TMI Blog2019 (9) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee company is entitled to benefit of section 80-IB(9)(iii) consecutively for seven assessment years starting from assessment year 2007-08. Based on these facts and circumstances, we direct the assessing officer to allow deduction under section 80-IB(9) of the Act, for the Seven Assessment Years 2007-08 to 2013-14 . Deduction u/s 80IC - special benefit to be given to new undertaking - HELD THAT:- Under section 80-IC(2)(iii), a 100% deduction from the profit of an assessee is allowed if the gross total income of the assessee includes profit of an undertaking producing article specified in Fourteenth Schedule subject to certain conditions. Section 80-IC is a special provision in respect of certain undertakings or enterprises in certain special categories states. The intention of the legislation is clear that certain underdeveloped states should be developed to the extent of national level for which special benefit is given to new undertaking in those states under the provisions of the Act. We note that assessee company has satisfied the conditions of section 80IC(2)(b)(iii) of the Act, therefore, entitled to claim deduction under section 80IC(2)(b)(iii) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation is an allowable expenses u/s 37(1) of the Act. Therefore, respectfully following the judgment Supra we direct the assessing officer to allow provisions of post- retirement benefits based on actuarial valuation as expense u/s 37(1) of the Act, after due verification and in accordance to law. Deduction of expenditure on account of corporate social responsibility - HELD THAT:- ACIT Vs. Jindal Power Limited [ 2016 (7) TMI 203 - ITAT RAIPUR] for the Assessment Year 2008-09, where it has been held that expenditure on Corporate Social Responsibility though voluntary, is allowable as business expenditure. It is also held that Explanation 2 to section 37(1) inserted w.e.f. 01-04-2015 is not retrospective. It applies only to Corporate Social Responsibility expenditure referred to in section 135 of the Companies Act,2013 and not to voluntary Corporate Social Responsibility expenditure. The Tribunal has observed that the amendment in the scheme of section 37(1) which has been introduced with effect from 1st April,2015 cannot be construed as to disadvantage to the assessee in the period prior to the amendment. This disabling provisions, as set out in Explanation 2 to section 37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or suspense account or by any other name in the books of account. Only a liability has been created in the books of account and no income by way of interest is credited to any account. Hence, provisions of explanation to section 194A are not applicable. Since there is a view that interest from part of judgement debt, following the well settled trite of law that if two views are possible, the favourable view to the assessee should be taken, the assessee company deserves benefit of doubt for non-deduction of tax at source under section 194A Addition u/s 14A - HELD THAT:- There is no disallowance under Rule 8D(2)(i). Besides under rule 8D(2)(ii) no disallowance can be made as the assessee has own funds which is more than investments made by assessee. However, for disallowance under Rule 8D(2)(iii) only the dividend bearing securities should be considered; for that we rely on the judgment of the Co-ordinate Bench of Kolkata in the case of REI Agro Ltd [ 2013 (9) TMI 156 - ITAT KOLKATA] . Therefore, we direct the AO to compute the disallowance under rule 8D(2)(iii) r.w. section 14A, of the Act, taking into account dividend bearing securities. Therefore, we allow these grounds rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 ₹ 38,65,11,189/- Ground No. 3 A.Y. 2008-09 ₹ 172,37,79,956/- Ground No. 3 A.Y. 2009-10 ₹ 127,81,23,636/- Ground No. 6 A.Y. 2010-11 ₹ 156,85,51,986/- Ground No. 4 A.Y. 2011-12 ₹ 156,46,99,775/- Ground No. 1 A.Y. 2012-13 ₹ 150,01,08,829/- Ground No. 1 A.Y. 2013-14 ₹ 132,81,10,853/- (2) Disallowance of claim of deduction under section 80-1C of the Income Tax Act, 1961. Ground and Assessment Year Amount Ground No.(4) for the Assessment Year 2008-09; ₹ 351,28,35,732/- Ground No.(4) for the Assessment Year 2009-10; ₹ 221,27,40,983/- Ground No.(7) for the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.(6) for the Assessment Year 2008-09 ₹ 350,25,274/- Ground No.(7) for the Assessment Year 2009-10 ₹ 402,89,573/- Ground No.(5) for the Assessment Year 2010-11 ₹ 470,96,316/- Ground No.(2) for the Assessment Year 2011-12 ₹ 497,43,581/- Ground No.(3) for the Assessment Year 2012-13 ₹ 586,21,435/- Ground No.(3) for the Assessment Year 2013-14 ₹ 536,19,001/- (7) Disallowance of claim of deduction under the head 'Provisions for Stores and Consumables' and 'Capital work in progress'. Ground No.