TMI Blog2023 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT] and followed by 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 on account of unutilised MODVAT credit. Nature of receipt - sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld.CIT(A). Addition made on account of unutilised MODVAT credit - HELD THAT:- As irespective 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 the Hon'ble Bombay High Court in the 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 on account of unutilised MODVAT credit. TDS u/s 195 - disallowance of interest paid to State Bank of India- Bahrain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee s appeal is partly allowed. Capital gain computation - AO power to refer the valuation of Land to the DVO - HELD THAT:- AO was not justified in considering fair market value of land based upon DVO s report obtained u/s 55A of the Act. This ground of appeal is accordingly allowed. Addition of provision for gratuity, provision for wealth tax, provision for VRS made while computing book profit u/s 115JB is deleted. Disallowance u/s 14A cannot be made while computing book profit u/s.115JB as relying on Vireet Investments Pvt Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] Deduction u/s.80IA on Rail Infrastructure allowed as quantified in form 10CCB subject to allocation of indirect expenditure as confirmed. Disallowance of claim of leave encashment - HELD THAT:- On perusal of relevant facts on record, it is observed that Hon'ble supreme court in the case of UOIv. Exide Industries Ltd. [ 2020 (4) TMI 792 - SUPREME COURT] has upheld constitutional validity of provision of section 43B(f) for provision for leave encashment liability and considering binding dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.NO. 268/MUM/2019 (REVENUE APPEAL) 3. First we take up, Revenue Appeal in ITA No. 268/Mum/2019 (common ground in assessee s appeal is also taken together). 4. In the Ground No. 1, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, the Ld. CIT(A) erred in restricting the disallowance to Rs. 1,94,00,000/- made u/s. 14A r.w.r, 8D(2) of the I.T, Rules. 5. On identical issue in Assessee s appeal, in the Ground No.1 2, following issue is raised: Ground No. 1: Disallowance of Rs. 1,94,00,000/- u/s. 14A of the Act: On the facts and in the circumstances of tire case and in law, the Commissioner of Income-tax(Appeals)-3 [hereinafter referred to as Ld. CIT (A)] was not justified and grossly erred in confirming the action of the Additional Commissioner of Income-tax (Large tax payer Unit) [hereinafter referred to as 'AO'] in adding back Rs. 1,94,00,000/- as noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments is correct. The total interest free capital of the appellant in the form of Share Capital and Reserves Surplus far exceeded its total investments as is evident from the details furnished in the table below. Particulars As on 31 March 2008 (Rs. in crores) As on 31 March 2007 (Rs. In crores) Share Capital 187.84 187.57 Reserves Surplus 4310.88 3275.12 Total Owned Capital 4498.72 3462.69 Total Investments 667.18 344.51 Investment in Subsidiaries 172.32 34.87 Strategic Investment 25.60 - Investment in Bonds 3.71 3.71 Investment in Certificates of Deposit -- - Investment in Mutual Fund 465.55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by it. On this issue, Hon'ble Supreme Court in the case of South Indian Bank Ltd [2021] 130 taxmann.com 178 has held 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 interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 11. Hon ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: 6. On thorough co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.16] [Matter remanded] 14. The above referred decision has been followed by co-ordinate Bench in the case of DCIT v. Shree Global Tradef in Ltd. in ITA No. 1374/Mum/2022 dated 22nd December, 2022 has held as under: 11. Having heard the rival submissions and perused the materials available on record. It is observed that the assessee has made a suo moto disallowance of Rs.1,263/- for which the assessee contends that the A.O. ought not to have applied Rule 8D on the ground that suo moto disallowance has been made by the assessee. The assessee further contends that without prejudice, the disallowance should be restricted only to the investments which have yielded an exempt income for the assessee during the impugned year. It is also pertinent to point out that since the assessee had not borrowed funds during the relevant year, no disallowance as per Rule 8D(2)(i) of the Income Tax Rules was warranted. It is also observed that the A.O. has recorded his satisfaction that the correctness of the assessee's claim of expenses of disallowance was not to the satisfaction of the A.O., thereby entitling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as has been rightly done by the Assessing Officer? 17. Similar issue was considered by us in the Department Appeal in Ground No 2 in AY 2005-06 and held as under: 18. Considered the rival contentions and material placed on record. On this issue, Coordinate bench held in the case of Mahindra Mahindra Ltd [2020] 113 taxmann.com 230 as under: 4. We have carefully considered the rival submissions. We find that as rightly pointed out by the ld. Representative for the assessee, the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra) has already dealt with the issue whether addition on account of MODVAT credit is warranted or not. The Hon'ble High Court relying on the decision of the Hon'ble Supreme Court in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven though Hon ble Supreme Court in the case of Sahani Steel Press Works Limited Vs. CIT (228 ITR 253} held that refund of sales tax is a revenue receipt? 20. On identical issue in Assessee s appeal, in the Ground No.5 6, following issue is raised: Ground No. 5: Addition of sales tax subsidy claimed as capital receipt - Rs. 47,37,44,762/-: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in not excluding sales tax incentive availed by the appellant under various schemes of different states of Maharashtra (Chanda unit) and Jharkhand (Chaibasa unit), aggregating to Rs. 47,37,44,762/-, being capital in nature, in computing total income under the normal provisions of the Act. Ground No. 6: On the facts and in the circumstances of the case and in law, the Ld. CIT (A) was not justified and grossly erred by disallowing Sales Tax Incentives by not following the order of the jurisdictional Bench of ITAT and Order of his precedent in the Appellant's own case without any reason recorded in the order. 21. Similar issue was considered by us in the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Notification No EXN C(9)2/9- dated 31-1-2-1994 (Himachal Unit). He discussed these schemes in quite a bit of detail-to the extent wordings of the preamble of the schemes are concerned, and concluded that while the amounts aggregating to Rs 130,57,12,796, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) and in directing the Assessing Officer to consider the Sales-tax exemption benefit of Rs. 5,45,81,171/- as capital receipts is concerned, Mr. Mehta contended 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that in view of decisions of this Court in CIT v. Birla VXL Ltd. [2013] 32 taxmann.com 330/215 Taxman 117 (Guj.) and in Dy. CIT v. Munjal Auto Industries Ltd. [2013] 37 taxmann.com 115/218 taxman 135 (Guj.) the issue is squarely covered and the decisions 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-to- day 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 28 th 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we find that ld. AR placed reliance on the decision of Hon ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no difference. 