TMI Blog2023 (11) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... th for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income. Allowability of pre-operative expenses as revenue 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 - HELD THAT:- As decided in own case in AY 2009-10 [ 2022 (11) TMI 1420 - ITAT MUMBAI ] 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 in our considered view, stands concluded in favour of the assessee.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. Additional depreciation u/s 32(1)(iia) - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 1420 - ITAT DELHI ] As observed that while computing the output of the CPP, AO has excluded the transmission loss which was considered by assessee in their calculations but during the course of hearing before bench, assessee conceded the ground on the exclusion of the units lost in transmission for the purpose of computing the turnover of CPP. As observed that Ld AR has filed details regarding rate to be taken, such working was not available with the file of AO hence on this limited purpose of verification for the year under consideration, the AO is directed to verify the working as submitted by Ld AR and directed to consider the market value of power sold by CPP units at the Electricity rate at which CMM units at different location is purchasing electricity from SEBs as held/discussed by various courts. Deduction u/s.80IA on Rail Infrastructure to be allowed. Adjustment on account of CENVAT in the profits of the eligible units to be deleted. Disallowing claim of leave encashment - HELD THAT:- Hon'ble supreme court in the case of UOI v. Exide Industries Ltd. [ 2020 (4) TMI 792 - SUPREME COURT ] has upheld constitutional validity of provision of section 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above additional ground is allowed for statistical purpose. Appeals filed by the revenue and assessee are partly allowed. - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, HON'BLE JUDICIAL MEMBER For the Appellant : Shri Yogesh Thar Shri Chaitanya Joshi Ms. Sukanya Jayaram For the Respondent : Smt. Shailja Rai ORDER PER S. RIFAUR RAHMAN (AM) 1. These are cross appeals pertaining to Assessment Year 2012-13 arising from the Appellate Order dated 29th December, 2017 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 21 st March, 2016 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) was partly allowed. Aggrieved both Assessee and Revenue are in appeal before us. ITA.NO. 3246/MUM/2018 (REVENUE APPEAL) 2. First we take up, Revenue Appeal: ITA No. 3246/Mum/2018 (common ground in assessee s appeal is also taken together). 3. In the Ground No.1, Department has raised the following grievance: On the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s suo-moto made by the Appellant and accordingly, ought to have been reduced while computing disallowance u/s 14A r.w.r 8D. 5. Similar issue was considered by us in the Department Appeal in Ground No 1 in AY 2008-09 and held as under: 10. Considered the rival submissions and material placed on record. So far as proportionate interest disallowance u/s 14A is concerned, it is observed that Assessee has sufficient own funds in the form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court in the case of South Indian Bank Ltd [2021] 130 taxmann.com 178 has held as under: Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assessee-scheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free securities - Whether since interest free own funds available with assessee exceeded their i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of other administrative expenditure is considered, it is observed that Hon'ble Delhi ITAT in the case of Vireet Investment Pvt. Ltd. [165 ITD 27] has held as under: Section 14A of the Income-tax Act, 1961 read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to exempt income not includible in total income - Assessment year 2008-09 - Whether only those investments are to be considered for computing average value of investment which yielded exempt income during year - Held, yes [Para 11.16] [Matter remanded] 14. The above referred decision has been followed by co-ordinate Bench in the case of DCIT v. Shree Global Tradefin Ltd. in ITA No. 1374/Mum/2022 dated 22 nd December, 2022 has held as under: 11. Having heard the rival submissions and perused the materials available on record. It is observed that the assessee has made a suo moto disallowance of Rs. 1,263/- for which the assessee contends that the A.O. ought not to have applied Rule 8D on the ground that suo moto disallowance has been made by the assessee. The assessee further contends that without prejudice, the disallowance should be restricted only to the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment which has yielded exempt income. The assessee gets the relief accordingly. This ground of appeal is partly allowed. 6. Respectfully following the above said decision, we partly allow the ground raised by the assessee and revenue. 7. In the Ground No. 2, Department has raised the following grievance: On the facts and in the circumstances of the case and in law the Id. CIT(A) erred in deleting the addition of unutilized CENVAT Credit amounting to Rs. 12,80,36,793/-. 8. Similar issue was considered by us in Department Appeal for AY 2005-06 in Ground no 2 and held as under: 18. Considered the rival contentions and material placed on record. On this issue, Coordinate bench held in the case of Mahindra Mahindra Ltd [2020] 113 taxmann.com 230 as under: 4. We have carefully considered the rival submissions. We find that as rightly pointed out by the ld. Representative for the assessee, the Hon'ble Bombay High Court in the case of Diamond Dye Chem Ltd. (supra) has already dealt with the issue whether addition on account of MODVAT credit is warranted or not. The Hon'ble High Court relying on the decision of the Hon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed herein above, the ground raised in Departmental Appeal is dismissed. 9. Respectfully following the above decision, we dismiss the ground raised by the revenue. 10. In the Ground No.3, Department has raised the following grievance: On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs. 13,34,92,198/- by holding that premature payment of deferred sales tax at Net Present Value against the total sales tax liability represent capital receipt and could not be a remission or cessation of a trading liability under section 41(1) of the Act, 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 of M/s Siemens Pub. Communication Network Pvt. Limited, wherein, it has been held that unless, the grant indeed received by the assessee is utilized for acquisition of an asset, the must be understood to be in nature of revenue receipt, except, by way of voluntary contribution received from parent company. 11. On identical issue in Assessee s appeal, in the Ground No.3, following issue is raised: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ze Products [(2001) 251 ITR 427 (SC)], CIT Vs S Kumars Tyre Manufacturing Co [(2004) 266 ITR 325 (MP)], and CIT Vs Abhishek Industries Ltd [(2006) 286 ITR 1 (P H)]. The entire amount of Rs 1169.93 crores was added to income of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) took note of the fact that these amounts pertained to five different units under four schemes- namely Maharshtra s Dispersal of Industries Package Scheme of Incentives 1993 (Maratha Unit), Punjab s Industrial Incentives Code under the Industrial Policy, 1996 (Ropar and Bhatinda Units), Rajasthan s Sales Tax New Incentives Scheme for Industries, 1989 (Rabriyawas Unit), and Exemptions/ Concessions to Industries Excise Taxation Department Notification No EXN C(9)2/9- dated 31-12-1994 (Himachal Unit). He discussed these schemes in quite a bit of detail-to the extent wordings of the preamble of the schemes are concerned, and concluded that while the amounts aggregating to Rs 130,57,12,796, in respect of Punjab and Maharashtra 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be revenue in nature unless these subsidies are for augmenting the profits of the assessee, and that is not even the case of the revenue. The CIT(A) is simply swayed by the wording of the preamble of the scheme- something clearly impermissible. These subsidy schemes are materially similar in nature, and there are, by now, a number of decisions of the coordinate benches, as also Hon ble Courts above, dealing with these schemes. It is also important to bear in mind the fact that the subsidies received by the assessee are in the nature of sales tax subsidies, and dealing with sales tax subsidies, Hon ble Gujarat High Court, in the case of CIT Vs Nirma Ltd [(2017) 397 ITR 49 (Guj)], has observed as follows: 7. So far as second issued as to Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) and in directing the Assessing Officer to consider the Sales-tax exemption benefit of Rs. 5,45,81,171/- as capital receipts is concerned, Mr.Mehta contended that in view of the decision of the Calcutta 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of Gujarat and also to secure balanced development of industries in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attract such investment was, inter alia, through exemption from payment of sales tax. 9. He further contended that in view of decisions of this Court in CIT v. Birla VXL Ltd. [2013] 32 taxmann.com 330/215 Taxman 117 (Guj.) and in Dy. CIT v. Munjal Auto Industries Ltd. [2013] 37 taxmann.com 115/218 taxman 135 (Guj.) the issue is squarely covered and the decisions which are sought to be relied upon by learned 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 obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax Appeals are therefore dismissed.' 10. In the case of Munjal Auto Industries Ltd. (supra), this Court has observed as under:- 7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the 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, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is only for setting up of the units based on the fixed percentage of the capital cost and not for running the business of the assessee. Moreover, even this subsidy which is determined based on sales tax assessment orders for 9 years, 6 years etc., are subject to maximum outer limit already fixed under the respective schemes. Though the quantification of the subsidy has been made post commencement of business, the measurement of subsidy is immaterial. In our considered opinion, none of the schemes contemplated to finance the assessee in the form of subsidy / incentive for meeting the working capital requirements of the assessee company post commencement of business. Hence, by applying the purpose test, apparently, the subsidy / incentive received in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we find that ld. AR placed reliance on the decision of Hon ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392, wherein the incentive conferred under that scheme were two fold. First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose like extension of docks as in the Seaham Harbour Dock Co. 5 case (supra). 16. There is a Canadian case St. John Dry Dock Ship Building Co. Ltd. v. Minister of National Revenue 4 DLR 1, which has close similarity to the case of Seaham Harbour Dock Co.'s case (supra). In that case it was held that where subsidies were given under statutory authority, the statutory purpose for which they are authorised is relevant and may even be decisive in determining whether it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational subsidy'. 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was distinguished, in para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. 20. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in nature. 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the purpose test . It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. 22. Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. 5.3.7. We further find that the Hon ble Gujarat High Court in CIT vs. Munjal Auto Industries Ltd., in Tax Appeal No.450 with 451-453 of 2012 dated 28/01/2013 also had an occasion to consider the very same issue in dispute before us. In this case also, the Revenue had taken a specific argument that since subsidy would be received only once unit goes for production, subsidy would be revenue nature. The Hon ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department, price and costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given through price and duty differentials, the character of the impugned incentive in this case was revenue and not capital in nature. On the other hand, according to the assessee, what was relevant to decide the character of the incentive is the purpose test and not the mechanism of payment. 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 10. In a recent judgement dated 8.1.2013 in case of DCIT- Circle 1(2) - Baroda v. Inox Leisure Ltd., we had an occasion to consider somewhat similar question in the backdrop of entertainment tax waiver scheme of State of Gujarat as well as State of Maharashtra. Even in such a case, the entertainment tax waiver which was granted in terms of sale of tickets was treated as capital in nature when it was found that same was relatable to the capital investment made by the assessee. It was held as under : 10. From the above noted provisions of thescheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Reliance Industries reported in 88 ITD 273. The ld. Special Counsel for the Revenue vehemently submitted that the decision of the Hon ble Special Bench has been reversed by the Hon ble Supreme Court by remitting the matter back to the Hon ble Bombay High Court. First of all, it would be relevant to bring on record the crux of the decision of the Special Bench in the case of Reliance Industries Ltd. In case of Special Bench decision of Reliance Industries Ltd, the scheme dealt with sales tax exemption under the scheme of Government of Maharashtra, 1979. Further the said scheme was implemented by SICOM. The following question was referred by the Hon ble President, Tribunal to the Special Bench: Whether, on the facts and in the circumstances of the case and in law the assessee company is justified in its claim that the sales-tax incentive allowed to it during the previous year in terms of the relevant Government order constitutes capital receipt and is not to be taken into account in the computation of total income? The Hon ble Tribunal for Asst Years 1984-85 and 1985-86 had held the sales tax exemption to be capital in nature as the same was given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctly interpreted and understood the ratio of the judgment of the Supreme Court in Sahney Steel Press Works Ltd. s case (supra). 38. In this view of the matter, we answer the question referred to us in the affirmative. 5.4.2. The ld. AR vehemently submitted that the department did not challenge the decision of the Special Bench before the Hon ble Bombay High Court. However, he fairly stated that there was a subsequent decision of the Division Bench of this Tribunal which followed the Special Bench and that Division Bench order was challenged by the Revenue before the Hon ble Bombay High Court. The Hon ble Bombay High Court while disposing of the said appeal did not reverse the decision of the Special Bench and accepted the same. When that appeal was further challenged by the Revenue before the Hon ble Supreme Court, the Hon ble Supreme Court remitted the matter back to the Hon ble Bombay High Court. Accordingly, he argued that the decision of Special Bench was never reversed by the Hon ble Supreme Court as stated by the ld. Special Counsel for the Revenue and accordingly still is a good law and therefore a binding precedent on this Division Bench. In fact, in asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Reliance Industries Ltd. (supra) . Thus, the Tribunal remanded the issue back to the Assessing Officer to be decided in the light of the Special Bench judgment in the case of Reliance Industries Ltd. The Revenue's grievance in this respect is two fold. It was contended that the issue was raised for the first time before the Tribunal and the same should not have been permitted. Secondly, the view of the Tribunal in case of Reliance Industries Ltd. was challenged before the High Court. The High Court in a judgment dated 15.04.2009 in Income Tax Appeal No. 1299 of 2008 had held that no question of law in this respect arises and thereby confirmed the judgment of the Tribunal. It was pointed out that against this judgment of the High Court, the Department had approached the Supreme Court and the Supreme Court had held that a question of law did arise. The Supreme Court framed a question and placed the matter back before the High Court. We are informed that this appeal is still pending. 4. On the other hand, learned Counsel for the assessee firstly contended that the Tribunal had merely remanded the issue back to the Assessing Officer. In earlier orders, the Revenue had app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in assessee s own case for A.Y.2001-02 had become final on the very same issue. Though the said decision has been rendered for subsequent assessment year as compared to the years under consideration before us, in view of identical facts and the same legal issue, and more especially, in order to address the fact of binding precedent of Special Bench decision in the case of Reliance Industries Ltd., this Bench deems it fit to place reliance on the said decision also of the Hon ble Jurisdictional High Court. Accordingly, we categorically hold that the decision of the Special Bench still holds the field and is a good law. The entire contentions raised by the ld. Special Counsel for the Revenue in this regard are hereby dismissed. 5.4.5. Further, we find that the Co-ordinate Bench of Ahmedabad Tribunal in the case of ACIT vs. Genus Electrotech Ltd., reported in 72 taxmann.com 101 had an occasion to consider the fact of Special Bench decision in a more elaborate manner. The relevant operative portion is reproduced hereunder:- 11. We find that so far as the Special Bench decision of this Tribunal in the case of Reliance Industries Ltd. (supra) is concerned, it still holds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would rather be guided by the special bench decision - which is exactly what another division bench, on the same set of facts as before us, did in the case of Ajanta Manufacturing Ltd. (supra). As for learned Commissioner (DR)'s suggestion that we should follow the jurisdictional High Court decision in the case off Colourman Dyechem Ltd. (supra), we find that Their Lordships, in this case, were dealing with an entirely different type of subsidy which was clearly dealing with an expansion situation. However, we would rather refrain from making any further detailed observations on this issue, as we are alive to the fact that Hon'ble jurisdictional High Court, in Tax Appeal No 358 of 2012, has admitted appeal against the decision of this Tribunal in Ajanta's Manufacturing Ltd. case (supra) and all these issues will now come up for consideration of Their Lordships. The fact that appeal is admitted does not, as we have stated earlier as well, does not affect the binding nature of the judicial precedents. There is no dispute before us that the scheme under which the sales tax and excise duty subsidy are given to this assessee are the same as in the case of Ajanta Manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sales Tax Incentive availed by the appellant amounting to Rs. 1,69,93,34,752/-, being capital in nature, in computing Book Profit u/s 115JB of the Act. 50. Learned representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon ble Calcutta High Court s judgment in the case of PCIT Vs Ankit metal Power Ltd [(2019) 416 ITR 591 (Cal)], by Hon ble jurisdictional High Court s judgment in the case of CIT Vs Harinagar Sugar Mills Ltd [ITA No 1132 of 2014, dated 4th January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. 51. We find that a coordinate bench of this Tribunal, in JSW Ltd s case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal Power Ltd. [2019] 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) held that when a receipt is not in the charac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, then the same cannot be considered for the purpose of computation of book profit u/s 115JB of the I.T.Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. 36,15,49,828/- from book profits computed u/s 115JB of the I.T. Act, 1961. 52. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly. 33. It is observed that coordinate bench has also decided similar issue in favour of Ambuja Cement Limited, holding company of assessee from A.Y. 2006-07 to 2011-12 as stated supra. It is observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with the issue whether addition on account of MODVAT credit is warranted or not. The Hon'ble High Court relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 130 Taxman 179/261 ITR 275 held that the unutilised credit cannot be directly added to the income of the assessee. The relevant para of the said decision is reproduced hereunder: 5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 07.11.2022 in the ITA No. 3307/Mum/2015 and 2428/Mum/2019 for A.Y. 2009-10 wherein it was held as under: 99. In ground no.8, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in allowing the pre-operative expenses amounting to Rs. 39,82,07,328/- whereas the assessee itself claimed these expenses as capital expenses in the books of accounts adding it to capital work in progress/fixed assets? 100. During the assessment proceedings, the Assessing Officer noted that the assessee has made this claim only by way of a revised return and that no such claim was originally made by the assessee. It was also noted that the books maintained under the Companies Act also show these expenses as capital expenses, which in an indicative, even if not conclusive, evidence of the expenses being in the nature of capital expenses. The judicial precedents relied upon by the assessee in support of the claim were noted, and left at that, and it was observed that the assessee is a big company assisted by a battery of lawyers and chartered accountants, but in its original return of income no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h referred supra and considering such fact addition made by Assessing Officer is deleted. This ground of appeal is dismissed. 19. Respectfully following the above decision, we dismiss the ground raised by the revenue. 20. In the Ground No.6, Department has raised the following grievance: On the facts and in the circumstances of the case in law the Id. CIT(A) erred in allowing the of claim of additional depreciation of Rs. 472,62,17,832/- u/s 32(l)(iia) of the Act without appreciating the fact that additional depreciation is allowable only on new machinery i.e. the first year in which it is put to use, especially, when the CIT(A) has relied upon the decision of Hon ble ITAT in the case of M/s Everest Industries Ltd. Vs CIT, which in fact, is in favour of revenue. 