TMI Blog2023 (1) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... before the date of filing the return, the deduction is allowed. However, cannot apply in the case of amounts which are held in trust, as it is in the case of employees contributions-which are deducted from their income. They are not part of the assessee employer s income, nor are they heads of deduction per se in the form of statutory pay out. They are others income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. As upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such 34 interpretation were to be adopted, the non-obstante clause u/s 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee s contribution on or before the due date as a condition for deduction. Respectfully following in the case of CHECKMAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer and allow the appeal of the Revenue. - ITA No. 1048/AHD/2012, 1236/AHD/2012, 1395/AHD/2010, 1438/AHD/2011, 1393/AHD/2010, 1910/AHD/2015, 2250/AHD/2015, 2521/AHD/2016, 2605/AHD/2016 - - - Dated:- 25-11-2022 - Shri Pawan Singh, Hon'ble Judicial Member And Dr. Arjun Lal Saini, Hon'ble Accountnat Member For the Assessee : Shri Rasesh Shah, CA For the Respondent : Shri H. P. Meena, CIT(DR) with Shri J. K. Chandnani, Sr. DR ORDER PER BENCH: This is bunch of nine appeals, consisting six appeals filed by the Assessee and three cross-appeals filed by the Revenue, pertaining to different assessment years, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), [in short the ld. CIT(A) ], which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the Act ]. 2. Since the issues involved in all these appeals are common and identical, therefore these six appeals of assessees and three cross-appeals of Revenue have been clubbed and heard together and a consolidated order is being passed for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13, NMC Unit Rs.1,62,84,844 /- (3) Learned CIT(A) has erred in law and on facts in disallowing following expenses: (i) Top Liner Expenses (a)ITA No.1393/Ahd/10, A.Y. 2007-08, Rs.62,09,335/- (b) ITA No.1048/Ahd/12, A.Y. 2009-10, Rs.64,06,835/- (c ) ITA No.1910/Ahd/15, A.Y. 2010-11, Rs.54,96,526/- (ii) Post Monitoring Expenses (a)ITA No.1393/Ahd/10, A.Y. 2007-08, Rs.22,47,292/- (b) ITA No.1048/Ahd/12, A.Y. 2009-10, Rs.32,41,860 /- (c ) ITA No.1910/Ahd/15, A.Y. 2010-11, Rs.33,65,220/- (iii) Land utilization charges/expenses (a)ITA No.1393/Ahd/10, A.Y. 2007-08, Rs.4,16,669/- (b) ITA No.1048/Ahd/12, A.Y. 2009-10, Rs.5,40,310/- (c) ITA No.1910/Ahd/15, A.Y. 2010-11, Rs.4,55,383/- (4) Learned CIT(A) has erred in law and on facts in confirming income computed by assessing officer under section 115JB of the Act, by making adjustments to the book profit: (a) ITA No.1393/Ahd/10, A.Y.2007-08 (b) ITA No.1048/Ahd/12, A.Y.2009-10 (5) Learned CIT(A) has erred in disallowing employees contribution towards ESIC of Rs.3,46,338/- ignoring the fact that same was paid before due dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat Enviro Protection and Infrastructure Ltd (PAN No.AABCG3746K). (1) ITA No.1438/Ahd/2011, for A.Y.2006-07: Assessee challenged the validity of reassessment under section 147 r.w.s.143(3) of the Act stating that ld CIT(A) erred in not appreciating that relevant material was disclosed in the original return of income and mere change of opinion does not empower the assessing officer to reopen concluded assessment 8. Succinct facts qua the issue are that in assessee`s case under consideration, the assessment u/s 143(3) of the Act was completed on 26.12.2008, determining the total income at Rs.3,10,033/-. Subsequently on perusal of the case records, it was noticed that assessee-company has claimed deduction of Rs.2,58,47,697/- u/s 80IA(4) of the Act, which includes income of Rs.1,18,364/- derived from the Alang unit of the assessee-company, the work contract of which was awarded by some other person and executed by the assessee-company and the same was allowed by the Assessing Officer while finalizing the assessment u/s 143(3) of the Act, on 26.12.2006. Further, it was noticed that assessee-company has not fulfilled the conditions laid down for claiming deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment had already been disclosed by the assessee in the return of income filed by him u/s 139(1) of the Act, therefore reopening is bad in law. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 10. We have heard both the parties and gone through the reasons recorded by the assessing officer and noted that there is no infirmity in the reasons so recorded by the assessing officer. The Hon'ble Supreme Court in the case of Phul Chand Bajrang Lal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held that in case of acquiring fresh information specific in nature and reliable, relating to the concluded assessment, which went to falsify the statement made by the assessee at the time of original assessment and, therefore, he would be permitted under the law to draw fresh inference from such facts and material. The Court also went to an extent of saying that there are two distinct and different situations where the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ang Unit Rs.9,00,178 /- (c) ITA No.1048/Ahd/12, A.Y. 2009-10, Alang Unit Rs.44,33,160/- (d) ITA No.1048/Ahd/12, A.Y. 2009-10, VMC Unit Vadodara, Rs.1,01,40,667/- (e) ITA No.1910/Ahd/15, A.Y. 2010-11, Alang Unit, Rs.30,66,609/- (f) ITA No.1910/Ahd/15, A.Y. 2010-11, SMC Unit Rs.27,40,226 /- (g) ITA No.1910/Ahd/15, A.Y. 2010-11, NMC Unit Rs.1,01,40,667/- (h) ITA No.2605/Ahd/16, A.Y. 2012-13, Alang Unit Rs.57,74,450/- (i) ITA No.2605/Ahd/16, A.Y. 2012-13, NMC Unit Rs.1,62,84,844 /- 14. The contention raised by the assessee in the concise ground No.2 is that these above units are engaged in operating and maintaining solid waste management system and thus qualifying as infrastructure facility. That is, these units are engaged in developing infrastructure facility, hence eligible for deduction under section 80IA(4) of the Act and Ld. CIT(A) wrongly applied the amendment made in section 80IA(4) by Finance Act, 2009. 