5.3.7. We further find that the Hon ble Gujarat High Court in CIT vs. Munjal Auto Industries Ltd., in Tax Appeal No.450 with 451-453 of 2012 dated 28/01/2013 also had an occasion to consider the very same issue in dispute before us. In this 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. It was held as under : 10. From the above noted provisions of the scheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher 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 at least 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case and in law the assessee company is justified in its claim that the sales- tax incentive allowed to it during the previous year in terms of the relevant Government order constitutes capital receipt and is not to be taken into account 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When that appeal was further challenged by the Revenue before the Hon ble Supreme Court, the Hon ble Supreme Court remitted the matter back to the Hon ble Bombay High Court. Accordingly, he argued that the decision of Special Bench was never reversed by the Hon ble 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department had approached the Supreme Court and the Supreme Court had held that a question of law did arise. The Supreme Court framed a question and placed the matter back before the High Court. We are informed that this appeal is still pending. 4. On the other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, we find that the Co-ordinate Bench of Ahmedabad Tribunal in the case of ACIT vs. Genus Electrotech Ltd., reported in 72 taxmann.com 101 had an occasion to consider the fact of Special Bench decision in a more elaborate manner. The relevant operative portion is 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 ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in Ajanta's Manufacturing Ltd. case (supra) and all these issues will now come up for consideration of Their Lordships. The fact that appeal is admitted does not, as we have stated earlier as well, does not affect the binding nature of the judicial precedents. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oordinate bench of this Tribunal, in JSW Ltd s case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) held that when a receipt is not in the character of income as defined under section 2(24) of the I.T. Act, 1961, then it cannot form part of the book profit u/s 115JB of the I.T. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the I.T. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit u/s 115JB of the I.T. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly. 33. It is observed 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 AO 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). 34. In the result, ground of appeal raised by the Departmental is dismissed. 22. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 23. In the Ground No.4, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the exclusion of Excise duty exemption availed by the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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, 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. (supra) and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra), we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made on account of unutilised MODVAT credit. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly, 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. Considering such fact and relying upon decision of Coordinate bench referred supra, we are inclined to accept the findings of Ld.CIT(A) for deleting the addition made by Assessing Officer. This ground of appeal in Departmental appeal is dismissed. 28. Respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subsequent year. That aspect of the matter is covered by a coordinate bench decision in the case of DCIT Vs Gloster Jute Mills Limited [(2017) 88 taxmann.com 738 (Kol)], which has been subsequently followed by other benches- including Mumbai benches. The coordinate bench has inter alia observed as follows: 24. Ground No. 3 raised by the revenue reads as follows :- 3. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in law by allowing assessee's claim of additional depreciation of plant and machinery on original cost in the year subsequent to the year of acquisition and installation and thereby has erred in deleting the addition of Rs. 54,21,617/- without appreciating the fact that such additional depreciation is allowable on plant and machinery only in the year of acquisition and installation. 25. This ground of appeal relates to the claim of the Assessee for additional depreciation u/s.32(1)(iia) of the Act. The undisputed facts are that the original cost of the new machinery purchased and installed by the Assessee after 31-3-2005 but before 1-4-2006 in the 100% EOU and DTA unit Rs. 29,77,470 and Rs. 2,41,30,615. The WDV of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional depreciation. 28. Before we set out the conclusions of the CIT(A) on this issue, it would be worthwhile to examine the history of scheme of allowance by way of additional depreciation in the Act. 'Sec.32 Depreciation. (1) In respect of depreciation of (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Section 32(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant shall be allowed as deduction under clause (ii): ' 29. It can be seen from the provisions of Sec.32(1)(iia) as it existed from 1-4-1981 to 31-3-1988 and reinserted subsequently from 1-4-2003 that the benefit for claiming additional depreciation was restricted only to the initial assessment year. However the provisions of Sec.32(1)(iia) as substituted by the finance Act, 2005 w.e.f. 1-4- 2006, the benefit for claiming additional depreciation was not so restricted to only to the initial assessment year. From AY 1981-82 to 87-88, the claim for additional depreciation was restricted to previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year. From AY 2003-04 till 2005-06, the claim for additional depreciation was restricted to previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or if any industrial undertaking existed before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than ten per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Indian Jute There is little merit in the contention of the AO that the asset is not new in the second year. In my view for claiming additional depreciation the assessee has to acquire and install the plant machinery after 31-03-2005 and the same should be new in the year of installation. There is no requirement that the assets should be new in the year of claim of additional depreciation. For the reasons aforesaid I am of the view that in terms of provisions of Section 32(1)(iia), additional depreciation is available in AY 2006-07 and subsequent years in respect of all new plant machinery acquired and installed after 31-03-2005 subject to overall criteria that total depreciation does not exceed the actual cost. Hence Ground No. 4 is decided in favour of the Appellant. 