(2) for the Assessment Year 2007-08 ₹ 16,17,31,186/- Ground No.(1) for the Assessment Year 2010-11 ₹ 13,56,00,000/- Capital work in progress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Ground No.(4) for the Assessment Year 2010-11; ₹ 5,61,254/- 4. Now, we shall take above grounds, one by one. Common ground No.1 raised by the assessee is as follows: (1) Disallowance of claim of deduction under section 80-IB(9) of the Income Tax Act, 1961 for the Motor Spirit New Industrial undertaking of the Assessee Company, commissioned on 25-07-2006. Ground and Assessment Year: Amount Ground No. 4. A.Y. 2007-08 ₹ 38,65,11,189/- Ground No. 3 A.Y. 2008-09 ₹ 172,37,79,956/- Ground No. 3 A.Y. 2009-10 ₹ 127,81,23,636/- Ground No. 6 A.Y. 2010-11 ₹ 156,85,51,986/- Ground No. 4 A.Y. 2011-12 ₹ 156,46,99,775/- Ground No. 1 A.Y. 2012-13 &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tha which is a product of refining of crude oil. Relying on the Circular No. 1/2009 dated 27-03-2009 where it has been stated that the term 'mineral oil' does not include petroleum and natural gas. The Id CIT(A) held that when petroleum is not included under mineral oil, there is no question of Naphtha to be considered as mineral oil because Naphtha, is not petroleum but it is a petroleum product made by refining of crude petroleum oil. Thus, the Id CIT(A) held that Naphtha is not mineral oil for the purpose of section 80-IB(9) of the Act . He also held that production of motor spirit from Naphtha is not a process of refining for the purpose of section 801B(9)(iii) of the Act. The Id CIT(A) held that a process of refining means to make fine or to purify, without involving any significant change in the substance and if the process involves conversion of one substance into another and especially when it also involves change of chemical composition of the substance, then the process cannot be said to be one of refining . Thus, he held that as process of conversion of Naphtha into Motor spirit involves change of chemical composition and conversion of one substance (Naphtha) int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mineral oil and hence the assessee company is entitled to deduction u/s 80-IB(9)(iii) of the Act in respect of the new Motor Spirit Unit ( M S Plant) which was commissioned on 25-07-2006. We note that section 80-IB of the Act allows deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings in computing the total income of an assessee an amount equal to such percentage and for such number of assessment years as specified in the section. A perusal of legislative history of section 80-IB(9) of the Act shows that the Finance Act,1999 restructured old section 80IA into two sections, section 80IA and 80-IB,w.e.f. 01-04-2000. (i).Sub section (9) of section 80-IB of the Act as introduced by Finance Act,1999 w.e.f. 01-04-2000 reads as under : (9) The amount of deduction to an undertaking which begins commercial production or refining of mineral oil shall be hundred per cent of the of the profit for a period of seven consecutive assessment years including the initial assessment year : Provided that where the undertaking is located in North Eastern Region, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng fulfills any of the following, namely:- (i) Is located in North Eastern Region and has begun or begins commercial production of mineral oil before the 1st day of April, 1997. (ii) Is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997. (but not later than 31st day of March,2017); inserted by Finance Act,2016 ,w.e.f 01-04-2017) (Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March,2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O19018/22/95-ONG.DO.VL,dated the 10th February,1999 or in pursuance of any law for the time being in force or by the Centre or a State Government in any other matter); inserted by Finance Act,2011 w.e.f 01-04-2012) (iii) Is engaged in refining of mineral oil and begins such refining on or after the 1st day of October ,1998; but not later than the 31st day of March,2012. (iv) Is engaged in commercial production of natural gas in blocks licensed under the VIII Round ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserted by Finance Act,1997w.e.f1st April ,1998 reads as under :- (4E) This section applies to any undertaking which begins commercial production of mineral oil in the North Eastern region . The sub-section was further amended by the Income Tax (Amendment) Act,1998 w.e.f 1st April, 1998 and this sub-section was made applicable all over India and after the words North Eastern Region , the words or in any part of India on or after the 1st April,1998 were inserted. Further amendments were made by the Finance (No.2) Act, 1998 and in subsection (4E), after the words commercial production , the words or refining were inserted and also the following proviso was inserted w.e.f01-04-1999: Provided that the provisions of this section shall apply in case of refining of mineral oil where the undertaking begins refining on or after the 1st day of October,1998. The issues of disputes in respect of the claim of the assessee are,(i) whether the raw material Naphtha processed by the new unit falls within the definition of Mineral oil and (2) whether the process of conversion of Naphtha to gasoline and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns any liquid hydrocarbons or mixture of hydrocarbons and any inflammable mixture (liquid , viscous or solid ) containing any liquid hydro- carbon. (ii) In the Petroleum and Carbide Manual issued by the Chief Inspector of Explosive of India in 1959, there is an opinion to the following effect:- Comments by the Chief Inspector of Explosive-The following more common articles of commerce fall within the definition of petroleum - liquid hydrocarbons or mixture of hydrocarbons, asphalt, aviation spirit, benzene, benzene ethyl, white oil, white spirit, xylene, xylol. Inflammable mixture (liquid , viscas or solid ) containing liquid hydrocarbons (or acetone, wood naphtha or methyl alcohol), cellulose enamels, lacquers and paints cement (patent), cleaning soaps, metal polices, paint removers, rubber solution, thinner (iii) Petroleum and Natural Gas Rules, 1959 defines Petroleum Product in Rule 3(n) as Petroleum Product means any commodity made from petroleum or natural gas and shall include refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, fuel oil, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng certain hydrocarbons, a broad term encompassing any volatile, flammable liquid hydrocarbon mixture. Like many hydrocarbon products, they are product of a refinery process in which a complex soup of chemicals is broken into another range of chemicals which are then graded and isolated mainly by their specific gravity and volatility. (iv).The word naphtha came from Latin and Greek. It is an ancient Greek word that was used to refer to any sort of petroleum or pitch. It appears in Arabic as naft and Hebrew as neft . Arabic and Persian have used and distilled petroleum for tar and fuel from ancient times, as attested in local Greek and Roman histories of the region. In old en usage naphtha simply means crude oil. The Ukrainian word and Russian word mean exactly crude oil . Also in Italy, naphtha is colloquially used to indicate diesel fuel. There is a conjecture that the word naphtha came (via Greek where it means any sort of petroleum) from Vedic God name ApamNapat. (v) In modern times, naphtha is obtained in petroleum refineries as one of the intermediate products from the distillation of crude oil. It is a liquid intermediate between the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Institute is devoted to multid is ciplinary areas of research and development in the downstream sector of hydrocarbon and related industry. The Institute undertakes R D work in areas of petroleum, natural gas, alternative fuels, petrochemicals, utilization of petroleum products in I C Engines and in industrial and domestic combustion. The Institute also provides technical and analytical services to petroleum refinery and related industries including technology transfer for developing novel state of art technologies and product. The Indian Institute of Petroleum (IIP) opined as under :- As per technical and commercial understanding of the term Mineral within the oil and gas industry, petroleum (which includes crude oil and petroleum products obtained there from) and natural gas can be categorized as Minerals Considering the fact that both the input i.e. crude oil and the output i.e. petroleum products are Minerals a refinery involved in refining of crude oil to produce petroleum products such as Naphtha, Motor Spirits, Aviation Turbine Fuel, Superior Kerosene Oil, High Speed Diesel etc. can be considered a Mineral based Industry . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no restriction u/s 80-IB(9) of the Act that the meaning of the term cannot be imported from other statutes or from the technical or commercial definition available in the industry or common parlance meaning. Normally, when the intention of Legislature is to give a narrow meaning of any term in the Act, restriction forms part of the section or a deeming fiction is created in the section. However, no such intention is found in section 80-IB(9) of the Act and hence meaning of the term mineral oil has to be wide and the same cannot be restricted to the meaning given in para 19.1 of Circular No.1/2009 dated 27-032009. We have mentioned above paras of this order, the meaning of mineral oil , petroleum , petroleum product in different statutes, which clearly justify that Naphtha will fall within the definition of mineral oil . The Id AO as well as Id CIT(A) even admitted that Naphtha is a Petroleum Product . It seems both the authorities below could not accept the contention of the assessee because of para 19.1 of Circular No.1/2009 dated 27-03-2009 which excluded even Petroleum and Natural Gas from the meaning of mineral oil . 