TMI Blog2023 (11) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... r capital receipt - HELD THAT:- Sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld. CIT(A). Excise duty exemption received by assessee are capital receipts both for the purpose of computing income as per normal provision of the Act as well as book profit u/s 115JB of the Act and the addition made by Assessing Officer is deleted. Preoperative expenses - assessee itself had claimed the expenses as capital expenses and added them to its capital work-in progress/fixed assets and there is no provision in Income-tax Act permitting the allowance of such expenses - HELD THAT:- It is observed that identical issue was decided by coordinate bench of Mumbai ITAT in the case of holding company of the assessee being Ambuja Cement Limited [ 2022 (11) TMI 1420 - ITAT MUMBAI] held as in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive.The limited grievance raised by the Assessing Officer is thus devoid of any legally s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting undertakings due to modification in Market Value of electricity generated - HELD THAT:- As observed that while computing the output of the CPP, the Assessing Officer has excluded the transmission loss which was considered by assessee in their calculations but during the course of hearing before bench, assessee conceded the ground on the exclusion of the units lost in transmission for the purpose of computing the turnover of CPP. As observed that Ld AR has filed details regarding rate to be taken based upon decisions referred supra, such working was not available with the file of AO hence on this limited purpose of verification for the year under consideration, the AO is directed to verify the working as submitted by Ld AR before us and directed to consider the market value of power sold by CPP units at the Electricity rate at which CMM units at different location is purchasing electricity from SEBs as held/discussed by various courts. Accordingly, this ground of appeal is allowed for statistical purpose. Deduction u/s.80IA on Rail Infrastructure to be allowed. Delete the Adjustment on account of CENVAT in the profits of the eligible units for deduction u/s 80IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de while computing book profit u/s 115JB is to be deleted. Sales tax and excise duty incentive be excluded while computing book profits u/s. 115JB - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, HON'BLE JUDICIAL MEMBER For the Assessee : Shri Yogesh Thar, Shri Chaitanya Joshi Ms. Sukanya Jayaram For the Department : Smt. Shailja Rai ORDER PER S. RIFAUR RAHMAN (AM ) 1. These are cross appeals pertaining to Assessment Year 2011-12 arising from the Appellate Order dated 29th January, 2019 by the Ld. Commissioner of income Tax (Appeals) 3 (hereinafter referred to as CIT(A)) whereby appeal filed by Assessee against the Assessment Order dated 16th March, 2015 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was partly allowed. Aggrieved both Assessee and Revenue are in appeal before us. 2. In the Ground No.1, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, Ld. CIT(A) erred in restricting the disallowance to Rs. 5.04 Crores made u/s. 14A r.w.r. 8D(2) of the I.T. Rules, in view of the Mumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rji Pallonji Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: 6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had deleted the addition made by the assessing officer under section 14-A of the Act by observing that the interest-free fund available with the respondent - assessee was far in excess of the advance given. Tribunal further noted that the Revenue does not dispute the said finding and relying on the decision of this Court in CIT v. Reliance Utilities Power Ltd. [2009] 178 Taxman 135/313 ITR 340, affirmed the deletion made by the first appellate authority. 7. We have perused the decision of this Court in Reliance Utilities Power Ltd. (supra) wherein it has been held that if there are funds available with the assessee, both, interest-free and overdraft and/ or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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'ble Apex Court in the case of Maxopp Investment Ltd. (supra) holds good in the present case. We are also of the considered opinion that the ld. CIT(A) has rightly held that the assessee has not made bifurcation of the expenses claimed under 'other expenses' and in case of which the A.O. had to invoke Rule 8D of the Income Tax Rules. The suo moto disallowance of the assessee does not disentitle the A.O. from invoking the said provision. In this regard, we find justification in the order of the ld. CIT(A) in upholding the A.O.'s action in invoking the provision of Rule 8D(2)(ii) by rejecting the assessee's contention that suo moto disallowance by the assessee warrants no further disallowances. The assessee's alternate claim is that the disallowance u/s. 14A read with Rule 8D(2)(iii) should be restricted only to those investments on which exempt income was earned by the assessee during the impugned year, by placing reliance on the decision of Vireet Investments Pvt. Ltd. (supra). We also find justification in the order of the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. 6. Considering the above, 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 metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: .. The relevant material facts, so far as necessary for adjudication of these grievances, are as follows. The assessee before us is a company engaged in the business of manufacturing of cement and generation of electricity. The assessee has set up its plants in different parts of the country, and as the location of some of these plants was in backward areas, the assessee had received certain sales tax concessions from the respective State Governments. These concessions were in the nature of exemptions and remissions etc, and were granted under specific schemes announced, under the industrial policies, from time to time. During the relevant previous year, the assessee received amounts aggregating to Rs 169,93,34,752, but all these receipts were treated as tax exempt on account of being in the nature of capital receipts. When income tax return filed by the assessee was subjected to the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee had a lodged a claim for exclusion of Rs 169.93 crores, being sales tax exemption/incentives received by it, as capital receipt, and hence not liable to tax. The Assessing Officer declined this claim, pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Hon ble Supreme Court in the case of CIT Vs Ponni Sugar and Chemicals Ltd [(2008) 306 ITR 392 (SC)]. A large number of judicial precedents have been cited in this context. Learned CIT(A) has then held that so far as the object and purpose for which the subsidy is given, only the subsidy schemes of the Maharashtra and Punjab State specifically state that the subsidies in question are for achieving dispersal of industries outside Mumbai, to attract them to the underdeveloped and developing areas of the State, and to promote the growth of the industry in the State, in the preamble to the scheme. It is on this basis that he has held that so far as the subsidies given by the Maharashtra and Punjab States are concerned, these are required to be treated as capital in nature, whereas, the subsidies received from the State Governments of Himachal Pradesh and Rajasthan, in the absence of specific mention to the effect in the preambles of the subsidy schemes that these subsidies are required to be held to be revenue in nature. However, in our considered view, the approach of discerning the purpose of the subsidy, solely from the specific words used in the preamble of the scheme and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Assessing Officer and the learned CIT (A). Referring to the judgment in Sahney Steel and Press Works Limited v. CIT 228 ITR 253 (SC), he submitted that the impugned sales tax exemption increased the profits of the assessee by eliminating the expenses which the assessee would have had to incur later and therefore the impugned receipts were in the revenue field. He also referred to Explanation (10) to Section 43 (1) of the Income Tax Act inserted in with effect from 01/04/99 to emphasise that the action of the assessee in not reducing the cost of assets by the amount of subsidy for working out the Written Down Value was indicative of the fact that the impugned receipts were not in the nature of capital receipts. 55. We have heard both the parties and considered their rival submissions. Perusal of the scheme extending the aforesaid incentives to prestigious units announced by Government of Gujarat on 26/07/91 makes it amply clear that the scheme was announced to attract investment in core sector industry having potential, to spur industrial growth in ancillary, tertiary and secondary sector of the economy. The other scheme announced by the Government of Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 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 fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard both the learned counsel and perused the record. We have also gone through the decisions cited before us. After considering the material on record, we are of the view that the issues involved in these appeals are squarely covered by the decisions of this Court in Birla VXL Ltd. (supra) and in Munjal Auto Industries Ltd. (supra). Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee and against the department. Accordingly, all these appeals are dismissed. 8. In the case of JCIT Vs Grasim Industries Limited (ITA Nos 2155/Mum/2016 and Ors; order date 29th April 2022), a coordinate bench has dealt with these legal issues in considerable detail and observed as follows: 5.3.5. . the dominant purpose for which the incentive scheme per se introduced by the respective State Governments was only for the purpose of setting up of industries in the respective areas for industrial development in State and also to accelerate development and absolutely not for augmenting the profits of the assessee. Effectively, the schemes of various State Governments envisaged the rapid industrialisation, growth and new employme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that case it was found that Lincolnshire Sugar Co. Ltd carried on the business of manufacturing sugar from home grown beet. The company was paid various sums under British Sugar Industry (Assistance) Act, 1931, out of monies provided by the Parliament. The question was whether these monies were to be taken into account as trade receipts or not. The object of the grant was that in the year 1981, in view of heavy fall in prices of sugar, sugar industries were in difficulty. The Government decided to give financial assistance to certain industries in respect of sugar manufactured by them from home-grown beet during the relevant period. Lord Macmillan held that- What to my mind is decisive is that these payments were made to the company in order that the money might be used in their business. He further observed that: I think that they were supplementary trade receipts bestowed upon the company by the Government and proper to be taken into computation in arriving at the balance of the company's profits and gains for the year in which they were received. 15. In the case before us, the payments were made to assist the new industries at the commencement of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to the applied in judging the character of a subsidy. The test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the Scheme with which we are concerned in this case is that the incentive must be utilised for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the Subsidy Scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the Subsidy Scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel. 23. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/ 333 ITR 335. While considering the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. 24. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 9. Such decision was considered in case of Ponni Sugars and Chemicals Ltd.(supra) and the Apex Court held and observed as under : 13. The main controversy ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee. 11. In the result we find no error in view of the Tribunal. Tax Appeals are dismissed. 5.3.7.1. It is pertinent to note that against this judgement, civil appeals were dismissed by the Hon ble Supreme Court vide its order dated 08/05/2018 on the ground that the issue is already covered in the decision of Chapalkar Brothers referred to supra. 