TMI Blog2021 (1) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 40A(9) are clearly attracted in this case - HELD THAT:- We notice that the Coordinate Bench of ITAT in assessee's own case for Assessment Year 2003-04 to 2009-10 [ 2017 (8) TMI 405 - ITAT MUMBAI] has already allowed the reimbursement of expenses to the educational institution. Therefore, respectfully following the decision of Coordinate Bench of ITAT which is applicable mutatis mutandis in the present case, we are inclined to dismiss the ground raised by the revenue. Claim of depreciation - Allowance of depreciation for earlier years, when such depreciation was not actually allowed in those years - HELD THAT:- As decided in own case [ 2016 (5) TMI 1386 - ITAT MUMBAI] it is not open for the Assessing Officer to assume the allowance of depreciation for earlier years, when such depreciation was not actually allowed in those years, because, the situation could have been different, if he would have reopened the assessment of those earlier years. Without amending the assessments of those years, the assumed written down value could not be considered to work out the depreciation of the current year. - Decided against revenue. VAT subsidy - CIT(A) observed that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that assessee was awarded a certificate of eligibility for exemption of entry tax considering the fact that assessee has made investments in the Units established in the State of Madhya Pradesh and the Industrial Development Scheme clearly states that the incentive awarded only because, the assessee has made the investments and also the Scheme of incentive clearly based on the range of the investment made by the respective industries. As held in the various decisions, it is not relevant what mechanism was adopted by the State Govt. to award the incentive, but for what purpose this incentive were awarded whether these were awarded to benefit the units to function profitably or in order to bring capital inside the State in order to improve the industrial development in the State. As per the scheme, it is clear that incentives were awarded only because of new industrial units were commenced after 2004 - Thus we are inclined to allow the ground raised by the assessee. Sale of Carbon Credit - assessee treated the above receipt as capital receipt with the submission that if the absence of any element or profit or gain, income from sale of carbon credit should be treated as capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Year 2011-12 filed by assessee and revenue. Since the issues in both the appeals are common, therefore we prefer to deal with these issues ground wise. 4. The brief facts of the case are, assessee filed its return of income on 29.09.11 declaring total loss of ₹ 1,36,67,03,673/- as per profit and loss (return of income) and ₹ 1,25,85,18,744/- u/s. 115JB of the Act. The return of income was processed u/s. 143(1) of the Act and thereafter, the case was selected for scrutiny and notices u/s. 143(2) and 142(1) were issued and served upon the assessee. In response, AR of the assessee attended and filed the relevant information as called for. 5. AO passed the assessment order by making disallowance u/s. 14A, 40A(9) of the Act, disallowance in respect of depreciation and bogus purchases. 6. Aggrieved with the above order, assessee preferred the appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of assessee, partly allowed the appeal of the assessee. During appellate proceedings, vide letter dated 02.11.17, assessee raised 4 additional grounds of appeal and since the additional grounds raised by the assessee are legal in nature, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly attributable to making investments and earning dividend income there from. As a matter of cautious, assessee suo moto added an amount of ₹ 29,87,943/- based on time spent by certain employees in connection with the investment activities. Assessee also submitted that AO determined disallowance under rule 8D to the extent of ₹ 11,52,09,273/- and also added back the amount suo moto disallowance made by the assessee while determining the book profit u/s. 115JB. Assessee further submitted that AO considered the whole interest expenditure incurred by the assessee and AO cannot charge the whole interest expenditure. Since assessee has incurred interest expenditure on specific term loan, other interest, processing fees and bank charges. Assessee further pointed out that AO has not recorded his dissatisfaction in respect of claim made by the assessee with regard to suo moto expenditure and relied on the various case laws. Assessee further submitted that investment yielding exempt income have been made out of its own funds and gave a chart in support of its claim for 3 years and relied on various case laws in this regard. Assessee further argued that 14A disallowance canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure debited in the P L A/c. has no nexus with the investments which have yielded exempt