TMI Blog2023 (7) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal for A.Y. 1993-94. Reduction of interest income while calculating deduction under section 80HHC - HELD THAT:-we find that the coordinate bench of the Tribunal, vide order dated [ 2023 (6) TMI 665 - ITAT MUMBAI ] , passed in assessee s own case for the assessment year 2003 04 in view of the decision of honourable Supreme Court in case of ACG Associated Capsules [ 2012 (2) TMI 101 - SUPREME COURT ] the Explanation to section 80 HHC to be applied on net interest and not on gross interest. Accordingly, we direct the AO to apply clause (baa) in respect of interest receipt by following the decision of honourable Supreme Court (supra). We accordingly direct the A.O. to exclude the excess of interest income over interest expenditure from the eligible profit of the company while computing deduction u/s 80HHC Reduction of 90% of the profit on sale of DEPB credits from the profit of the business for calculation of deduction u/s 80HHC - HELD THAT:- As we find that in Topman Exports [ 2012 (2) TMI 100 - SUPREME COURT ] held that profit on transfer of DEPB is covered under clause (iiid) of section 28 and 90% of such profit on transfer of DEPB certificate will get excluded from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax exemptions received by the assessee under all the schemes of various State Governments - Capital or revenue receipt - HELD THAT:- From the perusal of the eligibility certificate issued under the New Incentive Policy-Capital Investment Incentive (General) Scheme (1995-2000) we find that the same also mentions the total investment in fixed assets by the assessee. Therefore, we find that the sales tax exemption scheme of the Government of Gujarat is of the nature similar to the schemes considered by the coordinate bench in the earlier years, and thus, sales tax exemption received under this scheme is in the nature of capital receipt. Punjab Industrial Incentive Code under the Industrial Policy, 1996,we find that the said scheme was formulated with a view to promote growth of the industry in the State and for that purpose it provides various incentives for new industrial units that come into production or undertake expansion on or after 01/04/1996. We find that in the scheme, inter-alia, the capital subsidy is provided to the new large and medium units set up in the notified area as mentioned in Annexure-I of the scheme. We find that under the said scheme certificate of eligibil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made. As in South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT ] held that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore, no infirmity in the impugned order in deleting the disallowance made under section 14A Exclusion of sales tax and excise duty from the total turnover - HELD THAT:- We find that this issue is no longer res integra and has been decided in favour of the assessee in CIT v/s Lakshmi Machine Works [ 2007 (4) TMI 202 - SUPREME COURT ] wherein held that excise duty and sales tax component cannot form part of the total turnover for computation of deduction under section 80HHC of the Act. Thus, respectfully following the aforesaid decision, ground raised in Revenue s appeal is dismissed. Reduction of 90% of DEPB income from business profit for computing deduction under section 80HHC - HELD THAT:- We find that this issue is no longer res integra and has been decided in Topman Exports Ltd. [ 2012 (2) TMI 100 - SUPREME COURT ] wherein the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. ITA no.3439/Mum./2005 Assessee s Appeal A.Y. 2004 05 2. The brief facts of the case pertaining to the issue, as emanating from the record, are: For the year under consideration, the assessee filed its return of income on 29/10/2004, declaring a total income of Rs. 779,79,64,364. The assessee filed its revised return of income on 21/12/2004, declaring a total income of Rs. 767,94,11,530. In the revised return of income, the assessee claimed a deduction under section 80IA of the Act of Rs. 11,85,52,834, in respect of the profits of the Rail System. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as under section 142(1) of the Act were issued and served on the assessee. The assessee is engaged in the production and sales of Chemicals, Cement, and Textiles, and the production of Sponge Iron, and Viscose Staple Fibre. The Assessing Officer ( AO ), vide order dated 28/01/2005, passed under section 143(3) of the Act, assessed the total income of the assessee at Rs. 812,27,65,519, after making certain additions/disallowances to the income declared by the assessee. The learned CIT(A), vide impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 11,24,95,218/- should not be reduced from the profit of the business, while calculating allowable deduction under section 80HHC. 4.6 The CIT(A) failed to appreciate that interest, rent and miscellaneous receipts were operational income and were incidental to business. 4.7 The CIT (A) erred in not following the decisions of the Jurisdictional High Court in the cases of Bangalore Clothing Co. (260 ITR 371) and Alfa Laval India Ltd. (133 Taxman 740). 4.8 The CIT(A) erred in holding that profits from sale of DEPB credits Rs. 5.82,12,856/- are not income directly derived from exports business and erred in directing the AO to reduce 90% of DEPB credits from profits of business. 4.9 The CIT (A) ought to have held that DEPB credit is derived from exports business and shouldn't be reduced from business profits for the purpose of calculation of deduction allowable u/s. 80 HHC. 5. Appropriation of Head Office expenses 5.1 The CIT(A) erred in confirming the AO's action in apportioning Head Office expenses and reducing the amount of allowable deduction u/s. 80 0. 