14. We note that the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public sector and specific companies which could not begin refining of mineral oil till 01-04-2009. Thus, scope of section 80-IB(9) was extended to public sector and specific companies by the amendment in Finance Act,2008. The meaning of the term mineral oil was not restricted by the amendment in Finance Act,2008 in section 80-IB(9) of the Act. In para 19.1 of the Circular no 1 dated 27-03-09, while explaining the Finance Act,2008, CBDT opined that the term mineral oil does not include petroleum and natural gas. The said Circular was issued on 27-03-2009 explaining the provisions of Finance Act 2008. It appears that the Revenue through the Circular tried to force its view on the assessee without considering the intention of the Legislature to provide relief to public sector and specific company owned refineries. It shows that spirit of the amended provisions was not reflected in para 19.1 of the Circular No.1/2009. The assessee is a public sector undertaking and its M S Plant began refining in the Financial Year 2006-07, relevant to assessment year 2007-08. Thus, the assessee company began refining before 01-04-2009 and it did not require special concession introduced in the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over of the bill explaining the reason for the introduction of the bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. The H ble Apex Court in the case of Kerala State Industrial Development Corporation (2003) 259 ITR 51 (SC) has held that the Finance Minister s Speech can be relied upon to throw light on the object and purpose of the particular provisions introduced by the Finance bill. Moreover, if petroleum is not included in the meaning of mineral oil , there was no reason to extend concession to public sector companies till 31-03-2012.The speech of the Hon ble Finance minister shows that the contents of the Notes on Clauses are mere restatement of the positions of the Income-tax Department and the same cannot be binding on Courts and Tribunals. Hence, the Circular is not sacrosanct and it is not binding on the assessee company. The interpretation given by the Tribunals and the Courts will only be binding. The following is the extract from the reply of the Hon ble Finance Minister to the debate in the LokSabha on 29-04-2008, on Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Finance (No.2) Act,2009 w.e.f 01-04-2000 and restrictions put by Finance Act, 2008 were removed. The only conditions u/s 80-IB(9)(iii) is that the undertaking is engaged in refining of mineral oil and begins such refining on or after 01-10-1998 but not later than 31-03-2012. Again, the amendment has been made retrospective from 01-04-2000. This clearly shows that the scope of section 80-IB(9) of the Act has been extended by the Finance (No.2) Act,2009 and benefit extended to Public Sector Companies in Finance Act,2008 is also available to other companies w.e.f.01-04-2000. As Circular No.1/2009 dated 27-03-2009 was issued to explain the provisions of Finance Act,2008 and para 19.1 explained scope of section 80-IB(9) of the Act, after the amendment of section 80-IB(9) of the Act by the Finance (N0.2) Act,2009, such narrow explanation of the Circular does not hold good. As the scope of section 80-IB(9) has become wider and conditions put by Finance Act, 2008 were removed, the contents of the Circular No.1/2009 in para 19.1 has also become ineffective. Hence, meaning enunciated by para 19.1 of the Circular does not hold good w.e.f.01-04-2000. Moreover, scope of section 80-IB(9) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means petroleum in its raw form as it comes from the ground and the expression Mineral Oil is wide enough to include both petroleum as well as the product produced from petroleum by refining or the products secured from raw petroleum or crude oil. Prima facie, the company appears to have been engaged in the business of manufacturing or production of mineral oil. Further in the case of Add. CIT Vs. Distillers Trading Corporation Ltd (1982) 137 ITR 894(Del), the Hon'ble Delhi High Court has observed in para 5 of the order that: The AAC pointed out that the term Mineral Oil covers both crude oil and liquid products derived from liquid petroleum which are in the nature of mixture of hydrocarbons such as motor spirit, aviation kerosene and other allied articles. In order to find out whether ethyl alcohol was a mineral oil, it is necessary to see whether this product comes within the meaning of the word petroleum. The AAC referred to the definition of petroleum