TMI Blog2023 (2) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... but in the meanwhile, a reference was made to the Departmental Valuation Officer (Assistant Valuation Officer-II), Mumbai in terms of section 55A of the Act, 1961 in which a preliminary valuation report was furnished on March 2, 2015, but the final report was furnished only after the completion of assessment proceedings. Thereafter, the petitioner was served with second notice under section 148 of the Act, 1961. As entire reassessment notice has been issued based upon DVO s report which is impermissible in the eyes of law. The notice issued by Assessing Officer u/s 148 deserves to be quashed and consequent additions made in assessment order does not survive. On perusal of reasons recorded, it is observed that reassessment notice has been issued based upon DVO s report in which DVO has determined fair market value of land as on 01/04/1981 which means that alleged escapement of income is to the extent of Income from capital gain based upon DVO s report called u/s. 55A of the Act. It is observed that in original assessment proceedings, Assessing Officer has referred matter to DVO but assessed Income from Capital gain as shown in return of income as DVO s report was not received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether additional depreciation is allowable only on new machinery be 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. Deduction u/s 80IA on TG-3 and TG-3, Wadi unit allowed - As deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s verification at the end of the AO hence, this ground of appeal is allowed for statistical purpose. - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, HON'BLE JUDICIAL MEMBER For the Assessee : Shri Yogesh Thar Ms. Sukanya Jayaram For the Department : Smt. Shailja Rai ORDER PER S. RIFAUR RAHMAN (AM) ITA NO. 3136/MUM/2019 (Appeal Relating to Re-assessment) 1. This is the appeal pertaining to Assessment Year 2009-10 arising from the Appellate Order dated 30th January, 2019 passed by the Ld. Commissioner of income Tax (Appeals) 3 [hereinafter referred to as Ld.CIT(A)] whereby appeal filed by Assessee against the Assessment Order dated 31st March, 2015 passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was dismissed. The assessee has preferred appeal against order of CIT(A) and various grounds taken up by assessee are adjudicated hereinbelow: 2. In the Ground No.1, the assessee has raised the following grievance: Ground no.1: reassessment is bad in law and in utter disregard of the express provisions of the Income Tax Act, 1961 ( the Act ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any reasons being recorded by Assessing Officer shows that approval was mechanical in nature and therefore, is invalid for which reliance was placed on decision of Chhugamal Rajpal v. SP Chaliha (79 ITR 603) (SC)and CIT v. Smt. Attri Devi [2005] 276 ITR 532 (Punjab Haryana). The Ld.AR has further stated that reassessment proceedings to give effect to DVO's report is not sustainable in law for which reliance was placed on decision of ACIT v. Dhariya Construction Co. [(2010) 328 ITR 515 (SC)], Kamala Ojha v. ITO [(2017) 397 ITR 197 (Chattisgarh HC)] and CIT v. Meena Devi Mansinghka [(2008) 303 ITR 351 (Rajasthan HC)]. The Ld AR has further stated that Prior to 1-7-2012, reference u/s. 55A is invalid if value of asset as per registered valuer appointed by assessee was more than its FMV in the opinion of Assessing Officer for which reliance was mainly placed on following decisions: (i) CIT v. Puja Prints [2014] 360 ITR 697 (Bombay) (ii) Relevant extracts from explanatory memorandum to Finance Act, 2012 (iii) CIT v. Daulat Mota (ITA No. 1031 of 2008) (Bombay HC) (iv) Ms. Rubab M. Kazerani v. JCIT (2004) 91 ITD 429 (Mum.) (v) ITO v. Smt. Lalitaben B. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order as DVO s report was not received till passing of assessment order. Subsequently based upon DVO s report, Assessing Officer had issued notice u/s 148 in the case of assessee and reasons recorded as reproduced at Page No.2 of assessment order is reproduced herein under: 1. Assessee company filed return of income on 30.09.2009 declaring total income of Rs. 8,28,90,29,435/- under normal provisions of the Income Tax Act, 1961 and book profit of Rs.17,47,50,13,208/- u/s.115JB. The assessee filed revised return of income on 14.10.2010 declaring total income of Rs.5,64,55,61,652/- under normal provisions of the Income Tax Act, 1961 and book profit of Rs.13,61,51,13,601/- u/s. 115JB. The said return was further revised on 31.03.2011 declaring total income of Rs.5,44,28,87,207/- under normal provisions of the Income Tax Act, 1961 and Book Profit of Rs.13,61,51,13,601/- u/s. 115JB. Order u/s. 143(3) was passed on 26.03.2013 assessing the total income of Rs. 11,20,74,68,100/- under normal provisions and book profit of Rs. 17,91,85,65,400/- u/s. 115JB of the Income Tax Act, 1961. 2. During the year the Company has sold land at Village Kikatpally and Village Moosapet (Sanathan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent based on the opinion given by the District Valuation Officer (DVO). The opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment. The Hon ble Gujarat High court in the case of Akshar Infrastructure (P.) Ltd [2017] 79 taxmann.com 239 followed above decision of Hon ble Supreme court and observed as under: 5. Heard the learned Advocates appearing on behalf of the respective parties at length. At the outset, it is required to be noted that the scrutiny assessment under Section 143(3) of the Act is sought to be reopened by the Assessing Officer solely relying upon the DVO's report. Nothing is on record that except the DVO's report there was any further inquiry and/or material available with the Assessing Officer to form an independent opinion that the income chargeable to tax has escaped the assessment for the Assessment Year 2005-06. As held by Hon'ble the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of reopening of the assessment under section 147 of the Act. The Assessing Officer has to apply his mind as to the information; if any, collected and thereby form a belief thereon. 7.2 A similar view has been expressed by the Division Bench of this Court in case of Pr. CIT v. J. Upendra Construction (P) Ltd. (supra) (Gujarat) as well as in the case of Aavkar Infrastructure Co. (supra), in which, the Division Bench of this court has followed the decision of Supreme Court in the case of Dhariya Construction Co. (supra) and held that solely on the basis of DVO's report and without there being any further inquiry by the Assessing Officer to form an opinion that income chargeable to tax has escaped assessment and/or without applying mind to the information in the form of DVO's report, the Assessing Officer is not justified in reopening the assessment. From the material available on the record; except the report of DVO, there was no tangible material available with the Assessing Officer to form a believe that the income chargeable to tax has escaped the assessment. 7.3 Even otherwise, it appears from the DVO's report that the Assessing Officer has erred in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same was due to the fact that the assessee failed to disclose his income truly and fully. The reason to believe of an ITO cannot be substituted by an opinion of a valuer. Therefore, reopening of assessment merely on basis of valuation report is not valid. In this case, assessment order was passed under section 147 read with section 143(3) of the Act, 1961, on March 31, 2015 accepting the earlier return filed on March 31, 2013, but in the meanwhile, a reference was made to the Departmental Valuation Officer (Assistant Valuation Officer-II), Mumbai in terms of section 55A of the Act, 1961 in which a preliminary valuation report was furnished on March 2, 2015, but the final report was furnished only after the completion of assessment proceedings. Thereafter, the petitioner was served with second notice under section 148 of the Act, 1961. The Hon ble court has relied upon decision of Hon ble Supreme court in the case of Dhariya Construction Co.(supra) and other decisions and quashed reassessment notice issued by AO. The Hon ble Delhi ITAT in the case of ACIT v. SAIDAN KAPOOR in ITA No 4496/Del/2012 has also quashed reassessment notice issued u/s 148 of the Act. 13. It is obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifference between the two figures as undisclosed investment. It was in this background that this Court held that the report of the DVO, per se, is not information and cannot be relied upon without the books of account maintained by the assessee being rejected. While coming to this conclusion, the Court relied on the judgment of the Supreme Court in Sargam Cinema v. CIT [2011] 197 Taxman 203 dated 19.10.2009 in Civil Appeal No.6973/2009, in which case the Supreme court had held that without rejecting the books of accounts, the Assessing Officer could not have referred the matter to the DVO for the purpose of making an addition for undisclosed investment. It will be noticed that the judgment of this Court in Smt. Suraj Devi's case (supra) was not concerned with the validity of a reference made to the DVO under Section 55A of the Act for the purpose of estimating the fair market value of a property as on 01.04.1981 for computing the capital gains nor was the Court concerned with the validity of a reference made to the DVO under Section 55A, which was pending when the assessment order was passed (proceedings were completed). This judgment does not touch upon the point raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reject the books of account and on the contrary, framed the assessment on the basis of the cost of construction as reflected in the books of account. Under the circumstances, in the first place, no reference under section 142A of the Act as it stood at the relevant time could have been made without rejecting the books of account. Moreover, merely on the basis of the DVO's report, without any other material indicating escapement of income for the year under consideration, the Assessing Officer was not justified in reopening the assessment for the year under consideration. The Supreme Court, in the case of Dhariya Construction Co. (supra) has held that, opinion given by the DVO is not per se information for the purpose of the reopening an assessment under section 147 of the Act. Moreover, as the Assessing Officer, has framed the assessment based upon the books of account produced by the petitioner without rejecting the same, reopening the assessment by merely placing reliance upon the DVO's report without any other material, would amount to mere change of opinion and, therefore, also, the invocation of the provisions of section 147 of the Act is not justified. 