9911796707
TMI Blog2017 (6) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... peal filed by the assessee for A.Y. 2004-05 against the order passed by the A.O. under Sec. 143(3), marked as ITA No. 5963/Mum/2011. The assessee assailing the order of the CIT(A) had raised the following grounds of appeal before us:- ITA NO. 5963/MUM/2011 (A.Y. 2004-05) "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(A)], erred by confirming the disallowance made by A.O for deduction of Rs. 4,31,90,549/- under Section 80IB on LPG Plants on the ground that, LPG plant is not engaged in the manufacture or production of any article or thing. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not following the decision of the Hon'ble Bombay High Court in CIT v/s Reliance Utilities Ltd. (313 ITR 340), that the investments made by the Corporation, income from which is exempt from tax, were made out of the Corporation's own funds. 3. Learned CIT(A), erred in remitting back the case to Assessing Officer for statistical purpose to recompute the disallowance u/s 14A and rejecting the claim of the appellant that no expenditure was incurred by appellant for earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the authorized representatives for both the parties before us, as under:- (A). GROUND OF APPEAL NO. 1: Disallowance of deduction u/s. 80IB The CIT(A) being of the considered view that the filling of the LPG gas in cylinders does not constitute manufacturing of a new product, therefore subscribed to the view taken by his predecessor while disposing of the appeal of the assessee for A.Ys. 2002-03 and 2003-04, as under:- I have duly considered the submissions of the authorized representative and I find that the A.O. is justified in disallowing deduction u/s. 80IB. The filling of gas in cylinders does not constitute manufacturing of new product. There is lot of difference between a process and manufacture. Filling of gas in LPG cylinders may be a process but certainly is not a production or manufacture of new article or thing. The LPG remains LPG only even after being filled in cylinders. It is not correct to say that LPG filled in cylinders is a residual product which emerges after being subjected to various processes at the LPG Plant. These processes are undertaken to enable the LPG to be filled in cylinders. Hence in my considered opinion the assessee is not eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order records a finding of fact that the process of bottling the LPG gas into cylinder makes the same marketable on execution of the process. It therefore follows that a new product comes into existence" For giving the above finding this Court also relied upon the decision of this Court in Writ Petition No. 9455 of 2011 in the matter of M/s. Hindustan Petroleum Corporation Ltd. Vs. Maharashtra State Electricity Distribution Co. Ltd. and ors and also a decision dated 6 May 2010 of the Gujrat High Court in Bharat Petroleum Corporation Ltd. Vs. State of Gujarat & Ors. Holding that bottling LPG Gas is manufacturing activity". That still further the ld. A.R. relied on the judgments of the Hon'ble High Court of Bombay passed in the case of the assessee, as under:- (i) CIT-2, Mumbai Vs. Bharat Petroleum Corporation Ltd. (ITA No. 1152 and 1145 of 2014, dated 23.08.2016) (Page 4-6 of "APB"). (ii) CIT-2, Mumbai Vs. Bharat Petroleum Corporation Ltd. (ITA No. 320 and 353 of 2014, dated 23.08.2016). (Page 7-9 of "APB"). (iii) CIT-2, Mumbai Vs. Bharat Petroleum Corporation Ltd. (ITA No. 322 of 2014, dated 23.08.2016) (Page 10-12 of "APB"). (iv) CIT-2, Mumbai Vs. Bharat Petroleum Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the assessee stood eligible towards claim of deduction u/s. 80IB. We are of the considered view that as the issue involved in the present appeal is squarely covered by the aforementioned judgments of the Hon'ble High Court of Bombay ,as well as the order of the coordinate bench of the Tribunal in the assessee"s own case, thus finding no reason to take a different view, therein set aside the order of the CIT(A). The disallowance of assesses claim of deduction of Rs. 4,31,90,547/-by the A.O which thereafter had been upheld by the CIT(A), is thus deleted. The Ground of appeal no. 1 is thus allowed. (B). GROUND OF APPEAL NO. 2 & 3: Disallowance u/s. 14A 7. That the assessee corporation had received an amount of Rs. 117,79,32,321/- on account of interest on tax free securities and bonds and dividends from shares, which were claimed as exempt during the year under consideration. The A.O observing that the assessee had not allocated any disallowance of expense u/s. 14A relatable to the said exempt income, therefore estimated 10% of the exempt income as expense relatable to earning of such income and disallowed the same. The CIT(A) after deliberating on the contentions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and