income. A copy of the balance sheet of the assessee-company, which is placed in the paper book at pages 1 to 55, clearly points out that there are no borrowed funds either at the close of the earlier year or during the year under consideration. At the time of hearing, the Ld. Representative for the assessee also asserted that 'other interest' 'Bank Charges' debited in the P L A/c. are not in relation to the investments. Bank charges have been incurred with respect to export related transactions and 'Other Interest' is on deposits from customers, suppliers, etc. Be that as it may, it is quite evident that the Share Capital and Reserve Surplus available with the assessee company at the beginning of the year as well as at the close of the year under consideration are enough to cover the investments in question and, therefore, following the ratio of the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd., 313 ITR 340(Bom), it gives rise to a presumption that such investments have come out of interest free-funds. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of computing the total income under this Chapter . It is submitted that income under the normal provisions of the Act is computed under the five heads specified in Sec. 14. Provisions relating to computation of income under different heads are contained in Sec. 14 to 59, forming part of Chapter IV of the Act. In other words, the said Chapter provides for computation of income of an assessee under the normal provisions of the Act. As a necessary corollary, provisions of Sec. 14A cannot be extended to any Chapter, other than Chapter IV of the Act. Sec. 115JB finds place under Chapter XII-B of the Act. Therefore, provisions of Sec. 14A contained in Chapter IV cannot be imported and incorporated in Sec. 115JB especially considering the fact that clause (f) of Explanation 1 to Sec. 115JB [in respect of increasing the book profit by the amount of expenditure relatable to income to which Sec. 10 (excluding clause 38) or Sec. 11 or 12 apply] contains no reference to disallowance u/s. 14A of the Act. 3.2.28 It is submitted that based on the matching principle of accountancy, only expenses debited to the Profit Loss account that had direct and proximate nexus with the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance u/s. 14A read with rule 8D2(iii) to the exempt income earned which is ₹ 12,62,95,486/-. 6.12 The appellant has also taken the argument that the disallowance u/s. 14A read with rule 8D cannot be added while computing book profits u/s. 115JB. The special bench of the honourable ITAT, Delhi in the case of a CIT vs. Vireet Investment (P) Ltd. (2017) 82 Taxmann.com 415 while following the decision in the case of Bushan steel of Delhi High Court held that the computation under clause (F) of explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s. 14A read with rule 8 D. Accordingly, the assessing officer is directed not to make this addition while computing the book profit u/s. 115JB of the IT Act. This ground of appeal is partly allowed. 14. Aggrieved with the above, assessee is in appeal before us. 15. Before us, Ld. AR brought to our notice findings of AO and Ld. CIT(A) and submitted that it is fact on record that Ld. AO has not recorded any satisfaction before rejecting the suo moto disallowance made by the assessee in its return of income while determining the exempt income u/s. 14A. He submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above said letter itself, AO has displayed his dissatisfaction and he supported the findings of Ld. CIT(A) in this regard. 18. Considered the rival submission and material placed on record. We observed that assessee has earned exempt income of ₹ 12,62,95,486/- and made a suo moto disallowance of ₹ 29,87,943/-. After careful consideration of the assessment order passed by the AO and the order passed by Ld. CIT(A), it is fact on record that AO has not recorded any satisfaction before rejecting the suo moto disallowance made by the assessee and Ld. CIT(A) also clearly accepted this fact that no satisfaction was recorded. We notice from the record that no satisfaction was recorded even in the earlier Assessment Year 2008-09 and 2009-10 and based on the above facts on record, Coordinate Bench of ITAT has deleted the disallowance made u/s. 14A with the following observations:- 5.5 In so far disallowance of ₹ 75,71,222/- out of administrative expenses is concerned, the plea of the assessee is based on the requirements of section 14A(2) of the Act. The plea is that the method prescribed in Rule 80 of the rules cannot be straightway invoked to compute the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... postulates the satisfaction of the Assessing Officer. Courts will no readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated (M.A. Rasheed v. State of Kerala AIR 1974 SC 22491). A decision by the AO has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the AO is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and Fair procedure under article 