in nature in utter disregard of the fact that the ultimate objective for granting the exemption was to provide incentives to investors investing towards development of industries in the backward areas of Himachal Pradesh. 40. Similar issue was considered by us in the Assessee s Appeal Ground nos. 1 and 13 in AY 2006-07 and held as under: 97. Considered the rival submissions and material placed on record. On this issue, coordinate bench in the case of Ambuja Cement Limited in ITA No 2428/Mum/2013 2366/Mum/2013 (A.Y.2006-07) dated 31/10/2022 has held as under: 17. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has availed excise duty exemption, amounting to Rs 46,83,11,376, in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the industry is set up, or being subjected to substantial expansion, in the backward areas, it cannot be open to the revenue even to suggest that the object and purpose of the scheme are to promote industries in backward areas. The Assessing Officer had declined the relief on a technical ground about at what stage the receipts materialize, whether post- production or pre-production. That test, as is the settled legal position now, is no longer a relevant test. What is material is as to what is the purpose of the scheme in question, and a call about the object and purpose of the scheme is to be taken in a holistic manner and on the basis of the scheme on an overall basis. The approach adopted by the learned CIT(A) was not only legally incorrect but wholly superficial. The following observations by Hon ble jurisdictional High Court, in the case of PCIT Vs Welspun Steel Limited [(2019) 103 taxmann.com 436 (Bom)] are relevant in this regard 6. Having heard the learned Counsel for the parties on this question, we notice that, the Government of Gujarat Sales Tax Incentive Scheme was envisaged to promote large scale investments in the Kutch District since on account of devastatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est contained in both Sahney Steel as well as Ponni Sugars, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a complete family entertainment centre, more popularly known as multiplex theatre complex, has emerged. Those complexes offer various entertainment facilitate for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that Government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to multiplex theatre complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct multiplex theatre complexes, the idea being that exemption from entertainment duty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not part of the actual cost of plant or machinery. The Court, therefore, held that it could not have been deducted towards costs of acquisition. The Court held as under: We have carefully considered the provisions relating to the grant of cash subsidy under the schemes framed by the Central Government and the State Government. The Central Government as well as the State Government noticed that areas specified as backward areas and tribal areas were undeveloped or under-developed. Entrepreneurs were not willing to set up industries in such undeveloped or under- developed areas. The industries were concentrating only in urban areas. In other words, rapid urbanization was taking place. So far as the State of Gujarat is concerned, there was rapid industrial growth in cities like Baroda, Ahmedabad and Surat resulting in strain on municipal services. Urbanization created several problems such as pollution, growth of slums etc . It was also necessary to have balanced growth of industry in different regions. However, as pointed out above, entrepreneurs were reluctant to set up industries in backward areas. These areas were identified as backward because there was un-developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, it was the value of the fixed assets which formed the basis for computation of subsidy to be granted under the scheme. Subsidy, in our opinion, did not meet the cost of the fixed assets directly or indirectly. Under the scheme of the Central Government or the scheme of the State Government, cash subsidy was quantified by determining the same at a specified percentage of the value/ cost of the fixed assets. Therefore, as observed above, the basis adopted for determining the cash subsidy with reference to the cost or value of fixed assets was only a measure for quantifying the subsidy and it could not be said that the subsidy was given for the specific purpose of meeting any portion of the cost of the fixed assets. The subsidy was granted to compensate the entrepreneur for the hardship and inconvenience which he might encounter while setting up industries in backward areas. 11. Similar issue came up for consideration again before the Gujarat High Court in CIT v. Swastik Sanitary Works Ltd. [2006] 286 ITR 544. It was a case in which, the Government subsidy was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations made by Assessing Officer and arguments made by Ld DR are already dealt with by various decisions referred supra hence there is no reason to deviate from the finding given by Coordinate Bench referred supra. Thus, Excise duty exemption received by assessee are capital receipts both for the purpose of computing income as per normal provision of the Act as well as book profit u/s 115JB of the Act and the addition made by Assessing Officer is deleted. In the result, related grounds in Assessee s Appeal are allowed. 41. Respectfully following the above decision, we allow the ground raised by the assessee. 42. In the Ground No.4, Assessee has raised the following grievance: 4.0 That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) was not justified and grossly erred in treating the ground taken for modification of depreciation following the order of earlier assessment years as consequential in nature. 43. It relates to short allowance of depreciation. The LD. AR has not pressed this ground of appeal hence same is dismissed. 44. In the Ground No.5, assessee has raised the following grievance: 5.0 That on the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation has been provided in respect of any new machinery and plant which has been acquired and installed after 31.03.2005 which is available to the assessee @20% of the actual cost of machinery or plant in the year in which the said machinery or plant has been acquired or installed. If the arguments of the assessee were to be accepted, it would create an illogical situation wherein in the second year of the acquisition and installation of the machinery or plant, while depreciation u/s. 32(1)(i) would be allowed to it on the WDV of the asset in question, additional depreciation u/s. 32(1)(iia) would be worked out on the actual cost of the asset which would be higher than its WDV. This clearly not provided in the section. Hence, the action of the AO of not allowing additional depreciation u/s 32(1)(iia) amounting to Rs. 85,60,39,093/- on assets which were acquired before 01/04/2006 and allowing additional depreciation only on the Eligible assets acquired on or after 01/04/2006 is as per the clear provisions of the Act and therefore, justified. His action is upheld. This ground of appeal filed by the assessee is dismissed. 47. The Assessee has filed appeal against the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation u/ s. 32(1)(iia) would be worked out on the actual cost of the asset which would be higher than its WDV. This is clearly not provided in the section. 