21. Similar issue was considered by us in the assessee appeal in Ground No 5 in AY 2007-08 and held as under: 49. Considered the rival submissions and material placed on record. The brief facts of the case are that the assessee has claimed the additional depreciation on all the eligible assets acquired on or after 01-04-2005. However in the assessment order the Ld. AO has disallowed such addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the Assessee for additional depreciation u/s.32(1)(iia) of the Act. The undisputed facts are that the original cost of the new machinery purchased and installed by the Assessee after 31-3-2005 but before 1-4-2006 in the 100% EOU and DTA unit Rs. 29,77,470 and Rs. 2,41,30,615. The WDV of these machineries as on 1-4-2006 was Rs. 24,51,920/- and Rs. 1,81,50,266/- respectively. The Assessee availed of additional depreciation @ 20% on the original cost of the machinery at Rs. 5,95,494/- and Rs. 48,26,123/- respectively in AY 2006-07. In AY 2007-08 also the Assessee claimed additional depreciation at 20% of the original cost viz., Rs. 5,95,494 and Rs. 48,26,123 respectively in all depreciation totaling Rs. 54,21,617/-. 26. According to the AO, the deduction u/s.32(1)(iia) of the Act is granted only to new plant and machinery and once depreciation is granted in the 1st year in which the machinery is installed or put to use, the machinery ceases to be a new machinery and therefore additional depreciation cannot be allowed. The plea of the Assessee however was that Section 32(1)(iia) of the Act merely provides that further to the normal depreciation at the prescribed rates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 31-03-1988 and was deleted thereafter): (iia) in the case of any new machinery or plant (other than ships and aircraft) which has been installed after the 31 st day of March, 1980 but before the 1st day of April, 1985, a further sum equal to one-half of the amount admissible under clause (ii) (exclusive of extra allowance for double or multiple shift working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel) in respect of the previous year in which such machinery or plant is installed or, if the machinery or plant is first put to use in the immediately succeeding previous year, then in respect of that previous year : Sec.32(1)(iia) of the Act as reinserted by financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to manufacture or produce any article or thing on or after the 1 st day of April, 2002; or if any industrial undertaking existed before the 1st day of April, 2002, during any previous year in which it achieves the substantial expansion by way of increase in installed capacity by not less than ten per cent. From AY 2006-07, there is no restriction with regard to the year in which such additional depreciation should be allowed and also there is no restriction with regard to the additional depreciation being allowed only on the written down value and therefore the additional depreciation even in the second and subsequent years have to be allowed on the original cost of the Asset. These are evident from a plain reading and literal construction of the relevant statutory provisions. 30. The CIT(A) after considering the aforesaid scheme and history of the provisions of Sec.32(1)(iia) of the Act, deleted the addition made by AO observing as follows : I have considered the submissions of the Ld. A/R and find substance in the contention of the Appellant. On a conjoint reading of the provisions of section 32(1)(iia) inserted by Finance (No. 2) Act, 1980 and reinserted by Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. DR placed reliance on the order of the AO. The ld. Counsel for the assessee submitted that fiscal statute shall be interpreted on the basis of the language used therein and not de hors the same. It was argued that Clause (iia) to Sec. 32(1) was first introduced vide Finance (No. 2) Act, 1980 w.e.f. 01-04-81 and was applicable till AY 1987-88. The clause was subsequently re-introduced vide Finance Act, 2002 w.e.f. 01-04-03. On perusal of clause (iia) to Sec. 32(1) as existed during the aforesaid period, it could be seen that the legislature conferred the benefit of additional depreciation only in the first AY when the asset was installed and first put to use. However vide Finance Act, 2005, clause (iia) to Sec. 32(1) was amended w.e.f. 01-04- 06 wherein the condition of claiming additional depreciation only in the initial AY was deleted. It was submitted that since the specific condition for claim of additional depreciation in one year has been done away with, it should be construed as the intention of the legislature to allow additional depreciation in subsequent years as well. Reliance was placed on the following decisions wherein it has been held that a fiscal statute shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The expression new machinery is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01-04-2006. The plain language of the section warrants such an interpretation. We therefore uphold the order of CIT(A) and dismiss ground No.3 raised by the revenue. 50 We observe that in decision of ITAT Kolkata in the case of DCIT vs. Gloster Jute mills ltd. in ITA No. 1524/Kol/2013 dated 01.03.2017 has held that additional depreciation would be allowed in subsequent assessment years by observing that the condition imposed by the relevant provisions is that Plant and Machinery must be new at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 32(1)(iia), such later decision would prevail over the decision of Everst Industries Limited relied upon by Ld DR. As a result, since this aspect of the matter is no longer res integra, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the group concern s case of the assessee. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to allow depreciation u/s.32(1)(iia) of the Act. The assessee gets the relief accordingly. This ground of appeal is allowed 22. Respectfully following the above decision, we dismiss the ground raised by the revenue. 23. In the Ground No.7, Department has raised the following grievance: On the facts and in the circumstances of the case in law the Id. CIT(A) erred in directing the A.O. to allow deduction u/s. 80IA of the I.T. Act, in respect of profit derived from power-generating unit-TG3 located at Wadi. 24. Similar issue was considered by us in the Department Appeal in Ground no 9 in A.Y. 2005-06 and held as under: 60. Considered the rival submissions and material placed on record. The Assessee has claimed deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness already in existence, the negative prohibition would not be attracted. In the present case, the entire business of TG-2 and TG-3 power plant was transferred to the assessee. The undertaking of the assessee was not formed by the splitting up of the business. On this issue, Hon ble Bombay High court in the case of CIT v. Sonata Software Ltd [2012] 21 taxmann.com 23 has held as under:- Section 10A of the Income-tax Act, 1961 - Free trade zone - IOCL set up a software division in 1980s - IOCL made an application for setting up an undertaking in a Software Technology Park (STP) for which an approval was obtained on 30-9-1993 - Plant and machinery for said undertaking was imported in July, 1994 and first export was effected in October, 1994 - Thus, manufacturing activities, commenced in STP undertaking after stipulated date of 1-4-1994 as provided in section 10A - Subsequently, in October 1994 itself, IOCL transferred entire software division as a going concern on slump sale basis to assessee - It was apparent from records that ownership of business or undertaking changed hands and, thus, it could not be regarded as a case of reconstruction - It was also undisputed that entir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany cannot be stated to be illegal or against the statutory provisions. A similar view has been taken by the Bombay High Court in the case of CIT v. Dandeli Ferro Alloys P. Ltd. [1995] ITR 1, in which the Bombay High Court held that the facts on record clearly established that the amalgamated company was already incorporated and formed and had come into existence on March, 1973 and had become an industrial undertaking carrying on industrial and commercial activities on and from June 20, 1973, i.e., prior to the amalgamation of the amalgamating company with the amalgamated company, which had become effective from October 31, 1973. The amalgamated company was not formed by the splitting up, or the reconstruction, of a business already in existence. Therefore, the Tribunal was right in holding that the assessee company was entitled to relief under sections 80J and 80HH of the Act . 63. The CBDT had also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income-tax Act, 1961), way back in 1963 and clarified the matter vide Letter: F No 15/5/63-IT (A-I), dated 13 December 1963, which reads as under:- The Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns clearly suggest that deduction u/s 80IA is available to undertaking and change in ownership does not mean that unit is established by split up or reconstruction of entire business. Considering ratio laid down by various courts as referred supra, assessee is entitled to deduction u/s 80IA on two units purchased from Tata Power Company Limited. 67. It is emanating from assessment order and order of Ld.CIT(A) that TG-2 started commercial production from 1st April 1995 and no deduction was claimed till A.Y. 1998-99 as such unit was incurring losses. The assessee was eligible for deduction u/s 80IA for such unit in A.Y. 1999-2000 but no deduction was claimed as there was no positive Gross Total Income of assessee but it is fact that assessee was eligible for deduction was mentioned in notes forming part of return of income. It is undisputed fact that Assessing Officer has not disputed such claim in assessment proceedings. Subsequently, such unit was transferred to Tata Power Company and was again re-purchased by assessee in current year and assessee has claimed deduction u/s 80IA. So far as observation of Ld.CIT(A) that assessee is not entitled for such deduction as 80IA was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 profit c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case in law the Id. CIT(A) erred in deleting the addition of provision for normal gratuity in computing Book Profit u/s 115JB (Rs. 5,64,78,008/-), especially in view of the fact that the assessee itself disallowed the same, in the memo of income on account of same not being ascertained liability. 30. Similar issue was considered by us in the Department Appeal Ground No 12 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JB(2) of the Act. Accordingly, Ground No. 9 raised by the Revenue is dismissed. 86. Respectfully following decision of coordinate bench referred supra, addition of provision for gratuity made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 31. Respectfully following the above decision, we dismiss the ground raised by the revenue. 32. In the Ground No.10, Department has raised the following grievance: On the facts and in the circumstances of the case in law the 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 (Rs. 20,25,000/-). 33. 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the addition made by the Assessing Officer is deleted and this ground of appeal is allowed. . On appraisal of the said finding, we noticed that the claim of the assessee has been allowed in view of the decision of Bombay High Court in the case of CIT Vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 (Bom) 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 computin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision, we dismiss the ground raised by the revenue. 38. In the result, appeal filed by the Revenue is dismissed. ITA.NO. 3203/MUM/2018 (ASSESSEE APPEAL) 39. We now take up the appeal filed by the assessee in ITA No 3203/Mum/2018. 40. In the Ground No.2, Assessee has raised the following grievance 2(a). On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and grossly erred in confirming the action of AO in disallowing Club Entrance Fee of Rs. 15,50,500/- as expenditure not incurred wholly and exclusively for the purpose of the business. 2(b). On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has 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 issues. 