31. Aggrieved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal. The ld. DR placed reliance on the order of the AO. The ld. Counsel for the assessee submitted that fiscal statute shall be interpreted on the basis of the language used therein and not de hors the same. It was argued that Clause (iia) to Sec. 32(1) was first introduced vide Finance (No. 2) Act, 1980 w.e.f. 01-04-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that the provision of section 32(1)(iia) as amended w.e.f. 01-04-2006 by the Finance Act 2005, there is no restriction that the additional depreciation will be allowed only in one year or that it would be allowed only on the written down value. The law as it prevailed prior to the said amendment imposed such a condition that additional depreciation will be allowed only in the year of installation of machinery or plant or the year in which it is first put to use or the year in which the concerned undertaking begins to manufacture or produce any article or thing or achieves substantial expansion by way of increase in installed capacity by 25%. The only objection of the AO is that the provisions refer to new machinery or plant and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mills (supra). It is pertinent to refer to the Decision of Hon ble ITAT Kolkata in the case of DCIT vs Graphite India Ltd. in ITA No. 472/Kol/2018 dated 22.11.2019 wherein both of the above decisions of ITAT Kolkata as well as ITAT Mumbai has been duly considered and has decided in the favour of the assessee. In this decision, decision of ITAT Mumbai in the case of Everest Industries Limited (supra), was referred in finding of CIT(A). The ITAT has followed Gloster Jute Mills Ltd. (supra) and has decided the issue in assessee s favour. It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited(supra), holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of its existing business for forming both the units. Hon ble Bombay High court in CIT v. Gaekwar Foam Rubber Co. Ltd. [1959] 35 ITR 662 explains that the concept of a reconstruction of a business implies that the original business is not to cease functioning and its identity is not lost. Reconstruction is of a business already in existence implies that there must be a continuation of the activities of business of the same industrial undertaking where the ownership of a business or undertaking changes hands that would not be regarded as reconstruction. This judgment has specifically been approved by the Supreme Court in Textile Machinery Corpn. Ltd. v. CIT [1997] 107 ITR 195. As regards the splitting up of a business, the relevant test is whether an undertaking is formed by splitting up of a business already in existence. Unless the formation of the undertaking takes place by the splitting up of a business already in existence, the negative prohibition would not be attracted. In the present case, the entire business of TG-2 and TG-3 power plant was transferred to the assessee. The undertaking of the assessee was not formed by the splitting up of the business. On this issue, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are complied with by the assessee, the benefit extended by the provisions has to be granted to the assessee. The amalgamation of one company with the other company cannot be regarded as a splitting up or reconstruction or by a transfer of a new business of the plant and machinery of the old business. With reference to the Companies Act, the amalgamation was also for the benefit of the two companies, i.e., amalgamating and amalgamated company and in the public interest and also in the interest of the shareholders. Viewed from any angle amalgamation cannot be regarded as a splitting up of the company for the purpose of negativing the claim under the Income-tax Act, which has been statutorily conferred on the company, if such companies fulfil the conditions stipulated therein. Hence, we are of the view that the order of the Tribunal granting the benefit of sections 80HH and 80-I to the assessee-company cannot be stated to be illegal or against the statutory provisions. A similar view has been taken by the Bombay High Court in the case of CIT v. Dandeli Ferro Alloys P. Ltd. [1995] ITR 1, in which the Bombay High Court held that the facts on record clearly established th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame principle is applicable in the instant case. Admittedly, the undertaking was in existence since 2002. The proprietorship concern changed into a partnership firm. The benefit under Section 80-IB of the Act is available to the partnership firm and the conditions imposed under Section 80-IB(2)(i) does not come in the way. 65. Thus, the sanctity of the CBDT Circular has been upheld in the context of section 80IB, confirming that the tax holiday moves along with the undertaking and the ownership has no relevance. Similar decision is also rendered by Hon ble Punjab Haryana High Court in the case of Mega Packages [2011] 203 Taxman 236 while considering the eligibility of deduction under section 80-IC on conversion of proprietorship concern into a partnership firm and Hon ble Madras High court in the case of Heartland KG Information Ltd 359 ITR 1. 66. Thus, the crux of all the above decisions clearly suggest that deduction u/s 80IA is available to undertaking and change in ownership does not mean that unit is established by split up or reconstruction of entire business. Considering ratio laid down by various courts as referred supra, assessee is entitled to deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year was withdrawn. 68 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. 34. Respectfully following the above decision, we dismiss the ground raised by the revenue. 35. In the Ground No.8, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law the Id. CIT(A) erred in directing the assessing officer that auditor s fee and director s remuneration (indirect expenses) should not be apportioned for computing deduction u/s 80IA of the Act? 36. On identical issue in Assessee s appeal, in the Ground Nos.7 to 10 following issue is raised: Ground No. 7: Denial of claim of deduction u/s. 80IA in respect of Power Plant (TG2) at Wadi: On the facts and circumstances of the case and in law, the Ld. CIT (A) was not justified and grossly erred in confirming the denial of claim of deduction u/s 80IA in respect of Power Plant namely TG2 at Wadi in the state of Karnataka. Ground No. 8: Apportionment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such expenditure is required to be made. To that extent, Ld.CIT(A) has accepted the plea of assessee and such fact is not controverted by Ld. DR hence finding given by Ld.CIT(A) to that extent is upheld. Further, on this issue, coordinate bench in the case of Ambuja Cement Limited, holding company of assessee in ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019(for A.Y. 2010- 11 to 2012-13) vide order dated 07/11/2022 has held as under: 108. We are unable to see any merits in the stand of the assessee that the head office expenses cannot be allocated to all the units, as deductions and allowance of eligible units are 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para No 11.4.1 to 11.4.6 of his order and held as under: 14.4.1 I have considered the appellant s contention that the AO had no power to refer the valuation of Bhupendra Land to the DVO. The relevant provision of section 55A under which the reference was made read as under(as applicable to at the time when reference was made): 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value ; (b) in any other case, if the Assessing Officer is of opinion (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act, the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher than the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not justified. 8. The contention of the revenue that in view of the amendment to Section 55A(a) of the Act in 2012 by which the words is less than the fair market value is substituted by the words is at variance with its fair market value is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 2012 amendment was made effective only from 1 July 2012. The Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the present case is Section 55A(a) of the Act as existing during the period relevant to the Assessment Year 2006-07. At the relevant time, very clearly reference could be made to Departmental Valuation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value. 9. The contention of the revenue th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is is at variance with its fair market value . The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions directly contrary to decision of Hon'ble Jurisdictional High Court referred supra. The decisions referred by Ld. DR are in the context of different facts hence same cannot be relied upon. Considering the binding decisions of Hon'ble High Court referred supra, AO was not justified in considering fair market value of land based upon DVO s report obtained u/s 55A of the Act. This ground of appeal is accordingly allowed. 41.1 Respectfully following the above decision in assessee case, we dismiss the ground raised by the revenue. 