under the Petroleum Act,1934, and the Inflammable Substances Act,1952, and, reading the two provision together came to the conclusion that ethyl alcohol was petroleum within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act; that would be destructive of all known principles of law as the same would really amount to giving power to delegated authority to even amend the provisions of law enacted by Parliament. Such a contention cannot seriously be even raised. In case of Madura Chit Investment (P) Ltd Vs. ITO (1994) 208 ITR 228(Mad) it is held that instructions and Guidelines cannot overrIde the specific provision of the Income Tax Act. In case of CIT V Sirpur Paper Mills (1999) 237 ITR 41(SC) and CIT V Mahindra Sintered Products Ltd (2001) 252 ITR 576 (Bom) it is held that notification issued by the CBDT cannot curtail the scope of deduction granted by the Income Tax Act. In case of Associated Cement Co Ltd V CIT (1994) 210 ITR 69(Bom) it is held that the memorandum explaining the provisions of the Finance Act or the Circular of the Board cannot be used to curtail or modify the clear meaning of an expression used in the Statute. Thus, a Circular cannot overrlde the provision of law. For that we rely on the judgment of the Hon`ble Bombay High Court in the case of Banque Nationle de Paris Vs. CIT (1999) 237 ITR 518 (Bom). 18. Further, our view is fortified by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or production for the purpose of various incentives schemes under the Act is required to be examined in the light of facts and circumstances in each case. These can be no denial of the fact that crude oil contains hydrocarbons as paraffin, cycloparaffin, napthene and araomaticcomprcands which is obtained from beneath the earth s surface. We reiterate that this assessee admittedly drills / explores crude oil for the purpose of refining the same to various by-products. This we thus conclude that assessee s crude oil exploration very much amounts to production going by the relevant facts in the light of the preceding legal position. The Revenue s instant last argument is also rejected. We hold that CIT(A) has rightly granted sec. 80IC(2)(b) deduction to the taxpayer in assessment years 2005-06 and 2006-07. The Revenue s two corresponding appeal(s) ITA No.122 and 123/Gau/2018 also fails. 27. Next comes the assessee s four appeal(s) ITA No.87/Gau/2010, 33/Gau/2018, 325/Gau/2013 09/Gau/2014 relevant to assessment year(s) 2007-08 to 2010-11; respectively. Learned representatives inform us very fairly that the lower authorities have declined the assessee s sec. 80IC(2)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 221,27,40,983/- Ground No.(7) for the Assessment Year 2010-11 ₹ 170,67,11,811/ -. 19. We have already adjudicated the issue of the assessee company relating to deduction under section 80-IB(9) of the Act in para No. 4 to 17 of this order. We note that assessee company claimed benefit under section 80IB((9) of the Act from assessment years 2001 to 2007-08 for the original plant. The assessee company found that entitled to under section 80IC(2)(b)(iii) of the Act, for ten assessment years as all the conditions contained in the section were fulfilled by it. Since, the company availed deduction of 100% of its profit under section 80IB(9) of the Act for seven years, the assessee company claimed deduction under section 80IC for balance three assessment years starting from assessment year 2008-09. We have already explained the meaning of mineral in para No. 4 to 17 of this order, therefore, we do not repeat the same. Under section 80-IC(2)(iii), a 100% deduction from the profit of an assessee is allowed if the gross total income of the assessee includes profit of an undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2012-13 are against disallowance of claim of deduction of expenses under the head Prior Period Expenses . Brief facts qua the issue are that from the Tax audit Report u/s 44AB of the Act, the Id AO observed that the Tax Auditor had certified that an amount of ₹ 77,14,27,745/- had been debited in the Profit and loss account under the head Prior Period Expenses . The relevant portion of the Report Annexure V which is Schedule W of the Report of Tax Auditor has been incorporated in Para 5 of the Assessment order. From the Schedule W, the Id AO observed that the assessee credited ₹ 8,37,58,169/-on account of purchase for resale and other operating and administrative expenses and debited ₹ 85,51,85,914/- on account of sale of products, raw material consumed and depreciation, effecting net debit to the profit and loss at ₹ 77,14,27,745/-. The Id AO further observed that Sale of Product of ₹ 8,81,913/-, Raw Materials Consumed worth ₹ 2,28,13,514/- and depreciation amounting to ₹ 83,14,90,487/- relates to earlier years, but debited in the accounts during the assessment year 