TMI Blog2022 (11) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered as income at all and which does not enter into the computation provisions of the Income tax Act, cannot be subjected to tax u/s 115JB of the also . Learned Departmental Representative has not been able to show anything contrary to this decision of the coordinate bench. In this view of the matter, and respectfully following the views of the coordinate bench, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB. Addition of provision for interest on income-tax in computing Book Profit u/s 115JB - HELD THAT:- The law is clear and unambiguous, as Explanation 1 to Section 115JB categorically provides that income tax paid or payable, and the provision in respect thereof is to be added back to the book profits under section 115JB. We thus see no merits in the assessee's plea and reject the same. Notionally allocated expenditure which is alleged to be incurred to earn dividend income in computing Book Profit u/s 115JB - HELD THAT:- We are of the considered view that the assessee deserves to succeed in this plea for the reason that, eventually, there is no disallowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate benches have rejected the grievances of the Assessing Officer, against the reliefs so granted by the CIT(A). Learned Departmental Representative does not dispute this position but relies upon the stand of the Assessing Officer nevertheless. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches all along. Pre-operative expenses - HELD THAT:- The expenses, being in the nature of expenses incurred for the expansion of existing business, cannot be disallowed. Accordingly, the disallowance was deleted. Additional depreciation on all the eligible assets acquired before 01.04.2008 - HELD THAT:- As decided in Gloster Jute Mills Limited [ 2017 (3) TMI 1807 - ITAT KOLKATA ] only objection of the AO is that the provisions refer to new machinery or plant and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the employee stock option scheme - HELD THAT:- As long as a loss, even though it may not actually have crystallized, can be reasonably estimated, as indeed has been done in this case, it has to be taken into account in the computation of business income. In view of these discussions, as also following the views of the coordinate bench in the assessee‟s own case, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned disallowance - The assessee gets the relief accordingly. Disallowance u/s 14A r.w.r.8D - MAT computation u/s 115JB - HELD THAT:- As we restrict the disallowance under section 14A under rule 8D so as not to disallow any amount on account of interest, and delete the adjustment on account of 14A disallowance from book profits computed under section 115 JB. The assessee gets the relief accordingly. Deduction u/s 80-IA on captive power generating units - market value‟ is required to be taken into account -HELD THAT:- As which market value of the power is to be taken into account in the computation of profit for deduction under section 80IA, i.e. the market value to the end consumer or market value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uous approach. There is no good reason to reject the actual figures, just because actual figures show higher savings. There is thus not only there is no legally sustainable reason for invoking section 80IA(10), what the Assessing Officer has done post invoking section 80IA(10) is equally devoid of legally sustainable reasons. Considering case of Assam Cardon [ 2005 (12) TMI 212 - ITAT CALCUTTA-A ] we uphold the plea of the assessee, and vacate the adjustment made by the Assessing Officer to the claim of the assessee- particularly when similar claims were all along allowed to the assessee. The Assessing Officer is directed to delete the disallowance made by him, and grant the claim of deduction under section 80IA in respect of the jetty, as claimed by the assessee. Treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 80IA as cost of the eligible undertakings - HELD THAT:- It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any event, the fiction envisages under section 80IA(5) is to ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on expenditure incurred by the units vis- -vis overall expenditure. To this extent, we uphold the plea of the assessee. As also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee‟s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis- -vis overall expenditure. Claim for exclusion of profit on sale of investment being capital profit while computing book profits u/s. 115JB - HELD THAT:- We uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB. The assessee gets the relief accordingly. Leave encashment on provision basis while computing book profits u/s. 115 B - HELD THAT:- We are of the considered view that the stand of the Assessing Officer is unsustainable in law in view of the Hon'ble Supreme Court‟s judgment in the case of Bharat Earth Movers Ltd [ 2000 (8) TMI 4 - SUPREME COURT ] wherein Their Lordships have observed that we are satisfied that the provision made by the appellant-company for mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, in our considered view, the learned CIT(A) was indeed justified in deleting the impugned addition on account of income from the cessation of liability. We approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. - ITA No.2384 and 3475/Mum/2019 and 1241/Mum/2018 , ITA No. 2958 and 3843/Mum/2019 and 1889/Mum/2018 - - - Dated:- 7-11-2022 - Pramod Kumar (Vice President), and Sandeep S Karhail (Judicial Member) For the Appellant : Yogesh Thar along with Chitanya D. Joshi, For the Respondent : Jagdish Jangid, ORDER Per Pramod Kumar VP Assessment year 2010-11 1. These cross appeals are directed against the order dated 1st February 2019 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11. 2. We will first take up the appeal filed by the assessee. 3. In ground no. 1, the assessee has raised the following grievance: On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax(Appeals)-7 [hereinafter referred to as Ld. CIT (A)] was not justified and grossly erred in confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court has observed as follows: 8. In the opinion of this Court, the present case is covered by the Division Bench judgment in Cheminvest Ltd. v. CIT, [2015] 61 Taxmann.com 118 (Delhi), wherein this Court has held that the expression 'does not form part of the total income' in Section 14A of the Act means that there should be an actual receipt of income which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. 9. Furthermore, this Court in Pr. Commissioner of Income Tax (Central)-2 v. M/s Era Infrastructure (India) Ltd. in ITA No. 204/2022 vide judgment and order dated 20th July, 2022 has dealt with the issue of amendment made by the Finance Act, 2022 to Section 14A of the Act. The relevant portion of the said judgment is reproduced hereinbelow: 8. Consequently, this Court is of the view that the amendment of Section 14A, which is for removal of doubts cannot be presumed to be retrospective even where such language i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough he adds that the deduction can only be allowed when it is otherwise admissible, and that aspect of the matter will have to be examined by the Assessing Officer. That is indeed the correct approach. While we dismiss the grievance of the asseseee, we make it clear that the Assessing Officer will take a call, as and when the payment is actually made, on the admissibility of deduction in accordance with the law. 13. We have no reasons to take any other view of the matter than the view so taken by us in the assessee‟s own case. The grievance of the assessee is, in terms of and subject to the above observations which will apply mutatis mutandis in this assessment year as well, rejected. 14. Ground no.3 is thus dismissed. 15. In ground no. 4, the assessee has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the denial of claim for exclusion of interest u/s 244A of Rs. 5,83,17,899 received during the year without cognizing the fact that the interest income was contingent in nature at provisional assessment stage and can be said to accrue only on completio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the addition of Rs. 11,27,14,969/- provision for interest on income-tax in computing Book Profit u/s 115JB of the Act. 22. No specific arguments were advanced in support of this plea. In any event, the law is clear and unambiguous, as Explanation 1 to Section 115JB categorically provides that income tax paid or payable, and the provision in respect thereof is to be added back to the book profits under section 115JB. We thus see no merits in the assessee's plea and reject the same. 23. Ground no. 6 is thus dismissed. 24. In ground no. 7, the assessee has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in adding Rs. 53,64,316/- being notionally allocated expenditure which is alleged to be incurred to earn dividend income in computing Book Profit u/s 115JB of the Act. 25. Having heard the rival contentions and having perused the material on record, we are of the considered view that the assessee deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncessions were in the nature of exemptions and remissions etc, and were granted under specific schemes announced, under the industrial policies, from time to time. During the relevant previous year, the assessee received amounts aggregating to Rs 169,93,34,752, but all these receipts were treated as tax exempt on account of being in the nature of capital receipts. When income tax return filed by the assessee was subjected to the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee had a lodged a claim for exclusion of Rs 169.93 crores, being sales tax exemption/incentives received by it, as capital receipt, and hence not liable to tax. The Assessing Officer declined this claim, primarily on the basis of certain observations in the judgments in the cases of Tamilnadu Sugar Corporation Ltd Vs CIT [(2001) 251 ITR 843 (Mad)], CIT Vs Rajaram Maize Products [(2001) 251 ITR 427 (SC)], CIT Vs S KumarsTyre Manufacturing Co [(2004) 266 ITR 325 (MP)], and CIT Vs Abhishek Industries Ltd [(2006) 286 ITR 1 (P H)]. The entire amount of Rs 1169.93 crores was added to income of the assessee. Aggrieved, assssee carried the matter in appeal before the CIT(A). Learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract them to the underdeveloped and developing areas of the State, and to promote the growth of the industry in the State, in the preamble to the scheme. It is on this basis that he has held that so far as the subsidies given by the Maharashtra and Punjab States are concerned, these are required to be treated as capital in nature, whereas, the subsidies received from the State Governments of Himachal Pradesh and Rajasthan, in the absence of specific mention to the effect in the preambles of the subsidy schemes that these subsidies are required to be held to be revenue in nature. However, in our considered view, the approach of discerning the purpose of the subsidy, solely from the specific words used in the preamble of the scheme and without examining the overall scheme of the Act- which is admittedly to promote the growth of industry, is incorrect and superficial. The subsidies so received can be said to be revenue in nature unless these subsidies are for augmenting the profits of the assessee, and that is not even the case of the revenue. The CIT(A) is simply swayed by the wording of the preamble of the scheme- something clearly impermissible. These subsidy schemes are materiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act inserted in with effect from 01/04/99 to emphasise that the action of the assessee in not reducing the cost of assets by the amount of subsidy for working out the Written Down Value was indicative of the fact that the impugned receipts were not in the nature of capital receipts. 