TMI Blog2022 (5) TMI 1596X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.04.1981 due to non-availability of relevant information for computation of fair market value of such asset as on 01.04.1981, Section 55 of the Act was amended by the Finance Act, 2017 shifting the base year from 1981 to 2001 with effect from Assessment Year 2018-19. In our view, AO erred in simply rejecting the valuation report without point out any flaw in the methods adopted by the valuer to estimate the fair market value and/or bringing on record any material to support that value of INR 260 per Sq Mrts adopted by the AO represents the fair estimation of market value. We hold that the AO was not justified in rejecting the valuation report submitted by the Assessee. Accordingly, we direct the AO to determine the capital gains tax liability of the Assessee by taking the value of INR 2,29,81,000/- Per Sq. Mtrs determined by the valuer in the valuation report dated 08.07.2006 submitted by the Assessee as the cost of acquisition of TDRs. Nature of receipts - Sales tax subsidy taxability in computing the total income under normal provisions - Relevance of judicial precedents - HELD THAT:- Judicial precedents rendered in the context of an assessee enjoying incentives und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EME COURT] , and CIT v. Madras Auto Services (P) Ltd [ 1998 (8) TMI 1 - SUPREME COURT] , we confirm the order of CIT(A) of allowing deduction holding the same to be revenue in nature. Provision for Director's Retirement Benefit - We confirm the order of CIT(A) of allowing deduction holding the same to be a liability in praesenti to be discharged at future, capable of being estimated with reasonable certainty. Addition made in respect of provision for bad and doubtful debts in computation of book profit u/s 115JB - HELD THAT:- We remand this issue to the file of Assessing Officer for fresh determination, keeping in view, the provisions of clause (i) to Explanation 1 to Section 115JB(2) inserted by the Finance Act, 2009, with retrospective effect from 01.04.2001, and the principles enunciated in the case of CIT v. Vodafone Essar Gujarat Ltd. [ 2017 (8) TMI 451 - GUJARAT HIGH COURT] In view of the aforesaid directions, Ground stands disposed off. Addition of Wealth-Tax in computation of Book Profit u/s 115JB is to be deleted. Claim of provision for normal additional gratuity in computation of book profit u/s 115JB - Provision for Normal/Additional Gratuity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any of the clauses of Explanation to Section 115JB of the Act. Addition made in respect of revenue generated from trial run production in computation of book profit u/s 115JB is to be deleted as Expenditure incurred during the construction period which is issued by the Institute of Chartered Accountant of India, which is an authoritative body in the matter of laying down the accounting standard. That being so addition made by the Assessing Officer on the ground that the same has been added back in computing income under normal provisions of the Act and the said amount should have been credited in the profit and loss account is neither justified nor tenable. Expenses on VRS pertaining to earlier years in computation of book profit u/s 115JB is to be allowed as applying the principles laid down in the case of Apollo Tyres Ltd. [ 2002 (5) TMI 5 - SUPREME COURT] he accounts of the Assessee have been prepared in accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified by the statutory auditors, and therefore, in absence of any specific clause in Section 115JB(2) of the Act providing for increase of Book Profits by the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made from borrowed funds does not arise. In the appellate proceedings before us, nothing has been placed before us to establish that the aforesaid finding returned by CIT(A) is incorrect/perverse. Accordingly, we confirmed the order of CIT(A) on this issue. Setting off of unabsorbed depreciation of the current previous year with long term capital gain of the current previous year instead of setting it off with long term capital loss brought forward from earlier years - HELD THAT:- The assessee wanted to set off in future but the Assessing Officer declined the claim of the assessee on account of this fact that the claim is against provision of income tax. The CIT(A) has also declined the claim of the assessee on the basis of this fact that Section 71 deals with inter head adjustment and have precedence over section 74 of the Act. Nothing seems to contrary to the law. No law in support of the claim of assessee has been produced before us, therefore, taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. - Shri Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue are before us in crossappeals being aggrieved by the decision of the CIT(A) on various issues. The Revenue has raised 22 grounds of appeal. The Revenue has also raised 3 additional grounds of appeal, vide letter dated 28.01.2008, and 1 additional ground of appeal, vide letter dated 13.04.2010. The Assessee has raised 7 grounds of appeal and 1 additional grounds of appeal, vide letter dated 17.10.2019. We have heard both sides on admitting the additional grounds, we are of the view that the additional grounds raised by the Revenue as well as the Assessee are legal grounds which do not require examination of any facts not already on record. Accordingly, in view of the judgment of the Hon‟ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT:229 ITR 383, the additional grounds raised by the Revenue as well as the Assessee are admitted. 