5.3.8. Before us, the ld. Special Counsel for the Revenue referred to various decisions of Hon ble High Courts. But, all those decisions were rendered prior to the decision of Hon ble Supreme Court referred to above. Hence, the decisions relied upon by the ld. Special Counsel for the Revenue would not advance the case of the Revenue. 5.3.9. It is pertinent to note that in each of the aforesaid decisions of Hon ble Supreme Court, the Courts have been mindful of the fact that the subsidy has to be received after commencement of business and to be availed within 9,10 12 years, as the case may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon ble Supreme Court in the case of Sahney Steel Press Works Ltd. v. CIT (228 ITR 253) cannot be said to be erroneous. The Tribunal did recognise that the object with which subsidy is given is decisive as laid down by Hon ble Supreme Court. If the scheme is for setting up or expansion of industry in a backward area, it will be capital, irrespective of the modality or source of fund. If the scheme is for assisting of carrying out of business operations, it is revenue. Hon ble Supreme Court demonstrated the principle that the object of the subsidy must be given primary importance over the source of fund. 5.4.1. Ultimately the Special Bench after placing reliance on the decision of Hon ble Supreme Court in Sahney Steel and Hon ble Madras High Court in the case of CIT v. Ponni Sugars Chemicals Ltd. Reported in 260 ITR 605 held that the decision of the Tribunal in Asst Year 1985-86 is correct and observed the following: 37 .The observations of the Madras High Court lend support to the view that the purpose and object of the Scheme under which the subsidy is given is of more fundamental importance than the fact that the subsidy was received after the commencem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded this amount in the returned income and it had been taxed accordingly and the assessee did not raise this issue before the CIT(A) and the issue had attained finality? 5.4.3. While disposing of the questions Nos. c d, the Hon ble Jurisdictional High Court categorically held that the decision of the Special Bench of Tribunal had not been reversed or stayed by any higher judicial forum and it holds good as on date. The relevant operative portion of the judgement of Hon ble Jurisdictional High Court in this regard is reproduced as under:- 3. We will first address the questions no. (c) and (d), which are different elements of the same issue. The respondent assessee had received a subsidy. It is undisputed that up to the level of Income Tax Appellate Tribunal, the assessee did not raise a contention that such subsidy was towards capital account and, therefore, not taxable. However, before the Tribunal such a contention was raised. The Tribunal by the impugned judgment relied upon its earlier judgment for the Assessment Year 1999- 2000 in case of this very assessee and restored the issue back to the Assessing Officer. In the earlier order, the Tribunal had remanded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court. A question of law has been framed and placed for consideration of the 4 of High Court. However, this does not mean that the judgment of the Tribunal as on today stands reversed or stayed. In any case, quite apart from the judgment in the case of Reliance Industries Ltd. of the Special Bench of the Tribunal, it is always been for the assessee to contend before the Assessing Officer by pointing out the relevant clauses of the subsidy that in law the subsidy cannot be treated to be towards revenue account. It would be equally open for the Revenue to oppose such a contention if so advised. The Assessing Officer and the Revenue authorities would have to take a decision in accordance with law. These questions, therefore, are not considered. (emphasis applied by us while placing reliance on the decision of Hon ble Jurisdictional High Court) 5.4.4. Against this judgement on other issues, the Revenue preferred an SLP before the Hon ble Supreme Court and the same was dismissed vide order dated 23/08/2019 in SLP (Civil) Diary No.22929/2019. In other words, the Revenue while preferring SLP before the Hon ble Supreme Court did not even challenge this ground of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om disapproving the special bench decision, but it appears that the coordinate bench was led to believe, and there could not have been any other reason for ignoring the special bench decision, that this Special Bench decision is reversed. That is patently incorrect, and when we pointed it out to the learned Commissioner (DR), he did not have much to say except to rely upon the coordinate bench decision which seems to have followed that approach. The coordinate bench, in the case of Jindal Steel Power Ltd. (supra), did indeed travel much beyond its limited mandate in ignoring a binding judicial precedent simply because appeal against that special bench decision is now pending before Hon'ble Bombay High Court. When posed with a special bench decision and a division bench directly on the issue, though touching different chords, we have no difficulty in recognizing our limitations. The wisdom of a division bench, even if superior- as strenuously argued by the learned Commissioner, has to make way for the higher wisdom of a larger bench. It is this faith of judicial hierarchical system that is the strength of our functioning, and we must follow the same. We, therefore, regret our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 279 (SC)], Hon ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature. 10. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee that the amount of Rs 39,36,21,956 added to the income of the assessee must stand deleted, and reject the grievance of the Assessing Officer against the grant of relief of Rs 130,57,12,796 by the CIT(A). 9. In grounds nos. 12 and 13, the asessee has raised the following grievances: 12. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in not allowing exclusion of Sales Tax Incentive availed of Rs. 1,69,93,34,752/-, being capital in nature, in computing Book Profit u/s 115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Ltd. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot be part of book profit computed u/s 115JB of the Act. Similarly, the ITAT Kolkata Bench, in the case of Sipca India (P.) Ltd. v. Dy. CIT [2017] 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income even for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit u/s 115JB of the Act. 49. Insofar as, case laws relied upon by the department , we find that all those case laws have been either considered by the Tribunal or High Court and came to conclusion that in those cases the capital receipt is in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme under consideration, also provides for capital investment subsidy separately and in view of the decision of the Hon ble Supreme Court in the case ofM/s Siemens Pub. Communication Network Pvt. Ltd, wherein, it has been held that unless, the grant in aid received by the assessee is utilized for acquisition of an asset, the same must be understood to be in nature of revenue receipt, except, by way of voluntary contribution received from parent company ? 14. Similar issue was considered by us in Department Appeal for AY 2006-07 in Ground no 1 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in Departmental Appeal is dismissed. 15. Respectfully following the above decision, we dismiss the ground raised by the revenue. 16. In the Ground No.5, Department has raised the following grievance: 5. Whether, on the facts and in the circumstances of the case in law the Id. CIT(A) erred in deleting the disallowance of Rs.42,43,04,173/ - being preoperative expenses, when in its books of accounts, the assessee itself had claimed the expenses as capital expenses and added them to its capital-work-in progress/fixed assets and there is no provision in Income- tax Act permitting the allowance of such expenses? 17. Similar issue was considered by us in the Department Appeal in Ground No 8 in AY 2009-10 and held as under: 73.Considered the rival submissions and material placed on record. It is observed that identical issue was decided by coordinate bench of Mumbai ITAT in the case of holding company of the assessee being Ambuja Cement Limited vide order dated 07.11.2022 in the ITA No. 3307/Mum/2015 and 2428/Mum/2019 for A.Y. 2009-10 wherein it was held as under: 99. In ground no.8, the Assessing Officer has raised the following grievance: Whether, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Ltd (ITA Nos 55 and 57 of 2012; judgment dated 21 May 2012), Hon ble Delhi High Court has, in this context, observed, speaking through Hon ble Justice Easwar, that The fact that in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive . The limited grievance raised by the Assessing Officer is thus devoid of any legally sustained merits, and we reject the same. In any event, even on merits, the well reasoned order of the learned CIT(A), in our considered view, does not merit any interference. We approve the conclusions arrived at by the learned CIT(A) on this point and decline to interfere in the matter. 103. Ground no. 8 is thus dismissed. 74. It is observed that facts in assessee s case are similar to facts discussed by coordinate bench referred supra and considering such fact addition made by Assessing Officer is deleted. This ground of appeal is dismissed. 18. Respectfully following the above decision, we dismiss the ground raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oordinate 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 these machineries as on 1-4-2006 was Rs.24,51,920/- and Rs.1,81,50,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enty per cent of the actual cost of such machinery or 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 intital 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by the Jurisdictional High Court in the case of 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional depreciation u/s 32(1)(iia) and not new in subsequent years. 32. We have given very careful consideration to the rival submissions and 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 32(1) by Finance Act 2015, hence ITAT Mumbai did not follow the view expressed by the Kolkatta bench of Tribunal in the case of Gloster Jute 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 longe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking itself is purchased as it is in year under consideration which clearly prove that assessee has not split 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking on fulfilment of certain conditions mentioned therein. If the conditions mentioned in the sections 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unexpired period of 5 years provided the undertaking is taken over as a running concern. 12. The same 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 busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial 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. 24. Respectfully following the above decision, we dismiss the ground raised by the revenue. 25. In the Ground No. 8, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, Ld. 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? 26. Similar issue was considered by us in the Department appeal in Ground No 10 in AY 2005-06 and held as under: 75. Considered the rival submissions and material placed on record. We observe that the Assessing Officer has identified indirect expenditure incurred at Head Office i.e Statutory Audit fees, Audit for taxation matter, Director Fees, Cost Auditor expenses, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 109. In view of the above discussions, as also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee‟s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis- vis overall expenditure 76. Respectfully following decisions of coordinate bench referred supra, Assessing Officer is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis of expenditure incurred by the units vis- -vis overall expenditure. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee s appeal is partly allowed as directed herein above. 26.1 Respectfully following the above decision, we are dismissing the ground raised by the revenue and partly allow the grounds raised by the assessee. 