42. In the Ground No.10, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law the Id. CIT(A) was right in deleting the addition of provision for normal gratuity in computing book profit u/s 115JB of the Act? 43. Similar issue was considered by us in the Department Appeal Ground No 12 in AY 2005-06 and held as under: 85. 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 repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Year 1990- 91 (ITA No. 2361/Mum/1995), Assessment Year 2002-03 (ITA No. 4987/Mum/2007 others) and Assessment Year 2003-04 (ITA No. ITA. No. 5259 4895/Mum/2007 Assessment Year: 2004-05 4242/Mum/2007), we confirm the order of CIT(A), and hold that provision for Normal/Additional Gratuity of INR 5,86,82,751/- is in the nature of provision for an ascertained liability 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, Ground No. 9 raised by the Revenue is dismissed. 86. Respectfully following decision of coordinate bench referred supra, addition of provision for gratuity made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 44. Respectfully following the above decision, we dismiss the ground raised by the revenue. 45. In the Ground No.11, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, the Id. CTT(A) was right in deleting the addition of provision for wealth tax in computing book profit u/s 115JB of the Act? . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7;. 80,00,000/-. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - 37.3 I have considered the submissions made on behalf of the appellant. Respectfully following the decision of the Hon ble Bombay High Court in the case of Echjyay Forgings Ltd. (supra) and the Hon ble Special Bench of Kolkata Tribunal in the case of Usha Martin Industries Ltd. (supra) as well as my own order in appeal no. CIT(A)-I/IT/232/04- 05 for AY 1998-99 stated herein above, the addition made by the Assessing Officer is deleted and this ground of appeal is allowed. . On appraisal of the said finding, we noticed that the claim of the assessee has been allowed in view of the decision of Bombay High Court in the case of CIT Vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 (Bom) and JCIT Vs. Usha Martin Industries Ltd. (2007) 104 ITD 249 (Kolkata Tribunal) SB. We also noticed that the matter of controversy has been adjudicated by CIT(A) for the A.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 115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the Tribunal has, vide common order, dated 13.03.2019, passed in ITA No. 4242/MUM/2007 ITA No. 4988/MUM/2007 has held as under: 34. Under this issue the revenue has challenged the deletion of addition made in respect of VRS expenditure pertaining to earlier years in computing Book Profit u/s 115JB of the Act in sum of ₹. 18,69,64,996/-. The relevant finding has been given in CIT(A) in Para No. no. 27.4. On appraisal of the above said finding, we are of the view that the CIT(A) has allowed the claim of the assessee on the basis of decision of the case titled as Apollo Tyres Ltd. CIT (2002) 255 ITR 273 (SC). We also noticed that the issue has already been covered in favour of the assessee in the assessee s own case for the A.Y. 2002-03 in ITA. No.4987/M/2007. The facts are not distinguishable at this stage also. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(A) has allowed the claim of the assessee rightly, hence, the finding of the CIT(A) is not liable to be disturbed at this stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. 6.5. In view of the above, Ground No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of ACIT Vs Vireet Investments Pvt Ltd [(2017) 82 taxmann.com 415 (Del SB)]. The assessee gets relief on this point as well. 136. Considering such facts and decisions referred supra, it is held that disallowance u/s 14A cannot be made while computing book profit u/s.115JB of the Act. This ground of appeal in departmental appeal is dismissed. 54. In the result, appeal filed by department is dismissed. ITA NO. 6638/MUM/2018 (ASSESSEE S APPEAL) 55. We now take up the appeal filed by the Assessee in ITA No 6638/MUM/2018. 56. In the Ground No.3, Assessee has raised the following grievance: Ground No. 3 Disallowance of club expenses amounting to Rs. 60,06,792/- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified arid grossly erred in confirming the action of AO in disallowing Club Entrance Fee of Rs. 60,06,792/- as expenditure not incurred wholly and exclusively for the purpose of the business. Ground No:4 On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in disregarding and not following the order of the Hon'ble Income-tax Appellate Tribunal ('ITAT') in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court and of the Tribunal in Assessee s own cases specified herein above, we decide this issue in favour of the Assessee. Accordingly, order of CIT(A) to delete the addition of INR 17,45,829/-, consisting of expenditure incurred on club entrance fee of INR 15,00,000/- and subscription fee of INR 2,45,829/-, is confirmed. Ground No. 1 of the Departmental Appeal is dismissed. 25. It is further observed that on identical issue, Coordinate bench in Para No. 94 to 96 in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 5927/Mum/2012 (for A.Y. 2005-06) vide order dated 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. 58. Respectfully following the above decision, we allow the ground raised by the assessee. 59. In the Ground No.11, assessee has raised the following grievance: Without prejudice to Ground No. 8, 9 and 10; Ground No. 11: On the facts and in the circumstances of the case and without prejudice to above Grounds taken here-in-above, in the unlikely event if it is held that indirect Head Office expenses (and R D exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. 72 It is an undisputed fact that claim for deduction u/s.80IA was made in notes to return of income but only Form 10CCB was filed only before Assessing Officer. It is observed that the conditions mentioned in above referred section 80IA (7) for furnishing Form 10CCB along with return of income is directory in nature as held by various High courts discussed in this para. Hon ble Karnataka High Court in case of Sutures India (P.) Ltd. Reported in 125 taxmann.com 226 has held as under: Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Audit report) - Assessment year 2003-04 - Whether assessee-company could file audit report in Form no. 10CCB even at appellate stage so as to be eligible for deduction under section 80-IA - Held, yes [Paras 8 and 9] [In favour of assessee] 73. Further, the Hon ble Allahaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-Tax Act, 1961 was not filed along with the return of income but was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance for grant of additional depreciation in terms of section 32(1)(iia) of the Act. On appeal against the decision of the High Court dismissing the Department s appeal from the order of the Tribunal holding that the assessee was entitled to claim deduction under section 80-IB where the audit report in form 10CCB in support of the claim was not filed with the return but before the assessment was completed: The Supreme Court dismissed the appeals. 