14. Insof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed and set aside. Rule is made absolute accordingly with no order as to costs. 15. Considered the rival submissions and above referred Judicial pronouncements on the facts of assessee s case, entire reassessment notice has been issued based upon DVO s report which is impermissible in the eyes of law. The notice issued by Assessing Officer u/s 148 deserves to be quashed and consequent additions made in assessment order does not survive. 16. We have observed that there is one more angle to entire controversy in reassessment notice and subsequent reassessment order passed by Assessing Officer. On perusal of reasons recorded, it is observed that reassessment notice has been issued based upon DVO s report in which DVO has determined fair market value of land as on 01/04/1981 which means that alleged escapement of income is to the extent of Income from capital gain based upon DVO s report called u/s.55A of the Act. It is observed that in original assessment proceedings, Assessing Officer has referred matter to DVO but assessed Income from Capital gain as shown in return of income as DVO s report was not received by then. The Assessee has challenged such action of Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the assessment does not contain a reference to a particular issue with reference to which income has escaped assessment, yet the Assessing Officer may assess or reassess the income in respect of any issue which has escaped assessment, when such issue comes to his notice subsequently in the course of the proceedings. The reasons for the insertion of the Explanation 3 are to be found in the memorandum explaining the provisions of the Finance (No. 2) Bill, 2009. [Para 6] The memorandum states that some of the Courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which reasons have been recorded for reopening the assessment, and that it is not open to him to touch upon any other issue for which no reasons have been recorded. This interpretation was regarded by the Parliament as being contrary to the legislative intent. Hence, the Explanation 3 came to be inserted to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under section 147, though the reasons for such issue have not been included in the reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, what the Parliament intends by use of the words 'and also' is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2), must assess or reassess: (i) 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language used by the Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income, and if he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. [Para 16] Section 147(1), as it stands, postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income 'and also' any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words 'and also' are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by the Parliament. This view has been supported by the background which led to the insertion of the Explanation 3 to section 147. The Parliament must be regarded as being aware of the interpretation placed on the words 'and also', by the Rajasthan High Court in CIT v. Shri Ram Singh [2008] 306 ITR 343. The P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken opening capital balance as on 01-04-2008 at ₹ 23,29,401/- as against the closing balance on 31-03-2008 at ₹ 19,29,401/-. The excess capital balance of ₹4.00 lakh has been taken by the assessee. From the above reasons, it is apparent that the AO referred to the excess capital shown by the assessee as on 01-04-2008 by ₹ 4.00 lakh which formed the basis for the addition. Instantly, we are considering the A.Y. 2008-09 covering the period 01-04-2007 to 31-03-2008. It is revealed that on 31-03-2008, the assessee had correctly shown closing balance of capital at ₹ 19.20 lakh. The excess amount of ₹ 4.00 lakh was shown on 01-04-2008, which is the first day of the financial year 2008- 09 with the corresponding assessment year of 2009-10. Since such excess capital was recorded in the books for the financial year relevant to the A.Y. 2009- 10, no addition on this score could have been made for A.Y.2008-09 under consideration. We, therefore, order to delete this addition. 5. The only other ground on merits is against the confirmation of ad hoc addition of ₹ 81,405/-. Apart from this, the assessee has also challenged the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re has sought to curb. Any lawful jurisdiction to make addition on account of other incomes coming to the notice of the AO during the course of proceedings u/s 147 can be acquired only on the foundation of a validly acquired jurisdiction on legally sustainable items of income escaping assessment forming reasons for issuing notice u/s 148. In other words, if the AO fails to acquire a valid jurisdiction to make re-assessment on the basis of his reasons, then, he is also debarred for making additions for other incomes chargeable to tax which escaped assessment and come to his notice subsequently in the course of proceedings u/s 147. The Hon ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) has held to this extent. Similar view has been taken by the Hon ble Delhi High Court in CIT vs. Chiel Communications India Pvt. Ltd. (2013) 354 ITR 549 (Del). 7. When we test the facts of the instant case on the touchstone of the principle as discussed hereinabove, it turns out that the only addition made by the AO out of the recorded reasons stands deleted. In view of the above referred judgment of the Hon ble jurisdictional High Court in Jet Airways (supra), we o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VO against the provisions of section 55A, is bad in law: a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified of LTCG of Rs.7,24,21,286/- (LTCG of Rs.11,44,09,089/- less brought forward LTCL of AY 2008-09 of rs.4,19,87,803) by relying on the report of the DVO disregarding the fact that reference made to the DVO in the instant case was against the provisions of section 55A and hence the same is bad in law. b) The Appellant prays that the reassessment order of the AO be set aside as bad in law. 22. Similar issue was considered by us in the Assessee s Appeal in Ground No 6 for the A.Y. 2007-08 and held as under: - 58. Considered the rival submissions and material placed on record. It is observed that during the year under consideration assessee has sold the land and income from capital gain is shown in the revised computation of income after considering valuation report obtained for determining fair market value of land as on 1st April 1981. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 November 1972 can have no application in the face of the clear position in law. This is so as the understanding of the statutory provisions by the revenue as found in Circular issued by the CBDT is not binding upon the assessee and it is open to an assessee to contend to the contrary. 10. The contention of the revenue that the Assessing Officer is entitled to refer the issue of valuation of the property to the Departmental Valuation Officer in exercise of its power under Sections 131, 133(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 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words if assessee has relied upon a Registered Valuer's Report, Assessing Officer can proceed only under clause (a) and clause (b) would not be applicable. 16. In the present case, admittedly the assessee had relied on the estimate made by the Registered Valuer for the purpose of supporting its value of the asset. Any such situation would be governed by clause (a) of section 55A of the Act and the Assessing Officer could not have resorted to clause (b) thereof as held by the Division Bench of 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at para 12.10 and 12.11 of such order. 