TMI Blog2023 (2) TMI 1211X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of M/s Tamilnadu Petro Products Ltd. Vs ACIT [ 2010 (11) TMI 645 - MADRAS HIGH COURT] allowed deduction u/s 80IA of the Act where the facility was one of captive consumption. Thus even if the facility was for captive use, deduction u/s 80IA(4) cannot be denied. Thus applying the proposition of law laid down in all these case laws, in the facts of the case we hold that, on merits the assessee is entitled to claim deduction u/s 80IA of the Act. Disallowance of proportionate CENVAT credit availed for units eligible for deduction u/s 80-IA - The fiction envisages under section 80IA(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units are other units are treated as independent of each other, and the profit computations are on a standalone basis, the eligible unit must get the corresponding credit for the CENVAT credits availed by the other units. Viewed thus, not accounting for the CENVAT credit does not, in our considered view, vitiate the profits of the eligible undertaking, as long as all such credits are fully availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered view, does not merit any interference. We approve the conclusions arrived at by the learned CIT(A) on this point and decline to interfere in the matter. Additional depreciation u/s 32(1)(iia) - Whether additional depreciation is allowable only on new machinery i.e. the first year in which it is put to use? - HELD THAT:- It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited [ 2022 (11) TMI 1419 - ITAT MUMBAI] holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited [ 2018 (4) TMI 426 - ITAT MUMBAI] relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern s case of the assessee. We uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act. Dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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. Copy of such MOU, quantum of consideration received towards such MOU is not on record. Whether such MOU was legal or not or whether assessee company was legally capable of transferring such part of land to other party or not is not subject matter of present appeal as legal issue was already before Hon ble High court as referred supra. It is emanating from the order of Hon ble High court that approximately 35 acres of land came to be transferred in favour of HMP Cement in earlier years hence to that extent of land assessee is not entitled to long term capital loss as he was not having ownership of land to that extent in year under consideration. Considering such facts, AO is directed to re-compute income from long term loss after excluding long term capital loss pertaining to 35 acres of land as was transferred to HMP as referred supra. AO was not justified in considering fair market value of land based upon DVO s report obtained u/s 55A. Assessing Officer is directed to recomputed long t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook Profit u/s.115JB of the Act which is contrary to the provision of the Act. On this ground also the claim of assessee fails and adjustment made by Assessing Officer is also upheld. This ground of appeal is dismissed. Amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. Assessee has claimed deduction of VAT payment as per provision of section 43B - The issue requires verification at the end of the Assessing Officer - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, HON'BLE JUDICIAL MEMBER For the Assessee : Shri Yogesh Thar Shri Chaitanya Joshi Ms. SukanyaJayaram For the Department : Smt. Shailja Rai ORDER PER S. RIFAUR RAHMAN (AM) ITA.No. 3138/MUM/2019 (Appeal Relating to re-assessment) 1. This appeal is pertaining to Assessment Year 2010-11 arising from the appellate order dated 30th 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 28th December, 2016 passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four years from end of relevant assessment years and where the assessee has disclosed fully and truly all material facts, reopening beyond four years is bad-in-law. Reliance was placed mainly on following decisions: (i). Calcutta Discount Co. Ltd. v. ITO [(1961) 41 ITR 191] (Supreme Court) (ii). Mangalore Refinery and Petrochemicals Ltd. v. DCIT (2022) 137 taxmann.com 452 (Bombay) (iii). Runwal Realty (P.) Ltd. v. DCIT (107 taxmann.com 284) (Bombay) (iv). PCIT v. Punjab and Sind Bank (108 taxmann.com 351) (Delhi High Court) (v). [SLP dismissed by Supreme Court in (108 taxmann.com 352)] (vi). Hindustan Lever v. R.B. Wadkar (268 ITR 332) (Bombay High Court) (vii). Business India v. JCIT (370 ITR 154) (Bombay High Court) (viii). Bombay Stock Exchange v. DDIT (365 ITR 160) (Bombay High Court) (ix). Panchratna CHS v. AO (376 ITR 404) (Bombay High Court 5. The Ld. AR has also referred to original assessment order passed in the case of assessee wherein both the issue relating to reassessment notice was discussed hence he contended that reassessment notice is purely based upon change of opinion and such notice deserves to be quashed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and she very much relied on the ratio of the Hon'ble Delhi High Court. 9. Considered the rival submissions and material placed on record. It is observed that original assessment order u/s 143(3) of the Act was passed on 21/03/2014. The Assessing Officer has issued reassessment notice on 08/03/2016 i.e. beyond four years from end of relevant assessment year. The reasons recorded by Assessing Officer as reproduced at Page No 1 to 6 is reproduced herein below for sake of clarity: In this case, scrutiny assessment was completed on 16.03.2015 for A.Y. 2011-12 and re-assessment proceedings for AY 2009-10 was completed on 31.3.2015 wherein deduction u/s 80-IA(4) for development of private rail sidings claimed by assessee was disallowed. 2. During scrutiny proceedings for A.Y. 2011-12, a number of queries were raised and the issue was discussed extensively with the assessee company, after which it is specifically admitted by the assessee company and placed on record that: (a) At all of the plant sites on the portion of railway sidings the wagons are hauled inward and outward exclusively by Indian Railways, up to the gate of Plant . However, at Maratha Plant the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se years for claiming the deduction has been that it had developed rail systems and earn income by operating maintaining those rail systems. An impression was given as if they are running rail system onto such private sidings in between the nearest railway track [of Railway department] and their plant site. However, the actual fact is that transportation of goods is being done by the Railway department through their goods train [carrying the set of wagons, known as full rack] from originating station [for inward movement] to right up to the plant sites and right from plant sites to destination [for outward movement] and those goods train runs on the entire distance [including the portion on private sidings]. As such the railway department charges freight for the entire distance [including the length for the movement on such private sidings]. Thus, there is no doubt that transportation over the private sidings was done through goods train run by the railway department and not by the assessee company. It was also noted that as per the agreement, the loaded wagons were handed over (by railway department) to the assessee at the interchange point/ exchange yard, which are loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... railway department. The track extends beyond the interchange point within the plant premise to enable the loading/ unloading of wagons through its bulk handling system called tipplers. The other end of siding within the plant premise is also known as buffer end of siding. It was also admitted that beyond the interchange point located at the gate of factory premise (or within), the assessee rolled wagons within the plant premises through its own locomotives at certain locations. 2.4 During the Assessment proceedings of A.Y. 2011-12, the replies filed by the assessee were considered in the light of legal provisions enumerated in the Act, and the key findings arrived at, thereon, were noted as below: (I) The said infrastructure facility [so called its rail system] was simply a private railway sidings and not a facility of public utility and therefore do not fall within the definition of infrastructure facility for which exemption is intended in sec 80IA. For that reason alone, the assessee company was not entitled for deduction u/s 80IA. (II) The agreements under reference contained the various terms conditions whereby railway department had agreed for laying out p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks road freight and expenses for unloading loading the same at the railway yard of serving station [of Indian Railways] and that resulted into the profit of such rail system. The saving in freight has been estimated exorbitantly. The profits of the undertaking would be negligible if viewed and calculated as per the legal provisions laid down under the Act. The same has been discussed elaborately in the assessment order of A. Y.2011-12 and established the actual saving will be negligible as against claimed by the assessee of Rs. 57,352,663/-. 