15. In order to adjudicate the issue relating to deduction under section 80IA(4) in respect of the above units, we take lead case of Alang Unit-assessment year 2010-11. The facts narrated by the assessing officer in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or (ii) operating and maintaining or (iii) developing. operating and maintaining any infrastructure facility should be owned by Company. It is contended that the sub-clause (a)(b) (c) begins with the word it and the reference to the word it in these sub-clauses to clause (i) to sub-section (4) of section 80IA is with regard to the undertaking / enterprise and not with reference to the infrastructure facility. Had the intention of the legislature was to lay down the condition regarding owning of the infrastructure facility by the undertaking than it would not have categories operating and maintaining of facility as separate category. It is pertinent to note that the intention of the legislature is very clear and therefore it categories separate category of operating and maintaining which can only be of the facility owned by others. It may be noted that operating and marinating of facility owned by the undertaking itself is otherwise covered under developing, operating and maintaining. It is therefore clear beyond doubt that undertaking which is engaged in the business of operating and maintaining infrastructure facility should be owned by Company and not that infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT and High Court. Without prejudice to the contentions that the assessee Company is not hit by the rigors of the Explanation as it is operating and maintaining infrastructure facility, the assessee contends that it is well settled that only procedural amendments can have retrospective effect. Any amendment which is otherwise substantive in nature can never have a retrospective effect unless the same is beneficial to an assessee. The Explanation of any section has to subserve the main provisions of the statute and it cannot be read to curtail it or override it. In the facts of the present case, the impugned explanation added with respect to section 80-IA(4) of the Act is a substantive amendment substantially curtailing the right of an assessee to claim the deduction under section 80-IA(4) of the Act, which was otherwise available to it. This retrospective amendment is thus unduly oppressive and confiscatory. It is also contended that the relief granted under the main provisions of the Act cannot be taken away by way of amendment with retrospective effect by substituting the Explanation. It is submitted that the explanation cannot override the main provisions. It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to collect membership charges from Ship breakers and pay 10% of the same to GMB retaining 90% as consideration for operating the landfill site. The contract is of outsourcing of operation of infrastructure facility built and owned by GMB for contract period of 3 years. The CIT(A) while distinguished the decision of ITAT, Rajkot in the case of M/s. Tarmat Bell (supra) and held that the assessee was executing a work contract for operation maintenance of Alang Facility and not eligible for deduction u/s 80IA(4) of the Act. 7.3 The facts and arguments of the assessee remain the same, there is facts and law following the rule of consistency , the issue is decided against the assessee following the decisions rendered by my predecessors in A.Y 2006-07, 2007-08 2009-10. Accordingly, the ground of appeal is hereby dismissed. 19. We also reproduce, the CIT(A)`s findings in respect of SMC unit, which is as under: 8. The AO has observed in Para 6 of the assessment order that the assessee has claimed deduction of Rs.27,40,226/- on profits derived by it from activity of developing of Municipal Solid Waste (MSW) site under a work order obtained through tender from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y my predecessor in A.Y.2009-10 after giving detailed reasoning discussion in Para 8.4 8.5 of the appellate order dated 21.03.2012. Therefore, following the rule of consistency, the disallowance of deduction u/s 80IA(4) of the Act of Rs.27,40,226/- in respect of SMC Unit is upheld for the reason that facts, contentions of assessee and finding of the AO being remained the same, the decision of my predecessor rendered in AY 2009-10 is followed. In view of this ground of appeal is dismissed. 20. We also reproduce, the CIT(A)`s findings in respect of NMC unit, which is as under: Discussion and appellate decision: 9.4 After considering the submission and facts of the case, it is noticed that this issue has similar shades contour as were relating to VMC SMC. On the basis of same reasoning and following the precedent in its own case in A.Y 2009-10 when ld. CIT(A)-I, Surat has upheld the disallowance made by AO, I am of the considered view that following the rule of consistency Hon'ble jurisdictional High Court decision (in SCA 11286/2009), the issue is covered against the assessee. Hence, the disallowance of Rs.1,40,21,149/- made by AO is hereby sustaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally made the submission at para no. 17 of the submission made for A.Y. 2006-07 that in such case also the deduction u/s 80IA(4) is allowable. The ld Counsel also submits that facts are identical in case of Alang unit, VMC unit, SMC unit and NMC unit, therefore deduction under section 80IA(4) may be allowed in respect of these units. 23. On the other hand, ld DR for the Revenue, pleads in respect of Alang unit, VMC unit, SMC unit and NMC unit, that these units were bogus and created by the assessee to defraud the revenue. None of these units fulfils the basic conditions for claiming deductions under section 80IA(4) of the Act. The ld DR, by taking an example of SMC unit, pointed out that assessee has claimed deduction of Rs.27,40,226/- on profits derived by it from activity of developing of Municipal Solid Waste (MSW) site under a work order obtained through tender from Surat Mahanagar Seva Sadan (SMSS). Since, the assessee was not owner of the facility but only obtained a works contract , it was not eligible for deduction under section 80IA(4) of the Act. The ld DR cited identical examples for other units and states that assessee is not eligible to claim deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture, the provisions cannot be interpreted to confer the benefit on the assessee. Even Hon`ble Mumbai High court in the case of Indian Rayon Corp Ltd vs CIT[1998] 23 ITR 26/97 taxman.501(BOM), has categorically held that principles of beneficial interpretation would apply only in a case where there is a doubt about the true scope and ambit of the provisions. In view of above, the AO noted that assessee is not entitled to claim deduction under section 80IA(4) of the Act and therefore, we agree with the findings of the assessing officer. 