55. We have heard both the parties and considered their rival submissions. Perusal of the scheme extending the aforesaid incentives to prestigious units announced by Government of Gujarat on 26/07/91 makes it amply clear that the scheme was announced to attract investment in core sector industry having potential, to spur industrial growth in ancillary, tertiary and secondary sector of the economy. The other scheme announced by the Government of Gujarat as Capital Investment Incentive Scheme on 11th September 1995 was intended to attract investments to generate greater employment in less industrially developed areas of Gujarat and also to secure balanced development of industries in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fixed capital investment. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. But, if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and against the department. Accordingly, all these appeals are dismissed. 8. In the case of JCIT Vs Grasim Industries Limited ( ITA Nos 2155/Mum/2016 and Ors; order date 29th April 2022), a coordinate bench has dealt with these legal issues in considerable detail and observed as follows: 5.3.5. . the dominant purpose for which the incentive scheme per se introduced by the respective State Governments was only for the purpose of setting up of industries in the respective areas for industrial development in State and also to accelerate development and absolutely not for augmenting the profits of the assessee. Effectively, the schemes of various State Governments envisaged the rapid industrialisation, growth and new employment generation in the respective areas which would in turn promote the growth of the State. Hence, it could be safely concluded that subsidy / incentive granted is only for setting up of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sugar, sugar industries were in difficulty. The Government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home-grown beet during the relevant period. Lord Macmillan held that- What to my mind is decisive is that these payments were made to the company in order that the money might be used in their business. He further observed that: I think that they were supplementary trade receipts bestowed upon the company by the Government and proper to be taken into computation in arriving at the balance of the company's profits and gains for the year in which they were received. 15. In the case before us, the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing but supplementary trade receipts. It is true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the Scheme with which we are concerned in this case is that the incentive must be utilised for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the Subsidy Scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the Subsidy Scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 19. Sahney Steel was distinguished, in para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. 20. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o rely upon a judgment of the Jammu and Kashmir High Court in Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/ 333 ITR 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. 24. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars Chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 9. Such decision was considered in case of Ponni Sugars and Chemicals Ltd.(supra) and the Apex Court held and observed as under : 13. The main controversy arises in these cases because of the reason that the incentives were given through the mechanism of price differential and the duty differential. According to the Department, price and costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at 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 concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Hon'ble Supreme Court vide its order dated 08/05/2018 on the ground that the issue is already covered in the decision of Chapalkar Brothers referred to supra. 5.3.8. Before us, the ld. Special Counsel for the Revenue referred to various decisions of Hon'ble High Courts. But, all those decisions were rendered prior to the decision of Hon'ble Supreme Court referred to above. Hence, the decisions relied upon by the ld. Special Counsel for the Revenue would not advance the case of the Revenue. 5.3.9. It is pertinent to note that in each of the aforesaid decisions of Hon'ble Supreme Court, the Courts have been mindful of the fact that the subsidy has to be received after commencement of business and to be availed within 9,10 12 years, as the case may be, and yet by applying purpose test, it was held that subsidy was on capital account. 5.4 . Applicability of Special Bench decision of Mumbai Tribunal in the case of Reliance Industries reported in 88 ITD 273. The ld. Special Counsel for the Revenue vehemently submitted that the decision of the Hon'ble Special Bench has been reversed by the Hon'ble Supreme Court by remitting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the modality or source of fund. If the scheme is for assisting of carrying out of business operations, it is revenue. Hon'ble Supreme Court demonstrated the principle that the object of the subsidy must be given primary importance over the source of fund. 5.4.1. Ultimately the Special Bench after placing reliance on the decision of Hon'ble Supreme Court in Sahney Steel and Hon'ble Madras High Court in the case of CIT v. Ponni Sugars Chemicals Ltd. Reported in 260 ITR 605 held that the decision of the Tribunal in Asst Year 1985-86 is correct and observed the following: 37 .The observations of the Madras High Court lend support to the view that the purpose and object of the Scheme under which the subsidy is given is of more fundamental importance than the fact that the subsidy was received after the commencement of production or conditional upon it. Therefore, in our view and with respect, the Tribunal in the case of Reliance Industries Ltd. ( supra) had correctly interpreted and understood the ratio of the judgment of the Supreme Court in Sahney Steel Press Works Ltd.‟s case (supra). 38. In this view of the matter, we answer the question refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Special Bench of Tribunal had not been reversed or stayed by any higher judicial forum and it holds good as on date. The relevant operative portion of the judgement of Hon'ble Jurisdictional High Court in this regard is reproduced as under:- 3. We will first address the questions no. (c) and (d), which are different elements of the same issue. The respondent assessee had received a subsidy. It is undisputed that up to the level of Income Tax Appellate Tribunal, the assessee did not raise a contention that such subsidy was towards capital account and, therefore, not taxable. However, before the Tribunal such a contention was raised. The Tribunal by the impugned judgment relied upon its earlier judgment for the Assessment Year 1999-2000 in case of this very assessee and restored the issue back to the Assessing Officer. In the earlier order, the Tribunal had remanded the issue to the file of the Assessing Officer to decide the issue afresh after considering the decision of Special Bench of the Tribunal in the case of Reliance Industries Ltd. (supra) . Thus, the Tribunal remanded the issue back to the Assessing Officer to be decided in the light of the Special Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Bench of the Tribunal, it is always been for the assessee to contend before the Assessing Officer by pointing out the relevant clauses of the subsidy that in law the subsidy cannot be treated to be towards revenue account. It would be equally open for the Revenue to oppose such a contention if so advised. The Assessing Officer and the Revenue authorities would have to take a decision in accordance with law. These questions, therefore, are not considered. (emphasis applied by us while placing reliance on the decision of Hon'ble Jurisdictional High Court) 5 .4.4. Against this judgement on other issues, the Revenue preferred an SLP before the Hon'ble Supreme Court and the same was dismissed vide order dated 23/08/2019 in SLP (Civil) Diary No.22929/2019. In other words, the Revenue while preferring SLP before the Hon'ble Supreme Court did not even challenge this ground of subsidy and the decision of Special Bench of Tribunal in the case of Reliance Industries Ltd., Hence, the order of the Hon'ble Jurisdictional High Court in assessee‟s own case for A.Y.2001-02 had become final on the very same issue. Though the said decision has been rendered for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed it out to the learned Commissioner (DR), he did not have much to say except to rely upon the coordinate bench decision which seems to have followed that approach. The coordinate bench, in the case of Jindal Steel Power Ltd. (supra), did indeed travel much beyond its limited mandate in ignoring a binding judicial precedent simply because appeal against that special bench decision is now pending before Hon'ble Bombay High Court. When posed with a special bench decision and a division bench directly on the issue, though touching different chords, we have no difficulty in recognizing our limitations. The wisdom of a division bench, even if superior- as strenuously argued by the learned Commissioner, has to make way for the higher wisdom of a larger bench. It is this faith of judicial hierarchical system that is the strength of our functioning, and we must follow the same. We, therefore, regret our inability to follow the division bench in the case of Jindal Power, no matter how deeply we respect and admire the work of all our colleagues, and we would rather be guided by the special bench decision - which is exactly what another division bench, on the same set of facts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature. 