TMI Blog2023 (2) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... erest-free funds generated or available with the assessee if the interest-free funds were sufficient to meet the investments. Ground of appeal filed by Assessee is allowed. Addition of different unutilised CENVAT credit u/s 145A - HELD THAT:- , Coordinate bench held in the case of Mahindra Mahindra Ltd. [ 2020 (2) TMI 62 - ITAT MUMBA ] the amount of the unutilized Cenvat credit could not have been directly added to the closing stock. The Tribunal has not committed any error. (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. [ 2003 (1) TMI 8 - SUPREME COURT ] and followed by case of Diamond Dye Chem Ltd. [ 2017 (7) TMI 616 - BOMBAY HIGH COURT ], we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made. Ground of appeal filed by Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA for various reasons and there is nothing on record to prove that said company was not entitled for deduction in respect of 80IA on such power plant. On the other hand, claim of deduction u/s 80IA made by assessee is emanating from notes forming part of return of income for A.Y. 1999-2000 and not disputed by Assessing Officer in assessment proceedings hence there is no reason for not allowing deduction u/s 80IA for TG-2 Wadi. The Hon ble Bombay High court in the case of Simple Food Products (P.) Ltd. [ 2017 (8) TMI 646 - BOMBAY HIGH COURT ] has held that if deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. In view of holistic discussion made herein above, assessee is entitled to deduction u/s 80IA on TG-2 and TG-3, Wadi unit. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee s appeal is allowed. Apportionment of the indirect Head Office expenses while computing deduction u/s.80IA/80IB - HELD THAT:- AO is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok profit under the provisions of section 115JB? - above benefit to the assessee was denied by the Finance Act 2011 with retrospective effect 01-04-2005 - HELD THAT:- As decided in Torrent Pharmaceuticals Limited [ 2022 (3) TMI 340 - ITAT AHMEDABAD ] Admittedly, at the time of filing the return of income the assessee was entitled for the benefit as discussed above. But on a later date there was an amendment by the finance Act 2011 which denied the benefit to the assessee with retrospective effect. The Hon'ble Supreme Court in the case of Star India Pvt. Ltd vs. Commissioner of Central Excise [ 2005 (3) TMI 10 - SUPREME COURT ] has held that the benefit granted under the statute to the assessee cannot be withdrawn by way of retrospective amendment. Any amendment denying the benefit to the assessee cannot be brought under the statute with retrospective effect. Exclusion of amount withdrawn from share premium account while computing book profit u/s 115JB - HELD THAT:- We confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit loss account was correctly reduced from Book Profits by the Assessee while computing book profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating present appeal. Further, the Ld. AR of the Assessee has vehemently relied upon decision of coordinate bench in the case of Ambuja Cement Limited, holding company of Assessee for AY 2005-06 to 2012-13 and same are summarised herein below: - SR No ITA No Date of order 1 5883/Mum/2012 5927/Mum/2012 for AY. 2005-06 30/10/2022 2 2848/Mum/2013 and 2366/Mum/2013 for AY 2006-07 03/11/2022 3 6375/Mum/2013 6405/Mum/2013 for AY 2007-08 07/11/2022 4 2968/Mum/2015 3307/Mum/2015 for AY 2008-09, 1665/Mum/2019 2428/Mum/2019 for AY 2009-10 07/11/2022 5 2384/Mum/2019 for AY 2010-11, 3475/Mum/2018 for AY 2011-12 1241/Mum/2018 for AY 2012-13 07/11/2022 6 2384/Mum/2019 2958/Mum/2019 for AY 2010-11, 3843/Mum/2019 3475/Mum/2019 for AY 2011-12, 1241/Mum/2018 1889/Mum/2018 for 2012-13 07/11/2022 ITA 3786/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of interest @10% on above figure of ₹.153 crores and made disallowance at ₹.15.30 crores. 7. In appeal Ld.CIT(A) has discussed the above issue at Para No.5.4 and 5.5. of his order and held as under: 5.4 I have carefully considered the submission Under Sec. 14A(1), no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not fall part of the total income under Income Tax Act. Under Section-14A(2), if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to exempted income, he will determine the amount of expenditure incurred in relation to the exempted income, in accordance with the prescribed method. The prescribed method referred here is Rule 8D. There is no direct expenditure specifically incurred to earn the exempted income. Under Rule8D(2)(ii), the interest expenditure which is not directly attributable to any particular income or receipt is to be computed. 5.5 I have carefully considered the Ld. AR s submission that sufficient interest free own funds are available and that the investments generating exempted divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Williamson Financial Services Limited, (ITA No 154 to 156/Gau/2019), ITAT Gauhati Bench in which it was held that rule 8D is applicable retrospectively. Hence she contended that the observation of Assessing Officer is proper and prayed that order of Assessing Officer may be restored. 11. Considered the rival submissions and material placed on record. It is observed that Assessing Officer has not made disallowance u/s 14A applying rule 8D as it was not in statute in the year under consideration. The Assessing Officer has made proportionate disallowance of interest as per formula mentioned in Para No. 4.2 of Assessment Order. It is observed that Assessee has sufficient own funds in form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court held in the case of South Indian Bank Ltd[2021] 130 taxmann.com 178 as under: Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assessee-scheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court and Hon'ble Jurisdictional High Court referred supra, disallowance u/s 14A made by Assessing Officer is accordingly deleted. Thus, ground of appeal no. 1 in departmental appeal is dismissed and ground of appeal filed by Assessee is allowed. 14. In the Ground No 2, Department has raised the following grievance: On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of different unutilised CENVAT credit of ₹.16,93,37,435/- without appreciating the fact that the Assessing Officer has rightly made the said addition by invoking the provision of Sec. 145A of the Act. 15. The Assessing Officer has dealt with the issue at Para No. 5 to 5.3 of Assessment Order. The Assessing Officer has observed that Assessee has following exclusive method of accounting and unutilised CENVAT credit on closing stock of raw material and stores is ₹.16,93,37,435/- which is required to be added back to total income of assessee considering provisions of Section 145A of the Act. 16. In appeal Ld.CIT(A) has discussed the above issue at Para No. 6.4 and 6.5. of his order and held as under: 6.4 I have carefully conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 130 Taxman 179/261 ITR 275 held that the unutilised credit cannot be directly added to the income of the assessee. The relevant para of the said decision is reproduced hereunder: 5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. 6. Considering the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 7.3 As I find the issue is squarely covered by the decision of the Bombay High Court in the case of Otis Elevator Co. Ltd. vs. CIT reported at 195 ITR 682. This issue has also been decided in favour of the Assessee by the ITAT and my predecessors in the earlier years. Following such decisions, the addition made by the Assessing Officer is deleted . 