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TMI Blog2017 (12) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The operation of rail is not merely hauling of wagons but comprises of various activities all of which is carried on by the assessee Company. Section 80IA(2) provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 801A. In view of the above discussion and respectfully following the order of the Tribunal in assessee’s own case for the A.Y.2004-05 to 2008-09, we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 55,40,932/-. Following the same reasoning, we direct AO to restrict disallowance under Rule 8D(2)(iii) to the extent of ₹ 64,30,155/- as offered by assessee in the A.Y 2010-11. Disallowance made u/s.14A on account of interest and administrative expenses - Held that:- We restore this issue back to the file of the AO to verify the availability of cash surplus of ₹ 1571.93 crores generated during the year and which was invested in the units of mutual funds. If the AO found that assessee has generated cash surplus of 1571.93 crores, no disallowance on account of interest expenditure should be made in so far as cash surplus is much more than the investment so made in the units of mutual funds - ITA No.5065/Mum/2014, ITA No.7614/Mum/2014, ITA No.5107/Mum/2014, ITA No.7631/Mum/2014 - - - Dated:- 5-4-2017 - SHRI R.C.SHARMA, AM SHRI SANDEEP GOSAIN, JM Assessee by : Shri Arvind Sonde alongwith Shri Sampat Kabra Revenue by : Smt. S.Padmaja O R D E R PER R.C.SHARMA (A.M): These are the cross appeals filed by the assessee and revenue against the order of CIT(A) for the Assessment years 2009-10 and 2010-11 in the matter of order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act'), with effect from 12th August 2014. 2. On the facts and in the circumstances of the case, the CIT (A) erred in making the order dated 16/10/2014 in gross violation of the principles of natural justice. Without Prejudice to above:- 3. (a) On the facts and in the circumstances of the case and in law, the CIT (A) erred in not allowing deduction u/ s 80lA of the IT Act, aggregating to ₹ 102,51,93,819/-, in respect of profits of Rail Systems at Hirmi in the State of Chattisgarh, at Tadipatri in the State of Andhra Pradesh, at Arakkonam in the State of Tamil Nadu and at Durgapur in the State of West Bengal. 3 (b) On the facts and in the circumstances of the case and in law, the CIT (A) has misstated facts, made various factual errors and mistakes in passing the order. 4 On the facts and in the circumstances of the case, the CIT (A) erred in confirming the disallowance u/ s 14A of ₹ 13,85,61,471/- on account of interest u/ s 14A read with Rule 8D made by the learned Assessing Officer. 5 On the facts and in the circumstances of the case, the CIT (A) erred in disallowing a sum of ₹ 4,92,15,823/- on account of administrative expenses u/s 14A read with Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose locations; that the rail systems were set-up by L8:T Ltd [and that way by the assessee company as it had inherited the cement plants from L T Ltd by way of demerger] to enable the transportation of raw material [coal etc] and finished goods [i.e. cements] at their cement plants through railway wagons, at all the said; four locations. It was explained that prior to putting up those rail systems, the assessee used to transfer the material from the cement plants [at all the four locations] to the nearest railway station and vice-versa on road through trucks. Before the AO the claim of deduction was justified by assessee by taking the plea that the various conditions as prescribed u/s 80IA(4) was met with in as much as it had entered into an agreement with the government through department of Railways for developing, maintaining and operating the rail system [infrastructure facility]; and that in pursuance thereof it had developed the integrated rail system in between the plant and the nearest railway track [of Indian Railways] and running it [in between] for movement of the inward and outward material so as to enable it to transport the materials from its plants straightaway to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises could set-up the necessary and crucial components of a railway system and provide that on lease to Indian Railways for maintenance and operation; and in the context referred to the CBDT circular no 733 dated 03.01.1996 whereby the benefit of Sec. 80IA was also extended to such rail system constructed / developed by the private enterprises as per the said BOLT scheme. By that circular, the Board had also clarified that such concession would be available only to an infrastructure facility meant for development of rail systems and not to any other infrastructural facility including rolling stocks. The AO also observed that the assessee, had not given the said railway system or the crucial component thereof on lease to the railway department [had it been so, the profit by way of lease rent from such rail. system would have qualified for deduction u/s 80lA as per the concession given by the aforesaid circular]. Finally, the AO held that assessee was not eligible to claim the deduction u/s 80lA in r/o such rail systems and disallowed the claim accordingly. 11. In its appellate order CIT(A) noted that the issue has come up first in A.Y. 2004 05. In that year, the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entre and that the rail system is not an independent unit but it is 100% depending on the cement unit. Detailed submissions filed by the assessee which are reproduced in the assessment order was not found satisfactorily to the AO. Detailed submissions were again filed before the CIT(A). It was explained that the company had established a cement plant in Hirmi, The nearest available railway siding was at a distance of around 15 km from the plant. To facilitate inward and outward movement of goods, the assessee developed infrastructure facility of rail system which was made operating in 1999. The assessee company duly entered into an agreement with the railways, which is a part of Government of India. It was submitted that there was option available u/s 80lA with the assessee to claim deduction for any of 10 consecutive years as its own choice. The assessee has opted for claiming the deduction from A. Y. 2004-05 on wards. It was submitted that the income offered for tax by the assessee includes income from rail system and that certificate of M/s Sharp Tannan, CA in Form No 10CCB certifying the correctness of the aforesaid claim was duly submitted to the AO. 13.1. It was further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle that a person cannot make profits out of himself, The Supreme Court negative this argument and held that despite captive consumption of iron ore certain profits can be regarded as having derived from the extraction activities. The Supreme Court ruled in favour of bifurcating the total profits into two activities viz. the extraction activity and the manufacturing activity. It was therefore submitted that in view of the above, it is not correct to say that the assessee does not earn any profits from its rail system merely because the rail system is used for the captive purposes of the cement plant. 