35. We see no reasons to take any other view of the matter than the view taken by the coordinate bench in the assessee‟s own case for the immediately preceding assessment year. Respectfully following the same, we uphold the plea of the assessee and dismiss the grievance of the assessee. The relief granted by the CIT(A) in this regard also stands approved and confirmed. 36. Ground no 1 is thus dismissed. 37. In ground no. 2, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in allowing the appeal of the assessee and holding that gain arising out of pre-payment of deferred sales tax liability as a capital receipt? 38. As learned representatives fairly agree, whatever we decide, on this issue in the appeals for the preceding assessment years, which were also heard along with these cross appeals, will also follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income at Rs. 10,59,76,986/-, claiming deduction under section 80HHC of the I.T. Act in the sum of Rs. 82,48,864/-. 5. During the assessment proceedings, the Assessing Officer observed that the Assessee had credited amount of Rs. 4,14,87,985/- to the capital reserve contending that the said amount was a remission of loan liability. The Assessee stated that under the Industrial Backward Area Scheme of the Government of Maharashtra, it was entitled to defer the Sales Tax liability for a period of 7 years under the Deferral Scheme of 1983 and for a period of 6 years under the Deferral Scheme of 1988. In response to a Notification issued by the Government of Maharashtra regarding premature repayment of deferral Sales Tax at Net Present Value (NPV), the Assessee made a repayment of Rs. 3,37,13,393/- against the total liability of Rs. 7,52,01,378/-. The Assessee remitted the balance amount of Rs. 4,14,87,985/- and credited the said amount to its capital reserve account. The Assessing Officer asked the Assessee to show cause as to why the said amount should not be taxed in the hands of the Assessee as a revenue receipt. Relying on Circulars of the Central Board of Direct Taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave a sum of Rs. 4,14,87,985/-. The issue is as to whether this amount, which the assessee could save, is to be treated as 'income' by applying the provisions of Section 41 of the Act. The Assessing Officer treated it as the revenue receipt and thereby income. Contention of the assessee is that it is a capital receipt, which is accepted by the High Court. 9. In a very detailed and exhaustive judgment rendered by the High Court, it has discussed the view taken by the Assessing Officer, which was confirmed by the Commissioner of Income Tax (Appeals). Thereafter, the High Court noted in detail the manner in which the Tribunal has dealt with the issue. A perusal of the judgment would show that the High Court took into consideration the provisions of Section 41 of the Act and the conditions which are required to be satisfied for bringing a particular receipt as income within the ambit thereof and found that those conditions are not satisfied in the present case. The High Court also repelled the contention of the Revenue that the assessee obtained the benefit of reduction of sales tax liability under Section 43B of the Act as per the CBDT Circular No. 496 dated 25th Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted with the payment made. Mr. Gupta terms this as deemed payment and by the State to the Assessee. We are unable to agree with him. The Tribunal has found that the first requirement of section 41(1) is that the allowance or deduction is made in respect of the loss, expenditure or a trading liability incurred by the Assessee and the other requirement is the Assessee has subsequently obtained any amount in respect of such loss and expenditure or obtained a benefit in respect of such trading liability by way of a remission or cessation thereof. As rightly noted by the Tribunal, the Sales Tax collected by the Assessee during the relevant year amounting to Rs. 7,52,01,378/- was treated by the State Government as loan liability payable after 12 years in 6 annual/equal installments. Subsequently and pursuant to the amendment made to the 4th proviso to section 38 of the Bombay Sales Tax Act, 1959, the Assessee accepted the offer of SICOM, the implementing agency of the State Government, paid an amount of Rs. 3,37,13,393/- to SICOM, which, according to the Assessee, represented the NPV of the future sum as determined and prescribed by the SICOM. In other words, what the Assessee was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has availed excise duty exemption, amounting to Rs 46,83,11,376, in respect of their Darlaghat Unit, HP, and it was claimed as a capital receipt in nature. It was also noted that in terms of general Exemption No, 51 (Notification No. 50/2003 dated 10th June 2003) the assessee is entitled to 100% excise duty exemption for a period of ten years in respect of its cement manufacturing plant at Darlaaghat. The assessee‟s submission was that this exemption was in response to the announcement made by the Hon'ble Prime Minister to the effect that tax and central excise concession are made to attract investments in the industrial sector for special category states, including Uttarakhand. The Assessing Officer noted that though it is apparent from the excise notification that exemption is granted for only those units which are located in the backward areas and which have undertaken substantial expansion, however incentives are available only post production and therefore he finds no difference in sales tax and excise exemption claimed . Following the stand tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the parties on this question, we notice that, the Government of Gujarat Sales Tax Incentive Scheme was envisaged to promote large scale investments in the Kutch District since on account of devastating earth-quake, development of the district had suffered. The Scheme envisaged that, the same was confined only with the Kutch District. Similar, being the purpose and philosophy of the Government of India, while granting excise duty exemption, we may not separately take note of the back-ground thereof. In view of these facts, the question arises is - whether the Tribunal was justified in holding that Sales Tax and Excise duty exemption enjoyed by the assessee under the said subsidy scheme, was not taxable as revenue receipt. Such and similar issue has came up before different High Courts and Supreme Court on the numerous occasions. Reference to all those judgments would be un-necessary. However, the principle that has evolved is that, not the nomenclature of the subsidy or the fact that, the computation of the subsidy benefit is in terms of tax payable, would not be conclusive. What is to be examined in each case is the purpose for granting such subsidy. We may refer to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct multiplex theatre complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centres. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one - there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugars and Sahney Steel. 8. In the present appeal also, as noted, the subsidy was granted under schemes framed by the State and the Central Government, to be given to the assesses who set up new industry in Kutch District. The scheme was envisaged to encourage investment which would in turn, provide fresh employment opportunity in the distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of industry in different regions. However, as pointed out above, entrepreneurs were reluctant to set up industries in backward areas. These areas were identified as backward because there was un-development or underdevelopment of industries in these areas. It was, therefore, that the Government decided to give financial incentives to encourage and induce entrepreneurs to move to backward areas and establish industries there so that the region may develop and promote the welfare of the people living in that region. One of the incentives which the Government decided to grant was cash subsidy so that entrepreneurs could utilize such cash subsidy for any purpose connected with the establishment of industries in the backward areas. Once the decision to give cash subsidy was taken, the Government had to work out some method to determine the quantum of such subsidy. In other words, the question as to how the amount of cash subsidy should be determined had to be considered by the Government. The Government, in order to determine the amount of cash subsidy, decided to follow one of the recognized methods of working it out on the basis of the amount invested by an entrepreneurs in acquiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n CIT v. Swastik Sanitary Works Ltd. [2006] 286 ITR 544. It was a case in which, the Government subsidy was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries. In such a case, specified percentage of the fixed capital cost, which was the basis for determining the subsidy, would be granted. The Court held that, such basis for determining the subsidy was only a measure adopted under the scheme to quantify the financial aid and it was not a payment, directly or indirectly to meet any portion of the actual cost of acquisition of capital asset. It was held and observed as under:- ' In so far as question No.2 is concerned, this court finds that the same is squarely covered by the decision of the Supreme Court in CIT v. P. J. Chemicals Ltd., [1994] 210 ITR 830. In the said case, after review of the law on the point, the Supreme Court has held as under (head note): Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere in the matter. 48. Ground no. 4 is thus dismissed. 49. In ground no.5, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the pre-operative expenses amounting to Rs. 71,07,28,259/-, whereas the assessee itself claimed these expenses as capital expenses in the books of accounts adding it to capital work in progress/fixed assets? 50. This is also a recurring issue and has come up for consideration in some of the preceding assessment years. Learned representatives fairly agree that whatever we decide for the preceding assessment years on this issue, will also apply mutatis mutandis on this assessment year as well. Vide our order for the assessment year 200-10, we have decided an exactly the same ground of appeal, in favour of the assessee, as follows: 96. In ground no.8, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the pre-operative expenses amounting to Rs. 39,82,07,328/-whereas the assessee itself claimed these expenses as capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive . The limited grievance raised by the Assessing Officer is thus devoid of any legally sustained merits, and we reject the same. In any event, even on merits, the well reasoned order of the learned CIT(A), in our considered view, does not merit any interference. We approve the conclusions arrived at by the learned CIT(A) on this point and decline to interfere in the matter. 100. Ground no. 8 is thus dismissed. 