2007-08. The Id AO asked for an explanation for the amounts debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the Hon ble Gujarat High Court in case of Saurashtra Cement Chemical Industries Ltd V CIT (1995) 213 ITR 523 (Guj) has held that if any liability though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years, cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. In case of CIT V Jatia Manufacturing Investment Co (P) Ltd (1983) 142 ITR 536 (Cal) it is held that liability to pay interest to creditors having arisen or accrued to the assessee only on the final rejection of its request for waiver of interest in the previous year relevant year to assessment year 1970-71, the interest was an allowable expenses for assessment year 1970-71. In CIT V Khaitan Chemicals Fertilizers Limited (2008) 307 ITR 150 (del), the Hon ble High Court has observed that Accounting Standard (AS-5) stipulates that prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the assessee raised two grounds, namely Ground No.(3) for addition of ₹ 1,00,22,722/- made under the general provisions of the Act and Ground No.(7) for addition of ₹ 1,00,22,722/- made in determining book profit u/s 115JB of the Act. For the assessment year 2008-09, the assessee claimed deduction of ₹ 1,02,74,000/-being provisions for retiring benefits of employees, in computation of income under the general provisions of the Act as well as in determining income u/s 115JB of the Act, which was arrived at based on actuarial valuation . The Id AO added the amount in computation of income under general provisions of the Act hold ing that the amount is not an ascertained liability. However, the Id AO did not compute income u/s 115JB of the Act as income under the general provisions of the Act was on the higher sId e and book profit as shown by the assessee was taken in the assessment order. The Id AO considered the issue in para 8 and 9(page 5 ) of his order dated 23-12-2010. Hence, only Ground no.(2) was taken before the Id CIT(A) against additions of ₹ 1,02,74,000/- under the general provision of the Act. For the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submission of the assessee is included in the Paper Book for the assessment Year 2007-08 in para 10 in page 53 to60. For the Assessment 2008-09 , the assessee made submissions that provisions for retirement benefit of ₹ 1,02,74,000/- should be allowed as the same was arrived at based on actuarial valuation. The submission of the assessee is included in the Paper Book for the assessment Year 2008-09 in para 5 in page Nos. 34 to 38.For the Assessment 2009- 10, the assessee made submissions that provisions for resettlement benefit of ₹ 97,67,000/- should be allowed as the same was arrived at based on actuarial valuation. The submission of the assessee is included in the Paper Book for the assessment Year 2009-10 in para 4 in page 31 to 36.For the Assessment 2010- 11, the assessee made submissions that provisions for resettlement benefit of ₹ 8,37,000/- should be allowed as the same was arrived at based on actuarial valuation. The submission of the assessee is included in the Paper Book for the assessment Year 2010-11 in para 6 in page 29 to 34. We note that the Id CIT(A) decId ed the issues in para (F) in page 7 of his consolidated order dated 08-10- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Second Ground for the assessment year 2010-11 are partly allowed for statistical purposes. 28. We note that the Id CIT(A) in para 6 in page 4 and 5 of his appeal order No. Guwa-255/2015-16/128 dated 06-07-2016 for the Assessment year 2011-12 has held that provisions of resettlement benefit arrived at based on actuarial valuation is allowable deduction and the same is not hit by the provisions of section 43B of the Act. We note that the Coordinate Bench of Mumbai Tribunal in case of Hindustan Petroleum Corporation Ltd in ITA No.1294/Mum/2001 dated 26-09-2012 has held in para 1 to 10 that provisions of post retirement benefits based on actuarial valuation is an allowable expenses u/s 37(1) of the Act. Therefore, respectfully following the judgment of the Coordinate Bench in case of Hindustan Petroleum Corporation Ltd (Supra), we direct the assessing officer to allow provisions of post- retirement benefits based on actuarial valuation as expense u/s 37(1) of the Act, after due verification and in accordance to law. 29.Common ground No. 5 raised by assessee reads as follows: (5) Rejection of Additional Ground raised before the CIT(A) relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Id CIT(A), the assessee is in appeal before us. 32. We note that Id CIT(A) is not justified in not considering the additional grounds raised before him for the first time. It is well settled that the Id CIT(A) has ample power to consider an issue though not raised before the Id AO during assessment proceedings. It