2.8 Similar claim of the assessee was disallowed by the AO by reopening the case for AY 2009-10 and order U/s 143(3) r.w.s 147 Dated 31 March 2015 was passed to disallow the false claim of the assessee under Section 80IA(4), as the letters from Railway authorities and their view point were not available for consideration to the earlier AO s in the proceeding for the earlier years. However, the same were very crucial and as such fresh material to the facts of the case has come on record. 2.9. The assessee has wrongly claimed the deduction u/s 801 A(4) the A.Y. 2010-11 to the extent of Rs.94,94,83,706/-, 95,18,34,499/-. In light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assessment year i.e. A.Y. 2010-11, coming within the meaning of section 147 of the Income Tax Act, 1961. 5.. In view of the same, notice u/s 148 is issued after approval of CIT-LTU, vide letter No. CIT/LTU/Reopening/2015-16 dated 29.02.2016 . 10. On perusal of reasons recorded, it is apparent that reassessment notice has been issued by Assessing Officer mainly on two grounds i.e. one issue being alleged escapement on account of claim of deduction u/s80IA for railway infrastructure and the second being quantification of profits from railway infrastructure. The Second issue being alleged escapement on account of CENVAT element attributable to consumption of raw material and other services in relation to Captive Power Plants (CPP). It is an undisputed fact that reassessment notice has been issued for beyond four years from end of Assessment Year. During the course of original Assessment proceedings, Assessing Officer had issued notice u/s. 142(1) of the Act, dated 26th June, 2013 which is placed at paper book page 125 wherein following details were called for. The relevant points asked by the AO are as under: 4. Explain whether all conditions have been fulfilled rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is eligible for claiming deduction u/s. 80IA(4)(i) on infrastructure facility for a period of 10 consecutive Assessment Years out of initial 20 Assessment Years. The said infrastructure facility includes Rail System. 13.3 It was further submitted that the assessee has duly fulfilled all the conditions as specified in Section-80-IA(4) for claiming deduction. Further, the assessee submitted that the term Rail System has not been defined in I.T. Act, hence, reference needs to be drawn from the definition given in the other statutes. Section-2(31) of the Railways Act, 1989 defines Railways as to include lines of rail, sidings, fixed plant and machinery, rolling stocks etc. Thus, Railway sidings, tracks, loading and unloading system etc. taken together constitutes Rail System as envisaged in I.T. Act. On the basis of the above, Railway Siding, Railway Track, Loading and Unloading System, Wagon Tripler etc. being Rail System fails within the definition of infrastructure facility as per Section-80-IA. 13.4 The assessee had duly filled the certificate along with audited Profit Loss Account and Balance Sheet quantifying and claiming deduction u/s. 80-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reported details of deviation, if any, from the method of valuation prescribed u/s. 145A and the effect thereof on the Profit and Loss Account. In the said Annexure, the Tax Auditor has mentioned that there is no Impact on the profit of the year after application of the provisions of Section-145A. In the said Annexure, CENVAT element on the opening stock of Raw Materials, stores and spares is Rs.13,55,25,004/- and that of on closing stock is shown at Rs.5,10,51,276/-. During the course of assessment proceedings, the assessee was asked to explain as to why unutilized CENVAT credit referable to closing stock should not be added back u/s. 145A of the I.T. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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/- [Rs. 5,10,51,276 Rs.13,55,25,004/-] is adjusted in computing total income of the assessee. 13. It is thus observed that while passing the original Assessment Order Assessing Officer has critically examined both the issues involved in present reassessment notice. Even on perusal of reasons recorded before issuing notice under Section 148 of the Act, it is apparent that Assessing Officer has nowhere mentioned that there is any failure on the part of Assessee to disclose material facts relating to issues involved herein above. So far as issue of alleged escapement for deduction under Section 80- IA, entire issue is based upon Ld.CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 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 proceedings and escaped his knowledge; and the said fact would have material bearing on the outcome of the relevant assessment order. 9. Section 147 of the IT Act does not allow the re-assessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to re-assess and not the power to review. 10. To check whether it is a case of change of opinion or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment proceedings . 14. Hon'ble Supreme Court in the case of ACIT v. Ceat Limited 146 Taxmann.com 108 has dismissed SLP filed by department against High Court's ruling that where revenue had miserably failed to point out any facts or material which had not been disclosed by assessee during original assessment and entire basis for re-opening after expiry of four years from end of relevant assessment year was due to mistake of Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proceedings in case of assessee - Tribunal noted that notice seeking to reopen assessment had been issued beyond four years from end of relevant assessment year and, there was no failure on part of assessee to disclose fully and truly all material facts at time of assessment - Tribunal thus taking a view that reassessment proceedings had been initiated merely on basis of change of opinion, set aside same - High Court upheld Tribunal's order - Whether, on facts, SLP failed against order of High Court was to be dismissed - Held [Para 2] [In favour of assessee] 17. Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [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 or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences whether of facts or law he would draw from the primary facts. Keeping in view the principles enunciated above, we may deal with the contention advanced on behalf of the appellant that the present is not a case in which action could be taken under section 147(a) of the Act of 1961. This contention has been controverted by the learned counsel for the respondent who has canvas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, 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 be quashed and set aside - Held, yes [Paras 11-17] [In favour of assessee] 20. The Hon'ble Gujarat High Court in the case of QX KPO Services (P.) Ltd Vs DCIT [2018] 94 taxmann.com 467 has held that reassessment for examining another aspect/facet of same issue/claim already examined during original assessment is not permissible. The headnote of said decision is reproduced herein below: Section 10B, read with section 148, of the Income-tax Act, 1961 - Export oriented undertaking (Reassessment) - Assessment year 2011-12 - Assessee filed its return of income after claiming deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 2015. Against this order, the Revenue preferred Tax Appeal No. 439 of 2016 and this Court was pleased to dismiss the above said Appeal by an Order dated 14th June 2016 for A.Y 2008-2009 and confirmed the deduction under Section 10B of the Act. 10. From the letter dated 19th September 2013, while furnishing the explanation in support of the claim of deduction under Section 10B of the Act, it cannot be stated that there was any failure on the part of the petitioner in disclosing truly and fully all material facts necessary for its assessment for the year under consideration. The then Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reproduced below: As mentioned during the course of hearing, the issue arose in the assessee s case for the first time A.Y- 2011-12, which in-turn was based on the finding or the CIT(A)-5, Mumbai in case of M/S. Ultratech Cements Ltd. for the AY. 10-11, it is pertinent to mention that the decision disallowing the claim of deduction u/ s. of the Act in the case of M/S.Ultratech Cements Ltd was reversed by the Hon'ble ITAT-F Bench, Mumbai vide Its order dated 05/04/2017. The copy of the order was filed before your Honours during the course of hearing on 22/09/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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-- amended meaning Of the term ('infrastructure facility , it is amply clear that what has changed is in-fact the power of the CBDT any other public facility as infrastructure facility for the purpose of section 80IA(4) of the Act. The intention of