1. The undersigned would also like to rely upon the decisions of the Chennai ITAT in the case of CRI Pumps(P) Ltd. Vs ACIT (2013) 34 taxmann.com 123 (Chennai Tribunal), wherein in para 9 10 of its order, the Hon'ble Bench held as under 9. First requirement for being eligible for the claim of additional depreciation is that is should be on a new machinery or plant. A machinery is new only when it is first put to use. Once it is used, it is no longer a new machinery. Admittedly, the machinery, on which additional depreciation has been claimed, was already used in various preceding previous years. Therefore, for the impugned assessment year, it is no more a new machinery or plant. Once it is not a new machinery or plant, allowance u/ s. 32(1)(iia) cannot be allowed. Additional depreciation itself is only for a new machinery or plant. A claim of additional depreciation as made by the assessee, if allowed, will not be an allowance for a new machinery or plant. Intention of the Legislature was to give such addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 31-03-2006 for the reason that additional depreciation for the assessment year under consideration is allowable only on eligible assets acquired on or after 01-04-2006 meaning thereby the additional depreciation is allowed only for the assets acquired during the year under consideration and not on the assets acquired before the commencement of the year. The assessee has filed an appeal before CIT(A) against such assessment order. Subsequent to which the CIT(A) has decided the issue against the assessee. It is observed that identical issue was decided by coordinate bench of Mumbai in the case of holding company of the assessee being Ambuja Cement Limited vide order dated 07.11.2022 in the ITA No. 6375 and 6405/Mum/2013 for A.Y. 2007-08 wherein it was held as under: 25. So far as this grievance is concerned, the proposition canvassed before is that looking to the intent of the Act, the machinery acquired after 1-4-2005 but installed in the previous relevant to the assessment year to the assessment year 2007-08 should qualify for claim of depreciation . This aspect of the matter is no longer res integra. This issue is squarely covered by the judgment of the Hon ble Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of 20% on new plant and machinery acquired and installed after 31-03-2005. However, the period the period during which such additional depreciation shall be allowed is not specified in the Act. Thus, one may conclude that the allowance of additional depreciation shall not only be restricted to the initial year but continue to second and subsequent years. 27. The claim for additional depreciation was however rejected by the CIT(A) for the reason that additional depreciation is available only in respect of new plant and machinery acquired and installed after 31-03- 2005. The word 'new' is not defined in the Act. According to the Shorter Oxford Dictionary the word 'new' means not existing before; now made, or brought into existence, for the first time . The AO held that the assets on which additional depreciation was claimed by the assessee is neither new nor brought into existence in the hands of the assessee in the relevant previous year. It is already used in earlier years and is already depreciated and, therefore, old in the hands of the assessee in the previous year. He held that the qualification that the asset should be new was basic qualification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to fifteen per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided that such further deduction of fifteen per cent shall be allowed to (A) a new industrial undertaking during any previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or (B) any industrial undertaking existing before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than *[ten per cent ]: Subs. for twenty-five per cent by Finance (No. 2) Act, 2004, (w.e.f. 1- 4-2005). Sec.32(1)(iia) as substituted by Finance Act, 2005, (w.e.f. 1-4- 2006) reads as follows: (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of additional depreciation in the year of installation of P M. However, in the section 32(1)(iia) amended vide Finance Act, 2005 Legislature had omitted the proviso wherein it was provided that such depreciation could be claimed only in the initial assessment year. This being a specific omission it could be construed that the intent of the Legislature was not to restrict the allowance of additional depreciation to the year in which the assets are installed but also in the second and subsequent years provided that the aggregate depreciation does not exceed the cost of the asset. It is settled law that a fiscal statute has to be interpreted the basis of the language used therein and not interpreted out of context the same as held by Apex Court in the case of Orissa State Warehousing Corporation, Mohammad Ali Khan and Madurai Mills Co. Ltd. (Referred to by the Appellant.) Further, it is also imperative to state that Section 32(1)(iia) is a beneficial provision enacted with the view to provide benefit to the assessee. The same is also evident from the Explanatory Notes to the Finance Act, 2005 wherein it has been clarified that in order to encourage investment the provisions of sec. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if there is a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation : - Orissa State Warehousing Corpn. v. CIT [1999] 103 Taxman 623/237 ITR 589 (SC) - Prakash Nath Khanna v. CIT [2004] 135 Taxman 327/266 ITR 1 (SC) - Smt. TarulataShyam v. CIT [1977] 108 ITR 345 (SC) - Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC) Apart from the above, it was also pointed out that DTC Bill 2013 has proposed expressly that additional depreciation would be allowed in the FY in which the P M is used for the first time and those provisions are not made with retrospective effect. It was argued that the legislature has consciously not restricted the allowance of additional depreciation on the original cost for AY 2006-07 till AY 2013-14 to one year only and therefore the additional depreciation should be allowed on the original cost of the asset for the second and subsequent years as well. It was submitted that the condition imposed by the relevant provisions was that Plant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent years. The expression new machinery is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, ITAT held that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01.04.2006. However, subsequently in the Decision of ITAT Mumbai in the case of Everest Industries Ltd. vs. JCIT [2018] 90 taxmann.com 330. Such decision was also referred by Ld DR in her written submission. In this decision, the decision of ITAT Kolkata in the case of DCIT vs. Gloster Jute Mills Ltd. (supra) was distinguished and the case has been decided against the assessee on the ground that the Kolkatta bench of Tribunal has taken the view in favour of the assessee, on plain reading of the provisions of sec. 32(1)(iia) vis- vis old provisions, by holding that the additional depreciation prescribed u/s 32(1)(iia) of the Act is allowable every year and further held that the Kolkata bench of Tribunal did not consider the third proviso inserted by Finance Act, 2015. Since the legislative intent in in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation report dated 16th November, 2000 from accrued valuer who has valued the cost of property as on 1st April, 1981 at Rs. 21,72,95,000/-. According to the AO, such value of land appears to be on higher side hence he has referred the matter to DVO on 20th December, 2010 for valuing the land as on 1st April, 1981. In the assessment order AO has observed that capital gain is computed on the basis of revised claim submitted by assessee till receipt of such valuation report. 