26. The Ld.CIT(A) has discussed this issue at Para No 6 of his order and operative part of said order is reproduced herein under: 6.3 Decision On Ground No. 6 : I have considered the facts of the case, AO s contentions, submissions of the AO and case laws relied upon by the appellant. I find that the rail system has no access to the market. It is custom made as per the requirement of the cement units. Therefore, the value of its service cannot be ascertained in terms of the Sec. 80A(6). The rail system was used by the Indian Railway for transporting goods to and from the cement plants for which the Railways charged freight from the appellant. The Railways did not pay any fee to the appellant in return for using the 'Rail System' belonging to the appellant either through payment or by way of adjustment. Nor was any discount given to the appellant for using the 'Rail System'. The Railways charged the freight at the prevailing rates applicable. In other words, the Railways charged the same rate which is charged when the wagons are hauled on rails owned by the Railways. The appellant has relied on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ITA No.813-816 of 2017 (Kolkata Tribunal)] 28. On the other hand, Ld. DR has mainly relied upon finding of lower authorities. During the course of appellate hearing, Ld. DR has also filed written submission on this issue. The Ld DR in written submission has argued that deduction u/s 80IA(4) is for infrastructure facility for public facility. She further argued that amendment brought into effect by the Finance Act of 2001, merely taken away the right of CBDT to notify any other public facility other than those specifically mention in explanation to clause, one of subsection 4 of section 80IA of the Act as an infrastructure facility for the purpose of claiming deduction under section 80IA(4) of the Act. As per the confirmation received from the railway authorities, the railway sliding of the assessee are private in nature and not public. The railway sliding of the Assessee can be utilised by other persons only on payment of cost charges for such usage and the assessee will have precedence over the use of the railway sliding over any other person. Hence, the facility is not a public facility. On this basis, the Ld. DR. has argued that disallowance on account of deduction under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 sites were notified as independent booking stations and the freight was charged for the entire distance- including the distance from these private sidings to the railheads; (f) the notional profit computation is incorrect; and (g) the decisions of the Tribunal were not applicable as these critical facts were not placed before the Tribunal. The claim for deduction under section 80IA in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 80IA in reference to the infrastructure facility] as claimed by the assessee that railway had laid down those [sidings] partly on the land belonging to the railways and partly belonging to the assessee company so as to facilitate the transportation of raw materials/cement bags through railway wagons [from / to their plant sites]. The AO also noted that the assessee [rather L T Ltd.] ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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.16.30 crs. 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 to one more rail system at Durgapur [West Bengal] and the total claim amounted to Rs 61.56 crs. This claim for AY 2009-10 i.e. for the year under consideration had risen to 73.13 crs. 12. The rail systems at all these four locations viz. Hirmi, Tadipatri, Arakkonam Durgapur are said to have commenced the operations in AY. 2000-01, AY. 1999-00, AY. 2001-02 ft AY. 2002-03 respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the profits delivered by the rail system. In support of its contention that treatment of a transaction in books of accounts cannot govern the tax statement reliance was placed on the decision of the Supreme Court in the case of Kadernath Jute Manufacturing Company Ltd. 82 ITR 362; in the case of Tutcorin Alali Chemicals Ltd. in 227 ITR 172; in the case of Godhra Electricity Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 profits derived from the rail systems are clearly arising out of the business of developing operating and maintaining the rail system. 13.5. It was further submitted that substantial investment has been made in developing the railway system. There is an agreement with the railways for operating and maintaining the rail system. It employs required personnel directly or through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 from the rail system. There is no dispute that the appellant (i) is a company (if) has developed the rail system and (iii) it has entered into an agreement for operation and maintenance of the rail system with the railways i.e the Government. Thus all the 3 conditions required to be fulfilled as per Sec. 80IA(4)(i) have been satisfied by the appellant. Moreover rail system is defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reements 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 exemption from AY. 2004-05 after the ownership over the cement plants together with such rail systems were transferred to it following the demerger scheme in FY. 2003-04. 19. The CIT(A) further observed that the provision of railway track, signals, level crossings etc are the essential components of a rail system but that in itself would not give rise to any profit. For that moveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with the Indian Railways, wherein assessee was allowed to operate and maintain these sidings under supervision and as per the guidelines of Indian Railway. Our attention was invited to the various clauses particularly Class 2, 6, 7(a), 17 and 8(b) which stipulate for construction of railway sidings at the cost of the assessee. Construction work was awarded either to railway or third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed 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.)/349ITR 309 (Bom.) 3. CIT v. Paul Brothers. [1995] 79 Taxman 378/216 ITR 548 (Bom.) 4. CIT v. Macbrout Engineering (P.) Ltd. [2014] 52 taxmann.com 219 /[2015] 232 Taxman 406(Bombay) 5. CIT v. Modi Industries Ltd. [2010] 8 taxmann.com 129/327 ITR 570 (Delhi) 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alleged that profit computed by assessee for the rail system was very exorbitant and method adopted for computation was also not correct. Our attention was invited to the computation of profit as per table 'F'of CIT(A)'s order. She further contended that when L T Ltd., itself was not eligible for deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall be eligible for the benefit u/s.80IA. 31. With regard to sales tax exemption benefit being treated as capital receipt, she relied on the decision of Jammu and Kashmir High Court in the case of Shree Balaji Alloys v. CIT [2011] 198 Taxman 122/9 taxmann.com 255/333 ITR 335, Bombay High Court in case of CIT v. Chaphalkar Brothers [2013] 33 taxmann.com 431/215 Taxman 145 (Mag.)/351 ITR 309. 32. With regard to disallowance made u/s.14, she relied on the findings recorded by lower authorities. 33. We have considered rival contentions, carefully gone through the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way 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 private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment 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 under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee's claim of deduction u/s.80IA. 42. With regard to CIT(A)'s observation as to whether rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffic 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 the following conditions to be complied with for claiming deductions; (i) ...... (a) it is owned by a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Clause No. 6 - Payment by Applicant against the total estimated cost -wherein it is mentioned that, The applicant will pay in advance to the railway administratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the 'p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 system is, lower of the Freight chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition 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 come up on both the sides of sidings fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining 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 appropriate locations, loading/unloading of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company. 74. With regard to CIT(A)'s observation that all the four cement plants [having private sidings] were notified as independent booking station and the freight was charged by the railway department for the entire distance including the portion of private sidings [upto interchange point / exchange yard], we observe that this 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted by assessee for calculating one of the component of its revenue . 80. We further found that an amount towards loading and unloading charges is added to the above revenue for inward and outward movement of goods which is also carried out by the rail undertaking. The basis, for computing this component of revenue is the loading and unloading cost which the cement division was hitherto incurring during transportation through roadways. The question of reducing the freight payments to the Railways does not arise since this cost is incurred by the cement division and not by the railway undertaking. 81.In view of the above discussion, the explanation given by the CIT(A) 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 hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; 84. Thus, the Finance Act, 2001 amongst other conditions, particularly deleted the requirement for an assessee to transfer the infrastructure facility to the concerned government authorities with prescribed time. 85. In this regard reliance can be placed on the decision of Gujarat High Court in case of Katira Construction Ltd. v. UOI [2013] 31 taxmann.com 250/214 Taxman 599/352 ITR 513, wherein Court held as under:- 32. It is true that with effect from 1-4-2002 some significant changes were made in the 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 esides others, a road includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds including assessment years 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a prerequisite for eligibility of claim u/s 80- IA(4)(b), the assessee has correctly made the claim. 