6. The Ld. Authorised Representative of the Assessee appearing before us stated under instructions that the Assessee would only be pressing Ground No. 6 pertaining to setting off of unabsorbed depreciation for the relevant previous year, whereas all the other grounds raised by the Assessee can be disposed of as bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed in subsequent years, reads as under: 8. Ground no. 2 relates to disallowance of payments to clubs. The Assessing Officer made disallowance of Rs. 8,125/- representing payments made by the assessee to clubs. On appeal, it was contended that reimbursement of club fees to employees is an expenditure incurred by the assessee wholly and exclusively for the purpose of business and the expenditure is allowable as deduction u/s 37 of the Act. Reliance was placed on the decision reported in 13 ITD 550. The contention of the assessee was not acceptable to the CIT(A) who confirmed the disallowance observing that no attempt has been made to bifurcate the expenses between those relating to business of the assessee and those involving personal benefit to the employees. We observe that the issue is covered in favour of the assessee by the decision of the jurisdictional High Court in Otis Elevator Co (I) Ltd. 195 ITR 682 (Bom) wherein their Lordships held that payment of club fees made to promote business interest is an allowable expenditure. Following the decision supra this ground is decided in favour of the assessee. (Emphasis Supplied) 8.4. Respectfully following the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be attributed to the acquisition of TDR‟s by placing reliance on the decision of the Tribunal in the case of Jethalal D. Mehta vs. DCIT: (2005) 2 SOT 422 (Mum.) and the judgment of Hon‟ble Supreme Court in the case of CIT vs. B.C. Srinivasa Shetty: (1981) 128 ITR 294 (SC). The Assessing Officer was of the view that the cost of acquisition of TDRs could be taken as cost of acquisition of land surrendered. Accordingly, the Assessee was directed to furnish details of cost of acquisition of land surrendered. In response, without prejudice to the submission that no cost can be attributed to the acquisition of TDRs, the Assessee submitted that since the land surrendered was acquired before 1981, in terms of Section 55 of the Act the fair market value of land surrendered as on 01.04.1981 should be adopted as cost of acquisition. The Assessee submitted valuation report to support the valuation of INR 1,71,44,502/- as the fair market value as on 01.04.1981 by adopting the rate of INR 1,986/- per Sq. Meters. The Assessing Officer rejected the primary argument of the Assessee that no cost can be attributed to the acquisition of the TDR‟s and in principle accepted contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally justified in rejecting the contention of the Assessee that no cost can be attributed to the acquisition of the TDRs. We hold that the AO was also justified in holding that the cost of acquisition of to the TDRs was same as the cost of acquisition of land surrendered which could be determined by taking the fair market value of land surrendered as on 01.04.1981 in terms of provisions of Section 55 of the Act. 9.7. However, we are of considered view that the AO fell into error in adopting cost of INR 260 per Sq Mtrs as the basis for determining cost of acquisition of TDRs in view of the following. The determination of fair market value of land surrendered as on 01.04.1981 required estimation of price of such land. We have perused the valuation report, dated 08.07.2006 submitted by the Assessee wherein to arrive at the estimate/approximation of the fair market value as on 01.04.1981, the valuer adopted two methods. The valuer determined the value by Investment Reversion Method and also by Rent Capitalization Method, and thereafter, taking value of INR 1,986.57 per Sq. Mtrs. determined by Investment Reversion Method, being lower of the value determined by the aforesaid two metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in regd. Valuer report, the value is taken at Rs. 260 per sq.mt. as in the cost of land in question as on 01.04.81 comes out to be Rs. 22,44,495 (8632.68*260) (Emphasis Supplied) 9.8. On perusal of the above, it can be seen that the Assessing Officer has at first rejected the valuation report submitted by the Assessee on the ground that it does not refer to any sale instances. Thereafter, the Assessing Officer has taken value determined by another valuer in a valuation report submitted by another assessee, namely M/s M/s Colour Chem Ltd. without confronting the Assessee with the said valuation report. We note that the valuation report relied upon by the Assessing Officer is not a report of departmental valuation officer and therefore, does not stand on a better footing than the valuation report submitted by the Assessee. Further, no effort has been made by the Assessing Officer to bring on record any instance of sale. We also note that while adopting value of INR 260 Sq Mtrs, the Assessing Officer has not taken into consideration