5.2 The CIT(A) failed to appreciate that Head Office expenses cannot be reduced fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 13/06/2023, passed in assessee s own case in Grasim Industries Ltd. v/s DCIT, in ITA No.4745/Mum./2004 and ITA No.5978/Mum./2004, for the assessment year 2003 04, dismissed similar issue while following the decision rendered in assessee s own case in preceding years. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced below: 6. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in assessee's own case in Grasim Industries Ltd. v/s ACIT, in ITA no.4753/Mum./ 2004 and ITA no.5584/Mum./2004, for the assessment year 2002-03, wherein the coordinate bench, while dismissing the similar issue, following the earlier decision rendered in assessee's own case, observed as under:- 6. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 4083/Mum./2003 dated 22.10.2014 held as under: - 2. Rival contentions have been heard and perused the record. The assessee is engaged in manufacturing and sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully following the aforesaid decision, ground no.1, raised in assessee s appeal is dismissed. 8. The issue arising in ground no.2, raised in assessee s appeal is pertaining to the disallowance on account of Club Membership fees. 9. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee paid club membership fees of Rs. 7,70,244, towards Club Membership fees to various Clubs. During the assessment proceedings, on a perusal of the details, it was observed that the amount of Rs. 4,72,350, is paid to Otters Club for obtaining Life Membership. Accordingly, the assessee was asked as to why this payment should not be treated as capital expenditure. In response thereto, the assessee submitted that the payments have been made to the club for enrolling senior officials as members for the purpose of promoting the business of the assessee company. It was further submitted that such members meet various kind of people because of which they developed business relationships benefiting the assessee company. The assessee also submitted that in commercial work, the contact with right persons is vital for efficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Diners Club and Rs. 17,350/- incurred in the Taj Hotel Membership fees for S.V. Birla disallowed by Assessing Officer on the reasoning that early hearing same is business expenditure. 16. We have heard both the parties, we find that he aforesaid issue raised in the assessment year 1993-94 is covered in favour of the assessee by the decision of the jurisdictional High Court in Otis Elevator CO. (India) Ltd., v. CIT 195 ITR 682 (Bom.). Respectfully following the same, we dismiss the ground raised by the department. 13. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in ay 1993-94 is respectfully followed, accordingly, ground raised by the assessee is allowed. 12. The learned Departmental Representative ( learned DR ) could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in the facts and law was alleged in the relevant assessment year. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, we uphold the plea of the assessee and allow the Club Membership fees paid by the assessee. 12. In the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83/Mum/2003 dated 22.10.2014 held as under: - 7. The assessee is also aggrieved for taxing of interest received from Income Tax Department amounting to Rs. 13,64,09,609/-. We find that similar issue has been dealt with by the Tribunal in A.Y. 1993-94 in ITA No. 1523/Mum/1997 vide para 62 as under;- We have heard the parties and considered the rival submissions. These refunds have been granted to the assessee in the year under consideration and therefore they would partake the character of income of the assessee. If however, any refund has been found to be not refundable to the assessee and consequently the interest granted is withdrawn the same would not partake the character of income. We accordingly direct the Assessing Officer to reduce from the taxability of the aforesaid interest granted to the assessee, the amount which has been withdrawn subsequently. We direct accordingly. 8. It was argued by the Id. A.R. that benefit of interest so allowed by the department was subsequently withdrawn as a result of the appellate orders should be given to the assessee and the interest subsequently withdrawn should not be taxed and for this, reliance was placed on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Being aggrieved, the assessee is in appeal before us. 21. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 13/06/2023, passed in assessee s own case for the assessment year 2003 04 cited supra, while deciding similar issue in favour of the assessee by following the decision rendered in the preceding year, observed as under: 21. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee s own case for the assessment year 2002 03 cited supra, by following the decision rendered in the preceding year, observed as under: 18. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - 14. The next grievance of the assessee relates to allowing dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under section 80HHC of the Act, only 90% of net interest or net rental income is to be reduced under clause (1) of Explanation (baa) to section 80HHC of the Act. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case and no change in the facts and law was alleged in the relevant assessment year. Since in the present case, it is an accepted fact that interest paid during the year is Rs. 168.41 crore, while interest received is Rs. 39.33 crore, therefore, respectfully following the judicial precedence in assessee s own case cited supra, we uphold the plea of the assessee and allow grounds no.4.2 and 4.3, raised in assessee s appeal. 