26. On identical facts, our view is also fortified by the judgment of the Hon`ble Supreme Court in the case of M/S. DILIP KUMAR AND COMPANY ORS, in CIVIL APPEAL NO. 3327 OF 2007, dated 30.07.2018, wherein it was held as follows: 52.To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambigu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n charges/expenses, we have taken the lead case in ITA No.1910/Ahd/2015, for assessment year 2010-11. 31. The relevant material facts, as culled out from the material on record, are as follows. In respect of Provision for Top Cover expenses, the assessing officer examined the relevant documents and details submitted by the assessee. On verification of the audited accounts of the assessee and annexure thereof, schedule L of the notes on account, annexed to the audited accounts vide note no. (II)-(C) (D) in which the accounting principle followed by the assessee is mentioned. The assessee-company is engaged in developing, operating and maintaining hazardous solid waste management and treatment and disposal. The waste is dumped into secured landfill which are the final grave, yard of solid waste. The major components of secured landfill are: a) Bottom Liner systems b) Side Liner systems c) Top Liner systems d) Leachel Collection systems and e) Ground Water Monitoring systems. The items at a), b), d) and e) have been completed at first stage and the expenses on the same have already been incurred. Top Liner system is made alter the waste is filled and compacted in the cell. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Forests, Govt, of India).The wastes received at ICHWTSDF passes through various pre-treatment and treatment routes and finally disposed off in Secured Landfill Facility (SLF), which is a final graveyard for the safe disposal of hazardous wastes SLF is a disposal pit / cell provided with impermeable liner systems at the bottom, top and sides in order to ensure that neither any toxic component ever escapes the pit nor water from outside enters the pit. There are set legal norms/requirements for the design and operation of Secured Landfill Facility (SLF). The bottom liner system, side liner system, top liner or top cover system, leachate collection system are important and integral component of SLF. These are developed in phases for environmentally safe operation and maintenance. The landfill with Bottorn liner, side liner is developed first, the same shall be then utilized for disposal of wastes and then once completely filled, and the same shall be closed with top cover and subsequently maintained, The span of this operation depending on [he size of SLF ceil / pit and depending upon the waste receipt quantity. The copy of CPCB guidelines and CCA issued by GPCB to GEPIL, clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well. It is also pertinent to note that when the expenses are incurred on side and bottom liners the same are shown as balance of cell in balance sheet and not debited to profit and loss account it may please be appreciated that it is only the cost corresponding to the charges of waste received from the members during the year and credited to profit and loss account is claimed under the head Cell utilization charges. It may please be appreciated that it is established law under Income Tax. This method is being consistently followed in the industry carrying on the business of Hazardous Wastes Treatment, Storage and Disposed Facility. The problem of the tax treatment where an assessee has yet to carry out some obligation at the end of the year has been examined by the three judge Bench of Supreme Court in the case of Calcutta Co. Ltd. vs. CIT (1957) 37 ITR 1 (SC) which has laid down certain fundamental principles for deduction of accrued liability to be discharged at a future date. Hon'ble Apex Court while deciding the appeal in favour of the assessee held that The expressions Profits and Gains' should be understood in its commercial sense and there can be no computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this expenditure will be incurred in future and it is a legal obligation and is, therefore, an allowable expenditure. However, the contention made by the assessee regarding allowability of such expenditure is not found acceptable on the following reasons. (i) The assessee has not in fact incurred this expenditure during the year under assessment. Expenditure can be said to have been incurred when the goods/services/utility pertaining to such expenditure is in fact received by the businessman and for which either the payment is actually made or an enforceable liability towards the supplier is created for such goods/services/utility. Merely because in future as per statutory requirement assessee will have to incur this expense does not mean that the expenditure has actually been incurred. (ii) It is undisputed fact that during the year under assessment the assessee company has neither received any goods/services/utility in respect of this expenditure nor made any payment for that nor any enforceable liability has been created in favour of a supplier of such goods/services/utility. Hence no expenditure is in fact incurred. The deduction is claimed only in respect of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure is actually incurred. The fact that expenditure has not actually incurred is undisputed. In view of the above, it is clear that the top cover expenses in respect of cell 2, 3 4 of Rs.54,96,526/- charged to P L account have not actually been incurred by the assessee during the year under assessment and hence not allowable as expenditure. Therefore, the sum of Rs. Rs.54,96,526/- is disallowed. Further, it is also found that the assessee has shown provision for post monitoring Expenses of Rs.1 ,92,46, 474/- in its balance sheet and out of which expenses claimed during the year aggregates to Rs.33,65,220/- for post monitoring which is also not actually incurred but it is simply a provision for a future expense. Hence, this expenditure is also disallowed for the reasons mentioned herein above. Hence total disallowance on this account is of Rs.88,61,746/- (Rs.54,96,526 + Rs.33,65,220/-. The assessee has deliberately claimed this wrong expenditure which is not at all allowable as per the well-established law. 34. About Land Utilization expenses, the assessing officer noted that on verification of the Profit Loss account, that the assesses has debited a sum of Rs.5,60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted is part of cost of land which is a capital expenditure and, therefore, cannot be allowed as deduction. Hence, this expenditure of Rs.5,60,870/- was disallowed and added to the total income of the assessee. 