any of the factors relevant for arriving at the value of land such as location, locality, size of the land etc. To the contrary, even after noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y occurrences that are happening before our eyes in regard to the transfer of property. I think, this is one of the key sections that should help us to defeat the free play of unaccounted money and cheating of the Government. (Emphasis Supplied) 9.10. Thus, the opinion expressed by the valuer in the valuation report submitted by the Assessee has its basis in the practical difficulties faced while valuing the capital assets acquired before 1981 on the basis of instances of sale. This was also recognized by the legislature. In order to remove the genuine difficulties in computing the capital gains in respect of transfer immovable property including property acquired before 01.04.1981 due to non-availability of relevant information for computation of fair market value of such asset as on 01.04.1981, Section 55 of the Act was amended by the Finance Act, 2017 shifting the base year from 1981 to 2001 with effect from Assessment Year 2018-19. In our view, the Assessing Officer erred in simply rejecting the valuation report without point out any flaw in the methods adopted by the valuer to estimate the fair market value and/or bringing on record any material to support that value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 23.08.2006, during the assessment proceedings wherein the incentive/sales tax subsidy was quantified at INR 95,12,68,521/-. The Assessing Officer treated the aforesaid incentive/sales tax subsidy of INR 95,12,68,516/- as revenue receipt and rejected the contention of the Assessee that the incentive/sales tax subsidy was a capital in nature and was, therefore, not liable to tax. 10.2. Being aggrieved, the Assessee carried this issue in appeal before the CIT(A), who decided the issue in favour of the Assessee holding as under: 14.9 I have carefully considered the submissions made by the appellant. In my view, sales tax subsidy availed by various units of the appellant constitutes capital receipt in the hands of the appellant. Accordingly, respectfully following the decision in the case of Reliance Industries Ltd. (supra) and Frigsales (India) Ltd. (supra) as well as my own orders for A.Y. 2001-02 in appeal no. CIT(A)-1/IT/87/2004-05, for A.Y. 2002-03, in appeal no. CIT(A)- 1/IT/07/05-06 and A.AY. 2003-04 in appeal no. CIT(A)-1/IT/67/06- 07 disallowance made by the A.O. is deleted. Hence, these grounds of appeal are allowed. 10.3. The Revenue is now in appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had received Capital Investment Subsidy from the Government of West Bengal for setting up manufacturing Unit under the West Bengal Incentive Scheme, 1993. He held that the amount received by the assessee was not allocable towards any capital asset and was in the nature of incentive which was a taxable receipt. 10.1 .... 10.2 . 10.3. We have heard the rival submissions and perused the material before us. We find that the disputed amount was received by the assessee under a particular scheme i.e. West Bengal Incentive 1993. We find that the FAA had relied upon various case laws and decided the issue without examining the whole scheme. On a query by the Bench, the AR informed that the matter of Reliance Industries Ltd. was sent back by the Hon‟ble Supreme Court to the Hon‟ble High Court to decide afresh after considering the provisions of scheme. In our opinion, any scheme in itself cannot be treated revenue or capital in nature to arrive at a definite conclusion one has to consider scheme in entirety. We feel that the issue needs further investigation, therefore, in the interest of justice, the issue is restored back to the file of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we are restoring back the matter to the file of the Assessing Officer for fresh adjudication, who would decide the issue after affording a reasonable opportunity of hearing to the assessee. Ground no. 19 is decided in favour of the Assessing Officer, in part. 10.6. We note that in the assessment year before us the Assessee has received incentive in the form of sales tax subsidy from various state government aggregating to Rs. 95,12,68,516/- as detailed below: Location of Unit Amount Tikaria, Uttar Pradesh 29,92,39,613/- Wadi, Karnataka 37,86,70,711 Sindri, Bihar 11,21,18,,388 Chandrapur, Maharashtra 1,61,2,39,388 Total 95,12,68,521 10.7. We find that Assessing Officer has, in paragraph 9.3 of the Assessment Order, examined the provisions of different schemes and returned a finding that the scheme under which incentive have been claimed by the Assessee are similar to the scheme in the case of Sahney Steel and Press Works Ltd.(supra) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Subsidy being capital or revenue in nature for the purpose of computing income under the normal provision of the Act. The determination of this issue would be relevant for adjudication of Additional Ground No. 2. Accordingly, this issue is also remanded to the file of CIT(A) for adjudication in light of conclusion to be derived by the CIT(A) as to the nature of Sales Tax Subsidy. (Additional Ground No. 1 raised by the Assessee is similar to Additional Ground No.2 raised by the Revenue, and therefore, the same has not been pressed by the Assessee) 10.9. Additional Ground No. 1: Since Ground No. 3, Additional Ground No. 2 and Additional Ground No. 3 raised by the Revenue have been remanded to the file of CIT(A), Additional Ground No.1 raised by the Revenue is disposed off as being infructuous. However, before parting we would like to observe that judgment of the Hon‟ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT: 284 ITR 323 does not curtain the power of appellate authorities to entertain and accept a claim of assessee even if the same is not made by way of a revised return. 