75. Considering the binding decision of various High Courts including Supreme Court, deduction u/s.80IA cannot be denied merely on the ground that Form 10CCB was filed during the course of assessment proceedings. It is observed that CIT(A) has denied such deduction on the ground that books of account for such unit was not audited before the due date of filing return of income but provisions of the Act as relevant in year under consideration nowhere states that such books of account of separate unit need to be au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking the judgement of the Hon ble Supreme Court in the case of Goetze (India) Ltd. (supra) is not applicable in the present case as no fresh claim was made in the assessment proceedings, but it is a case where a claim put-forth in the return of income was only quantified during assessment proceedings and thus the Assessing Officer ought to have entertained the impugned claim. Alternatively, it is contended that the CIT(A) enjoys plenary powers of the Assessing Officer, and following the judgment of the Hon ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT, (1991) 187 ITR 688, the claim should have been entertained by him as the complete facts were on record. In this context, the learned counsel referred to the decision of the Pune Bench of the Tribunal in the case of Jain Irrigation Systems Ltd. vide ITA No.1319/PN/2009 dated 30.01.2012 wherein the import of the judgment of the Hon ble Supreme Court in the case of Goetze (India) Ltd. (supra) has been explained on the basis of the judgment of the Hon ble Delhi High Court in the case of CIT vs. Jai Parabolic Springs Ltd., (2008) 306 ITR 42 (Del), in the following words :- 5. We have carefully considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt was not excluded while computing the total income. In the short span of time allowed to us to file the return u/s. 153A, the exact quantification of the retention money could not be worked out. Hence, we will submit the details thereof later. But for the time being, we submit that the retention money in the various contracts is not taxable in view of the various decisions including the decisions cited below wherein it is held that the taxability of this amount is to be considered in the year in which this amount is due to the assessee from the contractee. (a) CIT v Associated Cables P. Ltd. (2006) 286 ITR 596 (Bom.) (b) DCIT v Spirax Marshall Ltd. (2007) 109 TTJ (Pune) 593 (c) National Heavy Engg. Co. Op. Ltd. v DCIT (2007) 105 ITD 485 (Pune) Inadvertently, in the Original Return of Income this amount was not claimed as deduction. We request Your Honour to kindly grant us appropriate deduction while completing assessment. We shall submit the necessary details and quantification of claim during the course of assessment. 20. The aforesaid Note clearly depicts the claim of the assessee to the effect that the retention money in various contracts retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to reject assessee s impugned claim for assessment years 2007-08 and 2008-09 on the ground that the claim was made by way of a letter during the course of assessments and not in the return of income. 23. The third objection which has been raised by the Revenue is in terms of a discussion made by the CIT(A) in para 3.6 of the impugned order. According to the CIT(A), if the claim for excluding retention money was entertained and allowed, it would result in the determination of total income at a figure below the income originally returned/assessed and thus the same was not permissible. This objection of the Revenue, in our view is no bar to entertain the aforesaid claim, keeping in mind the ratio of the judgement of the Hon ble Supreme Court in the case of CIT vs. Shelly Products Anr., (2003) 261 ITR 367 (SC) and also the judgement of the Hon ble Gujarat High Court in the case of Gujarat Gas Co. Ltd. vs. CIT, 245 ITR 54 (Guj). 24. On the basis of the aforesaid discussion, in conclusion we hold that in so far as the assessment years 2007-08 and 2008-09 are concerned, the claim of the assessee for exclusion of income on account retention money withheld by contractees/cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The grievance of the Revenue before us is that the impugned order is unsustainable as it is a passed in the face of the Apex Court Order in Goetze (India) Ltd. (supra). It is submitted that the impugned order could not have held that the claim for deduction could be entertained by the Assessing Officer in the absence of the same finding a place either in return of income or in the revised return of income. It is further submitted that in view of the decision of the Apex Court in CIT v. Sun Engineering Works (P.) Ltd.[1992] 198 ITR 297/64 Taxman 442 a re- assessment consequent to re-opening of the assessment cannot lead to reduction of income which had been originally assessed to tax. In the above view, it is submitted that the impugned order of the Tribunal is not justified and admission of the appeal is warranted. 9. For the purpose of the present appeal, the issue whether or not the claim of quantification made by the respondent before the Assessing Officer for the subject assessment years would be a fresh claim or not is academic. This in view of the fact that the impugned order has held that even if one accepts that the quantification of the amount of deduction ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is pending, would be treated as non est in law. Further, Section 153A(1) of the Act itself provides on filing of the return consequent to notice, the provision of the Act will apply to the return of income so filed. Consequently, the return filed under Section 153A(1) of the Act is a return furnished under Section 139 of the Act. Consequently, the respondent-assessee is being assessed in respect of abated assessment for the first time under the Act. Therefore the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section 153A of the Act and the case laws on the provision of the Act would equally apply. 12. This Court in Pruthvi Brokers Shareholders (supra) while dealing with a return of income filed under Section 139(1) of the Act has held that an assessee is entitled to raise a fresh claim before the Appellate Authorities, even if the same was not raised before the Assessing Officer at the time of filing return of income or by filing a revised return of income. This Court also placed reliance upon decision of the Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of return of income whereas in the case before High Court claim was made in the revision petition filed u/s.264 of the Act. It is observed that while passing the assessment order or CIT(A) s order, though AO/CIT(A) has not referred to provision of section 80A(5) of the Act, the Ld. DR has only raised this issue in her submission but such provision of the Act cannot be made applicable as in present case claim was made in notes forming part of return of income which is not denied by the lower authorities. The issue relating to filing of Form 10CCB or quantum of deduction is already discussed in preceding para hence no separate discussion is required. 80. It is observed that AO has not disputed the quantum of deduction u/s.80IA nor disputed whether assessee is eligible for deduction u/s.80IA on industrial undertaking relating to Rail Infrastructure facility, it is relevant to refer to decision of co-ordinate Bench in the case of Ambuja Cement Ltd. in ITA No. 1889 and 1241/Mum/2018,2384, 2958, 3475 and 3843/Mum/2019vide its order dated 07.11.2022 has held as under: 87. So far as this grievance of the assessee is concerned, only a few material facts need to be taken note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal but without success. Learned CIT(A) reiterated the same arguments and upheld the stand of the Assessing Officer. The assessee is not satisfied and is in further appeal before us. 88. 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. 