is a settled law that an appeal being a continuation of assessment proceedings, it would be permissible for an assessee to agitate its grievances before the first assessee authority. In case of CWT V Smt. Vimlaben Vadilal Mehta (1984) 145 ITR 11(SC) it is held that when an appeal is filed against an assessment order before the AAC, the assessment case is thrown open and appellate proceedings constitute a continuation of the assessment proceedings. In case of CIT V Kanpur Coal Syndicate (1964) 53 ITR 225(SC)it is held that scope of AAC s power is co-terminus with that of the ITO. CIT(A) has plenary power in disposing of an appeal. He can do what the ITO can do and also direct him what he has failed to do. In case of Jute Corporation of India Ltd Vs. CIT (1991) 187 ITR 688(SC) it is held that the observation of the Supreme Court in case of Kanpur Coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 46A, it is clear that this rule is intended to put fetters on the right of the assessee to produce before AAC, any evidence, whether oral or documentary, other than the evidence produced by him during the proceedings before the ITO, except in the circumstances set out therein. It does not deal with the powers of the AAC to make further enquiry or to direct the ITO to make further enquiry and report the result of the same to him. This position has been made clear by sub-rule (4) which specifically provides that the restrictions placed on the production of additional evidence by the assessee would not affect the power of the AAC to call for the production of any document or the examination of any witness to enable him to dispose of the appeal. Considering the legal position explained above, we admit the additional grounds raised by the assessee and the same is being adjudicated in the subsequent para of our order. 33. Common ground No.6 raised by the assessee reads as follows: (6) Disallowance of claim of deduction of expenditure for 'Corporate Social Responsibility' made following Guidelines issued by the Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SR expenses. Thus, simply because Net Profit is taken as base for determining the budget of CSR expenses, it need not lead to the conclusion that the expenses are application of funds and not allowable expenses. In accounting treatment of CSR expenditure, these are revenue in nature and the same should be charged as expenses to the Statement of Profit and Loss Account. However, when an asset is created from such expenditure, the definition of the word asset as per Framework for Preparation and Presentation of Final Statement issued by the Institute of Chartered Accountants (ICAI) should be followed and when the control of the asset is transferred to others, the same should be charged to Profit and Loss Account. 35. We note that regarding Circular No.1/2015 dated 21-01-2015 where it is stated that CSR expenditure is an application of income and not an expenses incurred wholly and exclusively for the purpose of carrying of business, it is submitted that Circular No.1/2015 dated 21-01-2015 has been issued explaining the provisions of Finance (No.2) Act,2014 and the same should be read with the provisions of Explanation 2 to section 37(1) of the Act inserted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive in nature. From the facts of the case and issue of law discussed hereinabove, it is clear that the assessee company is entitled to claim of deduction of its Corporate Social Responsibility expenses u/s 37(1) of the Act. Therefore, we allow assessee`s Ground No. (6) for the Assessment Year 2007-08, Ground No.(6) for the Assessment Year 2008-09 , Ground No.(7) for the Assessment Year 2009-10 and Ground No.(5) for the Assessment Year 2010-11, Ground No.(2) for the Assessment Year 2011-12, Ground No.(3) for the Assessment Year 2012-13,Ground No.(3) for the Assessment Year 2013-14, relating to claim of deduction of Corporate Social Responsibility expenses. 36. Common ground No. 7 raised by the assessee reads as follows: (7) Disallowance of claim of deduction under the head 'Provisions for Stores and Consumables' and 'Capital work in progress'. Ground No.(2) for the Assessment Year 2007-08 ₹ 16,17,31,186/- Ground No.(1) for the Assessment Year 2010-11 ₹ 13,56,00,000/- Capital work in progr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims of deduction of 'Prior period Depreciation'. Ground and Assessment Year Amount Ground.No.