9911796707
TMI Blog2023 (2) TMI 1211X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act: a) On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals)-3 [hereinafter referred to as Ld. CIT (A)] erred in confirming the action of the Deputy Commissioner of Income-tax (Large tax payer Unit) [hereinafter referred to as 'AO'] in initiating the reassessment proceedings u/s 147/148 of the Act. b) The Appellant prays that the reassessment order of the AO be set-aside as badin-law." 3. The Assessee has challenged reassessment notice issued by Assessing Officer u/s 148 of the Act. The Ld.CIT(A) has discussed the issue at Para No 4.3 of his order as under: "4.3 I have considered the AO's contentions, submissions of the appellant and case laws relied upon by the appellant. The AO reopened the assessment by issue of notice u/s.148 after recording the reasons for reopening and after taking necessary administrative approval u/s. 151 of the I.T. Act 1961 vide No. CIT(LTU)/Reopening/2015-16 dated 29.02.2016. Notice u/s 148 of the I.T Act, 1961 was issued on 08.03.2016. In response to the same, the assessee submitted that the revised return of income filed on 21.04.2016 be considered as filed in response to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g decisions: a. CIT vs. Kelvinator of India Limited [(2010) 320 ITR 561 (SC)] b. ITO v. Techspan India (P.) Ltd. [(2018) 92 taxmann.com 361 (SC)] c. PCIT v. Century Textiles & Industries Ltd. [(2018) 99 taxmann.com 205 (Bombay HC)]SLP dismissed in [(2018) 259 Taxman 360]" d. Marico Ltd. v. ACIT [(2020) 425 ITR 177 (Bombay HC)] e. GKN Sinter Metals Ltd. v. ACIT [(2015) 371 ITR 255 (Bombay HC)] f. Aroni Commercials Ltd. v. DCIT [(2017) 393 ITR 673 (Bombay HC)] 6. The Ld AR has also stated that in absence of no 'new' tangible material, reopening is bad-in-law for which he relied upon following decisions: (i) Plus Paper Food Pac Ltd. v. ITO [2015] 374 ITR 485 (Bombay) (ii) CIT v. Amitabh Bachchan [2013] 349 ITR 76 (Bombay) (iii) Asian Paints Ltd. v. DCIT (2009) (308 ITR 195) (Bombay) (iv) Kalpataru Ltd. v. DCIT [2021] 439 ITR 284 (Bombay) (v) Ananta Landmark (P.) Ltd. v. DCIT [2021] 439 ITR 168 (Bombay) 7. In addition to above, Ld. AR has also stated that when the subject matter is in appeal, reassessment notice cannot be issued, reassessment notice is based upon borrowed satisfaction and reopening for examining another aspect/facet of same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the wagons have to be brought one by one in front of the tippler by moving them on the tracks within the "Plant". (c) The wagons held by the assessee company are not used at all, except in circumstances of shortage of wagons supply by the Railway department. In such situation when railway department is unable to provide wagons, the "a" uses his own wagons for sending (outward movement) the finished material / and or receiving the raw material (inward movement). (d) At every "Plant" the manpower is nominated by the Indian Railways who looks after day to day signalling and other functions related to Indian Rail movements on these tracks (sidings). Though the manpower is nominated by Railways, but the expenses pertaining to their salaries, etc., are to be borne by the assessee company as per the agreement signed with Indian Railway. For the freight purpose also, the Railway Freight receipts are issued to the assessee company by these manpower nominated by "Indian Railways" within the plant premises only. (e) The layout plans of tracks have been obtained in respect of each plant and are placed on record. 2.1 In view of the emergence of fresh facts (and information provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods] again for outward movement and roll back to the interchange point again so that required number of wagons [generally full rack] could be made ready for being shunted with railway engine [at scheduled time]. That limited activity of movement of wagons [completely within the plant premises] otherwise also cannot be considered as operation of a rail system [an infrastructure facility in the nature of public facility] for which benefit is intended to be given in sec 80IA. 2.3 I would like to mention here that getting acceptance by the assessee [that goods train was run/ operated over the private siding by the railway department] was not easy. For that in the course of assessment proceedings for A.Y. 2011-12, various relevant queries were raised to bring on record the crucial facts onto the operation of rail system. The assessee's representatives were asked to clearly state the actual point onto their private sidings up to which the goods train was carried/ hauled up by the railway department and wagons were handed over to the assessee. The reference was made to the various clauses of the agreement which itself was titled as "Private Siding Agreement In Clause 14 of those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also charged freight. Thus, it is not a case of running of rail system [i.e. movement of goods train] by the assessee company on those private sidings and as such they did not operate any rail system onto those private sidings. Therefore, it cannot be said that the assessee company had operated any rail systems at all. Therefore, the deduction u/s 80IA would not be available to it onto the profit, if any, from such rail systems. 2.5 It is also pertinent to mention here that the detailed investigations were made by the CIT(A) -5, Mumbai, on the same issue of deduction u/s 80IA(4) of the Act, while finalizing the appeal in the case of M/s Ultra Tech cement Ltd for the A.Y. 2010-11. The Learned CIT(A) made extensive inquiries from almost every Zone of the Railway department in order to examine the claim of the assessee on the identical issue, and drew conclusion that such an activity does not qualify for the deduction u/s 80IA. 2.6 The AO at the time of scrutiny proceedings for A.Y. 2011-12 has (in view of the elaborate investigations made by the learned CIT(A)-5, Mumbai on the identical issue, and the material/evidences gathered and placed on record in the form of corresponde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of expenditure shows that the assessee is booking net of such expenses in P & L account i.e. without on account of excise/Cenvat/Service Tax etc. which is included in these expense invoices. So the net of material/service expense is debited to P & L account and the component of statutory duties/taxes is separately credited directly to "Cenvat Receivable account", without passing them through P & L account. 3.1. As per legal provisions of section 80IA(5) the eligible unit has to be looked upon/viewed as standalone unit in computing the eligible deduction U/s 80IA, and all the business expenses including (cess and duties) incurred by these units have to be set-off or reduced from the relevant year business turnover of the respective unit. It is a mandatory provision of the Act for allowing the deduction u/s 80IA and accordingly all the direct expenses related to these units have to be reduced in order to arrive at correct and true profits of the units eligible for deduction u/s 80IA. 3.2. In order to obtain the quantum of excess deduction claimed by the assessee company, notice(s) u/s 133(6) was issued (with prior approval of CIT(LTU), Mumbai) calling for the information of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of Assessment proceedings, it is found that Assessee has explained its claim for deduction under Section 80-IA on rail project as well as quantification issue was also discussed in such submission. Based upon written submission filed before Assessing Officer along with copies of agreement with Railway Administration, Assessing Officer has in principle held that Assessee is eligible for deduction under Section 80-IA on rail system. However, the Assessing Officer has allocated certain expenditure to units eligible for such deduction u/s 80-IA and made additions out of total claim for deduction made in return of income. The relevant part of original Assessment Order is reproduced herein below: "13. Tax Holiday u/s. 80-IA in respect of Rail System being an infrastructure Facility 13.1 In its return of income, the assessee has claimed deduction u/s.80IA on Rail System comprising of Railway sidings, Railway tracks, loading and unloading systems etc. maintained at Kymore, Tikaria, Wadi-I and Wadi-II units as under:- Sl. No. Name of the Unit State Amount of Deduction (in Rs.) 1. Kymore Madhya Pradesh 34,48,44,037 2. Tikaria Uttar Pradesh 3,20,72,486 3. Wadi-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail System. Accordingly, considering the disallowance made in the order, the computation of deduction u/s. 80-IA on Rail Systems is modified as under:- Unit Income Direct Expenses (excl. Book Depreciation) Indirect expenses apportioned Depreciation & other adjustment as per I.T. Act Eligible Deduction (A) (B) (C) (D) [A-(B+C+D)] Kymore 36,19,89,511 1,57,97,595 8,92,049 12,40,632 34,40,59,235 Tikaria 4,16,98,121 31,25,544 1,02,757 65,00,091 3,19,69,729 Wadi-I 24,47,04,759 70,16,906 6,03,025 6,56,978 23,64,27,850 Wadi-II 34,90,69,051 88,76,188 8,60,210 23,05,761 33,70,28,892 13.6 Subject to the above discussion, claim of deduction u/s. 8-IA on Rail System is accordingly allowed in this year." 12. So far as issue of CENVAAT credit is concerned, Assessee has filed written submission before Assessing Officer and even AO has made partial addition on account of unutilised CENVAT credit while passing Assessment Order. The relevant operative part of Assessment Order is reproduced herein below: "4. Unutilized CENVAT Credit 4.1 In Annexure-4 relating to Clause-12(b) of Form-3CD, the Tax Auditor has rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty payable on closing stock of cement as on last day of the accounting year before filing return of income for Assessment Year-2010-11 by adjusting unutilized CENVAT credit. 4.5 The assessee further submitted that irrespective of the fact whether unutilized CENVAT credit is included in closing stock or not, deduction towards unutilized CENVAT credit included in closing stock on 31.03.2009 of Rs. 13,55,25,004/- to be allowed as a deduction being part of opening stock of the current year, which has been disallowed in the assessment of A.Y. - 2009-10. 4.6 The submissions made by the assessee have been considered. However, the same are not acceptable. Similar disallowance was also made in the order u/s. 143(3) for earlier years. Since, there is no change in the facts of the case, following the reasoning given in the assessment order for earlier years, CENVAT element of Rs.5,10,51,276/- referable to closing stock of raw materials etc. is being added back in computing total income of the assessee. However, deduction is granted for unutilized CENVAT as on 01.04.2009 of Rs.13,55,25,004/-, disallowed in A.Y. - 2009-10. Accordingly, net CENVAT adjustment of Rs. 8,44,73,728/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the reassessment proceedings are void and bad in law. The relevant para of the said decision is reproduced as under: ".........The language of Section 147 makes it clear that the assessing officer certainly has the power to re-assess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153. However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words 'reason to believe' in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such reassessment proceedings merely on his change of opinion on the basis of same facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature. The said provision was incorporated in the scheme of the IT Act so as to empower the Assessing Authorities to re-assess any income on the ground which was not brought on record during the original proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts for the two categories, i.e., software development and human resource development, on which it has declared income separately. However, a bare perusal of notice dated 09.03.2004 which was issued in the original assessment proceedings under Section 143 makes it clear that the point on which the reassessment proceedings were initiated, was well considered in the original proceedings. In fact, the very basis of issuing the show cause notice dated 09.03.2004 was that the assessee was not maintaining any separate books of account for the said two categories and the details filed do not reveal proportional allocation of common expenses be made to these categories. Even the said show cause notice suggested how proportional allocation should be done. All these things leads to an unavoidable conclusion that the question as to how and to what extent deduction should be allowed under Section 10A of the IT Act was well considered in the original assessment proceedings itself. Hence, initiation of the re-assessment proceedings under Section 147 by issuing a notice under Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e postulated that the condition precedent to the reopening of an assessment has been fulfilled. 