22. In the present case, it is not disputed that interest paid by the assessee during the year is Rs. 153.88 crore, while interest received by the assessee is Rs. 21.56 crore. Therefore, respectfully following the judicial precedent rendered in assessee s own case cited supra, we uphold the plea of the assessee and allow the ground no. 4.2 and 4.3, raised in assessee s appeal. 23. The issue arising in grounds no.4.4, raised in assessee s appeal, is pertaining to the reduction of ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plea of the assessee and allow ground no.4.4, raised in assessee s appeal. 26. In the present case, upon perusal of the audited financial statements forming part of the paper book on Pages 75 76, we find that the assessee paid total rent of Rs. 8.39 crore, while it received a total rental income of Rs. 5.55 crore. Therefore, following the aforesaid decision rendered in assessee s own case, we uphold the plea of the assessee and allow ground no.4.4, raised in assessee s appeal. 27. The issue arising in grounds no.4.5, 4.6, and 4.7, raised in assessee s appeal is pertaining to the reduction of miscellaneous receipts from the profits of business while calculating the deduction under section 80HHC of the Act. 28. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the assessment proceedings, the assessee submitted that the miscellaneous receipts of Rs. 11,24,95,218, should not be reduced from the profit of the business for computing deduction under section 80HHC of the Act. 29. The AO, vide assessment order, passed under section 143(3) of the Act, did not agree with the submissions of the assessee and reduced 90% of the misc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Power Divn Bhiwani 10,776 15. Elegant 11,31,001 16. Vikram Cement 2,85,91,311 17. Aditya Cement 85,42,247 18. Grasim Cement 11,80,249 19. Rajashree Cement 3,45,675 20. Cement South 47,05,613 21. Dharani Cement 1,76,495 22. BGU 8,42,171 23. Cement Marketing East 70,42,133 24. Cement Marketing West 30,75,557 25. Cement Marketing North 4,20,958 26. Cement Marketing South 13,50,989 27. RM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the Hon ble jurisdictional High Court held that contract of insurance is a contract of indemnity and the indemnification stand on the same footing as the income that would have been realised by the assessee of the sale of the stock in trade. Accordingly, the Hon ble Court held that the insurance claim on account of the stock in trade does not constitute an independent income or receipt of the nature similar to brokerage, commission, interest, rent, or charges and thus would not be subjected to deduction of 90% under clause (1) of Explanation (baa). Statement of Misc. Receipts Sr. no. Units Amount (Rs.) 1. Rebate on sales tax 1.69 crore 2. Refund of Mineral Area Development Cess 2.83 crore 3. Sundry balances written back 52.36 lakh 4. Scrap sales 18.56 lakh 5. Sale of empty cement bag, plastic barrel, scrap barrel, waste oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny merit in the argument advanced on behalf of the Department. In this case, we are concerned with profits from business of exports of goods manufactured by the assessee. Therefore, the export profits were required to be computed in the ratio of export turnover to total turnover as contemplated by the above formula. Explanation (baa) was introduced into the Act by Finance (No. 2) Act, 1991 with effect from 1-4-1992. Under the Circular of CBDT bearing No. 621 dated 19-12-1991, it has been stated that the above formula gave distorted figure of export profits when receipts like interest, commission etc. which do not have element of turnover are included by the assessee in profit and loss account. Therefore, Explanation (baa) came to be introduced. Under that Explanation, profits of business, for the purposes of section 80HHC, does not include receipts which do not have element of turnover like rent, commission, interest etc. However, as some expenditure might be incurred in earning such incomes an ad hoc 10% deduction from such incomes is provided to account for those expenses. However, the learned counsel for the Department cannot invoke Explanation (baa) in every matter involving re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the purpose and the object of that Explanation. In the present case, the receipt in question is labour charges. However, this nomenclature may not be accurate. In the present case, the assessee is a manufacturer and exporter of garments. In the present case, the Tribunal has recorded a finding of fact which is not challenged, namely, that there was no difference between the activities relating to export business carried on by the assessee and the processes carried on for manufacturing garments for others under job-work contracts. The Tribunal has further found, on facts, that the activity of labour job involved use of machinery, labour and material which were also forming part of the activity of manufacturing garments for its own sales. The Tribunal further found that there was no difference between manufacturing of garments for the assessee's own sales and manufacturing of garments for others on labour job basis. These are findings of fact. They have not been challenged in the Memo of Appeal. The Memo of Appeal proceeds only on the basis that because the receipt is by way of labour charges, Explanation (baa) stood attracted. As stated above, each case will have to be exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of the AO for de novo adjudication. We further direct that if upon examination it is found that the receipt is having an element of turnover or arises out of the business operation of the assessee then the same cannot be excluded from the profit of the business for the purpose of computing deduction under section 80HHC of the Act. During the hearing, the learned Sr. Counsel also submitted that the net miscellaneous expenses incurred by the assessee is Rs. 70.34 crore, while miscellaneous income is Rs. 11.48 crore and therefore applying the ratio laid down by the Hon ble Supreme Court in ACG Associated Capsules Pvt. Ltd. (supra), only the net amount can be added. As noted above, under the broad head ‗Miscellaneous Receipt the assessee has received income of varied nature. Therefore, we deem it appropriate to remand this aspect also to the file of the AO for de novo adjudication after necessary examination. If upon examination it is found that the miscellaneous expenses incurred by the assessee are of a similar nature as business income earned, then relief be granted to the assessee in light of the decision in ACG Associated Capsules Pvt. Ltd. (supra). As a result, g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. Amount received towards plane landing charges 4,000 20. Earnest money forfeited 25,000 21. Liquidated damages 5,960,247 22. Commission on recurring deposit post office 58,006 23. Cost of packing of durable tonner (829,388) 24. Toner rent maintenance (333,447) 25. Recovered towards vehicle charges 79,104 26. Commission on Savings CTD Scheme 7,118 27. Toners Hydraulic testing paint recovery 442,350 28. Rebate on franking machine 1,600 29. State environment award from MP Housinf Environment Dept. 75,000 30. Provision wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. During the hearing, the assessee provided the following details of these receipts: Particulars Amount 1. Subsidy Rs. 52.74 lakh 2. Scrap sales Rs. 39.47 lakh 3. Sundry balances written back Rs. 30.57 lakh 4. Provision written back Rs. 19.81 lakh 5. Liquidated damages Rs. 59.60 lakh 6. Deposit forfeited Rs. 9.09 lakh 7. Hire charges Rs. 43.53 lakh 8. Bad debts recovered Rs. 74.93 lakh 9. Other miscellaneous income Rs. 4.89 crore 10. Net miscellaneous expenses incurred Rs. 49.67 crore 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such profit on transfer of DEPB certificate will get excluded from profits of the business , while calculating the deduction under section 80HHC of the Act. Since the learned CIT(A) has already directed the AO to reduce only 90% of such income for calculating the deduction under section 80HHC of the Act, therefore, in view of the aforesaid decision we find no infirmity in the aforesaid direction of the learned CIT(A). Accordingly, grounds no.4.8 and 4.9 raised in assessee s appeal are decided in light of the decision of the Hon ble Supreme Court. 38. The issue arising in grounds no.5.1 and 5.2, raised in assessee s appeal is pertaining to allocation of Head Office expenses and reducing the same from deduction under section 80 O of the Act. 39. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee has claimed a deduction of Rs. 2,38,533, under section 80 O of the Act. The total turnover of the ED D unit for the previous year was Rs. 27.15 crore. Therefore, the AO, vide assessment order passed under section 143(3) of the Act, allocated the Head Office expenses of Rs. 7,05,900 (being 0.26% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.1 On a similar issue the Tribunal in assessee s own case in AY 1994-95(supra) in paragraphs 25 to 25.2 has held as follows:- 25. In grounds of appeal No. 32 to 35, the assessee has challenged the order of the CIT(A) in allocating head office expenses and thereby reducing the quantum of deduction available to the assessee under the following provisions: Section Rs. 8OHH 14,20,000 801 5,54,600 80M 7,50,000 80-0 3,50,000 30,74,600 25.1 Facts of the case, in brief, are that the AO estimated the expenses and allocated head office expense to the various units which had claimed benefits u/s. 8OHH,801, 80M and 80-0 of the Act. Since the nexus between the head office and the individual units cannot be denied and since the assessee did not give details so as to give better allocation of these expenses to various units, the CIT(A) upheld the action of the AO. Aggrieved with such order of the CIT(A), the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as ground no.5.3 is concerned, keeping in view our aforesaid decision in respect of grounds no.5.1 and 5.2, the issue arising in ground no.5.3, raised in assessee s appeal becomes infructuous and hence, kept open. 44. The issue arising in grounds no. 6.1 and 6.2, raised in assessee s appeal, is pertaining to the exclusion of miscellaneous receipts from business profits while computing deduction under section 80-IA of the Act. 45. The brief facts of the case pertaining to this issue, as emanating from the record, are: The AO, vide assessment order passed under section 143(3) of the Act, held that the miscellaneous receipts are not derived from industrial undertaking and thus, the assessee is not entitled to deduction under section 80-IA of the Act on such receipts. 