41. Similar issue was considered by us in Department Appeal in Ground No 3 in AY 2005-06 and held as under: 24. Considered the rival contentions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench assessee s own case for A.Y. 2004-05 in ITA No 5259/Mum/2027 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. 42. Respectfully following the above decision, we allow the ground raised by the assessee. 43. In the Ground No.4, Assessee has raised the following grievance: 4(a). On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and rather grossly erred in confirming the action of AO in reducing the claim for deduction u/s 80-IA on captive power generating units by an amount of Rs. 59,59,11,901/- by modifying the basis of determining the 'market value' of power captively consumed, adopted by the appellant. 4(b). On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified rather grossly erred in confirming the action of AO in computing 'market value' of power captively consumed based on average of the purchase price of power in various States across India by Tata P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Tribunal and High Court, including, the decision of the coordinate bench in case of Reliance Industries (ITA 4361/M/12, order dated 12/04/2017), which was later approved by the Hon ble Jurisdictional High Court [2020] 421 ITR 686 (Bombay). 61. It is important to note here that the case of Reliance Industries (supra) pertains to AY 2009-10 along with other preceding assessment years. Accordingly, it has to be considered that the judicial authorities have taken into consideration all the relevant amendments, including 80IA(6). Further, it is relevant to reproduce the relevant portion of the decision from coordinate bench Order, wherein the ITAT has held as under: 17. The assessee had claimed the deduction u/s.80IA on power generation undertaking by adopting price which the industrial consumers paid during the year under consideration for electricity purchased from State Power Distribution Agency. However, the Assessing Officer has restricted the claim of deduction u/s.80IA to Rs. 34,23,45,990/- by taking 16% return on capital base as per the parameters prescribed by the Regulatory Authorities i.e. State Electricity Board for procuring the electricity. 18. By t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. (Explanation - For the purposes of this sub-section; market value , in relation: to any goods 'or services, 'means the price that such goods or services would ordinarily fetch in the open market.) A perusal of the said section reveals that where transfer of any goods or services by the eligible business to any other business carried on by the assessee is not recorded in the books of accounts of the eligible business at the market value of such goods or services as on date of the transfer, then for the purposes of the deduction, the profits and gains of such eligible business is required to be computed as if the transfer has been made at the market value of such goods or services as on that date. As per the Explanation,' 'market value' in relation to the goods would mean the price that such-goods would ordinarily fetch in the open market. The proviso to sub-section(8) of section 80IA would come into operation only' when in the opinion of the Assessing Officer; the computation of profits and gains of the eligible business in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the electricity which the assessee can fetch in the open market. There being no open market for electricity during the period under review, the regulatory bodies fixed the price of electricity. He has further held that the tariff fixed for sale by the State. Power Distribution Agency for industrial consumers could not be called as market price as the regulatory fixes the tariff considering the wheeling charges, transmission loss due to leakage, past losses of the distribution agency, etc. In my opinion, the findings of the AO cannot be taken to be correct. Even though there may be 110 open market for the goods, an open market has to be presumed in respect of the goods in question in view of the categorical condition laid down in the provisions itself and the law laid down in this regard by the different Hon'ble Courts of the land and which have/been relied upon by the assessee in its submissions. The Assessing Officer has not brought any material to show that the price charged was not in consonance with the market value. The AO has also not suggested, leave alone computed as to what the market value of the goods should be. While the assessee has given detailed reasons as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To sum up under Sec. 80IA(8), the following conditions are required to be satisfied:- a) Any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee. b) The' consideration if any for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the. date of transfer, c) It is only when condition (b).is satisfied then the Revenue gets a right to determine profits and gains of such eligible business at the market value of such-goods or services. as on the date of its transfer. The Assessing Officer had considered the rate' charged by the State Distribution Agency as the market value of the goods 'transferred by the eligible business in the original assessment of the assessee, There is nothing on record to show as to how the value of the goods adopted/taken by the assessee do not correspond to the market value of such goods especially in light of the reasons given by the assessee. The Assessing Officer has also not expressed any opinion as to how the computation of profits and gains of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of power would be the best basis for working out the profits of the business of generation of power even after the order MERC. In this case, the assessee, other than using power generated from its own captive generating units, was also purchasing power from TPC. In the case of Jindal Steel Power Ltd. reported in 16 SOT 509 (Del), Hon 'ble Tribunal has held as follows Sec: 43A of the Electricity (Supply)Act,1948, lays down rules and conditions for determining the tariff for sale of electricity by a generating company to the State Electricity Boards. A perusal of the same reveals that the tariff is determined on the basis of various parameters contained therein: From the aforesaid, it is evident that on one hand it is only upon granting of specific' consent that a private person call set up a power generating unit having 'restrictions on the use of power generated and at the same time the tariff at which a power generating unit can supply power to the Electricity Board is also liable to 'be determined in accordance with the statutory requirements. In this context it can be safely deduced that determination of tariff between the assessee and the Board c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, or where any goods held for the purposes of any 'other business'. carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of transfer, then for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer in either case, had been made at the market value of such goods as' on that date . The above concept of transfer pricing is also apparent in r. 7 of I T Rules, 1962 provided for determining the income from agricultural produces consumed by the agriculturist-assessee in his business as raw material. The rule provides that in the case' of income which is partially agricultural income and partially income chargeable as business income in determining that part which is chargeable to income-tax, the market value of any agricultural produce which has been raised by the assessee and utilized as a raw material in such business hall be deducted at the prevalent market value. This principle has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he captive power generating units of the assessee, such rate would be taken by the Assessing Officer for computing the profits of the eligible business, eligible for deduction u/s. 80IA. However, if the rate charged by the suppliers is the same as the rate adopted for sale by the captive power generating units of the assessee, such rate adopted should be accepted for the purpose of working out the deduction u/s.80-lA. Subject to the above, this ground or-appeal filed by the assessee is allowed. 19. We found that exactly similar issue has been considered by the Tribunal in assessee's own case for the assessment year 2006-07 therein issue has been decided in favour of the assessee. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee's own case, we do not find any infirmity in the order of CIT(A) for allowing assessee's claim of deduction u/s. 80IA with reference to power generating undertaking and the power so generated being used mainly for captive consumption. 20. Learned DR has relied on the decision of Calcutta High Court in the case of ITC Ltd., (2015) 64 Taxman.com 214 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Tribunal and for matters connected therewith or incidental thereto . 25. A look at the Statement of Objects and Reasons annexed to the bill, para 4 would indicate that the Act seeks to encourage private sector participation in generating, transmission and distribution of electricity and promoting competition and providing for newer concepts like power trading and open access. A copy of the statement of Objects and reasons is annexed herewith. Para 4(i) of the Objects and Reasons is particularly important and it reads as under: Generation is being delicensed and captive generation is being freely permitted. Hydro projects would, however, need approval of the State Government and clearance from the Central Electricity Authority which would go into the issues of dam safety and optimal utilisation of water resources. (Emphasis supplied). 26. Reference is invited to this para to show that captive generation is being freely promoted. With this background, it is necessary to see what is the scope and impact of the Electricity Act 2003. 27. Section 12 provides that no person shall transmit electricity or distribute electricity or undertake trading in electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Transmission Utility or the State Transmission Utility, as the case may be: Provided further that any dispute regarding the availability of transmission facility shall be adjudicated upon by the Appropriate Commission. (Emphasis Supplied) 30. Section 9 is a non-obstante clause and permits any person to construct, maintain or operate a Captive Generation plant and dedicated transmissions lines. A bare perusal of section 9(1) would indicate that there is no restriction whatsoever on a person in respect of Captive Generation plant. It is neither required to obtain a licence under section 7 or under section 12 as a generating company if it consumes power within itself. In other words, a Captive Generation Plant does not need to apply for licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73. 