89. We find that the very case, on the basis of investigation in which the authorities below had decided the matter in favour of the assessee, came up before a coordinate bench of this Tribunal, and, in the said case, the matter was decided in favour of the assessee. In the said judgment, reported as Ultratech Cement Ltd Vs ACIT [(2017) 88 taxmann.com 907 (Mumbai)], the coordinate bench has held as follows: 9. During the course of assessment AO disallowed assessee's claim of deduction u/s.80IA in respect of profit of rail systems. The assessee made this claim on the ground that it had earned profit by operating its rail systems at Hirmi [Chhattisgarh], Tadipatri [AP], Arakkonam [Tamil Nadu] and Durgapur [West Bengal]. In the context, during the assessment proceedings it was explained that the assessee had inherited those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks] to the site of cement plants of the company so as to enable it to transport its goods [raw material cement] from/to their plant sites itself [so that it could avoid transportation through the roads till the nearest railway station and loading and unloading etc]; that on such request the railway authorities conducted survey and laid down sidings and charged the assessee for laying out the railway track and other related infrastructure. The AO also noted that the wagons were actually run on those sidings by the railway authority and not by the assessee company. The AO also took note that railway authorities had posted its staff for weighing raw material/ cement bags loaded/unloaded by the assessee; and that all activities were directly or indirectly being carried out by the railway authorities and the assessee only reimbursed the expenses or charges levied by the railways in r/o siding maintenance etc. as per the agreement. The AO inferred that the so called rail system [of the assessee company] is not a self reliant, independent unit; and that it is providing services to the cement plants of the assessee company only. The AO also stated that railway department do not allow o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) that the L T Ltd. on whose request the private sidings were set up at all these four locations, never claimed any such deduction u/s 80IA(4). The deductions are being claimed by the assessee company since AY. 2004-05, after the various cements plants were transferred to the assessee company [in the year 2003- 04] as per demerger scheme. In AY. 2004-05, claim was made [for the first time] in respect of such Rail System at Hirmi. Then in AY. 2007-08, it started claiming deduction in respect of rails systems at Tadipatri and Arakkonam and then in AY. 2008-09 for Durgapur also. From AY. 2009-10 and onwards the claim pertains to all the four units. 13. The CIT(A) further noted that in Ays. 2004-05 2005-06, the Hon'ble ITAT vide its order dated 20.08.2009 in ITA Nos. 7735 7736/Mum/2007 had decided this issue in the favour of assessee. Later that decision of the tribunal was followed by the ITAT in its [assessee] case in AY. 2006-07 [ ITA No. 2604/M/09 order dated 31.5.2010] and in AYs 2007-08 2008-09 [ITA Nos. 8143/mum/2010 and 1813/Mum/2012, order dated 28.02.2014]. The relevant part of the Tribunal's decision in AY. 2004- 05 is reproduced hereunder: 13. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Sutlet Cotton Mills Ltd. in 116 ITR 1 and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be entitled to benefit of Sec 80IA and an assessee who does not raise internal invoices would not be entitled to such benefit. 13.2. The assessee further submitted that Sec. 80IA(8) itself contemplates 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 further submitted that the section itself envisages situation of captive consumption. Reliance was placed on the decision reported in 59 ITR 514 (Guj.) and 254 ITR 17 (Bom). 13.3. Further reliance was also placed on the decision of the Supreme Court in the case of Tata Iron Steel Company Ltd. in 48 ITR 123 and stated that in that case, the assessee was engaged in the business of extraction of iron ore and manufacturing of iron and steel therefrom. The final product sold by the company was the finished iron and steel. Under some statute, a cess was leviable on the annual net profits derived from the mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It is was further submitted that the rail system is not formed by splitting up or reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore argued that the rail system is not a part of the cement unit but is an, independent unit. It was further submitted' that the conditions specified in Sec. 8OIA(4)(i) in r/o an infrastructure facility are fully satisfied in the present case. The rail system is owned by the assessee company which is a company registered in India. The assessee has entered into an agreement with the Railways for operating and maintaining the new infrastructure facility. It has started operating and maintenance the infrastructure facility after 01.04.1995. 14. After considering the submission and perusing the material on record, the CIT(A) was satisfied with the explanation of the assessee and taking into consideration the various case laws held that the assessee is eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean that the rail system is not a profit centre. It is also found that all the doubts raised by the AO in the assessment order have been fully explained by the appellant the AO has himself stated in the assessment order that the rail system was developed by L T Ltd which has been inherited by the appellant as a result of the demerger and Circular No. 733 dated 03.01.1996 categorically stated that benefit of sec. 80IA is applicable to development of rail system and there is no gain saying that fact that the appellant has developed the rail system and is operating and maintaining the same. After perusal of the facts as well as the judicial pronouncements quoted above it is therefore held that the appellant is eligible for deduction u/s 80IA in r/o profits from rail system. In view of the same, the AO is directed to allow deduction u/s 80IA of Rs. 15,64,33,576/-17. As stated above neither the findings of the Id CIT(A) could 'be controverted by the Id DR nor any other material was brought on record to establish otherwise. Therefore in view of the uncontroverted rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would arise by charging the freight thereon. 20. The CIT(A) further observed that as per' the agreement, the railway track, signals, level crossings etc were laid out on the cost of L T Ltd. The cost of maintenance was also to be borne by L T Ltd. [and now by the assessee]. On that only expenses are incurred and there would be no profit element. Then the issue arises of running the wagons onto those tracks. As per the agreement, the assessee was not permitted to run the wagon onto those tracks. 21. As per CIT(A), it is not a case of running of railways [goods train] by L T Ltd. or the assessee company on those private sidings and as such the assessee did not run any rail system onto those private sidings. Therefore, it cannot be said that the assessee company had operated any rail systems at all. Therefore the deduction u/s 80lA would not be available to it onto the profit, if any, from such rail systems. 22. The CIT(A) also observed that there is very limited profit on operation of such rail system and the claim made by assessee u/s.80IA is exorbitant. 23. In view of the above discussion, the CIT(A) concluded that assessee's claim of deduction u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supervision of the Railways. Clause 6 is specifically provided for payment in advance to the railway administration, the total estimated cost of the work done by the party and thus by the railway administration. Clause 7(a) stipulate that assessee will provide and deliver at site the permanent way and other materials in accordance with the railway administration standard and specifications. Clause 17 stipulate that assessee shall provide labour for and bear the cost of all Operations on the siding. Clause 9(b) provides for maintenance and other charges for the operation of the sidings at assessee's cost and expense to the satisfaction of railway administration.' 26. Learned AR also argued that all the conditions of Section 80IA(4) was complied with for claiming deductions. Learned AR also invited our attention to the observation of CIT(A) with respect to the freight rate insofar as CIT(A) has wrongly considered the rate for quintals as against per Metric Ton adopted by assessee while computing eligible amount of deduction u/s.80IA (4). It was also contended by learned AR that assessee has started claiming deduction for rail system u/s.80IA only from A.Y.2004-05 since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd. v. CIT [1979] 2 Taxman 22/[1980] 123 ITR 669 (GUJARAT) 8. Ace Multi Axes System Ltd. v. Dy. CIT [2015] 228 Taxman 98/[2014] 49 taxmann.com 168/367 ITR 266 (Karnataka) 9. ITO v. Smt. Urmila Bhandari [IT Appeal Nos.766, 2593 (Delhi) of 2013, dated 20-10-2014] 10. Dy. CIT v. Selvel Advertising (P.) Ltd. [2015] 58 taxmann.com 196 (Kol.