14 must be observed by the AO when he arrives at his satisfaction under sub-section (2) section 14A. As we shall note shortly hereafter, sub-rule(1) of rule 8D has also incorporated the essential requirements of sub-section (2) of section 14A before the AO proceeds to apply the method. In the absence of the recording of the necessary satisfaction, in our view, it was wrong on the part of the AO to determine the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that it is engaged in the business of manufacture of cement and clinker and their factory is located in Satna and the institution which provides education facilities. It is their business necessity to develop the locality near to their factory premises and also to provide various facility to their staff and people located in that area. It is also submitted that the main object of the Institution is to set up educational institutions for providing education, vocational training, development of curricular activities and other activities relating to human resources amongst the children of the employees and also to the children of surrounding community. It also submitted that as there is a business necessity to set up educational institutions for providing educational and other curricular activities to the children of employees and surrounding community, the expenditure incurred is for the purpose of carrying on the business activities of the company and is wholly and exclusively for the purpose of business. 23. After considering the submission of the assessee, AO rejected the submissions made by assessee and observed that the expenses reimbursed by the assessee are relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of a particular year and since explanation 5 to section 32 has clarified that irrespective of the claim made such deduction has to be allowed for computing the total income, the eligible depreciation should be calculated after allowing for such reduction in WDV on account of depreciation allowable for Assessment Year 2000-2001 and 2001-2002. In response, assessee has submitted that the amendment for compulsorily claiming depreciation in the computation of income is effective from Assessment Year 2002-2003. The assessee had also submitted that since depreciation was not claimed for Assessment Year 2000-2001 and 2001-2002 and consequently not being allowed in the assessment, the same cannot be reduced in arriving at WDV of fixed assets for calculation of depreciation in future years. However, AO rejected the contention of the assessee and proceeded to make disallowance. 28. Aggrieved with the above order, assessee preferred the appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of assessee observed that the issue under consideration has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year 2005-06 and 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 (Mad.), Hon'ble Kerala High Court in CIT vs. Kerala Electric Lamp Works Ltd. (2003) 261 ITR 721 (Ker.), the Hon'ble J K. High Court in CIT vs. Agya Wanti 248 ITR 641 (J K). It is noted that the Department has relied upon the decision in K.K. Doshi (245 ITR 849)(Bom.), which has been reversed by Hon'ble Apex Court in (2008) 297 ITR 38(SC), wherein, the main point was that as to whether the amendment to section 80HHC of the Income Tax Act, 1961, brought about by the Finance (No. 2) Act, 1991, w.e.f. 1st April, 1992, is prospective in nature or is retrospective. This Court in the case of P.R. Prabhakar vs. CIT (2006) 204 CTR (SC) 27: (2006) 284 ITR 548 (SC), relying upon Circular No. 621 :, dt. 19th Dec., 1991 [(1992) 101 CTR (St) 1] issued by the CBDT, has held that the amendment in question is prospective in nature and the same is binding on the Revenue. In view of Circular No. 621 dt. 19th Dec., 1991 issued by the CBDT and the aforesaid judgment of this Court, the appeals were accepted and the orders passed by the Hon'ble High Court of Bombay were set aside leaving the parties to bear their own costs, thus, we affirm the stand of the Ld. Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Trade Investment Facilitation Corporation Ltd. sanctioned subsidy of ₹ 6.87 crores and a copy was enclosed. Ld. AR brought to the notice Ld. CIT(A) key objectives of the schemes, which are given below:- (a) To accelerate the pace of industrialization and make Madhya Pradesh industrially a leading state. (b) To maximize employment prospects. (c) To attract foreign direct investment by developing world-class infrastructure. (d) To create congenial environment for the development of small, medium and large industries. (e) To ensure balanced regional development by generating employment. (f) To chalk out special packages for removing industrial sickness. (g) To integrate the different employment oriented schemes in order to provide employment opportunities on a sustainable basis, (h) To rationalize commercial tax rates to make the state's industries competitive vis-a-vis industries in other states, (i) To provide direction to industrialization, keeping in view the available local resources and the existing industrial base. (j) To ensure private sector participation in the state's industrialization, (k) To financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that sales tax subsidy received by the assessee from the Govt. of Madhya Pradesh is after setting up of the new industry and the subsidy received by the assessee is revenue nature and it is liable to tax. Accordingly, he dismissed the grounds raised by the assessee. 