53. In appeal CIT (A) has discussed the above issue at para 10.1 of his order and held as under: 10.1 I have considered the facts of the case and the submissions made by the assessee. I am of the opinion that no appeal lies against the action of the Assessing Officer of referring any matter to the Valuation Cell. In view of the same, this ground of appeal taken by the assessee is dismissed. 54. The assessee has referred appeal against above finding of CIT(A). During the course of appellate hearing, Ld. AR has argued that prior to 1st July, 2012, for the purpose of valuation u/s.55 of the Act, reference cannot be made if value of asset given by assessee was more than market price. The Ld. AR has main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t obtained through an invalid reference is also invalid, the undersigned would like to place reliance on the Hon'ble Supreme Court's decision in the case of Pushpadevi M. Jatia Vs. M.L. Wadhawan(1987 AIR 1748); wherein the Apex Court held that If evidence in relevant the court is not concerned with the method by which it was obtained. There is a long line of authority to support the opinion that the court is not concerned with how the evidence is obtained. Reliance is also placed Supreme Court's decision in the case of Pooran Mal Vs. Director of Inspection (1974) 93 ITR 505 in which it was held that even though the search and seizure had been conducted in contravention of the provisions of section 132 of the LT. Act material obtained can be used by the Income Tax authorities. Thus even if the reference made by A.O. is considered not valid the valuation report can always be used in the income tax proceedings for the purposes of the Act. In view of the above submission the reference made to the DVO for A.Y. 's 200708, 2008-09, 2009-10 and 2010-11 should be held as valid reference and the reopening initiated for A.Y. 2009-10, (which is before the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reference could be made to Departmental Valuation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value. 9. The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of Section 55A(a) (ii) of the Act is not acceptable. This is for the reason that Section 55A(b) of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary. 10. The contention of the revenue that the Assessing Officer is entitled to refer the issue of valuation of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. Sub- clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause(ii) of clause (b). In any case, clause (b) would apply where clause(a) does not apply since it starts with the expression in any other case . In other words if assessee has relied upon a Registered Valuer's Report, Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable. 16. In the present case, admittedly the assessee had relied on the estimate made by the Registered Valuer for the purpose of supporting its value of the asset. Any such situation would be governed by clause (a) of section 55A of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirect expenditure incurred at Head Office i.e Statutory Audit fees, Audit for taxation matter, Director Fees, Cost Auditor expenses, Subscription to CME etc and observed that such expenditure are not allocated to eligible businesses and to that extent deduction u/s 80IA is claimed excess. Before Ld.CIT(A), assessee has claimed that cost audit fees and subscription to CMA are in respect of cement manufacturing unit hence no allocation of such expenditure is required to be made. To that extent, Ld.CIT(A) has accepted the plea of assessee and such fact is not controverted by Ld. DR hence finding given by Ld.CIT(A) to that extent is upheld. Further, on this issue, coordinate bench in the case of Ambuja Cement Limited, holding company of assessee in ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019 (for A.Y. 2010-11 to 2012-13) vide order dated 07/11/2022 has held as under: 108. We are unable to see any merits in the stand of the assessee that the head office expenses cannot be allocated to all the units, as deductions and allowance of eligible units are required to be taken into account while treating such units as profit centres, and computing the profits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssly erred in confirming the action of the A.O. in not allowing deduction u/s 80IA on infrastructure facility, being rail systems at Kymore, Tikaria, Wadi I Wadi II in computing total income under the normal provisions of the Act. 65. The Assessing Officer has dealt with this issue at para 15 of his order. The AO has observed that in the return of income, the assessee through notes has claimed deduction u/s.80IA on Rail System maintained at Kymore, Wadi-I, Tikaria and Wadi- II units. During the course of assessment proceedings, assessee has filed 10CCB quantifying the claim of deduction u/s.80IA. During the course of assessment proceedings, assessee has filed its submission in support of such claim which is reproduced at para 15.2 of assessment order. However, the claim made by assessee was not accepted by AO on the ground that claim was not made in the return of income and as per provisions of section 80IA (7) it is mandatory to file certificate in the prescribed form along with return of income. 66. In appeal CIT (A) has discussed the above issue at para 13.2.1 13.2.1 of his order and held as under: 13.2.1 I have considered the facts of the case and the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtakings in respect of which deduction u/s 80IA has been claimed at the time of filing the return of income or even at the time of filing the revised return. The assessee has also not shown any good and sufficient reason for the delay in filing the Form No. 10CCB. Further, the issue in appeal in the case of Ramco International (supra) relied upon by the assessee was different from the issue in the present appeal. The issue in the said appeal was whether in the facts and circumstances of the case and in law, the Tribunal was right in law in allowing the assessee's claim of deduction u/s 80IB which the assessee had neither claimed in the return of income nor through a revised return of income and whether the decision of the tribunal was contrary to the law as spelt out by the Hon'ble Supreme Court in Goetze (India) Ltd. reported in 284 ITR 323 (SC) and in Gurjargravures (P) Ltd. reported in 111ITR 1 (SC). However, in the present appeal, what is to be decided is whether the deduction u/s 80IA would be admissible when the accounts of the undertaking for the year relevant to the assessment year for which the deduction is claimed have audited as provided in sec. 80IA(7) at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich he relied upon decision of Coordinate Bench in the case of DCIT v. Kamdhenu Builders Developers ITA No.7010 of 2010. The AR has also stated that it has made claim in return of income but quantification was not made as there was no completion of audit of rail accounts separately and claim cannot be made based upon unaudited separate accounts. On the other hand, the Ld. DR in her written submission has vehemently referred to decision of Hon'ble Bombay High Court in the case of EBR Enterprise (supra). She has also stated that mere making claim by way of notes to accounts without any audit cannot be considered as valid claim. The assessee has quantified the quantum of claim after lapse of more than two years from due date of filing return of income hence such deduction cannot be allowed. 