8. We are satisfied that not only material facts were disclosed to the petitioner truly and fully, but they were carefully scrutinized and figures of income as well as deduction were viewed carefully by the Assessing Officer. In the circumstances, the petition is allowed in terms of prayer clause (a), which reads under :- "(a) That this Hon'ble Court may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction under article 226 of the Constitution of India calling for the records of the case leading to the issue of the notice under section 148 of the Act, dated 12th December 2007 being Exhibit 'D' hereto and after going through the same and examining the question of legality thereof to quash, cancel and set aside the impugned notice dated 12th December, 2007 being Exh. 'D' hereto." 9. Petition disposed accordingly with no order as to costs." 16. Hon'ble Supreme Court in case of L&T Ltd. v. PCIT [2020] 113 taxmann.com 48 has held as under: "Assessing Officer initiated reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR 191, 201 (SC). As further observed in that case: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative, Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee-to tell the assessing authority what inferences, whether of facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961 - Business expenditure - Allowability of (Reassessment) - Assessment year 2006-07 - Whether once it becomes evident that Assessing Officer had raised query and reply thereto was furnished by assessee, endeavour on part of revenue to reopen assessment is fraught with two infirmities, namely, it cannot be said that income escaped assessment on account of failure to make a true and full disclosure of material facts (in cases where proviso operates) and reassessment would then fall in realm of mere change of opinion on basis of very same material, which is legally impermissible - Held, yes - After period of four years from completion of assessment, reassessment proceedings were initiated on ground that 'leased assets repurchase expenses' were claimed as revenue expenses, though same were capital in nature and, thus, required to be disallowed - During course of scrutiny assessment, Assessing Officer had made specific query as regards leased assets repurchase expenses and solicited explanation and documents and in compliance thereto, assessee furnished requisite information and documents - Whether, on facts, impugned notice under section 148 was required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduction under Section 10B of the Act. It appears from the record that on 19th September 2013, the petitioner furnished required details to the respondent explaining the claim of deduction under Section 10B of the Act [as at Annexure "E" collectively]. The Assessing Officer then was convinced with the explanation given by the petitioner claiming deduction under Section 10B of the Act and accepted the return for the year under consideration by making no disallowance in respect of the claim of deduction under Section 10B of the Act, while framing assessment ITA No.7609/Mum/2019 and other appeals M/s. Grasim Industries Limited (Successor to Aditya Birla Nuvo Ltd) under Section 143 [3] of the Act, by his Order dated 6th January 2014. It also appears from the decision rendered by this Court dated 14th June 2016 passed in Tax Appeal No. 439 of 2016 that for the Assessment Year 2008-2009, deduction under Section 10B of the Act was claimed by the petitioner, which was denied earlier. CIT [A] also disallowed the deduction claimed by the petitioner. In second appeal before the ITAT, the claim made by the petitioner under Section 10B of the Act was allowed by an Order dated 4th November 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of appeal, it is observed that in proceedings paras we have already held that reassessment notice itself is bad in law and additions made in reassessment order does not survive for reasons stated herein above, grounds of appeal raised on merits does not require separate adjudication. However, issues involved in present appeal are also found in other assessment years appeal heard by this bench, hence considering such facts, other grounds of appeal as raised by assessee are also discussed on merits in subsequent paras. 24. In the Ground No.2, Assessee has raised the following grievance: "Without Prejudice to Ground No. 1: Ground No, 2: Disallowance of claim made for Rail System u/s 80-IA of the Act amounting to Rs. 95,18,34,499/-: 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. 801A towards rail system to the Appellant as claimed." 25. At the time of hearing, Without prejudice to the above, Ld.DR submitted a written submission and it is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IA(4) of the Income-tax Act, '1961 does not require the Infrastructure facility to be a public facility for allowing deduction under section 80IA. The explanation to section 80IA(4) defines the term 'infrastructure facility' to mean a road including toll road, a bridge or a raj/ system without anything further We observe that the CIT(A) has been referring to the pre-amended definition of the term 'infrastructure facility' which was applicable till AY 2001-02 The assessee company began its claim of deduction from AY 2004-05 when the definition was simplified with no indication about 'public facility', Thus CIT(A) was not correct while declining claim of deduction u/s.80IA(4) on this reasoning", It is submitted that the use of the phrase or any other public facility of a similar nature..." after the words 'a road, bridge, airport, port, inland waterways and inland ports, rail system" while defining 'infrastructure facility' in the preamended provisions, leaves no doubt that the infrastructure facilities specifically mentioned therein have necessarily to be public facilities. On comparing the language of the pre-amended and the post-- amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e changes eligible for such deduction None of the above references have observed that the changes so brought wef 01.04.2002, also include doing away with the primary eligibility criteria of the infrastructure facility being in the nature of a public facility for the purpose of section 80IA(4) of the Act. It may be mentioned that on perusal of the facts, as emanating from the CIT(A)'s order and the ITAT's order in the case of Ultratech Cement Ltd., it can be safely assumed that the agreement between Ultratech Cement Ltd. and the Railway authorities and that between ACC LTD and the Railway authorities arc similarly worded. The ITAT, in para 58 of its order after making reference to Railway Sidings agreement entered into by Ultratech Cement Ltd. with the Railway authorities came to the conclusion that the Railway Sidings of Ultratech Cement Ltd were not merely for its own business but had the potential to confer benefit to the public at large and hence, the facility was in fact a public utility. Therefore, reference is made to clause 19 of the Agreement entered into by M/S ACC Ltd. with the Railway authorities, available on page 32 of the assessee's paper book dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracks, loading and unloading systems, at Ropar, Maratha, Sankrail, Farraka and Bhatapara units. He also the assessee's contention that these rail systems alongside the cement plants are to enable the transportation of raw material (i.e. coal etc) and finished goods (i.e. cement) to and from the cement plants of the assessee. The assesse's claim that the rail system meets all the requirements of Section 80IA(4) was also noted. The method adopted for computing the income was being excess of road freight and handling charges payable for transportation of goods by road to the nearest railhead, over the tariff payable for transportation of goods from railway siding to the rais head as per tariff notified by the Indian Railways. This claim, however, did not find favour with the assessee this time, even though the same stand of the assessee was accepted for three consecutive preceding assessment years. After elaborately discussing the things in detail, and extensively referring to investigations carried out in the case of Ultratech Cements Limited, the Assessing Officer concluded that (a) the so called rail system of the assessee company is simply a private rail siding, and is not any in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by L&T Ltd. [and that way by the assessee company as it had inherited the cement plants from L&T Ltd. by way of demerger] to enable the transportation of raw material [coal etc] and finished goods [i.e. cements] at their cement plants through railway wagons, at all the said; four locations. It was explained that prior to putting up those rail systems, the assessee used to transfer the material from the cement plants [at all the four locations] to the nearest railway station and vice versa on road through trucks. Before the AO the claim of deduction was justified by assessee by taking the plea that the various conditions as prescribed u/s 80IA(4) was met with in as much as it had entered into an agreement with the government through department of Railways for developing, maintaining and operating the rail system [infrastructure facility]; and that in pursuance thereof it had developed the integrated rail system in between the plant and the nearest railway track [of Indian Railways] and running it [in between] for movement of the inward and outward material so as to enable it to transport the materials from its plants straightaway to the various destinations and vice versa at all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l components of a railway system and provide that on lease to Indian Railways for maintenance and operation; and in the context referred to the CBDT circular No. 733, dated 03.01.1996 whereby the benefit of Sec. 80IA was also extended to such rail system constructed / developed by the private enterprises as per the said BOLT scheme. By that circular, the Board had also clarified that such concession would be available only to an infrastructure facility meant for development of rail systems and not to any other infrastructural facility including rolling stocks. The AO also observed that the assessee, had not given the said railway system or the crucial component thereof on lease to the railway department [had it been so, the profit by way of lease rent from such rail. system would have qualified for deduction u/s 80lA as per the concession given by the aforesaid circular]. Finally, the AO held that assessee was not eligible to claim the deduction u/s 80lA in r/o such rail systems and disallowed the claim accordingly. 11. In its appellate order CIT(A) noted that the issue has come up first in A.Y. 2004-05. In that year, the assessee had claimed deduction of Rs 15.63 crores in r/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit but it is 100% depending on the cement unit. Detailed submissions filed by the assessee which are reproduced in the assessment order was not found satisfactorily to the AO. Detailed submissions were again filed before the CIT(A). It was explained that the company had established a cement plant in Hirmi, The nearest available railway siding was at a distance of around 15 km. from the plant. To facilitate inward and outward movement of goods, the assessee developed infrastructure facility of rail system which was made operating in 1999. The assessee company duly entered into an agreement with the railways, which is a part of Government of India. It was submitted that there was option available u/s 80lA with the assessee to claim deduction for any of 10 consecutive years as its own choice. The assessee has opted for claiming the deduction from A.Y. 2004-05 on wards. It was submitted that the income offered for tax by the assessee includes income from rail system and that certificate of M/s Sharp &Tannan, CA in Form No. 10CCB certifying the correctness of the aforesaid claim was duly submitted to the AO. 13.1. It was further submitted that the rail system is a profit centre. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself, The Supreme Court negative this argument and held that despite captive consumption of iron ore certain profits can be regarded as having derived from the extraction activities. The Supreme Court ruled in favour of bifurcating the total profits into two activities viz. the extraction activity and the manufacturing activity. It was therefore submitted that in view of the above, it is not correct to say that the assessee does not earn any profits from its rail system merely because the rail system is used for the captive purposes of the cement plant. 