46. The learned CIT(A), vide impugned order, noted that the AO has not discussed this issue in the assessment order and has also not given the reason for excluding the miscellaneous receipts from the profit of eligible business for computing deduction under section 80-IA of the Act. The learned CIT(A) noted that under the miscellaneous receipts, the assessee has shown the income out of interest receipts, access ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions of both sides and perused the material available on record. In the year under consideration, the assessee included miscellaneous receipts of Rs.10,10,73,313 for the purpose of computation of deduction under section 80 IA of the Act. As per the details of miscellaneous receipts, provided on page 135 of the paper book, these receipts include interest, excess/short provision, prior period adjustments, rent, miscellaneous receipts, job charges, exchange rate difference, export incentive, profit on the sale of DEPB license, notice pay and sludge sales. As per the assessee, all these receipts are directly connected with and derived from the eligible business, and therefore, should be considered for computation of deduction under section 80-IA of the Act. As is evident from the record, the learned CIT(A) only examined the receipts from job charges and excess provisions written back and considered the same to be business profits for computing deduction under section 80-IA of the Act. While, the other receipts, as noted above, under the broad category of 'miscellaneous receipts' were not examined by any of the lower authorities to determine whether they are derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Government cannot give subsidy in cash due to recourse constraints, subsidy has been granted by allowing the assessee to retain the sales tax payable to the State Government. 4. A note stating brief description of the various schemes is attached and a copy of the Schemes and eligibility certificates is also enclosed. A perusal of the Scheme and the purpose for which it was framed by the State shows that the incentive was given for bringing about necessary infrastructure in processing / developing the backward / notified area and thus the incentive is in the capital field and therefore cannot be taxed as revenue receipt. The incentive is based on the amount of investment in fixed assets. It is to induce or motivate the businessman to move and take a risk. 5. The assessee company is liable to pay sales tax on sale of finished goods and purchase of raw material and other inputs as per the applicable sales tax law of the State. However, in accordance with the Scheme, the assessee has been allowed to retain the same subsidy. The assessee is required to file returns with the concerned authorities, which work out the notional liability of sales tax and complete the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 117.45 8. Amount of sales tax subsidy for the previous year are as per return filed by the assessee company with the respective state/sales tax authorities and may change on completion of assessment. 52. The AO, vide assessment order passed under section 143(3) of the Act, held that the State Governments have not given any amount of subsidy either in cash or in-kind to the assessee. It was further held that the object of the government is to grant sales tax exemption to increase sales and not the capital investment in the state. It was further held that under the scheme, the assessee is not required to pay the amount of sales tax and there cannot be any question of receiving the subsidy. Therefore, the AO rejected the claim of the assessee and held that the sales tax exemption received by the assessee is revenue in nature and therefore is part of the taxable profit of the business. 53. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 54. We have considered the submissions of both sides and perused the material available on record. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 already fixed under the respective schemes. Though the quantification of the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the form of subsidy / incentive for meeting the working capital requirements of the assessee company post commencement of business. Hence, by applying the purpose test, apparently, the subsidy / incentive received in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Canadian case St. John Dry Dock Ship Building Co. Ltd. v. Minister of National Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co. 's case (supra). In that case it was held that where subsidies were given under statutory authority, the statutory purpose for which they are authorised is relevant and may even be decisive in determining whether it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the coordinate bench in the earlier years, and thus, sales tax exemption received under this scheme is in the nature of capital receipt. 58. Similarly, as regards the Sales Tax Incentive Scheme (Incentives offered by the Government of Gujarat under the New Incentive Policy-Capital Investment Incentive (General) Scheme-1995-2000), forming part of the paper book from pages 553-575, we find that the said scheme was to accelerate the development of the backward areas of the State and to create large-scale employment opportunities. Further, under the said scheme, it was also stressed that the need is to increase the total flow of investment to the industrial sector with the proper development of infrastructure and human resources to sustain long-term growth and achieve sustainable development. From the perusal of the eligibility certificate issued under the aforesaid scheme, forming part of the paper book on page 577, we find that the same also mentions the total investment in fixed assets by the assessee. Therefore, in view of the above, we find that the sales tax exemption scheme of the Government of Gujarat is of the nature similar to the schemes considered by the coordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon ble Supreme Court in NTPC Ltd vs CIT: [1998] 229 ITR 383 (SC). We find that the coordinate bench of the Tribunal in assessee s own case for the assessment year 2003-04, vide order dated 13/06/2023 cited supra decided a similar issue in favour of the assessee following the decision rendered in preceding years. The relevant findings of the coordinate bench, in the aforesaid decision, are as under:- 57 Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon ble Supreme Court in NTPC Ltd vs CIT: [1998] 229 ITR 383 (SC). Having heard the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee s own case in Grasim Industries Ltd (supra), vide order dated 14/12/2021, for the assessment year 2002-03, decided the similar issue in favour of the assessee, following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack Company, a company incorporated and registered in Egypt (U.A.R.) was not taxable in India. 