11. Ground No. 4: On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of INR 2,23,00,000/- following the decision of Hon‟ble Supreme Court in the case of the Assessee, i.e., CIT vs. Associated Cement Companies Ltd. (1988) 172 ITR 275 (SC), and withdrew the depreciation at the rate of 5% allowed by the Assessing Officer. 11.3. Revenue is in appeal challenging the decision of CIT(A) to delete the addition of INR.2,23,00,000/-. 11.4. The Ld. Departmental Representative relied upon the assessment order. The Authorised Representative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee‟s own case for the Assessment Year 2003-04 wherein the tribunal had granted relief to the Assessee. 11.5. We have considered the rival contentions and perused the material on record. We note that for the immediately preceding assessment year (AY 2003-04), identical issue has been decided in favour of the Assessee. The relevant extract of the common order, dated 13.03.2019, of the Tribunal passed in ITA No. 4242 4988/MU/2007 for the Assessment Year 2003-04 reads as under: 24. Under this issue the revenue has challenged the deletion of addition in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles laid down by the Hon‟ble Supreme Court in the CIT Vs. Associated Cement Companies Ltd. (1988) 172 ITR 257 (SC), and respectfully following the decision of the co-ordinate bench of the Tribunal in the case of the Assessee for the Assessment Year 2003-04, we confirm the order of CIT(A) of setting aside the disallowance of INR 2,23,00,000/- made by the Assessing Officer. Accordingly, Ground No. 4 raised by the Revenue is dismissed. 12. Ground No. 5: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of expenditure of Dry Fly Ash Handing System at Madukkarai of INR.4,57,00,000/- 12.1. During the relevant previous year, the Assessee incurred expenditure of INR.4,57,00,000/- on construction of Dry Ash Handing System at construction at Mettur Thermal Power Station at Madukkarai (hereinafter referred to as MTPS‟) and claimed deduction for the same in the return of income. During the assessment proceedings, the Assessee was asked to explain why the aforesaid expenditure should not be capitalized. In response to the same, the Assessee submitted that the Assessee obtains fly ash, raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that admittedly the Assessee is not the owner of the Dry Flash Ash Handling System. The expenditure did not result in creation of any asset of enduring nature and was incurred for smooth running of the business. Accordingly, applying the principles laid down by the Hon‟ble Supreme Court in the CIT Vs. Associated Cement Companies Ltd. (supra), and CIT v. Madras Auto Services (P) Ltd. (supra), we confirm the order of CIT(A) of allowing deduction for INR 4,57,00,000/- holding the same to be revenue in nature. Accordingly, Ground No. 5 raised by the Revenue is dismissed. 13. Ground No. 6: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made in respect of provision for Director‟s Retirement Benefit at Rs.1,88,97,500/-. 13.1. During the relevant previous year, the Assessee made 'Provision for Director's Retirement Benefit' to the tune of INR 1,88,97,500/- on the basis of actuarial valuation report. However, in the computation of total income filed along with the original as well as revised return, the Assessee had added back the aforesaid amount and thus, did not claimed deduction for the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act of Rs.2,84,53,850/ is the subject matter of the next ground. During the assessment proceedings, the Assessing Officer found that the assessee had created provision for director's retirement benefit on the basis of actuarial valuation and it was added in computing total income. Subsequently, exclusion was claimed before the FAA. As the similar addition was deleted in MAT computation, so, he allowed the claim made by the assessee. 19.1. Before us, the DR argued that the FAA allowed the claim that was not before the Assessing Officer. The DR contended that provision made for Director's Retirement Benefit was made on the basis of actuarial valuation, that it represented a liability in praesenti that was to be discharged at future date. He referred to the case of Bharat Earth Movers (245 ITR 428). He also stated that similar claim was allowed by the Tribunal while deciding the appeal for the AY.1990-91. 