13.4. It was further submitted that the Board Circular No. 733 dated 03.01.1996 states that deduction u/s 80lA is applicable to an infrastructure facility meant for development of rail system. It was contended that the AO has categorically stated in para 5.2.3 of his order that rail system was developed by L&T and was inherited by the assessee out of demerger. It was further submitted that in a demerger all the property of the undertaking is necessarily transferred by the demerged company to the resulting company, therefore it is immaterial whether the rail system was developed by L&T Ltd. or by the resulting company i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand the Id counsel of the assessee placed reliance on the order of the CIT(A). Attention of the Bench was drawn on para 5.2 of the order of the AO and then on the provision of Sec 8OIA clause 2 and sub- clauses 3&4. It was further explained that the assessee can avail benefit of deduction u/s 80IA in 10 years of his choice out of 15 years period. The provisions are very clear. Attention of the Bench was also drawn on the copy of the agreement placed at page .93 of the paper book. It was further submitted that all the conditions of Sec. 80IA have been fulfilled. Reliance was placed on the decision reported in 40 ITR 123. It was submitted that the ClT(A) has discussed the issue extensively and the findings of the ld. CIT(A) remained uncontroverted. Therefore the order of the CIT(A) is liable to be confirmed in this regard. 16. We have heard the rival submission and considered them carefully: We have also perused the various material placed on record on which our attention was drawn. After taking into consideration we find that the CIT(A) has dealt with the aspect in detail. Contention raised before the ClT(A) on behalf of the assessee were not found incorrect or false. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee has been examined by him afresh from the point of view of the relevant provisions of the Act and the facts as to whether the 'Rail System' as referred to by the assessee could indeed be treated as the infrastructure facility for which deduction u/s 80lA is intended to by the legislature; and whether the assessee operated that rail system. 15. Replies and justification filed by assessee was not accepted by CIT(A) and he held that the rail system of the assessee do not fall within the definition of the infrastructure facility, as the same could not be treated as a facility of public utility. For this reason the assessee company was held to be not entitled for the deduction u/s.80IA in r/o the profit, from the operation of rail system. Reasons for the same was as under:- 16. The CIT(A) observed that the agreements under reference were not at all any agreements for developing, maintaining and operating any infrastructure facility to which benefit of exemption is intended to be given in Section 80IA. For this reason also the assessee company was held to be not entitled for deduction u/s.80IA in r/o the profit from the operation of rail system. 17. The CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been brought on record in the A.Y. 2010-11, he declined claim of deduction u/s. 80IB(4). 24. With regard to the disallowance, deduction u/s. 80IA(4), Revenue is in appeal before us in the A.Y. 2009-10, whereas assessee is in appeal for the A.Y. 2010-11. 25. It was vehemently argued by learned AR that Revenue authorities have not considered the eligibility requirement u/s.80IA as brought by the Finance Act 2001 wherein Finance Act, 2001 has deleted the requirement of the assessee to transfer the infrastructure facility to the concern Government authorities within prescribed time. He contended that CIT(A) has wrongly applied the provisions of law as applicable prior to 01/04/2002 while considering the assessee's claim for deduction for the Ays.2009-10 and 2010-11 under consideration. Learned A.R threadbare taken us to the objections raised by the CIT(A) and the reply filed by the assessee controverting each and every objection of the CIT(A). Our attention was invited to the amended provisions of Section 80IA(4) which does not require infrastructure facility to be a public facility for allowing deduction u/s. 80IA. Our attention was also invited to the terms and conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in tax free securities and it was contended that since investment was out of assessee's own interest free funds, in terms of decision of Jurisdictional High Court in case of CIT v. Reliance Utilities & Power Ltd. [2009] 178 Taxman 135/313 ITR 340 (Bom.) and CIT v. HDFC Bank Ltd., [2014] 49 taxmann.com 335/226 Taxman 132 (Mag.)/366 ITR 505 (Bom.), no disallowance of interest is warranted. With regard to the disallowance made under Rule 8D(2)(iii) he contended that assessee itself has offered the amount attributable for earning the exempt income, therefore, further disallowance made by Revenue authorities was not justified. 28. Learned AR also invited our attention to the order of the Tribunal in assessee's own case for Ays. 2004-05 to 2008-09, wherein Tribunal have after considering in detail allowed the assessee's claim u/s.80IA with regard to rail system. Sales Tax exemption as capital receipt was also decided by Tribunal in assessee's own case for the Ays. 2004-05 to 2008-09, relevant decision of the Tribunal was also filed before us. 29. Learned AR relied on following judicial pronouncements in support of the proposition that benefit allowed in earlier ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng done by the Indian Railways and not by the assessee Company, therefore, assessee was not entitled for 80 IA(4). She further alleged that profit computed by assessee for the rail system was very exorbitant and method adopted for computation was also not correct. Our attention was invited to the computation of profit as per table 'F'of CIT(A)'s order. She further contended that when L&T Ltd., itself was not eligible for deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L&T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall be eligible for the benefit u/s.80IA. 31. With regard to sales tax exemption benefit being treated as capital receipt, she relied 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms subject to prior approvals and conditions. Therefore, the assessee accordingly entered into agreement with the Rail authorities to develop, operate and maintain its rail systems. The agreement lays down various conditions to be complied with, before and during the development, maintaining and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed 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 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as may be fixed upon by mutual consent of the applicants and railway administration in such manner as shall be determined in each case by the Railway administration. The assessee undertakes to shunt the wagons from such point to his premises and back with his own labour. However", no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted for all the rail systems, Form 10CCB, duly certified and audited by M/s. G.P Kapadia & Co., Chartered Accountants along 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 sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with terms and conditions of the agreements under the supervision and as per guidelines of Indian Railways. As per 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 restricts the deduction u/s.80-IA to other rail systems. We found that the Hon'ble I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded by the applicant and the entire cost has been borne by the applicant. (b) Clause No. 6 - Payment by Applicant against the total estimated cost -wherein it is mentioned that, "The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration" (c) Clause No. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." (d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistency 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 ♦ Cruch of South India Trust Association v. Telugu Church Council [1996] 2 SCC 520 51. From the record we also found that the overall profits of the company have increased due to such commercial benefits and the same should have been treated as the revenue of the rail systems, which is the Fair Market Value of the services provided by the undertaking as per the provisions of Sec. 80IA(8) and the assessee is entitled for bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and are considered as income of the rail system arising due to setting up of such integrated rail system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia & Co. Chartered Accountants, alongwith Balance Sheet, P&L Account, Schedules forming part of Balance sheet and P&L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct. 56. With regard to CIT(A)'s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply a private siding and not any infrastructure facility of Public Utility therefore the infrastructure of such private sidings should be treated as "Private Facility", we observe that Section 80IA(4) of the Income-tax Act, 1961 does not require the infrastructure facility to be a public facility for allowing deduction under section 80IA. The explanation to section 80IA(4) defines the term 'infrastructure facility' to mean a road including toll road, a bridge or a rail system without anything further. We observe that the CIT(A) has been referring to the pre-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement entered by the assessee with the railway authority, a perusal of clause 19 of the Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discretion and prior permission of the railway authorities thereby rendering the facility open for general public at large. Hence, such a facility is in fact a public utility. 59. With regard to CIT(A)s conclusion for the A.Y. 2010-11 at page 42, to the effect that the agreements entered between the assessee Company & Railway Department, contained the terms & conditions for construction of Private Sidings and that cannot be treated as any agreement for development, operation & maintenance of any Rail system, we observe that as per section 80- IA(4)(i)(b), an assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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: 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income-tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per clause (b)of Section 80IA (4)(i) an agreement has to be entered with the Central Government or a State Government or a Local Authority or any other statutory body for (i) developing or (ii) Operating and maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. The Indian Railways, with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. 65. We also observe that the agreements entered into by the assessee are for the development, operation and maintenance of the Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is borne by it. 72. From the record we also found that even the maintenance of the Rail system such as alignment of track & gauge maintenance, patching of ballast, maintenance of railway track sleepers, signalling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the assessee. 73. Thus the operation of rail is not merely hauling of wagons but comprises of various activities all of which is carried on by the assessee Company. 74. With regard to CIT(A)'s observation that all the four cement plants [having private sidings] were notified as independent booking station and the freight was charged by the railway department for the entire distance including the portion of private sidings [upto interchange point / exchange yard], we observe that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oints and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the easiest available comparable, it has been adopted by assessee for calculating one of the component of its "revenue". 80. We further found that an amount towards loading and unloading charges is added to the above revenue for inward and outward movement of goods which is also carried out by the rail undertaking. The basis, for computing this component of revenue is the loading and unloading cost which the cement division was hitherto incurring during transportation through roadways. The question of reducing the freight payments to the Railways does not arise since this cost is incurred by the cement division and not by the railway undertaking. 