36. On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee is in appeal before us. 37. Learned Counsel for the assessee submitted before us written submission, which is reproduced below: Assessee made the provisions for top liner expenses of Rs.54,96,526/-, post monitoring expenses of Rs. 33,65,220/- and land utilization expenses of Rs. 5,60,870/-. Assessee made the provision following the mercantile method of accounting which envisages matching principle. When the receipt is considered as income, the corresponding expenses should be considered as revenue expenditure. Assessing officer reproduced accounting principle adopted by the assessee at para no. 10.2 of the assessment order. Assessee filed the detailed submission vide letter dated 27.02.2013 justifying the allowability of provisions for top cover expenses and post monitoring expenses. The assessing officer disallowed the expenses on the ground that no such expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned, we note that it is not actually incurred by assessee but it is simply a provision for a future contingent expense, therefore not allowable. About land utilization expenses Rs.5,60,870/-, we note that no such expenditure is incurred by the assessee but it is sort of depreciation on land. Under Income-tax law, no depreciation is allowable on land, therefore it has been rightly disallowed by the assessing officer. We note that after using the land for Solid Waste Management, as per assessee this land will be of no use and, therefore, a certain percentage of the cost of land is charged to Profit and loss account as land utilization expenses. However, this is nothing but just depreciation. What is debited is part of cost of land which is a capital expenditure and, therefore, cannot be allowed as deduction. 40. Hence, we confirm the following findings of ld CIT(A), which is reproduced below: 10.1 The ld. AO stated in para 10.3 of the assessment order that the assessee has claimed deduction for provision for Top cover at Rs.54,96,526/-. The assessee furnished its explanation which was not found acceptable, therefore for the reason given in para 10.4 (1) to (iv) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult, Concise and Summarized ground No.3 is dismissed. 43. The concise and summarized ground No.4 of appeals of Assessee, is reproduced below: (4) Learned CIT(A) has erred in law and on facts in confirming income computed by assessing officer under section 115JB of the Act, by making adjustments to the book profit: (a) ITA No.1393/Ahd/10, A.Y.2007-08 (b) ITA No.1048/Ahd/12, A.Y.2009-10 44. We have heard both the parties. Learned Counsel for the assessee submits that assessing officer must make adjustment in the book profit only as per the provisions of section 115JB of the Act, for that ld Counsel relied on the judgment of Hon`ble Supreme Court in the case of Apollo Tyres Limited Vs. CIT 255 ITR 273(SC). On the other hand, learned DR for the Revenue reiterated the stand taken by the assessing officer. We note that while making adjustment in the book profit, the assessing officer must adhere with the provisions of section 115JB of the Act, therefore, we direct the assessing officer to make adjustment in the book profit as per the provisions of section 115JB of the Act. For statistical purposes the ground raised by the assessee is allowed. 45. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofession . Likewise, Section 40A(2) opens with a non-obstante clause and spells out what expenses and payments are not deductible in certain circumstances. Section 41 elaborates conditions which apply with respect to certain deductions which are otherwise allowed in respect of loss, expenditure or trading liability etc. If we consider this scheme, Sections 40- 43B, are concerned with and enact different conditions, that the tax adjudicator has to enforce, and the assessee has to comply with, to secure a valid deduction. 32. The scheme of the provisions relating to deductions, such as Sections 32- 37, on the other hand, deal primarily with business, commercial or professional expenditure, under various heads (including depreciation). Each of these deductions, has its contours, depending upon the expressions used, and the conditions that are to be met. It is therefore necessary to bear in mind that specific enumeration of deductions, dependent upon fulfilment of particular conditions, would qualify as allowable deductions: failure by the assessee to comply with those conditions, would render the claim vulnerable to rejection. In this scheme the deduction made by employers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is underlined by the condition that it has to be deposited on or before the due date. 34. It is therefore, manifest that the definition of contribution in Section 2 (c) is used in entirely different senses, in the relevant deduction clauses. The 20 differentiation is also evident from the fact that each of these contributions is separately dealt with in different clauses of Section 36 (1). All these establish that Parliament, while introducing Section 36(1)(va) along with Section 2(24)(x), was aware of the distinction between the two types of contributions. There was a statutory classification, under the IT Act, between the two. 35. It is instructive in this context to note that the Finance Act, 1987, introduced to Section 2(24), the definition clause (x), with effect from 1 April 1988; it also brought in Section 36(1)(va). The memorandum explaining these provisions, in the Finance Bill, 1987, presented to the Parliament, is extracted below: Measures of penalising employers mis-utilising contributions to the provident fund or any funds set up under the provisions of the Employees State Insurance Act, 1948, or any other fund for the welfare of employees - 12.