also taking into consideration the findings recorded by the Revenue Authority, this presumption is established. Hence, in the net result, this ground of appeal filed by the assessee is allowed." It was thus averred by the ld. A.R. that the disallowance made by the A.O u/s. 14A which thereafter had been upheld by the CIT(A), was liable to be set aside. The Ld. A.R in order to drive home his contention that the assessee corporation had substantial interest free funds during the year under consideration, and thus it could safely be presumed that the investments made by the assessee corporation in the tax free income yielding investments during the year were made out of the interest free funds, and as such no part of the tax free income yielding investments could be related to the interest bearing funds, therein took us through his "Paper book" filed on 09.03.2017. We have perused the Final accounts of the assessee corporation for the year under consideration, Statement of dividend income/Interest income exempt from tax, as well as its Computation of income, placed at Page 1-35 of the "APB". The Ld. A.R had drawn our attention to a "Chart" marked as "Incremental Cash Flow of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. We find that our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of Reliance Utility and Power Ltd. (Supra), which thereafter had been followed by the Hon'ble High Court in the case of CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) and HDFC Bank Ltd. Vs. DCIT (2016) 383 ITR 529 (Bom). We thus are of the considered view that the facts of the present case are squarely covered by the aforesaid judgments of the Hon'ble Jurisdictional High Court, as well as the order passed by the Tribunal in the assessee"s own case for the immediately preceding years, viz. A.Ys. 2002-03 and 2003-04. 10. Alternatively, we find that the A.O after rejecting the claim of the assessee that no disallowance was called for u/s. 14A, had therein estimated the said disallowance @10% of the exempt income, and madea consequential addition of Rs. 11,77,93,232/-. We are unable to persuade ourselves to be in agreement with the whimsical estimation of disallowance by the A.O. We are of the considered view that the very process of determination of the amount of expenditure incurred in relation to exempt income would be triggered, only if the A.O. returns a finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of Rs. 10 crores only on the basis of a pure guess work, while for it was the contention of the assessee that the said expenditure was only to the extent of Rs. 28,67,365/-, therefore directed the A.O to verify the said factual position from the books of accounts of the assessee and restrict the disallowance to the actual amount charged by the assessee to its profit and loss account. 12. The assessee being aggrieved with the aforesaid order of the CIT(A) had therein assailed the same before us. That it was submitted by the ld. A.R. that the issue as regards allowability of the perennial deposits as a revenue expenditure, and subjecting them to tax in the year in which they are refunded, have been looked into and approved by the Tribunal in the assessees own case, viz. Bharat Petroleum Corporation Ltd. Vs. DCIT, Mumbai (ITA 2257/Mum/2011, A.Y. 2002-03), dated 19.10.2016 (Page 38-41 of "APB"). It was thus submitted by the Ld. A.R. that the issue was squarely covered in favour of the assessee. The ld. D.R. did not rebut the aforesaid contention so raised before us. 13. We have heard the Authorized Representatives for both the parties, perused the orders of the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of amortization of premium of leasehold land by the CIT(A), had therein carried the matter in appeal before us. That at the very outset it was submitted by the ld. A.R. that in the light of the judgment of the Hon'ble High Court of Bombay in the case of CIT-3 Vs. Reliance Industrial Infrastructure Ltd. (ITA No. 3611 of 2010), the claim of the assessee in respect of an amount of Rs. 2,47,98,757/- incurred towards registration and stamp duty charges, as was raised by way of a revised return of income for A.Y. 2014-15, was accepted and allowed by the A.O vide his order passed u/s. 143(3). The ld. A.R. in order to substantiate the aforesaid factual position, therein drew our attention to the copy of the aforesaid assessment order placed at Page No. 50 of "APB". Per contra, the ld. D.R. relied on the orders of the lower authorities. 14. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We find that as stands gathered from the records, the revenue in the assessment framed in the hands of the assessee corporation for A.Y. 2014-15 had allowed the registration and stamp duty charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for both the parties, perused the orders of the lower authorities and the material produced before us. We are of the considered view that after appreciating the facts of the case in toto, it can safely be concluded that the leasehold premium amortized by the assessee corporation was in the nature of compensation paid to the landlords, in addition to the rent. We thus are of the considered view that the leasehold premium amortized by the assessee corporation, being in the nature of rent, was therefore allowable as a revenue expenditure in the hands of the assessee. We are of the considered view that our aforesaid view stands fortified by an analogy that can safely be drawn from the judgment of the Hon'ble Jurisdictional High Court in the case of Reliance Industrial Infrastructure Ltd. (supra), on the basis of which the claim of the assessee corporation towards registration and stamp duty charges of Rs. 2,47,98,757/-, as observed by us hereinabove, had been allowed as a revenue expenditure in the assessment framed in the case of the assessee corporation for A.Y. 2014-15. We are further of the considered view that the claim of the assessee corporation that the lease premium paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s", as held by the A.O, had been looked into and decided by a coordinate bench of the Tribunal, i.e. ITAT "H", bench, Mumbai, in the case of Mangalore Refineries and Petro Chemicals Ltd., Mumbai, Vs. DCIT-3(2), Mumbai (ITA No. 77/Mum/2003, dated 31.12.2003). The Ld. A.R. therein drew our attention to the aforesaid order of the Tribunal in the case of Mangalore Refineries and Petro Chemicals Ltd. (supra) (Page 67-90 of "APB") ,wherein the Tribunal after deliberating on the aforesaid issue under consideration had therein categorically held that the Income tax authorities were not justified in considering the interest from the amounts due in the Oil Pool account and the interest on the Oil bonds as "income from other sources", and had thus accepted the claim of the assessee that the said interest income was chargeable to tax as "Profit and gains of the business". It was further submitted by the ld. A.R. that the appeal filed by the revenue against the aforesaid order of the Tribunal had been dismissed by the Hon'ble High Court of Bombay in the case of Commissioner of Income Tax-3 Vs. Mangalore Refineries and Petro Chemicals Ltd.(Supra) (ITA No. 2440 of 2013, dated 06.09.2016) (Bom), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Mangalore Refineries and Petro Chemicals Ltd.(Supra). We find that the order of the Tribunal passed in the case of Mangalore Refineries and Petro Chemicals Ltd. Vs. DCIT (ITA No. 776/Mum/2004), dated 31.01.2003, adjudicating the aforesaid legal issue had not been considered by the CIT(A) while disposing of the appeal of the assessee before us, therefore in all fairness restore the matter to the file of the CIT(A) with a direction to adjudicate the same in the backdrop of the aforesaid judgment of the Hon'ble High Court of Bombay in the case of Manglore Refineries and Petro Chemicals Ltd.(supra). Needless to say, the CIT(A) during the course of readjudicating the aforesaid issue will afford reasonable opportunity of being heard to the assessee. The additional ground of appeal raised by the assessee is thus allowed for statistical purposes in terms of our aforesaid observations. 17. The appeal of the assessee is allowed in terms of our aforesaid observations. ITA NO.5966/MUM/2011 (A.Y. 2005-06) We would now advert to the appeal of the assessee for A.Y. 2005-06. The assessee corporation assailing the order of the CIT(A) had raised the following grounds of appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the order of the CIT(A) had carried the matter in appeal before us. We herein deal with the contentions raised by the assessee corporation before us, as under:- (A) GROUND OF APPEAL NO. 1 Disallowance of amortization of premium on leasehold land: 21. That the assessee had assailed the upholding by the CIT(A) of the disallowance of Rs. 1,40,19,374/- on amortization of premium of leasehold land. That at the very outset of the hearing of the appeal it was submitted by the ld. A.R. that the issue involved in the "Ground of Appeal No. 1" in the present appeal was identical to the "Ground of Appeal No. 5" raised by the assessee corporation in its appeal before us for A.Y. 2004-05, viz. Bharat Petroleum Corporation Ltd. Vs. Additional CIT-Range-2(1), Mumbai, marked as ITA 5963/Mum/2011. The ld. D.R. had not disputed the aforesaid factual position. We have perused the orders of the lower authorities and the material produced before us. We find that the issue involved in the present appeal is identical to that as was raised before us by the assessee corporation as "Ground of appeal No. 5" in its appeal for A.Y. 2004-05. That in the backdrop of our observations and reasonings adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee u/s. 80IB on LPG plants. The assessee had in its return of income raised its claim towards deduction u/s 80IB, which however was disallowed by the A.O on the ground that the LPG plant is not engaged in the manufacturing or production or any article or thing. The said disallowance of the assesses claim towards deduction u/s 80IB was thereafter upheld by the CIT(A). That at the time of the hearing of the appeal, it was submitted by the ld. A.R. that the issue involved in the present appeal is identical to that involved in the "Ground of Appeal No. 1" raised in the assesses own appeal for A.Y. 2004-05, viz. Bharat Petroleum Corporation Ltd. Vs. Additional CIT-Range-2(1), Mumbai, marked as ITA 5963/Mum/2011. The ld. D.R. had not disputed the aforesaid factual position. We have perused the orders of the lower authorities and the material produced before us. We find that the issue involved in the present appeal is identical to the issue involved in the assesses own appeal before us for A.Y. 200405. That in the backdrop of our observations and reasonings adopted while adjudicating the "Ground of Appeal No. 1" in the aforesaid appeal, viz. Bharat Petroleum Corporation Ltd. Vs. Additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations. ITA NO.2259/MUM/2011 A.Y . 2004-05 We now take up the appeal of the assessee which is directed against the order passed by the CIT(A)-4, Mumbai, dated 24.01.2011, which in itself arises from the order passed by the A.O. u/s. 143(3) r.w.s. 147 of the income tax Act 1961, (for short "Act"), dated 04.12.2008. The assessee had assailed the order of the CIT(A) by raising the following grounds of appeal before us:- 1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the A.O. had reason to believe that income has escaped assessment and consequently holding that the reopening u/s 148 of the Income Tax Act, 1961 (the Act) was justified. 2. On facts and circumstances of the case and in law , in the absence of any tangible material before the A.O., the reassessment proceedings initiated by him were based on a mere change of opinion and consequently were invalid in law and the learned CIT(A) erred in upholding the reassessment proceedings. 3. On facts and circumstances of the case and in law, the Reopening being based on mere conjecture and change of opinion and consequently the Reassessment Notice, Reassessment Proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded with and after disallowing the assessee"s claim towards additional depreciation u/s.32(1)(iia) of Rs. 4,00,07,977/-, therein assessed the latters income at Rs. 2284,80,73,4200/-. The assessee carried the matter in appeal before the CIT(A),who however dismissed the same. 27. The assessee assailing the order of the CIT(A) had therein carried the matter in appeal before us. That it was submitted by the ld. A.R. that the CIT(A) had wrongly upheld the disallowance of additional depreciation claimed by the assessee u/s. 32(1)(iia). It was submitted by the ld. A.R. that the sole basis for disallowing the assessee"s entitlement towards claim of additional depreciation u/s. 32(1)(iia), as had weighed in the mind of the lower authorities was that the activity of the bottling LPG gas could not be construed as a production or manufacturing activity, and as such in the absence of the satisfaction of the said requisite condition of manufacture or production of any article or thing, as contemplated u/s. 32(1)(iia) of the Act, the assessee stood disentitled towards claim of the aforesaid additional depreciation. 28. It was submitted by the ld. A.R. that the issue as to whether activity of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not dispute the aforesaid contentions so raised before us. 30. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and material produced before us. We find that the issue as to whether the activity of bottling LPG gas amounts to production or manufacturing, or not, is no more res integra in light of the judgment of the Hon'ble Jurisdictional High Court in the case Bharat Petroleum Corporation Ltd. Vs. CIT-Mumbai City (ITA No. 612 and 613 of 2001), wherein the Hon'ble High Court had in unequivocal terms held that bottling LPG gas is a manufacturing activity. We thus are of the considered view that now when the very perception of the department that the activity of bottling LPG gas does not amount to manufacturing or production activity, does no more survive, therefore the disallowance of the assesses claim towards additional depreciation by holding to the contrary, thus cannot be sustained. We thus set aside the order of the CIT(A) and restore the matter to the file of the A.O, with a direction to allow the claim of the assessee towards additional directions u/s. 32(1)(iia). 31. The 'Ground of Appeal No. 4 and 5' raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
