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TMI Blog2014 (3) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... the succeeding years." 3. The facts of the case are that before the Assessing Officer, the assessee did not make any claim with regard to exemption of sales tax, entry tax and electricity duty subsidy claimed to have been received by the assessee during the accounting year relevant to the assessment year under consideration. Before the learned CIT(A), the assessee raised following additional ground:- "That the amount of Rs. 3,59,71,541 accruing to the applicant on account of exemption from sales tax, entry tax and electricity duty was capital receipt not exigible to tax." 4. Learned CIT(A), after admission, discussed the above additional ground. The relevant finding of the CIT(A) in this regard reads as under:- "Reliance has been placed on the judgment of the Hon'ble Supreme Court of India in the case of Jute Corporation of India Ltd. Vs. CIT 187 ITR 688 wherein the Hon'ble Court has held that the powers of the first appellate authority are co-terminus with that of the AO and there appears to be no reason as to why the appellate authority can't modify the assessment order on additional ground even if not raised before the Assessing Officer. 2.1 The additional groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of his contention that the decision of ITAT in this regard for AY 2004-05 is not a binding precedent. His arguments can be summarized as under:- (i) That the ITAT misapplied the decision of Hon'ble Apex Court in the case of Sahney Steel and Press Works Ltd. and Others Vs. CIT - [1997] 228 ITR 253 and CIT Vs. Ponni Sugar and Chemicals Ltd. - 306 ITR 392 (SC). (ii) That the ITAT wrongly distinguished the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Siya Ram Garg - 237 CTR 321 (P&H). (iii) The ITAT failed to follow the series of decisions of other High Courts. He specifically referred to following decisions:- (a) CIT Vs. Rasoi Ltd. - [2011] 335 ITR 438 (Cal). (b) Shree Balaji Alloys Vs. CIT and Another - [2011] 333 ITR 335 (J&K). (iv) That the ITAT failed to follow the decision of the Special Bench of ITAT in the case of DCIT Vs. Reliance Industries Ltd. - [2004] 88 ITD 273 (Mum.)(SB). It is submitted by the learned counsel that the decision of Special Bench of ITAT is binding on a Division Bench. He further stated that the ITAT misunderstood and misapplied the decision of Hon'ble Apex Court in the case of CIT Vs. Reliance Industries Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the issue of taxability of sales tax and other subsidies is covered in favour of the Revenue by the decision of ITAT in assessee's own case in the immediately preceding year. That the assessee is seeking review of the decision of ITAT in the earlier year by another Division Bench of ITAT in the subsequent year which is not permissible by law. If the assessee is aggrieved by the decision of ITAT for AY 2004-05, it can either file the miscellaneous application for rectification of the above order or file appeal before Hon'ble Jurisdictional High Court. In support of his contention, he relied upon the decision of Hon'ble Delhi High Court in the case of DLF Universal Ltd. Vs. CIT - [2008] 306 ITR 271 (Delhi) and stated that Hon'ble Delhi High Court has held that it is not only a matter of judicial propriety but also a matter of judicial discipline that one Bench of the Tribunal should not take a contrary view with another Bench of the Tribunal but should refer the matter to a Larger Bench for getting the controversy resolved. He, therefore, submitted that the subsequent Division Bench has no authority to take a contrary view than what is taken by the ITAT in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention, the ITAT, while passing the order for AY 2004-05, has violated the above settled principle of judicial propriety. But, the Revenue is of the opinion that the above principle of judicial propriety should be strictly observed by us while passing the order for AY 2002-03. We also respectfully agree with both the parties that it is a settled judicial propriety that one Division Bench should not take a view contrary to the view taken by another Division Bench. Now, whether the ITAT violated the above settled principle of judicial propriety or not is not for us to adjudicate. It has been pointed out by the learned counsel that the assessee had filed the appeal before the Hon'ble Jurisdictional High Court against the order of ITAT for AY 2004-05 and the matter is pending before them. Therefore, whether there is violation of principle of judicial discipline or not in AY 2004-05, is sub judice before Hon'ble High Court. Now, so far as this year is concerned, we find that there is a decision of Division Bench of ITAT in assessee's own case for AY 2004-05. Whether the subsidy is a capital receipt or revenue receipt would depend