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts: those made as contributions, by the employers, and those amounts credited by the employers, into the provident fund account of employees, received from the latter, as their contribution. Both these contributions had to necessarily be made on or before the due date. 38. This court had occasion to consider the object of introducing Section 43B, in Allied Motors. The court held, after setting out extracts of the Budget speech of the Finance Minister, for 1983-84, that: Section 43B was, therefore, clearly aimed at curbing the activities of those tax-payers, who did not discharge their statutory liability of payment of excise duty, employer s contribution to provident fund, etc., for long periods of time but claimed deductions in that regard from their income on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year. It was to stop this mischief that Section 43B was inserted. 39. Original Section 43B(b) enabled the assessee/employer to claim deduction towards contribution as an employer, by way of contribution to any provident fund . The second proviso was substituted by Finance Act, 1989 with effect from 01.04.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union introduced amendments to the IT Act, including an amendment to Section 43B; the memorandum explaining the provisions in the Finance Bill, 2003 in the matter of Section 43B. inter alia, reads thus: The Bill also proposes to provide that in case of deduction of payments made by the assessee as an employer by way of contribution to any provident fund or superannuation fund or any other fund for the welfare of the employees shall be allowed in computing the income of the year in which such sum is actually paid. In case the same is paid before the 23 due date of filing the return of income for the previous year, the allowance will be made in the year in which the liability was incurred. These amendments will take effect from 1st April, 2004 and will accordingly apply in relation to the assessment year 2004-05 and subsequent years. 41. The Notes on Clauses inter alia, reads as follows: It is also proposed to amend the first proviso to the said section so as to omit the references of clause (a), clause (c), clause (d), clause (e) and clause (f) which is consequential in nature. It is also proposed to omit the second proviso to the said section. These amendments will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to that effect in his books of accounts. The same situation arose prior to 1-4-1984, in the context of assessees collecting sales tax and other indirect taxes from their respective customers and claiming deduction only by making provision in their books without actually remitting the amount to the exchequer. To curb this practice, Section 43-B was inserted with effect from 1-4-1984, by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued and, under Section 43-B, it became mandatory for the assessee(s) to account for the aforestated items not on mercantile basis but on cash basis. This situation continued between 1-4-1984 and 1-4-1988, when Parliament amended Section 43-B and inserted the first proviso to Section 43-B. 11. By this first proviso, it was, inter alia, laid down, in the context of any sum payable by the assessee(s) by way of tax, duty, cess or fee, that if an assessee(s) pays such tax, duty, cess or fee even after the closing of the accounting year but before the date of filing of the return of income under Section 139(1) of the Act, the assessee(s) would be entitled to deduction under Section 43-B on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under Section 43-B which, as stated above, was inserted with effect from 1-4-1984 *** 22. It is important to note once again that, by the Finance Act, 2003, not only is the second proviso deleted but even the first proviso is sought to be amended by bringing about a uniformity in tax, duty, cess and fee on the one hand vis- -vis contributions to welfare funds of employee(s) on the other. This is one more reason why we hold that the Finance Act, 2003 is retrospective in operation. Moreover, the judgment in Allied Motors (P) Ltd. [(1997) 3 SCC 472 : (1997) 224 ITR 677] was delivered by a Bench of three learned Judges, which is binding on us. Accordingly, we hold that the Finance Act, 2003 will operate retrospectively with effect from 1-4-1988 (when the first proviso stood inserted). 23. Lastly, we may point out the hardship and the invidious discrimination which would be caused to the assessee(s) if the contention of the Department is to be accepted that the Finance Act, 2003, to the above extent, operated prospectively. Take an example, in the present case, the respondents have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the contention of the Department is to be accepted that Finance Act, 2003, 2003, to the above extent, operated prospectively. Take an example - in the present case, the respondents have deposited the contributions with the R.P.F.C. after 31st March [end of accounting year] but before filing of the Returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right upto 1st April, 2004, and who pays the contribution after 1st April, 2004, would get the benefit of deduction under Section 43B of the Act. In our view, therefore, Finance 27 Act, 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1st April, 1988, when the first proviso was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 444. 19 Union of India Ors. vs. Exide Industries Limited Ors., 2020 (5) SCC 274. 28 21. Section 43B bears heading certain deductions to be only on actual payment . It opens with a non-obstante clause. As per settled principles of interpretation, a non obstante Clause assumes an overriding character against any other provision of general application. It declares that within the sphere allotted to it by the Parliament, it shall not be controlled or overridden by any other provision unless specifically provided for. Out of the allowable deductions, the legislature consciously earmarked certain deductions from time to time and included them in the ambit of Section 43B so as to subject such deductions to conditionality of actual payment. Such conditionality may have the inevitable effect of being different from the theme of mercantile system of accounting on accrual of liability basis qua the specific head of deduction covered therein and not to other heads. But that is a matter for the legislature and its wisdom in doing so. 22. The existence of Section 43B traces back to 1983 when the legislature conceptualised the idea of such a provision in the 1961 Act. Initially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eks to subjugate. 