-Trib.) 11. Century Enka Limited v. Dy. CIT [2015] 58 taxmann.com 318/154 ITD 426 (Kol.-Trib.) 12. Janak Dehydration (P.) Ltd. v. Asstt. CIT [2011] 44 SOT 93 (Ahmedabad) (URO) 13. U.P. State Bridge Corporation Ltd. v. Dy. CIT [2015] 62 taxmann.com 61/70 SOT 517 (Lucknow - Trib.) 14. Asst. CIT v. Apex Packing Products (P.) Ltd. [IT Appeal Nos. 145 to 150 (PNJ) of 2013, dated 3-1- 2014] 30. On the other hand, it was vehemently argued by learned DR that rail system of the assessee company was simply the profit siding and not any inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and revenue revolves around assessee's eligibility for claim of deduction u/s. 80IA (4) of the Income-tax Act. From the record we found that assessee UltraTech Cement Ltd. ('UTCL') has acquired the cement business of Larsen Toubro Limited (L T') along with the Rail systems at Hirmi, Tadipatri, Arrokonam and Durgapur in the FY. 2003-04. These Railway systems were developed on or after 01/04/1995 by the L T. year wise details of the aforesaid rail systems are as follows: Unit I Rail system Undertakings Year of Commencement of operations (A. Y.) Initial year of claim (A.Y.) Rail system at Hirmi in the state of Chhattisgarh 2000-01 2004-05 Rail system at Tadipatri in the state of Andhra Pradesh 1999-00 2007-08 Rail system at Arakkonam in the state of Tamil Nadu 2001-02 2007-08 Rail System at Durgapur in the state of West Bengal 2002-03 2008-09 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilitate the transportation of goods for the assessee from and upto the factory premises, and therefore the Agreements entered into by the assessee with the Indian Railways cannot be regarded as required agreements between the Govt. and the assessee. In this respect the assessee submitted as under before the lower authorities. (a) as per section 80- IA(4)(i)(b) the agreement has to be entered with the Central Govt or a State Govt or a Local Authority or any other statutory body for (i) developing or (ii) Operating and Maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. Indian Railways is the statutory body under the Indian Railways Act. (b) The provision of Sec.80-IA (8) contemplates a situation where goods or services are transferred by an eligible undertaking and vice versa. Undoubtedly therefore, the section itself envisages situations of captive consumption. (c) Further as mentioned in clause 15 of the agreement, the rail systems developed by the appellant can be made available to any third party with the prior approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) Clause No. 6 - Payment by Applicant against the total estimated cost - wherein it is mentioned that, The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration (c) Clause No. 7(a) - Permanent way materials - The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant. (d) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifies that tax holiday benefit u/s. 80IA of the Act was also available to private enterprises which only built and leased out the rail system to the Indian Railways. In spite the absence of activities-'operate and maintain' the rail systems, such 'infrastructure facilities' were also declared as eligible to claim deduction under the said section. Further, the circular also states that rail systems developed other than under the BOLT scheme were also eligible for benefit u/s 80IA. In case of the assessee, the clarification of benefits u/s. 80IA being available to those rail systems who do not 'operate and maintain' the systems clearly establishes that, enterprises who in fact operate and maintain the rail systems were certainly eligible for tax holiday benefits. As the assessee has entered into agreements with the railway authorities to develop, operate maintain the rail systems, which in fact the company has done from the initial day. There was indeed an 'infrastructure' facility eligible for deduction u/s 80lA. We also found that the Hon'ble ITAT in assessee's own case for AY. 2006-07, has categorically allowed the deduction u/s. 80-IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue authorities on applicability of CBDT circular No.733 on BOLT schemes, systems developed under BOLT scheme are also eligible for 80-IA benefit, and in no way restricts the deduction u/s. 80IA to other rail systems. We found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80IA for its rail system after dealing with the Circular No. 733 dtd 3.1.1996. 46. Therefore the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80 IA(4)(i) and in no case it can be inferred that they are not the required agreements under section 80IA. 47. We also found that no siding charges are levied by Indian Railways for the rail systems developed by the assessee. The assessee has developed, operates and maintains the rail systems. The systems are being operated by the assessee as permitted under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time to time. The entire cost was borne by the assessee and is appearing in the balance sheet of the assessee as placed on record. We have also verified the same and found it correct. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant. (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reasons of negligence or non- observance of such rules, regulations and orders .... Further, the appellant carries out all the operations for smooth movement of its goods, viz. Shunting of the Wagons, placing of the wagons at appropriate locations, Loading / Unloading of Wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, Weighing of Wagons on Motion Weigh Bridges, Maintaining signa ling systems, Wagons, Couplings, Rake f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amalgamated Coalfields Ltd. v. Janapada Sabha AIR 1964 SC 1013 Cruch of South India Trust Association v. Telugu Church Council [1996] 2 SCC 520 51. From the record we also found that the overall profits of the company have increased due to such commercial benefits and the same should have been treated as the revenue of the rail systems, which is the Fair Market Value of the services provided by the undertaking as per the provisions of Sec. 80IA(8) and the assessee is entitled for benefit u/s 80IA accordingly. However, the basis adopted for calculating the revenue from rail system by the assessee has been conservatively considered as lower of the freight chargeable through Rail and Road freight saved. The rail freight being lower is considered after further discounting it by 50% based on the circular of Indian Railways for the freight chargeable upto the nearest railway station. 52. We also found that assessee has furnished all the information with regard to No. of Railway Engines / Locomotives and Railway Wagons owned by the assessee before the lower authorities which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee and expenses which were incurred earlier for loading and unloading of materials at the plant as well as the nearest Indian Railway station have been avoided and saved and are considered as income of the rail system arising due to setting up of such integrated rail system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia Co. Chartered Accountants, alongwith Balance Sheet, P L Account, Schedules forming part of Balance sheet and P L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct. 56. With regard to CIT(A)'s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply a private siding and not any infrastructure facility of Public Utility therefore the infrastructure of such private sidings should be treated as Private Facility , we observe that Section 80IA(4) of the Income-tax Act, 1961 does not require the infrastructure facility to be a public facility for allowing deduction under section 80IA. The explanation to section 80IA(4) defines the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holiday for construction of infrastructure facility in the form of railway which is meant for captive consumption. 