23. Aggrieved with the above observation of Ld.CIT(A), Revenue has filed this appeal. During the course of appellate proceedings, Ld. AR of the assessee has relied upon finding of Ld.CIT(A) and contended that identical issue is also decided in its favour in A.Y. 1987-88 to 1991-92 and also in A.Y. 2004-05, whereas Ld.DR has relied upon finding of Assessing Officer and contended that observation of Assessing Officer may be restored. 24. Considered the rival submissions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench assessee s own case for A.Y. 2004-05 in ITA No 5259/Mum/2027 dated 27/05/2022 wherein it is held as under: 3. We have heard the rival contentions and perused the material on record. We note that the Tribunal has decided iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31/10/2022 has dismissed revenue s appeal. Respectfully following the above said decisions as discussed herein above, this ground in Departmental Appeal is dismissed. 26. In the Ground No 4, Department has raised the following grievance: On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of ₹.1,50,42,422/- holding that the amount received on sale of TDR is a capital receipt. 27. During the course of appellate proceedings, Ld.AR of the assessee has admitted that it is capital receipt and Ld. DR has relied on the findings of Assessing Officer. Considering the above, addition made by Assessing Officer for ₹.1,50,42,422/- is sustained and this ground of appeal in departmental appeal is allowed. 28. In the Ground No 5, Department has raised the following grievance: On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition made by the Assessing Officer on account of sales tax subsidy under the normal provisions and u/s.115JB of the Act, relying on the order of his predecessor without appreciating the new fact brought out by the Assessing Officer in the impugned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer may be restored. On the other hand, the Ld. AR has relied upon finding of Ld.CIT(A) and argued that each scheme of sales tax was considered by Ld.CIT(A) in appellate proceedings and issue is decided in assessee s favour. It was also explained that relevant decisions for various courts, each scheme was also provided during the course of appellate proceedings, The Ld.AR of the assessee has also referred to decision of Coordinate bench in its own case for A.Y. 2003-04 wherein identical issue was decided in favour of the assessee. The Ld. AR has also relied upon decision of coordinate bench in the case of Ambuja Cement Limited (referred supra) for A.Y. 2005-06 to 2011-12 wherein sales tax incentives received by assessee for various units set up in different states and availed different incentive schemes as capital receipts. The Ld. AR has also relied upon decisions of various ITAT as well as High court for various different schemes wherein sales tax incentives are treated as capital receipts. 32. Considered the rival submissions and material placed on record. On this issue, coordinate bench in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 5927/Mum/2012 (A.Y.2005- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,12,796, in respect of Punjab and Maharashtra Schemes, are indeed capital receipts in nature, and exempt from tax as such, the amounts aggregating to Rs 39,36,21,956 are revenue in nature, and to that extent the Assessing Officer was justified in including the same in taxable income. None of the parties is satisfied. While the assessee is aggrieved of the amount of Rs 39,36,21,956 being included in his taxable income, the Assessing Officer is aggrieved of the learned CIT(A) s granting relief of Rs 130,57,12,796. Both parties are in appeal before us. 6. We have heard the rival contentions, perused the material on record, and duly considered the facts of the case in the light of the applicable legal position. 7. We find that the learned CIT(A) has, in his elaborate analysis, primarily followed the Special Bench decision in the case of DCIT Vs Reliance Industries Ltd [(2004) 88 ITD SB 273 (Mum)]. Upon analysis of this decision, he has noted that for deciding the nature of subsidy, whether capital or revenue, what should be seen and examined is the purpose for which the subsidy has been given, and not the timing of the subsidy or the manner in which it has been given to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that in view of the decision of the Calcutta and Punjab High Court, the Tribunal has committed an error in reversing the view taken by CIT (Appeals) so far as Tax Appeal No.226 of 2010 is concerned, wherein the CIT (A), after discussing the evidence has held in favour of the department. In this regard, he has relied upon the decision of High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2010] 8 taxmann.com 218/[2011] 339 ITR 632, wherein it is held that object of subsidy being to set up new units in backward area is a capital receipt and another decision of High Court of Calcutta in the case of CIT v. Chhindwara Fuels [2001] 114 Taxman 707/[2000] 245 ITR 9, wherein it is held that subsidy in the form of refund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr. Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discussed the issue in detail in para 54 and 55 of its decision, which reads as under:- 54. Per contra, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions which are sought to be relied upon by learned advocate for the appellant are not applicable in the facts of the present case. In the case of Birla VXL Ltd. (supra), this Court has observed as under:- '12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-today functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry. 13. In a recent decision dated 28th January 2013 in Tax Appeal No. 450 of 2012 and connected appeals, we had an occasion to examine the nature of incentives received by the assessee from the State Government in the form of entertaining tax waiver for setting up multiplexes. In such context, we had in wake of the revenues contention that the receipt was revenue in nature, held and observed as under : From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was related to percentage of fixed capital investment. 8. 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 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. 11. He also submitted that in view of above decisions, these appeals may not be ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 ITR 392, wherein the incentive conferred under that scheme were two fold. First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon ble Supreme Court in para 14 of its decision had held that character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. In fact, the Hon ble Supreme Court while rendering this decision had duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd., reported in 228 ITR 253 and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case. In this regard, it would be relevant to reproduce the operative portion of the decision of Hon ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., as under:- 14. The second case is Lincolnshire Sugar Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational subsidy'. 