48. One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. 20 This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations. 49. That deductions are to be granted only when the conditions which govern them are strictly complied with. This has been laid down in State of Jharkhand v Ambay Cements 21 as follows: 23 . In our view, the provisions of exemption clause should be strictly construed and if the condition under which the exemption was granted stood changed on account of any subsequent event the exemption would not operate. 24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the industrial policy and the exemption notifications. 25. In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Sons Ltd., (1999) 3 SCC 346] and State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] (hereinafter referred to as Kesoram Industries case [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] , for brevity). In the later decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute: (i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing 22 Commissioner of Income Tax v. Ace Multi Axes Systems Ltd., 2018 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahakari Sandh Ltd., [2013] 35 taxmann.com 616 (Rajasthan High Court). 32 Parliament intended to retain the separate character of these two amounts, is evident from the use of different language. Section 2(24)(x) too, deems amount received from the employees (whether the amount is received from the employee or by way of deduction authorized by the statute) as income - it is the character of the amount that is important, i.e., not income earned. Thus, amounts retained by the employer from out of the employee s income by way of deduction etc. were treated as income in the hands of the employer. The significance of this provision is that on the one hand it brought into the fold of income amounts that were receipts or deductions from employees income; at the time, payment within the prescribed time by way of contribution of the employees share to their credit with the relevant fund isto be treated as deduction (Section 36(1)(va)). The other important feature is that this distinction between the employers contribution (Section 36(1)(iv)) and employees contribution required to be deposited by the employer (Section 36(1)(va)) was maintained - and continues to be maintained. On the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees contributions-which are deducted from their income. They are not part of the assessee employer s income, nor are they heads of deduction per se in the form of statutory pay out. They are others income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. If such 34 interpretation were to be adopted, the non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3 and ground No.5. (ii ) In ITA No.1910/Ahd/2015, for A.Y.2010-11: Assessee did not press ground No.5. 57. We have heard both the parties and noted that above mentioned grounds of appeal (appeal-wise) have not been pressed by ld Counsel during the course of hearing, hence we dismiss above grounds of appeal, as not pressed. 58. Concise and summarised grounds of appeal of Revenue, in case of Gujarat Enviro Protection and Infrastructure Ltd (PAN No.AABCG3746K), assessment year-wise, is reproduced below for ready reference: (1) On the facts and circumstances of the case and in law, the ld CIT(A) has erred in deleting the addition made on account of disallowance of claim under section 80IA(4) of the Income Tax Act, in respect of the following units: (i)ITA No.1236/A/12, A.Y. 2009-10, Gabheni Unit, Rs.15,35,59,562/- (ii) ITA No.2250/A/15, A.Y. 2010-11, Gabheni Unit, Rs.19,32,33,992/- (iii) ITA No.2521/A/16, A.Y. 2012-13, Gabheni Unit, Rs. 1,42,35,127/- (iv) ITA No.2521/A/16, A.Y. 2012-13, Co-Processing Unit, Rs. 1,25,70,515/- (v) ITA No.2521/A/16, A.Y. 2012-13, Palsana Unit, Rs. 6,50,77,043/- 59. Brief facts qua the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profit and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. -[Explanation. - For the purposes of this clause, infrastructure facility means - (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management - system ; (d) a port, airport, inland waterway [inland port or navigational channel in the sea];) 60. The assessing officer, from the above contents of the section 801A(4) observed that any assessee who wants to claim the deduction has to fulfil the three conditions. The first condition is the infrastructure facility should be owned by the assessee and the Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also part of this MoU. On first page of MoU under A, it is specifically mentioned that whereas ICHWMF facility initiated by GEPIL, Govt of Gujarat and ministry of Environment Forest (Govt. of India) Vide clause 3.1 of conditions of MoU (Annexure-II), under heading work delivery, it is specifically mentioned that ICHWMF shall design and construct facility Vide clause 3.11 of conditions of MoU ( Annexure-II), it is reiterated that the ICHWFM shall design and construct the project Vide clause 5.1 of the conditions of MOU (Annexure-II) under the heading operations, ICHWMF (i.e Company's Ghabeni Unit) has to operate and maintain facility Under the heading life of TSDF(ICHWMF) in annexure-II of MoU, it is agreed amongst parties that The ICHWMF has the right and obligation to conduct and operate the project for the period commencing on the commencement date 30.06.2001 and ending nearly on the day 30 years after the practical completion date It is pertinent to mention that MOU entered into by the company with MOEF and G1DC is exhaustive agreement for developing, operating and maintaining integrated common hazardous waste manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly as well as through GPCB for financial assistance for establishment of further provisions in the facility under Phase- I. D. GPCB, after careful examination of the same, has forwarded the request to MoEF for financial assistance. E. MoEF after careful examination of the project proposal and need for financial assistance has agreed to contribute to an extent of Rs. 200 lakh (Rupees Two hundred lakh only ) for Phase-11 of the project comprising of (i) Construction of secured landfill cell-2 and 3, (ii)Procurement of collection/transportation/monitoring equipment. F. The MoEF shall make the payments to GIDC and GIDC shall disburse its payments to ICHWMF (GEPIL) in accordance with the provisions set forth in this MoU and those stated in the Sanction Order. 