27. In the Ground No. 9, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, Id. CIT(A) erred in deleting the addition of provision for normal gratuity in computing Book Profit u/s 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, 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. 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 Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear (AY 2003-04), identical issue has been decided in favour of the Assessee. The relevant extract of the common order, dated 13.03.2019, passed in ITA No. 4242 4988/MUM/2007 for the Assessment Year 2003- 04 reads as under: 44. Issue no. 15 is in connection with the deletion of addition in respect of provision of Wealth Tax in computing book profit u/s 115JB of the Act in sum of ₹.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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. Having heard the rival contentions and having perused the material on record, we are of the considered view that the assessee deserves to succeed in this plea for the reason that, eventually, there is no disallowance under section 14A on the facts of this case, and, in any event, the issue is covered, as regards the question of adjustment of book profits under section 15JB for the 14A disallowance, in favour of the assessee, by a special bench decision in the case 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. 35. Respectfully following the above decision, we dismiss the ground raised by the revenue. 36. In the result, appeal filed by the Revenue is dismissed. ITA.NO. 3139/MUM/2019 (ASSESSEE APPEAL) 37. We now take up the appeal filed by the assessee in ITA No 3139/Mum/2019. 38. In the Ground No.2, Assessee has raised the following grievance: Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance 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) 4. Respectfully following the decision of the Hon ble Bombay High 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court) (iii) CIT v. My Home Power Ltd (46 taxmann.com 314) (Andhra Pradesh High Court) (iv) CIT v. SubhashKabini Power Corporation Ltd [2016] 385 ITR 592 (Karnataka) (v) DCIT v. Aditya Birla Nuvo Ltd (67 taxmann.com 380) (Mumbai - Trib.) (vi) Essel Mining Industries Limited v. DCIT (ITA No. 602 of 2021) (Mumbai Tribunal) 45. On the other hand, Ld DR has relied upon decision of Ahmedabad ITAT bench in the case of Kalpataru Transmission Limited and argued that decision of Hon ble Hyderabad ITAT in the case of My Home Power Limited v. DCIT confirmed by Andhra Pradesh High court is not applicable to assessee s case. 46. Ld.DR with regard to denial of claim of proceeds received from sale of Voluntary Emission Receipts (VERs) submitted as under: - The issue is discussed in para 16.1 to para 16.4 on pages 74 to 77 of the Assessment order and para 11.1 and 11.3 (Page 31 and 32) of the CIT(A)'s order. The same may kindly be referred to. As per the facts available on record, The Company had commissioned a 9MW wind power project in Tamil Nadu wherein the project is registered under the CDM project for voluntary emissions reduction with UNFCCC. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) decidedon 10 th May 2019 by the Hon ITAT 'C' Bench Ahmedabad. Attention of the Bench was drawn to para 18 of the ITAT's Order wherein the ITAT acknowledged the fact that there is a series of decisions of this Tribunal, starting with the decision in the case ofMy Home Power Ltd vs DCIT [(2013) 63 SOT 227 (Hyd), on this issue and all but one of these decisions are in favour of the assessee . After culling out the reasoning which prevailed upon the Hyderabad ITAT to decide the matter in favour of the assessee in para 18, the Ahmedabad ITAT in para 19 of its order observed as under 19. In all other decisions on the same lines, as cited before us, there is a reference to the aforesaid observations of the Tribunal and there is hardly any independent analysis of the factual situation. The same reasoning has been adopted by the coordinate benches. (emphasis supplied) For detailed reasons as discussed in para 20 and 21, the Ahmedabad Tribunal came to the conclusion that various crucial facts were not brought to the notice of the Hyderabad Bench and therefore, the Hyderabad Bench could not deal with the peculiarities of different types of carbon credits, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the CDM since in these cases the unit generating these credits are set up for the predominate purpose ofgenerating emission reductions through making modifications in the working mechanism. It is reiterated that in the assessee's case as well, the VERs were received by the assessee under the Clean Development Mechanism (CDM). Hence the decision of My Home Power Ltd. V DCIT (2013) (21 ITR 186) (HYD.ITAT) confirmed by Andhra Pradesh High Court (2014) (365 ITR 82) is not applicable to assessee's case and the same are taxable as revenue receipts in view of the decision of theAhmedabad ITAT as discussed. Reliance is also placed on the following decisions of the Apex Court: As held in the case of KTMTM Abdul Kayoom vs CIT 1962 SUPP(1) SCR 518 21. ..each case depends on its own facts and the closesimilarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide, therefore, on which side of the line a case falls, the broad r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the current case. It is relevant to refer to finding of Hon ble High court [2014] 46 taxmann.com 314 which reads as under: This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal, dt.2.11.2012, on the following substantial questions of law: 1. Whether, in the facts and circumstances of the case and in law, ITAT is correct in holding that sale of Carbon Credits is to be considered as Capital Receipt and not liable for tax under any head of income under Income Tax Act, 1961? 2. Whether, in the facts and circumstances of the case and in law, ITAT is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the Carbon Credits, without appreciating that generation of Carbon Credits is intricately linked to the machinery and processes employed in the production process by the assessee? 2. Sri J.V. Prasad, learned Counsel appearing for the appellant - Revenue submits that the consideration received on account of sale of Carbon Credits should be treated to be business income as the sale has been made in connection with the business. 3. We have considered the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held that the receipt should be treated as a capital receipt. In this regard, it would be beneficial to refer to the decision in the case of CIT v. SubhashKabini Power Corporation Ltd., [(2016) 385 ITR 0592 (Karn.)]. In the said decision, the Karnataka High Court approved the view taken by the ITAT, Hyderabad Bench, which decision was upheld by the High Court of Andhra Pradesh in the case of CIT v. My Home Power Ltd. [(2014) 365 ITR 0082 (AP)], which was subsequently followed by the ITAT, Chennai and Jaipur Benches. The operative portion of the judgment reads as follows:- 11. The decision has been upheld by the Hon'ble Andhra Pradesh High Court. This decision has been subsequently followed by the ITAT Chennai and Jaipur Benches. There is no decision either from the Hon'ble Supreme Court or from the Hon'ble jurisdictional High Court. These decisions indicate that sale of carbon credit would result capital receipt which is not taxable. When we confronted the learned DR with regard to this position, it was contended that the position as on the day when the assessment order was passed, is to be seen and on that day these orders were not available. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the CIT is upheld, then, in law, it will affect the computation of income, ultimately because the receipt will not be taxable, it will not come under the ambit of computation of income. Simultaneously it will be excluded from the deduction u/s 80- IA as well as of the total income. The result will remain as it is. It is a revenue neutral case. Therefore, in view of the ratio laid down by the Hon'ble jurisdictional High Court in the case of Gopala Gowda (supra), the second condition for taking action u/s 263 does not exist. The assessment order is not prejudicial to the interests of the Revenue. In view of the above discussion, we allow the appeal of the assessee and quash the impugned order of the learned CIT passed u/s 263 of the Income-tax Act. 3. The aforesaid shows that, so far as the question as to whether, the income by sale of carbon credit could be termed as capital receipt or profit, is concerned, the Tribunal has considered the decision of the Hyderabad Bench and it has further taken note of the fact that decision of the Tribunal of Hyderabad Bench was carried before the Andhra Pradesh High Court and the said decision was not interfered with. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall have to examine this question on principle but before we do so, we must refer to the decision of this Court in Maheshwari Devi Jute Mills case since that is the decision which weighed heavily with the High Court, in fact, compelled it to negative the claim of the assessee and hold the expenditure to be on capital account. That was a converse case where the question was whether an amount received by the assessee for sale of loom hours was in the nature of capital receipt or revenue receipt. The view taken by this Court was that it was in the nature of capital receipt and hence not taxable. It was contended on behalf of the Revenue, relying on this decision, that just as the amount realised for sale of loom hours was held to be capital receipt, so also the amount paid for purchase of loom hours must be held to be of capital nature. But this argument suffers from a double fallacy. 5. In the first place it is not a universally true proposition that what may be capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit is not so transitory as to have no endurance at all . There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature, acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. But even if this test were appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f universal application. But even if we were to apply this test, it would not be possible to characterise the amount paid for purchase of loom hours as capital expenditure, because acquisition of additional loom hours does not add at all to the fixed capital of the assessee. The permanent structure of which the income is to be the produce or fruit remains the same; it is not enlarged. We are not sure whether loom hours can be regarded as part of circulating capital like labour, raw material, power etc., but it is clear beyond doubt that they are not part of fixed capital and hence even the application of this test does not compel the conclusion that the payment for purchase of loom hours was in the nature of capital expenditure. After making the aforesaid observation, at paragraph No. 10, the Apex Court, on the basis of the facts of the said case concluded as under: Similarly, if payment has to be made for securing additional power every week, such payment would also be part of the cost of operating the profit-making structure and hence in the nature of revenue expenditure, even though the effect of acquiring additional power would be to augment the productivity of the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law would arise for consideration. 29. The Hon'ble Division Bench of this Court in the case of PCIT v. Arun Textiles (P.) Ltd. [T.C.A.No.606 of 2016, dated 29-8-2016], after referring to the decision in My Home Power Ltd., (supra), dismissed the appeal filed by the Revenue and confirmed the order passed by the ITAT holding that sale of carbon credits has to be considered as capital receipt and accordingly, it is not taxable. 30. The argument of Ms. V. Pushpa, learned Senior Standing Counsel is by referring to the substantial questions of law framed by the assessee and it is submitted that if the receipts from sale of carbon credit has to be treated as a capital receipt, then the assessee could not have claimed it as a deduction under section 80-IA of the Act and if the substantial question of law as framed by the assessee is to be answered, it should be answered against the assessee. 