31. The reason for excluding a Captive Generation plant from any of the technical standards for construction of electricity plants relating to connectivity with the grid, is because a person can, without a licence, construct, maintain and operate a Captive Generation plant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the Calcutta High Court, the regulated selling price by a third party to the assessee cannot form the selling price by a Captive Generation plant. Whilst this is the absolutely correct and true, it is wholly irrelevant in context of Electricity Act, 2003. In a much as under the Electricity Act 2003, when the Captive Generation plant notionally sells electricity to itself, there is no regulation in respect of market price. In this connection, the decision of Supreme Court in the case of ThiruArooran Sugars Ltd. v. CIT (1997) 227 ITR 432 is material. In that case, the assessee company was a manufacturer of sugar which purchased sugarcane from the market for crushing. It also had its own cane fields where it cultivated sugarcane, which was entirely consumed by its factory. Since the profit made by the assessee from the sale of sugar arose out of agricultural activities as well as manufacturing activities, the income earned by the assessee was required to be divided into two parts. No tax was leviable on agricultural income, but the profit generated from non-agricultural activities was leviable to be taxed under the Act. Therefore the agricultural income had to be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase was at a price controlled by the Sugarcane Control Order or not is quite immaterial. There was a price at which sugarcane could ordinarily be purchased by the assessee for the purpose of its own business. The price paid by the assessee was the market price. It is by now well-settled that market does not have to be one open place of business where buyer and seller congregate (Emphasis Supplied). 37. According to the Supreme Court, it is not necessary that there must be an actual market where buyers and consumers congregate to purchase and sell Goods Where there is no such open market, an estimate of the market price will have to be done on an estimated hypothetical basis. It stated at page 440, para (f) of 227 ITR 432. The principle that value of a property will be the price which it will fetch if sold in the open market is a well-known method of valuation which has been adopted in a large number of statutes in England and also in India. It is well-settled that existence of an open market is not a pre- condition for application of this principle. There may or may not be an actual market where buyers and sellers congregate to purchase and sell goods. Where there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GEB). It is not relevant whether that price was controlled or not. If the price at which the GEB supplied as controlled then that would be the market price vis-a- vis the assessee. Accordingly, the price charged by GEB should be adopted as market price. Therefore, the decision of Supreme Court in ThriuArooran Sugars completely covers the situation of the assessee. 40. The Supreme Court at page 441 has stated as under: These are the principles universally applied to find out the price at which the goods are ordinarily sold in the open market. For determination of market value, there is no pre-requisite that an open market where buyers and sellers congregate to buy and sell goods must exist. In the instant case, the assessee-company actually bought sugarcane from a large number of growers year after year in the ordinary course of business. The price at which it buys sugarcane must/be taken to be the market price. If the price is controlled by Sugarcane Control Order, the controlled price will be taken as the market price because it is at this price that a willing buyer and a willing seller are expected to transact business. As Lord Denning pointed out, it does not make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are similarly provisions in Section 61 so that the distribution licensee can derive reasonable return. There is thus an in-built mechanism to ensure permissible profit both to the generating companies and the distribution licensees ..... 45. This conclusion is indisputable as applicable to licenced generating companies selling in the market but has no application to a 'captive generating plant' as much as there is no tariff fixed by Tariff Regulation Commission for self consumption. Therefore, the open market for sale of electricity by a licenced generating company and the open market which must be assumed for consumption of electricity by the generating producer itself are two different markets and the market price for self consumption and the market price for sale by the licenced generating companies to outsiders are two different prices. The Electricity Act, 2003 contemplates determination of market price only in respect of licenced generating companies willing to distribute or transmit power to a distribution licensees or to a consumer and it is only those generating companies which are regulated under section 42(2). The self consumption of electricity by a Cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(1) above. Hence for supply of power by a captive power plant to the captive users or to open access consumers, it is not required to get the tariff approved by the commission as stated in section 86(1)(a) of the Electricity Act, 2003. 49. Therefore, the decision of the Calcutta High Court cannot be applied to the acts of the assessee in as much as it was delivered in respect of A Y 2002-03 for which the Electricity Act 2003 did not apply and also for the reason that the Honourable Court has not considered the provisions of sections 8, 9, 42 and 2(g) of the Electricity Act, 2003. Further the provisions of section 62 of the Electricity Act, 2003 referred to by the Honourable Court are not applicable to the fact of the assessee's case. 50. The Calcutta High Court has dissented from the decision of three different High Court as follows: 1. The decision of Chattisgarh High Court Bilaspur Bench in the case of ACIT v. Godavari Power Ispat Ltd. - 223 Taxman 234. 2. CIT v. Kanoria Chemicals and Industries Ltd 35 taxmann.com (Cal). 3. CIT v. Graphite India Ltd ITA No ITA No 733 of 2008 (Cal). 4. Madras High Court decision referred to in page 12 (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tea Co. Ltd - 89 ITR 236 (SC) In view of the above discussion, the Calcutta High Court can have no application to the assessee's case. 56. In view of the above, we respectfully follow the order of the Tribunal in assessee's own case and confirm the order of CIT(A). 62. It is observed that above decision was upheld by Hon ble Bombay High court in 421 ITR 686 and observed as under: Question (c) pertains to the dispute between the department and the assessee regarding the rate at which the electricity generated by one unit of the assessee- company and provided to the another be valued. The assessee contended that such valuation should be at the rate at which the electricity distribution companies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ( the Act for short) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he true market value. The Assessee gave explanation that the rates determined by the MERC do not reflect the correct market rate. The finding is that the mode of computation and deduction under Section 80IA requires no deviation from the past. The findings of fact and to be found in paragraphs 42 to 50 also reflect that the very issue came up for consideration for the Assessment Year 2003-2004. For the reasons assigned by the ITAT and finding that the attempt is to seek reappreciation and reappraisal of the factual data that we come to a conclusion that even question (d) as framed is not a substantial question of law. 8. Thus, the issue at hand had been examined by this Court on earlier occasion and the view of the Tribunal under similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of CIT v. Godawari Power Ispat Ltd. [2014] 42 taxmann.com 551/223 Taxman 234, in which the Court held and observed as under: 31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed. 11. Judgment of Calcutta High Court in case of CIT v. ITC Ltd. [2016] 236 Taxman 612/[2015] 64 taxmann.com 214 was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by this Court earlier and in view of the decisions of the Chhattisgarh and Gujarat High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chasing same from State Electricity Board (SEB) - Assessee had determined ALP of said specified domestic transactions at rate ranging from Rs. 7.66 per unit to Rs. 7.87 per unit which was Average Annual Landed Cost (AALC) at which non-eligible unit procured power from SEB - Thus, assessee followed internal CUP for benchmarking specified domestic transactions of transfer of power from SEB by taking non- eligible units as tested party in TP Study Report and, accordingly, ALP of power captively consumed had been benchmarked at ALC of power purchased by tested party from SEB - Assessee had also duly reported these transactions in audited report in Form 3CEB - However, TPO opined that average rate of Rs. 3.47 per unit calculated on basis of sale data of power by independent CPPs/IPPs as determined by various tariff orders would be ALP of domestic specified transactions and, accordingly, made an upward adjustment - It was noted that CPPs benchmarked transactions with non-eligible units at a rate at which power was supplied by SEB to non-eligible units and, therefore, was prevailing rate at which power had been supplied by SEB to other parties/factories located in same geographical areas/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the working as submitted by Ld AR before us and directed to consider the market value of power sold by CPP units at the Electricity rate at which CMM units at different location is purchasing electricity from SEBs as held/discussed by various courts including decision of coordinate bench in the case of Reliance Industries Limited and Ambuja Cement Limited referred supra. Accordingly, this ground of appeal is allowed for statistical purpose. 45. Respectfully following the above said decision, however, for the year under consideration, the working is already available on the records of the Assessing Officer, we direct the assessing officer to verify the same as per the direction given in the order for AY 2011-12 and accordingly, we allow the ground raised by the assessee for statistical purpose. 46. In the Ground No.5, Assessee has raised the following grievance: 5(a). On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified rather grossly erred in confirming the action of AO in not allowing the claim of tax holiday u/s 80-IA on infrastructure facility, being Rail System, developed, operated and maintained by the appellant at various locations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem on mere conjectures, surmises and preconceived notion. 5(g). Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred in not adjudicating the AO's action who himself was in a quandary in suggesting two alternative methods for computing deduction u/s 80IA on Rail System and thus was not justified in not quantifying the exact amount of deduction available to the appellant if deduction u/s 80-IA on allowance of deduction in appellate proceedings. 5(i) Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) grossly erred and not justified in not deciding upon the AO's suggestion that in case the appellant was found to be eligible in appellate proceedings, adjustments on account of allocated HO expenses and CENVAT expenses were to be made while determining the claim. 