51. We see no reasons to take any other view of the matter than the view so taken by us in assessee‟s own cases for the preceding assessment years. Respectfully following the same, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 52. Ground no. 5 is thus dismissed. 53. In ground no.6, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, an additional depreciation shall be allowed to the assessee at the rate of 20% on new plant and machinery acquired and installed after 31-03-2005. However, the period the period during which such additional depreciation shall be allowed is not specified in the Act. Thus, one may conclude that the allowance of additional depreciation shall not only be restricted to the initial year but continue to second and subsequent years. 27. The claim for additional depreciation was however rejected by the CIT(A) for the reason that additional depreciation is available only in respect of new plant and machinery acquired and installed after 31-03-2005. The word 'new' is not defined in the Act. According to the Shorter Oxford Dictionary the word 'new' means not existing before; now made, or brought into existence, for the first time . The AO held that the assets on which additional depreciation was claimed by the assessee is neither new nor brought into existence in the hands of the assessee in the relevant previous year. It is already used in earlier years and is already depreciated and, therefore, old in the hands of the assessee in the previous year. He held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finance (No.2) Act, 2002 w.e.f. 1-4-2003, reads thus: ' (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to fifteen per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii): Provided that such further deduction of fifteen per cent shall be allowed to- (A) a new industrial undertaking during any previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or (B) any industrial undertaking existing before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than *[ten per cent ]: Subs. for twenty-five per cent by Finance (No. 2) Act, 2004, (w.e.f. 1-4-2005). Sec.32(1)(iia) as substituted by Finance Act, 2005, (w.e.f. 1-4-2006) reads as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Act, 1980 and reinserted by Finance Act, 2002 it is evident that the said sections specifically restricted the allowability of additional depreciation in the year of installation of P M. However, in the section 32(1)(iia) amended vide Finance Act, 2005 Legislature had omitted the proviso wherein it was provided that such depreciation could be claimed only in the initial assessment year. This being a specific omission it could be construed that the intent of the Legislature was not to restrict the allowance of additional depreciation to the year in which the assets are installed but also in the second and subsequent years provided that the aggregate depreciation does not exceed the cost of the asset. It is settled law that a fiscal statute has to be interpreted the basis of the language used therein and not interpreted out of context the same as held by Apex Court in the case of Orissa State Warehousing Corporation, Mohammad Ali Khan and Madurai Mills Co. Ltd. (Referred to by the Appellant.) Further, it is also imperative to state that Section 32(1)(iia) is a beneficial provision enacted with the view to provide benefit to the assessee. The same is also evident from the Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following decisions wherein it has been held that a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. Even if there is a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation :- - Orissa State Warehousing Corpn. v. CIT [1999] 103 Taxman 623/237 ITR 589 (SC) - Prakash Nath Khanna v. CIT [2004] 135 Taxman 327/266 ITR 1 (SC) - Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC) - Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC) Apart from the above, it was also pointed out that DTC Bill 2013 has proposed expressly that additional depreciation would be allowed in the FY in which the P M is used for the first time and those provisions are not made with retrospective effect. It was argued that the legislature has consciously not restricted the allowance of additional depreciation on the original cost for AY 2006-07 till AY 2013-14 to one year only and therefore the additional depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. 56. Ground no. 6 is thus dismissed. 57. In ground no.7, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition in respect of unutilized CENVAT credit? 58. Learned representatives fairly agree that this issue is covered, in favour of the assessee, by decisions of the coordinate benches in assessee‟s own cases for the assessment years 1999-2000 to 2004-05, even though the learned departmental representative rather dutifully relied upon the stand of the Assessing Officer. We see no reasons to take any other view of the matter than so taken by the coordinate benches, and, respectfully following the same, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 59. Ground no. 7 is thus dismissed 60. In ground no.8, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in excise duty exemption while computing the Book profit us. 115JB of the Act, whereas the same is in the nature of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile the appeal of the assessee for the assessment year 201-11 is partly allowed, the appeal of the revenue for the assessment year 2010-11 is dismissed. Assessment year 2011-12 68. These cross appeals are directed against the order dated 11th March 2019 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2011-12. 69. We will first take up the appeal filed by the assessee. 70. In ground no. 1, the assessee has raised the following grievances: a) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals)-7 (hereinafter referred to as Ld. CIT (A)] erred in confirming the action of the Additional Commissioner of Income-tax (Large tax payer Unit) [hereinafter referred to as 'AO'] in adding back Rs. 1,83,76,076/- on the contention that the same is notional and contingent in nature. b) The Appellant prays that the aforesaid addition be deleted. 71. So far as this ground of appeal is concerned, the relevant material facts are like this. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced in page 149 of the factual paper book, it could be seen that the date of grant is 22-4-2010 and the one year period gets over on 22-4-2011 which falls in A.Y. 2012-13. Hence, the vesting period falls during A.Y. 2012-13. We find that no ESOP expenses are debited by the assessee in A.Y. 2013-14 which is accepted by the ld. PCIT itself and which fact is also staring from the audited financial statements of the assessee. Hence, the additional compensation cost of Rs. 32.55 Crores on account of ESOP has been debited as 'expenditure' by the assessee in the year of vesting i.e. A.Y. 2012-13 rightly, which is also in consonance with the decision of the Hon'ble Special Bench of Bangalore Tribunal in the case of Biocon Ltd. (supra) . It is also important to bear in mind the fact that once one of the Hon'ble High Courts, even if non-jurisdictional, takes a view of the matter contrary to what the Tribunal has said, we have to follow the same humbly. A coordinate bench of the Tribunal, in the case of Tej International Pvt Ltd Vs DCIT [(2000) 69 TTJ 650 (Del)], has observed that In the hierarchical judicial system that we have, better wisdom of the Court below has to yie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, i.e. ground no. 11, the assessee has also raised the following grievance: Addition of Rs. 1,79,533/- being notional expenditure incurred to earn exempt income while computing book profits us. 115JB of the Act: a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in adding Rs. 1,79,533/- being notionally allocated expenditure allegedly incurred to earn dividend income in computing Book Profit u/s 115 B. b) The Appellant prays that the AO be directed to exclude the amount of disallowance made u/s. 14A while computing book profits u/s. 115JB. 77. We find that an identical issue came up for our consideration in the assessee‟s own case for the assessment year 2008-09, and while dealing with the same and after hearing the parties and perusing the records, we have, vide our order of even date, has held as follows: 5. So far as these grievances of the assessee are concerned, it is sufficient to take note of the fact that so far as this assessment year is concerned, it is the first assessment year post insertion of rule 8D and as is the settled legal position in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the 14A disallowance, we find that this aspect of the matter stands concluded, in favour of the assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd [(2017) 82 taxmann.com 415 (Del SB)]. The assessee gets relief on this point as well. 7. Ground nos. 1 is thus allowed for statistical purposes, and ground no. 4 is thus allowed. 78. We see no reasons to take any other view of the matter than the view so taken by us in the assessee‟s own case. Respectfully following the same, we restrict the disallowance under section 14A under rule 8D so as not to disallow any amount on account of interest, and delete the adjustment on account of 14A disallowance from book profits computed under section 115 JB. The assessee gets the relief accordingly. 79. Ground nos. 2 is thus allowed for statistical purposes in the terms indicated above, and ground no. 11 is allowed. 80. In ground no. 3, the assessee has raised the following grievances: a) On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of AO in reducing the claim for deduction u/s 80-IA on captive power generating units by an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benches holding that it is market value for the customer which must be adopted for this purpose, such as in the case of West Coast Paper Mills Ltd Vs JCIT [(2006) 100 TTJ 833 (Mum)]. The same were the views of another coordinate bench in the case of Reliance Industries Ltd. Hon'ble jurisdictional High Court has upheld the Tribunal‟s order holding that it is price to the consumer, and not the intra-power companies trading price, which must be taken into account. Rejecting admission of a substantial question of law against the order of the Tribunal Hon'ble jurisdictional High Court, in the case of CIT Vs Reliance Industries Limited [(2020) 421 ITR 686 (Bom)] has, in this regard, observed as follows: 4. Question (c) pertains to the dispute between the department and the assessee regarding the rate at which the electricity generated by one unit of the assessee-company and provided to the another be valued. The assessee contended that such valuation should be at the rate at which the electricity distribution companies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proviso and explanation thereto. The Tribunal eventually held that till the Assessment Year 2005-2006, the Revenue considered the rate at which the power was purchased by the Assessee from Tata Power Company as market value. There is nothing brought on record as to how the rate determined by the MERC is the true market value. The Assessee gave explanation that the rates determined by the MERC do not reflect the correct market rate. The finding is that the mode of computation and deduction under Section 80IA requires no deviation from the past. The findings of fact and to be found in paragraphs 42 to 50 also reflect that the very issue came up for consideration for the Assessment Year 2003-2004. For the reasons assigned by the ITAT and finding that the attempt is to seek reappreciation and reappraisal of the factual data that we come to a conclusion that even question (d) as framed is not a substantial question of law. 8. Thus, the issue at hand had been examined by this Court on earlier occasion and the view of the Tribunal under similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in the open market. To our mind sum of Rs. 