38. Aggrieved with the above assessee is in appeal before us raising this ground of appeal. 39. Before us, Ld. AR brought to our notice the industrial scheme of Madhya Pradesh which was also extracted by Ld. CIT(A) at page no. 31 of its order. He brought to our notice sanction order received by the assessee from MP trade and Investment Facilitation Corp. Ltd., which is placed on record at page no. 130 of the paper book and submitted that this sanction order was received by the assessee as Industrial Investment Promotion Assistance under the MP Industrial Investment Promotion Scheme 2004. He further brought to our notice that this new industrial promotion policy is effective for the industries commencing commercial production on or after 01.04.2004 and submitted that this scheme is promoted by the MP Govt. in order to increase the rate of economic development in the State and in order to improve the infrastr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and relying on relevant case law. He supported the findings of Ld. CIT(A) that all the subsidy are having revenue character and he relied in the case of Sahney Steel and press works 228 ITR 253 (SC). He further submitted that Ld. CIT(A) has decided the issue based on the facts on record but primarily, the documents and facts were not verified by any authority and for that purpose, he prayed that the issue may be remitted back to the AO for further verification and AO may be given proper opportunity to verify the issue whether it is capital or revenue. 41. After considering the submission of both Ld. Counsels on this issue, we notice that the Coordinate Bench of ITAT in the case Parle Agro Pvt. Ltd. vrs. ACIT (ITA No. 6209/Mum/2013) has already decided this issue in detail. For the sake of clarity, relevant portion of the said decision is reproduced below:- 19. We have heard rival contentions and gone through the finding given in the impugned orders. The subsidy given by the MP Government in pursuance of Madhya Pradesh Udyog Nivesh Samvardhan Yogana was for setting-up of an industrial unit in the backward area of state of Madhya Pradesh and subsidy offered was in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO for factual verification and documents and AO may be given opportunity to verify the claim of the assessee. We notice that this issue was analyzed and adjudicated by Ld. CIT(A) after verifying the relevant documents submitted by the assessee before him and moreover, the proceedings before Ld. CIT(A) is only extension of assessment, it is otherwise known as extended assessment proceedings, therefore Ld. CIT(A) has applied his mind and came to the conclusion with his own reasoning and rejected the submission /contention of the assessee. Therefore, there is no necessity to remit this issue back to the AO for further verification. 43. Therefore, respectfully following the decision of Coordinate Bench of ITAT which is applicable mutatis mutandis in the present case, we are inclined to allow the ground nos. 2(a) and 2(b) raised by the assessee. Ground No. 3(a) 3(b) raised by assessee in respect of Sales Tax exemption. 44. This issue is relating to Sales Tax exemption scheme by the Maharashtra Govt. Since this issue is made for the first time during appellate proceedings, Ld. CIT(A) with reference to Jurisdictional High Court decision, considered the additional grounds rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ponni Sugars Chemicals Ltd. [306 ITR 392 (SQ] ii) Shree Balaji Alloys v. CIT [333 ITR 335 (J K)] upheld by Hon'ble Supreme Court (287 CTR 459) iii) CIT v. Chaphalkar Brothers [400 ITR 279 (SQ] iv) PCIT v. Shyam Steel Industries [303 CTR 628 (Cal)] 49. On the other hand, Ld. DR submitted that Ld. CIT(A) has considered the facts and issue raised by the assessee before him and Ld. CIT(A) rejected the contentions of the assessee by giving reasons and relevant case law. He supported the findings of Ld. CIT(A) that all the subsidy are having revenue character and he relied in the case of Sahney Steel and press works 228 ITR 253 (SC). He further submitted that Ld. CIT(A) has decided the issue based on the facts on record but primarily, the documents and facts were not verified by any authority and for that purpose, he prayed that the issue may be remitted back to the AO for further verification and AO may be given proper opportunity to verify the issue whether it is capital or revenue. 