81.In view of the above discussion, the explanation given by the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amended section 80IA(4) clause (b) stood as under from AY. 2002-03 onwards: "(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;" 84. Thus, the Finance Act, 2001 amongst other conditions, particularly deleted the requirement for an assessee to transfer the infrastructure facility to the concerned government authorities with prescribed time. 85. In this regard reliance can be placed on the decision of Gujarat High Court in case of Katira Construction Ltd. v. UOI [2013] 31 taxmann.com 250/214 Taxman 599/352 ITR 513, wherein Court held as under:- "32. It is true that with effect from 1-4-2002 some significant changes were made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit. 88. In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment year, must apply for determination of eligibility of the claim. In respect of AY. 2004-05 onwards including assessment years 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a prerequisite for eligibility of claim u/s 80- IA(4)(b), the assessee has correctly made the claim. 89. In view of the above, we can safely conclude that even if an assessee does not fulfil all the requisite conditions for availing the tax holiday benefit in the year in which the new infrastructure facility is set up or has commenced operation, but in a subsequent year, all the requisite conditions for availing such benefit are fulfilled, the assessee would be entitled to avail the tax holiday benefit in respect of such subsequent assessment year(s). For this purpose reliance is placed on the decision of the Hon'ble ITAT of Jaipur in the case of Asstt. CIT v. Shiv Agrevo Ltd. [2009] 34 SOT 1 (URO). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined. 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries & Distilleries Ltd. v. Asstt. CIT [2009] 116 ITD 241 which pertains to AY. 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chennai Tribunal and concurred with the view that Section does not mandate that first year of 10 consecutive assessment years should be always first year of set-up of enterprise. The High Court has held that as initial year is not defined in Section 80lA as compared to Section 80IB where it is specifically provided that the year of commencement of business will be the initial year for the purpose of claiming the deduction, the year of option has to be treated as initial assessment year for the purpose of Section 80IA. 92. It is pertinent to mention here that once the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 80IA. 96. In view of the above discussion and respectfully following the order of the Tribunal in assessee's own case for the Ays. 2004-05 to 2008-09, we do not find any merit in the action of the Revenue authorities declining the claim of deduction u/s.80IA(4). Accordingly AO is directed to allow the deduction as claimed by the assessee with respect to its rail system. We direct accordingly. 90. Learned Departmental Representative does not dispute the fact that the issue before us is covered by this decision of the coordinate bench, though he places 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds revenue's ground of. appeal against very availability of deduction u/s. 80IA in respect of railway siding the Hon 'ble High Court rejected the same holding as under: ''After hearing the counsel at some length and perusing with their assistance the order passed by the Commissioner of Income Tax (Appeals) and the income Tax Appellate Tribunal, we are of the opinion that though the appeal deserves admission but it should not be on the question of law as framed at Page 5 of the paper book. That questions the very applicability of the provision. From the findings of the Commissioner of Income Tax (Appeals), the only question which can be raised as substantial question of law and arising from the discussion on this point is whether the respondent assessee is eligible for deduction u/s. 80IA of the Income Tax Act by urging that the Rail system is not a profit Centre but a cost saving Exercise undertaken in terms of subsection (4) of section 80IA? ......" 40. Thus as regards 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the AO in treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 80IA as cost of the eligible undertakings. b) The Appellant therefore prays that the action of CIT(A) and AO be set-aside." 29. Similar issue was considered by us in the assessee Appeal in Ground No 4 in AY 2009-10 and held as under: "38.Considered the rival submissions and material placed on record. It is relevant to refer to decision of co-ordinate Bench in the case of Ambuja Cement Ltd. in ITA No. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019 vide its order dated 07.11.2022 has decided issue in favour of assessee: "102. We find that Section 80IA(5), which has been heavily relied upon by the assessee, provides that " notwithstanding anything contained 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 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible units. The assessee gets the relief accordingly." 39. It is observed that facts of assessee's case are identical with facts of decisions referred supra. Considering decision of Coordinate Bench referred supra, addition made by Assessing Officer is thus deleted and this ground of appeal is allowed." 30. Respectfully following the above decision, we allow the ground raised by the assessee. 31. In the result, appeal filed by the assessee is allowed. ITA NO. 3177/MUM/2019 (Revenue Appeal) ITA NO. 3137/MUM/2019 (Assessee Appeal) 32. These are cross appeals pertaining to Assessment Year 2010-11 arising from the appellate order dated 29th January, 2019 passed 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 21st March, 2014 under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was partly allowed. 33. First we take up, Revenue Appeal in ITA No. 3177/Mum/2019(common ground in assessee's appeal is also taken together). 34. In the Ground No.1, Department has raised the following grievance: "Whether, on the facts and in the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 11. Hon'ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji& Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: "6. On thorough 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the A.O. has recorded his satisfaction that the correctness of the assessee's claim of expenses of disallowance was not to the satisfaction of the A.O., thereby entitling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon'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 plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. 6. Considering the above, 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see 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, primarily on the basis of certain observations in the judgments in the cases of Tamilnadu Sugar Corporation Ltd Vs CIT [(2001) 251 ITR 843 (Mad)], CIT Vs Rajaram Maize Products [(2001) 251 ITR 427 (SC)], CIT Vs S Kumars Tyre Manufacturing Co [(2004) 266 ITR 325 (MP)], and CIT Vs Abhishek Industries Ltd [(2006) 286 ITR 1 (P&H)]. The entire amount of Rs 1169.93 crores was added to income of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) took note of the fact that these amounts pertained to five different units under four schemes- namely Maharashtra's Dispersal of Industries Package Scheme of Incentives 1993 (Maratha Unit), Punjab's Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 without examining the overall scheme of the Act- which is admittedly to promote the growth of industry, is incorrect and superficial. The subsidies so received can be said to be revenue in nature unless these subsidies are for augmenting the profits of the assessee, and that is not even the case of the revenue. The CIT(A) is simply swayed by the wording of the preamble of the scheme- something clearly impermissible. These subsidy schemes are materially similar in nature, and there are, by now, a number of decisions of the coordinate benches, as also Hon'ble Courts above, dealing with these schemes. It is also important to bear in mind the fact that the subsidies received by the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as Capital Investment Incentive Scheme on 11th September 1995 was intended to attract investments to generate greater employment in less industrially developed areas of Gujarat and also to secure balanced development of industries in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 must be treated as having been received for capital purposes. 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." 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax Appeals are therefore dismissed.' 10. In the case of Munjal Auto Industries Ltd. (supra), this Court has observed as under:- "7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 employment generation in the respective areas which would in turn promote the growth of the State. Hence, it could be safely concluded that subsidy / incentive granted is only for setting up of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit already fixed under the respective schemes. Though the quantification of the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the form of subsidy / incentive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 business to carry on their business. The payments were nothing but supplementary trade receipts. It is true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a Canadian case St. John Dry Dock & Ship Building Co. Ltd. v. Minister of National Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co. 's case (supra). In that case it was held that where subsidies were given under statutory authority, the statutory purpose for which they are aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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 given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." 19. Sahney Steel was distinguished, in para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. 20. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in nature. 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the "purpose test". It was specifically held that the point of time at which the subsidy is paid is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars & Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 arises in these cases because of the reason that the incentives were given through the mechanism of price differential and the duty differential. According to the Department, price and costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given through price and duty differentials, the character of the impugned incentive in this case was revenue and not capital in nature. On the other hand, according to the assessee, what was relevant to decide the character of the incentive is the purpose test and not the mechanism of payment. 14. In our view, the controversy in hand can be resolved if we apply the test laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." 10. In a recent judgement dated 8.1.2013 in case of DCITCircle1(2)-Baroda v. Inox Leisure Ltd.,we had an occasion to consider somewhat similar question in the backdrop of entertainment tax waiver scheme of State of Gujarat as well as State of Maharashtra. Even in such a case, the entertainment tax waiver which was granted in terms of sale of tick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 be, and yet by applying purpose test, it was held that subsidy was on capital account. 5.4. Applicability of Special Bench decision of Mumbai Tribunal in the case of Reliance Industries reported in 88 ITD 273. The ld. Special Counsel for the Revenue vehemently submitted that the decision of the Hon'ble Special Bench has been reversed by the Hon'ble Supreme Court by remitting the matter back to the Hon'ble Bombay High Court. First of all, it would be relevant to bring on record the crux of the decision of the Special Bench in the case of Reliance Industries Ltd. In case of Special Bench decision of Reliance Industries Ltd, the scheme dealt with sales tax exemption under the scheme of Government of Maharashtra, 1979. Further the said scheme was implemented by SICOM. The following question was referred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 commencement of production or conditional upon it. Therefore, in our view and with respect, the Tribunal in the case of Reliance Industries Ltd. ( supra) had correctly interpreted and understood the ratio of the judgment of the Supreme Court in Sahney Steel & Press Works Ltd.'s case (supra). 38. In this view of the matter, we answer the question referred to us in the affirmative. 