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed. 11. Judgment of Calcutta High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified by the Indian Railways. This claim, however, did not find favour with the assessee this time, even though the same stand of the assessee was accepted for three consecutive preceding assessment years. After elaborately discussing the things in detail, and extensively referring to investigations carried out in the case of Ultratech Cements Limited, the Assessing Officer concluded that (a) the so called rail system of the assessee company is simply a private rail siding, and is not any infrastructure of public utility; (b) the agreements entered into between the assessee company and the Indian Railways consisting of terms and conditions for private sidings, and could not be viewed as an agreement for building, operating and maintenance of a rail system; (c) the conditions stipulated under section 80IA have not been satisfied; (d) the actual operation of the rail system (i.e. running of the goods train) was being done by the Indian Railways and not the assessee company; (e) all the four cement plant sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement with the government through department of Railways for developing, maintaining and operating the rail system [infrastructure facility]; and that in pursuance thereof it had developed the integrated rail system in between the plant and the nearest railway track [of Indian Railways] and running it [in between] for movement of the inward and outward material so as to enable it to transport the materials from its plants straightaway to the various destinations and vice versa at all those four locations; and that by way of such operation of rail systems, it has been able to save the expenses for loading [at those plants] into the trucks, road freight and expenses for unloading and loading the same at the site of nearest Indian railways and that resulted into the. profit of such rail systems . 10. However, the AO noted that those agreements were for laying out private sidings and not for any rail system [as referred to in Explanation (a) to the clause (t) of sub-section (4) section 80IA in reference to the infrastructure facility] as claimed by the assessee that railway had laid down those [sidings] partly on the land belonging to the railways and partly belonging to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay department [had it been so, the profit by way of lease rent from such rail. system would have qualified for deduction u/s 80lA as per the concession given by the aforesaid circular]. Finally, the AO held that assessee was not eligible to claim the deduction u/s 80lA in r/o such rail systems and disallowed the claim accordingly. 11. In its appellate order CIT(A) noted that the issue has come up first in A.Y. 2004-05. In that year, the assessee had claimed deduction of Rs 15.63 crores in r/o rail system at Hirmi, Raipur District, Chattisgarh. In A.Ys. 2005- 06 2006-07, the assessee claimed deduction of Rs.16.30 crs. Rs 20.95 crs. respectively in r/o that rail system at Hirmi. In A.Y. 2007- 08, the claim was made in r/o two more rail systems [one at Tadipatri in Andhra Pradesh the other at Arakkonam in Tamil Nadu]. The total claim for that year amounted to Rs 52.38 crs. [Rs 21.09 crs. -Hirmi; Rs 25.56 crs. -Tadipatri Rs 5.73 crs. -Arakkonam]. In A.Y. 2008-09, the claim extended to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption available u/s 80lA with the assessee to claim deduction for any of 10 consecutive years as its own choice. The assessee has opted for claiming the deduction from A.Y. 2004-05 on wards. It was submitted that the income offered for tax by the assessee includes income from rail system and that certificate of M/s Sharp Tannan, CA in Form No. 10CCB certifying the correctness of the aforesaid claim was duly submitted to the AO. 13.1. It was further submitted that the rail system is a profit centre. The rail system is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the assessee company as a whole. It was submitted that by developing this infrastructure facility, there has been saving in transportation cost and overall profits of the company have increased due to such savings. It was such that the mere fact that it does not raise an invoice from its railway unit to its cement unit cannot govern the tax implication of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A is applicable to an infrastructure facility meant for development of rail system. It was contended that the AO has categorically stated in para 5.2.3 of his order that rail system was developed by L T and was inherited by the assessee out of demerger. It was further submitted that in a demerger all the property of the undertaking is necessarily transferred by the demerged company to the resulting company, therefore it is immaterial whether the rail system was developed by L T Ltd. or by the resulting company i.e. the assessee. Further it was submitted that the facility of rail system consists of all that is required to carry on the railway activity in an organized and systematic manner. The activity of rail system is real and substantial and it is carried on with said purpose viz transportation of goods from one place to another and thereby augmenting profits of the company as a whole by saving transportation cost which it would have otherwise incurred. It was further submitted that the profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system. 13.5. It was further submitted that substantial investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has discussed the issue extensively and the findings of the ld. CIT(A) remained uncontroverted. Therefore the order of the CIT(A) is liable to be confirmed in this regard. 16. We have heard the rival submission and considered them carefully: We have also perused the various material placed on record on which our attention was drawn. After taking into consideration we find that the CIT(A) has dealt with the aspect in detail. Contention raised before the ClT(A) on behalf of the assessee were not found incorrect or false. Conditions of Sec. 80IA have been fulfilled by the assessee. Thereafter, the CIT(A) came to the conclusion that the assessee is eligible for deduction u/s 80IA. The findings of the Id. CIT(A) are given in para 3.10 are as under :- 3.10 After perusal of the facts of the case, findings given by the AO and submissions made by the appellant, I find that the only issues in this case is whether the appellant is eligible for deduction u/s. 80IA in r/o profits derived from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it has entered into an agreement for operation and maintenance of the rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was held to be not entitled for the deduction u/s.80IA in r/o the profit, from the operation of rail system. Reasons for the same was as under:- 16. The CIT(A) observed that the agreements under reference were not at all any agreements for developing, maintaining and operating any infrastructure facility to which benefit of exemption is intended to be given in Section 80IA. For this reason also the assessee company was held to be not entitled for deduction u/s.80IA in r/o the profit from the operation of rail system. 17. The CIT(A) also observed that L T Ltd., who have developed the said rail system was also not eligible u/s.80IA on operations of those rail systems under the provisions that existed at the relevant time i.e., prior to 01/04/2002 when such infrastructure facility was said to have become operational. 18. The CIT(A) observed that the L T Ltd., did not claim exemption on operation of those rail systems. Rather the assessee company has started claiming exemption from AY. 2004-05 after the ownership over the cement plants together with such rail systems were transferred to it following the demerger scheme in FY. 2003-04. 19. The CIT(A) further ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly applied the provisions of law as applicable prior to 01/04/2002 while considering the assessee's claim for deduction for the Ays.2009-10 and 2010-11 under consideration. Learned A.R threadbare taken us to the objections raised by the CIT(A) and the reply filed by the assessee controverting each and every objection of the CIT(A). Our attention was invited to the amended provisions of Section 80IA(4) which does not require infrastructure facility to be a public facility for allowing deduction u/s. 80IA. Our attention was also invited to the terms and conditions of the agreement entered between the assessee company and the railway department which contained conditions for construction of railway sidings, development of sidings, laying of tracks, signaling system and all the essential components of rail system. The terms of the agreement also provided for its operation and maintenance. He vehemently argued that the rail systems were developed in accordance with the agreements entered with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. Learned AR also invited our attention to the order of the Tribunal in assessee's own case for Ays. 2004-05 to 2008-09, wherein Tribunal have after considering in detail allowed the assessee's claim u/s.80IA with regard to rail system. Sales Tax exemption as capital receipt was also decided by Tribunal in assessee's own case for the Ays. 2004-05 to 2008-09, relevant decision of the Tribunal was also filed before us. 29. Learned AR relied on following judicial pronouncements in support of the proposition that benefit allowed in earlier year cannot be denied in subsequent years. 1. RadhaSoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) 2. CIT v. Western Outdoor Interactive (P) Ltd. [2012] 25 taxmann.com 340/210 Taxman 229 (Mag.)