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TMI Blog2022 (5) TMI 1596X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Assessment Year 2004-05 on 01.11.2004 offering to tax the Book Profits as per provisions of Section 115JB of the Act which was processed under Section 143(1) of the Act. Thereafter, the Assessee filed a revised return on 31.03.2006 declaring total income of INR 169,16,298/- under the normal provisions of the Act and Book Profit of INR 1,50,76,67,103/- as per the provisions of Section 115JB of the Act. 3. The case of the Assessee was selected for scrutiny and notice under Section 143(2) and 142(1) of the Act were issued. In response to the same, the Assessee filed various replies/submissions, and furnished information and documents. The Assessing Officer (Assessing Officer) completed the assessment under Section 143(3) of the Act vide order, dated 26.12.2006, after making additions/disallowances under normal provisions of the Act and also making adjustments to the book profits. The Assessing Officer determined total Income under normal provisions of the Act at INR 63,60,985/- and computed book profits under Section 115JB of the Act at INR 3,05,82,73,260/-. Since the assessed income tax payable on income as computed under the normal provisions of the Act was less than 7.5% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant incurred expenditure of INR 17,45,829/-, consisting of club entrance fee of INR 15,00,000/- and subscription fee of INR 2,45,829/- which were disallowed by the Assessing Officer on the ground that the same were capital in nature since the same provided enduring benefit to the Assessee. 8.2. In appeal, the CIT(A) deleted the addition holding the expenditure to be business expenditure of revenue nature incurred for smooth running of business of the Assessee by relying upon the decision of Hon‟ble Bombay High Court in the case of Otis Elevator Co (I) Ltd. vs. CIT (1992) 195 ITR 682 (Bom) and American Express International Banking Corporation vs. CIT (2002) 258 ITR 601 (Bom). The CIT(A) also noted that similar issue has been decided by the Tribunal in the favour of the Assessee in the Assessee‟s own case for Assessment Year 1987-1988 to 1991-1992. 8.3. We have heard the rival contentions and perused the material on record. We note that the Tribunal has decided identical issue in the favour of the Assessee in Assessee‟s own case in ITA No. 647/Mum/1997 (AY 1991-92), ITA No. 2361/Mum/1995 (AY 1990- 91), ITA No. 288/Mum/1993 (AY 1989-90), ITA No. 968/Mum/1992 (AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f land aggregating to 8,632.68 Sq. Meters for widening and development of roads to Thane Municipal Corporation (TMC). The details of the land handed over are as under: CTS No. Area in Sq. Meters Purpose of surrender 1. 1,500.00 Setback of LBS Marg 2. 4,443.00 18 m wide DP Road 3. 1,725.00 15 m wide DP Road (service road) 4. 964.68 Set back area of Mental Hospital Road Total 8,632.68 9.2. Thus, out of the 1,11,093 Sq. Meters, the Assessee had surrendered land aggregating to 8,632.68 Sq. Meters, and in lieu thereof, the Assessee got Transferable Development Rights (TDRs) which were sold to Kalapataru Properties (Thane) Pvt. Ltd. for consideration of INR 6,60,61,542/- during the relevant previous year. 9.3. In the original return of income the Assessee offered to tax capital gains arising from sale of TDRs while in the revised return the Assessee did not offer the same to tax. This was noticed by the Assessing Officer in the assessment proceedings which lead to issuance of show-cause notice to the Assessee in this regard. In reply to the show-cause notice, the Assessee submitted that the capital gains arising from transfer of TDR‟s cannot be computed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations made by the Hon‟ble Tribunal in paragraph 5 of the aforesaid decision: "5. We may mention that as far ............................ The CIT(A)‟s observations that this right cannot be said to be without any cost of acquisition because the TDRs have been received on surrender of reserved plot to the Government is ex facie incorrect inasmuch as what we are really concerned with is the right to receive the TDR on the plot owned by the assessee, and not with the right to receive the TDR from the Government. The person getting TDRs from the Government has to surrender the reserved plot but the person on whose plot such TDRs can be used, as is the case we are in seisin of, does not do anything more than owning the "receiving plot" (Emphasis Supplied) 9.6. In the case before us issue pertains to determination of the cost of acquisition of TDRs obtained by the Assessee in lieu of surrender of land. The cost of acquisition of TDRs is identifiable and can be determined, as opted by the Assessee, by taking fair market value of land surrendered as on 01.04.1981 as per Section 55 of the Act. Accordingly, we overturn the order of the CIT(A) to this extent and hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of regd. Valuer Report dated 08.07.2006 regarding value of the said land as on 01.04.81 which can be taken under Section 55(2)(b)(i). The regd. Valuer has reported value of land as on 01.04.81 to the tune of Rs. 1986.57 per sq.mt. Perusal of the said report revealed that the valuation done by regd. valuer is purely on basis of estimation. No instance of sale of land in the vicinity of the said area during the period has been quoted in the report. Rather, the report has been based on hypothetical methods. In other case namely M/S Colour Chem Ltd., that assessee has sold a piece of land at Thane and a report form regd. Valuer has been furnished regarding valuation as on 01.04.81. In that case, the regd. Valuer has reported the value of land as on 01.04.81 to the tune of Rs. 260 per sq.mt. The land in present case is situated at rear side of ACC Ltd. and near to Mental Hospital, Thane. The piece of land in case of M/S Colour Chem Ltd. is situated at old Mumbai Agra