5.4.2. The ld. AR vehemently submitted that the department did not challenge the decision of the Special Bench before the Hon'ble Bombay High Court. However, he fairly stated that there was a subsequent decision of the Division Bench of this Tribunal which followed the Special Bench and that Division Bench order was challenged by the Revenue before the Hon'ble Bombay High Court. The Hon'ble Bombay High Court while disposing of the said appeal did not rever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital 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 the issue to the file of the Assessing Officer "to decide the issue afresh after considering the decision of Special Bench of the Tribunal in the case of Reliance Industries Ltd. (supra)". Thus, the Tribunal remanded the issue back to the Assessing Officer to be decided in the light of the Special Bench judgment in the case of Reliance Industries Ltd. The Revenue's grievance in this respect is two fold. It was contended that the issue was raised for the first time before the Tribunal and the same should not have been permitted. Secondly, the view of the Tribunal in case of Reliance Industries Ltd. was challenged before the High Court. The High Court in a judgment dated 15.04.2009 in Income Tax Appeal No. 1299 of 2008 had held that no question of law in this respect arises and thereby confirmed the judgment of the Tribunal. It was pointed out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt) 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 subsidy and the decision of Special Bench of Tribunal in the case of Reliance Industries Ltd., Hence, the order of the Hon'ble Jurisdictional High Court in assessee's own case for A.Y.2001-02 had become final on the very same issue. Though the said decision has been rendered for subsequent assessment year as compared to the years under consideration before us, in view of identical facts and the same legal issue, and more especially, in order to address the fact of binding precedent of Special Bench decision in the case of Reliance Industries Ltd., this Bench deems it fit to place reliance on the said decision also of the Hon'ble Jurisdictional High Court. Accordingly, we categorically hold that the decision of the Special Bench still holds the field and is a good law. The entire contentions raised by the ld. Special Counsel for the Revenue in this regard are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 inability to follow the division bench in the case of Jindal Power, no matter how deeply we respect and admire the work of all our colleagues, and we would rather be guided by the special bench decision - which is exactly what another division bench, on the same set of facts as before us, did in the case of Ajanta Manufacturing Ltd. (supra). As for learned Commissioner (DR)'s suggestion that we should follow the jurisdictional High Court decision in the case off ColourmanDyechem Ltd. (supra), we find that Their Lordships, in this case, were dealing with an entirely different type of subsidy which was clearly dealing with an expansion situation. However, we would rather refrain from making any further detailed observations on this issue, as we are alive to the fact that Hon'ble jurisdictional High Court, in Tax Appeal No 358 of 2012, has admitted appeal aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 115JB of the Act. 13. That on the facts and in the circumstances of the case, necessary directions may please be given to the A.O. to exclude of Sales Tax Incentive availed by the appellant amounting to Rs. 1,69,93,34,752/-, being capital in nature, in computing Book Profit u/s 115JB of the Act. 50. Learned representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon'ble Calcutta High Court's judgment in the case of PCIT Vs Ankit metal & Power Ltd [(2019) 416 ITR 591 (Cal)], by Hon'ble jurisdictional High Court's judgment in the case of CIT Vs Harinagar Sugar Mills Ltd [ITA No 1132 of 2014, dated 4th January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. 51. We find that a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income, but by a specific provision, the same has been exempted and hence, the came to the conclusion that, once particular receipt is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, then the same cannot be considered for the purpose of computation of book profit u/s 115JB of the I.T.Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs.36,15,49,828/- from book profits computed u/s 115JB of the I.T. Act, 1961. 52. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra) has already dealt with the issue whether addition on account of MODVAT credit is warranted or not. The Hon'ble High Court relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 130 Taxman 179/261 ITR 275 held that the unutilised credit cannot be directly added to the income of the assessee. The relevant para of the said decision is reproduced hereunder:- "5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the pre-operative expenses amounting to Rs. 39,82,07,328/- whereas the assessee itself claimed these expenses as capital expenses in the books of accounts adding it to capital work in progress/fixed assets?" 100. During the assessment proceedings, the Assessing Officer noted that the assesee has made this claim only by way of a revised return and that no such claim was originally made by the assessee. It was also noted that the books maintained under the Companies Act also show these expenses as capital expenses, which in an indicative, even if not conclusive, evidence of the expenses being in the nature of capital expenses. The judicial precedents relied upon by the assessee in support of the claim were noted, and left at that, and it was observed that "the assessee is a big company assisted by a battery of lawyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 49. Respectfully following the above decision, we dismiss the ground raised by the revenue. 50. In the Ground No.6, Department has raised the following grievance: "Whether, on the facts and in the circumstances of the case & in law, Id. CIT(A) erred in allowing the of claim of additional depreciation of Rs. 155,77,10,174/- u/s 32(l)(iia) of the Act without appreciating the fact that additional depreciation is allowable only on "new machinery" i.e. the first year in which it is put to use?" 51. Similar issue was considered by us in the assessee appeal in Ground No 5 in AY 2007-08 and held as under: "49.Considered the rival submissions and material placed on record. The brief facts of the case are that the assessee has claimed the additional depreciation on all the eligible assets acquired on or after 01-04-2005. However in the assessment order the Ld. AO has disallowed such additional depreciation on the assets acquired on or after 01-04-2005 but before 31- 03-2006 for the reason that additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.1,81,50,266/- respectively. The Assessee availed of additional depreciation @ 20% on the original cost of the machinery at Rs.5,95,494/- and Rs.48,26,123/- respectively in AY 2006-07. In AY 2007-08 also the Assessee claimed additional depreciation at 20% of the original cost viz., Rs.5,95,494 and Rs.48,26,123 respectively in all depreciation totalingRs.54,21,617/-. 26. According to the AO, the deduction u/s.32(1)(iia) of the Act is granted only to "new" plant and machinery and once depreciation is granted in the 1st year in which the machinery is installed or put to use, the machinery ceases to be a new machinery and therefore additional depreciation cannot be allowed. The plea of the Assessee however was that Section 32(1)(iia) of the Act merely provides that further to the normal depreciation at the prescribed rates, an additional depreciation shall be allowed to the assessee at the rate of 20% on new plant and machinery acquired and installed after 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed: Section 32(1)(iia) of the Act was originally introduced by the finance (no.2) Act, 1980 w.e.f. 1-4-1981 reads thus (the sub-section existed upto 31-3-1988 and was deleted thereafter): "(iia) in the case of any new machinery or plant (other than ships and aircraft) which has been installed after the 31st day of March, 1980 but before the 1st day of April, 1985, a further sum equal to one-half of the amount admissible under clause (ii) (exclusive of extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the 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, then in respect of that previous year :" Sec.32(1)(iia) of the Act as reinserted by finance (No.2) Act, 2002 w.e.f. 1-4-2003, reads thus: '(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the year in which such additional depreciation should be allowed and also there is no restriction with regard to the additional depreciation being allowed only on the written down value and therefore the additional depreciation even in the second and subsequent years have to be allowed on the original cost of the Asset. These are evident from a plain reading and literal construction of the relevant statutory provisions. 30. The CIT(A) after considering the aforesaid scheme and history of the provisions of Sec.32(1)(iia) of the Act, deleted the addition made by AO observing as follows :- "I have considered the submissions of the Ld. A/R and find substance in the contention of the Appellant. On a conjoint reading of the provisions of section 32(1)(iia) inserted by Finance (No. 2) Act, 1980 and reinserted by Finance Act, 2002 it is evident that the said sections specifically restricted the allowability of additional depreciation in the year of installation of P&M. However, in the section 32(1)(iia) amended vide Finance Act, 2005 Legislature had omitted the proviso wherein it was provided that such depreciation could be claimed only in the initial assessment year. This being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly re-introduced vide Finance Act, 2002 w.e.f. 01-04-03. On perusal of clause (iia) to Sec. 32(1) as existed during the aforesaid period, it could be seen that the legislature conferred the benefit of additional depreciation only in the first AY when the asset was installed and first put to use. However vide Finance Act, 2005, clause (iia) to Sec. 32(1) was amended w.e.f. 01-04- 06 wherein the condition of claiming additional depreciation only in the initial AY was deleted. It was submitted that since the specific condition for claim of additional depreciation in one year has been done away with, it should be construed as the intention of the legislature to allow additional depreciation in subsequent years as well. Reliance was placed on the following decisions wherein it has been held that a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. Even if there is a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation :- - Orissa State Warehousing Corpn. v. CIT [1999] 103 Taxman 623/237 ITR 589 (SC) - Prakash Nath Khanna v. CIT [2004] 135 Taxman 327/266 ITR 1 (SC) - Smt. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01-04-2006. The plain language of the section warrants such an interpretation. We therefore uphold the order of CIT(A) and dismiss ground No.3 raised by the revenue. " 50 We observe that in decision of ITAT Kolkata in the case of DCIT vs. Gloster Jute mills ltd. in ITA No. 1524/Kol/2013 dated 01.03.2017 has held that additional depreciation would be allowed in subsequent assessment years by observing that the condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The expression "new machinery" is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, ITAT held that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01.04.2006. However, subsequently in the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly. This ground of appeal is allowed." 52. Respectfully following the above decision, we dismiss the ground raised by the revenue. 53. In the Ground No.7, Department has raised the following grievance: "Whether, on the facts and in the circumstances of the case & in law the Id. CIT(A) erred in directing the A.O. to allow deduction u/s. 80IA of the I.T. Act, in respect of power-generating unit-TG3 located at Wadi?" 54. On identical issue in Assessee's appeal, in the Ground No.3, following issue is raised: "Ground No. 3 : Denial of claim of deduction u/s 80-IA with respect of Wadi Power Plant TG 2 (Rs. 49,32,41.899 /-): a) On the facts and circumstances of the case and in law, the Ld. CIT (A) was not justified and grossly erred in confirming the action of AO in denying the claim of Appellant in relation to deduction u/s 80IA in respect of Power Plant namely TG2 at Wadi in the state of Karnataka. b) The Appellant prays that claim of the Appellant in relation to deduction u/s.80IA be allowed." 