50. Considered the rival submission of both Ld. Counsels on this issue and material placed on record, we notice that Coordinate Bench of ITAT in the case ACIT v. Mihir Packaging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries unit was District Industries Centre under which eligible certificate has to be procured after fulfilling certain conditions. Clause 5 provided various nature of incentive, which should be given and one of them included Special Capital Incentive for SSI Unit . The said scheme also provides the effective steps comprising of initial effective steps and final effective steps which were to be undertaken before being eligible for the grant of subsidy. Finally, in terms of clause 5.2, special capital incentive for SSI unit, was admissible as a grant after completion of all initial and final effective steps and will be computed on the basis of fixed capital investment actually made by the eligible SSI unit. The maximum ceiling for D+ category has been put at ₹ 20,00,000. 16. The assessee had fulfilled the eligible criteria and also complied with the effective steps to be taken and thereafter, it has received the subsidy under special capital incentive for SSI unit based on its capital investment, which finally worked out to ₹ 20,00,000. Thus, from the preamble and also various other terms, it is seen that the purpose of the subsidy was to set-up a new unit in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly, the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel Press Works Ltd.'s case (supra) lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53. Since this issue is made for the first time during appellate proceedings, therefore Ld. CIT(A) considered the additional grounds raised by the assessee and this claim of the assessee submitted first time before him, accordingly Ld. CIT(A) accepted and adjudicated the same. 54. The brief facts relating to this ground are, the assessee has received entry tax exemption from the Madhya Pradesh government. As per the Scheme, the incentive has been availed to achieve increasing employment to qualify the residence of the state of Madhya Pradesh and to accelerate the pace of industrialization and the same is capital in nature, hence is liable to be excluded in computing total income. Ld. CIT(A) observed that in the preceding paragraphs while deciding the issue of sales tax subsidy received by the assessee from the Madhya Pradesh state government, by applying the same ratio, the entry tax exemption is held to be revenue in nature and is liable to tax. Accordingly, he dismissed this ground raised by the assessee. 55. Aggrieved with the above assessee is in appeal before us raising this ground of appeal. 56. Before us, Ld. AR brought to our notice the Scheme of Madhya Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee before him and Ld. CIT(A) rejected the contentions of the assessee by giving reasons and relevant case laws. He supported the findings of Ld. CIT(A) that all the subsidy are having revenue character and he relied in the case of Sahney Steel and press works 228 ITR 253 (SC). He further submitted that Ld. CIT(A) has decided the issue based on the facts on record but primarily, the documents and facts were not verified by any authority and for that purpose, he prayed that the issue may be remitted back to the AO for further verification and AO may be given proper opportunity to verify the issue whether it is capital or revenue. 58. Considered the rival submissions of both Ld. Counsels on this issue and material placed on record, we notice that assessee was awarded a certificate of eligibility for exemption of entry tax considering the fact that assessee has made investments in the Units established in the State of Madhya Pradesh and the Industrial Development Scheme clearly states that the incentive awarded only because, the assessee has made the investments and also the Scheme of incentive clearly based on the range of the investment made by the respective industries. As held i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental concerns and not as part of the business of the assessee. Further, the assessee treated the above receipt as capital receipt with the submission that if the absence of any element or profit or gain, income from sale of carbon credit should be treated as capital receipt and should be excluded in computing the total income both under the normal provisions of the Act as well as in computing book profit under section 115JB of the Act. 62. Ld. CIT(A) observed that the United Nation's (UN) Kyoto protocol commits to certain development countries to reduce their GHG (green house gases) emissions and for this, they will be given carbon credits. He further observed that a reduction in emission entitles the entity to credit in the form of a Certified Emission Reduction (CER) certificate. The above said CER is tradeable and its holder can transfer it to an entity which needs carbon credits to overcome an unfavourable position on carbon credits and as per Article 6 of the Kyoto Protocol provides for achieving these reduction norms, the parties may acquire from any such other party emission reduction units resulting from projects aimed in reducing and throw anthropogenic emissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al placed on record, we notice that assessee has sold the CERs and received the revenue and the same were credited in the profit and loss account and offered to tax. Before Ld. CIT(A), assessee first time claimed that these sale of carbon credit is capital in nature, accordingly raised additional grounds. 