19.2.We find that the issue of a certain business liability was deliberated upon and adjudicated by the Hon‟ble Apex Court in the case of Bharat Earth Movers and it was held that if a business liability had definitely arisen in the accounting year and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,88.97,500 12 Contingencies 2,60,43,844 13 Technical fees, interest and royalty 2,07,95,361 Before taking up the specific grounds raised by the assessee, it would be relevant to consider the legal prepositions laid down by the Hon‟ble Supreme Court and the Hon‟ble Bombay High Court. In the case of Apollo Tyres Ltd. Versus CIT:255 ITR 73, the Hon‟ble Supreme Court has, while examining the provisions of section 115J (pari materia to section 115 JB), held as under: 5. The above Speech . In spite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the revenue that it is still open to the Assessing Officer to rescrutinise the accounts and satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. In our opinion, reliance placed by the revenue on sub-section (1A) of section 115J in support of the above contention is misplaced. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies under the Companies Act it is not open to the Assessing Officer to contend that the profit and loss account has not been prepared in accordance with the provisions of the Companies Act, 1956. In the case of Bharat Earth Movers Vs. CIT: 245 ITR 428, the Hon‟ble Supreme Court has, while examining the nature of ascertained and contingent liability, held as under: 4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. In view of the above judicial pronouncements, we proceed to adjudicate the grounds of appeal as under. 14.1. Ground No. 7 : On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to Section 115JB(2) by the Finance Act, 2009, with retrospective effect from 01.04.2001 which reads as under: (i) the amount or amounts set aside as provision for diminution in the value of any asset . 14.1.4. We note that Hon‟ble Gujarat High Court while examining the above provision in the case of CIT v. Vodafone Essar Gujarat Ltd. : (Tax Appeal No. 749 of 2012, reported in 397 ITR 55) has held as under: 24. By way of culmination of above judicial pronouncements and statutory provisions, the situation that arises is that prior to the introduction of clause (i) to the explanation to section 115JB, as held by the Supreme Court in case of HCL Comnet Systems Services Ltd. (supra), the then existing clause (c) did not cover a case where the assessee made a provision for bad or doubtful debt. With insertion of clause (i) to the explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for computation of book profit under section 115JB of the Act. However, if this was not a mere provision made by the assessee by merely debiting the Profit and Loss Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placing reliance on the decision of the Special Bench of the Tribunal in the case of CIT vs. Usha Martin Industries Ltd. : (2007) 288 (18) ITR 63 (Kol) (SB), judgment of Hon‟ble Bombay High Court in the case of CIT Vs. Echjay Forgings P. Ltd. : (2001) 251 ITR 15 (Bom) and the orders passed by CIT(A) for the Assessment Year 1998-99 and 2003-04. 14.2.3. Revenue is in appeal, challenging the relief granted by CIT(A). We have heard the rival contentions and perused the record. While the Departmental Representative relied upon the assessment order, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee‟s own case for the Assessment Year 2002-03 and 2003-04 wherein the Tribunal had granted relief to the Assessee. 14.2.4. We note that the Hon‟ble Bombay High Court has, in the case of CIT vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 has held as under: 4. The short point which arises for consideration in this appeal is, whether the Assessing Officer was right in disallowing the claims for deduction in respect of the five items and ordering addition ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. (Emphasis Supplied) 14.2.6. In view of the above, we confirm the order of CIT(A) and hold that provision for Wealth-Tax of INR 70,00,000/- is not required to be added back while computing Book Profits under Section 115JB of the Act. Accordingly, Ground No 8 raised by the Revenue is dismissed. 14.3. Ground No. 9 : On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing the assessee‟s claim of provision for normal additional gratuity amounting to INR 5,86,82,751/- in computation of book profit u/s 115JB of the I T Act. 14.3.1. During the relevant previous year, the appellant has debited INR 5,86,82,751/- in respect of provision for normal amounting to INR 5,00,00,000/- and provision for additional gratuity amounting to INR 86,82,751/-. According to the Assessee, the provision was created on the basis of actuarial valuation report and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal for the A.Y. 1990-91 as well as my own orders for AY 1998-99 in appeal no. CIT(A)- I/IT/232/04-05 the addition made by the Assessing Officer is deleted and the ground stands allowed in favour of the appellant. 47. On appraisal of the said finding, we noticed that this issue has been covered by decision of Hon‟ble ITAT in the assesee‟s own case for the A.Y. 1990-91 in ITA. No.2361/M/1995 in the A.Y. 2002-03 in ITA. No.4987/M/2007. There is nothing on record to which it can be assumed that the order has been varied or changed in appellate proceeding. Since this issue has been duly adjudicated in favour of the assessee by above mentioned decision of the Hon‟ble ITAT, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. 14.3.