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies. 5.3.6. Yet another decision was rendered by Hon ble Supreme Court in the case of CIT vs. Chapalkar Brothers reported in 400 ITR 279 which held that where the object of respective subsidy schemes of State Government was to encourage development of multiple theatre complexes, incentives would be held to be capital in nature and not revenue receipts. The relevant operative portion of the judgment is reproduced hereunder:- 18. After discussing the judgment in Sahney Steel Press Works Ltd.'s case (supra) this Court then held: The importance of the judgment of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is 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 centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case also, the Revenue had taken a specific argument that since subsidy would be received only once unit goes for production, subsidy would be revenue nature. The Hon ble Gujarat High Court referred to the relevant subsidy scheme noted that concession was capped @125% of fixed capital investment and could be availed within 9 years. The Hon ble Gujarat High Court after considering the decision of Hon ble Supreme Court both in the case of Sahney Steel and Press Works Ltd., and Ponni Sugars and Chemicals referred to supra had held as under:- 7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. This clearly comes out from various provisions of the scheme. For example, the scheme was applicable only to the new project or to a existing project provided investment in fixed capital or capacity was increased atleast by 50%.Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. In other words, the upper limit of total incentive which the unit could receive from the State Government in the form of tax waiver would not exist 100% of the eligible capital investment regardless of the residue of the period of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the computation of total income? The Hon ble Tribunal for Asst Years 1984-85 and 1985-86 had held the sales tax exemption to be capital in nature as the same was given for industrial development of the backward districts as well as generation of employment. However, the matter was referred to the Special Bench as it was alleged that the decision for AY 1985-86 was virtually overruled by subsequent decision of the Mumbai Tribunal in the case of Bajaj Auto Ltd (ITA No. 49 and 1101 of 1991). The Special Bench held that the decision of Bajaj Auto has not overruled the decision of Hon ble Mumbai Tribunal for AY 1985- 86 on the following basis: i) There cannot be any question of overruling the decision of one Bench by another bench of equal strength as it would be contrary to the established norms of judicial system in the country. ii) Even on merits it cannot be said that the Tribunal has laid out more stress on the form of the scheme and not their substance as held in Bajaj Auto as the Tribunal in the order for AY 1985-86 has explained the difference between exemption schemes of Maharashtra and Andhra Pradesh in detail. iii) Reliance placed by Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court as stated by the ld. Special Counsel for the Revenue and accordingly still is a good law and therefore a binding precedent on this Division Bench. In fact, in assessee s own case for A.Y.2001-02 in ITA No.778 of 2015 dated 18/12/2018 before the Hon ble Jurisdictional High Court, wherein the question Nos. c d was exactly on this point. For the sake of convenience, the question Nos. c d raised by the Revenue before the Hon ble Jurisdictional High Court is reproduced hereunder:- (c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restoring the issue of taxability of the sale tax exemption benefit of Rs.58 crores availed by the assessee to the file of the Assessing Officer for deciding afresh after considering the decision of the Special Bench of the ITAT in the case of DCIT V. Reliance Industries Ltd., 88 ITD 273, which has not been accepted by the Revenue? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in entertaining the additional ground without appreciating that the assessee had treated the amount of sales tax exemption benefit of Rs.58 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand, learned Counsel for the assessee firstly contended that the Tribunal had merely remanded the issue back to the Assessing Officer. In earlier orders, the Revenue had approached the Court against the similar orders of the Tribunal. The High Court on two occasions, in the order dated 27.09.2016 and 22.11.2016 passed in Income Tax Appeal Nos. 475 of 2014 and 102 of 2014 respectively had not entertained the challenge of the Revenue. In any case, it was contended that the facts on record are available and the Tribunal has merely asked the Assessing Officer to take a decision on the assessee's contention. 5. As long as the material exists on record, a contention raised by the assessee for the first time before the Tribunal, cannot be barred. So much is clear from series of judgments of various Courts including of this Court in case of CIT Vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336. It is not the case of the Revenue that the assessee in the context of its contention on the nature of the subsidy, desired to produce additional evidence. It is true that the judgment of this Court confirming the order of the Tribunal in case of Reliance Industries Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reproduced hereunder:- 11. We find that so far as the Special Bench decision of this Tribunal in the case of Reliance Industries Ltd. (supra) is concerned, it still holds the field. All that has happened, as a result of Hon'ble Supreme Court's decision dated 9th September 2011, is that Hon'ble Bombay High Court has now admitted the question whether, on the facts and circumstances of the case, the Hon'ble Tribunal was right in holding that sales tax exemption was a capital receipt and will, in due course though, adjudicate on this legal issue. To that extent, Hon'ble Bombay High Court's order dated 15th April 2009, to the extent of declining to admit this question, stands reversed. However, the decision of the Special Bench still holds good as the same has not, and at least not yet, even been examined by Hon'ble Bombay High Court. Mere admission of appeal against a decision, as is elementary, does not affect the biding nature of a judicial precedent. The Special Bench decision, in the case of Reliance Industries Ltd. (supra), was not reversed by Hon'ble Supreme Court, but was directed to be examined, on merits, by Hon'ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edents. There is no dispute before us that the scheme under which the sales tax and excise duty subsidy are given to this assessee are the same as in the case of Ajanta Manufacturing Ltd. (supra). All the material facts being the same, there is no reason to take any other view of the matter than the view so taken by the coordinate bench. We must, therefore, uphold the conclusions arrived at by the Commissioner (Appeals), which are in consonance with the Special Bench decision in the case of Reliance Industries Ltd. (supra) and coordinate bench decision in the case of Ajanta Manufacturing Ltd. (supra), and decline to interfere in the matter. (emphasis supplied by us) 5.4.6. In view of the above, no fault could be attributed on the ld. CIT(A) placing reliance on the decision of the Special Bench of the Tribunal and granting relief to the assessee in the instant case. 9. In the Special Bench decision in the case of Reliance Industries Ltd (supra), what came up for consideration was specifically the sales tax subsidy, and that decision, as we seen in the elaborate analysis of the coordinate bench- as extracted above still holds good in law. In the case of CIT Vs Chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered 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 where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of Kolkata Tribunal, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that coordinate bench has also decided similar issue in favour of Ambuja Cement Limited, holding company of assessee from A.Y. 2006-07 to 2011-12 as stated supra. It is observed that various observations made by Assessing Officer and arguments made by Ld. DR are already dealt with by various decisions referred supra hence there is no reason to deviate from the finding given by Coordinate Bench referred supra. Thus, sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld.CIT(A) both for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income . 