Road, Thane. The value of land in a relatively small city can not vary from Rs. 260 to 1986.57 per sq.mt. when both the lands are similarly located. Since the assessee has not furnished any evidence in support of valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 55(2) of the Act: "This rule being a rule of construction has been repeatably applied in India in interpreting statutory provisions. It would, therefore, be legitimate in interpreting sub-section (2) to consider what was the mischief and defect for which section 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub-section (2) or in other words, what was the object and purpose of enacting that subsection. Now in this connection the speech made by the Finance Minister while moving the amendment introducing subsection (2) is extremely relevant, as it throws considerable light on the object and purpose of the enactment of sub-section (2). The Finance Minister explained the reason for introducing sub-section (2) in the following words: "Today, particularly every transaction of the sale of property is for a much lower figure than what is actually received. The deed of registration mentions a particular amount; the actual money that passes is considerably more. It is to deal with these classes of sales that this amendment has been drafted. It does not aim at perfectly bonafide transactions ... but essentially relates to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Income. Additional Ground No. 2: On the facts and in the circumstances of the case and in view of the decision of the Apex Court in the case of M/s Apollo Tyres Ltd. Vs. CIT [2002] [255 ITR 273] [SC], the Ld. CIT(A) erred in directing to deduct exempted sales tax for computation of Book Profit u/s 115JB of the Act. Additional Ground No. 3: On the facts and in the circumstances of the case the Ld. CIT(A) ought not to have granted the relief on the basis of the decision in the case of Reliance Industries Ltd. as the facts of the appellant case is different from that of the facts of the case relied on by the Ld. CIT(A) as the case of Reliance Industries relates to State of Maharashtra, whereas in the assessee‟s case the schemes relating to other states are different where the income is Revenue in nature. 10.1. Ground No.3 & Additional Ground No. 3: The relevant facts are that during the year relevant to assessment year the Assessee availed incentive/ sales tax subsidy of INR 95,12,68,516/- . However, in the Revised Return, by an inadvertent error, amount of incentive was quantified at INR 162,13,06,137/-. which error was sought to be rectified by filing a letter, dated 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision, we direct that the Sales Tax incentive/subsidy relating to the impugned previous year also, be treated only as capital receipt. Assessee succeeds in its additional ground No. 7" 10.5. The aforesaid decision of the Tribunal for the Assessment Year 1997- 98 has been relied upon in the subsequent years. We note that for the Assessment Year 2002-03, the Tribunal has remanded the issue to the file of Assessing Officer with the directions for fresh adjudication after examining the incentive schemes whereas for the immediately succeeding Assessment Year 2003-04, the issue has been decided in favour of the Assessee by the Tribunal. For the Assessment Year before us, the CIT(A) has, in paragraph 14.9 of the impugned order, merely concluded that sales tax subsidy received by the Assessee is revenue in nature without examining the provisions of the incentive schemes as was the case in the Assessment Year 2002-03. While deciding this issue in appeal for the Assessment year 2002-03, the Tribunal after noting these facts, held as under: "10. Ground No. 9 is about subsidy received from Government of West Bengal of Rs. 12,10,000/-. The Assessing Officer found that the assessee had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the part of the total income under either of the provisions." 20.1 .... 20.2. We have heard the rival submissions. As far as addition under the MAT provisions is concerned we are of the opinion that in view of the judgment of Apollo Tyres (supra) the Assessing Officer is not authorised to disturb the book result. Therefore, we confirmed the order of the FAA to that extent. But, the issue of addition of various subsidies/incentives, we are of the opinion that same needs further verification. While deciding ground no. 9, we have held that the Assessing Officer should analyse the scheme and then only adjudicate it. Following the same, 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, Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With the aforesaid directions, Ground No.3 as well as Additional Ground No. 3 raised by the Revenue letter dated 28.01.2008 stands disposed. 10.8. Additional Ground No. 2: The Additional Ground No.2 pertains to inclusion/exclusion of Sales Tax Subsidy while computing book profit under Section 115JB of the Act. In paragraph 10.7 above, we have remanded the issue to the file of CIT(A) for determination of the nature of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted at the rate of 5% of INR 2,23,00,000/. 11.2. In appeal, the CIT(A) held that the expenditure of INR 2,23,00,000/- incurred on construction of Jukehi-Kymore Road was revenue in nature. The road belonged to the Government of Madhya Pradesh, and therefore, it could not be said that the aforesaid expenditure resulted in creation of any asset of enduring nature for the Assessee. Thus, the CIT(A) deleted the 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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." 11.6. In the present case as a result of the expenditure incurred by the Assessee, there has neither been any addition to the capital asset, nor has there been any change the capital structure. Accordingly, applying the 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 Handin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon‟ble Supreme Court in the case of CIT vs. Associated Cement Companies Ltd. (1988) 172 ITR 275 (SC) and CIT v. Madras Auto Services (P) Ltd. : (1988) 233 ITR 468 (SC). 