/349 ITR 309 (Bom.) 3. CIT v. Paul Brothers. [1995] 79 Taxman 378/216 ITR 548 (Bom.) 4. CIT v. Macbrout Engineering (P.) Ltd. [2014] 52 taxmann.com 219 /[2015] 232 Taxman 406 (Bombay) 5. CIT v. Modi Industries Ltd. [2010] 8 taxmann.com 129/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so not correct. Our attention was invited to the computation of profit as per table 'F'of CIT(A)'s order. She further contended that when L T Ltd., itself was not eligible for deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall be eligible for the benefit u/s.80IA. 31. With regard to sales tax exemption benefit being treated as capital receipt, she relied on the decision of Jammu and Kashmir High Court in the case of Shree Balaji Alloys v. CIT [2011] 198 Taxman 122/9 taxmann.com 255/333 ITR 335, Bombay High Court in case of CIT v. Chaphalkar Brothers [2013] 33 taxmann.com 431/215 Taxman 145 (Mag.)/351 ITR 309. 32. With regard to disallowance made u/s.14, she relied on the findings recorded by lower authorities. 33. We have considered rival contentions, carefully gone through the orders of the authorities below and materials placed before us. We had also deliberated on the judicial pronouncements referred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or operating rail systems subject to prior approvals and conditions. Therefore, the assessee accordingly entered into agreement with the Rail authorities to develop, operate and maintain its rail systems. The agreement lays down various conditions to be complied with, before and during the development, maintaining and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings / construct the siding is meant for Railway administration's permission for allowing the assessee for developin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of clause 14, Wagons are hauled by the Railway Administration from the point marked 'X' or such other points as may be fixed upon by mutual consent of the applicants and railway administration in such manner as shall be determined in each case by the Railway administration. The assessee undertakes to shunt the wagons from such point to his premises and back with his own labour. However , no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee's case siding charges are not leviable. 38. The rail systems were developed by assessee under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreements substantiating the same are as under:- (a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that the Railway administration will at the cost and the expenses of the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the applicant. 39. These are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the assessee and the entire cost for the same is borne by the assessee. 40. From the record we also found that the assessee has duly submitted for all the rail systems, Form 10CCB, duly certified and audited by M/s. G.P Kapadia Co., Chartered Accountants along with Balance Sheet, P L account, Schedules forming part of Balance sheet and P L Account. 41. However, the AO did not agree with assessee's contention and held that Rail systems developed by assessee is not eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee's claim of deduction u/s.80IA. 42. With regard to CIT(A)'s observation as to whether rail systems developed by M/s. L T were in accordance with the Build-Own-Lease- Transfer (BOLT) scheme of the Indian Railways, we observe that L T had entered into agreements with the railway authorities to develop, operate maintain the rail systems, which in fact the company has done from the initial day. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay authorities to develop, Operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. As per the relevant provisions of law during relevant period there is no requirement for Rail Infrastructure to be In BOLT scheme, to be eligible for claiming deduction under Section SO-lA (4)(i). Section 80-lA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) ...... (a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant clauses of the agreements substantiating the same which reads as under: (a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) Clause No. 6 - Payment by Applicant against the total estimated cost -wherein it is mentioned that, The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... (c) Clause No. 7(a) - Permanent way materials - The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the same is borne by the appellant. 50. The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee's own case. The facts and the agreements were also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the 'principles of res judicata' do not apply to income tax proceedings and each assessment year being a separate unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.26 Tadipatri -- -- -- 25.56 25.22 31.03 Arakkonam -- -- -- 5.73 6.30 7.11 Durgapur -- -- -- -- 5.71 6.72 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the basis adopted for calculating the revenue from rail system is, lower of the Freight chargeable through Road and Rail. The Rail Freight being lower is considered after discounting it further by 50% based on the Circular of Indian railways for the freight chargeable upto the nearest railway station. Freight Rates are considered as per the Freight Rate chart Freight Circulars issued from time to time by Indian Railways, based on the classification of the goods transported. The Railway freight rates are uniformly charged to everyone by Indian Railways. The copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndhra Chamber of Commerce [1965] 55 ITR 722 wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point of interchange till factory gate of the assessee has immense potential, with enabling powers to the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well. 60. Our attention was also invited to letter No. 99/TC(FM)26/1/Pt-II (Sub-Liberalization of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. 61. As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its goods, viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee. 62. With regard to CIT(A)'s conclusion at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hirmi South Eastern Railway March 2000 Tadipatri South central Railway 03-05-1999 Arakkonam Southern Railway 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard to CIT(A)'s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the Indian Railways and not by the assessee Company. 69. We found that the CIT(A) has equated running of goods train with the operation of Rail System . This is the sole basis on which he has arrived at his conclusion that since the assessee is not running the goods train it is not operation of Rail System and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner as explained in para 3.2.14 [with reference to table F] above. If that is done, there would hardly be any profit to those rail systems. 76. In this regard, we found that prior to setting up of railway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division. 77. After verifying the computation of income eligible for deduction u/s.80IA, as filed by assessee, we found that the CIT(A) has misunderstood the working of the revenue calculation and alleged that such working is ill-conceived as the actual transportation of materials on the siding is carried out by the railway authorities. Based on such misunderstanding, he further alleged that assessee has claimed deduction for notional profits whereas section 80lA allows deduction for profits deri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rail system in Table F, has no relevance since it is merely based on his incorrect assumption. 82. Further, we found that observation of CIT(A) with respect to the freight rate is also not correct in so far as for comparison, he has considered the rate per quintal as against per Metric Ton adopted by the assessee which can be observed from the calculation submitted by assessee before the lower authorities. Without any evidence in hands, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operation of railway siding with merely hauling of wagons. The operations of railway siding involves various activities other than the hauling of wagons. Mere haulage of wagons cannot be equated with operations of railway siding. We found that assessee has filed reports in Form 10CCB from M/s G.P.Kapadia Co., Chartered Accountant. The CIT(A) himself has allowed the deduction in AY. 2009-10 based on the similar facts available on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction 86. In terms of the above averments, after acquiring the cement business from L T, the assessee started claiming deduction for Rail system u/s. 80-IA fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2009] 34 SOT 1 (URO). In this case, the assessee-company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the year in which the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention here that once the deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement Chemical Industries Ltd. (supra), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act. 93. Even the Supreme Court in case of Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480 /196 ITR 188 held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L T Ltd in the FY. 2003-04 on account of demerger, could be treated as eligible to the deduction under the aforesaid section in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustify the same. We have also noted that in three immediately preceding assessment years, the same stand of the assessee, which has been rejected now, was accepted during the scrutiny assessment proceedings. While it is indeed true that there is no res judicata in the income tax assessment proceedings, at the same time, following the principles of consistency duly recognized by Hon'ble Supreme Court in the case of Radhasoami Satsang Vs CIT [(1992) 193 ITR 321 (SC)], unless there is a change in the material facts, the issues which have been settled one way or other must to be disturbed. In this view of the matter, and respectfully following the coordinate bench in the case of Ultratech Cement Ltd (supra), we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance in respect of claim of 80IA in respect of rail system. The assessee gets the relief accordingly. 91. Ground no. 4 is thus allowed. 92. In ground no. 5, the assessee has raised the following grievance: On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in denying the deduction claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are more than 300% of the actual charges and this fact clearly shows that the assessee had so arranged his affairs to show extraordinary profits to avail higher deduction under section 80IA of the Act, than admissible. It was in this backdrop and solely for this recorded reason that the Assessing Officer invoked Section 80IA(10) which provides that Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom . He then referred to the Explanation to Section 80IA(8) , which provides that market value, in relation to any goods or services, means (a) the price that such goods or services would ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Year 12039617.2 Add: Depreciation as per Books 18927319 Less: Depreciation as per Act 10480379 Business profits 20486557.2 Deduction u/s. 80IA @ 100%` 20486557.2 94. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without success. The assessee is not satisfied and is in further appeal before us. 95. We have heard the rival contentions, perused the material on record and duly considered the fact of the case in the light of the applicable legal position. 96. We find that the Assessing Officer has invoked the provisions of Section 80IA(10) for the short reason, as set out in the assessment order, that the notional savings of the assessee are much more than actual charges borne by the assesse, as evident from the fact, for example, that the assessee has, in actual incurred and paid Rs 5,43,27,689 on account of wharfage, stevedoring and storage charges for their material (cement, clinkers, coal, gypsum) but has computed the notional market value for the same at whoppi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s leading to contrived profit figures. What is used for computing the profits is working out the notional profits and that computation of notional profits has a certain basis. All that can be seen and examined by the Assessing Officer whether such a computation is in accordance with the law or not, but it is not open to the Assessing Officer, by invoking section 80IA(10), to disturb this computation- unless the computation itself does not meet the test of law. The only question thus open to the Assessing Officer was to take a call on whether this system of computing the profits on the basis of notional savings is an acceptable method of computing the profits or not. Once the Assessing Officer holds, as he implicitly did in this case as well, that the method is acceptable, it is not open to him to reject the results just because the savings were more than a very large portion of the expenditure. The mention of figures like 300% is in a way inappropriate because even if post construction of the jetty, the expense level is so reduced that the benefit is 300% of the actual expenses, all it means is that the savings are more than 3 times the actual expense level, i.e. 75% of earlier exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old the plea of the assessee, and vacate the adjustment made by the Assessing Officer to the claim of the assessee- particularly when similar claims were all along allowed to the assessee. The Assessing Officer is directed to delete the disallowance made by him, and grant the claim of deduction under section 80IA in respect of the jetty, as claimed by the assessee. 98. Ground no. 5 is thus allowed. 99. In ground no. 6, the assessee has raised the following grievances: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO in treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 801A as cost of the eligible undertakings. 100. So far as this grievance of the assessee is concerned, only a few material facts need to be taken note of. During the course of the assessment proceedings, the Assessing Officer noted that while computing the deduction under section 80IA in respect of captive power plants, ports and rail systems, the assessee had debited the expenses directly attributable to the eligible units, net of CENVAT credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made . All that this provision does is that it provides for the profits of the eligible unit being treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT credit, he must also make an adjustment for the corresponding CENVAT credit availed by any other unit of the assessee other than the eligible unit. If the captive power unit makes a payment of X amount, and in turn, it generates a CENVAT credit of X amount, which is availed by another unit, say Ropar Cement Manufacturing Unit, the hypothetical independence embedded in the profit computation on a standalone basis requires that the Ropar Cement Manufacturing Unit must reimburse the captive power unit for such a CENVAT credit. It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant company instead of allocation on the basis of turnover made in the order u/s 143(3). 106. So far as these grievances of the assessee are concerned, it is sufficient to take note of the fact that in the computation of profits of the eligible units, the assessee has made no adjustment for the common head office expenses. The assessee's stand was that such expenditure does not have direct or immediate nexus with these units. This plea did not find favour with the Assessing Officer, as he was of the view that the head office expenditure are common expenses which need to be allocated to every unit, including eligible units, as all the units benefit from the same. The allocation of expenses was done on the basis of the turnover. Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without any success. The assessee is not satisfied and is in further appeal before us. 107. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 108. We are unable to see any merits in the stand of the assessee that the head office expenses cannot be allocated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The Appellant prays that the disallowance of education cess be deleted. 112. Learned counsel, however, submits that the assessee does not wish to press this grievance, and these grounds of appeal, therefore, may be dismissed as not pressed. The prayer is accepted. The ground of appeal is dismissed as not pressed. 113. Ground no. 8 is thus dismissed in the terms indicated above. 114. In ground no. 9, the assessee has raised the following grievances: Disallowance of claim of leave encashment of Rs. 6,54,66,319/- a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in not allowing the claim of leave encashment amounting to Rs. 6,54,66,319 / -. b) The Appellant prays that the AO be directed to allow the claim of the Appellant. 115. Learned representatives fairly agree that whatever is decided on the above issue for the assessment year 2006-07, the cross-appeals for which were heard along with this set of cross-appalls will apply mutatis mutandis for this assessment year as well. While dealing with the assessment year 2006-07, we have held as follows: 44. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition of Income as given in sec. 2(24) of the Act and hence it does not enter into the computation provisions of the Income tax Act. Accordingly it was contended that, an item of receipt which is not considered as income at all and which does not enter into the computation provisions of the Income tax Act, cannot be subjected to tax u/s 115JB of the also . Learned Departmental Representative has not been able to show anything contrary to this decision of the coordinate bench. In this view of the matter, and respectfully following the views of the coordinate bench, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB. The assessee gets the relief accordingly. 120. Ground no. 10 is thus allowed. 121. Ground no. 11 has already been discussed earlier in this order and is allowed. No further adjudication is, as such, required. 122. In ground no. 12, the assessee has raised the following grievances: Addition of Rs. 6,54,66,319/- in respect of leave encashment on provision basis while computing book profits u/s. 115 B of the Act: a) On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer for adjudication on merits. Learned Departmental Representative, however, opposes the plea. 127. Having heard the rival contentions and having perused the material on record, we deem it fit and proper to admit the ground of appeal but remit the same to the file of the Assessing Officer for adjudication on merits. Ordered, accordingly. 128. Ground no. 13 is thus allowed for statistical purposes. 129. In the result, the appeal of the assessee is partly allowed in the terms indicated above. 130. We will now take up the appeal filed by the Assessing Officer. 131. In ground no. 1, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) as right in allowing the appeal of the assessee and holding the sales tax incentives as capital in nature? 132. While dealing with the appeal for the assessment year 2010-11 earlier in this order, and for the detailed reasons set out in paragraphs 32 to 35 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. Respectfully following the view so taken in assessee‟s own case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the appeal of the assessee and holding excise duty exemption availed by the assessee as capital receipt? 139. This is also a recurring issue and has come up for consideration in a number of preceding assessment years in assessee‟s own cases. In the assessee‟s own case for the immediately preceding year, and for the detailed reasons set out in paragraphs 40 to 42 and following the decisions in the preceding assessment years referred to therein, we have upheld the similar relief allowed to the assessee. We see no reasons to take any other view of the matter for this assessment year. Respectfully following our decisions in the assessee‟s own cases, we uphold the relief granted by the learned CIT(A) on this count as well. We thus confirm the conclusions arrived at by the CIT(A) on this count as well, and decline to interfere in the matter 140. Ground no. 4 is thus dismissed. 141. In ground no.5, the Assessing Officer has raised the following grievance: On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the road transport subsidy availed by the assessee, aggregating to Rs. 41,05,28,050/-, as capital in natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 10,73,50,135/, whereas the assessee itself claimed these expenses as capital expenses in the books of accounts adding it to capital work in progress/ fixed assets? 147. This is also a recurring issue and has come up for consideration in assessee‟s own case for several preceding assessment years. In our order for the assessment year 2009-10, this issue has been discussed at length from paragraphs 96-100, and in the assessee‟s own case for the immediately preceding year 2010-11, which is being disposed of vide this consolidated order, and for the detailed reasons set out in paragraphs 48-51 and following the decisions in the preceding assessment years referred to therein, we have upheld the similar relief allowed to the assessee. We see no reasons to take any other view of the matter for this assessment year. Respectfully following our decisions in the assessee‟s own cases, we uphold the relief granted by the learned CIT(A) on this count as well. We thus confirm the conclusions arrived at by the CIT(A) on this count as well, and decline to interfere in the matter. 148. Ground no. 7 is thus dismissed. 149. In ground no.8, the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. In ground no.10, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the exclusion of Sales tax incentive, excise duty exemption, road transport subsidies and interest subsidies while computing the Book profit u/s. 115JB of the Act, even though the said incentives are revenue in nature? 