70. With regard to railway sliding claim of the assessee Ld. DR supported the findings of the Assessing Officer and Ld. CIT(A) and further she relied on the decision of the Hon ble Bombay High Court in the case of EBR Enterprise (Supra). However, Ld. AR filed written Submission distinguishing the facts on the above case, in response to the submissions of the Ld. AR, Ld. DR responded as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e request should be reasonable. However, in the assessee's case, the behavior of the assesse of delaying the audit and the quantification of the claim by more than 2 years can not be considered as reasonable by any para meter. Moreover, the Hon'ble Supreme Court has not made any observation on the proposition as raised by the assessee. (Copy of the order enclosed) (ii) The assessee's claim of allowable expenditure was quantified in the note appended to the return of income. (Copy of the order enclosed) (iii) Was on reopening and the claim made by the assessee would have gone to increase the returned income and not reduce as in assessee's case. Further, it cannot be discerned from the text of the Judgement that the claim was not quantified by the assessee. (Copy of the order enclosed) 4. The decision relied upon by the assessee is prior to Hon'ble Bombay High Court's decision in the case of EBR Enterprises vs. Union Of India and hence is not relevant. Further, in the instant case, the deduction claimed u/s 80IB(10) stood quantified by the assesse as against the assessee's case wherein irrespective of the fact that the = quantification wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. 72. It is an undisputed fact that claim for deduction u/s.80IA was made in notes to return of income but only Form 10CCB was filed only before Assessing Officer. It is observed that the conditions mentioned in above referred section 80IA (7) for furnishing Form 10CCB along with return of income is directory in nature as held by various High courts discussed in this para. Hon ble Karnataka High Court in case of Sutures India (P.) Ltd. Reported in 125 taxmann.com 226 has held as under: Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Audit report) - Assessment year 2003-04 - Whether assessee-company could file audit report in Form no. 10CCB even at appellate stage so as to be eligible for deduction under section 80IA - Held, yes [Paras 8 and 9] [In favour of assessee] 73. Further, the Hon ble Allahabad High Court in case of Fortuna Foundation Engineers Consultants (P.) Ltd. Reported in 81 taxmann.com 189 has held as under: II. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the assessment was made that would amount to sufficient compliance for grant of additional depreciation in terms of section 32(1)(iia) of the Act. On appeal against the decision of the High Court dismissing the Department s appeal from the order of the Tribunal holding that the assessee was entitled to claim deduction under section 80IB where the audit report in form 10CCB in support of the claim was not filed with the return but before the assessment was completed: The Supreme Court dismissed the appeals. 75. Considering the binding decision of various High Courts including Supreme Court, deduction u/s.80IA cannot be denied merely on the ground that Form 10CCB was filed during the course of assessment proceedings. It is observed that CIT(A) has denied such deduction on the ground that books of account for such unit was not audited before the due date of filing return of income but provisions of the Act as relevant in year under consideration nowhere states that such books of account of separate unit need to be audited before the filing of return of income. It is an undisputed fact that books of account of assessee company was audited by chartered Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the assessment proceedings, but it is a case where a claim put-forth in the return of income was only quantified during assessment proceedings and thus the Assessing Officer ought to have entertained the impugned claim. Alternatively, it is contended that the CIT(A) enjoys plenary powers of the Assessing Officer, and following the judgment of the Hon ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT, (1991) 187 ITR 688, the claim should have been entertained by him as the complete facts were on record. In this context, the learned counsel referred to the decision of the Pune Bench of the Tribunal in the case of Jain Irrigation Systems Ltd. vide ITA No.1319/PN/2009 dated 30.01.2012 wherein the import of the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. (supra) has been explained on the basis of the judgment of the Hon ble Delhi High Court in the case of CIT vs. Jai Parabolic Springs Ltd., (2008) 306 ITR 42 (Del), in the following words :- 5. We have carefully considered rival submissions. In our view, the plea of the assessee is well-reasoned, inasmuch as the judgment of the Hon ble Supreme Court in the case of Goetze (In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he retention money could not be worked out. Hence, we will submit the details thereof later. But for the time being, we submit that the retention money in the various contracts is not taxable in view of the various decisions including the decisions cited below wherein it is held that the taxability of this amount is to be considered in the year in which this amount is due to the assessee from the contractee. (a) CIT v Associated Cables P. Ltd. (2006) 286 ITR 596 (Bom.) (b) DCIT v Spirax Marshall Ltd. (2007) 109 TTJ (Pune) 593 (c) National Heavy Engg. Co. Op. Ltd. v DCIT (2007) 105 ITD 485 (Pune) Inadvertently, in the Original Return of Income this amount was not claimed as deduction. We request Your Honour to kindly grant us appropriate deduction while completing assessment. We shall submit the necessary details and quantification of claim during the course of assessment. 20. The aforesaid Note clearly depicts the claim of the assessee to the effect that the retention money in various contracts retained/deducted by the customers is not taxable; and, various case laws have also been cited, including that of the Hon ble Jurisdictional High Court of Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessments and not in the return of income. 23. The third objection which has been raised by the Revenue is in terms of a discussion made by the CIT(A) in para 3.6 of the impugned order. According to the CIT(A), if the claim for excluding retention money was entertained and allowed, it would result in the determination of total income at a figure below the income originally returned/assessed and thus the same was not permissible. This objection of the Revenue, in our view is no bar to entertain the aforesaid claim, keeping in mind the ratio of the judgement of the Hon ble Supreme Court in the case of CIT vs. Shelly Products Anr., (2003) 261 ITR 367 (SC) and also the judgement of the Hon ble Gujarat High Court in the case of Gujarat Gas Co. Ltd. vs. CIT, 245 ITR 54 (Guj). 24. On the basis of the aforesaid discussion, in conclusion we hold that in so far as the assessment years 2007-08 and 2008-09 are concerned, the claim of the assessee for exclusion of income on account retention money withheld by contractees/customers has been wrongly rejected by the lower authorities. 77. It is observed that in above referred case, the fact was that assessee has made claim i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia) Ltd. (supra). It is submitted that the impugned order could not have held that the claim for deduction could be entertained by the Assessing Officer in the absence of the same finding a place either in return of income or in the revised return of income. It is further submitted that in view of the decision of the Apex Court in CIT v. Sun Engineering Works (P.) Ltd.