47. Similar issue was considered by us in the assessee Appeal in Ground No 3 in AY 2009-10 and held as under: 30. Considered the rival submissions and material placed on record. It is observed that entire controversy of allowability of deduction u/s 80IA(4) on Rail Infrastructur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany 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 respect of the rail system was rejected. Aggrieved, assessee carried the matter in appeal but without success. Learned CIT(A) reiterated the same arguments and upheld the stand of the Assessing Officer. The assessee is not satisfied an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.] had primarily requested the' railway department to extend the sidings [railway tracks] to the site of cement plants of the company so as to enable it to transport its goods [raw material cement] from/to their plant sites itself [so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respectively [refer assessee's reply dated 06.01.2014] It was further observed by CIT(A) that the L T Ltd. on whose request the private sidings were set up at all these four locations, never claimed any such deduction u/s 80IA(4). The de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 TutcorinAlali Chemicals Ltd. in 227 ITR 172; in the case of Godhra Electricity Company in 91 Taxman 91; in the case of Bokaro Steel Ltd in 263 ITR 315 and in the case of Sutlet Cotton Mills Ltd. in 116 ITR 1 and submitted that it would be totally incorrect to say that an assessee who raises internal invoices would be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material 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 railway authorities and it bearing the salary cost relating thereto. It was submitted that the rail system is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in explanation to sec. 80IA(4)(i) as an infrastructure facility. Further separate books of account are being maintained by the appellant. The mere fact that internal invoices are not raised does not mean that the rail system is not a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 movement of traffic [i.e. material] is to be made over those railway tracks. The profit would arise by charging the freight thereon. 20. The CIT(A) further observed that as per' the agreement, the railway track, signals, level crossi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 party contractors based on their expertise and the work was undertaken under the supervision of the Railways. Clause 6 is specifically provided for payment in advance to the railway administration, the total estimated cost of the work d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before us. 29. Learned AR relied on following judicial pronouncements in support of the proposition that benefit allowed in earlier year cannot be denied in subsequent years. 1. RadhaSoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) 2. CIT v. Western Outdoor Interactive (P) Ltd. [2012] 25 taxmann.com 340/210 Taxman 229 (Mag.)/349 ITR 309 (Bom.) 3. CIT v. Paul Brothers. [1995] 79 Taxman 378/216 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. CIT v. Delhi Press Patra Prakashan Ltd. [2013] 34 taxmann.com 3/217 Taxman 288/355 ITR 14 (Delhi) 7. Saurashtra Cement Chemical Industries Ltd. v. CIT [1979] 2 Taxman 22/[1980] 123 ITR 669 (GUJARAT) 8. Ace Multi Axes System Ltd. v. Dy. CIT [2015] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems 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 orders of the authorities below and materials placed before us. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. 34. Grievance of both the assessee and revenue revolves around assessee's eligibility for claim of deduction u/s.80IA (4) of the Income-tax Act. From the record we found that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings / construct the siding is meant for Railway administration's permission for allowing the assessee for developing the Rail system as per the norms and supervision of Indian Railways. The revenue authorities alleged that the Railway system have been developed to facilitate the transportation of goods for the assessee from and upto the factory premises, and therefore the Agreements entered into by the assessee with the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to shunt the wagons from such point to his premises and back with his own labour. However , no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee's case siding charges are not leviable. 38. The rail systems were developed by assessee under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreements substantiating the same are as under:- (a) Clause No. 2, Agreement to Construct Siding - Wherein it is mentioned that the Railway administration will at the cost and the expenses of the applicant, in all respect, construct the railway sidings Further kindly be informed that, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0CCB, duly certified and audited by M/s. G.P Kapadia Co., Chartered Accountants along with Balance Sheet, P L account, Schedules forming part of Balance sheet and P L Account. 41. However, the AO did not agree with assessee's contention and held that Rail systems developed by assessee is not eligible for claim of deduction u/s.80IA (4). Now, we deal precisely with the observation made by CIT(A) for declining Assessee's claim of deduction u/s.80IA. 42. With regard to CIT(A)'s observation as to whether rail systems developed by M/s. L T were in accordance with the Build-Own-Lease- Transfer (BOLT) scheme of the Indian Railways, we observe that L T had entered into agreements with the railway authorities to develop, operate maintain the rail systems, which in fact the company has done from the initial day. The assessee was permitted to setup and even operate maintain the rail systems so developed. Further, regarding' Circular No. 733 dated 03-01-1996, we found that the Circular clarifies that tax holiday benefit u/s. 80-IA of the Act was also available to private enterprises which only built and leased out the rail system to the Indian Railways. In sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreements under the supervision and as per guidelines of Indian Railways. As per the relevant provisions of law during relevant period there is no requirement for Rail Infrastructure to be In BOLT scheme, to be eligible for claiming deduction under Section SO-lA (4)(i). Section 80-lA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) ...... (a) it is owned by a company registered in India (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: 45. With regard to objection of revenue authorities on applicability of CBDT circular No.733 on BOLT schemes, systems developed under BOLT scheme are also eligible for 80-IA benefit, and in no way restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, for construction of the siding under the supervision of the Railways, the contract for construction and supervision has been awarded by the applicant and the entire cost has been borne by the applicant. (b) Clause No. 6 - Payment by Applicant against the total estimated cost -wherein it is mentioned that, The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration (c) Clause No. 7(a) - Permanent way materials - The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50. The question of allowability of the deduction u/s. 80IA in respect of rail systems has been settled in earlier years by the Hon'ble ITAT in assessee's own case. The facts and the agreements were also placed before authorities in those years. Therefore, the claim based on same facts needs to be allowed following the principle of Consistency in assessment proceedings. Even though the 'principles of res judicata' do not apply to income tax proceedings and each assessment year being a separate unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year. The above principles have been accepted in the undernoted case: H.A. Shah Co v. CIT [1956] (30 ITR 618) (Bom.) Amalgamated Coalfields Ltd. v. Janapada Sabha AIR 1964 SC 1013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54. We have also verified the calculation of revenue from rail system, filed before the lower authorities and found that the basis adopted for calculating the revenue from rail system is, lower of the Freight chargeable through Road and Rail. The Rail Freight being lower is considered after discounting it further by 50% based on the Circular of Indian railways for the freight chargeable upto the nearest railway station. Freight Rates are considered as per the Freight Rate chart Freight Circulars issued from time to time by Indian Railways, based on the classification of the goods transported. The Railway freight rates are uniformly charged to everyone by Indian Railways. The copies of Form 10CCB including the Profit and loss account, Balance sheet along with Schedules, giving- therein the basis for calculation of revenue has been submitted before the lower authorities and had been duly examined by us and found to be correct. 55. We also found that the loading and unloading of goods is being done by the integrated Rail system set up by the assessee and expenses which were incurred earlier for loading and unloading of materials at the plant as well as the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement. Any benefit to the business even though it is first enjoyed by the particular trade or establishment eventually is for the general public good. It has to be noted that several industries may come up on both the sides of sidings from the interchange point till factory gate, if anyone of them wants to make use of railway sidings, it is permissible for the Railway Administration to entertain such request and by making use of the exiting siding, can extend or branch off and lay railway tracks to the industry which makes the request and lay siding accordingly. Thus, the railway siding from the point of interchange till factory gate of the assessee has immense potential, with enabling powers to the Railway Administration (which itself is a public department), to be developed into a facility that will ensure to the public at large. The railway sidings are always constructed for captive consumption. Thus, the provisions of section 80IA(4) cannot be read in the manner to make it redundant, when the legislature in all its wisdom intended to give benefit of tax holiday for construction of infrastructure facility in the form of railway which is meant for captive consumption. 58. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61. As far as operations is concerned, we found that the assessee carries out all the following operations for smooth movement of its goods, viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee. 62. With regard to CIT(A)'s conclusion at page 42 of A.Y. 2010-11 to the effect that various conditions given in Section were not met with, we observe as under:- a. Section 80-IA (4)(i) provides the following conditions to be complied with for claiming deductions; (i) any enterprise carrying on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely:- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the conditions specified in section 80IA(4) has been complied with by the assessee entitling it to claim the tax holiday. 68. With regard to CIT(A)'s observation that the actual operation of Rail System [i.e. running of goods train] onto the private sidings between the serving railway station and plant premises [upto interchange point! exchange yard], was being done by the Indian Railways and not by the assessee Company. 69. We found that the CIT(A) has equated running of goods train with the operation of Rail System . This is the sole basis on which he has arrived at his conclusion that since the assessee is not running the goods train it is not operation of Rail System and hence not eligible for claiming deduction under section 80IA(4). 70. As per our considered view, the operation of Rail System is not simply running of goods train. Operation of Railway Systems comprises of various activities viz. shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory premises, is adopted as the basis of calculating the revenue of the railway undertaking. The revenue is, however, computed for the actual services rendered by the railway undertaking to the cement division. 77. After verifying the computation of income eligible for deduction u/s.80IA, as filed by assessee, we found that the CIT(A) has misunderstood the working of the revenue calculation and alleged that such working is ill-conceived as the actual transportation of materials on the siding is carried out by the railway authorities. Based on such misunderstanding, he further alleged that assessee has claimed deduction for notional profits whereas section 80lA allows deduction for profits derived from actual operations. 