65. The issue arising in the aforesaid additional ground of appeal is pertaining to the taxability of dividend received from Egyptian company. Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon ble Supreme Court in NTPC Ltd. (supra). During the year under consideration, the assessee received Rs. 1,16,24,021 as a dividend from M/s Alexandria Carbon Black Company S.A.E., a company incorporated and registered under the laws of Egypt (U.A.R.). It is the plea of the assessee that the aforesaid dividend received from the Egyptian company is not taxable in India. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in assessee s own case in assessment year 2003-04. Vide order dated 13/06/2023 cited supra, the coordinate bench observed as under:- 65. Having considered the submissions of both sides, we find that as per Article 11(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther contracting State that is country of source then country of resident i.e., India is precluded from including the same income in India; Thirdly, the Hon ble Supreme Court in Azadi Bachao Andolan (supra), has approved the reasoning of R.M. Muthaiah (supra) in an entirely different context, therefore, it cannot be held that the Hon ble Supreme Court has carved out any express law on the phraseology of may be taxed ; Fourthly, in P.V.A.L. Kulandagan Chettiar (supra s) the Hon ble Supreme Court has specifically refrained from giving any such interpretation of may be taxed and affirmed the decision of High Court on a different reasoning and grounds. Thus, this decision does not carve out any express law on the phrase may be taxed ; and Lastly, the Hon ble Supreme Court in Turquoise Investments Finance Ltd. (supra) has not only confirmed the decision of R.M. Muthaiah (supra) but also decision of the M.P. High Court, wherein extensively reliance was placed on the decision of S.R.M. Firm (supra). Thus, this decision of the Hon ble Supreme Court in a way has confirmed the entire reasoning of the S.R.M. Firm (supra) which, in our opinion, is slightly different fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf . In exercise of the powers so vested in the Central Government, vide notification no. 91 of 2008 dated 28th August 2008, it was notified as follows: In exercise of the powers conferred by sub-section (3) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief of tax, or as the case may be, avoidance of double taxation, provides that any income of a resident of India may be taxed in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. 11. The effect of Hon'ble Supreme Court's judgment in Kulandagan Chettiar's case (supra) thus was clearly overruled by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production cost of the advertisement films as a revenue expenditure by relying upon his earlier orders for the AYrs. 2002-03 and 2003-04 without appreciating that the department has not accepted the orders by filing appeal with the ITAT. 5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 1,95,057/- as incurred towards earning of exempt dividend income by relying upon his decision for earlier years without appreciating that the same have not been accepted by the department by filing an appeal with the ITAT. 6. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO not to reduce the claim of deduction u/s.80-IA by relying upon his earlier orders on the issue for AYrs. 1996-97 to 2003-04 without appreciating that the department had not accepted the same by filing an appeal to the ITAT. 7. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to exclude excise duty and sales-tax from the total turnover for the computing of deduction u/s.80HHC by relying on the jurisdictional High Court's decision in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A), vide impugned order, following judicial precedent in assessee s own case deleted the aforesaid disallowance made by the AO. Being aggrieved, the Revenue is in appeal before us. 73. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 13/06/2023, passed in assessee s own case for the assessment year 2003 04 cited supra, while deciding similar issue in favour of the assessee by following the decision rendered in the preceding year, observed as under: 73. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench, vide order dated 14/12/2021, passed in assessee s own case for the assessment year 2002 03, while following the decision rendered in the preceding year, decided the similar issue in favour of the assessee, by observing as under: 48. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration, the assessee made 24 contributions amounting to Rs. 18,61,084, to various local organizations located in and around the areas where the plants/offices of the assessee company are situated. During the assessment proceedings, the assessee submitted that such contributions are not in the nature of charity but are made purely for business consideration. It was further submitted that such contributions are necessary for maintaining a good relationship and to earn the goodwill of the local population which ensures the smooth working of the factories and, therefore, should be allowed as business expenditure. The A.O., vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that such contributions are essential in the nature of donations and since a specific provision already exists in the Act to take care and govern the allowability of payments made in the nature of donations, only such payments which satisfies the conditions laid down under section 80G of the Act can be allowed as deduction. Accordingly, the AO held that these contributions do not satisfy those conditions and, therefore, are not eligible for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision, we sustain the order passed by the Ld.CIT(A) and dismiss the Ground No. 2 raised by the revenue. We order accordingly. 79. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case and no change in facts and law was alleged in relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee s own case cited supra, ground no.2, raised in Revenue s appeal is dismissed. 79. In the present appeal, the learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent rendered in assessee s own case cited supra, grounds no.2, raised in Revenue s appeal is dismissed. 80. The issue arising in ground no.3, raised in Revenue s appeal is pertaining to the deletion of disallowance on account of rural development expenses. 81. The brief facts of the case pertaining to the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue at page 4-5, para 11 of his order. We found that the issue has been decided by the Tribunal in assessee s own case in its favour in assessment years 1998-99, 1999-00 2000-01. We further found that the Department on this ground is not in appeal before the Hon ble High Court in these years. Respectfully following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) for deleting the rural development expenses amounting to Rs. 66,08,937/-. 61. Respectfully following the above decision, we sustain the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly. 84. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case and no change in facts and law was alleged in the relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee s own case cited supra, ground no.3, raised in Revenue s appeal is dismissed. 85. In the present appeal, the learned DR could not show us any reason to deviate from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - 47. The issue in ground No. 13 with regard to deleting the disallowance of expenses incurred for making advertisement films has been dealt with by the A.O. at page 15-16, para 26. The ld. CIT(A) deleted the same after having observed at page 12-13, para 21 of his order. We found that the issue has already been settled by the Tribunal in assessee s own case in A.Y. 1976-77 and no ground was taken by the Department before the Hon ble High Court. Similar issue has been decided by the Hon ble Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC). Accordingly, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company. 95. Respectfully following the above decision, we do not find any reason to interfere with the order of the Ld.CIT(A) and dismiss the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year. Therefore, it is sufficiently evident that during the year under consideration, the assessee's own funds are more than investments, including the investments for earning exempt income. We including the investments find that the Hon'ble Jurisdictional High Court in CIT vs HDFC Bank Ltd., [2014] 366 ITR 505 (Bom.) held that where assessee's own funds and other non-interest bearing funds were more than the investment in tax-free securities, no disallowance under section 14A of the Act can be made. We further find that the Hon'ble Supreme Court in South Indian Bank Ltd. vs CIT, [2021] 438 ITR 001 (SC) held that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore, respectfully following the law laid down by the Hon'ble Supreme Court and the Hon'ble jurisdictional High Court in cases cited supra, we find no infirmity in the impugned order in deleting the disallowance made under section 14A. Accordingly, ground no.5, raised in Revenue s appeal is dismissed. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 15-16, para 23.5 23.6. We found that the issue has been decided by the Tribunal in assessee s own case in its favour in assessment years 1994-95 to 1998-99 and the Department is not in appeal against the order of the Tribunal. Respectfully following the order of the Tribunal, we do not find any reason to interfere with the order of ld. CIT(A) on this issue.. 110. Respectfully following the above decision, we do not find any reason to interfere with the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly. 110. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case and no change in facts and law was alleged in relevant assessment year. This issue has been decided in favour of the assessee in the preceding years also. Therefore, respectfully following the judicial precedent in assessee s own case cited supra, ground no.9, raised in Revenue s appeal is dismissed. 99. In the present appeal, the learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee s own case. This issue is recurring in nature and has been decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no.10CCB, along with the return of income. The AO found that the claim of the Rail System, Hotgi, is on the line of claim in respect of Rail system, Raipur, which was rejected for the assessment year 2003 04. Accordingly, the AO rejected the claim of deduction under section 80IA of the Act in respect of Rail System, Hotgi. 