[1992] 198 ITR 297/64 Taxman 442 a re- assessment consequent to re-opening of the assessment cannot lead to reduction of income which had been originally assessed to tax. In the above view, it is submitted that the impugned order of the Tribunal is not justified and admission of the appeal is warranted. 9. For the purpose of the present appeal, the issue whether or not the claim of quantification made by the respondent before the Assessing Officer for the subject assessment years would be a fresh claim or not is academic. This in view of the fact that the impugned order has held that even if one accepts that the quantification of the amount of deduction made during the course of assessment proceedings is a fresh claim it is a settled position so far as this Court is concerned that it can be made before and coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of the Act will apply to the return of income so filed. Consequently, the return filed under Section 153A(1) of the Act is a return furnished under Section 139 of the Act. Consequently, the respondent-assessee is being assessed in respect of abated assessment for the first time under the Act. Therefore the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section 153A of the Act and the case laws on the provision of the Act would equally apply. 12. This Court in Pruthvi Brokers Shareholders (supra) while dealing with a return of income filed under Section 139(1) of the Act has held that an assessee is entitled to raise a fresh claim before the Appellate Authorities, even if the same was not raised before the Assessing Officer at the time of filing return of income or by filing a revised return of income. This Court also placed reliance upon decision of the Apex Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 wherein while dealing with the powers of the Assessing Officer it had held that a claim not made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order or CIT(A) s order, though AO/CIT(A) has not referred to provision of section 80A(5) of the Act, the Ld. DR has only raised this issue in her submission but such provision of the Act cannot be made applicable as in present case claim was made in notes forming part of return of income which is not denied by the lower authorities. The issue relating to filing of Form 10CCB or quantum of deduction is already discussed in preceding para hence no separate discussion is required. 80. It is observed that AO has not disputed the quantum of deduction u/s.80IA nor disputed whether assessee is eligible for deduction u/s.80IA on industrial undertaking relating to Rail Infrastructure facility, it is relevant to refer to decision of co-ordinate Bench in the case of Ambuja Cement Ltd. in ITA No. 1889 and 1241/Mum/2018,2384, 2958, 3475 and 3843/Mum/2019 vide its order dated 07.11.2022 has held as under: 87. So far as this grievance of the assessee is concerned, only a few material facts need to be taken note of. During the course of assessment proceedings, the Assessing Officer took note of the fact that the assessee has claimed deduction under section 80IA on rail syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appeal before us. 88. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 89. We find that the very case, on the basis of investigation in which the authorities below had decided the matter in favour of the assessee, came up before a coordinate bench of this Tribunal, and, in the said case, the matter was decided in favour of the assessee. In the said judgment, reported as Ultratech Cement Ltd Vs ACIT [(2017) 88 taxmann.com 907 (Mumbai)], the coordinate bench has held as follows: 9. During the course of assessment AO disallowed assessee's claim of deduction u/s.80IA in respect of profit of rail systems. The assessee made this claim on the ground that it had earned profit by operating its rail systems at Hirmi [Chhattisgarh], Tadipatri [AP], Arakkonam [Tamil Nadu] and Durgapur [West Bengal]. In the context, during the assessment proceedings it was explained that the assessee had inherited those rail systems [along with cement plants-Hirmi Cement Works, A P Cement Works, Arakkonam Cement Works West Bengal Cement Works] out of demerger from L T Ltd. at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoid transportation through the roads till the nearest railway station and loading and unloading etc]; that on such request the railway authorities conducted survey and laid down sidings and charged the assessee for laying out the railway track and other related infrastructure. The AO also noted that the wagons were actually run on those sidings by the railway authority and not by the assessee company. The AO also took note that railway authorities had posted its staff for weighing raw material/ cement bags loaded/unloaded by the assessee; and that all activities were directly or indirectly being carried out by the railway authorities and the assessee only reimbursed the expenses or charges levied by the railways in r/o siding maintenance etc. as per the agreement. The AO inferred that the so called rail system [of the assessee company] is not a self reliant, independent unit; and that it is providing services to the cement plants of the assessee company only. The AO also stated that railway department do not allow operation of the railways by any private enterprise and for that reason it [railway department] had formulated a Build-own-lease- transfer (BOLT) scheme whereby the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g claimed by the assessee company since AY. 2004- 05, after the various cements plants were transferred to the assessee company [in the year 2003- 04] as per demerger scheme. In AY. 2004- 05, claim was made [for the first time] in respect of such Rail System at Hirmi. Then in AY. 2007-08, it started claiming deduction in respect of rails systems at Tadipatri and Arakkonam and then in AY. 2008-09 for Durgapur also. From AY. 2009-10 and onwards the claim pertains to all the four units. 13. The CIT(A) further noted that in Ays. 2004-05 2005-06, the Hon'ble ITAT vide its order dated 20.08.2009 in ITA Nos. 7735 7736/Mum/2007 had decided this issue in the favour of assessee. Later that decision of the tribunal was followed by the ITAT in its [assessee] case in AY. 2006-07 [ ITA No. 2604/M/09 order dated 31.5.2010] and in AYs 2007-08 2008- 09 [ITA Nos. 8143/mum/2010 and 1813/Mum/2012, order dated 28.02.2014]. The relevant part of the Tribunal's decision in AY. 2004- 05 is reproduced hereunder: 13. Regarding the issue in r/o deduction u/s 80lA on profit of Rail system at Hirmi, the AO rejected the claim on the ground that the rail system is not a profit centre bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of Sec 80IA and an assessee who does not raise internal invoices would not be entitled to such benefit. 13.2. The assessee further submitted that Sec. 80IA(8) itself contemplates a situation where goods or services are transferred by an eligible undertaking to non-eligible undertaking and vice versa. In such cases, deduction is to be allowed based on the market value of such goods or services. It was further submitted that the section itself envisages situation of captive consumption. Reliance was placed on the decision reported in 59 ITR 514 (Guj.) and 254 ITR 17 (Bom). 