78. In this regard, we observe that the railway systems of the assessee has been rendering following services to the cement division: shunting of the wagons, placing of the wagons at appropriate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands, the CIT(A) has merely stated that crucial facts were not disclosed by the assessee without referring to any specific facts which were not disclosed. Perhaps he is indicating about the operations of railway siding being carried out by the railways and not by the assessee. However, as aforesaid, he is comparing the operation of railway siding with merely hauling of wagons. The operations of railway siding involves various activities other than the hauling of wagons. Mere haulage of wagons cannot be equated with operations of railway siding. We found that assessee has filed reports in Form 10CCB from M/s G.P.Kapadia Co., Chartered Accountant. The CIT(A) himself has allowed the deduction in AY. 2009-10 based on the similar facts available on records but changed his decision merely based on the replies to questionnaire from various Railway Department. 83. The CIT(A) has also raised a query as to whether the L T Ltd. which had developed said rail system was eligible for deduction u/s 80lA in respect of profit, if any, otherwise on operation maintaining that system under the provisions that existed at the relevant time [prior to 01.04.2002] when such infrastructure facilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding toll road instead of hitherto existing expression 'road', and (iii) that the requirement of transferring the infrastructural facilities developed by the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. These changes, however, would not alter the situation vis-a-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction 86. In terms of the above averments, after acquiring the cement business from L T, the assessee started claiming deduction for Rail system u/s. 80- IA from Assessment year 2004-05 onwards since it satisfied all the conditions as prescribed u/s 80IA(4) as it stood during AY. 2004-05, viz: (a) It is owned by a company registered in India. (b) It has entered into an agreement with the Government for developing / operating /maintaining the infrastructure facility, and (c) It has st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1998-99. After the final completion of the project, the assessee-company applied directly for a permanent registration certificate of its status as a small scale industry (SSI) under section 11-B of the Industrial Development Regulation Act, 1951 (IRDA) to the prescribed authority, who granted the certificate dated 30-3-1998, which was a conclusive and final proof of such a status under the provisions of IRDA. The return of income filed earlier by the assessee for the assessment year 1999-2000 as subsequently revised, wherein a claim of deduction under section 80-IA was made. The Assessing Officer disallowed the claim of the assessee, on the ground that the assessee started production from the assessment year 1997-98 itself, the year in which the assessee was not a small scale industry, and, therefore, the assessee did not fulfil the condition of section 80-IA in the initial year. On appeal, the Commissioner (Appeals), allowed the assessee's claim under section 80-1A. On Revenues appeal, the ITAT held that for claiming deduction under section 80-IA, it has to be determined at end of relevant previous year that as to whether assessee is registered as SSI and there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court in case of Bajaj Tempo Ltd. v. CIT [1992] 62 Taxman 480 /196 ITR 188 held that a provision in the taxing statute for promoting growth and development is to be construed liberally and hence, even the restriction contained in such a provision has to be construed so as to advance the objective of the provision and not to frustrate it. 94. The CIT(A) has also raised an objection to the effect that since L T was not eligible for deduction u/s.80IA on operation of those rail system, then whether the assessee company, which inherited the cement business [i.e. cement plants together with said rail system] of the L T Ltd in the FY. 2003-04 on account of demerger, could be treated as eligible to the deduction under the aforesaid section in respect of profit, if any, of those rail system for the later years. In this regard we observe that assessee has inherited the cement business from L T Ltd., in FY. 2003-04 on account of merger. Post merger it started claiming deduction for Rail system u/s. 80-IA from Assessment year 2004-05 onwards as it satisfied all the conditions as prescribed u/s 80IA(4). Section 80IA(12) provided that in the scheme of amalgamation or merger, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Vs CIT [(1992) 193 ITR 321 (SC)], unless there is a change in the material facts, the issues which have been settled one way or other must to be disturbed. In this view of the matter, and respectfully following the coordinate bench in the case of Ultratech Cement Ltd (supra), we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance in respect of claim of 80IA in respect of rail system. The assessee gets the relief accordingly. 31 It is relevant to refer to decision of Kolkata ITAT in the case of RASHMI METALIKS LTD in ITA No 813 to 816/Kol/2017 dated 02/05/2018 wherein it is held as under: 38. Learned Counsel for the assessee also took us through the agreement entered into by' the assessee in respect of the Railway System operated by it and pointed out that the clauses in the agreement are exactly identical and it is a standard agreement and since the facts and circumstances being similar the issue of deduction u/s. 80IA in respect of Railway system should be allowed in favour of the assessee. On a perusal of the agreement dated 16.01.2007 entered with South Western Railway, '. Hubli division for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed above, we hold that the assessee is entitled for deduction u/s. 80IA in respect of the Railway System and water Supply project and therefore we set-aside the orders of the Ld- PCIT passed u/s 263 of the Act for the Assessment Years 2008-09 to 2011-12. 44. In the result, appeals of the assessee are allowed. 40. The judgment of the Hon'ble Bombay High Court in the case of M/s. Ultra Tech Cement Ltd in ITA No.6070 of 2010 has confirmed the order of the ITAT. The Hon'ble Madras High Court in the case of M/s Tamilnadu Petro Products Ltd. Vs ACIT 338 ITR 643 allowed deduction u/s 80IA of the Act where the facility was one of captive consumption. Thus even if the facility was for captive use, deduction u/s 80IA(4) cannot be denied. Thus applying the proposition of law laid down in all these case laws, in the facts of the case we hold that, on merits the assessee is entitled to claim deduction u/s 80IA of the Act. Hence we find the orders of the ld. Pr.CIT passed u/s 263 not sustainable on facts as well as in law. Thus we hold that the order of the AO in all the four assessment years 2009-10 to 2012-13, are not erroneous or prejudicial to the interest of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h allocation should be made on the basis of total cost of the respective eligible undertaking to the total cost (aggregate of cost of cement manufacturing unit and cost of the eligible unit) instead of allocation on the basis of turnover made in the order u/s 143(3). 50. Similar issue was considered by us in the assessee Appeal in Ground No 4 in AY 2009-10 and held as under: 38. Considered the rival submissions and material placed on record. It is relevant to refer to decision of co-ordinate Bench in the case of Ambuja Cement Ltd. in ITA No. 1889 and 1241/Mum/2018, 2384, 2958, 3475 and 3843/Mum/2019 vide its order dated 07.11.2022 has decided issue in favour of assessee: 102. We find that Section 80IA(5), which has been heavily relied upon by the assessee, provides that notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entical with facts of decisions referred supra. Considering decision of Coordinate Bench referred supra, addition made by Assessing Officer is thus deleted and this ground of appeal is allowed. 51. Respectfully following the above said decision, we allow the ground raised by the assessee. 52. In the Ground No.7, Assessee has raised the following grievance: 7(a). On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in apportioning a part of the indirect Head Office expenses aggregating to Rs. 342,37,67,717/- and adjusting such allocated amount of Rs 5,19,49,509/- in computing Tax Holiday u/s 80IA for eligible Captive Power Plants, without establishing any nexus between the nature of expenses and such eligible units of the appellant. 7(b) Without prejudice to the above, on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the action of AO in apportioning a part of the indirect Head Office expenses aggregating to Rs. 348,44,83,383/- (including Rs 6,07,15,666/- being R D Expenses) and adjusting such allocated amount of Rs 22,85,42,527/- in computing Tax Holiday u/s 80IC for eligible Gagal 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the profits accordingly. The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if they are independent of each other, and once that fiction sets in, the expenses incurred by someone other than eligible unit, in the interest of the eligible unit, are to be taken into account while computing the profits of the eligible unit. Accordingly, the allocation of expenses, as the learned Assessing Officer rightly contends, must be done. The assessee has further contended that HO expenses are not derived from or derived by the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per our above directions. This ground of appeal is partly allowed. 57. Respectfully following the above said decision, we partly allow the ground raised by the assessee. 58. In the Ground No.9, Assessee has raised the following grievance: On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified rather grossly erred in confirming the action of AO in not allowing deduction for Education Cess levied on Income Tax and Dividend Distribution Tax aggregating to Rs. 11,14,63,106/- as allowable expenditure in computing the total income. 59. During the course of appellate proceedings, Ld.AR has not pressed this ground of appeal hence same is dismissed as not pressed. 60. In the Ground No.10, Assessee has raised the following grievance: On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified rather grossly erred in confirming the action of AO in disallowing loss arising on write off of under construction assets amounting to Rs. 74,40,899/- in computing total income. 61. Similar issue was considered by us in the assessee Appeal in Ground No 13 in AY 2011-12 and held as under: 103 Considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent by the assessee on sites to bring into existence a new asset and new source of income and therefore, such expenditure was in the nature of capital expenditure. 