the legislature cannot be Interpreted in a manner so as to come to the conclusion that the requirement of the infrastructure facility to be in the nature of public utility is no more necessary for claiming deduction u/ s.80IA(4)of the Act. To support the contention, reliance is placed on the Explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dated 04/08/2022. On perusal of clause 19 of the agreement it is seen that whether right to sidings by any person or persons other than assessee company is only upon payment by such person or persons to the assessee company. It is further seen that the use of the siding or any extension or part thereof by the Railway Administration or by other persons shall be so conducted in such manner and to such extent as to interfere as little possible with the free use of the siding by the ACC Ltd. whose traffic shall have precedence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 infrastructure of public utility; (b) the agreements entered into between the assessee company and the Indian Railways consisting of terms and conditions for private sidings, and could not be viewed as an agreement for building, operating and maintenance of a rail system; (c) the conditions stipulated under section 80IA have not been satisfied; (d) the actual operation of the rail system (i.e. running of the goods train) was being done by the Indian Railways and not the assessee company; (e) all the four cement plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 those four locations; and that by way of such operation of rail systems, it has been able to save the expenses for loading [at those plants] into the trucks, road freight and expenses for unloading and loading the same at the site of nearest Indian railways and that resulted into the. profit of such rail systems. 10. However, the AO noted that those agreements were for laying out private sidings and not for any rail system [as referred to in Explanation (a) to the clause (t) of sub-section (4) section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 rail system at Hirmi, Raipur District, Chattisgarh. In A.Ys. 2005- 06 2006-07, the assessee claimed deduction of Rs.16.30crs. Rs 20.95 crs. respectively in r/o that rail system at Hirmi. In A.Y. 2007- 08, the claim was made in r/o two more rail systems [one at Tadipatri in Andhra Pradesh the other at Arakkonam in Tamil Nadu]. The total claim for that year amounted to Rs 52.38 crs. [Rs 21.09 crs. - Hirmi; Rs 25.56 crs. -Tadipatri Rs 5.73 crs. -Arakkonam]. In A.Y. 2008- 09, the claim extended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rail system is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the assessee company as a whole. It was submitted that by developing this infrastructure facility, there has been saving in transportation cost and overall profits of the company have increased due to such savings. It was such that the mere fact that it does not raise an invoice from its railway unit to its cement unit cannot govern the tax implication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause 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 assessee. Further it was submitted that the facility of rail system consists of all that is required to carry on the railway activity in an organized and systematic manner. The activity of rail system is real and substantial and it is carried on with said purpose viz transportation of goods from one place to another and thereby augmenting profits of the company as a whole by saving transportation cost which it would have otherwise incurred. It was further submitted that the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Conditions of Sec. 80IA have been fulfilled by the assessee. Thereafter, the CIT(A) came to the conclusion that the assessee is eligible for deduction u/s 80IA. The findings of the Id. CIT(A) are given in para 3.10 are as under :- 3.10 After perusal of the facts of the case, findings given by the AO and submissions made by the appellant, I find that the only issues in this case is whether the appellant is eligible for deduction u/s. 80IA in r/o profits derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 CIT(A) also observed that L T Ltd., who have developed the said rail system was also not eligible u/s.80IA on operations of those rail systems under the provisions that existed at the relevant time i.e., prior to 01/04/2002 when such infrastructure facility was said to have become operational. 18. The CIT(A) observed that the L T Ltd., did not claim exemption on operation of those rail systems. Rather the assessee company has started claiming exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance 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 conditions of the agreement entered between the assessee company and the railway department which contained conditions for construction of railway sidings, development of sidings, laying of tracks, signaling system and all the essential components of rail system. The terms of the agreement also provided for its operation and maintenance. He vehemently argued that the rail systems were developed in accordance with the agreements entered w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 year cannot be denied in subsequent years. 1. RadhaSoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) 2. CIT v. Western Outdoor Interactive (P) Ltd. [2012] 25 taxmann.com 340/210 Taxman 229 (Mag.)/349 ITR 309 (Bom.) 3. CIT v. Paul Brothers. [1995] 79 Taxman 378 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d our attention to the observation made by CIT(A) to the effect that the actual operation of rail system on to the private sidings between the serving railway station and plant premises was being 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 255/3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and vice versa through Road and used to incur road freight and loading unloading charges at multiple stages. To save these costs and other incidental costs, the assessee decided to develop the rail infrastructure from its manufacturing setup till the nearest Indian Railway station. It is Indian Railways who either have the power to develop any railways in India or it can enter into any arrangement with any person for developing and for operating rail systems 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 pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Maintain its rail systems. M/s. L T had awarded contract to the private parties for construction of rail sidings (including upto the nearest rail head) under the supervision of Indian Railways approved agency, and the entire cost for construction / development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. It was further explained in terms of clause 14, Wagons are hauled by the Railway Administration from the point marked 'X' or such other points 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of such rules, regulations and orders (e) Clause No. 8(b) - Wherein it is mentioned that, \\ Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. 39. These are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the assessee and the entire cost for the same is borne by the assessee. 40. From the record we also found that the assessee has duly submitted 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 elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rail systems i.e. at Tadipatri, Arakkonam and Durgapur are placed on record and we have carefully perused the relevant terms and conditions. The Indian Railways plays role in operations and maintenance of the Rail systems, traffic Management, etc. as mentioned under the various clauses of the Agreements entered into, and the entire cost of such operation and maintenance is borne by the assessee including for the Railway staff being deputed for the purpose. 44. From the record we found that M/s. L T had entered into agreements with the Railway authorities to develop, Operate and Maintain the Rail systems which infact the company has done from initial day. This agreement with the Railway Authorities was not under the BOLT Scheme but infact the assessee was permitted to setup and even operate and maintain the rail system so developed in accordance 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Railways approved agency, and the entire cost for construction/ development paid to the aforesaid agency and supervision charges paid to Indian Railways approved agency have been borne by the assessee, apart from all costs incurred for all the materials and incidental expenses. 49. From the record we found that the rail systems were developed 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. We have carefully gone through the relevant clauses of the agreements substantiating the same which reads as under: (a) ClauseNo.2,AgreementtoConstructSidingWhereinitismentionedthat theRailwayadministration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting. Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant. (e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the same is borne by the appellant. 