67. After considering the submission of the assessee, we find that this carbon credit should be treated as capital in nature. We notice that Ld. CIT(A) by relying on the case DCIT vs. Kalpataru Power Transmission Ltd. (supra), decided this issue against the assessee. We further notice that this issue was already considered by Hon'ble AP High Court and Karnataka High Court in favour of the assessee. Our attention was also drawn by Ld. AR to the case of Dodson Lindblom Hydro Power Ltd. Bom HC and Dy. CIT v. Dodson Lindblom Hydro Power Ltd., which are similar to the facts of the present case, wherein the Hon'ble Jurisdictional High Court held that the sale of carbon credit is to be considered as capital receipt, therefore not liable to tax. The same reasoning was followed by Hon'ble Allahabad and Rajasthan High Court. Therefore, considering the consistent view of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by Hon'ble Kolkata High Court that these incentives/receipts are capital receipt and does not fall within the definition of income under section 2(24) of the Act and also receipts are not in the character of income. Therefore, it cannot form part of the book profit u/s. 115JB of the Act. Accordingly Ground no. 6 7 raised by assessee are allowed. Additional Ground raised by assessee during this appellate authority. 73. During this appellate proceedings, assessee filed an additional ground of appeal with plea that assessee while filing the income tax return for this Assessment Year, assessee has not claimed deduction of education cess as allowable expenditure. Assessee has come across the decision in the case of Chambal Fertilizers and Chemicals Ltd. vrs. JCIT (ITA No. 52/2018)-(Raj. HC), wherein the Hon'ble Rajasthan High Court has held that 'cess' is not part of tax and based on the said decision, assessee is seeking to claim Educational Cess paid. 74. Similarly, assessee has debited an amount towards Debenture Redemption Reserve should be excluded in the computation of book profit u/s. 115JB of the Act as it is a provision made towards a known lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The brief facts relating to this ground are, during the course of assessment proceedings, AO observed that in the computation of income, assessee has reduced expenses on account of Mines, development expenses. It is also seen that vide Note 3 to statement-II being depreciation calculation as per Income Tax Act, it was stated that, Expenditure incurred on Mines Development is capitalized as fixed asset in the financial books of account. AO further observed that the company is proposing to claim expenditure incurred during the year as Revenue expenditure in its income tax return hence the same is not considered as Addition to Fixed Asset for reporting under clause-14. When the assessee was asked to substantiate the said claim, assessee vide letter dated 16.12.14 submitted as below: (a) During the previous year relevant to assessment year 2012-13, the company has incurred a sum of ₹ 24,90,46,960/- as Mines Development Expenses. In its books of account the company has treated the same as capital expenditure to be depreciated over a period of five years. However, while computing the total income, the company has claimed the entire amount of ₹ 24,90,46,960/- as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any contrary facts. The Department is not expected to a different view. 7.2.4 The appellant also places reliance on the following decisions:- a) In the case of CIT-vs.-Amalgamated Jambad Syndicate Pvt. Ltd. ( (1979) 117 ITR 6981 (Cal.) the Hon'ble Calcutta High Court dealt with the allowability of expenditure incurred on removal of overburden. It was observed that the overburden resting on the surface of a particular area, if removed, could enable the company only to reach the coal under that and not any further. If any further surface had to be exposed, further overburden had to be removed. The expenditure is not made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business but is incurred for running the business with a view to produce profits and therefore, it is revenue expenditure. b) In the case of CIT vs. Katras Jharia Coal Co. Ltd.[ (1979) 118 ITR 6](Cal), the Hon'ble Calcutta High Court held that the expenses incurred in removing the overburden for reaching the coal seam did not result in any enduring benefit as the process had to be repeated immediately, the expenditure was, therefore, allowable as re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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