on the incentive scheme of the concerned gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the subsidy given with the object of setting up the industry and the subsidy given after the industry commences production and conditional upon the commencement of production. Factually, the Tribunal found that the assessee's case which fell under the Maharashtra Scheme was a case where the subsidy was given for the purpose of facilitating the assessee to set up an industry in Patalganga, Raigad District, which was a notified area. The actual disbursement took place after the assessee commenced production, but, according to the Tribunal, it was only a mode of disbursement and had nothing to do with the object for which the subsidy was given. Thus, it was found that the Tribunal did notice the crucial observations of the Supreme Court in Sahney Steel & Press Works Ltd.'s case (supra) which gave primacy to the object of the subsidy over the fact that it was given after the commencement of production. The Tribunal's observations made on the basis of the observations of the Supreme Court in Sahney Steel & Press Works Ltd.'s case (supra) also showed that the Tribunal was alive to the distinction between the character of the subsidy given with the object of promoting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous. The relevant observation of their Lordships reported at page 267 of 228 ITR reads as under:- "The Madhya Pradesh High Court in the case of CIT v . Dusad Industries 162 ITR 734, dealt with a case where Government had framed a scheme for granting sales tax subsidies to industries set up in backward areas. The High Court was of the view that the object of the scheme was not to supplement the profits made by industries. In that view of the matter, the High Court held that the subsidies given under the said scheme by the Government to newly set up industries were capital receipts in the hands of the industries and could not be taxed as revenue receipts. In that case, 75 per cent of the sales tax paid in a year for a period of five years from the day of starting of production was to be given back by the Government to the industry concerned. The High Court was of the view that obviously the subsidy was given by way of an incentive for capital investment and not by way of addition to the profits of the assessee as was clear from the facts and circumstances of the case. The Madhya Pradesh High Court, however, failed to notice the significant fact that under the scheme framed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at expenditure relatable to trips made for non business purposes could only be disallowed by the Department. From the order of the Tribunal in assessee's own case placed at paper book page 286 onwards we find that the matter has been discussed by the Tribunal at page 304. The Hon'ble Tribunal had held that the case of the assessee could not be shut out in its entirety and it observed that in relation to trips to Delhi, Tirupati, Ghana no purpose has been stated by the assessee even in the details filed before them. Therefore, the disallowance to that extent was justified and as regards expenses on trips to other places where assessee was able to explain the purpose of visits, the Tribunal had allowed the same to have been incurred for business purposes. However, in the present case, the Assessing Officer had specifically pointed out journeys undertaken by the assessee which were not for business purposes and assessee neither before the Assessing Officer nor before ld.CIT(A) was able to produce any evidence to claim that air journeys performed in respect of places noted in the assessment order were undertaken for business purposes. Therefore, the facts of assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness purposes. Needless to mention that he will allow adequate opportunity of being heard to the assessee before making such disallowance. 19. Ground No.3 of the assessee's appeal reads as under:- "That the Commissioner of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in upholding the action of the Assessing Officer in charging interest under section 234B of the Act." 20. At the time of hearing before us, learned counsel fairly agreed that ground No.3 is only consequential. We, therefore, direct the Assessing Officer to rework out the interest under Section 234B, if any, after determining the income as per our order. ITA No.608/Del/2009 (Revenue's appeal : AY 2002- 2002-03):- 21. Ground No.1 of the Revenue's appeal reads as under:- "On the facts and in the circumstances of the case, the ld.CIT(A) has erred in allowing depreciation of Rs. 2,14,03,225/- under section 32 of Income-tax Act as against the straight line method adopted by the AO." 22. The relevant facts are that in its return of income, the assessee claimed depreciation of Rs. 2,14,03,225/- on the written down value of the assets of the power ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the previous year in which the assessee began to generate power, whichever is later. It is seen that no particular format or procedure has been laid down in the second proviso in relation to exercise of option by an assessee. Second proviso only says that option is to be exercised before the due date for furnishing the return of income under section 139(1) for the assessment year 1998-99 in respect of power generating undertaking then existing and for the first assessment year in which a new undertaking begins to generate power. The case of the assessee is that it began to generate power during the previous year relevant to assessment year 1999-2000. As per Annexure- D annexed to the computation of income chargeable to tax filed along with the return of income for assessment year 1999-2000, the assessee had claimed depreciation in accordance with sub-rule (1) read with appendix-I." 26. Respectfully following the above decision on an identical issue on similar facts and circumstances of the case, we uphold the action of the learned CIT(A) in this regard during the year. In the result, ground No.1 is rejected. 27. Ground No.2 of the Revenue's appeal reads as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A), the Revenue is in appeal. 32. The learned AR, at the outset, pointed out that the Revenue had moved against the said order of the Tribunal for the AY 2001-02 which has been dismissed by the Hon'ble Punjab & Haryana High Court vide its order dated 2.9.2008 for the AY 2000-01 reported in 180 Taxman 543 and for AY 2001-02 in ITA No.53/2008. 33. In support of the ground, the learned DR has basically placed reliance on the assessment order. He submitted that the decision of the Tribunal in the case of Hero Motor Corporation for the AY 2006-07 is relevant for adjudication of an identical issue. He submitted further that the decision of Delhi Bench of the Tribunal in the case of Additional CIT Vs. Jindal Steel and Power Lid - 16 SOT 509, which is assessee's own case, is against the Revenue but the issue remains open for consideration of the facts brought out by the Assessing Officer i.e. the losses on T&D suffered by the SEB (which supplies large geographical areas) are not there in the case of internal captive consumption and hence internal transfer pricing would require to factor the same to determine if the price charged internally is at arm's length or is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges incurred in relation to obtaining loans/issuing debentures for the expansion of the business of the assessee should be allowed as revenue deduction :- (i) India Cements Ltd. Vs. CIT - 60 ITR 52 (SC). (ii) DCIT Vs. Gujarat Alkalies and Chemicals Ltd. - 299 ITR 85 (SC). (iii) CIT Vs. Super Spinning Mills Ltd. - 296 ITR 168 (Chennai). (iv) CIT Vs. Meenakshi Mills Ltd. - 290 ITR 107. (v) Borosil Glass Works Ltd. Vs. ACIT - (2004) 3 SOT 940 (Mum.Tri.). (vi) Premier Automobiles Limited Vs. CIT - 80 ITR 415 (Bom). (vii) Gujarat Guardian Vs. JCIT - 114 TTJ 565 (Delhi) affirmed by Delhi HC in 177 Taxman 484/222 CTR 526. (viii) Shri Rama Multi Tech Limited Vs. ACIT - 92 TTJ 568 (Ahd.Tri.). (ix) Havell's India Limited Vs. ACIT - 140 TTJ 283 (Del.). 40. The learned AR also cited the decision of Hon'ble Rajasthan High Court in the case of Secure Meters Ltd. - 321 ITR 611 (Raj.), wherein even in the context of convertible debentures, expenditure incurred was held to be allowable as a revenue deduction. He pointed out that the SLP preferred by the Revenue against the said order has also been dismissed by the Hon'ble Supreme Court in SLP No.10548/2009. 41. Having go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere admittedly issued in order to raise funds for meeting capital expenditure and for working capital requirements. The setting up of 55 MW power project at Raigarh was part of expansion of the existing business of the assessee. In support, he placed reliance on the following decisions:- (i) Setabganj Sugar Mills Ltd. Vs. CIT - 41 ITR 272 (SC). (ii) CIT Vs. Prithvi Insurance Co. Ltd. - 63 ITR 632 (SC). (iii) Produce Exchange Corporation Ltd. Vs. ITO - 77 ITR 739. (iv) B.R. Ltd. Vs. V.P. Gupta CIT Bombay - 113 ITR 647 (SC). (v) India Cements Ltd. Vs. CIT - 60 ITR 52 (SC). (vi) CIT Vs. Rane (Madras) Ltd. - 293 ITR 459 (Del.). (vii) Jay Engineering Works Ltd. Vs. CIT - 311 ITR 405 (Del). (viii) Indorama Synthetics Ltd. - 333 ITR 18 (Del). (ix) CIT Vs. Monnet Industries Ltd. - 332 ITR 627 (Del.). 46. Learned AR further submitted that the proviso to Section 36(1)(iii) inserted by the Finance Act, 2003 effective from 1.4.2004, has been held to be prospective in nature by the Hon'ble Supreme Court in the case of Core Health Care Ltd. - 298 ITR 194. 