50. The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee's own case. The facts and the agreements were al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Durgapur 2 30 53. Unit wise details of amount of claim of deduction u/s.80-IA on the profits of Rail System for AY. 04-05 to AY. 09-10 is as under:- Rail Systems at AY.04-05 AY.05-06 AY.06-07 AY.07-08 AY.08-09 AY.09-10 Hirmi 15.63 16.13 20.95 21.09 24.33 28.26 Tadipatri -- -- -- 25.56 25.22 31.03 Arakkonam -- -- -- 5.73 6.30 7.11 Durgapur -- -- -- -- 5.71 6.72 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the basis adopted for calculating the revenue from rail syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 57. As per our considered view, even assuming that the requirement of public facility is to be fulfilled, it is worth noting that a section of public is also considered to be public. This principle has been laid down by the Hon'ble Supreme Court in the context of a Chamber of Commerce CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 wherein it was ruled that even though the Andhra Chamber of Commerce was established only to serve the traders and businessmen in the State of Andhra Pradesh, such traders and businessmen constituted a section of public and therefore the Chamber existed for a public charitable purpose. In the ultimate analysis of the facts in the case of assessee Company, the benefits of such siding does ensure to the public in general - to the consumers of cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with whom the assessee has entered into an agreement, is the statutory body designated under the Indian Railways Act. We found that the agreement does not merely contain the terms and conditions of the construction of railway siding i.e. development of siding (laying of tracks, signal system and all the essential components of Rail Systems) but it also contains the terms and conditions relating to its operation and maintenance as well. 60. Our attention was also invited to letter No. 99/TC(FM)26/1/Pt-II (SubLiberalization of siding 'Rules) of the Railway Boar clarifying that the capital cost of new siding, maintenance cost, cost of Railway staff etc. will be borne by the enterprise only, which also supports our view. 61. As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its goods, viz. shunting of the wagons, placing of the wagons at appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and maintenance of the Railway siding. Thus this fulfils the requirement in clause (b). 66. The last requirement as per clause (c) is regarding commencement of operation and maintenance of facility on or after 1st April, 1995. All the railway sidings were developed after April, 1995 as can be verified from the date of agreements entered into by the assessee with the Railway authorities; which are as under:- Location Authority with which Agreement is entered Date of agreement Hirmi South Eastern Railway March 2000 Tadipatri South central Railway 03-05-1999 Arakkonam Southern Railway 08-01-2001 Durqapur Eastern Railway 18-10-2002 67. This also is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. In view of above all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 is a fact which is undisputed by the assessee and nothing turns out of it. 75. CIT(A) also alleged that the notional profit computed for so called rail system has been very exorbitant and the method is also not correct. It need to be computed in the manner as explained in para 3.2.14 [with reference to table F] above. If that is done, there would hardly be any profit to those rail systems. 76. In this regard, we found that prior to setting up of railway siding, the assessee used to transport its goods through road to the nearest railway station. Only the few components of the cost of road transportation, which the cement division of the assessee was hitherto incurring for transportation of materials to and from the factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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) and the tabular representation of the computation of revenue of rail system in Table F, has no relevance since it is merely based on his incorrect assumption. 82. Further, we found that observation of CIT(A) with respect to the freight rate is also not correct in so far as for comparison, he has considered the rate per quintal as against per Metric Ton adopted by the assessee which can be observed from the calculation submitted by assessee before the lower authorities. Without any evidence in hands, the CIT(A) has merely stated that crucial facts were not disclosed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 said provisions. Three of these changes which are material were: (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied; (ii) that the explanation of the term 'infrastructure facility' was changed to besides others, a road including toll road instead of hitherto existing expression 'road', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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). In this case, the assessee-company, whose main object was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on and from 1-1-1997 on a trial run; however, the systematic activity of refining commenced only in the previous year relating to the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 deduction for the very first is allowed then in subsequent year the deduction cannot be disallowed on the same ground. Hon'ble High Court decision in the case of Saurashtra Cement Chemical Industries Ltd. (supra), has pointed out that once deduction is allowed in the first year, revenue has no power to deny the deduction in subsequent assessment years as provided under the Act. 93. Even the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted 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 assessee, which has been rejected now, was accepted during the scrutiny assessment proceedings. While it is indeed true that there is no res judicata in the income tax assessment proceedings, at the same time, following the principles of consistency duly recognized by Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 the Revenue on the very applicability of the provisions of section 80JA of the Act for the Rail System. Therefore/ respectively following the said decision we hold that the assessee entitled for the deduction u/s. 80JA of the Act in respect of the railway system . 43. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 circumstances of the case in law the Ld. CIT(A) erred in restricting the disallowance to Rs.5.59 Crores made u/s. 14A r.w.r. 8D(2) of the I.T. Rules, in view of the Mumbai ITAT's decision in the case of ACIT vs Citicorp Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 625(Mum)] has, inter alia, observed as follows: 6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had deleted the addition made by the assessing officer under section 14-A of the Act by observing that the interest-free fund available with the respondent - assessee was far in excess of the advance given. Tribunal further noted that the Revenue does not dispute the said finding and relying on the decision of this Court in CIT v. Reliance Utilities Power Ltd. [2009] 178 Taxman 135/313 ITR 340, affirmed the deletion made by the first appellate authority. 7. We have perused the decision of this Court in Reliance Utilities Power Ltd. (supra) wherein it has been held that if there are funds available with the assessee, both, interest-free and overdraft and/ or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the assessee if the interest-free funds were sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd. (supra) holds good in the present case. We are also of the considered opinion that the ld. CIT(A) has rightly held that the assessee has not made bifurcation of the expenses claimed under 'other expenses' and in case of which the A.O. had to invoke Rule 8D of the Income Tax Rules. The suo moto disallowance of the assessee does not disentitle the A.O. from invoking the said provision. In this regard, we find justification in the order of the ld. CIT(A) in upholding the A.O.'s action in invoking the provision of Rule 8D(2)(ii) by rejecting the assessee's contention that suo moto disallowance by the assessee warrants no further disallowances. The assessee's alternate claim is that the disallowance u/s. 14A read with Rule 8D(2)(iii) should be restricted only to those investments on which exempt income was earned by the assessee during the impugned year, by placing reliance on the decision of Vireet Investments Pvt. Ltd. (supra). We also find justification in the order of the ld. CIT(A) in holding that the disallowance u/s. 14A read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. 6. Considering the above, the amount of the unutilized Cenvat credit could not have been directly added to the closing stock. The Tribunal has not committed any error. (underlined for emphasis by us) It is evident from the above that irrespective of the method of accounting followed by the assessee, i.e. 