13.4. It was further submitted that the Board Circular No 733 dated 03.01.1996 states that deduction u/s 80lA is applicable to an infrastructure facility meant for development of rail system. It was contended that the AO has categorically stated in para 5.2.3 of his order that rail system was developed by L T and was inherited by the assessee out of demerger. It was further submitted that in a demerger all the property of the undertaking is necessarily transferred by the demerged company to the resulting company, therefore it is immaterial whether the rail system was developed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced reliance on the order of the AO and on the other hand the Id counsel of the assessee placed reliance on the order of the CIT(A). Attention of the Bench was drawn on para 5.2 of the order of the AO and then on the provision of Sec 8OIA clause 2 and sub clause 3 4. It was further explained that the assessee can avail benefit of deduction u/s 80IA in 10 years of his choice out of 15 years period. The provisions are very clear. Attention of the Bench was also drawn on the copy of the agreement placed at page .93 of the paper book. It was further submitted that all the conditions of Sec 80IA have been fulfilled. Reliance was placed on the decision reported in 40 ITR 123. It was submitted that the ClT(A) has discussed the issue extensively and the findings of the ld CIT(A) remained uncontroverted. Therefore the order of the CIT(A) is liable to be confirmed in this regard. 16.We have heard the rival submission and considered them carefully: We have also perused the various material placed on record on which our attention was drawn. After taking into consideration we find that the CIT(A) has dealt with the aspect in detail. Contention raised before the ClT(A) on behalf of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of ' Rail Systems' as referred to by the assessee has been examined by him afresh from the point of view of the relevant provisions of the Act and the facts as to whether the 'Rail System' as referred to by the assessee could indeed be treated as the infrastructure facility for which deduction u/s 80lA is intended to by the legislature; and whether the assessee operated that rail system. 15. Replies and justification filed by assessee was not accepted by CIT(A) and he held that the rail system of the assessee do not fall within the definition of the infrastructure facility, as the same could not be treated as a facility of public utility. For this reason the assessee company was held to be not entitled for the deduction u/s.80IA in r/o the profit, from the operation of rail system. Reasons for the same was as under:- 16. The CIT(A) observed that the agreements under reference were not at all any agreements for developing, maintaining and operating any infrastructure facility to which benefit of exemption is intended to be given in Section 80IA. For this reason also the assessee company was held to be not entitled for deduction u/s.80IA in r/o the profit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, by stating that new facts have been brought on record in the A.Y.2010-11, he declined claim of deduction u/s. 80IB(4). 24. With regard to the disallowance, deduction u/s. 80IA(4), Revenue is in appeal before us in the A.Y.2009-10, whereas assessee is in appeal for the A.Y.2010-11. 25. It was vehemently argued by learned AR that Revenue authorities have not considered the eligibility requirement u/s.80IA as brought by the Finance Act 2001 wherein Finance Act 2001 has deleted the requirement of the assessee to transfer the infrastructure facility to the concern Government authorities within prescribed time. He contended that CIT(A) has wrongly applied the provisions of law as applicable prior to 01/04/2002 while considering the assessee s claim for deduction for the A.Y.2009-10 and 2010-11 under consideration. Learned A.R threadbare taken us to the objections raised by the CIT(A) and the reply filed by the assessee controverting each and every objection of the CIT(A). Our attention was invited to the amended provisions of Section 80IA(4) which does not require infrastructure facility to be a public facility for allowing deduction u/s. 80IA. Our attention was also invite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in tax free securities and it was contended that since investment was out of assessee s own interest free funds, in terms of decision of Jurisdictional High Court in case of Reliance Utilities and Power Ltd., 313 ITR 340 and HDFC Bank Ltd., 366 ITR 505, no disallowance of interest is warranted. With regard to the disallowance made under Rule 8D(2)(iii) he contended that assessee itself has offered the amount attributable for earning the exempt income, therefore, further disallowance made by Revenue authorities was not justified. 28. Learned AR also invited our attention to the order of the Tribunal in assessee s own case for A.Y.2004-05 to 2008-09, wherein Tribunal have after considering in detail allowed the assessee s claim u/s.80IA with regard to rail system. Sales Tax exemption as capital receipt was also decided by Tribunal in assessee s own case for the A.Y.2004-05 to 2008-09, relevant decision of the Tribunal was also filed before us. 29. Learned AR relied on following judicial pronouncements in support of the proposition that benefit allowed in earlier year cannot be denied in subsequent years. 