63. Ongoing through the contents of the above agreement, the assessing officer observed that ICHWMF (Integrated common hazardous waste management facility) has approached the MOEF directly as well as through GPCB for financial assistance for establishment of further provisions in the facility under Phase-II. It is also mentioned on the first page of the MOU that MOEF after careful examinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zardous waste in excess quantity is accumulated beyond prescribed time limits under the rules. 3. Assessee was not carrying decontamination of drum. 4. Assessee was not operating ETP regularly. 5. Assessee has stored certain hazardous waste beyond 90 days in the site. 6.Assessee has kept the drums of solid wastes on the PDF dumping site (cell) which is not supposed to be stored at this place. 65. Earlier while scrutinizing the similar issue in the immediately preceding year i.e. A.Y. 2009-10, the then AO noticed that the activities of GEPIL were not upto the mark or requirement specially in treating, the hazardous waste and GEPIL has failed to fulfil the status of solid waste treatment plant eligible for deduction u/s 80IA and the conditions as laid down under section 80IA are not fulfilled by GEPIL. The newspaper reports published at the time were also taken into consideration and were made part of the order of the A.Y. 2009-10 and are also forming of this order as per Annexure which is annexed at the end of order. The then AO was of the view- point that these observations of the GPCB are clearly indicating that assesses was violating the environmental nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y submission of all legally required information to GPCB. We have completely complied with all requirements of permission granted on 18.2.11 and CPCB guidelines for coprocessing. Our existing stock of 4500 MT (this includes raw material, product and residue as well) is well within the permitted storage capacity of 6300MT worked out as per order dt. 18.02.2011. 3 You are not carrying decontamination of drum The activity of De-contamination of Drum is carried out regularly. GPCB during their 8 visit in last 12 months have witnessed the activity of decontamination of Drum. Recently at the instruction of RO, GPCB, Surat more than 400 decontaminated drums have bene donated to Forest Department for tree plantation. 4 ou are not operating ETP regularly ETP plant is being operated regularly. ETP is 60 KLPD capacity and is a batch process. Our batch process is carried out as penalty Scheduled hours. It might be a case that during your visit the batch process was not taken up which led you to draw the conclusion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs.19,32,33,992/- deduction claimed by assessee u/s 80IA of the I.T Act was disallowed by the assessing officer. 67. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld CIT(A), who has allowed the deduction under section 80IA(4) of the Act. The ld CIT(A), while allowing the appeal of the assessee held that there is no change in circumstances or in law in respect of Assessee's Gabheni unit suggesting a different view and relied on the judgment of Hon'ble Apex Court in case of Radhasparnj Satsang Vs. CIT (1992) 193 ITR 321 (SC).The ld CIT(A) also held that MOU entered into by the Assessee with MOEF and GIDC is an exhaustive agreement whereby Assessee have to develop, operate and maintain Integrated Common Hazardous Waste Management Facility (ICHWMF). This MOU also prescribes detailed terms and conditions and on basis of which financial assistance of Rs.2.00 crores was granted. The AO has erred in treating it just a subsidy agreement, which was wrong. The ld CIT(A) also held that assessee has committed some minor irregularities and the same should not be considered for disallowance of deduction under section 80IA( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into any separate agreement with MOEF GIDC for the purpose of developing, Operating, maintaining of the facility ICHWMF and nor it produced any other document in support of his claim. The preliminary enquiry proved that assessee was not treating the hazardous waste as per requisite norms and failed to fulfil the status of solid waste treatment plant eligible for deduction u/s 80IA of the I.T Act. Further assessee was also not fulfilling the conditions laid down u/s 80IA of the I.T Act, to be eligible for deduction. Due to irregularities noticed by the authorities as well as opposed by the local residents at large, Gujarat Pollution control board (in brief GPCB) are clearly indicating that assesses was violating the environmental norms and not treating the waste properly as required by the Law. The assessee`s activities were came into limelight recently due to allegation and agitation of the local habitants that without treating the hazardous waste received from the industry assessee through underground pipe line discharging waste in to outside the premises. Due to this untreated hazardous waste effects on health of animals and habitants placed in and around the facility. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s waste materials as per statutory requirements which cannot be taken as agreement for developing, operating, maintaining the infrastructural facility as laid down in section 80IA of the I.T Act. The Assessee neither have development agreement and operation and maintenance agreement with any of the authorities mentioned in section 80IA(4)(i)(b ) of the I.T Act 1961. Hence the contention of the assessee that he meets the requirement of the provisions laid down as per section 80IA of the I.T Act for claiming deduction is not acceptable and squarely rejected by the assessing officer. We agree with the findings of the assessing officer. 