'Inclusive method', wherein the taxes are included in the opening stock, purchases, etc. or the 'Exclusive method', the MODVAT credit does not have any impact on the profit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Industrial Incentives Code under the Industrial Policy, 1996 (Ropar and Bhatinda Units), Rajasthan s Sales Tax New Incentives Scheme f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 in the nature of sales tax subsidies, and dealing with sales tax subsidies, Hon ble Gujarat High Court, in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. 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 attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 essence it was meant for capital outlay expended by the assessee for set up of the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for meeting the working capital requirements of the assessee company post com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 authorised is relevant and may even be decisive in determining wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idy 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 not relevant; the source of the subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 State, the fact that the subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tickets was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the decisions relied upon by the ld. Special Counsel for the Revenue would not advance the case of the Revenue. 5.3.9. It is pertinent to note that in each of the aforesaid decisions of Hon ble Supreme Court, the Courts have been mindful of the fact that the subsidy has to be received after commencement of business and to be availed within 9,10 12 years, as the case may 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugars Chemicals Ltd. Reported in 260 ITR 605 held that the decision of the Tribunal in Asst Year 1985-86 is correct and observed the following: 37 .The observations of the Madras High Court lend support to the view that the purpose and object of the Scheme under which the subsidy is given is of more fundamental importance than the fact that the subsidy was received after the 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t raise a contention that such subsidy was towards capital account and, therefore, not taxable. However, before the Tribunal such a contention was raised. The Tribunal by the impugned judgment relied upon its earlier judgment for the Assessment Year 1999- 2000 in case of this very assessee and restored the issue back to the Assessing Officer. In the earlier order, the Tribunal had remanded 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 confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing reliance on the decision of Hon ble Jurisdictional High Court) 5.4.4. Against this judgement on other issues, the Revenue preferred an SLP before the Hon ble Supreme Court and the same was dismissed vide order dated 23/08/2019 in SLP (Civil) Diary No.22929/2019. In other words, the Revenue while preferring SLP before the Hon ble Supreme Court did not even challenge this ground of 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 rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, though touching different chords, we have no difficulty in recognizing our limitations. The wisdom of a division bench, even if superior- as strenuously argued by the learned Commissioner, has to make way for the higher wisdom of a larger bench. It is this faith of judicial hierarchical system that is the strength of our functioning, and we must follow the same. We, therefore, regret our 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 jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of relief of Rs 130,57,12,796 by the CIT(A). 9. In grounds nos. 12 and 13, the asessee has raised the following grievances: 12. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in not allowing exclusion of Sales Tax Incentive availed of Rs. 1,69,93,34,752/-, being capital in nature, in computing Book Profit u/s 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit u/s 115JB of the Act. 49. Insofar as, case laws relied upon by the department , we find that all those case laws have been either considered by the Tribunal or High Court and came to conclusion that in those cases the capital receipt is in the nature of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 4. We have carefully considered the rival submissions. We find that as rightly pointed out by the ld. Representative for the assessee, the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra) has already dealt with the issue whether addition on account of MODVAT credit is warranted or not. The Hon'ble High Court relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 130 Taxman 179/261 ITR 275 held that the unutilised credit cannot be directly added to the income of the assessee. The relevant para of the said decision is reproduced hereunder: 5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions and material placed on record. It is observed that identical issue was decided by coordinate bench of Mumbai ITAT in the case of holding company of the assessee being Ambuja Cement Limited vide order dated 07.11.2022 in the ITA No. 3307/Mum/2015 and 2428/Mum/2019 for A.Y. 2009-10 wherein it was held as under: 99. In ground no.8, the Assessing Officer has raised the following grievance: Whether, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at by the learned CIT(A) on this point and decline to interfere in the matter. 103. Ground no. 8 is thus dismissed. 74. It is observed that facts in assessee s case are similar to facts discussed by coordinate bench referred supra and considering such fact addition made by Assessing Officer is deleted. This ground of appeal is dismissed. 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition and installation. 25. This ground of appeal relates to the claim of the Assessee for additional depreciation u/s.32(1)(iia) of the Act. The undisputed facts are that the original cost of the new machinery purchased and installed by the Assessee after 31-3-2005 but before 1-4-2006 in the 100% EOU and DTA unit Rs.29,77,470 and Rs.2,41,30,615. The WDV of these machineries as on 1-4-2006 was Rs.24,51,920/- and Rs.1,81,50,266/- 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 provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Section 32(1)(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding previous year. From AY 2003-04 till 2005-06, the claim for additional depreciation was restricted to previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or if any industrial undertaking existed before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than ten per cent. From AY 2006-07, there is no restriction with regard 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4 is decided in favour of the Appellant. 31. Aggrieved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal. The ld. DR placed reliance on the order of the AO. The ld. Counsel for the assessee submitted that fiscal statute shall be interpreted on the basis of the language used therein and not de hors the same. It was argued that Clause (iia) to Sec. 32(1) was first introduced vide Finance (No. 2) Act, 1980 w.e.f. 01-04-81 and was applicable till AY 1987-88. The clause was subsequently 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 addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern s case of the assessee. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act. The assessee gets the relief accordingly. 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 fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Reconstruction is of a business already in existence implies that there must be a continuation of the activities of business of the same industrial undertaking where the ownership of a business or undertaking changes hands that would not be regarded as reconstruction. This judgment has specifically been approved by the Supreme Court in Textile Machinery Corpn. Ltd. v. CIT [1997] 107 ITR 195. As regards the splitting up of a business, the relevant test is whether an undertaking is formed by splitting up of a business already in existence. Unless the formation of the undertaking takes place by the splitting up of a business already in existence, the negative prohibition would not be attracted. In the present case, the entire business of TG-2 and TG-3 power plant was transferred to the assessee. The undertaking of the assessee was not formed by the splitting up of the business. On this issue, 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 Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the old business. With reference to the Companies Act, the amalgamation was also for the benefit of the two companies, i.e., amalgamating and amalgamated company and in the public interest and also in the interest of the shareholders. Viewed from any angle amalgamation cannot be regarded as a splitting up of the company for the purpose of negativing the claim under the Income-tax Act, which has been statutorily conferred on the company, if such companies fulfil the conditions stipulated therein. Hence, we are of the view that the order of the Tribunal granting the benefit of sections 80HH and 80-I to the assessee-company cannot be stated to be illegal or against the statutory provisions. A similar view has been taken by the Bombay High Court in the case of CIT v. Dandeli Ferro Alloys P. Ltd. [1995] ITR 1, in which the Bombay High Court held that the facts on record clearly established 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IB(2)(i) does not come in the way. 65. Thus, the sanctity of the CBDT Circular has been upheld in the context of section 80IB, confirming that the tax holiday moves along with the undertaking and the ownership has no relevance. Similar decision is also rendered by Hon ble Punjab Haryana High Court in the case of Mega Packages [2011] 203 Taxman 236 while considering the eligibility of deduction under section 80-IC on conversion of proprietorship concern into a partnership firm and Hon ble Madras High court in the case of Heartland KG Information Ltd 359 ITR 1. 