106. The learned CIT(A), vide impugned order, following the decision of its predecessor in office in the assessment year 2003 04, deleted the disallowance made by the AO under section 80IA of the Act in respect of Rail System, Raipur, and Hotgi. Being aggrieved, the Revenue is in appeal before us. 107. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 13/06/2023, passed in assessee s own case for the assessment year 2003 04 cited supra, while deciding similar claim in favour of the assessee in respect of Rail System at Raipur, observed as under: 122. We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee has a cement plant in Raipur District. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes a situation where goods or services are transferred by an eligible undertaking to non eligible undertaking and vice versa. In such cases, deduction is to be allowed based on the market value of such goods or services. It was submitted that Section Itself envisages situation of captive consumption. Reliance was placed 59 ITR 514(Gui.) Anil Starch Ltd. vs CIT. 254 ITR 187(Bom.) CIT vs. Win Laboratories Pvt Ltd and 48 ITR 123(SC) Tata Iron Steel Co. Ltd. vs State of Bihar. 16.6 Further, it was submitted that the facility of Rail System consists of all that is required to carry on the railway activity in an organised and systematic manner. The activity of Rail System is real and substantial and it is carried on with a said purpose, namely, 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. The profits derived from the Rail System are clearly arising out of the business of developing, operating and maintaining the Rail System. 16.7 The appellant submitted that substantial investment has been made in setting up the Rail System. All the assets are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount. 6.12 The appellant submitted that the number of employees directly employed in the eligible business is not relevant at all. There is an agreement with the railway authority for operation and maintenance of the Rail System and under the said agreement, the operations and maintenance is to be carried out by the railways and the appellant bears the cost of the employees deputed by the railway authorities for this purpose. It is settled position that in order to compute the number of workers, casual and other workers appointed through the contractors have to be taken into consideration. The number of employees, including appointed through the railway authorities, would far exceed 10. The appellant relied 152 ITR 152(Kar.), K.G. Yediyurappa Co, and 99 Taxmann 229 Vikshana Tdg Investment Pvt Ltd. In any case, the condition of employing a minumum of 10 workers is not applicable to an infrastructure enterprise. 16.13 The appellant argued that the AO's allegations that it has no control over the operations of the Rail system, is baseless and without merits. Merely because the workers are deputed by the railway under the operations and maintenance agreement, does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned DR were not the basis for disallowance under section 80-IA of the Act. In this regard, the following observations of the Special Bench of the Tribunal in Mahindra and Mahindra Ltd vs DCIT, [2009] 30 SOT 374 (Mumbai) (SB), becomes relevant:- In our considered opinion the learned Departmental Representative has no jurisdiction to go beyond the order passed by the Assessing Officer. He cannot raise any point different from that considered by the Assessing Officer or CIT(A). His scope of arguments is confined to supporting or defending the impugned order. He cannot set up an altogether different case. If the learned DR is allowed to take up a new contention de hors the view taken by the Assessing Officer that would mean the learned A.R. stepping into the shoes of the CIT exercising jurisdiction under section 263. We, therefore, do not permit the learned DR to transgress the boundaries of his arguments. 125. Therefore, on this preliminary basis only, as noted by the Special Bench of the Tribunal in the aforesaid decision, the contention of the learned DR is rejected. Even otherwise, it is an accepted position that the assessee did not make any claim in the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar submissions, as were made in the preceding assessment year. The learned DR reiterated that the operations commenced prior to entering of the agreement by the assessee with the concerned Railway Authorities. We find that the coordinate bench of the Tribunal in the preceding year duly considered similar arguments of the learned DR and found no merits in the same. We also find that as per section 80IA(4) of the Act, one of the conditions for applicability of the section is that there has to be an agreement entered with the other Statutory Body for developing or operating and maintaining or developing, operating and maintaining a new infrastructure facilities. No material has been brought on record to show that such an agreement does not exist in the present case and the only plea raised by the learned DR is that such an agreement is post the commencement of operation and, therefore, the assessee does not satisfy the conditions as provided in section 80IA(4) of the Act for availing the benefit of the said section. However, we find that the language of the section does not support the submissions so made by the learned DR, as there is no specific requirement in the section that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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