55. Similar issue was considered by us in the Department Appeal ground No 9 and in Assessee's Appeal ground No 3 in AY 2005-06 and held as under: "60. Considered the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the undertaking takes place by the splitting up of a business already in existence, the negative prohibition would not be attracted. In the present case, the entire business of TG-2 and TG-3 power plant was transferred to the assessee. The undertaking of the assessee was not formed by the splitting up of the business. On this issue, Hon'ble Bombay High court in the case of CIT v. Sonata Software Ltd [2012] 21 taxmann.com 23 has held as under:- "Section 10A of the Income-tax Act, 1961 - Free trade zone - IOCL set up a software division in 1980s - IOCL made an application for setting up an undertaking in a Software Technology Park (STP) for which an approval was obtained on 30-9-1993 - Plant and machinery for said undertaking was imported in July, 1994 and first export was effected in October, 1994 - Thus, manufacturing activities, commenced in STP undertaking after stipulated date of 1-4-1994 as provided in section 10A - Subsequently, in October 1994 itself, IOCL transferred entire software division as a going concern on slump sale basis to assessee - It was apparent from records that ownership of business or undertaking changed hands and, thus, it could not be regarded as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of sections 80HH and 80-I to the assessee-company cannot be stated to be illegal or against the statutory provisions. A similar view has been taken by the Bombay High Court in the case of CIT v. Dandeli Ferro Alloys P. Ltd. [1995] ITR 1, in which the Bombay High Court held that the facts on record clearly established that the amalgamated company was already incorporated and formed and had come into existence on March, 1973 and had become an industrial undertaking carrying on industrial and commercial activities on and from June 20, 1973, i.e., prior to the amalgamation of the amalgamating company with the amalgamated company, which had become effective from October 31, 1973. The amalgamated company was not formed by the splitting up, or the reconstruction, of a business already in existence. Therefore, the Tribunal was right in holding that the assessee company was entitled to relief under sections 80J and 80HH of the Act". 63. The CBDT had also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income-tax Act, 1961), way back in 1963 and clarified the matter vide Letter: F No 15/5/63-IT (A-I), dated 13 Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above decisions clearly suggest that deduction u/s 80IA is available to undertaking and change in ownership does not mean that unit is established by split up or reconstruction of entire business. Considering ratio laid down by various courts as referred supra, assessee is entitled to deduction u/s 80IA on two units purchased from Tata Power Company Limited. 67. It is emanating from assessment order and order of Ld.CIT(A) that TG-2 started commercial production from 1 st April 1995 and no deduction was claimed till A.Y. 1998-99 as such unit was incurring losses. The assessee was eligible for deduction u/s 80IA for such unit in A.Y. 1999-2000 but no deduction was claimed as there was no positive Gross Total Income of assessee but it is fact that assessee was eligible for deduction was mentioned in notes forming part of return of income. It is undisputed fact that Assessing Officer has not disputed such claim in assessment proceedings. Subsequently, such unit was transferred to Tata Power Company and was again re-purchased by assessee in current year and assessee has claimed deduction u/s 80IA. So far as observation of Ld.CIT(A) that assessee is not entitled for such deduction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided issue in its favour. The relevant finding is reproduced herein below: 14.2.3. Revenue is in appeal, challenging the relief granted by CIT(A). We have heard the rival contentions and perused the record. While the Departmental Representative relied upon the assessment order, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee's own case for the Assessment Year 2002-03 and 2003-04 wherein the Tribunal had granted relief to the Assessee. 14.2.4. We note that the Hon'ble Bombay High Court has, in the case of CIT vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 has held as under: "4. The short point which arises for consideration in this appeal is, whether the Assessing Officer was right in disallowing claims for deduction in respect of the five items and ordering addition thereof to the net profit for the purposes of section 115J. 5. The addition of the five items to the net profit is, accordingly, discussed hereinbelow: (I) Addition of wealth-tax paid by the assessee to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g decided in favour of the assessee against the revenue." (Emphasis Supplied) 14.2.6. In view of the above, we confirm the order of CIT(A) and hold that provision for Wealth-Tax of INR 70,00,000/- is not required to be added back while computing Book Profits under Section 115JB of the Act. Accordingly, Ground No 8 raised by the Revenue is dismissed." 81. Respectfully following the decision of coordinate bench referred supra, addition of provision for wealth tax made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed." 59. Respectfully following the above decision, we dismiss the ground raised by the revenue. 60. 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 interest expenses to earn dividend income in computing Book Profit u/s. 115JB of the Act (Rs.5.595 Crores)?" 61. On identical issue in Assessee's appeal, in the Ground No.12, following issue is raised: "Without prejudice to Ground No. 1, Ground No. 12: Disallowance u/s 14A in respect of exempt income (Rs 5,59,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of Club Entrance Fee (Rs* 5,00.000/-} a) 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 disallowing Club Entrance Fee of Rs. 5,00,000/- as expenditure not incurred wholly and exclusively for the purpose of the business. b) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in disregarding and not following the order of the Hon'ble Income-tax Appellate Tribunal ('ITAT') in the Appellant's own case on the same issue in earlier years." c) The Appellant prays that the AO be directed to allow the claim of the Appellant. 67. Similar issue was considered by us in Department Appeal in Ground No 3 in AY 2005-06 and held as under: "24.Considered the rival contentions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench assessee's own case for A.Y. 2004-05 in ITA No 5259/Mum/2027 dated 27/05/2022 wherein it is held as under: "3. We have heard the rival contentions and perused the material on record. We note that the Tribunal has decided identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has dismissed revenue's appeal. Respectfully following the above said decisions as discussed herein above, this ground in Departmental Appeal is dismissed." 68. Respectfully following the above decision, we allow the ground raised by the assessee. 69. In the Ground No.4, Assessee has raised the following grievance: "Ground No. 4 : Disallowance of proportionate Head Office expenditure and Research & Development expenditure while computing deduction u/s 80IA/80IB/80IC (a) On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in apportioning a part of the indirect Head Office expenses aggregating to Rs. 18,06,75,661/- and adjusting such allocated amount of Rs. 1,26,98,280/- in computing Tax Holiday u/s 80IA for eligible Captive Power Plants, without establishing any nexus between the nature of expenses and such eligible units of the appellant. (b) 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. 21,33,60,210/- (including Rs 3,26,84,549/- being R&D Expenses) and adjusting su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to all the units, as deductions and allowance of eligible units are required to be taken into account while treating such units as profit centres, and computing the profits accordingly. The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if they are independent of each other, and once that fiction sets in, the expenses incurred by someone other than eligible unit, in the interest of the eligible unit, are to be taken into account while computing the profits of the eligible unit. Accordingly, the allocation of expenses, as the learned Assessing Officer rightly contends, must be done. The assessee has further contended that HO expenses are not „derived from‟ or „derived by‟ the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has discussed this issue at Para No 14 of assessment order. The Assessing Officer has observed that assessee company had two stretches of land in Porbandar, Gujarat. In the year, 1956, these lands were transferred to the assessee for industrial use, one under conditional grant and another one under conditional lease for 99 years, both with restriction on transfer. The said lands have been reposed by the Government of Gujarat. The issue was settled by the Gujarat High court deciding the matters against the assessee vide order dated 15/12/2009. Based upon the same, assessee has treated the sale value of land at Rs Nil and after considering indexed cost of acquisition based upon valuation as on 01/04/1981, assessee has claimed Long Term capital loss at Rs 26,81,63,920. The written submission filed before Assessing Officer is reproduced at Page No 24 and 25 of assessment order. The Assessing Officer has referred to provisions of Section 2(47) of the Act and observed that transaction of assessee does not fall within the definition of "Transfer" under the Income Tax Act. He has observed that land was allotted to assessee subject to fulfilment of certain conditions including us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of 1957)." From the details submitted by the assessee during the course of assessment proceedings, the AO felt that the fair market value of the property as on 01-04- 1981, as estimated by the Registered valuer was on a higher side. With a view to determining the FMV of the said property as on 01-04-1981, the AO made a reference to the valuation to the DVO concerned. The action of AO is upheld. Accordingly, I dismiss ground of appeal no.11." 75. The Assessee has filed appeal against above referred order. The Ld.AR has argued that as land is repossessed by Government of Gujarat, rights are transferred in favour of Government which tantamount to "transfer" of land. During the course of appellate hearing, Ld. AR has argued that prior to 1st July, 2012, for the purpose of valuation u/s.55 of the Act, reference cannot be made if value of asset given by assessee was more than market price. The Ld. AR has mainly relied upon following decisions: (i) CIT v. Puja Prints [2014] 360 ITR 697 (Bombay) (ii) CIT v. DaulatMota (ITA No. 1031 of 2008) (Bombay HC) (iii) Ms. Rubab M. Kazerani v. JCIT (2004) 91 ITD 429 (Mum.) (iv) ITO v. Smt. Lalitaben B. Kapadia (2008) 115 TTJ 938 (Mum) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case as emanating from perusal of the Hon'ble Gujarat High Court's order dated 15.122009 are that :The lands were granted to the assessee as new tenure land i.e. unalinated land and restricted land meaning thereby said lands cannot be transferred / sold without the prior permission of the Collector (refer para 3.3 of the order on page 75 of the assessee's paper book).Similarly, certain land was leased to the assessee only for the purpose of cement industry and on certain terms and conditions, more particularly, with the condition that the same cannot be transferred without prior permission of the Collector. The lands in question were not being used for the purpose, for which it was leased / granted i.e. manufacturing of cement was totally stopped since last 5 years. Land admeasuring of 35 acres was transferred by the assessee in favour of Fraser Investment Ltd. (subsequently named as I-IMP Cement Ltd.).The said HMP Cement Ltd. also stopped manufacturing of cement since long. 79. As there were various violations and breach of conditions, show cause notice was issued by the Collector Porbandar for forfeiting / resuming the land in state Govt. The subsequent order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon'ble Supreme Court in the case of Pushpadevi M. Jatia V. M. L. Wadhawn 1987 AIR 1748, if evidence is relevant, the Court is not concerned with the method by which it was obtained. She also relied upon decision of Hon'ble Supreme Court in the case