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in the case of the Assessee for the Assessment Year 1990- 91 (ITA No. 2361/Mum/1995), Assessment Year 2002-03 (ITA No. 4987/Mum/2007 others) and Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Echjay Forgins (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. 14.5. Ground No. 11: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made in respect of provision for Director's Retirement Benefit at Rs.1,88,97,500/- in computation of book profit u/s 115JB of the Act. 14.5.1. During the relevant previous year the Assessee made 'Provision for Director's Retirement Benefit' to the tune of INR 1,88,97,500/- on the basis of actuarial valuation report. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the ARs of the appellant, I find that provision for director‟s retirement benefit cannot be considered as unascertained liability since the same has been calculated on the basis of actuarial valuation and is squarely covered by the decision of Hon‟ble Apex Court in the case of Bharat Earth Movers (supra). Therefore, provision for director‟s retirement is an allowable deduction in computing profits and gains of business or profession. Further, in my view additions made in computing book profit u/s 115JB on the ground that the same has been added back in the computing total income under normal provisions of the Act is not tenable. Thus, respectfully following the decision of Mumbai High Court in the case of Echjay forgings Ltd. (Supra) and the decision of Hon‟ble Tribunal in the appellant own case for AY 1990-91 as well as my own orders for AY 1998-99 and for AY 2002-03 as discussed herein above the addition made by the Assessing Officer is deleted and this ground of appeal is allowed. 33. Since the case of the assessee has duly been covered by the assessee‟s own case for the A.Y. 2002-03 in ITA. No. 4987/M/2007, for the A.Y. 1990-91 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee‟s own case for the Assessment Year 2003-04, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities before fairly conceding that the identical issue has been remanded to the to the file of the Assessing Officer by the Tribunal in Assessee‟s own case for the immediately preceding Assessment Year 2003-04. 14.6.4. During the pendency of the appeal before the Tribunal, clause (i) to Explanation 1 to Section 115JB(2) by the Finance Act, 2009, with retrospective effect from 01.04.2001 which provides that the amount set aside as provision for diminution in the value of any asset is required to be added back while computing Book Profits under Section 115JB of the Act. During the assessment proceedings, the Assessee had claimed that the Provision for Contingencies was made against the diminution in the value of the investment. In the immediately preceding Assessment Year 2003-04, while deciding the identical issue, the Tribunal in Assessee‟s own case in ITA No. 4242/MUM/2007 and ITA No. 4988/MUM/2007 held as under: 53. Under this issue the revenue has challenged the allowance of the claim in connection with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of Bharat Earth Movers (245 ITR 528) and the judgment of Hon‟ble Bombay High Court in the case of CIT Vs. Echjay Forgings P. Ltd. : (2001) 251 ITR 15 (Bom). However, the Assessing Officer, not being satisfied with the submissions of the Assessee, added back the aforesaid provision for while computing Book Profits under Section 115JB of the Act holding that the Assessee has failed to establish that the same was for an ascertained liability. 14.7.2. In appeal before CIT(A) the Assessee contended that the aforesaid provisions was not made for unascertained liability. The Profit Loss account of the Assessee has been prepared in accordance with Part II and III of Schedule VI to the Companies Act, 1956 and in compliance with the applicable Accounting Standard on mercantile basis. Assessee further submitted that in view of the judgment of Hon‟ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT : (2002) 255 ITR 273 (SC), the Provision for Technical Fees, Royalty and Interest should not be added back while computing Book Profits under Section 115JB of the Act. The submissions of the Assessee found favour with the CIT(A) who deleted the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue. The order of CIT(A) holding that the Provision for Technical Fees, Royalty and Interest amounting to INR 2,07,95,361/- is not required to be added back while computing Book Profit under Section 115JB of the Act is confirmed. Accordingly, Ground No. 13 raised by the Revenue is dismissed. 15. Ground No. 14: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made in respect of revenue generated from trial run production at Rs.86,55,040/- in computation of book profit u/s 115JB of the I T Act. 15.1. During the relevant previous year, the Assessee had reduced the revenue generated from trial run production of captive power plant at Madukkarai amounting to INR 86,55,040/- from the expenditure incurred during the trial production and capitalized the net expenditure as cost of asset in the Books of Account. In response to the query raised during the assessment proceedings, the Assessee filed detailed submission vide letter, dated 22.11.2006. However, not being satisfied with the Explanation/submission of the Assessee, the Assessing Officer added the revenue generated from trial run production amounting to INR 86,55,040 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.7987/M/2007. By honoring the order passed by the Hon‟ble ITAT in the assessee‟s own case (supra), we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. 