66. Thus, the crux of all the above decisions clearly suggest that deduction u/s 80IA is available to undertaking and change in ownership does not mean that unit is established by split up or reconstruction of entire business. Considering ratio laid down by various courts as referred supra, assessee is entitled to deduction u/s 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectfully following the above decision, we dismiss the ground raised by the revenue and allow the ground raised by the assessee. 57. In the Ground No.8, 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 wealth tax provision in computing Book Profit u/s. 115JB of the Act (Rs. 1,34,00,000/-)? 58. Similar issue was considered by us in the Department Appeal Ground No 11 in AY 2005-06 and held as under: 80.Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided 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 Assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01) 251 ITR 15 (Bom) and JCIT Vs. Usha Martin Industries Ltd. (2007) 104 ITD 249 (Kolkata Tribunal) SB. We also noticed that the matter of controversy has been adjudicated by CIT(A) for the A.Y. 1998-99 also and against the said decision, the revenue is not in appeal. It is reiterated that the adjustment can only be made in view of Section 115JB of the Act which has been specified in Explanation to Section 115JB of the Act. In view of the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue. (Emphasis Supplied) 14.2.6. In view of the above, we confirm the order of CIT(A) and hold that provision for Wealth-Tax of INR 70,00,000/- is not required to be added back while computing Book Profits under Section 115JB of the Act. Accordingly, Ground No 8 raised by the Revenue is dismissed. 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. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 82 taxmann.com 415 (Del SB)]. The assessee gets relief on this point as well. 136. Considering such facts and decisions referred supra, it is held that disallowance u/s 14A cannot be made while computing book profit u/s.115JB of the Act. This ground of appeal in departmental appeal is dismissed. 63. Respectfully following the above decision, we dismiss the ground raised by the revenue and allow the ground raised by the Assessee. 64. In the result, appeal filed by the Revenue is dismissed. ITA.NO. 3137/MUM/2019 (ASSESSEE APPEAL) 65. Now we take up, Assessee Appeal in ITA No. 3137/Mum/2019. 66. In the Ground No.2, Assessee has raised the following grievance Ground No. 2: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his ground is decided in favour of the assessee. (Emphasis Supplied) 4. Respectfully following the decision of the Hon ble Bombay High Court and of the Tribunal in Assessee s own cases specified herein above, we decide this issue in favour of the Assessee. Accordingly, order of CIT(A) to delete the addition of INR 17,45,829/-, consisting of expenditure incurred on club entrance fee of INR 15,00,000/- and subscription fee of INR 2,45,829/-, is confirmed. Ground No. 1 of the Departmental Appeal is dismissed. 25. It is further observed that on identical issue, Coordinate bench in Para No. 94 to 96 in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 5927/Mum/2012 (for A.Y. 2005-06) vide order dated 31/10/2022 has dismissed revenue s appeal. Respectfully following the above said decisions as discussed herein above, this ground in Departmental Appeal is dismissed. 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 dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deduction u/s 80IA is claimed excess. Before Ld.CIT(A), assessee has claimed that cost audit fees and subscription to CMA are in respect of cement manufacturing unit hence no allocation of such expenditure is required to be made. To that extent, Ld.CIT(A) has accepted the plea of assessee and such fact is not controverted by Ld. DR hence finding given by Ld.CIT(A) to that extent is upheld. Further, on this issue, coordinate bench in the case of Ambuja Cement Limited, holding company of assessee in ITA Nos. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019(for A.Y. 2010-11 to 2012-13) vide order dated 07/11/2022 has held as under: 108. We are unable to see any merits in the stand of the assessee that the head office expenses cannot be allocated to all the units, as deductions and allowance of eligible units are required to be taken into account while treating such units as profit centres, and computing the profits accordingly. The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if they are independent of each other, and once that fiction sets in, the expenses incurred by someone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is against the provisions of section 55A and hence the same is bad in law. (b) Without prejudice to above, 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 relying on the report of the DVO which was received after the completion of assessment. (c) Without prejudice to above, 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 relying on the valuation report of the DVO which is based on arbitrary rates and unreasonable assumptions. (d) The Appellant prays that the reduction in capital loss of Rs 26,81,63,920/- be deleted. 73. The Assessing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of subsection (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation. In this section, Valuation Officer has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 55A of the IT Act, 1961 was made to the DVO for determining the FMV of the land as on 01.04.1981. The report of the DVO was received during the pendency of assessment proceedings and as against total FMV of Rs. 4.24 cr. computed by the assessee, the FMV computed by the DVO stood at Rs. 1.43 cr. Accordingly, the AO, after adopting the FMV as provided by the DVO, recomputed the Long Term Capital Loss at Rs. 9.06 cr. as against 26.81 cr., returned by the assessee on a without prejudice basis. It may be mentioned that a written submission on the validity of the reference made to the DVO u/s. 55A of the IT Act in A.Ys. 2006-07 to 2010-11 is already made by the undersigned separately. Discussed underneath is the submission specific to the issues involved in A.Y. 2010-11. 78. Facts of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard is placed on the Hon'ble Delhi High Court's decision in the case of CIT-II Vs. Jansampark Advertising Marketing (P) Ltd. (2015) 56 taxmann.com 286 (Delhi), wherein the question 'whether however as two appellate authorities, viz. Commissioner (Appeals) and Tribunal, are also forums for fact-finding, in the event of AO failing to discharge his functions properly, obligation to conduct proper inquiry on facts would naturally shift to door or said appellate authorities and they having noticed want of proper inquiry, cannot close chapter simply by allowing appeal and deleting additions made' was answer in affirmative in favour of the revenue. 81. With reference to reliance placed by the Ld. AR on the decision of Puja Prints (supra), Ld. DR has argued that in view of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is observed that the dispute under this ground relates to transfer of Porbandar land comprising of two land parcels, one acquired by the Assessee under a long term lease and the other acquired under conditional grant, both from the Government of Gujarat, sometime in 1956/1957. During the year under consideration, the said plots were repossessed by the Government of Gujarat for alleged non-compliance with certain terms of the original allotment. The Assessee had challenged the said action of repossession of its plots by the Gujarat Government by filing writ petitions before the Hon Gujarat High Court which came to be decided against the Assessee in current year. It is undisputed fact that assessee was holding long term lease from Government hence it has become de facto owner of the land. As assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 03.01.1956 only for the purpose of cement industry and on certain terms and conditions more particularly with condition that same cannot be transferred without prior permission of the Collector. Lease agreement was entered into on 15.03.1982 along with certain terms and conditions inclusive of not to transfer aforesaid lands in question without prior permission of the State Government / Collector. 