58. We have carefully gone through the terms and conditions of the agreement entered by the assessee with the railway authority, a perusal of clause 19 of the Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discretion and prior permission of the railway authorities thereby rendering the facility open for general public at large. Hence, such a facility is in fact a public utility. 59. With regard to CIT(A)s conclusion for the A.Y. 2010-11 at page 42, to the effect that the agreements entered between the assessee Company Railway Department, contained the terms conditions for construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and operating any infrastructure facility which fulfils all the following conditions, namely:- (a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1 st day of April, 1995: 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income-tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per clause (b)of Section 80IA (4)(i) an agreement has to be entered with the Central Government or a State Government or a Local Authority or any other statutory body for (i) developing or (ii) Operating and maintaining or (iii) Developing, Operating and Maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee. 71. With regard to allegation of the CIT(A) that the assessee has never claimed that it is hauling the wagons on the entire siding, we found that hauling of wagons is only one of the activity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is borne by it. 72. From the record we also found that even the maintenance of the Rail system such as alignment of track gauge maintenance, patching of ballast, maintenance of railway track sleepers, signalling points and railway gate cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises 79. All the aforesaid services are carried out by the railway system inside the factory premises. Further even the maintenance of the Rail system such as alignment of track gauge maintenance, patching of ballast, maintenance of railway track sleepers, signaling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise on operation maintaining that system under the provisions that existed at the relevant time [prior to 01.04.2002] when such infrastructure facility is said to have become operational. As per our considered view one of condition for claiming deduction under the pre-amended section 80IA(4) (i.e. prior to AY 2002-03) stipulated that the assessee should enter into an agreement with the Government (Central or State) or other authorities mentioned therein for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility. Further, the agreement should also provide for transfer of such infrastructure facility to such authorities within the period stipulated in the agreement. The Central Government realizing the need to encourage investment particularly in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agreement with the Government for developing / operating /maintaining the infrastructure facility, and (c) It has started operating and maintaining the infrastructure facility on or after April, 1995. 87. Thus, under the amended conditions of the section 80-IA(4) i.e. post AY 2002-03, L T as well as UTCL were eligible for claiming deduction u/s 80IA. As per section 80IA(2), the deduction is available at the option of the assessee, for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. The assessee has started claiming deduction post AY. 2004-05 and is within the period of available twenty years. Under section 80IB, u/s 80lC, 80ID and 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit. 88. In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng deduction under section 80-IA, it has to be determined at end of relevant previous year that as to whether assessee is registered as SSI and there is no condition in Act that an industrial undertaking should fulfil all conditions as laid down under section 80-IA in very initial year itself and not thereafter. 90. Even as per fiction created by section 80IA(5), the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year . Prior to 1-4-2000, section 80IA(12) defined the initial assessment year for various types of eligible assessees. However, after the amendment by the Finance Act, 1999, the definition of initial assessment year has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in section 80IA(2) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined. 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries Distilleries Ltd. v. Asstt. CIT [2009] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2004-05 onwards as it satisfied all the conditions as prescribed u/s 80IA(4). Section 80IA(12) provided that in the scheme of amalgamation or merger, the deduction is available to the amalgamated / resulting company. The relevant provision of sec. 80IA(12) reproduced hereunder:- Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger. (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. 95. Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the block of 20 years. Based on the same, year-wise commencement of operation as submitted during the course of hearing is reproduced hereunder in a tabular format: Particulars Kymore Tikaria Wadi 1 Wadi 2 Initial Assessment Year of claim AY 2007-08 AY 2007-08 AY 2007-08 AY 2007-08 Date of Commencement of Operation 27/07/1998 21/06/2003 10/07/2003 01/08/2006 1st Assessment Year of Commencement AY 1999-00 AY 2004-05 AY 2004-05 AY 2007-08 10th consecutive AYs from 1st Year of claim i.e. AY 2007-08 AY 2016-17 AY 2016-17 AY 2016-17 AY 2016-17 83. The learned A.R. has further pointed out that if deduction u/s. 80IA is denied in A.Y. 2007-08 and 2008-09 merely on technical ground, it will be entitled for deduction u/s. 80- IA for such units for two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave encashment amounting to Rs. 6,98,40,495/-on provision basis based on actuarial valuation in computing the total income. 65. The Assessing Officer has discussed this issue at Para No 15 of assessment order. The Assessing Officer has referred to provisions of section 43B (f) and observed that provision for leave encashment cannot be allowed as deduction. 66. In appeal, Ld.CIT (A) has discussed the above issue at Para No 16.4.1 16.4.2 of his order which held as under: 16.4.1 The decision of the Hon'ble Calcutta High Court is not binding as it is not the jurisdictional High Court. Further, the order of the Hon'ble High Court has been stayed by the Supreme Court. Therefore, I proceed to decide the matter treating that provisions of Sec. 43B(f) continues to be part of the statute. 16.4.2 As per the provisions of Sec. 43B(f), deduction for leave encashment can be allowed only on payment basis. There is no ambiguity whatsoever in the provisions. Therefore, in principle the action of the AO is upheld. In the course of the appellate proceedings, the AR of the appellant submitted that the AO wrongly disallowed certain expenses in respect of which payments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed. 90. Respectfully following decision of coordinate bench referred supra, addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 72. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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. Accordingly, Ground No. 18 raised by the Revenue is allowed. 142. However, during the course of the hearing the Ld. AR also referred to the decision of Hon ble Karnataka HC in the case of Best Trading and Agencies Limited v. DCIT [119 Taxmann.com 129]. The finding of the said decision at Para No. 13 is reproduced hereunder for ready reference: . 13. sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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