89. In view of the above, we can safely conclude that even if an assessee does not fulfil all the requisite conditions for availing the tax holiday benefit in the year in which the new infrastructure facility is set up or has commenced operation, but in a subsequent year, all the requisite conditions for availing such benefit are fulfilled, the assessee would be entitled to avail the tax holiday benefit in respect of such subsequent assessment year(s). For this purpose reliance is placed on the decision of the Hon'ble ITAT of Jaipur in the case of Asstt. CIT v. Shiv Agrevo Ltd. [2009] 34 SOT 1 (URO). 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chennai Tribunal and concurred with the view that Section does not mandate that first year of 10 consecutive assessment years should be always first year of set-up of enterprise. The High Court has held that as initial year is not defined in Section 80lA as compared to Section 80IB where it is specifically provided that the year of commencement of business will be the initial year for the purpose of claiming the deduction, the year of option has to be treated as initial assessment year for the purpose of Section 80IA. 92. It is pertinent to mention here that once the 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 80IA. 96. In view of the above discussion and respectfully following the order of the Tribunal in assessee's own case for the Ays. 2004-05 to 2008-09, we do not find any merit in the action of the Revenue authorities declining the claim of deduction u/s.80IA(4). Accordingly AO is directed to allow the deduction as claimed by the assessee with respect to its rail system. We direct accordingly. 90. Learned Departmental Representative does not dispute the fact that the issue before us is covered by this decision of the coordinate bench, though he places reliance on the stand of the authorities below, and seeks to justify the same. We have also noted that in three immediately preceding assessment years, the same stand of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing the counsel at some length and perusing with their assistance the order passed by the Commissioner of Income Tax (Appeals) and the income Tax Appellate Tribunal, we are of the opinion that though the appeal deserves admission but it should not be on the question of law as framed at Page 5 of the paper book. That questions the very applicability of the provision. From the findings of the Commissioner of Income Tax (Appeals), the only question which can be raised as substantial question of law and arising from the discussion on this point is whether the respondent assessee is eligible for deduction u/s. 80IA of the Income Tax Act by urging that the Rail system is not a profit Centre but a cost saving Exercise undertaken in terms of subsection (4) of section 80IA? ...... 40. Thus as regards the claim for the deduction u/s. 80JA of the Act Per se, the ITAT order can be treated as final in favour of the assessee as the Hon 'ble High Court refused to admit the question raised by 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking. (b) The Appellant, therefore, prays that the action of CIT(A) and AO be set aside. 34. The Assessing Officer has discussed this issue at Para No 8 of assessment order. During the course of the assessment proceedings, the Assessing Officer noted that while computing the deduction under section 80IA in respect of captive power plants, ports and rail systems, the assessee had debited the expenses directly attributable to the eligible units, net of CENVAT credit availed, wherever applicable, on the expenditure incurred. These CENVAT credits are available under the excise provisions and adjusted against the excise duty liability on goods produced by the related cement manufacturing units. In effect, the component of expenses of statutory duties/ taxes is credited directly to CENVAT receivable account‟ without routing it through the profit and loss account. The Assessing Officer was of the view that Section 80A(IA) provides for exemption in respect of profit derived by an eligible undertaking‟ for the specified purposes, but the critical words are derived from and, therefore, it is only the expenditure, which had a direct and proximate (immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al against the finding of Ld.CIT(A). During the course of appellate hearing, Ld AR has relied upon submission filed before lower authorities and relied upon decision of coordinate bench in the case of Ambuja Cement Limited whereas Ld DR has relied upon decision of lower authorities. 37. 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by Assessing Officer is thus deleted and this ground of appeal is allowed. 39. In the result, appeal of the assessee is allowed. ITA No. 3176/MUM/2019 (Revenue Appeal) ITA No 3135/MUM/2019 (Assessee s Appeal) 40. These are cross appeals pertaining to Assessment Year 2009-10 arising from the Appellate Order dated 30th January, 2019 passed by the ld. Commissioner of income Tax (Appeals) 1 [hereinafter referred to as CIT(A)) whereby appeal filed by Assessee against the Assessment Order dated 26th March, 2013 passed under Section 143(3) of the Income Tax Act, 1961) hereinafter referred to as the Act) was partly allowed. 41. First we take up the appeal of the Revenue in ITA No. 3176/Mum/2019 (common ground in assessee s appeal is also taken together). 42. 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.4.55 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 Finance (India) Ltd[ 108 ITD 457) [MUM]? 43. On identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 11.Hon ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: 6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the 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 Utiliti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance should be restricted only to the investments which have yielded an exempt income for the assessee during the impugned year. It is also pertinent to point out that since the assessee had not borrowed funds during the relevant year, no disallowance as per Rule 8D(2)(i) of the Income Tax Rules was warranted. It is also observed that the A.O. has recorded his satisfaction that the correctness of the assessee's claim of expenses of disallowance was not to the satisfaction of the A.O., thereby entitling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd. (supra) holds good in the present case. We are also of the considered opinion that the ld. CIT(A) has rightly held that the assessee has not made 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 130 Taxman 179/261 ITR 275 held that the unutilised credit cannot be directly added to the income of the assessee. The relevant para of the said decision is reproduced hereunder: 5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Jharkhand be held as capital receipt not chargeable to tax. Without prejudice to Ground No. 3, Ground No. 10 : Non exclusion of Sales Tax Incentive Excise Duty Incentive in the computation of Book profit u/s 115JB (Rs. 1,61,13.68,562/- Rs. 2,18,96,78,981/- respectively. a) On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of AO in denying the appellant's claim of exclusion of Sales Tax Incentive and Excise Duty Exemption benefits availed/received during the year amounting to Rs. 161,13,68,562/- and Rs. 2,18,96,78,981/- respectively, as the same being capital in nature, while computing Book Profit u/s 115JB. b) The Appellant prays that the amount of sales tax and excise duty incentive be excluded while computing book profits u/s. 115JB of the Act 51. Similar issue was considered by us in the Department Appeal Ground no 5 in AY 2005-06 and held as under: 32. Considered the rival submissions and material placed on record. On this issue, coordinate bench in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 5927/Mum/2012 (A.Y.2005-06) dated 31/10/2022 has held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schemes, are indeed capital receipts in nature, and exempt from tax as such, the amounts aggregating to Rs 39,36,21,956 are revenue in nature, and to that extent the Assessing Officer was justified in including the same in taxable income. None of the parties is satisfied. While the assessee is aggrieved of the amount of Rs 39,36,21,956 being included in his taxable income, the Assessing Officer is aggrieved of the learned CIT(A) s granting relief of Rs 130,57,12,796. Both parties are in appeal before us. 6. We have heard the rival contentions, perused the material on record, and duly considered the facts of the case in the light of the applicable legal position. 7. We find that the learned CIT(A) has, in his elaborate analysis, primarily followed the Special Bench decision in the case of DCIT Vs Reliance Industries Ltd [(2004) 88 ITD SB 273 (Mum)]. Upon analysis of this decision, he has noted that for deciding the nature of subsidy, whether capital or revenue, what should be seen and examined is the purpose for which the subsidy has been given, and not the timing of the subsidy or the manner in which it has been given to the industry , as is also held by Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alcutta and Punjab High Court, the Tribunal has committed an error in reversing the view taken by CIT (Appeals) so far as Tax Appeal No.226 of 2010 is concerned, wherein the CIT (A), after discussing the evidence has held in favour of the department. In this regard, he has relied upon the decision of High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2010] 8 taxmann.com 218/[2011] 339 ITR 632, wherein it is held that object of subsidy being to set up new units in backward area is a capital receipt and another decision of High Court of Calcutta in the case of CIT v. Chhindwara Fuels [2001] 114 Taxman 707/[2000] 245 ITR 9, wherein it is held that subsidy in the form of refund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr. Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discussed the issue in detail in para 54 and 55 of its decision, which reads as under:- 54. Per contra, the learned D.R. Supported the orders passed by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed advocate for the appellant are not applicable in the facts of the present case. In the case of Birla VXL Ltd. (supra), this Court has observed as under:- '12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-today functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry. 13. In a recent decision dated 28th January 2013 in Tax Appeal No. 450 of 2012 and connected appeals, we had an occasion to examine the nature of incentives received by the assessee from the State Government in the form of entertaining tax waiver for setting up multiplexes. In such context, we had in wake of the revenues contention that the receipt was revenue in nature, held and observed as under : 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 11. He also submitted that in view of above decisions, these appeals may not be entertained. 12. We have heard both the learned counsel and perused the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon ble Supreme Court in para 14 of its decision had held that character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. In fact, the Hon ble Supreme Court while rendering this decision had duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd., reported in 228 ITR 253 and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case. In this regard, it would be relevant to reproduce the operative portion of the decision of Hon ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., as under:- 14. The second case is Lincolnshire Sugar Co. Ltd. v. Smart 20 TC 643. In that case it was found that Lincolnshire Sugar Co. Ltd car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies. 5.3.6. Yet another decision was rendered by Hon ble Supreme Court in the case of CIT vs. Chapalkar Brothers reported in 400 ITR 279 which held that where the object of respective subsidy schemes of State Government was to encourage development of multiple theatre complexes, incentives would be held to be capital in nature and not revenue receipts. The relevant operative portion of the judgment is reproduced hereunder:- 18. After discussing the judgment in Sahney Steel Press Works Ltd.'s case (supra) this Court then held: The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidy would be revenue nature. The Hon ble Gujarat High Court referred to the relevant subsidy scheme noted that concession was capped @125% of fixed capital investment and could be availed within 9 years. The Hon ble Gujarat High Court after considering the decision of Hon ble Supreme Court both in the case of Sahney Steel and Press Works Ltd., and Ponni Sugars and Chemicals referred to supra had held 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 unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 8. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistancein carry ing on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. This clearly comes out from various provisions of the scheme. For example, the scheme was applicable only to the new project or to a existing project provided investment in fixed capital or capacity was increased atleast by 50%. Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. In other words, the upper limit of total incentive which the unit could receive from the State Government in the form of tax waiver would not exist 100% of the eligible capital investment regardless of the residue of the period of its exemption eligibility as per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial development of the backward districts as well as generation of employment. However, the matter was referred to the Special Bench as it was alleged that the decision for AY 1985-86 was virtually overruled by subsequent decision of the Mumbai Tribunal in the case of Bajaj Auto Ltd (ITA No. 49 and 1101 of 1991). The Special Bench held that the decision of Bajaj Auto has not overruled the decision of Hon ble Mumbai Tribunal for AY 1985- 86 on the following basis: i) There cannot be any question of overruling the decision of one Bench by another bench of equal strength as it would be contrary to the established norms of judicial system in the country. ii) Even on merits it cannot be said that the Tribunal has laid out more stress on the form of the scheme and not their substance as held in Bajaj Auto as the Tribunal in the order for AY 1985-86 has explained the difference between exemption schemes of Maharashtra and Andhra Pradesh in detail. iii) Reliance placed by Tribunal in Asst Year 1985-86 on the decision of Hon ble Supreme Court in the case of Sahney Steel Press Works Ltd. v. CIT (228 ITR 253) cannot be said to be erroneous. The Tribunal did recognise that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 in ITA No.778 of 2015 dated 18/12/2018 before the Hon ble Jurisdictional High Court, wherein the question Nos. c d was exactly on this point. For the sake of convenience, the question Nos. c d raised by the Revenue before the Hon ble Jurisdictional High Court is reproduced hereunder:- (c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restoring the issue of taxability of the sale tax exemption benefit of Rs.58 crores availed by the assessee to the file of the Assessing Officer for deciding afresh after considering the decision of the Special Bench of the ITAT in the case of DCIT V. Reliance Industries Ltd., 88 ITD 273, which has not been accepted by the Revenue? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in entertaining the additional ground without appreciating that the assessee had treated the amount of sales tax exemption benefit of Rs.58 crores as revenue receipt and had included this amount in the returned income and it had been taxed accordingly and the assessee did not raise this issue before the CIT(A) and the issue had attained finality? 5.4.3. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal. The High Court on two occasions, in the order dated 27.09.2016 and 22.11.2016 passed in Income Tax Appeal Nos. 475 of 2014 and 102 of 2014 respectively had not entertained the challenge of the Revenue. In any case, it was contended that the facts on record are available and the Tribunal has merely asked the Assessing Officer to take a decision on the assessee's contention. 5. As long as the material exists on record, a contention raised by the assessee for the first time before the Tribunal, cannot be barred. So much is clear from series of judgments of various Courts including of this Court in case of CIT Vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336. It is not the case of the Revenue that the assessee in the context of its contention on the nature of the subsidy, desired to produce additional evidence. It is true that the judgment of this Court confirming the order of the Tribunal in case of Reliance Industries Ltd. has been partially reversed by the Supreme Court. A question of law has been framed and placed for consideration of the 4 of High Court. However, this does not mean that the judgment of the Tribunal as on today stands reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court's decision dated 9th September 2011, is that Hon'ble Bombay High Court has now admitted the question whether, on the facts and circumstances of the case, the Hon'ble Tribunal was right in holding that sales tax exemption was a capital receipt and will, in due course though, adjudicate on this legal issue. To that extent, Hon'ble Bombay High Court's order dated 15th April 2009, to the extent of declining to admit this question, stands reversed. However, the decision of the Special Bench still holds good as the same has not, and at least not yet, even been examined by Hon'ble Bombay High Court. Mere admission of appeal against a decision, as is elementary, does not affect the biding nature of a judicial precedent. The Special Bench decision, in the case of Reliance Industries Ltd. (supra), was not reversed by Hon'ble Supreme Court, but was directed to be examined, on merits, by Hon'ble Bombay High Court. That is quite different from disapproving the special bench decision, but it appears that the coordinate bench was led to believe, and there could not have been any other reason for ignoring the special bench decision, that this Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no reason to take any other view of the matter than the view so taken by the coordinate bench. We must, therefore, uphold the conclusions arrived at by the Commissioner (Appeals), which are in consonance with the Special Bench decision in the case of Reliance Industries Ltd. (supra) and coordinate bench decision in the case of Ajanta Manufacturing Ltd. (supra), and decline to interfere in the matter. (emphasis supplied by us) 5.4.6. In view of the above, no fault could be attributed on the ld. CIT(A) placing reliance on the decision of the Special Bench of the Tribunal and granting relief to the assessee in the instant case. 9. In the Special Bench decision in the case of Reliance Industries Ltd (supra), what came up for consideration was specifically the sales tax subsidy, and that decision, as we seen in the elaborate analysis of the coordinate bench- as extracted above still holds good in law. In the case of CIT Vs Chaphalkar Brothers [(2018) 400 ITR 279 (SC)], Hon ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the book profit u/s 115JB of the I.T. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the I.T. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit u/s 115JB of the I.T. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the case of Sutlej Cotton mills Ltd. v. Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions referred supra hence there is no reason to deviate from the finding given by Coordinate Bench referred supra. Thus, sales tax incentives received by assessee are rightly considered as Capital Receipts by Ld.CIT(A). 34.In the result, ground of appeal raised by the Departmental is dismissed. 52. Respectfully following the above decision, we dismiss the ground raised by the Revenue. 53. In the Ground No.4, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the exclusion of Excise duty exemption availed by the assessee company aggregating to Rs.2,18,96,78,981/- in computing total income under normal provisions of the Act as capital in nature, for its cement manufacturing units namely, Gagal Unit-1 Gagal Unit-II located in the State of Himachal whereas the same is in the nature of revenue incentive, especially when the scheme under consideration, also provides for capital investment subsidy separately and in view of the decision of the Hon ble Supreme Court in the case ofM/s Siemens Pub. Communication Network Pvt. Ltd, wherein, it has been held that unless, the grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) and followed by the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra), we set-aside the order of the CIT (A) and direct the Assessing Officer to delete the addition made on account of unutilised MODVAT credit. This Ground of appeal is accordingly allowed. 19.It is observed that on identical issue, Coordinate bench in Para No. 32 to 34 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 decisions of Coordinate as discussed herein above, the ground raised in Departmental Appeal is dismissed. 55. Respectfully following the above decision, we dismiss the ground raised by the revenue. 56. In the Ground No.5, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding Mumbai benches. The coordinate bench has inter alia observed as follows: 24. Ground No. 3 raised by the revenue reads as follows :- 3. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in law by allowing assessee's claim of additional depreciation of plant and machinery on original cost in the year subsequent to the year of acquisition and installation and thereby has erred in deleting the addition of Rs.54,21,617/- without appreciating the fact that such additional depreciation is allowable on plant and machinery only in the year of acquisition and installation. 25. This ground of appeal relates to the claim of the Assessee for additional depreciation u/s.32(1)(iia) of the Act. The undisputed facts are that the original cost of the new machinery purchased and installed by the Assessee after 31-3-2005 but before 1-4-2006 in the 100% EOU and DTA unit Rs.29,77,470 and Rs.2,41,30,615. The WDV of these machineries as on 1-4-2006 was Rs.24,51,920/- and Rs.1,81,50,266/- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f depreciation of (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reinserted subsequently from 1-4-2003 that the benefit for claiming additional depreciation was restricted only to the initial assessment year. However the provisions of Sec.32(1)(iia) as substituted by the finance Act, 2005 w.e.f. 1-4- 2006, the benefit for claiming additional depreciation was not so restricted to only to the intital assessment year. From AY 1981-82 to 87-88, the claim for additional depreciation was restricted to previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year. From AY 2003-04 till 2005-06, the claim for additional depreciation was restricted to previous year in which such undertaking begins to manufacture or produce any article or thing on or after the 1st day of April, 2002; or if any industrial undertaking existed before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has to acquire and install the plant machinery after 31-03-2005 and the same should be new in the year of installation. There is no requirement that the assets should be new in the year of claim of additional depreciation. For the reasons aforesaid I am of the view that in terms of provisions of Section 32(1)(iia), additional depreciation is available in AY 2006-07 and subsequent years in respect of all new plant machinery acquired and installed after 31-03-2005 subject to overall criteria that total depreciation does not exceed the actual cost. Hence Ground No. 4 is decided in favour of the Appellant. 31. Aggrieved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal. The ld. DR placed reliance on the order of the AO. The ld. Counsel for the assessee submitted that fiscal statute shall be interpreted on the basis of the language used therein and not de hors the same. It was argued that Clause (iia) to Sec. 32(1) was first 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) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act 2005, there is no restriction that the additional depreciation will be allowed only in one year or that it would be allowed only on the written down value. The law as it prevailed prior to the said amendment imposed such a condition that additional depreciation will be allowed only in the year of installation of machinery or plant or the year in which it is first put to use or the year in which the concerned undertaking begins to manufacture or produce any article or thing or achieves substantial expansion by way of increase in installed capacity by 25%. The only objection of the AO is that the provisions refer to new machinery or plant and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of DCIT vs Graphite India Ltd. in ITA No. 472/Kol/2018 dated 22.11.2019 wherein both of the above decisions of ITAT Kolkata as well as ITAT Mumbai has been duly considered and has decided in the favour of the assessee. In this decision, decision of ITAT Mumbai in the case of Everest Industries Limited (supra), was referred in finding of CIT(A). The ITAT has followed Gloster Jute Mills Ltd. (supra) and has decided the issue in assessee s favour. It is observed that coordinate bench in its later decision in the case of Ambuja Cement Limited(supra), holding company of assessee has allowed similar claim of depreciation. When coordinate bench of ITAT in its latest decision has decided issue in favour of assessee by holding that assessee is entitled for additional depreciation u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited relied upon by Ld DR. As a result, since this aspect of the matter is no 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61. It is relevant to refer to Oxford dictionary, the term split up means to separate of end relationship. It is undisputed fact in present case that assessee has acquired both the units as a whole. It is not the case that assessee has set up two different power plant by purchasing only partial assets which were used by another assessee but entire undertaking itself is purchased as it is in year under consideration which clearly prove that assessee has not split any of its existing business for forming both the units. Hon ble Bombay High court in CIT v. Gaekwar Foam Rubber Co. Ltd. [1959] 35 ITR 662 explains that the concept of a reconstruction of a business implies that the original business is not to cease functioning and its identity is not lost. Reconstruction is of a business already in existence implies that there must be a continuation of the activities of business of the same industrial undertaking where the ownership of a business or undertaking changes hands that would not be regarded as reconstruction. This judgment has specifically been approved by the Supreme Court in Textile Machinery Corpn. Ltd. v. CIT [1997] 107 ITR 195. As regards the splitting up of a business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of deduction to the amalgamated company. The Ld.CIT(A) and the Tribunal upheld the claim of the taxpayer. The Hon ble Madras High Court confirmed the decision of the Tribunal and observed as follows: A reading of the provision of sections 80HH and 80-I of the Act, it is clear that the same has been incorporated to encourage the new industrial undertaking on fulfilment of certain conditions mentioned therein. If the conditions mentioned in the sections are complied with by the assessee, the benefit extended by the provisions has to be granted to the assessee. The amalgamation of one company with the other company cannot be regarded as a splitting up or reconstruction or by a transfer of a new business of the plant and machinery of the old business. With reference to the Companies Act, the amalgamation was also for the benefit of the two companies, i.e., amalgamating and amalgamated company and in the public interest and also in the interest of the shareholders. Viewed from any angle amalgamation cannot be regarded as a splitting up of the company for the purpose of negativing the claim under the Income-tax Act, which has been statutorily conferred on the company, if such compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s more or less the same as provided in Section 80-IB of the Act. The Central Board of Direct Taxes issued a circular F. No.15/5/63-IT(A-1) dated 13th December, 1963 indicating that the benefit of Section 84 is attached to the undertaking and not to the owner thereof and, consequently, the successor would be entitled to the benefit for the unexpired period of 5 years provided the undertaking is taken over as a running concern. 