12.4. We have heard the rival contentions and perused the record. We do not find any infirmity in the order passed by the CIT(A) on this issue. On perusal of orders passed by lower authorities it is clear 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Forgings P. Ltd. (supra). Furthermore, we noticed that the issue has been squarely covered by assessee‟s own case in ITA. No.4987/M/2007.The relevant finding has been given in para no. 19 which is hereby reproduced as under.: "19.Deletion of addition in respect of provision for Director's Retirement Benefit in computing income under normal provisions of the Act of 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 als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 Leave Encashment 3,26,00,238 11 Director‟s Retirement 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 upon a fresh inquiry in regard to the entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing 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 in the circumstances of the case and in law, the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and crediting the provision for bad and doubtful debt, but by simultaneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 thereof to the net profit for the purposes of section 115J. 5. The addition of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 therefore, was not added back while computing Book Profit under Section 115JB of the Act. During the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 Assessment Year 2003-04 (ITA No. 4242/Mum/2007), we confirm the order of CIT(A), and hold that provision for Normal/Additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;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 computation of Book Profits under Section 115JB of the Act filed along with the original and the revised return, the said amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. No. 2361/M/1995, therefore, in the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities 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 the provision for contingencies in computation of book profit u/s 115JB of the Act in sum of Rs.3,75,00,000/-. While arguing the case the Ld. Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 addition holding as under: " 30.3. I have considered the submission made on behalf of the appellant and find that the treatment in the accounts, in respect of provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit 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/- to the Book Profit computed under Section 115JB of the Act. 15.2. In appeal, the CIT(A) deleted the addition made in respect of Revenue generated from trial run production of INR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 books of account. However, from the Assessment Year 2004-05, compensation payable under the VRS has been charged to the profit & loss account in the books of accounts. Whereas, while computing taxable inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). 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 case of Apollo Tyres Ltd. vs. CIT (supra), The accounts of the Assessee have been prepared in accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified by the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting 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 have heard the rival contentions and perused the record. We note that the 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, date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 debited to Profit & Loss Account as per accepted accounting practice and applicable accounting standards. The accounts has been prepared in accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/- 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. 17 raised by the Revenue is dismissed. 19. Ground No. 18 : On the facts and in the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Madukkarai of INR 4,75,00,000/- in computation of book profit u/s 115JB of the Act. 20.1. The Assessing Officer had added back the expenditure of INR 2,23,00,000/- on Jukehi Road, at Kymore and INR 4,75,00,000/- on Dry Fly Ash Handing System at Madukkarai expenditure while computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). Therefore, respectfully following the decision of the Hon‟ble ITAT for A.Y. 1990- 91 as well as the orders of my predecessor for A.Y. 1997- 98 and A.Y. 1998-99 the addition made by the Assessing Officer of Rs.76,63,200/- is deleted. Hence this ground of appeal is allowed." 51. On appraisal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability. 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 asked to state whether any direct or indirect expenditure has been incurred for earning the above income. In response to the same, the Assessee vide letter dated 16.11.2006, submitted that no expenditure has been incurred for the purpose of earning dividend income. Hence, no disallowance is called for on this acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the circumstances of the case, the Ld. CIT (Appeals) erred in confirming the addition of dividend distribution tax of Rs. 9,08,00,000/- in computing Book Profit u/s 115]B. Ground No. 3: That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) erred in confirming the addition of corporate tax paid at Saudi Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sorbed 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 be interfere with at this appellate stage."
25.2.2. In view of the above, the order passed by CIT(A) on this issue is confirmed. Ground No. 6 raised by the Assessee is dismissed.
26. In view of the above, appeal of the Revenue is partly allowed while the appeal of the Assessee is dismissed.
Order pronounced on 27.05.2022. X X X X Extracts X X X X X X X X Extracts X X X X
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