of Pooran Mal V. Director of Inspection 93 ITR 505 wherein it is held that even if reference made by Assessing Officer is considered not valid, the valuation report can always be used in the Income Tax proceedings for the purpose of the Act. 82. Further, Ld. DR has filed written submission dated 13/01/2023 before Hon'ble Bench wherein she has referred to order of Hon'ble Gujarat High court passed in assessee's own case which relates to re-possession of land by Government and contended that lands in question were not being used for the purpose for which it was leased/granted, land admeasuring 35 acres was transferred by the assessee in favour of Fraser Investments Limited in earlier years, Based upon such facts, she has contended that matter was to remanded back to Assessing Officer for recording back specific finding relating to year of sale, year of capital gain, what would be cost of acquisition in the hands of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company was having rights in the land though same was subject to fulfilment of certain conditions, such rights were extinguished in current year as land leased to assessee were re-possessed by the Government in view of order of Hon'ble Gujarat High court which is nothing but extinguishment of rights as per Section 2(47) of the Act. It is observed that assessee company had used the land for manufacturing purpose for certain years but same was not carried out since few years hence Collector, Porbandar has passed the order for re-possessing such land which was in dispute before Hon'ble High court. Thus, repossession of land by the State Government cannot be terms as penalty as observed by AO but rights in lands are repossessed by the Government of Gujarat. As Hon'ble Gujarat High court has passed the order for obtaining back such possession of land from assessee company in year under consideration, assessee company has rightly computed Long Term Capital gain/loss in year under consideration. Thus, argument of AO that assessee was not absolute owner of land and re-possession of land by State of Gujarat is not transfer u/s 2(47) of the Act cannot be accepted. 85. So far as issue rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stopped manufacturing of cement since long and as it was found that there is breach of conditions of order / lease agreement, a show cause notice was issued by the Collector, Porbander calling upon petitioner no.1 as to why lands in question should not be forfeited / resumed in the State Government. Petitioner no.1 replied to the same and after considering reply and submissions made by the petitioners, by impugned order dated 24.01.2002 Collector, Porbander directed to resume lands in question to the State Government and forfeiting the same i.e. of the lands (Subject matter of both the Special Civil Applications)................ 8. It is not in dispute and cannot be disputed that all the lands in question were leased in favour of the petitioner for a period of 99 years for cement industry with certain terms and conditions inclusive of condition that same cannot be transferred without prior permission of the Collector. By MOU executed in 1989 approximately 35 acres of land came to be transferred in favour of HMP Cement Limited for consideration. It is the contention on behalf of the petitioner that there was no sale deed in favour of Fraser Investment Limited (HMP Cement Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are passed after giving opportunity to the petitioner after following principles of natural justice, same are not required to be interfered with by this Court in exercise of powers under Article 226 and 227 of the Constitution of India. 10. Now so far as contention of the petitioner with respect to land bearing survey no.59 and 60/3 total 122 acres and 11 gunthas of land situated at Porbander, same was granted / allotted / leased in favour of the petitioner on payment of full consideration of Rs.3,97,823.87 paise, therefore, no action could have been taken by the Collector is concerned, it is to be noted that by order dated 13.08.1993 passed by Collector, Junagadh, said lands were given as unalienated land and as new tenure restricted land and said land could not have been transferred without prior permission of the Collector, still land in question have been transferred in favour of HMP Cement Limited without prior permission of the Collector. Therefore, there is breach of condition of order dated 17.08.1993 also. Even otherwise, in the facts and circumstances of the case, more particularly when since last many years land in question were not used for manufacturing of cement i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 697 wherein it is held as under: 7. We find that Section 55A(a) of the Act very clearly at the relevant time provided that a reference could be made to the Departmental Valuation Officer only when the value adopted by the assessee was less than the fair market value. In the present case, it is an undisputed position that the value adopted by the respondent-assessee of the property at Rs.35.99 lakhs was much more than the fair market value of Rs.6.68 lakhs even as determined by the Departmental Valuation Officer. In fact, the Assessing Officer referred the issue of valuation to the Departmental Valuation Officer only because in his view the valuation of the property as on 1981 as made by the respondent-assessee was higher then the fair market value. In the aforesaid circumstances, the invocation of Section 55A(a) of the Act is not justified. 8. The contention of the revenue that in view of the amendment to Section 55A(a) of the Act in 2012 by which the words "is less than the fair market value" is substituted by the words " "is at variance with its fair market value" is clarifactory and should be given retrospective effect. This submission is in face of the fact that the 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of law as existing during the period relevant to Assessment Year 2006-07, we are of the view that questions (a) and (b) do not raise any substantial question of law." 88. During the course of appellate hearing, Ld. AR has referred various decisions of co-ordinate Bench of Mumbai ITAT wherein identical issue is decided in favour of the assessee. The Hon'ble Gujarat High Court in the case of CIT v. Gauranginiben S. ShodhanIndl 367 ITR 238 has also held as under: "15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference." 17. In the result, we see no reason to interfere. However, we have given our independent reasons and should not be seen to have confirmed the reasonings adopted by the Tribunal in the impugned judgment. Tax Appeal is dismissed." 89. It is observed that decisions referred hereinabove are identical on the facts and Ld. DR has not referred any decisions directly contrary to decision of Hon'ble Jurisdictional High Court referred supra. The decisions referred by Ld. DR are in the context of different facts hence same cannot be relied upon. Considering the binding decisions of Hon'ble High Court referred supra, Assessing Officer was not justified in considering fair market value of land based upon DVO's report obtained u/s 55A of the Act. 90. Considering above observation and discussion, Assessing Officer is directed to recomputed long term capital loss in the case of assessee. This ground of appeal is accordingly allowed for statistical purpose. 91. In the Ground No.6, Assessee has raised the following grievance: Ground No. 6 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal return of income, while computing book profit under Section 115JB of the Act, the Assessee omitted to exclude aforesaid profit on sale of fixed assets. However, in the revised return, while computing book profits under Section 115JB of the Act the same were excluded. In response to query raised during the course of assessment proceedings, the Assessee, vide letter dated 16.11.2006, filed detailed submission substantiating the claim. However, the Assessing Officer rejected the claim of the Assessee by placing reliance on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Veekay Lal Investments Co. Pvt. Ltd. : 249 ITR 597 (Bom) 19.2. Being aggrieved, the Assessee filed before CIT(A) on this issue. 19.4. We note that in the immediately preceding Assessment Year 2003-04, the Tribunal has decided this issue in favour of the Revenue, vide common order 13.03.2019 passed in ITA No. 4242/MUM/2007 and ITA No. 4988/MUM/2007, holding as under: "52. Under this issue the revenue has challenged the deletion of the addition of profit on sale of fixed assets in computation of book profit u/s 115JB of the Act in sum of Rs.5,19,20,846/-. At the time of argument, the Ld. Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For yet another reason, the assessee has to be given the benefit of indexed cost of acquisition as considering the profits on sale of land without giving the benefit of indexed cost of acquisition results in taxing the income other than actual/real income. In other words, a mere book keeping entry cannot be treated as income. ..................." 143. On perusal of the aforesaid decision, it is evident that the assessee will be entitled to indexed cost of acquisition while computing capital gains u/s 115JB of the IT Act. It is also to be noted that in the immediately preceding year i.e. AY 2004-05, Coordinate bench has held that long term capital gains credited in the books of accounts is taxable to which even the Ld. AR fairly conceded. However, it was only during the current year as well as AY 2005-06 that the Ld. AR of the assessee referred to the decision of Hon'ble Karnataka High Court as relied and reproduced supra. Extensively relying on it he claimed that the indexed cost of acquisition does not form part of income computed u/s 115JB of the Act. Respectfully following the ratio laid down by Hon'ble Karnataka High Court, the Assessing Officer is directed to recompute ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 99. Respectfully following the above decision, we allow the ground raised by the assessee. 100. In the Ground No.9, Assessee has raised the following grievance: Ground No. 9 : Non exclusion of Sales Tax Incentive & Excise Duty Incentive in the computation of Book profit u/s 115JB (Rs. 73.48,92,089/- & Rs. 175,50,60,850/- respectively) (a) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the action of AO in denying the appellant's claim of exclusion of Sales Tax Incentive and Excise Duty Exemption benefits availed/received during the year under consideration amounting to Rs. 73,48,92,089/- and Rs. 175,50,60,880/- respectively, being capital in nature, in computing Book Profit u/s 115JB. (b) The Appellant prays that the amount of sales tax and excise duty incentive be excluded while computing book profits u/s. 115JB of the Act. 101. Similar issue was considered by us in the assessee Appeal in Ground No 13 in AY 2006-07 and held as under: "97.Considered the rival submissions and material placed on record. On this issue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise exemptions. For this short reason alone, the impugned additions must stand deleted as the related receipts are required to be treated as capital receipts in nature. The observations in the context of the first ground of appeal will apply mutatis mutandis here as well. That apart, once the Assessing Officer himself also accepts that the object and purpose of the excise exemption scheme are to promote the industry is set up, or being subjected to substantial expansion, in the backward areas, it cannot be open to the revenue even to suggest that the object and purpose of the scheme are to promote industries in backward areas. The Assessing Officer had declined the relief on a technical ground about at what stage the receipts materialize, whether postproduction or pre-production. That test, as is the settled legal position now, is no longer a relevant test. What is material is as to what is the purpose of the scheme in question, and a call about the object and purpose of the scheme is to be taken in a holistic manner and on the basis of the scheme on an overall basis. The approach adopted by the learned CIT(A) was not only legally incorrect but wholly superficial. The following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court. It was noted that, Maharashtra Government's subsidy was not in form of an exemption from payment of entertainment duty to multiplex theater complex. The scheme was introduced to start new cinema houses in the State. The Supreme Court observed that, in such circumstance, the purpose tests for grant of subsidy should be applied. It was concluded as