12. The same principle is applicable in the instant case. Admittedly, the undertaking was in existence since 2002. The proprietorship concern changed into a partnership firm. The benefit under Section 80-IB of the Act is available to the partnership firm and the conditions imposed under Section 80-IB(2)(i) does not come in the way. 65. Thus, the sanctity of the CBDT Circular has been upheld in the context of section 80IB, confirming that the tax holiday moves along with the undertaking and the ownership has no relevance. Similar decision is also rendered by Hon ble Punjab Haryana High Court in the case of Mega Packages [2011] 203 Taxman 236 while considering the eligibility of deduction under section 80-IC on conversion of proprietorship concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of return of income for A.Y. 1999-2000 and not disputed by Assessing Officer in assessment proceedings hence there is no reason for not allowing deduction u/s 80IA for TG-2 Wadi. The Hon ble Bombay High court in the case of Simple Food Products (P.) Ltd. [2017] 84 taxmann.com 239 has held that if deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent assessment years unless relief for initial year was withdrawn. 68 In view of holistic discussion made herein above, assessee is entitled to deduction u/s 80IA on TG-2 and TG-3, Wadi unit. Thus, related ground of appeal in departmental appeal is dismissed and ground of appeal in assessee s appeal is allowed. 62. Respectfully following the above decision, we dismiss the ground raised by the revenue and allow the grounds raised by the assessee. 63. In the Ground No.7, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, Id. CIT(A) erred in directing the assessing officer that auditor s fee and director s remuneration (indirect expenses) should not be apportioned for computing deduction u/s 80IA of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the Assessing Officer has identified indirect expenditure incurred at Head Office i.e Statutory Audit fees, Audit for taxation matter, Director Fees, Cost Auditor expenses, Subscription to CME etc and observed that such expenditure are not allocated to eligible businesses and to that extent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case in law, Id. CIT(A) erred in deleting the disallowance of Rs. 52,85,01,072/- being preoperative expenses, when in its books of accounts, the assessee itself had claimed the expenses as capital expenses and added them to its capital- work-in progress/fixed assets and there is no provision in Income-tax Act permitting the allowance of such expenses? 68. The Assessing Officer has dealt with the issue at Para No 16 of his order. The Assessing Officer observed that assessee has incurred expenditure of ₹.52,85,01,072/- in respect of employee remuneration, travelling expenses, maintenance expenses, stores spares, power fuel for new units before commencement of commercial production. The Assessing Officer has observed that such expenditures are capital expenditure and required to be added to Capital Work in Progress. There is no provision in the Income Tax Act permitting the allowance of expenditure incurred during the construction period or during the period before the assets are put to use. On these basis Assessing Officer has treated such expenditure as capital expenditure. 69. This issue is dealt by Ld.CIT(A) at Para No 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are accounted in the records of the assessee. By no stretch of imagination, the expenditure incurred on accounts of salaries, wages, marketing expenditure, professional fee, travelling etc falls in the capital fields but for the alleged preoperative nature of the claim. Therefore, we have no doubt to treat the impugned expenditure as allowable revenue but for the allegation of the AO. No expenditure incurred on acquisition of the capital assets such as plant machinery, land and building, technical know-how etc., is included in the expenditure claimed by the assessee. 9. New product vs New business: Memorandum of Association of the assessee provides for the following main object of the business of the assessee and the same reads as under: to produce or cause to be produced, buy, process, grade, pack, store and sell milk, milk products and ice-cream 9.1.From the above it is evident that the assessee is engaged in the manufacture of the dairy/milk products, ice creams etc. Accordingly, the manufacture of product of the assessee does not stop with the icecreams only. Assessee manufactures the ice-creams for the Baskin Robbins for making and marketing in India. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure of capital nature. The control and management, accounts, CEOs for both the dairy /milk products is one and the same. AO has not made out the absence of interlacing of the above. Under the factual matrix of the case, we find the claim of the assessee is allowable. Accordingly, the AO is directed to delete the addition. The order of the CIT (A) is thus, affirmed. 14. In the result, appeal of the Revenue is dismissed. I also find that for AY 2012-13, CIT(A)-3, Mumbai has decided the similar issue in appellant s own case. I am in agreement with the view of my predecessor and followed the same. Respectfully following the decision of the jurisdictional Bench of the ITAT, I allow the ground of appeal no. 13. 70. The department has filed appeal against the finding of Ld.CIT(A). The Ld. AR has relied upon submissions filed before Ld.CIT(A) and contended that such expenditures are revenue in nature hence same deserves to be allowed. The Ld. AR has mainly relied upon the following decisions: (i) CIT v. Rane (Madras) Ltd. (293 ITR 459) (Madras) (ii) CIT v. Relaxo Footwears Ltd. (293 ITR 231) (Delhi High Court) (iii) Reliance Footprint Ltd. v. ACIT [IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of expenses incurred for the expansion of existing business, cannot be disallowed. Accordingly, the disallowance was deleted. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 101. We have heard the rival submissions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 102. The short grievance raised before us by the Assessing Officer is whether, even when the expenditure is shown in the books of accounts, it can be treated as revenue in nature. That question, in our considered view, stands concluded in favour of the assessee. In the case of CIT Vs Havells India Ltd (ITA Nos 55 and 57 of 2012; judgment dated 21 May 2012), Hon ble Delhi High Court has, in this context, observed, speaking through Hon ble Justice Easwar, that The fact that in the books of account the assessee had capitalised the expenses does not prevent the assessee from claiming them as revenue expenses since the question of allowance of expenses has to be considered in the light of the legal position and the accounting treatment cannot be conclusive . The limited grievance raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ground No.10, Department has raised the following grievance: Whether, on the facts and in the circumstances of the case in law, Id. CIT(A) erred in deleting the addition of provision for normal gratuity in computing Book Profit u/s 115JB (Rs. 20,24,70,335/-)? 78. Similar issue was considered by us in the Ground No 12 of Department Appeal in AY 2005-06 and held as under: 85. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: 14.3.3. Revenue is in appeal, challenging the decision of CIT(A) of deletion of INR 5,86,82,751/-. We have heard the rival contentions and perused the record. While the Departmental Representative relied upon the assessment order, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee s own case for the Assessment Year 1990-91, 2002-03 and 2003-04 wherein the tribunal had granted relief to the Assessee. 14.3.4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Revenue is dismissed. 86.Respectfully following decision of coordinate bench referred supra, addition of provision for gratuity made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 79. Respectfully following the above decision, we dismiss the ground raised by the revenue. 80. In the Ground No.11, 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 Income Tax Act, 1961 of Rs. 79,20,000/-)? 81. 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 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is deleted and this ground of appeal is allowed. . On appraisal of the said finding, we noticed that the claim of the assessee has been allowed in view of the decision of Bombay High Court in the case of CIT Vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 (Bom) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. ITA No. 3135/MUM/2019 (Assessee Appeal) 86. We now take up the appeal filed by the assessee in ITA No 3135/Mum/2019 87. In the Ground No.2, Assessee has raised the following grievance: Ground No. 2: Disallowance of Club Entrance Fee (Rs. 5.00,000 /-) 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. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in disregarding and not following the order of the Hon'ble Income-tax Appellate Tribunal ('ITAT') in the Appellant's own case on the same issue in earlier years. The Appellant prays that the AO be directed to allow the claim of the Appellant. 