34. In the result, ground of appeal raised by the Departmental is dismissed. 35. In the Ground No 6, Department has raised the following grievance: On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition made by the Assessing Officer by disallowing the provision of Director s retirement benefit of ₹.1,88,80,377/- treating the same as unascertained liability. 36. The Assessing Officer has dealt with the issue at Para No.11 to 11.3 of Assessment Order. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced as under.: 19. Deletion of addition in respect of provision for Director's Retirement Benefit in computing income under normal provisions of the Act of ₹.2,84,53,850/ is the subject matter of the next ground. During the assessment proceedings, the Assessing Officer found that the assessee had created provision for director's retirement benefit on the basis of actuarial valuation and it was added in computing total income. Subsequently, exclusion was claimed before the FAA. As the similar addition was deleted in MAT computation, so, he allowed the claim made by the assessee. 19.1. Before us, the DR argued that the FAA allowed the claim that was not before the Assessing Officer. The DR contended that provision made for Director's Retirement Benefit was made on the basis of actuarial valuation, that it represented a liability in praesenti that was to be discharged at future date. He referred to the case of Bharat Earth Movers (245 ITR 428). He also stated that similar claim was allowed by the Tribunal while deciding the appeal for the AY.1990-91. 19.2.We find that the issue of a certain business liability was deliberated upon and adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assessment Order. The Assessing Officer has observed that in original return of income, assessee company has made disallowance u/s 40 (a) for ₹.1,51,06,703/- in respect of interest payment made to SBI Bank-Bahrain branch as no TDS was deducted. However, in revised return of income, Assessee Company has not made any disallowance on the ground that State Bank of India being a Banking Company under the Banking Regulation Act, 1990, provision of Section 194A is not applicable. This contention of assessee is not found acceptable to Assessing Officer on the ground that SBI offshore banking unit Bahrain is agent for loan borrowed from SBI International(Mauritius) limited and if interest is paid to NRI, provisions of Section 195 is applicable. As assessee company has not deducted TDS on such payment, Assessing Officer made disallowance u/s 40(a) of the Act. 43. This issue is dealt by Ld.CIT(A) at Para No. 11.4 of his order as under: 11.4 I have carefully considered the submissions of the Ld. AR. The payment has been made to the Bahrain Branch of State Bank of India (SBI). This branch is part of SBI which is governed by the Banking Regulation Act. Section194A(3)(iii)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an. Therefore, any interest payment to ICICI Bank Ltd., Singapore branch is not coming within the provisions of section 195 of the Act. No doubt, any payment made to a resident banking company is outside the purview of provision of section 195 of the Act. Similarly, any payment made to a non-resident including a banking company is coming within the provision of section 195 of the Act. The primary dispute is with regard to the residential status of payee in Singapore and the lender of external commercial borrowings. As per the letter of Jt. CIT(OSD)-3(1), Mumbai, the residential status of the ICICI Bank Ltd., has been clarified .. 46. It is observed that Ld.CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No 3783 of 2000 for A.Y. 1996-97 and ITA No 7594 of 2004 for A.Y. 1999-2000. 51. Considered the rival submissions and material placed on record. On identical issue claimed by the assessee is allowed by Coordinate bench in ITA No 7594 of 2004 dated 28/06/2012 (A.Y. 1999-2000) and held as under: 12.1 The expenditure of ₹.7,95,594 was incurred for dismantling old and unserviceable assets in phased manner. By incurring expenditure no new assets of enduring nature was brought into existence and hence was claimed as revenue expenditure. AO disallowed the expenditure relying on the Tax Audit Report. The same was upheld by the CIT (A) following the decision in the case of Lake Palace Hotels and Motels Pvt. Ltd vs. CIT (1995) 213 ITR 735 (Raj.). Similar issue in assessee's own case has been allowed by the ITAT Mumbai in the following appeals: a)AY91-92-ITANo.1105/Mum/97 b)AY92-93-ITANo.3961/Mum/97 c)AY96-97-ITANo.3783/Mum/00 d)AY97-98-ITANo.3298/M/01 12.2 Respectfully following the decision in earlier years, which have not been challenged by the Revenue, we allow assessee's claim. We also hope that the Revenue will not make similar I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 80IA. The AO has mentioned that Tata Power was not eligible for deduction. The Assessee says that they have not claimed it. In September, 2004 the unit was re-purchased by the Assessee who has claimed deduction u/s. 80IA for AY:2005-06 which is presently under consideration . 15.11 Before going through the interpretation of the provisions it will be pertinent to examine the provisions of sec. 80IA. As per sec. 80IA(2) the deduction can be claimed by an assessee for any ten consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise commences its activities which is eligible for deduction. In this case, the Assessee has done power generation which is one of the eligible activities under this section. So the Assessee had the option of claiming the deduction u/s. 80IA for any ten consecutive assessment years within 15 years from AY: 1995- 96. The Assessee claimed deduction in the year 1999-2000, so the claim should have continued for the next nine years in order to maintain the eligibility for such deduction. However in the Assessee's case deduction has not been claimed after 1999-2000 and is claimed again this year ie. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar was applicable to sec. 80J also. The provisions of sec. 80IA is also applicable to profits and gains derived by an undertaking or an enterprise. So the spirit of the Board's circular will also be applicable to this section. If an undertaking is transferred as a going concern, the new owner can claim the deduction u/s. 80IA, if the claim otherwise comes under the provision of this section. Further, in the light of the judicial pronouncements cited earlier, the Assessee's case is not a case of splitting of an industrial undertaking. The generation unit as a whole has been sold to the Assessee. Since the deduction u/s. 80IA is allowable on the profits of this unit, the Assessee who has purchased the unit can claim such deduction, as the other conditions prescribed u/s. 80IA are fulfilled. In view of this, the AO is directed to allow deduction u/s.80IA in respect of TG-3. As has already been held earlier, no such deduction is allowable in case of TG-2. the AO is directed accordingly. 