47. Considering the above submissions and especially the decisions cited by the learned AR including the decision of Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , under similar facts, the claim of the assessee was allowed. The Mumbai Bench of the Tribunal in the said case of HPCL (supra) has held that just because an expenditure was voluntary in nature and was not forced on the assessee by a statutory obligation, it could not cease to be a business expenditure. In that case, the assessee company had incurred expenditure on 20 point programme in view of the specific directions of the Government of India. The Assessing Officer disallowed the expenditure incurred. The Tribunal has, however, deleted the disallowance with the said finding and observation that it cannot but be in the business interest of the assessee company to abide by specific direction of the Government of India for 20 point programme. In this regard, the Tribunal has followed the ratio laid down by the Hon'ble Madras High Court in the case of Madras Refineries Ltd. - 266 ITR 170 (Mad). Hon'ble Madras High Court held that the concept of business is not static. It is evolved over a period of time to include in its fold the concrete expression of care and concern for the society at large and the people of the locality in which the business is located in particular. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills (P) Ltd. (supra), Hon'ble Supreme Court has been pleased to lay down the basis for determining as to whether the expenditure would constitute "current repairs" allowable under Section 31 of the Act. In the case of Ramraju Surgical Cotton Mills (supra), the Hon'ble Supreme Court has been pleased to remit the matter to the first appellate authority in the absence of requisite details regarding production capacity remaining constant even after replacement. We find that in the present case before us, it is undisputed fact that there is no increase in the production capacity. We thus are of the view that the learned CIT(A) under the facts and circumstances of the case has rightly come to the conclusion that the claimed expenditure was revenue in nature. The same is upheld. Ground No.6 is accordingly rejected. 56. Consequently, the appeal of the Revenue is dismissed. ITA No.221/Del/2009 (Revenue's appeal : AY 2005-06):- 57. The Revenue has questioned the first appellate order on the following grounds :- "1. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law in allowing deduction u/s 80-1A at Rs. 196,70,79,113/- as against at Rs. 117, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITD 273, whose facts are identical to that of the appellant company. 4. That the Commissioner of Income Tax (Appeals), Rohtak has grossly erred on facts and in the circumstances of the case and in law in not allowing the subsidy amounting to Rs. 58,88,22,668/- as capital receipt for the reason that the benefit of the subsidy part became operative only at the time of commencement of the production, therefore revenue receipt in defiance of the decision of Hon'ble Supreme Court in case of Ponni Sugar & Chemicals Ltd. v. CIT (2008) 174 Taxman 87 in which it was held that 'the point of time when the subsidy is paid is not relevant'. 5. That the Commissioner of Income Tax (Appeals) erred on facts and in law in disallowing a sum of Rs. 14,58,085 out of the expenditure on running and maintenance of aircrafts for alleged non business use. 6. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the action of the Assessing Officer in charging interest under section 234B of the Act." 62. Both the parties agreed that grounds no.1 to 4 are having an identical issue as to whether the claimed subsidy amounting to Rs. 58,88,22,668/- is capital receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for statistical purposes. 68. Ground No.6 regarding charging of interest under Section 234B of the Act is consequential in nature, hence, does not need independent adjudication. 69. The assessee has raised the following additional ground:- "That on the facts and circumstances of the case and in law the assessing officer may kindly be directed to allow deduction of Rs. 12,69,91,881 while computing 'book profits' in terms of clause (iv) of Explanation 1 to section 115JB of the income Tax Act, 1961 ('the Act')". 70. Learned AR submitted that the appellant does not wish to press this additional ground, wherein a direction has been sought to be given to the Assessing Officer to allow deduction of Rs. 12,69,91,881/- while computing book profits in terms of clause (IV) of explanation E-1 to section 115 ZB of the Act. We thus reject this additional ground as withdrawn. 71. In the result, the appeal is partly allowed for statistical purposes. 72. In summary, (i) the appeal filed by the assessee for the AY 2002-03 is deemed to be partly allowed for statistical purposes; (ii) the appeal of the Revenue for the AY 2002-03 is dismissed; (iii) the appeal preferred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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