88. Similar issue was considered by us in Department Appeal in Ground No 3 in AY 2005-06 and held as under: 24. Considered the rival contentions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental 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. 89. Respectfully following the above decision, we allow the ground raised by the assessee. 90. In the Ground No.6, Assessee has raised the following grievance: Ground No. 6: Long term capital gain on sale of Sanathnagar Land (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 relying on the report of the DVO in the valuation of Sanathnagar land disregarding the fact that reference made to the DVO in the instant case 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the 2012 amendment was made effective only from 1 July 2012. The Parliament has not given retrospective effect to the amendment. Therefore, the law to be applied in the present case is Section 55A(a) of the Act as existing during the period relevant to the Assessment Year 2006-07. At the relevant time, very clearly reference could be made to Departmental Valuation Officer only if the value declared by the assessee is in the opinion of Assessing Officer less than its fair market value. 9. The contention of the revenue that the reference to the Departmental Valuation Officer by the Assessing Officer is sustainable in view of Section 55A(a) (ii) of the Act is not acceptable. This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act. In this case, it is an undisputable position that the issue is covered by Section 55A(a) of the Act. Therefore, resort cannot be had to the residuary clause provided in Section 55A(b)(ii) of the Act. In view of the above, the CBDT Circular dated 25 November 1972 can have no application in the face of the clear position in law. This is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is is at variance with its fair market value . The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. Sub-clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause(ii) of clause (b). In any case, clause (b) would apply where clause(a) does not apply since it starts with the expression in any other case . In other words if assessee has relied upon a Registered Valuer's Report, Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncashment (Rs. 15,77,47,827/-) (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 not allowing the claim of leave encashment amounting to Rs. 15,77,47,827/-. (B) The Appellant prays that the AO be directed to allow the claim of the Appellant. 94. Similar issue was considered by us in the Department Appeal Ground No 13 in AY 2005-06 and held as under: 89.Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in its favour. The relevant finding is reproduced herein below: 14.4.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The relevant finding is reproduced herein below: 14.4.4. We have considered the rival contentions and perused the material on record. We note that the CIT(A) has granted relief to the Assessee by following the judgment of the Hon ble Supreme Court in the case of Bharat Earth Movers (245 ITR 528), and the Hon ble Bombay High Court in the case of CIT v. EchjayForgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added 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. 100. Respectfully following the above d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 in favour of the revenue against the assessee. 19.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in Assessee s own case, we set aside the order of CIT(A) and restore the order of the Assessing Officer on this issue. Accordingly, Ground No. 18 raised by the Revenue is allowed. 142. However, during the course of the hearing the Ld. AR also referred to the decision of Hon ble Karnataka HC in the case of Best Trading and Agencies Limited v. DCIT [119 Taxmann.com 129]. The finding of the said decision at Para No. 13 is reproduced hereunder for ready r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to recompute taxable long term capital gains arising on transfer of fixed assets as well as investments after giving the benefit of indexed cost of acquisition (if applicable) while computing taxable profits u/s 115JB of the Act. Thus, Assessee s appeal is partly allowed for statistical purpose, subject to the directions herein above. 103. Respectfully following the above decision, we partly allow the ground raised by the assessee for statistical purpose. 104. In the Ground Nos.13 14, Assessee has raised the following grievance: Ground No. 13: Non-adjudicating additional ground regarding claim u/s. 43B: On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not adjudicating the additional ground filed by the Appellant regarding the claim of VAT paid u/s. 43B by the date of filing of return of income. The Appellant prays that the CIT(A) be directed to adjudicate the said additional ground on merits. Without prejudice to Ground No 13, Ground No. 14: Allowability of VAT paid of Rs. 16,12,57,412/- u/s. 43B: On the facts and circumstances of the case and in law, the Ld. AO ought to have allowed the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz ., 'if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made .' clearly relate to cases where the ground was available when the return was filed and the assessment order was made but 'could not have been raised' at this stage. The words are 'could not have been raised' and not 'were not in existence'. Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz., where 'the ground became available on account of change of circumstances or law.' [Paras 12 and 13] It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The revenue has not suggested much less established that the omission was deliberate, mala fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. [Para 21] Therefore, the appeal of the revenue was liable to be dismissed. [Para 26] . 106. So far as the merits of the case is concerned, it is observed that assessee has claimed deduction of VAT payment as per provision of section 43B of the Act. The issue requires verification at the end of the Assessing Officer hence, this ground of appeal is allowed for statistical purpose. 107. In the result, appeal filed by assessee is partly allowed. 108. To sum-up, appeal filed by the revenue is dismissed and appeals filed by the assessee are partly allowed. Order pronounced in the open court on 28th February, 2023. CORRIGENDUM ITA NO.5655/MUM/2011, 3135/MUM/2019, 3137/MUM/2019 A.Y: 2006-07, 2009-10, 2010-11 CORRIGENDUM TO ORDER DATED 28.02.2023 PER S. RIFAUR RAHMAN (AM) 1. The above appeals were pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is eligible to claim as business expenditure. After considering the submissions, we are inclined to remit this issue back to the file of Assessing Officer to verify the claim of the assessee and allow the same on the payment basis as per law. Therefore, this additional ground raised by the assessee is allowed for statistical purpose. ITA NO.3135/MUM/2019 (A.Y: 2009-10) 4. At Para No. 94, we dealt with the issue of Leave Encashment allowance u/s 115JB, we observe that the similar issue was considered by us in the A.Y.2008-09 in Ground No 13 and instead of reproducing the decision, we have wrongly reproduced the findings given in the A.Y.2005- 06. The more relevant facts for this ground is from Ground No.13 of A.Y. 2008-09. Therefore, we are hereby reproducing the above in the corrigendum for this Assessment Year as under: 94. Similar issue was considered by us in the assessee appeal Ground No 13 in AY 2008-09 and held as under: - 67. Considered the rival submissions and material placed on record. On perusal of relevant facts on record, it is observed that Hon'ble supreme court in the case of UOI v. Exide Industries Ltd. [425 ITR 1] has upheld con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee-scheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income - Held, yes [Para 27] [In favour of assessee] 11. Hon ble jurisdictional High Court has, in the case of PCIT v. Shapoorji Pallonji Co Ltd [(2020) 117 taxmann.com 625(Mum)] has, inter alia, observed as follows: 6. On thorough consideration we find that the principle of apportionment does not arise in this case as the jurisdictional facts have not been pleaded by the Revenue. In fact Tribunal while affirming the order of the first appellate authority noted that the first appellate authority had del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and perused the materials available on record. It is observed that the assessee has made a suo moto disallowance of Rs.1,263/- for which the assessee contends that the A.O. ought not to have applied Rule 8D on the ground that suo moto disallowance has been made by the assessee. The assessee further contends that without prejudice, the disallowance should be restricted only to the investments which have yielded an exempt income for the assessee during the impugned year. It is also pertinent to point out that since the assessee had not borrowed funds during the relevant year, no disallowance as per Rule 8D(2)(i) of the Income Tax Rules was warranted. It is also observed that the A.O. has recorded his satisfaction that the correctness of the assessee's claim of expenses of disallowance was not to the satisfaction of the A.O., thereby entitling the A.O. to invoke the provisions of Rule 8D and the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd. (supra) holds good in the present case. We are also of the considered opinion that the ld. CIT(A) has rightly held that the assessee has not made bifurcation of the expenses claimed under 'other expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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