31. In our considered view, there is a slightly different approach that needs to be adopted, as this Court exercises power under section 260A of the Act, while deciding the substantial question of law. The assessee is required to place all materials before the Assessing Officer and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which relate to the assessment of the assessee may be raised before the Tribunal. If' for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him. 34. After referring to the above decisions, it was pointed out that the Appellate Tribunal is competent to pass such orders on the appeal, as it thinks fit and it would be the duty of the Tribunal to decide all questions on fact and law before it, even though it was not raised by the departmental authorities. After referring to the powers of the Tribunal and that of this Court and the Hon'ble Supreme Court, it was pointed out that based on the cardinal principle, which has been incorporated as a veritable constitutional provision, that no tax can be levied or collected save under authority of law. 35. It was further pointed out that the task of an Appellate Authority under the taxing statute, especially a non-depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form precisely the same functions, as the assessing authority. The above decision and the findings rendered are a clear answer to the arguments raised before us by the Revenue contending that substantial question of law no. 4, as framed has to be decided against the assessee. We, thus, have no hesitation to hold that the Tribunal failed to exercise its power in a proper prospective as a final fact finding authority and examining as to whether there is any adjustment required to be made in the assessee's tax liability qua the various decisions of the Court, which have held that receipt on account of sale of carbon credit is capital in nature. 38. In the instant case, the assessee while preferring appeal before the CIT(A), has specifically raised a contention that the receipts from sale of carbon credit is a capital receipt and cannot be included in the taxable income. Though this ground raised by the assessee before the CIT(A) has been recorded in the order, the CIT(A) did not take a decision on the same. Similar ground was raised by the assessee before the Tribunal, which was not considered by the Tribunal, though the Tribunal refers to all the decisions relied on by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Jurisdictional High court in the case of PCIT v. Dodson Lindblom Hydro Power Pvt. Ltd dated 27/02/2019 in INCOME TAX APPEAL NO.1820 OF 2016 wherein it is held as under: (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT, is correct in holding that sale of carbon credit is to be considered as Capital Receipt and not liable for tax under any head of income under Income Tax Act, 1961? (ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT, is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the Carbon Credits, without appreciating that generation of Carbon Credits is intricately linked to the machinery and processes employed in the production process by the assessee? 4 Though two questions are framed, singular issue is whether the receipts of the Assessee arising out of sale of carbon credit is to be considered as capital receipt and therefore not liable to tax. This issue is considered by the several High Courts starting from the judgment of Andhra Pradesh High Court in the case of Commissioner of Income Tax v/s. My Home Power L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower generating units mainly used for captive power consumption. The Assessing Officer has prepared tabular chart showing market value of such goods on transfer at Page No 37 of assessment order. On perusal of such table, it is apparent that assessee has considered 6.30 per unit at which the units generated by it were sold to Tata Power Trading Company Limited. The Assessing Officer at Para No. 10.28 of his order has observed that assessee before it claimed that notional market value of the electricity generated by CPP shall be the same as what the manufacturing unit would have paid electricity to the State Government or other party if CPP would not be in existence. The Assessing Officer has referred to provisions of Section 80IA(8) of the Act and observed that basic notion of the assessee company of calculating saving of its manufacturing unit on account of power supply by CPP on the basis of rate of electricity which would have been charged by Electricity Board is incorrect and what is required to calculate the sale price which the undertaking would have fetched if its electricity gets sold in open market. Based upon the same, AO has worked out average value of electricity sold b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds or services as on that date. Explanation. For the purposes of this sub-section, the expression market value , in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any. The dispute is whether the market value means the market value at which the power grid purchases power or the market value at which a consumer purchases power. The answer to this question is provided by explanation to section 80A(6). Where the goods or services are sold by the eligible unit, the market price would mean the value at which such goods or services can be sold in the open market. Normally, cost of electricity consumed by the end user has three components they are generation costs, transmission costs an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urChini Mills Ltd (ITA 1672/Kol/2019) (Kolkata ITAT) 57. During the course of appellate hearing, Ld AR has filed revised working of the turnover of the eligible CPP units by adopting rate which the assessee s Cement Manufacturing Unit (CMM) would have paid to purchase the power from the State Electricity Board (SEB) which means Average Annual Landed Cost (AALC) of power purchased from SEB at each location. This method has been followed by assessee while claiming deduction u/s 80IA in return of income for A.Y. 2011-12 hence there was no need for submitting revised working in such year. 58. The Ld DR has mainly relied upon observations made by lower authorities. She has mainly relied upon provision of Section 80IA(6) of the Act and contended that since the CPP of the assessee have supplied power to the assessee s CMU, the market value to be adopted for quantification of the turnover of the CPP should be in relating to goods or service sold or supplied. The Ld.DR has thus stated that ratio laid down by various courts as relied upon by assessee cannot be made applicable and distinguishable to the facts of this case. 59. Ld.DR with regard to Reduction in deduction u/s 80-IA o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the market value in view of the explanation to subsection 6 of section 80A of the Income Tax Act, 1961. The sub section (6) of 80A was brought on statute by the Finance Act of 2009 'With retrospective effect from 01.04.2009 and hence is applicable to the AN. under consideration. It is pertinent to mention that section 80A(6) is a nonobstante clause. For the sake of ready reference, sub section 6 of section 80A along with its explanation is reproduced hereunder: (6) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading C. Deductions in respect of certain incomes , where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to Tata Power Trading Company Limited. by one of its units at Kymore in Madhya Pradesh, that too only over a short period of three months, worked out the turnover of the CPPs after adopting the average rate at which the power was purchased by the two players in the power sector, the Tata Power Trading Company Limited and the Tata Power Trading Corporation Limited, the working is available on page 40 the assessment order. while computing the net output of the CPPs, the AO has excluded the transmission loss which was considered by the assessee. It is pertinent to mention that during the course of hearing before the Bench, the Ld. AR of the assessee conceded the ground on the exclusion of the units lost in transmission for the purpose of computing the turnover of the CPPS. However, to support its revised working, filed for the first time only during the course of hearing on 09.01 2023, the AR relied on various case laws, mentioned in the summary chart mentioned by him. During the course of hearing, reliance was predominantly placed on the Bombay High Court's decision in the case of CIT vs Reliance Industries Ltd. [2020] 421 ITR 686 (Bombay) The list of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cases relied upon by the AR are pertaining to A.Ys prior to A.Y. 2009-10, ie. when the provisions of sub-section 6 of section 80 A was not on statute. Even in cases, wherein the AY involved happens to be post 2009-10,for example Mumbai ITAT's decision dated 29/11/2022 passed in the case of ACIT US Century Textiles and Industries Ltd. [ITA No. 1886/Mum/2022 for AY 2010-11 (copy of the decision was filed by the Ld. AR on 09.01.2023during the course of hearing), the issue is decided in favour of the assessee by placing reliance on such decisions, wherein the Court had no opportunity to consider the provisions of section 80A(6) of the Act and its explanation. Reference is also made to para 6 of the ITAT's order passed in the case of ACIT Century Textiles and Industries Ltd, which is reproduced hereunder for ready reference, which mentions that the Ld.DR could not point out any change in facts or law is a sis that of the earlier years 6. We note that on this issue the LCIT(A) has decided in favour of the assesses by following the decision of the Tribunal in A.Y 2006-0) by order dt.14.06.2017and deleted Rs 292,15,38/- which was disallowed by AO. We note tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judicial authorities have taken into consideration all the relevant amendments, including 80IA(6). Further, it is relevant to reproduce the relevant portion of the decision from coordinate bench Order, wherein the ITAT has held as under: 17. The assessee had claimed the deduction u/s.80IA on power generation undertaking by adopting price which the industrial consumers paid during the year under consideration for electricity purchased from State Power Distribution Agency. However, the Assessing Officer has restricted the claim of deduction u/s.80IA to Rs.34,23,45,990/- by taking 16% return on capital base as per the parameters prescribed by the Regulatory Authorities i.e. State Electricity Board for procuring the electricity. 18. By the impugned Order CIT(A) allowed assessee's claim of deduction u/s.80IA after having its observation at pages 6.3 of its appellate order. Precise observation is as under:- 6.3 I have considered the facts of the case and submissions of the appellant as against the observation / findings of the AO in his order. The contentions raised by the appellant in respect of the ground of appeal are being discussed and decided as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness to any other business carried on by the assessee is not recorded in the books of accounts of the eligible business at the market value of such goods or services as on date of the transfer, then for the purposes of the deduction, the profits and gains of such eligible business is required to be computed as if the transfer has been made at the market value of such goods or services as on that date. As per the Explanation,' 'market value' in relation to the goods would mean the price that such-goods would ordinarily fetch in the open market. The proviso to sub-section(8) of section 80IA would come into operation only' when in the opinion of the Assessing Officer; the computation of profits and gains of the eligible business in the manner provided in the main sub-section presents exceptional difficulty. It is, therefore, clear that the Assessing Officer, in order to invoke the proviso, must form an opinion based on the material on record that the computation in the manner provided presented exceptional difficulties. If he does not form an opinion, he cannot invoke the proviso to determine the profits gains of the eligible business. It would, therefore, berequi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akage, past losses of the distribution agency, etc. In my opinion, the findings of the AO cannot be taken to be correct. Even though there may be 110 open market for the goods, an open market has to be presumed in respect of the goods in question in view of the categorical condition laid down in the provisions itself and the law laid down in this regard by the different Hon'ble Courts of the land and which have/been relied upon by the assessee in its submissions. The Assessing Officer has not brought any material to show that the price charged was not in consonance with the market value. The AO has also not suggested, leave alone computed as to what the market value of the goods should be. While the assessee has given detailed