13.3. Further reliance was also placed on the decision of the Supreme Court in the case of Tata Iron Steel Company Ltd. in 48 ITR 123 and stated that in that case, the assessee was engaged in the business of extraction of iron ore and manufacturing of iron and steel therefrom. The final product sold by the company was the finished iron and steel. Under some statute, a cess was leviable on the annual net profits derived from the mines. It was contended that since no iron ore extracted is sold to an outsider, no profits could be said to have been derived from the extracting activities. This argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cement production. It is was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore argued that the rail system is not a part of the cement unit but is an, independent unit. It was further submitted' that the conditions specified in Sec. 8OIA(4)(i) in r/o an infrastructure facility are fully satisfied in the present case. The rail system is owned by the assessee company which is a company registered in India. The assessee has entered into an agreement with the Railways for operating and maintaining the new infrastructure facility. It has started operating and maintenance the infrastructure facility after 01.04.1995. 14. After considering the submission and perusing the material on record, the CIT(A) was satisfied with the explanation of the assessee and taking into consideration the various case laws held that the assessee is eligible for deduction us BOIA in rlo profits from rail system. Accordingly, the AO was directed to allow deduction u/s 80IA. Now the department is in appeal here before the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant the AO has himself stated in the assessment order that the rail system was developed by L T Ltd which has been inherited by the appellant as a result of the demerger and Circular No. 733 dated 03.01.1996 categorically stated that benefit of sec. 80IA is applicable to development of rail system and there is no gain saying that fact that the appellant has developed the rail system and is operating and maintaining the same. After perusal of the facts as well as the judicial pronouncements quoted above it is therefore held that the appellant is eligible for deduction u/s 80IA in r/o profits from rail system. In view of the same, the AO is directed to allow deduction u/s 80IA of Rs. 15,64,33,576/-17. As stated above neither the findings of the Id CIT(A) could 'be controverted by the Id DR nor any other material was brought on record to establish otherwise. Therefore in view of the uncontroverted reasoning given by the Id. CIT(A) we confirm his order on this issue also. 14. After having all the above observation, the CIT(A) noted that the issue of the allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid out on the cost of L T Ltd. The cost of maintenance was also to be borne by L T Ltd. [and now by the assessee]. On that only expenses are incurred and there would be no profit element. Then the issue arises of running the wagons onto those tracks. As per the agreement, the assessee was not permitted to run the wagon onto those tracks. 21. As per CIT(A), it is not a case of running of railways [goods train] by L T Ltd. or the assessee company on those private sidings and as such the assessee did not run any rail system onto those private sidings. Therefore, it cannot be said that the assessee company had operated any rail systems at all. Therefore the deduction u/s 80lA would not be available to it onto the profit, if any, from such rail systems. 22. The CIT(A) also observed that there is very limited profit on operation of such rail system and the claim made by assessee u/s.80IA is exorbitant. 23. In view of the above discussion, the CIT(A) concluded that assessee's claim of deduction u/s.80IA is not allowable. However, by observing that the Tribunal has allowed the claim of assessee in the Ays. 2004-05, 2006- 07 to 2008-09, to follow the judicial discipl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty and thus by the railway administration. Clause 7(a) stipulate that assessee will provide and deliver at site the permanent way and other materials in accordance with the railway administration standard and specifications. Clause 17 stipulate that assessee shall provide labour for and bear the cost of all Operations on the siding. Clause 9(b) provides for maintenance and other charges for the operation of the sidings at assessee's cost and expense to the satisfaction of railway administration.' 26. Learned AR also argued that all the conditions of Section 80IA(4) was complied with for claiming deductions. Learned AR also invited our attention to the observation of CIT(A) with respect to the freight rate insofar as CIT(A) has wrongly considered the rate for quintals as against per Metric Ton adopted by assessee while computing eligible amount of deduction u/s.80IA (4). It was also contended by learned AR that assessee has started claiming deduction for rail system u/s.80IA only from A.Y.2004-05 since it has satisfied all the conditions as prescribed u/s.80IA (4). 27. With regard to disallowance u/s.14A on account of interest, our attention was invited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Taxman 98/[2014] 49 taxmann.com 168/367 ITR 266 (Karnataka) 9. ITO v. Smt. Urmila Bhandari [IT Appeal Nos.766, 2593 (Delhi) of 2013, dated 20-10-2014] 10. Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.-Trib.) 11. Century Enka Limited v. Dy. CIT [2015] 58 taxmann.com 318/154 ITD 426 (Kol.-Trib.) 12. Janak Dehydration (P.) Ltd. v. Asstt. CIT [2011] 44 SOT 93 (Ahmedabad) (URO) 13. U.P. State Bridge Corporation Ltd. v. Dy. CIT [2015] 62 taxmann.com 61/70 SOT 517 (Lucknow - Trib.) 14. Asst. CIT v. Apex Packing Products (P.) Ltd. [IT Appeal Nos. 145 to 150 (PNJ) of 2013, dated 3-1- 2014] 30. On the other hand, it was vehemently argued by learned DR that rail system of the assessee company was simply the profit siding and not any infrastructure facility of public utility, therefore, revenue authorities have correctly declined claim of deduction u/s.80IA(4). She further contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee UltraTech Cement Ltd. ('UTCL') has acquired the cement business of Larsen Toubro Limited (L T') along with the Rail systems at Hirmi, Tadipatri, Arrokonam and Durgapur in the FY. 2003-04. These Railway systems were developed on or after 01/04/1995 by the L T. year wise details of the aforesaid rail systems are as follows: Unit I Rail system Undertakings Year of Commencement of operations (A. Y.) Initial year of claim (A.Y.) Rail system at Hirmi in the state of Chhattisgarh 2000-01 2004-05 Rail system at Tadipatri in the state of Andhra Pradesh 1999-00 2007-08 Rail system at Arakkonam in the state of Tamil Nadu 2001-02 2007-08 Rail System at Durgapur in the state of West Bengal 2002-03 2008-09 35. M/s. L T had entered into agreements with the Railway authorities to develop, operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired agreements between the Govt. and the assessee. In this respect the assessee submitted as under before the lower authorities. (a) as per section 80- IA(4)(i)(b) the agreement has to be entered with the Central Govt or a State Govt or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. Indian Railways is the statutory body under the Indian Railways Act. (b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption. (c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approval of the Indian Railways. 