4. As lands in question were not used for the purpose for which it was leased / granted i.e. manufacturing of cement was totally stopped since last 5 years and that it was found that land admeasuring approximately 35 acres was transferred in favour of Fraser Investment Limited (subsequently named as HMP Cement Limited) without prior permission of the Collector and that said HMP Cement Limited also 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was in occupation and possession of HMP Cement Limited. At this stage it is to be noted that even subsequently HMP Cement Limited approached BIFR and even bankers who advanced loan to said HMP Cement Limited and creditors approached DRT and in Court auction most of the land in question came to be sold. It prima facie appears that as such HMP Cement Limited was not owner of the land in question and only leasehold rights were transferred, how land in occupation and possession of HMP Cement Limited could have been sold in proceedings before the DRT as if HMP Cement Limited was owner. Be that as it may. The fact remains that there are concurrent finding given by both the authorities below with respect to breach of terms and conditions of lease / grant of land in question and when impugned orders 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 Porba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d came to be transferred in favour of HMP Cement in earlier years hence to that extent of land assessee is not entitled to long term capital loss as he was not having ownership of land to that extent in year under consideration. Considering such facts, AO is directed to re-compute income from long term loss after excluding long term capital loss pertaining to 35 acres of land as was transferred to HMP as referred supra. 87. So far as issue of applicability of Section 55A and DVO s report obtained by AO, it is observed that the AO has not found any material information which prove that such valuation is incorrect but only on presumption that such valuation is higher, he has referred the matter to DVO. The identical issue is discussed by Jurisdictional High Court in the case of CIT v. Puja Prints 360 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 prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33(6) and 142(2) of the Act is entirely based upon the decision of the Guwahati High Court in Smt. Amiya Bala Paul (supra). However, the Apex Court in Smt. Amiya Bala Paul (supra) has reversed the decision of the Guwahati High Court and held that if the power to refer any dispute with regard to the valuation of the property was already available under Sections 131(1), 136(6) and 142(2) of the Act, there was no need to specifically empower the Assessing Officer to do so in circumstances specified under Section 55A of the Act. It further held that when a specific provision under which the reference can be made to the Departmental Valuation Officer is available, there is no occasion for the Assessing Officer to invoke the general powers of enquiry. In view of the above and particularly in view of clear provisions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Court in the case of Hiaben Jayantilal Shah v. ITO [2009] 310 ITR 31/181 Taxman 191 (Guj.). In the said decision, it was held and observed as under: 10. Under clause(a) of sec. 55A of the Act under the Assessing Officer is entitled to make the reference to the Valuation Officer in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer is of the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause(b) of Sec. 55A of the Act, the Assessing Officer has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not allowing deduction for Education Cess levied on Income Tax and Dividend Distribution Tax aggregating to Rs. 21,17,06,797/- as allowable expenditure in computing the total income. (b) The Appellant prays that the disallowance of education cess be deleted. 95. Similar issue was considered by us in the assessee Appeal in Ground No 9 in AY 2006-07 and held as under: 141. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided issue in favour of Revenue. The relevant finding is reproduced herein below: 19.1. During the relevant previous year the Assessee had credited to the Profit Loss Account net profits on sale of fixed assets amounting to INR 10,98,70,597/-. In the original 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 le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. The indexed cost of acquisition is a claim allowed by section 48 of the Act to arrive at the income taxable under the income from capital gains. The difference between the sale consideration and indexed cost of acquisition represents the actual cost of the assessee, which is taxable as per section 45 of the Act at the rates provided under section 112 of the Act. There is no provision in the Act to prevent the assessee from claiming indexed cost of acquisition on the sale of asset in case, where the assessee is subjected to section 115JB of the Act. In any case, since, the indexed cost of acquisition is subjected to tax under a specific provision viz., section 112 of the Act, therefore, the provisions of section 115JB of the Act, which is a general provision cannot be made applicable to the case of the assessee. 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 af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed. 90. Respectfully following decision of coordinate bench referred supra, addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in appeal before the CIT(A). Learned CIT(A) also confirmed the stand of the Assessing Officer on the short ground that the exemption notification does not specifically state the object and purpose of the concession to be promotion of industry in the specified areas etc. The assessee is aggrieved, and is in appeal before us. 18. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 19. We have noted that the Assessing Officer himself states that he finds no difference in sales tax and excise exemption claimed , and in the immediately preceding paragraphs in this order, we have held that sales tax exemption receipt is a capital receipt in nature. There cannot be any good reasons to take a different view of the matter in respect to 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of this Court in which, the dispute between assessee and the Revenue was with respect to subsidy granted to the multiplex cinema operators in the form of entertainment tax waiver. The subsidy was granted in view of the fact that, industry was highly capital intensive. The Revenue argued that, the subsidy was revenue in nature. This Court after referring to several decisions of the Supreme Court including the case of CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 and Sahney Steel and Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253 (SC) held that, subsidy had not been granted for construction but only after setting up of a new industry which was in the nature of assistance given for the purpose of carrying on business. 7. On further appeal by the Revenue, Supreme Court confirmed the decision of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est would ensure that, the subsidy was capital in nature. 9. The second question raised by the Revenue is consequent of the first question, in which, the Revenue argues that, if the subsidy is treated as a capital in nature, the same must bring down assessee's costs of acquisition of plant and machinery. The assessee's claim of depreciation to that extent must shrink. Assessee argues that, the Tribunal correctly held that, the subsidy had not been given in relation to acquisition of plant or machinery and that, therefore, same cannot be adjusted towards cost of acquisition. 10. It is undoubted that, the subsidy had no relation to the assessee's acquisition of plant or machinery. It was to be granted to an industry which had set up the new industrial unit in the District of Kutch. In such back- ground, question - arises whether 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 deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsidy was granted was free to utilize it in any manner he liked. It would, therefore, appear that quantification of subsidy on the basis of investment was a measure adopted by the Government for convenience to work out the subsidy. If subsidy could be utilized by the entrepreneur in any manner he liked, could it be said that it was granted for meeting the cost of the capital assets? In our opinion, taking an overall view of the various provisions of the scheme, it is difficult to hold that cash subsidy was granted to entrepreneur to meet the cost of the fixed assets or part thereof The cost of the fixed assets was merely adopted as a measure for working out subsidy. In fact, a careful examination of the scheme reveals that it is the value of the fixed assets and not its cost which is adopted as the basis for computing the amount of the subsidy. 