57. Against the observation of Ld.CIT(A), Revenue has filed further appeal for allowing the deduction u/s 80IA claimed for TG-3 whereas Assessee has filed further appeal for denying the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d plant and machinery on which deduction under Section 80IA is not available. She also submitted that TCS has not claimed the deduction and the same cannot be claimed in the hands of the assessee as it is not the new assets but used assets, as per the provisions the assessee cannot claim deduction in the second hand machineries. She prayed that the order of Assessing Officer may be sustained. 60. Considered the rival submissions and material placed on record. The Assessee has claimed deduction u/s 80IA on two units purchased from Tata Power Limited and such deduction is denied on the ground that assessee has not set up any undertaking and same has been formed by transfer of previously used plant machinery. It is relevant to refer to provisions of Section 80IA which reads as under: 3) This section applies to an undertaking referred to in [clause (ii) or] clause (iv) of sub-section (4)] which fulfils all the following conditions, namely: (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an 52[undertaking] which is formed as a result of the re-establishment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly, 1994 and first export was effected in October, 1994 - Thus, manufacturing activities, commenced in STP undertaking after stipulated date of 1-4-1994 as provided in section 10A - Subsequently, in October 1994 itself, IOCL transferred entire software division as a going concern on slump sale basis to assessee - It was apparent from records that ownership of business or undertaking changed hands and, thus, it could not be regarded as a case of reconstruction - It was also undisputed that entire business of software was transferred to assessee, and, thus, assessee-undertaking could not be said to be one formed by splitting up of business - Whether on facts, assessee had fulfilled conditions mentioned in section 10A(2) and, thus, its claim for exemption under section 10A was to be allowed - Held, yes [In favour of assessee] 62. Further, in CIT v. Silical Metallurgic Ltd (324 ITR 29), the facts before Hon ble Madras High Court were as follows: there were three units at different places being new industrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reconstruction, of a business already in existence. Therefore, the Tribunal was right in holding that the assessee company was entitled to relief under sections 80J and 80HH of the Act . 63. The CBDT had also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income-tax Act, 1961), way back in 1963 and clarified the matter vide Letter: F No 15/5/63-IT (A-I), dated 13 December 1963, which reads as under:- The Board agree the benefit of section 84 attaches to the undertaking and not to the owner, thereof. The successor will be entitled to the benefit for the unexpired period of five years provided the undertaking is taken over as a running concern . The Board set out two principles (prima facie, independent of one another or the later dependent on the primary and the first principle): i. The deduction attaches to the undertaking and not to the owner; and ii. A successor would be entitled to the deduction, for the residual period, if the undertaking is transferred as a running concern 64. The aforesaid Board Circular have been relied upon by various Courts and its applicability have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee but it is fact that assessee was eligible for deduction was mentioned in notes forming part of return of income. It is undisputed fact that Assessing Officer has not disputed such claim in assessment proceedings. Subsequently, such unit was transferred to Tata Power Company and was again re-purchased by assessee in current year and assessee has claimed deduction u/s 80IA. So far as observation of Ld.CIT(A) that assessee is not entitled for such deduction as 80IA was not claimed by undertaking during the period A.Y.2000-2001 to AY 2004-05, it is observed that Ld.CIT(A) himself has accepted that assessee can claim deduction u/s 80IA for consecutive 10 years out of block of 15 years from commencement of business which does not mean that if in block of 10 years, deduction u/s 80IA was not claimed for one or more reasons, such claim is lapsed for subsequent years. Further it is also a settled position that the deduction u/s 80IA is qua undertaking and not qua entity. Every undertaking will be entitled to avail deduction u/s 80IA for a period of 10 consecutive years from 15 years from the commencement of business. There is substance in the argument of Ld. AR of the assessee tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company overlooks the operations of all its affiliated units and the expenses incurred at the head office is related to all affiliated units. So, in order to work out the profits from any particular unit, proportionate expense of the head office has to be taken into consideration, otherwise the profit and loss of the unit will give a very distorted picture. In view of this the AO is justified in considering proportionate head office expenditure for working out the profits of the power plant on which deduction u/s. 80IA has been claimed. However, from the details of the expenditure considered by the AO, the Ld.AR has pointed out that, the cost audit fee of ₹.1,54,280 and subscription to CMA - ₹.64,46,000 are in respect of cement manufacturing unit. Since these two items of expenditure are specifically incurred for cement manufacturing units the AO directed to exclude these two items out of the expenditure he has considered as mentioned at page 27 para 16.7 of the assessment order. The deduction should be reworked accordingly. 73. Against the observation of Ld.CIT(A), both department and assessee has further filed appeal. The Ld.AR of the assessee has argued that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be taken into account while treating such units as profit centres, and computing the profits accordingly. The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if they are independent of each other, and once that fiction sets in, the expenses incurred by someone other than eligible unit, in the interest of the eligible unit, are to be taken into account while computing the profits of the eligible unit. Accordingly, the allocation of expenses, as the learned Assessing Officer rightly contends, must be done. The assessee has further contended that HO expenses are not derived from‟ or derived by‟ the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment has filed this ground in this appeal. Before us, Ld. AR has relied upon appellate order passed in its own case for A.Y. 2002-03 to 2004-05 and contended that no such adjustment is required to be made. On the other hand, Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 80. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided issue in its favour. The relevant finding is reproduced herein below: 14.2.3. Revenue is in appeal, challenging the relief granted by CIT(A). We have heard the rival contentions and perused the record. While the Departmental Representative relied upon the assessment order, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee s own case for the Assessment Year 2002-03 and 2003-04 wherein the Tribunal had granted relief to the Assessee. 14.2.4. We note that the Hon ble Bombay High Court has, in the case of CIT vs. Echjay Forgings (P) Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 1998-99 also and against the said decision, the revenue is not in appeal. It is reiterated that the adjustment can only be made in view of Section 115JB of the Act which has been specified in Explanation to Section 115JB of the Act. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. (Emphasis Supplied) 14.2.6. In view of the above, we confirm the order of CIT(A) and hold that provision for Wealth-Tax of INR 70,00,000/- is not required to be added back while computing Book Profits under Section 115JB of the Act. Accordingly, Ground No 8 raised by the Revenue is dismissed. 81. Respectfully following the decision of coordinate bench referred supra, addition of provision for wealth tax made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 82. In the Ground No 12, Department has raised the following grievance: On the facts and the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46. Under this issue the revenue has challenged the allowance of claim of provision for additional gratuity in computing book profit u/s 115JB of the Act amounting to ₹.1,21,90,817/-. The proposition is the same which has been discussed above while deciding the issue no. 15. The finding of the CIT(A) in this regard is hereby reproduced as under.: 38.2 I have considered the submission made on behalf of the appellant. Respectfully following the order of Hon ble Tribunal for the A.Y. 1990-91 as well as my own orders for AY 1998-99 in appeal no. CIT(A)- I/IT/232/04-05 the addition made by the Assessing Officer is deleted and the ground stands allowed in favour of the appellant. 47. On appraisal of the said finding, we noticed that this issue has been covered by decision of Hon ble ITAT in the assesee s own case for the A.Y. 1990-91 in ITA. No.2361/M/1995 in the A.Y. 2002-03 in ITA. No.4987/M/2007. There is nothing on record to which it can be assumed that the order has been varied or changed in appellate proceeding. Since this issue has been duly adjudicated in favour of the assessee by above mentioned decision of the Hon ble ITAT, we are of the view that the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther this issue has been decided by my predecessor in AYs:2003-04 and 2004-05 in favour of the Assessee. Following these decision the appeal is allowed. 89. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: 14.4.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 6 above, we have concluded that Provision for Director's Retirement Benefit is not a provision for unascertained liability. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528). Further, in the immediately preceding assessment year (AY 2003- 04), identical issue has been decided in favour of the Assessee. The relevant extract of the order, dated 13.03.2019, passed by the Tribunal in the case of the Assessee for the ITA. No. 5259 4895/Mum/2007 Assessment Year: 2004-05 Assessment Year 2003-04 (ITA No. 4242 4988/MUM/2007 reads as under: 32. Under this issue the revenue has challenged the deletion of addition in respect of provision for Director s Retirement Benefit in computing Book Profit U/s 115JB of The Act amounting to ₹.46,27,200/-. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: 26.5 On consideration of the submission made by the ARs of the appellant, I find that provision for director s retirement benefit cannot be considered as unascertained liability since the same has been calculated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertained liability hence while computing book profit u/s 115JB, same was added back to total income. This issue is dealt by Ld. CIT(A) at Para No. 25.7 of his order as under: 25.7 As the Ld.AR has pointed out this is a provision for diminution of the value of investment, and as such cannot be taken as a unascertained liability to be covered u/s. 115JB. This view is supported by the decision of the Special Bench of ITAT, Calcutta in the case of Usha Martin Industries and the recent decision of the Supreme Court in the case of CIT -vs.- M/s HCL Comnet systems Services Ltd. (Civil Appeal No. 5800 of 2008) FurthertheLd.AR of the Assessee has brought to my notice that this issue has been decided in favour of the Assessee by my predecessors in AY: 2001-02,2002-03, 2003-04 2004-05. Since the issue is the same I follow these orders and allow this ground of appeal. 98. Against the observation of Ld. CIT(A), department has filed this ground in this appeal. Before us, Ld. AR fairly conceded that above issue is against assessee by the decision of coordinate bench of ITAT in A.Y.2002-03 to 2004-05 and matter was set aside to file of Assessing Officer. The Ld.DR has relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving an opportunity of being heard to the Assessee in accordance with law. Accordingly, we decide this issue in favour of the revenue against the assessee. (Emphasis Supplied) 14.6.5. Respectfully following the aforesaid decision of the Tribunal, we remand the issue back to the file of the Assessing Officer for fresh adjudication keeping in view the provisions of Clause (i) to Explanation 1 to Section 115JB(2) of the Act and after giving Assessee an opportunity of being heard. The order of CIT(A) on this issue is set aside with the aforesaid directions. Ground No. 12 raised by the Revenue is allowed 100. Respectfully following the decision of coordinate bench referred supra, we remand the issue back to the file of the Assessing Officer for fresh adjudication keeping in view the provisions of Clause (i) to Explanation 1 to Section 115JB(2) of the Act and after giving Assessee an opportunity of being heard. The order of Ld. CIT(A) on this issue is set aside with the aforesaid directions. This ground of appeal in Departmental Appeal is allowed. 101. In the Ground No 16, Department has raised the following grievance: On the facts and the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt orders of the earlier years for making the adjustment . 103. Against the observation of Ld. CIT(A), department has filed this ground in this appeal. Before us, Ld. AR has stated that identical issue is decided in its favour by coordinate bench of ITAT in A.Y. 2002-03 to 2004-05. The Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 104. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in favour of assessee. The relevant finding is reproduced herein below: 6.4. We have considered the rival contentions and perused the material on record. The CIT(A) has allowed the claim of the Assessee applying the principles laid down by the Hon ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (supra), The accounts of the Assessee have been prepared in accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified by the statutory auditors, and therefore, in absence of any specific clause in Section 115JB(2) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his order. The Assessing Officer has observed that assessee has reduced book profit u/s 115JB by profit on sale of fixed assets and profit on sale of Investments. The Assessing Officer has referred to decision of Hon ble Supreme court in the case of Apollo Tyres Limited [255 ITR 273] and observed that reduction claimed by the assessee does not come under any of the items stated in the explanation and he denied such deduction as claimed in return of income. This issue is dealt by Ld. CIT(A) at Para No. 28.6 and 28.7 of his order as under: 28.6 I have considered the submissions of the Ld.AR and gone through the assessment order. So far as the profit on sale of fixed assets amounting₹.13,64,84,104 is concerned, the Ld.AR has brought to my notice that the Assessing Officer allowed the deduction of this profit from the income as claimed by the appellant. He only refused to allow such deduction under sec. 115JB. This issue has been decided by my predecessors in favour of the appellant in AYs-2001-02 to 2004-05, following the decision of the ITAT, Mumbai in the case of ITO -vs.