reasons as to why the price of the goods recorded by it corresponds to till! market value, the Assessing Officer has not given any specific findings to hold as to why such price does not correspond to the market value of the goods and as to what was the market value of such goods. The assessee has contended that the 'rate 'charged to the end user by the State Electricity Board would provide the 'most appropriate basis to arrive at the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) It is only when condition (b).is satisfied then the Revenue gets a right to determine profits and gains of such eligible business at the market value of such-goods or services. as on the date of its transfer. The Assessing Officer had considered the rate' charged by the State Distribution Agency as the market value of the goods 'transferred by the eligible business in the original assessment of the assessee, There is nothing on record to show as to how the value of the goods adopted/taken by the assessee do not correspond to the market value of such goods especially in light of the reasons given by the assessee. The Assessing Officer has also not expressed any opinion as to how the computation of profits and gains of the business tn. The manner provided in the main sub-section' presented exceptional difficulties. Hence, proviso to Sec. 80lA could not have been invoked by him. It is also clear that the parameter 'relating to 16% of capital base js only an exercise for fixation of tariff and is only one of the many parameters taken into consideration for fixing the tariff under' the Old Electricity Act of 1948, This parameter is for working 'out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules and conditions for determining the tariff for sale of electricity by a generating company to the State Electricity Boards. A perusal of the same reveals that the tariff is determined on the basis of various parameters contained therein: From the aforesaid, it is evident that on one hand it is only upon granting of specific' consent that a private person call set up a power generating unit having 'restrictions on the use of power generated and at the same time the tariff at which a power generating unit can supply power to the Electricity Board is also liable to 'be determined in accordance with the statutory requirements. In this context it can be safely deduced that determination of tariff between the assessee and the Board can be said to be an exercise between a buyer and seller neither in a competitive environment and nor in the ordinary course of trade and business. It is an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the' buying tariff in terms of scenario cannot be, equated with a situation where the price is determined in the normal course of trade and competition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed as if the transfer in either case, had been made at the market value of such goods as'on that date . The above concept of transfer pricing is also apparent in r. 7 of I T Rules, 1962 provided for determining the income from agricultural produces consumed by the agriculturist-assessee in his business as raw material. The rule provides that in the case' of income which is partially agricultural income and partially income chargeable as business income in determining that part which is chargeable to income-tax, the market value of any agricultural produce which has been raised by the assessee and utilized as a raw material in such business hall be deducted at the prevalent market value. This principle has been considered and upheld by the Supreme Court in the case of ThiruArooran Sugars Ltd. Vs. ClT (1997) -142 CTR (SC) 9; (1997) 227 ITR 432 (SC). Therefore, we direct the assessing authority to work out the profits on the basis of the price of the power generated' by the assessee' at the average of the annual landed cost of electricity 'purchased by the assessee from Karnataka State Electricity Board during the impugned previous year. It may be deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee is allowed. 19. We found that exactly similar issue has been considered by the Tribunal in assessee's own case for the assessment year 2006-07 therein issue has been decided in favour of the assessee. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee's own case, we do not find any infirmity in the order of CIT(A) for allowing assessee's claim of deduction u/s. 80IA with reference to power generating undertaking and the power so generated being used mainly for captive consumption. 20. Learned DR has relied on the decision of Calcutta High Court in the case of ITC Ltd., (2015) 64 Taxman.com 214 and contended that distributing expenditure not actually incurred by the assessee increases its profits. Such profit cannot be said to be derived from industrial undertaking, therefore, to this extent deduction u/s.80IA cannot be allowed. 21. In the course of the hearing, the Revenue has relied on the decision of Calcutta High Court in Commissioner of Income tax, Kolkata-III v. M/s. ITC Ltd. (ITA 426 of 2006) for the proposition that the market price deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Objects and Reasons is particularly important and it reads as under: Generation is being delicensed and captive generation is being freely permitted. Hydro projects would, however, need approval of the State Government and clearance from the Central Electricity Authority which would go into the issues of dam safety and optimal utilisation of water resources. (Emphasis supplied). 26. Reference is invited to this para to show that captive generation is being freely promoted. With this background, it is necessary to see what is the scope and impact of the Electricity Act 2003. 27. Section 12 provides that no person shall transmit electricity or distribute electricity or undertake trading in electricity unless he is authorised to do so by a licence issued u/s 14 or he is exempt under section 13. 28. It is quite clear that under section 12, a licence is not required for generation of electricity and this is made clear by section 7 which reads as follows: PART III- GENERA TION OF ELECTRICIT Section 7. (Generating company and requirement for setting up of generating station): Any generating company may establish, operate and maintain a generating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whatsoever on a person in respect of Captive Generation plant. It is neither required to obtain a licence under section 7 or under section 12 as a generating company if it consumes power within itself. In other words, a Captive Generation Plant does not need to apply for licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73. 31. The reason for excluding a Captive Generation plant from any of the technical standards for construction of electricity plants relating to connectivity with the grid, is because a person can, without a licence, construct, maintain and operate a Captive Generation plant and use dedicated transmission lines. His generating, transmitting and consuming power within his own jurisdiction neither needs access nor seeks to use the grid and therefore such a Captive Generation Plant is not cabined and cribbed by any regulatory mechanism under the Electricity Act 2003. 32. If however, the Captive Generation Plant seeks to supply electricity to any outsider through the grid, the proviso requires that the supply of electricity shall be regulated in the same manner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of ThiruArooran Sugars Ltd. v. CIT (1997) 227 ITR 432 is material. In that case, the assessee company was a manufacturer of sugar which purchased sugarcane from the market for crushing. It also had its own cane fields where it cultivated sugarcane, which was entirely consumed by its factory. Since the profit made by the assessee from the sale of sugar arose out of agricultural activities as well as manufacturing activities, the income earned by the assessee was required to be divided into two parts. No tax was leviable on agricultural income, but the profit generated from non-agricultural activities was leviable to be taxed under the Act. Therefore the agricultural income had to be determined and for that market value of the sugarcane consumed in its factory had to be determined. The relevant rule 7 of the Income- tax Rules, 1962 read as follows: Income which is partially agricultural and partially from business - (1) In the case of income which is partially agricultural income as defined in section 2 and partially income chargeable to income-tax under the head 'profits and gains of business', in determining that part which is chargeable to income-tax the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket where buyers and consumers congregate to purchase and sell Goods Where there is no such open market, an estimate of the market price will have to be done on an estimated hypothetical basis. It stated at page 440, para (f) of 227 ITR 432. The principle that value of a property will be the price which it will fetch if sold in the open market is a well-known method of valuation which has been adopted in a large number of statutes in England and also in India. It is well-settled that existence of an open market is not a precondition for application of this principle. There may or may not be an actual market where buyers and sellers congregate to purchase and sell goods. Where there is no such open market, an estimate of the market price will have to be done on a hypothetical basis. 38. The Supreme Court also referred to its decision in the case of Ahmed G. H Ariff v. CWT [1970] 761TR 471 (SC), in the following words: In the case of Ahmed G.H. Ariff v. CWT [1970176 ITR 471, explaining the phrase 'if sold in the open market' in section 7(1) of the Wealth-tax Act, it was observed by Grover, J., speaking for the Court that the phrase did not contemplate actual sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the goods are ordinarily sold in the open market. For determination of market value, there is no pre-requisite that an open market where buyers and sellers congregate to buy and sell goods must exist. In the instant case, the assessee-company actually bought sugarcane from a large number of growers year after year in the ordinary course of business. The price at which it buys sugarcane must/be taken to be the market price. If the price is controlled by Sugarcane Control Order, the controlled price will be taken as the market price because it is at this price that a willing buyer and a willing seller are expected to transact business. As Lord Denning pointed out, it does not make any difference to this position that the assessee was the only buyer in the region where its factory was located . 41. The Calcutta High Court has however stated at page 11: But in the case before us the electricity generated by the assessee could not be sold to anyone other than a distribution company or a company which is engaged both in generation and distribution. 42. In our case, the entire consumption is by the assessee itself and the assessee is not obliged to sell to only a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the open market for sale of electricity by a licenced generating company and the open market which must be assumed for consumption of electricity by the generating producer itself are two different markets and the market price for self consumption and the market price for sale by the licenced generating companies to outsiders are two different prices. The Electricity Act, 2003 contemplates determination of market price only in respect of licenced generating companies willing to distribute or transmit power to a distribution licensees or to a consumer and it is only those generating companies which are regulated under section 42(2). The self consumption of electricity by a Captive Power Plant is' not regulated under Electricity Act, 2003. In the decision of Supreme Court InThiruArooran Sugars also, it is quite clear that self consumption of sugarcane was not regulated and given that circumstance, the Supreme Court held that because the manufacturing unit was purchasing sugar from other growers that price ought to be adopted as market price. Similarly in the case of the assessee, in respect of the electricity produced by Captive Power Plant for consumption, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not considered the provisions of sections 8, 9, 42 and 2(g) of the Electricity Act, 2003. Further the provisions of section 62 of the Electricity Act, 2003 referred to by the Honourable Court are not applicable to the fact of the assessee's case. 50. The Calcutta High Court has dissented from the decision of three different High Court as follows: 1. The decision of Chattisgarh High Court Bilaspur Bench in the case Of ACIT v. Godavari Power Ispat Ltd. - 223 Taxman 234. 