72. The Assessing Officer also noted that assessee`s activities were came into limelight recently due to allegation and agitation of the local habitants that without treating the hazardous waste received from the industry, the assessee through underground pipe line discharging waste in to outside the premises. Due to this untreated hazardous waste effects on health of animals and habitants placed in and around the facility. In this scenario Gujarat Pollution control board has taken up enquiry and came with findings and asked the facility to stop it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t when an assessee claims exemption/deduction, it is the bounder duty of the assessee to fully substantiate it, and if this is not done, the deduction claimed by the assessee may be disallowed. It has been held by the Hon`ble Supreme Court in the case of Dwarkadas Keshavdas Morarka (1962) 44 ITR 529 (SC) that an assessment year under the Act, is self-contained assessment period no res judicata for Assessing Officer, who is not a court and he is not precluded from arriving at a conclusion inconsistent with his conclusion in another year. Hence, it is well settled that principle of res judicata is not applicable to income-tax proceedings. Meaning thereby, acceptance of claim of the assessee, in past by the department has no bearing in this assessment year. We note that assessee has failed to comply status of solid waste treatment plant in the year under consideration and that is why the assessing officer has denied the deduction under section 80IA(4) of the Act. In view of above discussion, the decision of Assessing Officer should be upheld. 75. We note that assessee has not followed procedure for establishing Solid Waste Management System and ld CIT(A) allowed the deduction bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, when the competent legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the legislature. *** 34. The passages extracted above, were quoted with approval by this Court in at least two decisions being CIT v. Kasturi Sons Ltd. [CIT v. Kasturi Sons Ltd., (1999) 3 SCC 346] and State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] (hereinafter referred to as Kesoram Industries case [State of W.B. v. Kesoram Industries Ltd., (2004) 10 SCC 201] , for brevity). In the later decision, a Bench of five Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute: (i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein. 80. Therefore, based on the facts and circumstances of the case and legal position applicable to these facts, we confirm the findings of the assessing officer, and allow the following appeals of Revenue: (i) ITA No.1236/A/12, A.Y. 2009-10, Gabheni Unit, Rs.15,35,59,562/- (ii) ITA No.2250/A/15, A.Y. 2010-11, Gabheni Unit, Rs.19,32,33,992/- (iii) ITA No.2521/A/16, A.Y. 2012-13, Gabheni Unit, Rs. 1,42,35,127/- 81. Now we shall take ITA No.2521/AHD/2016, A.Y. 2012-13, Co-Processing Unit, Rs. 1,25,70,515/-, appeal of the Revenue: 82. Brief facts qua the issue are that assessee has claimed deduction under section 80IA of the Act on the income earned from the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not allowable and hence the same was disallowed by AO to the tune of Rs.1,25,70,515/-. 84. On appeal, ld CIT(A) deleted the disallowance. Aggrieved, the Revenue is in appeal before us. 85. Learned Counsel for the assessee, submitted that Co-processing unit, Surat involved in the business of developing operating and maintaining solid waste management system. In the solid waste management system, assessee was claiming that he was dealing with Hazardous waste generated from the local industries at Surat. In the form 10CCB report, the assessee has mentioned that local authorities have given approval to this unit, therefore ld CIT(A) has correctly allowed deduction under section 80IA(4) of the Act. 86. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 87. We have heard both the parties. We note that as per the amended provision of Explanation to Section 80IA of the I.T. Act, deduction u/s 80IA(4) of the I.T. Act shall not be allowable to an assessee engaged in the business of developing or operating and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility, the nature of a work contract awarded by any person [including the Central, or State Government] and executed by the undertaking or enterprise referred to Section (1) of Section 80IA. The AO noted that in the instant case the assessee is engaged in executing works contract. In the instant case, the enterprise has not entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for developing, maintaining and operating a new infrastructure facility. Therefore, as per the amended provision of Explanation to Section 80IA inserted by the Finance Act (No.2) 2009 with retrospective effect from 01.04.2000, the deduction under section 80IB(4) claimed by the assessee from the profits and gains of Palsana Unit of the assessee company is not allowable and hence the same was disallowed. 90. On appeal, ld CIT(A) deleted the disallowance of deduction under section 80IA(4) of the Act. Aggrieved, the Revenue is in appeal before us. 91. Learned DR for the Revenue, has primarily reiterated the stand taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 80IA(4) of the Act. Besides, the assessee has not followed the due procedure for establishing Palsana unit. The letter received by assessee from GPCB for its authorization, is not a valid document to claim deduction under section 80IA(4) of the Act. Moreover, the assessee has not entered into an agreement with the Central Government or a State Government or a local authority for developing, maintaining and operating a new infrastructure facility. Therefore, as per the amended provision of Explanation to Section 80IA inserted by the Finance Act (No.2) 2009 with retrospective effect from 01.04.2000, the deduction under section 80IB(4) claimed by the assessee from the profits and gains of Palsana Unit of the assessee company is not allowable. One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. The legal precedents cited by us in case of Ghabini Unit are squarely applicable to this unit also. Hence, we confirm the findings of the assessing officer and allow the appeal of the Revenue. 94. In the result, all appeals filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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