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 fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(1) of the Income Tax Act,1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc. 20. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee. The Assessing Office is, accordingly, directed to delete the impugned addition . 43. In view of the above discussions, as also bearing in mind the entirety of the case, we see no legally sustainable merits in the grievance of the Assessing Officer. The views expressed by the learned CIT(A), being in conformity with our decisions for the preceding assessment years, meet our approval. 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 obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eekay 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 ₹.5,19,20,846/-. At the time of argument, the Ld. Representative of the assessee has disclosed this fact that this issue has been decided against the assessee in the ITA. No. 5259 4895/Mum/2007 Assessment Year: 2004-05 assessee s own case for the A.Y.2002-03 in ITA. No.4241/M/2007 dated 29.07.2015. Since this issue has been decided against the Assessee in the assessee s own case (supra), therefore, the finding of the CIT(A) on this issue is hereby ordered to be set aside and we allow the claim of the revenue for the addition of said amount while computing the book profit u/s 115JB of the Act. Accordingly, this issue is decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the immediately preceding year 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 subject to the decisions as relied supra. However, 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 taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB of the Act. Thus, the related ground of appeal in Departmental Appeal as well as Assessee s appeal is partly allowed subject to the above directions. 105. Respectfully following the above said decision, we allow the above ground raised by the assessee. 106. In the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h interest on a scientific basis. On the other hand, the Ld. DR has relied upon orders of lower authorities and argued that any provision of Income Tax including interest need to be added while computing Book Profit u/s.115JB of the Act 110. Considered the rival submissions and material placed on record. It is observed that assessee has made provision for interest u/s.244A and interest u/s.234D in Profit Loss account but such provision was not added back while computing Book Profit us/.115JB of the Act. So far as provisions for interest u/s.234D is concerned, the Ld. AR has not pressed such issue based upon co-ordinate Bench decision in the case of Ambuja Cement Ltd., hence this issue doesn t require separate adjudication and action of AO to that extent is upheld. 111. So far as provisions of interest u/s.244A is concerned, assessee has debited its Profit Loss account with estimated amount of interest 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 up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29/07/2015 has decided issue in favour of assessee. The relevant finding is reproduced herein below: 5. Additional ground no.4 is about exclusion of amount transferred to debenture redemption reserved in computing group profit of provisions of section 115JB of ₹.50 crores. 5.1. During the course of hearing before us, representatives of both the sides agreed that identical issue had been decided in favour of the assessee, by the Tribunal while adjudicating the appeals for AY.s.1997- 98(ITA/3298/Mum/01),1998-99(ITA/639/M/03),1999-00 (ITA/7594/Mum/04),2000-01(ITA/9570/Mum/04). We find that the decision of the Tribunal for AY.1998-99 for exclusion debenture redemption reserved had not been challenged by the department before the Hon'ble High Court and thus the order has attained finality. It is also found that the Hon'ble Bombay High Court of Bombay had dismissed the departmental appeal with regard to the issue 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 mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal submissions, but also additional claims not made in the return filed by it. [Para 10] From a consideration of decision of the Supreme Court rendered in the case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688/[1990] 53 Taxman 85, it is clear that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. They may choose not to exercise their jurisdiction in a given case is another matter. [Para 11] Further the observation of the Supreme Court in the case of Jute Corpn. of India Ltd. (supra ) to the effect '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 .' 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 authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. There is less reason to interfere with the exercise of discretion by the appellate authorities in permitting the assessee to raise this claim. The assessee is entitled to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the assessee ought not be prejudiced. [Para 18] The orders of the Commissioner (Appeals) and the Tribunal clearly indicate that they had exercised their jurisdiction to consider the additional claim, as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in the case of National Thermal Power Corpn. Ltd. v. CIT [1998] 229 ITR 383. [Para 19] Both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs. 40 lakhs under section 43B. The Assessing 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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly allowed. 119 Para. No 113 - Ground no 12 of Assessee's appeal related disallowance u/s 14A adjudicated by giving reference of exclusion of amount transfer to debenture redemption reserve. ITA NO.5655/MUM/2011 (A.Y: 2006-07) 2. Assessee has raised additional ground for the A.Y.2006-07 which was not adjudicated on oversight, accordingly, we proceed to dispose of this ground by way of this corrigendum. In the additional ground the assessee has raised ground that outstanding BIS Marking fees of ₹.477,161/-, which was disallowed u/s 43B in A.Y.2005-06, it was prayed that this payment was made subsequently in the current assessment year and the assessee failed to claim the same in the return of Income. It was submitted that the assessee is entitled to raise the genuine and legal issue before the appellate authorities in additional ground by relying on the decision of Hon ble Bombay High Court in the case of CIT v. Pruthvi Brokers and Shareholders P Ltd [349 ITR 336]. On the other hand, Ld DR objected for the above proposition and the assessee could claim the same in the return of income and also not claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The same deserves to be dismissed. Accordingly, we are modifying the decision in the Para No. 96 in fact we are modifying the Para 95 and 96 as under: 95 96. During the course of appellate proceedings, Ld.AR has not pressed this ground of appeal hence same is dismissed as not pressed. 6. At Para No. 112, 113 114 we have adjudicated the ground raised by the assessee with regard to disallowance u/s. 14A, however, inadvertently reliance was incorporated relating to Debenture redemption reserve issue, which is the mistake apparent in the Tribunal order. As there is mistake with respect to reference and extraction, we modify Para No. 113 114 of the Tribunal order in A.Y.2010-11 as under: - 113. Similar issue was considered by us in the Assessee s Appeal in Ground No 1 in AY 2008-09 and held as under: - 10. Considered the rival submissions and material placed on record. So far as proportionate interest disallowance u/s 14A is concerned, it is observed that Assessee has sufficient own funds in the form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct returned by the first appellate authority as affirmed by the Tribunal which is identical in the present case. 7.1 We also note that the said decision of this Court has been affirmed by the Supreme Court in CIT v. Reliance Industries Ltd. [2019] 102 taxmann.com 52/261 Taxman 165/410 ITR 466. 12. Respectfully following the binding decision of Hon'ble Supreme Court and Hon'ble Jurisdictional High Court referred supra, disallowance u/s 14A made by Assessing Officer in connection with proportionate interest disallowance deleted by the Ld.CIT(A) is sustained. 13 So far as disallowance of other administrative expenditure is considered, it is observed that Hon'ble Delhi ITAT in the case of Vireet Investment Pvt. Ltd. [165 ITD 27] has held as under: Section 14A of the Income-tax Act, 1961 read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to exempt income not includible in total income - Assessment year 2008-09 - Whether only those investments are to be considered for computing average value of investment which yielded exempt income during year - Held, yes [Para 11.16][Matter remanded] 14. The above referred dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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