6. Aggrieved by this order/disallowance, an appeal was preferred before the first appellate authority by the assessee. That also came to be dismissed and the Commissioner of Income Tax (Appeals) agreed with the assessing officer. Thereafter, the tribunal was approached and Mr. Malhotra would submit that in reversing the concurrent views, the tribunal committed an error of law, which is apparent on the face of the record. It is the tribunal's finding, which is perverse to say the least. It is the stand of the assessee, which was culled out from a letter addressed by the assessee itself. Once that letter and other record was analysed to arrive at the eventual conclusion, then, the tribunal should not have interfered with it. The interference by the tribunal raises substantial questions of law. 7. On the other hand, Mr. Mistri learned senior counsel appearing for the assessee supported the view of the tribunal. It is submitted by him that the expenditure in question was incurred for setting up/construction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and profitable. When the towers are not exclusively meant for leasing out to third parties for earning the revenue, but used for transmission of telephone signals of assessee's own cellular services, then, it cannot be said that the towers, which are used for the assessee's own business, are new source of income. A cellular tower can be a new independent source of income, if it is erected exclusively for leasing out to the other operators. However, on facts, this was not the position and the tribunal, therefore, rightly concluded that in series of decisions, the High Courts and the Hon'ble Supreme Court of India has laid down the principle that if an expenditure is incurred for doing the business in a more convenient and profitable manner and has not resulted in bringing any new asset into existence, then, such expenditure is allowable business expenditure. In the present case, no new business was set up, but towers in addition to which were already set up were proposed at site, which project was later on abandoned. 10. We do not find that the tribunal has committed any perversity or applied incorrect principles to the given facts and circumstances. When the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence, submission of a tender for the Vaizag Port was not in the nature of venturing into a new line of business. 7. In Alembic Chemical Works Co. Ltd. (supra) a pharmaceutical Company had obtained technical know-how from abroad for increasing yield of penicillin in its existing plant, the know-how being utilised for expansion of the existing business. The Supreme Court found that there cannot be a single criterion determinative as to whether a particular outlay is capital or revenue. It was held; the expenditure being 'once for all' is inconclusive to find it as spend for capital and the test of 'enduring benefit' may break down in many instances. What is relevant is the purpose of the outlay and its intended object and effect, considered in a common- sense way having regard to the business realities (sic-para14). The Honourable Supreme Court held expense incurred for acquisition of technical know-how for achieving higher production of penicillin was a business expenditure and not in the nature of a capital expenditure especially when the assessee was engaged in the business of manufacture and sale of drugs. We reiterate the finding of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Echjay Forgins (P) Ltd. (2001) 251 ITR 15. We do not find any infirmity in the order passed by the CIT(A) to the extent it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed. 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. 65. Respectfully following the above decision, we allow the ground raised by the assessee. 66. In the Ground No.12, Assessee has raised the following grievance: 12(a). On the facts and in the circumstances of the case, the Ld. CIT(A) was not justified and grossly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is granted for only those units which are located in the backward areas and which have undertaken substantial expansion, however incentives are available only post production and therefore he finds no difference in sales tax and excise exemption claimed . Following the stand taken for sales tax exemption etc, he held that the excise exemption receipts are also revenue in nature. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) also confirmed the stand of the Assessing Officer on the short ground that the exemption notification does not specifically state the object and purpose of the concession to be promotion of industry in the specified areas etc. The assessee is aggrieved, and is in appeal before us. 18. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 19. We have noted that the Assessing Officer himself states that he finds no difference in sales tax and excise exemption claimed , and in the immediately preceding paragraphs in this order, we have held that sales tax exemption receipt is a capital receipt in nature. There cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that has evolved is that, not the nomenclature of the subsidy or the fact that, the computation of the subsidy benefit is in terms of tax payable, would not be conclusive. What is to be examined in each case is the purpose for granting such subsidy. We may refer to the decision of the Supreme Court in case of CIT v. Chaphalkar Bro. [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR 279. It was a case arising out of judgment of this Court in which, the dispute between assessee and the Revenue was with respect to subsidy granted to the multiplex cinema operators in the form of entertainment tax waiver. The subsidy was granted in view of the fact that, industry was highly capital intensive. The Revenue argued that, the subsidy was revenue in nature. This Court after referring to several decisions of the Supreme Court including the case of CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 and Sahney Steel and Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253 (SC) held that, subsidy had not been granted for construction but only after setting up of a new industry which was in the nature of assistance given for the purpose of carrying on business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the subsidy was granted under schemes framed by the State and the Central Government, to be given to the assessee s who set up new industry in Kutch District. The scheme was envisaged to encourage investment which would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. Nevertheless, the purpose test would ensure that, the subsidy was capital in nature. 9. The second question raised by the Revenue is consequent of the first question, in which, te Revenue argues that, if the subsidy is treated as a capital in nature, the same must bring down assessee's costs of acquisition of plant and machinery. The assessee's claim of depreciation to that extent must shrink. Assessee argues that, the Tribunal correctly held that, the subsidy had not been given in relation to acquisition of plant or machinery and that, therefore, same cannot be adjusted towards cost of acquisition. 10. It is undoubted that, the subsidy had no relation to the assessee's acquisition of plant or machinery. It was to be granted to an industry which had set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of cash subsidy should be determined had to be considered by the Government. The Government, in order to determine the amount of cash subsidy, decided to follow one of the recognized methods of working it out on the basis of the amount invested by an entrepreneurs in acquiring capital assets as cash subsidy. The scheme does not say as to in what manner the subsidy was granted is to be utilized. In other words, the entrepreneur to whom the subsidy was granted was free to utilize it in any manner he liked. It would, therefore, appear that quantification of subsidy on the basis of investment was a measure adopted by the Government for convenience to work out the subsidy. If subsidy could be utilized by the entrepreneur in any manner he liked, could it be said that it was granted for meeting the cost of the capital assets? In our opinion, taking an overall view of the various provisions of the scheme, it is difficult to hold that cash subsidy was granted to entrepreneur to meet the cost of the fixed assets or part thereof The cost of the fixed assets was merely adopted as a measure for working out subsidy. In fact, a careful examination of the scheme reveals that it is the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note): Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actual cost The expression 'actual cost' in section 43(1) of the Income Tax Act,1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc. 20. In view of these discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee. The Assessing Office is, accordingly, directed to delete the impugned addition . 43. In view of the above discussions, as also bearing in mind the entirety of the case, we see no legally sustainable merits in the grievance of the Assessing Officer. The views expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of AO in adding Rs.97,00,000/- being notionally allocated expenditure allegedly incurred to earn dividend income in computing Book Profit u/s 115JB 73. Similar issue was considered by us in the Departmental Appeal in Ground No 20 in AY 2005-06 and held as under: 129. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee s own case for A.Y. 2002-03 in ITA No 4987/M/2007 dated 29/07/2015 has decided issue in favour of assessee. The relevant finding is reproduced herein below: 5. Additional ground no.4 is about exclusion of amount transferred to debenture redemption reserved in computing group profit of provisions of section 115JB of ₹. 50 crores. 5.1. During the course of hearing before us, representatives of both the sides agreed that identical issue had been decided in favour of the assessee, by the Tribunal while adjudicating the appeals for AY.s. 1997-98 (ITA/3298/Mum/01), 1998-99 (ITA/639/M/03), 1999-00 (ITA/7594/Mum/04), 2000-01 (ITA/9570/Mum/04). We find that the decision of the Tribunal for AY.1998-99 for exclusion debenture redemption reserved had not been challenged by the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings, the Assessee, vide letter dated 16.11.2006, filed detailed submission substantiating the claim. However, the Assessing Officer rejected the claim of the Assessee by placing reliance on the judgment of Hon ble Bombay High Court in the case of CIT vs. Veekay Lal Investments Co. Pvt. Ltd. 249 ITR 597 (Bom) 19.2. Being aggrieved, the Assessee filed before CIT(A) on this issue. 19.4. We note that in the immediately preceding Assessment Year 2003-04, the Tribunal has decided this issue in favour of the Revenue, vide common order 13.03.2019 passed in ITA No. 4242/MUM/2007 and ITA No. 4988/MUM/2007, holding as under: 52. Under this issue the revenue has challenged the deletion of the addition of profit on sale of fixed assets in computation of book profit u/s 115JB of the Act in sum of ₹. 5,19,20,846/-. At the time of argument, the Ld. Representative of the assessee has disclosed this fact that this issue has been decided against the assessee in the ITA. No. 5259 4895/Mum/2007 Assessment Year: 2004-05 assessee s own case for the A.Y.2002-03 in ITA. No.4241/M/2007 dated 29.07.2015. Since this issue has been decided against the Assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mere book keeping entry cannot be treated as income. . 113. On perusal of the aforesaid decision, it is evident that the assessee will be entitled to indexed cost of acquisition while computing capital gains u/s 115JB of the Act. It is also to be noted that in the immediately preceding year Coordinate Bench has held that long term capital gains credited in the books of accounts is taxable to which even the Ld. AR fairly conceded subject to the decisions as relied supra. However, he claimed that the indexed cost of acquisition does not form part of income computed u/s 115JB of the Act. Respectfully following the ratio laid down by Hon ble Karnataka High Court, the Assessing Officer is directed to recompute taxable long term capital gains arising on transfer of fixed assets after giving the benefit of indexed cost of acquisition while computing taxable profits u/s 115JB of the Act. Thus, the related ground of appeal in Departmental Appeal as well as Assessee s appeal is partly allowed subject to the above directions. 77. Respectfully following the above said decision, we partly allow the ground raised by the assessee. Additional ground: 78. That o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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