15.4. In view of the above, we do not see any infirmity in the order passed by the CIT(A) on this issue. Respectfully following the abovesaid decision of the Tribunal in the case of the Assessee for the Assessment Year 2003-04, we confirm the order of CIT(A) on this issue Accordingly, Ground No. 14 raised by the Revenue is dismissed. 16. Ground No. 15 : On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made in respect Expenses on VRS pertaining to earlier years of INR 21,24,43,994/- in computation of book profit u/s 115JB of the IT Act. 16.1. As per the accounting policy consistently followed by the Assessee, expenditure incurred on account of Voluntary Retirement Scheme (VRS) was amortized over a period of 5 years till Assessment Year 2003-04 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act has nothing to do with computation of book profits under section 115JB, which is a selfcontained code and it is subject to only those adjustments which are specified in the Explanation to section 115JB(2). Further, VRS expenditure amortised in the profit and loss account cannot be said to be answered an ascertained liability and is also not covered under the provisions of Explanation to Section 115JB(2). Hence, respectfully following the principles laid down by the Hon‟ble Apex Court in the case of Apollo tyres Ltd (supra) as well as other decisions cited hereinabove, the addition made by the Assessing Officer is deleted and this ground of appeal is allowed. 16.3. Revenue is in appeal, challenging the above relief granted by the CIT(A). While the Departmental Representative relied upon the Assessment Order, the Authorised Representative of the Assessee relied upon the decision of the Tribunal in Assessee‟s own case for the Assessment Year 2003-04. 16.4. We have considered the rival contentions and perused the material on record. The CIT(A) has allowed the claim of the Assessee applying the principles laid down by the Hon‟ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse to the query raised during the course of assessment proceedings, the Assessee, vide letter dated 08.12.2006, submitted that the aforesaid capital expenditure has been debited to Profit Loss Account as per accepted accounting practice which is in line with the applicable accounting standards. Since the accounts has been prepared m accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified by the statutory auditors, no further adjustment is called for on this account in view of the decision of Apex Court in the case of Apollo Tyres -vs.- CIT (2002) 255 ITR 273 (SC). However, disregarding the submission of the Assessee, the Assessing Officer added back INR 14,16,56,815/- while computing book profits under Section 115JB of the Act. 17.3. In appeal, the CIT(A) granted relief to the Assessee accepting the contention of the Assessee and following the decision of Hon‟ble Supreme Court in the case of Apollo Tyres Ltd. (supra) as well as the order passed by the CIT(A) in the case of the Assessee for the Assessment Year 1998-99, 2002-03 and 2003-04. Revenue is in appeal, challenging the aforesaid decision of CIT(A). 17.4. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in the case of the Assessee for the Assessment Year 2002-03 (ITA No. 4987Mum/2007 others) and Assessment Year 2003-04 (ITA No. 4988/Mum/2007), we confirm the order of CIT(A) holding that capital expenditure of INR 14,16,56,815/- debited to Profit Loss Account is not required to be added back while computing book profits under Section 115JB of the Act. Accordingly, Ground No. 16 raised by the Revenue is dismissed. 18. Ground No. 17: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition in respect of deferred revenue expenditures of earlier years amounting to Rs.3,23,69,815/-. 18.1. During the relevant previous year, the Assessee had debited INR 3,23,69,815/- to the Profit loss account being deferred revenue expenditure. The Assessing Officer added back the aforesaid deferred revenue expenditure to Book Profits for the reason that the same has been added back while computing profits under normal provisions of the Act. 18.2. In response to the query raised during the course of assessment proceedings the Assessee, vide letter dated 08.12.2006, submitted that the aforesaid deferred revenue expenditure has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifically held that the computation of income under the normal provision of the Act has nothing to do with computation of book profit u/s 115JB of the Act in which specifically adjustment has been given in Explanation to Section 115JB(2) of the Act. No doubt, the addition which nowhere fall within the provision of Section 115JB of the Act and Explanation (2) of the Act is not required to be added to the income of Assessee, therefore, in the said circumstances, the same is not required to be added while computing the book profit u/s 115JB of the Act. Since the matter of controversy has been adjudicated by the CIT(A) judiciously and correctly, therefore, the finding of the CIT(A) is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. 