156. As we have, for the detailed reasons set out earlier, approved the action of the CIT(A) in treating these subsidies as a capital receipt in nature, this ground of appeal is rendered infructuous and is dismissed as such. 157. Ground no. 10 is also dismissed. 158. In the result, the appeal of the revenue is dismissed. 159. To sum up, while the appeal of the assessee for the assessment year 2011-12 is partly allowed, the appeal of the revenue for the assessment year 2011-12 is dismissed. Assessment year 2012-13 160. These cross-appeals and cross-objections pertain to the same assessee and are directed against the order dated 05th January 2018 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2011-12, we uphold the plea of the assessee, and direct the Assessing Officer to delete the adjustments made by him in this regard. The assessee gets the relief accordingly. 164. Ground no. 1 is thus allowed. 165. In ground nos. 2 3, the assessee has raised the following grievances: 2(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO in not allowing the claim of tax holiday u/s 80-IA aggregating to Rs. 1,56,56,92,349/- on infrastructure facility, being Rail System, developed, operated and maintained by the appellant at various locations. 2(b). Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO in holding that for the purpose of claim of tax holiday u/s 801A on infrastructure facility, being Rail System, the same should be a facility for public utility. The Ld. CIT(A) also erred in concluding that the Appellant was not operating rail system merely because sidings were laid from / upto the plant site. 2(c). Without prejudice to above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a quandary in suggesting two alternative methods for computing deduction us 801A on Rail System and thus was not justified in not quantifying the exact amount of deduction available to the appellant if deduction u/s 80-IA on allowance of deduction in appellate proceedings. 2(i) Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred and not justified in not deciding upon the AO's suggestion that in case the appellant was found to be eligible in appellate proceedings, adjustments on account of allocated HO expenses and CENVAT expenses were to be made while determining the claim. 166. While dealing with the same issue for the immediately preceding assessment year, and for the detailed reasons set out in paragraphs 79 to 84 earlier in this order, we have decided this issue in favour of the assessee. We see no reasons to take any other view of the matter than the view so taken for the immediately preceding assessment year, i.e. 2011-12. As a matter of fact, the orders for the said assessment year extensively rely upon, and refer to, this assessment year. Therefore, respectfully following our decision for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in agreeing with the AO in treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 801A as cost of the eligible undertakings. 4(b). Without prejudice to above, on the facts and in the circumstances of the case and in law, assuming without admitting that if it is held that CENVAT credit relating to undertakings eligible for deduction u/s 80IA is required to be reduced from the profits of the eligible undertakings, such adjustment should be made on the basis of the actual Cenvat Credit availed on Inputs and capital goods used in the undertakings eligible for deduction u/s 80IA. 4(c). Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified in agreeing with the AO's action of apportioning CENVAT credit on the basis of turnover of the undertakings eligible for deduction u/s 80IA computed in the audited accounts filed along with Form 10CCB instead of turnover of the eligible undertakings recomputed in the order u/s 143(3). 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, such allocation should be made on the basis of total cost of the respective eligible undertaking to the total cost of the appellant company instead of allocation on the basis of turnover made in the order u/s 143(3). 175. While dealing with the same issue for the immediately preceding assessment year, and for the detailed reasons set out in paragraphs 106 to 111 earlier in this order, we have decided this issue against the assessee in principle but have given some relief on the basis of allocation of expenses. We see no reasons to take any other view of the matter than the view so taken for the immediately preceding assessment year, i.e. 2011-12. As a matter of fact, the orders for the said assessment year extensively rely upon, and refer to, this assessment year. Therefore, respectfully following our decision for the assessment year 2011-12, we uphold the plea of the assessee, and direct the Assessing Officer to make necessary adjustments in the quantum of adjustments, as resulting from the revised basis of allocation. Subject to these observations, plea of the assessee is rejected. 176. Ground no. 5 is thus partly allowed in the terms indicated above. 177. In groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment is actually made, on the admissibility of deduction in accordance with the law. 182. We have no reasons to take any other view of the matter than the view so taken by us in assessee‟s own case. The grievance of the assessee is, in terms of and subject to the above observations which will apply mutatis mutandis in this assessment year as well, rejected. 183. Ground no. 7 is thus dismissed. 184. In ground no. 8, the assessee has raised the following grievance: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO/TPO in enhancing the Arm's Length Price of international transaction, being License Fee amounting to Rs. 3,46,89,411/- at 8.5% of Net Sales applying CUP Method instead of 0.30% of the Net Sales as submitted by the appellant in the absence of exact comparables. 185. So far as this grievance of the assessee is concerned, it is to be noted that during the relevant previous year, the assessee received licence fees of Rs 25,15,710 being 0.30% of the net sales from its Sri Lanka AE by the name of Holcim (Lanka) Ltd. When the arm‟s length pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, in JSW Ltd‟s case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) held that when a receipt is not in the character of income as defined under section 2(24) of the I.T. Act, 1961, then it cannot form part of the book profit u/s 115JB of the I.T. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the I.T. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit u/s 115JB of the I.T. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly. 191. Ground nos. 9 is thus allowed in the terms indicated above. 192. In ground no.10, the assessee has raised the following grievance: 10(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A)erred in not admitting additional ground raised by the Appellant that the Appellant ought to be granted the benefit of Article 10 of the India Mauritius Double Tax Avoidance Agreement on the dividends declared to Holderind Investments Ltd., Mauritius. 10(b). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not admitting additional evidences submitted by the Appellant. 10(c). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have held that the dividend declared by the Appellant should have been liable to dividend distribution tax (DDT') at the rate of 5 percent as against 16.2225 percent and the refund of excess DDT paid ought to have been allowed to the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in assessee‟s own case, we dismiss this grievance as well, and decline to interfere in the matter. 203. Ground no 2 is thus dismissed. 204. In ground no. 3, the Assessing Officer has raised the following grievance: On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the exclusion of excise duty incentive availed by the assessee, aggregating to Rs.126,32,00,487/-, as capital in nature, while computing its total income, whereas the same is in the nature of revenue incentive. 205. This is also a recurring issue and has come up for consideration before us in assessee‟s own case for several preceding assessment years. While dealing with the appeal for the assessment year 2011-12 earlier in this order, and for the detailed reasons set out in paragraphs 139 to 141 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. We see no reasons to take any other view of the matter in this assessment year. Respectfully following the view so taken in assessee‟s own case, we dismiss this grievance as well, and decline to interfere in the matter. 206. Ground no 3 is thus dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. We see no reasons to take any other view of the matter than the view so taken by us. Respectfully following the view so taken in assessee‟s own case, we dismiss this grievance as well, and decline to interfere in the matter. 215. Ground no 6 is thus dismissed. 216. In ground no. 7, the Assessing Officer has raised the following grievance: On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the assessing officer to delete the addition of unutilized CENVAT credit on last day of accounting year being 31.03.2012 to the closing stock u/s. 145A of the Act. 217. This is also a recurring issue and has come up for our consideration in a number of preceding assessment years in the assessee‟s own cases. While dealing with the appeal for the assessment year 2011-12 earlier in this order, and for the detailed reasons set out in paragraphs 153 to 155 and decisions referred to therein, we have dismissed exactly the same grievance of the assessee. The same is view of the coordinate benches in assessee‟s own cases right f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be added to the income of the assessee. We have noted that the Assessing Officer has not conducted any enquiries whatsoever, and there is nothing more than the entries being old that has been put against the assessee. In these circumstances, in our considered view, the learned CIT(A) was indeed justified in deleting the impugned addition on account of income from the cessation of liability. We approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 223. Ground no. 9 is also thus dismissed. 224. In ground no. 10, the Assessing Officer has raised the following grievance: On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the exclusion of sales tax incentive, excise duty exemption and road transport subsidy as capital in nature, while computing the total income u/s. 115JB of the Act, whereas the same are in the nature of revenue incentive. 225. As we have, for the detailed reasons set out earlier, approved the action of the CIT(A) in treating these subsidies as a capital receipt in nature, this ground of appeal is rendered infructuous and is dismissed as such. 226. Ground no. 10 is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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