2. CIT v. Kanoria Chemicals and Industries Ltd 35 taxmann.com (Cal). 3. CIT v. Graphite India Ltd ITA No ITA No 733 of 2008 (Cal). 4. Madras High Court decision referred to in page 12 (Citation notavailable). 51. Under these circumstances following two principles involved here. 1. Where there is a conflict of views between High Court, Tribunal may choose to follow what in its opinion is the correct view. 2. When there is a conflict of opinion between two or more High courts, opinion of jurisdictional High Court, which is in favour of the assessee ought to be followed. 52. If neither of the above two principles are followed, there is a decision of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate at which the electricity generated by one unit of the assesseecompany and provided to the another be valued. The assessee contended that such valuation should be at the rate at which the electricity distribution companies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ( the Act for short) in respect of the profits arising out of such activity. Obviously, therefore the attempt on the part of the assessee was to claim larger profit under the unit which was eligible for such deduction as against this, attempt of the revenue would be see that the ineligible unit shows greater profit. 6. The Tribunal in the impugned judgment extracted extensively from the order of CIT (Appeals) and independent reasons for confirming the same. In such order CIT (Appeals) had placed reliance on an earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the factual data that we come to a conclusion that even question (d) as framed is not a substantial question of law. 8. Thus, the issue at hand had been examined by this Court on earlier occasion and the view of the Tribunal under similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of CIT v. Godawari Power Ispat Ltd. [2014] 42 taxmann.com 551/223 Taxman 234, in which the Court held and observed as under: 31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer or the Steel-Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market. 32. In our opinion, the AO committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed. 11. Judgment of Calcutta High Court in case of CIT v. ITC Ltd. [2016] 236 Taxman 612/[2015] 64 taxmann.com 214 was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by this Court earlier and in view of the decisions of the Chhattisgarh and Gujarat High Court, we see no reason to entertain this question. 63. Further, coordinate bench in the case of Reliance Industries Ltd v. ACIT has allowed the case for AY 2016-17 [2022] 143 taxmann.com 194has allowed similar case by relying on coordinate bench of the Tribunal vide order dated 08/03/2022 in AY 2014-15 and 2015-16, and has held that the view of the authorities below that the definition of the market value shall change for the purpose of domestic transfer pricing regimen is not at all sustainable. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ALC of power purchased by tested party from SEB - Assessee had also duly reported these transactions in audited report in Form 3CEB - However, TPO opined that average rate of Rs. 3.47 per unit calculated on basis of sale data of power by independent CPPs/IPPs as determined by various tariff orders would be ALP of domestic specified transactions and, accordingly, made an upward adjustment - It was noted that CPPs benchmarked transactions with non-eligible units at a rate at which power was supplied by SEB to non-eligible units and, therefore, was prevailing rate at which power had been supplied by SEB to other parties/factories located in same geographical areas/location - Further, both CPPs as well as SEB supplied/sold power during year and, thus, there was no timing difference as well, therefore, transactions of purchase of power by non-eligible units from SEB fulfil internal CUP parameters vis product comparability and similar market conditions and, thus, ALC paid by non-eligible units to SEB was held to represent internal comparable ALP - Whether, on facts, Commissioner (Appeals) had rightly held that ALC at which power was procured by non-eligible units from SEB was most ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance u/s 80-IA on Rail System (Rs. 1,26,17,49,139/-: a) On facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO in denying the deduction claimed by the Appellant u/s. 801A of the Act in respect of Rail System, b) The Appellant prays that the AO be directed to allow the deduction u/s. 80IA towards rail system to the Appellant as claimed. 69. Similar issue was considered by us in the assessee Appeal in Ground No 3 in AY 2009-10 and held as under: 30. Considered the rival submissions and material placed on record. It is observed that entire controversy of allowability of deduction u/s 80IA(4) on Rail Infrastructure facility was raised based upon CIT(A) s order in the case of Ultratech Cement Limited as referred in assessment order. This fact is also mentioned by Ld DR in its written submission. The Ld. DR has also stated that on perusal of facts as emanating from the CIT(A) s order and the ITAT s order in the case of Ultratech Cement Limited, it can be safely assumed that the agreement between Ultratech Cement Limited and the Railway Authorities and that between assessee and the Rail Authorities are similarly w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Railways and not the assessee company; (e) all the four cement plant sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the notional profit computation is incorrect; and (g) the decisions of the Tribunal were not applicable as these critical facts were not placed before the Tribunal. The claim for deduction under section 80IA in respect of the rail system was rejected. Aggrieved, assessee carried the matter in appeal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to in Explanation (a) to the clause (t) of sub-section (4) section 80IA in reference to the infrastructure facility] as claimed by the assessee that railway had laid down those [sidings] partly on the land belonging to the railways and partly belonging to the assessee company so as to facilitate the transportation of raw materials/cement bags through railway wagons [from / to their plant sites]. The AO also noted that the assessee [rather L T Ltd.] had primarily requested the' railway department to extend the sidings [railway tracks] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tri Rs 5.73 crs. -Arakkonam]. In A.Y. 2008- 09, the claim extended to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs. 12. The rail systems at all these four locations viz. Hirmi, Tadipatri, Arakkonam Durgapur are said to have commenced the operations in AY. 2000-01, AY. 1999-00, AY. 2001-02 ft AY. 2002-03 respectively [refer assessee's reply dated 06.01.2014] It was further observed by CIT(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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m its railway unit to its cement unit cannot govern the tax implication of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the decision of the Supreme Court in the case of Kadernath Jute Manufacturing Company Ltd. 82 ITR 362; in the case of TutcorinAlali Chemicals Ltd. in 227 ITR 172; in the case of Godhra Electricity Company in 91 Taxman 91; in the case of Bokaro Steel Ltd in 263 ITR 315 and in the case 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 consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would have otherwise incurred. It was further submitted that the profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system. 13.5. It was further submitted that substantial investment has been made in developing the railway system. There is an agreement with the railways for operating and maintaining the rail system. It employs required personnel directly or through the railway authorities and it bearing the salary cost relating thereto. It was submitted 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is eligible for deduction u/s. 80IA in r/o profits derived from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it has entered into an agreement for operation and maintenance of the rail system with the railways i.e the Government. Thus all the 3 conditions required to be fulfilled as per Sec. 80IA(4)(i) have been satisfied by the appellant. Moreover rail system is defined in explanation to sec. 80IA(4)(i) as an infrastructure facility. Further separate 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 03.01.1996categorically 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those rail systems. Rather the assessee company has started claiming exemption from AY. 2004-05 after the ownership over the cement plants together with such rail systems were transferred to it following the demerger scheme in FY. 2003-04. 19. The CIT(A) further observed that the provision of railway track, signals, level crossings etc are the essential components of a rail system but that in itself would not give rise to any profit. For that movement of traffic [i.e. material] is to be made over those railway tracks. The profit 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the rail systems were developed in accordance with the agreements entered with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various clauses particularly Class 2, 6, 7(a), 17 and 8(b) which stipulate for construction of railway sidings at the cost of the assessee. Construction work was awarded either to railway or third party contractors based on their expertise and the work was undertaken under the 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 ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. CIT v. Paul Brothers. [1995] 79 Taxman 378/216 ITR 548 (Bom.) 4. CIT v. Macbrout Engineering (P.) Ltd. [2014] 52 taxmann.com 219 /[2015] 232 Taxman406(Bombay) 5. CIT v. Modi Industries Ltd. [2010] 8 taxmann.com 129/327 ITR 570 (Delhi) 6. CIT v. Delhi Press Patra Prakashan Ltd. [2013] 34 taxmann.com 3/217 Taxman 288/355 ITR14(Delhi) 7. Saurashtra Cement Chemical Industries Ltd. v. CIT [1979] 2 Taxman 22/[1980] 123 ITR669(GUJARAT) 8. Ace Multi Axes System Ltd. v. Dy. CIT [2015] 228 Taxman 98/[2014] 49 taxmann.com168/367 ITR266 (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.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the decision of Jammu and Kashmir High Court in the case of Shree Balaji Alloys v. CIT [2011] 198 Taxman 122/9 taxmann.com 255/333 ITR 335, Bombay High Court in case of CIT v. Chaphalkar Brothers [2013] 33 taxmann.com 431/215 Taxman 145 (Mag.)/351 ITR 309. 32. With regard to disallowance made u/s.14, she relied on the findings recorded by lower authorities. 33. We have considered rival contentions, carefully gone through the orders of the authorities below and materials placed before us. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. 34. Grievance of both the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings / construct the siding is meant for Railway administration's permission for allowing the assessee for developing the Rail system as per the norms and supervision of Indian Railways. The revenue authorities alleged that the Railway system have been developed to facilitate 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 agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee's case siding charges are not leviable. 38. The rail systems were developed by assessee under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreements substantiating the same are asunder:- (a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railwaysidings Further kindly be informed that, for construction of the siding under the supervision of the 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with Balance Sheet, P L account, Schedules forming part of Balance sheet and P L Account. 