36. It was therefore contended that the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA( 4 )(i) and in no case it can be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Applicant against the total estimated cost - wherein it is mentioned that, The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration (c) Clause No. 7(a) - Permanent way materials - The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant. (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;operate and maintain' the rail systems, such 'infrastructure facilities' were also declared as eligible to claim deduction under the said section. Further, the circular also states that rail systems developed other than under the BOLT scheme were also eligible for benefit u/s 80-IA. In case of the assessee, the clarification of benefits u/s. 80-IA being available to those rail systems who do not 'operate and maintain' the systems clearly establishes that, enterprises who in fact operate and maintain the rail systems were certainly eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY. 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. 43. The Rail systems of assessee at Hirmi, Tadipatri, Arakkonam and at Durgapur were developed under the Agreements entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rail systems. We found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. 46. Therefore the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA(4)(i) and in no case it can be inferred that they are not the required agreements under section 80-IA. 47. We also found that no siding charges are levied by Indian Railways for the rail systems developed by the assessee. The assessee has developed, operates and maintains the rail systems. The systems are being operated by the assessee as permitted under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time to time. The entire cost was borne by the assessee and is appearing in the balance sheet of the assessee as placed on record. We have also verified the same and found it correct. 48. Contention of revenue authorities that Railways had constructed the rail system is not factually correct. In fact, M/s. L T had entered into agreement with the appropriate rail authorities to Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non- observance of such rules, regulations and orders .... Further, the appellant carries out all the operations for smooth movement of its goods, viz. Shunting of the Wagons, placing of the wagons at appropriate locations, Loading / Unloading of Wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, Maintaining signa ling systems, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc. Further, in Clause No. 14 - Traffic on Siding - it is mentioned that applicant underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also found that the overall profits of the company have increased due to such commercial benefits and the same should have been treated as the revenue of the rail systems, which is the Fair Market Value of the services provided by the undertaking as per the provisions of Sec. 80IA(8) and the assessee is entitled for benefit u/s 80IA accordingly. However, the basis adopted for calculating the revenue from rail system by the assessee has been conservatively considered as lower of the freight chargeable through Rail and Road freight saved. The rail freight being lower is considered after further discounting it by 50% based on the circular of Indian Railways for the freight chargeable upto the nearest railway station. 52. We also found that assessee has furnished all the information with regard to No. of Railway Engines / Locomotives and Railway Wagons owned by the assessee before the lower authorities which are as under:- Rail Systems at No. of Engines/Locomotives No. of Wagons Hirmi 2 49 Tadipatri 2 76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia Co. Chartered Accountants, alongwith Balance Sheet, P L Account, Schedules forming part of Balance sheet and P L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct. 56. With regard to CIT(A)'s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply a private siding and not any infrastructure facility of Public Utility therefore the infrastructure of such private sidings should be treated as Private Facility , we observe that Section 80IA(4) of the Income-tax Act, 1961 does not require the infrastructure facility to be a public facility for allowing deduction under section 80IA. The explanation to section 80IA(4) defines the term 'infrastructure facility' to mean a road including toll road, a bridge or a rail system without anything further. We observe that the CIT(A) has been referring to the pre-amended definition of the term 'infrastructure facility' which was applicable till AY. 2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discretion and prior permission of the railway authorities thereby rendering the facility open for general public at large. Hence, such a facility is in fact a public utility. 59. With regard to CIT(A)s conclusion for the A.Y. 2010-11 at page 42, to the effect that the agreements entered between the assessee Company Railway Department, contained the terms conditions for construction of Private Sidings and that cannot be treated as any agreement for development, operation maintenance of any Rail system, we observe that as per section 80- IA(4)(i)(b), an assessee has to enter into an agreement with the Central Government or a State Government or a Local A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1 st day of April, 1995: 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income-tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per clause (b)of Section 80IA (4)(i) an agreement has to be entered with the Central Government or a State Government or a Local Authority or any other statutory body for (i) developing or (ii) Operating and maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. 65. We also observe that the agreements entered into by the assessee are for the development, operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rail system is being operated by the assessee and the cost of above operations is borne by assessee. 71. With regard to allegation of the CIT(A) that the assessee has never claimed that it is hauling the wagons on the entire siding, we found that hauling of wagons is only one of the activity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is borne by it. 72. From the record we also found that even the maintenance of the Rail system such as alignment of track gauge maintenance, patching of ballast, maintenance of railway track sleepers, signalling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the assessee. 73. Thus the operation of rail is not merely hauling of wagons but comprises of various activities all of which is carried on by the assessee Company. 74. With regard to C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises 79. All the aforesaid services are carried out by the railway system inside the factory premises. Further even the maintenance of the Rail system such as alignment of track gauge maintenance, patching of ballast, maintenance of railway track sleepers, signaling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the easiest available comparable, it has been adopted by assessee for calculating one of the component of its revenue . 80. We further found that an amount towards loading and unloading charges is added to the above revenue for inward an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould enter into an agreement with the Government (Central or State) or other authorities mentioned therein for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility. Further, the agreement should also provide for transfer of such infrastructure facility to such authorities within the period stipulated in the agreement. The Central Government realizing the need to encourage investment particularly in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amended section 80IA(4) clause (b) stood as under from AY. 2002-03 onwards: (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; 84. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as UTCL were eligible for claiming deduction u/s 80IA. As per section 80IA(2), the deduction is available at the option of the assessee, for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. The assessee has started claiming deduction post AY. 2004-05 and is within the period of available twenty years. Under section 80IB, u/s 80lC, 80ID and 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit. 88. In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment year, must apply for determination of eligibility of the claim. In respect of AY. 2004-05 onwards including assessment years 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a pre- requisite for eligibility of claim u/s 80- IA(4)(b), the assessee has correctly made the claim. 89. In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80IA(5), the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year . Prior to 1-4-2000, section 80IA(12) defined the initial assessment year for various types of eligible assessees. However, after the amendment by the Finance Act, 1999, the definition of initial assessment year has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in section 80IA(2) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined. 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries Distilleries Ltd. v. Asstt. CIT [2009] 116 ITD 241 which pertains to AY. 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger. (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. 95. Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 80IA. 96. In view of the above discussion and respectfully following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2007-08 AY 2007-08 AY 2007-08 AY 2007-08 Date of Commencement of Operation 27/07/1998 21/06/2003 10/07/2003 01/08/2006 1 st Assessment Year of Commencement AY 1999-00 AY 2004-05 AY 2004-05 AY 2007-08 10 th consecutive AYs from 1st Year of claim i.e. AY 2007-08 AY 2016-17 AY 2016-17 AY 2016-17 AY 2016-17 83. The learned A.R. has further pointed out that if deduction u/s.80-IA is denied in A.Y. 2007-08 and 2008-09 merely on technical ground, it will be entitled for deduction u/s. 80-IA for such units for two years subsequent to 10 consecutive years as mentioned in above referred chart. Thus, for these units assessee would be entitled to deduction u/s.80-IA for A.Ys. 2017-18 and 2018-19 which fall within the block of 10 consecutive years as mentioned in section 80-IA(4) of the Act. The learned A.R. has also pointed out that in A.Ys. 2017-18 and 2018-19 the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Profit Loss Account net profits on sale of fixed assets amounting to INR 10,98,70,597/-. In the original return of income, while computing book profit under Section 115JB o the Act, the Assessee omitted to exclude aforesaid profit on sale of fixed assets. However, in the revised return, while computing book profits under Section 115JB of the Act the same were excluded. In response to query raised during the course of assessment proceedings, the Assessee, vide letter dated 16.11.2006, filed detailed submission substantiating the claim. However, the Assessing Officer rejected the claim of the Assessee by placing reliance on the judgment of Hon ble Bombay High Court in the case of CIT vs. Veekay Lal Investments Co. Pvt. Ltd. : 249 ITR 597 (Bom) 19.2. Being aggrieved, the Assessee filed before CIT(A) on this issue. 19.4. We note that in the immediately preceding Assessment Year 2003-04, the Tribunal has decided this issue in favour of the Revenue, vide common order 13.03.2019 passed in ITA No. 4242/MUM/2007 and ITA No. 4988/MUM/2007, holding as under: 52. Under this issue the revenue has challenged the deletion of the addition of profit on sale of fixed assets i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the provisions of section 115JB of the Act, which is a general provision cannot be made applicable to the case of the assessee. For yet another reason, the assessee has to be given the benefit of indexed cost of acquisition as considering the profits on sale of land without giving the benefit of indexed cost of acquisition results in taxing the income other than actual/real income. In other words, a mere book keeping entry cannot be treated as income . . 143. On perusal of the aforesaid decision, it is evident that the assessee will be entitled to indexed cost of acquisition while computing capital gains u/s 115JB of the IT Act. It is also to be noted that in the immediately preceding year i.e. AY 2004-05, Coordinate bench has held that long term capital gains credited in the books of accounts is taxable to which even the Ld. AR fairly conceded. However, it was only during the current year as well as AY 2005-06 that the Ld. AR of the assessee referred to the decision of Hon ble Karnataka High Court as relied and reproduced supra. Extensively relying on it he claimed that the indexed cost of acquisition does not form part of income computed u/s 115JB of the Act. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court of Bombay had dismissed the departmental appeal with regard to the issue while deciding the appeal for AY 1999-00. Considering the above facts we decide the last additional ground against the AO. 130 It is matter of fact that department has not challenged the appellate order of A.Y. 1998-99 before Hon ble High court and matter has attained finality. Hon ble Bombay High court in the case of Raymond Limited [2012] 21 taxmann.com 60 has held that Amount set apart as a Debenture Redemption Reserve (DRR) is not a reserve within the meaning of Explanation (b) to section 115JA. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld.CIT(A) holding that amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. This ground of appeal in Departmental Appeal is dismissed. 89. Respectfully following the above decision, we allow the ground raised by the assessee. 90. During the course of appellate hearing, assessee has filed following additional grounds of appeal: That on the facts and in the circumstances of the case, outstanding BIS Marking Fees and Sales tax aggregating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz., 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made .' clearly relate to cases where the ground was available when the return was filed and the assessment order was made but 'could not have been raised' at this stage. The words are 'could not have been raised' and not 'were not in existence'. Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability which he must do in accordance with the orders allowing the assessee a deduction of Rs. 40 lakhs under section 43B. [Para 20] The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The revenue has not suggested much less established that the omission was deliberate, mala fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. [Para 21] Therefore, the appeal of the revenue was liable to be dismissed. [Para 26] . 93. So far as the merits of the case is concerned, it is observed that assessee has claimed deduction of BIS marketing fees / sale tax as per provision of section 43B of the Act. The issue requires verification at the end of the Assessing Officer hence, it is remitted to the file of AO to verify the claim of the assessee as per law, accordingly, this ground of appeal is allowed for statistical purpose. 94. In the result, appeal filed by assessee is partly allowed as indicated above. ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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