under:- "Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugars, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a complete family entertainment centre, more popularly known as multiplex theatre complex, has emerged. Those complexes offer various entertainment facilitate for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that Government with a view to commemorate the birth c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er such subsidy would be adjustable towards assessee's costs of acquisition of capital assets. We may notice that, a similar question was considered by Division Bench of Gujarat High Court in case of CIT v. Grace Paper Industries (P.) Ltd. [1990] 183 ITR 591/52 Taxman 18. The Court noted that, the subsidy was granted by the Government for development of industries in back-ward areas. It was not part of the actual cost of plant or machinery. The Court, therefore, held that it could not have been deducted towards costs of acquisition. The Court held as under:- "We have carefully considered the provisions relating to the grant of cash subsidy under the schemes framed by the Central Government and the State Government. The Central Government as well as the State Government noticed that areas specified as backward areas and tribal areas were undeveloped or under-developed. Entrepreneurs were not willing to set up industries in such undeveloped or underdeveloped areas. The industries were concentrating only in urban areas. In other words, rapid urbanization was taking place. So far as the State of Gujarat is concerned, there was rapid industrial growth in cities like Baroda, Ahmeda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidy. Emphasis on value and not the cost is evident from the fact that land and building already owned by an industrial unit, cost of tools, jigs, dies and moulds, transport charges, insurance premium, erection cost, value of second-hand machinery purchased by an industrial unit etc. were to be taken into account while computing the value of fixed assets for the purposes of subsidy. In other words, it was the value of the fixed assets which formed the basis for computation of subsidy to be granted under the scheme. Subsidy, in our opinion, did not meet the cost of the fixed assets directly or indirectly. Under the scheme of the Central Government or the scheme of the State Government, cash subsidy was quantified by determining the same at a specified percentage of the value/ cost of the fixed assets. Therefore, as observed above, the basis adopted for determining the cash subsidy with reference to the cost or value of fixed assets was only a measure for quantifying the subsidy and it could not be said that the subsidy was given for the specific purpose of meeting any portion of the cost of the fixed assets. The subsidy was granted to compensate the entrepreneur for the hardship and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We, therefore, confirm and approve the relief granted by the CIT(A) and decline to interfere in the matter. 44. Ground no. 3 is thus dismissed." 98. It is observed that coordinate bench has also decided similar issue in favour of Ambuja Cement Limited, holding company of assessee from A.Y. 2006-07 to 2011-12 as stated supra. It is observed that various observations made by Assessing Officer and arguments made by Ld DR are already dealt with by various decisions referred supra hence there is no reason to deviate from the finding given by Coordinate Bench referred supra. Thus, 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. In the result, related grounds in Assessee's Appeal are allowed." 102. Respectfully following the above decision, we allow the ground raised by the Assessee. 103. In the Ground No.10, Assessee has raised the following grievance: "Ground No. 10: Non-exclusion of Capital Profit of Rs. 6,00,96,830/- a) On the facts and in the circumstances of the case, the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been decided against the Assessee in the assessee's own case (supra), therefore, the finding of the CIT(A) on this issue is hereby ordered to be set aside and we allow the claim of the revenue for the addition of said amount while computing the book profit u/s 115JB of the Act. Accordingly, this issue is decided in favour of the revenue against the assessee." 19.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in Assessee's own case, we set aside the order of CIT(A) and restore the order of the Assessing Officer on this issue. Accordingly, Ground No. 18 raised by the Revenue is allowed. " 112. However, during the course of the hearing the Ld. AR also referred to the decision of Hon'ble Karnataka High Court in the case of Best Trading and Agencies Limited v. DCIT [119 Taxmann.com 129]. The finding of the said decision at Para No. 13 is reproduced hereunder for ready reference: "................... 13. section 115JB(5) of the Act reads as under: "(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee being a company, mentioned in this Section." Thus, by virtue of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ground No.11, Assessee has raised the following grievance: "Ground No. 11: Addition of provision for Interest on Income Tax (Rs. 45,88,00,000/-): On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in adding Rs. 45,88,00,000/- being provision for interest on income tax in computing Book Profit u/s 115JB." 107. The Assessing Officer has discussed this issue at Para No 22 of assessment order. The assessee has made provision for Rs..45.88 crores in Profit & Loss Account out of which Rs..23.16 crores represent interest u/s.244A of the Act and Rs..22.72 crores represent for interest u/s.234D of the Act. The above referred amount was claimed as expenditure on the ground that such interest is not "Income Tax" but provision against interest from refund made on scientific basis. However, this contention of the assessee was not accepted by Assessing Officer on the ground that explanation 2 to Section 115JB requires amount of Income Tax including interest charge under the Act to be added while computing Book Profit. 108. In appeal Ld.CIT (A) has discussed the above issue at Para No 21.3 of his order and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t u/s.244A which would be withdrawn based upon past assessment orders passed in its case. The assessee has claimed that such provision is on a scientific basis. It is observed that explanation 2 to Section 115JB clearly provides that amount of Income Tax would be subject to upwards adjustment while computing Book Profit. Such Explanation also provides that any interest charged under the Act would be subject to positive adjustment. Though, in assessee's case, interest u/s.244A charged to Profit & Loss account is not recovered by Assessing Officer by passing any order but same is provided based upon past experience based upon assessment orders / appellate orders in case of assessee hence such interest provided in the books of account in actual sense partakes the character of interest as provided in explanation 2 to section 115JB of the act. If assessee would have actually paid amount received u/s.244A to Assessing Officer on account of additions made in assessment order and such interest if would have been debited to P&L account, such interest would have been disallowed while computing Book Profit hence on this analogy also provision of interest deserves to be added back while comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while deciding the appeal for AY 1999-00. Considering the above facts we decide the last additional ground against the AO." 130 It is matter of fact that department has not challenged the appellate order of A.Y. 1998-99 before Hon'ble High court and matter has attained finality. Hon'ble Bombay High court in the case of Raymond Limited [2012] 21 taxmann.com 60 has held that Amount set apart as a Debenture Redemption Reserve (DRR) is not a reserve within the meaning of Explanation (b) to section 115JA. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld.CIT(A) holding that amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. This ground of appeal in Departmental Appeal is dismissed. 114. Respectfully following the above decision, we allow the ground raised by the assessee. 115. In the Ground No. 13 & 14, Assessee has raised the following grievance: "Ground No. 13: Non-adjudicating additional ground regarding claim u/s. 43B: a) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not adjudicating the additional ground filed by the Appellant regarding the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return was filed or when the assessment order was made....' or 'that the ground became available on account of change of circumstances or law,' does not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz., 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made....' clearly relate to cases where the ground was available when the return was filed and the assessment order was made but 'could not have been raised' at this stage. The words are 'could not have been raised' and not 'were not in existence'. Grounds which were not in existence when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer is, therefore, now only to compute the assessee's tax liability which he must do in accordance with the orders allowing the assessee a deduction of Rs. 40 lakhs under section 43B. [Para 20] The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The revenue has not suggested much less established that the omission was deliberate, mala fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. [Para 21] Therefore, the appeal of the revenue was liable to be dismissed. [Para 26]". 107. So far as the merits of the case is concerned, it is observed that assessee has claimed deduction of VAT payment as per provision of section 43B of the Act. The issue requires verification at the end of the Assessing Officer hence, this ground of appeal is allowed for statistical purpose. 117. Respectfully following the above decision, we allow the ground for statistical purpose. 118. In the result, appeal filed by assessee is part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and material placed on record. It was submitted that the assessee made the payment to BIS Marking in the current assessment year and the same is eligible to claim as business expenditure. After considering the submissions, we are inclined to remit this issue back to the file of Assessing Officer to verify the claim of the assessee and allow the same on the payment basis as per law. Therefore, this additional ground raised by the assessee is allowed for statistical purpose. ITA NO.3135/MUM/2019 (A.Y: 2009-10) 4. At Para No. 94, we dealt with the issue of Leave Encashment allowance u/s 115JB, we observe that the similar issue was considered by us in the A.Y.2008-09 in Ground No 13 and instead of reproducing the decision, we have wrongly reproduced the findings given in the A.Y.2005- 06. The more relevant facts for this ground is from Ground No.13 of A.Y. 2008-09. Therefore, we are hereby reproducing the above in the corrigendum for this Assessment Year as under: "94. Similar issue was considered by us in the assessee appeal 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure incurred in relation to exempt income not includible in total income (General) - Assessee-scheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 11. Hon'ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji & Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: "6. On thorough 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 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 022 has held as under: "11. Having heard the rival submissions and perused the materials available on record. It is observed that the assessee has made a suo moto disallowance of Rs.1,263/- for which the assessee contends that the A.O. ought not to have applied Rule 8D on the ground that suo moto disallowance has been made by the assessee. The assessee further contends that without prejudice, the disallowance should be restricted only to the investments which have yielded an exempt income for the assessee during the impugned year. It is also pertinent to point out that since the assessee had not borrowed funds during the relevant year, no disallowance as per Rule 8D(2)(i) of the Income Tax Rules was warranted. It is also observed that the A.O. has recorded his satisfaction that the correctness of the assessee's claim of expenses of disallowance was not to the satisfaction of the A.O., thereby entitling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon'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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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