41. However, the AO did not agree with assessee's contention and held that Rail systems developed by assessee is not eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee's claim of deduction u/s.80IA. 42. With regard to CIT(A)'s observation as to whether rail systems developed by M/s. L T were in accordance with the Build-Own-Lease- Transfer (BOLT) scheme of the Indian Railways, we observe that L T had 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. The assessee was permitted to setup and even operate maintain the rail systems so developed. Further, regarding' Circular No. 733 dated 03-01-1996, we found that the Circular clarifies that tax holiday benefit u/s. 80-IA 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 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the relevant provisions of law during relevant period there is no requirement for Rail Infrastructure to be In BOLT scheme, to be eligible for claiming deduction under Section SO-lA (4)(i). Section 80-lA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) ...... (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 1st dayof April, 1995: 45. With regard to objection of 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for construction of the siding under the supervision of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 50. The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee's own case. The facts and the agreements were also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the 'principles of res judicata' do not apply to income tax proceedings and each assessment year being a separate unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year. The above principles have been accepted in the undernoted case: H.A. Shah Co v. CIT [1956] (30 ITR 618) (Bom.) Amalgamated Coalfields Ltd. v. Janapada Sabha AIR 1964 SC 1013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Durgapur -- -- -- -- 5.71 6.72 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the basis adopted for calculating the revenue from rail system is, lower of the Freight chargeable through Road and Rail. The Rail Freight being lower is considered after discounting it further by 50% based on the Circular of Indian railways for the freight chargeable upto the nearest railway station. Freight Rates are considered as per the Freight Rate chart Freight Circulars issued from time to time by Indian Railways, based on the classification of the goods transported. The Railway freight rates are uniformly charged to everyone by Indian Railways. The copies of Form 10CCB including the Profit and loss account, Balance sheet along with Schedules, giving- therein the basis for calculation of revenue has been submitted before the lower authorities and had been duly examined by us and found to be correct. 55. We also found that the loading and unloading of goods is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point of interchange till factory gate of the assessee has immense potential, with enabling powers to the Railway Administration (which itself is a public department), to be developed into a facility that will ensure to the public at large. The railway sidings are always constructed for captive consumption. Thus, the provisions of section 80IA(4) cannot be read in the manner to make it redundant, when the legislature in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. 61. As far as operations is concerned, we found that the assessee carries out all the following 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, 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. 62. With regard to CIT(A)'s conclusion at page 42 of A.Y. 2010-11 to the effect that various conditions given in Section were not met with, we observe as under:- a. Section 80-IA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) any enterprise carrying on the business of (i) developing, (ii) maintaining an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard to CIT(A)'s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the Indian Railways and not by the assessee Company. 69. We found that the CIT(A) has equated running of goods train with the operation of Rail System . This is the sole basis on which he has arrived at his conclusion that since the assessee is not running the goods train it is not operation of Rail System and hence not eligible for claiming deduction under section 80IA(4). 70. As per our considered view, the operation of Rail System is not simply running of goods train. Operation of Railway Systems comprises of various activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division. 77. After verifying the computation of income eligible for deduction u/s.80IA, as filed by assessee, we found that the CIT(A) has misunderstood the working of the revenue calculation and alleged that such working is ill-conceived as the actual transportation of materials on the siding is carried out by the railway authorities. Based on such misunderstanding, he further alleged that assessee has claimed deduction for notional profits whereas section 80lA allows deduction for profits derived from actual operations. 78. In this regard, we observe that the railway systems of the assessee has been rendering following services to the cement division: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is merely based on his incorrect assumption. 82. Further, we found that observation of CIT(A) with respect to the freight rate is also not correct in so far as for comparison, he has considered the rate per quintal as against per Metric Ton adopted by the assessee which can be observed from the calculation submitted by assessee before the lower authorities. Without any evidence in hands, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operation of railway siding with merely hauling of wagons. The operations of railway siding involves various activities other than the hauling of wagons. Mere haulage of wagons cannot be equated with operations of railway siding. We found that assessee has filed reports in Form 10CCB from M/s G.P.Kapadia Co., Chartered Accountant. The CIT(A) himself has allowed the deduction in AY. 2009-10 based on the similar facts available on records but changed his decision merely based on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction 86. In terms of the above averments, after acquiring the cement business from L T, the assessee started claiming deduction for Rail system u/s. 80- IA from Assessment year 2004-05 onwards since it satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT v. Shiv Agrevo Ltd. [2009] 34 SOT 1 (URO). In this case, the assessee-company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92. It is pertinent to mention here that once the deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement Chemical Industries Ltd. (supra), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act. 93. Even the Supreme Court in case of Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480 /196 ITR 188 held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L T Ltd in the FY. 2003-04 on account of demerger, could be treated as eligible to the deduction under the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the stand of the authorities below, and seeks to justify the same. We have also noted that in three immediately preceding assessment years, the same stand of the assessee, which has been rejected now, was accepted during the scrutiny assessment proceedings. While it is indeed true that there is no res judicata in the income tax assessment proceedings, at the same time, following the principles of consistency duly recognized by Hon'ble Supreme Court in the case of Radhasoami Satsang Vs CIT [(1992) 193 ITR 321 (SC)], unless there is a change in the material facts, the issues which have been settled one way or other must to be disturbed. In this view of the matter, and respectfully following the coordinate bench in the case of Ultratech Cement Ltd (supra), we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance in respect of claim of 80IA in respect of rail system. The assessee gets the relief accordingly. 31. It is relevant to refer to decision of Kolkata ITAT in the case of RASHMI METALIKS LTD in ITA No 813 to 816/Kol/2017 dated 02/05/2018 wherein it is held as under: 38. Learned Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the claim for the deduction u/s. 80JA of the Act Per se, the ITAT order can be treated as final in favour of the assessee as the Hon 'ble High Court refused to admit the question raised by the Revenue on the very applicability of the provisions of section 80JA of the Act for the Rail System. Therefore/ respectively following the said decision we hold that the assessee entitled for the deduction u/s. 80JA of the Act in respect of the railway system . 43. Thus, in view of what is discussed above, we hold that the assessee is entitled for deduction u/s. 80IA in respect of the Railway System and water Supply project and therefore we set-aside the orders of the LdPCIT passed u/s 263 of the Act for the Assessment Years 2008-09 to 2011-12. 44. In the result, appeals of the assessee are allowed. 40. The judgment of the Hon'ble Bombay High Court in the case of M/s. Ultra Tech Cement Ltd in ITA No.6070 of 2010 has confirmed the order of the ITAT. The Hon'ble Madras High Court in the case of M/s Tamilnadu Petro Products Ltd. Vs ACIT 338 ITR 643 allowed deduction u/s 80IA of the Act where the facility was one of captive consumption. Thus even if the facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made . All that this provision does is that it provides for the profits of the eligible unit being treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT credit, he must also make an adjustment for the corresponding CENVAT credit availed by any other unit of the assessee other than the eligible unit. If the captive power unit makes a payment of X amount, and in turn, it generates a CENVAT credit of X amount, which is availed by another unit, say Ropar Cement Manufacturing Unit, the hypothetical independence embedd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us between the nature of expenses and such eligible units of the appellant. Without prejudice to the above, on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the action of AO in apportioning a part of the indirect Head Office expenses aggregating to Rs. 312,93,72,524/ - (including Rs 4,93,33,594/- being R D Expenses) and adjusting such allocated amount of Rs 25,24,48,200/- in computing Tax Holiday u/s 80IC for eligible Gagal 1 Cement Manufacturing Unit, without establishing any nexus between the nature of expenses and such eligible units of the appellant. (c) Without prejudice to the Ground 7 (b), that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified rather grossly erred in confirming the action of AO in apportioning Research Development expenses incurred at Thane Technical Service Centre amounting to Rs, 4,93,33/594/- in computing Tax Holiday u/s 80IC, (d) On the facts and in the circumstances of the case and without prejudice to Ground Nos. 7(a), 7(b) and 7(c) taken here-in-above, in the unlikely event if it is held that indirect Head Office expenses (and R D expenses as the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation would be more appropriate based on expenditure incurred by the units vis- -vis overall expenditure. To this extent, we uphold the plea of the assessee. 109. In view of the above discussions, as also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee‟s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis- vis overall expenditure 76. Respectfully following decisions of coordinate bench referred supra, Assessing Officer is directed to allocate Head office expenses (other than auditor fees and CMA expenses) on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has observed that such transfer is covered within the ambit of slump sale and entire consideration of ₹.10 crores are charged to capital gain tax as per section 50B r.w.s 2(42C) of the Act. 79. In appeal Ld.CIT (A) has discussed the above issue at Para No 19.3 of his order and held as under: 19.3 I have carefully perused the agreement submitted and the contention of the appellant. The AO disallowed long term capital gain on sale of Air Pollution Control business and treated the transaction as slump sale within the meaning of Sec 50B and hence the AO considered the entire amount of Rs. 10 crores for computation of capital gains tax. I agree with the AO. Therefore, the ground of appeal no. 15 is dismissed. 