18.5. Applying the principles laid down by the Hon‟ble Supreme Court in the Apollo Tyres Ltd. (supra) and respectfully following the decisions of the co-ordinate bench of the Tribunal in the case of the Assessee for Assessment Year 2003-04 (ITA No. 4988/Mum/2007), we confirm the order of CIT(A) holding that deferred revenue expenditure INR 3,23,69,815/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 115JB of the Act in sum of Rs.5,19,20,846/-. At the time of argument, the Ld. Representative of the assessee has disclosed this fact that this issue has been decided against the assessee in the 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. 20. Ground No. 19 : On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of expenditure on Jukehi Road, at Kymore of INR 2,23,00,000/- and Dry Fly Ash Handing System at Maduk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2003-04, the addition made by the A.O. of Rs. 9,66,64,158/- is deleted. Hence, this ground of appeal is allowed. 21.3. Now, the Revenue is in appeal before us against the above finding of the CIT(A) on this issue. We note that CIT(A) has granted relief to the Assessee following decision of the Tribunal in the case of the Assessee in Assessment Year 1990-91 and 1998-99. Further, in the immediately preceding assessment year (AY 2003-04), identical issue has been decided in favour of the Assessee. The relevant extract of the order, dated 13.03.2019, passed by the Tribunal in the case of the Assessee for the Assessment Year 2003-04 (ITA No. 4242 4988/MUM/2007 reads as under: 50. Under this issue the revenue has challenged the deletion of addition made in respect of amount withdrawn from share premium account in computation of book profit u/s 115JB of the Act. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - 40.3 I have considered the submissions made on behalf of the appellant. In my view write back of share premium account is an allowable deduction in view of clause (i) of Explanation to Section 115JB(2). Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86,82,751/-. 23.1. During the relevant previous year, the appellant had made provision for additional gratuity of INR 86,82,751/-. While dismissing Ground No. 9 raised by the Revenue, we have, in paragraph 14.3.5 above, concluded that the provision for additional gratuity is a provision for ascertained liability. Further, the CIT(A) has granted relief to the Assessee by following decision of the Tribunal in the case of the Assessee for the Assessment Year 1990-91 (ITA No. 2361/Mum/95). In view of the aforesaid, we are not inclined to interfere the order of CIT(A) on this issue. Accordingly, Ground No. 22 raised by the Revenue is dismissed. 24. Additional Ground No. 1 (letter dated 13.04.2010): On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 18.60 crores made by Assessing Officer u/s 14A of the I.T. Act, 1961. 24.1. During the relevant previous year the Assessee had earned Dividend Income of Rs. 37,59,59,110/-. The same was credited to the Profit and Loss Account. In the computation of total income the same was claimed exempt u/s 10(34)/10(35) of the Act. During the course of hearing, the Assessee was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made before the lower authorities. 24.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has, while granted relief to the Assessee has, after taking into account details of investments, own funds and borrowed funds furnished by the Assessee, returned a factual finding that the dividend income received during the year pertained to investments made by the Assessee in the earlier years out of its own funds and therefore the question of assuming that the such dividend income pertained to investments made from borrowed funds does not arise. In the appellate proceedings before us, nothing has been placed before us to establish that the aforesaid finding returned by CIT(A) is incorrect/perverse. Accordingly, we confirmed the order of CIT(A) on this issue. Assessee‟s Appeal : ITA No. 4895/MUM/2007 25. The Assessee has raised the following grounds of appeal: Ground No.1: That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) erred in confirming the addition of Deferred Tax Liability of Rs. 37,53,00,000/- in computing Book Profit u/s 115JB. Ground No.2.: That on the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year (AY 2003-04), identical issue has been decided in favour of the Revenue. The relevant extract of the order, dated 13.03.2019, passed by the Tribunal in the case of the Assessee for the Assessment Year 2003-04 (ITA No. 4242 4988/MUM/2007) reads as under: 12. Under this issue the assessee has challenged the confirmation of setting off of unabsorbed depreciation of the current previous year with long term capital gain of the current previous year instead of setting it off with long term capital loss brought forward from earlier years. The assessee wanted to set off in future but the Assessing Officer declined the claim of the assessee on account of this fact that the claim is against provision of income tax. The CIT(A) has also declined the claim of the assessee on the basis of this fact that Section 71 deals with inter head adjustment and have precedence over section 74 of the Act. Nothing seems to contrary to the law. No law in support of the claim of assessee has been produced before us, therefore, taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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