- Frigsales (India) Ltd (supra). Since the facts are the same, I follow the orders of my predecessor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, vide common order 13.03.2019 passed in ITA No. 4242/MUM/2007 and ITA No. 4988/MUM/2007, holding as under: 52. Under this issue the revenue has challenged the deletion of the addition of profit on sale of fixed assets in computation of book profit u/s 115JB of the Act in sum of ₹.5,19,20,846/-. At the time of argument, the Ld. Representative of the assessee has disclosed this fact that this issue has been decided against the assessee in the ITA. No. 5259 4895/Mum/2007 Assessment Year: 2004-05 assessee s own case for the A.Y.2002-03 in ITA. No.4241/M/2007 dated 29.07.2015. Since this issue has been decided against the Assessee in the assessee s own case (supra), therefore, the finding of the CIT(A) on this issue is hereby ordered to be set aside and we allow the claim of the revenue for the addition of said amount while computing the book profit u/s 115JB of the Act. Accordingly, this issue is decided in favour of the revenue against the assessee. 19.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in Assessee s own case, we set aside the order of CIT(A) and restore the order of the Assessing Officer on this issue. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not form part of income computed u/s 115JB of the Act. Respectfully following the ratio laid down by Hon ble Karnataka High Court, the Assessing Officer is directed to recompute taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB of the Act. Thus, the related ground of appeal in Departmental Appeal as well as Assessee s appeal is partly allowed subject to the above directions. 114. In the Ground No 18, Department has raised the following grievance: On the facts and the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow deduction u/s 80HHC computed on the basis of book profit u/s 115JB of the Act. 115. The Assessing Officer has dealt with this issue at Para No. 29 of his order. The Assessing Officer has observed that assessee has claimed deduction u/s 80HHC on book profit in revised return of income. The assessee has relied upon decision of Hon ble Pune ITAT in the case of Smruthi Organisers Limited wherein it is held that for computing book profit u/s 115JA, clause (viii) of the explanation being export profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT in the case of M/s. Syncome Formulations (I) Ltd. vs. DCIT in ITA No.2711/Mum/2003. 29.8 Ld.AR further brought to my notice that similar issue has been decided in favour of the appellant by the CIT (Appeals) from AYs. 2001-02 to 2004-05. 116. Against the above observation of Ld. CIT(A), department has filed further appeal. The Ld. AR has relied upon the finding of Ld.CIT(A) and contended that Section 115JB is an alternative mode of taxation where taxation is not on the basis of total income as computed under the Act but it is on the basis of the book profit computation. The Ld. AR has mainly relied upon following decisions in support of claim. (i). CIT v. Bhari Information Technology Systems (P.) Ltd. [(2012) 340 ITR 593 (SC)] (ii). DCIT v. Syncome Formulations (I) Ltd. [2007] 106 ITD 193 (Mumbai Tribunal) (SB)] (iii). Torrent Pharmaceuticals Limited [2022] ITA 1285/Ahd/2017 117. The Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 118. Considered the rival submissions and material placed on record. It is relevant to refer to provisions of Section 115JB on statue for year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unconstitutional. The assessee also contended that at the time of filing the return of income the clause (iv) of explanation 1 to section 115JB of the Act was very much in force. The provisions of section 294 of the Act provides that the provisions specified under the statute as on 1st day of the assessment year shall be prevalent. As such, the clause (iv) of explanation 1 to section 115JB of the Act was very much in force as on the 1st day of the assessment year. Accordingly the assessee contended that it cannot be denied the benefit of the deduction provided under clause (iv) to section 115JB of the Act. 96.2. However, the Assessing Officer disregarded the contention of the assessee by observing that the amendment by the Finance Act 2011 was brought under the statute with retrospective effect i.e. 1-4-2005 wherein the benefit given to the assessee under clause (iv) of explanation 1 of section 115JB of the Act was denied to the assessee. Accordingly, the AO did not allow the deduction of the amount of ₹ 79,58,97,799/- to the assessee while calculating the amount of profit under section 115JB of the Act. 97. Aggrieved assessee preferred an appeal to the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (a) or clause (b) or clause (c ) of subsection (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or 101.1. The above benefit to the assessee was denied by the Finance Act 2011 with retrospective effect 01-04-2005. Admittedly, at the time of filing the return of income the assessee was entitled for the benefit as discussed above. But on a later date there was an amendment by the finance Act 2011 which denied the benefit to the assessee with retrospective effect. The Hon'ble Supreme Court in the case of Star India Pvt. Ltd vs. Commissioner of Central Excise reported in 280 ITR 321 has held that the benefit granted under the statute to the assessee cannot be withdrawn by way of retrospective amendment. The relevant extract of the Judgment reads as under: It was clear from the language of the validation clause of section 148 of the Finance Act, 2002, that the liability was extended not by way of clarification but by way of amendment to the Finance Act with retrospective effect. It is well-established that while it is permissible for the Legislature to retrospectively legislate, such retrospectivit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectfully following the aforesaid decision of coordinate bench in the case of Torrent Pharmaceuticals Limited, the ground raised by the department is dismissed. This ground of appeal in Departmental Appeal is dismissed. 121. In the Ground No 19, Department has raised the following grievance: On the facts and the circumstances of the case and in law the CIT(A) erred in directing the Assessing Officer to exclude Rs 33,10,349/- being amount withdrawn from share premium account while computing book profit u/s 115JB of the Act. 122. The Assessing Office has dealt with this issue at Para No. 30 of his order and referred to decision of Hon ble Supreme court in the case of Apollo Tyres Limited [255 ITR 273] and observed that reduction claimed by the assessee on account of withdrawal from share premium amount does not come under any of the items stated in the explanation and he denied such deduction as claimed in return of income. This issue is dealt by Ld. CIT(A) at Para No. 30.10 of his order as under: 30.10 I have considered the submissions. As the Ld.AR has pointed out the issue has been decided in the appellant's favour by the ITAT, Mumbai in the appellant' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of amount withdrawn from share premium account in computation of book profit u/s 115JB of the Act. The claim was allowed in view of the decision of Hon ble ITAT Mumbai in the assessee s own case for the A.Y.1990-91 in ITA. No. 5259 4895/Mum/2007. Further the matter has been adjudicated by Hon ble ITAT in the assessee s own case for the A.Y. 1998-99 in ITA. No.6320/M/2003. Since the case of the assessee has squarely covered by decision of the Hon ble ITAT in the assessee s own case, therefore, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. (Emphasis Supplied) 21.4. In view of the above, we do not find any infirmity in the order passed by CIT(A). Accordingly, we confirm the order of CIT(A) holding that amount of INR 9,66,64,158/-, transferred from Share Premium Account to the profit loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided issue in favour of assessee. The relevant finding is reproduced herein below: 5. Additional ground no.4 is about exclusion of amount transferred to debenture redemption reserved in computing group profit of provisions of section 115JB of ₹.50 crores. 