(5) for the Assessment Year 2009-10, ₹ 2,58,27,259/- And ₹ 22,83,310/- 40. We have heard both the parties and perused the material available on record, we note that the assessee company claimed that there was an apparent mistake in computation of income for the Assessment Year 2009-10 as prior period depreciations amounting to ₹ 2,58,27,259/- and ₹ 22,83,310/-were not adjusted in computation of income. It was claimed that the two amounts should have been added to current depreciation. During assessment proceedings, the assessee company realised the mistake and informed the Id AO in its written submission in para 3(c) of the submission dated 12-08-2011 which is given in page 4 of the Paper Book for the Assessment Year 2009-10. On appeal, the Id CIT(A) has held that the proper course of action for the assessee was to revise the return of income u/s 139(5) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for Provision for Allowance for Non- Management Staff' Ground and Assessment Year Amount Ground No.(3) for the Assessment Year 2010-11; ₹ 17,46,80,387/- The assessee informs us by way of written submission that he does not want to press this ground, therefore, we dismiss the common ground No. 11 raised by the assessee as not pressed. 42. Common ground No. 12 raised by the assessee reads as follows: (12). Disallowance of claim of deduction for 'Other Provisions'. Ground and Assessment Year Amount Ground No.(4) for the Assessment Year 2010-11; ₹ 5,61,254/- The assessee informs us by way of written submission that he does not want to press this ground, therefore, we dismiss the common ground No. 12 raised by the assessee as not pressed. 43. Now, we shall take Revenue s appeal. Ground No. 1 and 2 raised by Revenue in ITA No.97/Gau/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. I direct the Assessing Officer to verify the facts and allow deduction of the mount if the same is taxed twice. We note that the assessee had debited an amount of ₹ 38,92,108/- towards other provisions (unsettled Tour bills, Medical Expenses, etc.) in its submission for A.Y. 2010-11. The assessee had furnished details of bills amounting to ₹ 33,30,854/- only and for the balance amount of ₹ 5,61,254/-(₹ 38,92,108- ₹ 33,30,854), the assessee had not submitted any bill and it was purely a provision. The A.O. had disallowed the amount of ₹ 5,61,254/-and added to the total income of the assessee for the A.Y. 2010-11. It appears from the books of the accounts of the assessee that the amount of ₹ 5,61,254/- were reversed and credited to P L Account in the relevant A.Y.2011-I2. Considering this factual position, we do not find any infirmity in the order of Id CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. 47. Ground No.5 raised by Revenue in ITA No.97/Gau/16, A.Y. 2011-12 relates to in directing the assessing officer to verify the facts relating to the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company preferred for further litigation. However, appeal before higher authorities need not make an ascertained liability into a contingent liability in all cases. The assessee company clearly explained why and how the provisions are made following different paragraphs of the Accounting Standard AS-29. Moreover, subsequent developments of the events of dismissal of the appeals by the Golaghati Court fortify the justification of the assessee to make provisions of the interest liability in the previous year relevant to assessment year 2012-13. Hence, the assessee is entitled to deduction of ₹ 1,88,88,019/- being the provisions made for interest liability for the previous year relevant to assessment year 2013-13. I am of the view that the provisions of section 194A are not applicable to the facts of the case. Section 194A of the Act is applicable at the time of credit of the income to the account of the payee or at the time of payment thereof whichever is earlier. In case of the assessee company, an unilateral action is taken by the assessee company to recognize its liability and a sum of money is kept separately as provisions in its books of account for the liability. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of ITAT in the case of C-heminvest Ltd. Vs CIT 121 ITD 318 (Delhi) (SB) held that the dis-allowance u/s 14A of the Act can be made even in the year where there is no exempt income earned or received by the assessee. The decision of the Special Bench on which the CIT(A) placed reliance has since been reversed by the Hon ble Delhi High Court in the case of Cheminvest Ltd. Vs CIT 317 ITD 33 (Delhi), wherein it was held that if there is no exempt income earned or received by the assessee, no dis-allowance is warranted under section 14A read with rule 8D of the Rules. We note that Coordinate Bench of ITAT Kolkata in the case of REI Agro Ltd. Vs. DCIT 144 ITD 141 (Kol-Trib) has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) (iii) of the Rules. The aforesaid view of the Tribunal has since been affirmed as correct by the Hon ble Calcutta High Court in G.A.No.3581 of 2013 in the appeal against the order of the Tribunal in the case of REI Agro Ltd. (supra). We note that there is no disallowance under Rule 8D(2)(i). Besides unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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