80. Considered the rival submissions and material placed on record. It is observed that assessee has divested its Air Pollution Control business for total consideration of ₹.10 crores to GEA Process Engineering (India) Private Limited. While filing return of income, the assessee has shown income on the basis of such sale treating the same as item-wise sale except for technical knowhow and design and drawings. The assessee has considered value assigned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special provision for computation of capital gains in case of slump sale- (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of longterm capital assets and shall be deemed to be the income of the previous year in which the transfer took place: Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets. (2) In relation to capital assets being an undertaking or division transferred by way of such sale, the net worth of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48. (3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Artex Mfg. Co. [1997] 227 ITR 260/93 Taxman 357 and CIT v. Electric Control Gear Mfg. Co. [1997] 227 ITR 278/93 Taxman 384. In both these cases, one of the issues for consideration before the Supreme Court was whether the surplus received by the assessee on sale of the entire business as a going concern was taxable under section 41(2). In the first case, the Supreme Court held that since the price attributable to plant and machinery and dead stock which were transferred had been disclosed by the assessee during the course of assessment proceedings before the ITO, section 41(2) was applicable, but under this section the liability was limited to the amount of surplus to the extent of difference between the written down value and the actual cost. The Supreme Court further held that if the amount of surplus exceeded the difference between the written down value and the actual cost, then the surplus amount to the extent of such excess will have to be treated as capital gains for the purpose of taxation. In the second case, in the agreement for sale of the entire business as a going concern, there was nothing to indicate the price attributable to assets like machinery, plant or building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are, therefore, unable to agree with the view of the High Court that section 41(2) is not applicable. Question No. 2 referred to the High Court is, therefore, answered in the affirmative, i.e., in favour of the revenue and against the assessee. 88. With this back ground and considering provisions of Section 50B and Section 2(42C) as discussed herein above, it is observed that lower authorities have treated sale of refractory business as slum sale based upon BTA agreement executed with purchaser wherein total sale consideration is mentioned at Rs 10 crore in lieu of transfer of business of refractories undertaking. It is undisputed fact that in the board note, it is clearly mentioned that transaction would be item wise sale. It is relevant to note that transfer of business for a lumpsum consideration including transfer of manpower is not material in present facts of the case but what is material is that assessee has assigned the value to each assets/liabilities of undertaking which is sold and such value is based upon valuation report already on record. Even Hon ble Supreme court in the case of CIT v. Artex Mfg. Co(supra) has observed that even though agreement does not indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Capital gain on sale of a divisions without transfer of other related business assets and liabilities of undertaking in the year under consideration. The assessee has correctly treated transaction of sale as item wise sale in return of income and computed Income from capital gain as applicable to sale of Individual item of assets. Thus, addition made by Assessing Officer and sustained by Ld.CIT(A) cannot be upheld and related ground of appeal is allowed. 92. In the Ground No.11, Assessee has raised the following grievance: Ground No. 11: Denial of claim for deduction of Leave Encashment on provision basis (Rs. 17,56,03,359/-): 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 allowing the claim of leave encashment amounting to Rs. 17,56,03,359/-. The Appellant prays that the AO be directed to allow the claim of the Appellant. 93. Similar issue was considered by us in the assessee Appeal in Ground No 13 in AY 2008-09 and held as under: 67. Considered the rival submissions and material placed on record. On perusal of relevant facts on record, it is ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure. The Assessing Officer has rejected the decision relied upon by Assessee on the ground that if expenses on construction of building or installation of machine is incurred by Assessee either for the purpose of setting up a new business or expansion of same business and later on realised that such assets are not viable to be used for the business purpose, expenditure written off cannot be allowed as deduction u/s.37 of the Act nor qualifies for any relief of depreciation. On this ground Assessing Officer had made disallowance of expenditure written off in Books of Accounts and claimed as revenue expenditure. 99. In appeal Ld.CIT (A) has discussed the above issue at Para No 22.3 of his order and held as under: 22.3 I have considered the rival contentions. The appellant itself treated the expenditure as capital expenditure and asset as capital work in progress. Just because the appellant abandoned the project, the character of the expenditure and the asset cannot change. The appellant has relied on the decision of the Delhi High Court in the case of CIT vs. Priya Village Roadshows Ltd. (2010) 228 CTR 271 (Del), In that case, the abandoned project was in the same line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal work in progress and the said amount was claimed as deduction in the computation of Total income bring loss incidental to the business of the company. In para 18.3 of the assessment order the AC) has given an categorical finding that on perusal of the nature of expenses incurred by the assessee company there is no doubt about the fact that the expenses claimed by the assessee are capital in nature Hence the same were disallowed u/s 37 of the Act. The details of the assets under construction written off is available on Page 743 of the assessee's paper book, the copy of which is enclosed for ready reference as Enclosure-3. Perusal of the details substantiate that the expenses are capital in nature However, the assessee placed reliance on the following decision of the various High Court i) CIT Idea Cellular Ltd. [2016] 76 taxmann.com 77 (Bombay HC ii) Pr. CIT Rediff.com India Ltd. (2022) 441 ITR 195 (Bombay High Court. iii) CIT South India Corporation Ltd. (423 ITR 158) (Kerala Perusal of all the case laws relied upon by the assessee shows that for deciding the issues in favour of the assessee, the High Courts in all the three cases relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred were basically revenue in nature. However, as already mentioned before, the details of the assets under construction written off, submitted by the assessee, are undoubtedly capital in nature and therefore cannot be allowed as deduction even if one looks at the facts of the decisions in the case of Tata Robins Fraser Ltd. (2012) 211 Taxman 257 and Indo Rama Synthetics (1) Ltd. p. CIT [2009] 185 Taxman 277 (Delhi), which have been followed by the various courts in deciding the issue in favour of the assessees. Reliance is once again placed on the following decisions of the Apex Court: As held in the case of KTMTM Abdul Kayoom v. CIT 1962 SUPP (1) SCR 518 21. each case depends on its own facts and the close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive . The Hon'ble Apex Court in Megh Singh us Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re relating to abandoned project is allowable as revenue expenditure as held by various courts, few of them are discussed herein below. 104. The Hon ble Bombay High court in the case of CIT v. Idea Cellular Ltd. [2016] 76 taxmann.com 77 has held as under: 5. During the assessment proceedings, the assessing officer noted that the assessee claimed as a revenue expenditure a sum of Rs.3,94,75,619/- being the amount written off by the assessee in respect of expenses incurred on projects originally set up to put up cell sites, but later abandoned. These expenses were disallowed by the assessing officer as that was spent by the assessee on sites to bring into existence a new asset and new source of income and therefore, such expenditure was in the nature of capital expenditure. 6. Aggrieved by this order/disallowance, an appeal was preferred before the first appellate authority by the assessee. That also came to be dismissed and the Commissioner of Income Tax (Appeals) agreed with the assessing officer. Thereafter, the tribunal was approached and Mr. Malhotra would submit that in reversing the concurrent views, the tribunal committed an error of law, which is apparent on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, but the project was then abandoned due to the reason that the site was not suitable. The reasons assigned by the assessing officer and the first appellate authority are unsustainable, according to the tribunal for the simple reason that cellular towers were being erected for the purpose of assessee's own business of providing cellular services to the customers. The towers are meant for the business of providing cellular services. It is by utilising these towers that such services are provided. It is not an independent source of income. It is only to make the cellular services provided more efficient, convenient and profitable. When the towers are not exclusively meant for leasing out to third parties for earning the revenue, but used for transmission of telephone signals of assessee's own cellular services, then, it cannot be said that the towers, which are used for the assessee's own business, are new source of income. A cellular tower can be a new independent source of income, if it is erected exclusively for leasing out to the other operators. However, on facts, this was not the position and the tribunal, therefore, rightly concluded that in series of decisions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been dealt with by the Tribunal and held on facts in favour of the assessee. 6. We see from the order of the Tribunal that it had found that the assessee had been engaged in the activity of construction of building, berths etc. for Chennai Container Private Limited in the Madras Port Trust. The assessee was carrying on the business of clearing and forwarding, handling port services, cargo handling, steamer agents etc. and had also made constructions as herein above stated in the Madras Port Trust. The Tribunal found that the assessee had already entered the line of business of constructions in the Ports and hence, submission of a tender for the Vaizag Port was not in the nature of venturing into a new line of business. 7. In Alembic Chemical Works Co. Ltd. (supra) a pharmaceutical Company had obtained technical know-how from abroad for increasing yield of penicillin in its existing plant, the know-how being utilised for expansion of the existing business. The Supreme Court found that there cannot be a single criterion determinative as to whether a particular outlay is capital or revenue. It was held; the expenditure being 'once for all' is inconclusive to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book profits u/s. 115JB. b) The Appellant prays that the AO be directed to exclude the provision for leave encashment while computing book profits u/ s. 115JB. 109. Similar issue was considered by us in the Department Appeal in Ground No 13 in AY 2005-06 and held as under: 89. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: 14.4.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd grossly erred in confirming the action of AO in adding Rs. 59,97,00,000/- being provision for interest on income tax in computing Book Profit u/s 115JB. b) The Appellant prays that the AO be directed to exclude provision for interest on income tax while computing book profits u/ s. 115JB. 114. Similar issue was considered by us in the assessee Appeal in Ground No 11 in AY 2010-11 and held as under: 108. Considered the rival submissions and material placed on record. It is observed that assessee has made provision for interest u/s.244A and interest u/s.234D in Profit Loss account but such provision was not added back while computing Book Profit us/.115JB of the Act. So far as provisions for interest u/s.234D is concerned, the Ld. AR has not pressed such issue based upon coordinate Bench decision in the case of Ambuja Cement Ltd., hence this issue doesn t require separate adjudication and action of AO to that extent is upheld. 115. Respectfully following the above said decision, we dismiss the ground raised by the Assessee. 116. In the Ground No.17, Assessee has raised the following grievance: Without prejudice to Ground No. 1; Ground No. 17: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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