5.1. During the course of hearing before us, representatives of both the sides agreed that identical issue had been decided in favour of the assessee, by the Tribunal while adjudicating the appeals for AY.s.1997- 98(ITA/3298/Mum/01),1998-99(ITA/639/M/03),1999-00 (ITA/7594/Mum/04),2000-01(ITA/9570/Mum/04). We find that the decision of the Tribunal for AY.1998-99 for exclusion debenture redemption reserved had not been challenged by the department before the Hon'ble High Court and thus the order has attained finality. It is also found that the Hon'ble Bombay High Court of Bombay had dismissed the departmental appeal with regard to the issue while deciding the appeal for AY 1999-00. Considering the above facts, we decide the last additional ground against the AO. 130. It is matter of fact that department has not challenged the appellate order of A.Y. 1998-99 before Hon ble High court and matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal) (SB)] 134. On the other hand, Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 135. Considered the rival submissions and material placed on record. The Assessing Officer has made disallowance u/s 14A while computing income as per normal provisions of the Act as well as book profit u/s 115JB of the Act. The disallowance made by Assessing Officer u/s 14A is already deleted in proceeding paras hence consequential adjustment made while computing book profit u/s 115JB cannot be made. On this issue, coordinate bench in the case of Ambuja Cement Limited in ITA NO ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019 (AY 2010-11, 2011-12 and 2012-13) vide order dated 07/11/2022 held as under: 25. Having heard the rival contentions and having perused the material on record, 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 section 14A on the facts of this case, and, in any event, the issue is covered, as regards the question of adjustment of book profits under section 15JB for the 14A disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the items stated in the explanation and he denied such deduction as claimed in return of income. This issue is dealt by Ld. CIT(A) at Para No. 32.6 of his order as under: 32.6 I have considered assessee s explanation. As per section 115JB every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II III of Schedule VI to the Companies Act, 1956 (1 of 1956). Any increase or reduction has to be limited to explanation to the section 115JB of Income Tax. Hon'ble Supreme Court in the case of Apollo Tyre Ltd Vs CIT, 255 ITR 273 has clearly stated that 'If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of section 115J of the Act, then it should be that income which is acceptable to the authorities under the Companies Act. The reduction claimed by assessee doesn't come under any of the items stated in the explanation. The claim of reduction of ₹.20,69,06,874 as premium on redemption of foreign currency convertible bond is accordingly not allowable. In view of this, the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the [securities] premium account ; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the [securities] premium account were paid-up share capital of the company. (2) The [securities] premium account may, notwithstanding anything in subsection (1), be applied by the company- (a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; (b) in writing off the preliminary expenses of the company; (c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or (d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company. (3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act: Provided that any part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntingent amount. The assessee could have very well debited the amount to the profit and loss account, but it has chosen to debit the amount to share premium account in the books, which is also permitted as per Companies Act. No infraction of law in this regard was pointed out. Since revenue has accepted the debit of the premium to share premium account, it is clear that revenue has accepted that redemption premium amount has been accepted as accrued. Nevertheless the case law in this regard duly support the proposition. In this regard, we may refer to the decision of Hon ble Bombay High Court in the case of S.M.Holding Finance (P) Ltd. 264 ITR 370 as under:- Both the above appeals raised a common question of law and fact and, therefore, they are heard together and disposed of by this common judgment. Both the appeals have been preferred by the Department. They concern asst. yr. 1995-96 and 1996-97, respectively. For the sake of convenience, we reproduce herein the facts in IT Appeal No. 215 of 2001. The following question is referred for opinion of this Court: Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures. He submitted that originally the debentures were issued at 2 per cent. which was changed to 0 per cent during the life of issued debentures. That, originally the issued debenture was for 5 years which was changed to 10 years during the existence of the issued debentures. He submitted that in the case of Madras Industrial Investment Corporation (supra) as also in the case of Taparia Tools Ltd. (supra), there was no discretion vested in the assessee to alter the terms of the issued debentures during the subsistence of the issued debentures whereas in the present case the borrower had the discretion to change the terms of the issued convertible debentures. He, therefore, submitted that during the assessment year in question, there was no ascertainment of liability to the tune of ₹ 54,75,000 and, therefore, the AO was right in disallowing the claim for deduction. Findings 5. We do not find any merit in the above arguments advanced on behalf of the Department. Firstly, we have gone through the records and proceedings (R P). In the entire R P, there is nothing to indicate alterations of terms and conditions during the subsistence of the issued convertible deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal is about disallowance of pro rata premium of ₹ 5.39 crores payable on redemption of 'Foreign Currency Convertible Bonds'(FCCB).As per the AO the bonds were convertible into shares and, therefore, could not be construed as a borrowing, that they increased capital base of the company and that the expenditure incurred was capital in nature. The AR submitted that FCCB were a form of borrowing thai they were shown in the balance- sheet under loans that premium payable on redemption was cost of borrowing, that option of conversion of bonds into shares was only with the bond holders, that conversion was a subsequent event which did not change the initial character of the bonds of a debt, that in the event of redemption payment of premium was mandatory, that premium being a cost of borrowing was allowable on time ,that premium was neither capital nor contingent in nature, that issue of FCCB had been held to be revenue in appellant is own case for the assessment year 1997-98 (ITA/7845/M/2004).DR supported the order of the AO. 20. From the above, it is clear that the amount of debenture redemption premium is accrued and liable to be deducted. Hence, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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