1. RadhaSoami Satsang v. Commissioner of Income Tax [1992]193 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was very exorbitant and method adopted for computation was also not correct. Our attention was invited to the computation of profit as per table F of CIT(A) s order. She further contended that when L T Ltd., itself was not eligible for deduction u/s.80IA, how assessee company became eligible for the same after demerger and inherited the cement business i.e., cement plants together with the rail systems of the L T Ltd., She placed reliance on the Circular No.733 dated 03/01/1996 which provided that BOLT scheme of Indian Railway shall be eligible for the benefit u/s.80IA. 31. With regard to sales tax exemption benefit being treated as capital receipt, she relied on the decision of Jammu and Kashmir High Court in the case of Shree Balaji Alloys 198 Taxman 122, Bombay High Court in case of Chaphallkar Brothers 33 Taxman.com 431. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions. Therefore, the assessee accordingly entered into agreement with the Rail authorities to develop, operate and maintain its rail systems. The agreement lays down various conditions to be complied with, before and during the development, maintaining and operating the rail systems. Such rail system can also be made available to any third party with the permission of the Indian Railway. For this purpose, the assessee approached to the Indian Railways for development of Rail systems which Indian railways has agreed to provide permission for laying down the railway sidings (including the rail line upto the nearest rail head) and accordingly the assessee had awarded the contract to the private parties for construction and to the Indian Railway approved agency for supervision and consultancy of the Rail system and had borne the entire cost of development including for incidental expenses paid to all the agencies. The clause in the agreement saying that railway administration is willing to lay the said sidings / construct the siding is meant for Railway administration's permission for allowing the assessee for developing the Rail system as per the norms and supervision of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cants and railway administration in such manner as shall be determined in each case by the Railway administration. The assessee undertakes to shunt the wagons from such point to his premises and back with his own labour. However , no siding charges are charged by Indian Railways, since it is a private siding. The Clause 16 reads to mean that, charges such as Siding Charges are to be paid 'wherever leviable'. In assessee s case siding charges are not leviable. 38. The rail systems were developed by assessee under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. Relevant clauses of the agreements substantiating the same are 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 spite the absence of activities- 'operate and maintain' the rail systems, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 restricts the deduction u/s.80-IA to other rail systems. We found that the Hon'ble ITAT in assessee's own case for AY 2006-07, has categorically allowed the deduction u/s. 80-IA for its rail system after dealing with the Circular No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cost wherein it is mentioned that, The applicant will pay in advance to the railway administration the total estimated cost of the work consisting of the estimated costs of work done by the party and those by the railway administration .... c) Clause no. 7(a) - Permanent way materials - The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant. d) Clause No. 17 - Working of the Siding - wherein it is mentioned that ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 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: Shah Co (HA) v. CIT (1956) (30 ITR 618) (Bom) Amalgamated Coalfields vs. Janapada Sabha AIR 1964 SC 1013 South India Trust Association vs. Telugu Church Council (1996) 2 SCC 520 Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) 51. From the record we also found that the overall profits of the company have increased due to such commercial benefits and the same should have been treated as the revenue of the rail systems, which is the Fair Market Value of the services provided by the undertaking as per the provisions of Sec. 80IA(8) and the assessee is entitled for benefit u/s 80IA accordingly. However, the basis adopted for calculating the revenue from rail system by the assessee has been conservatively considered as lower of the freight chargeable through Rail and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 nearest Indian Railway station have been avoided and saved and are considered as income of the rail system arising due to setting up of such integrated rail system. The assessee has already submitted for all the Rail Systems form 10CCB duly certified and audited by M/s. GP Kapadia Co. Chartered Accountants, alongwith Balance Sheet, P L Account, Schedules forming part of Balance sheet and P L Account. We have also checked the amount eligible for deduction as furnished in form 10 CCB and found the same as correct. 56. With regard to CIT(A) s observation in the A.Y.2010-11 at page 42 to the effect that the so called 'Rail System' of the assessee company are simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We have carefully gone through the terms and conditions of the agreement entered by the assessee with the railway authority, a perusal of clause 19 of the Railway Siding agreement entered into by the assessee with the Railway authorities, clarifies that construction and operation of the railway siding was not merely for the purpose of the business of the assessee, but was with a long term perspective to create an infrastructure facility which could, at a future point of time and in case a need arise, potentially confer benefit to the public at large. The agreement with the Railway authorities, provided that the facility so created could be made available to others with the discreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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) 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: 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 71. With regard to allegation of the CIT(A) that the assessee has never claimed that it is hauling the wagons on the entire siding, we found that hauling of wagons is only one of the activity in the entire operation of the rail system. Under the Railways Act, 1989 nobody other than railway administration is allowed to haul wagons of the railway tracks. As per materials placed on record, all the activities relating to the operation of rail system except hauling of wagons till the interchange point, is done by the assessee and the entire cost for the same is born ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 79. All the aforesaid services are carried out by the railway system inside the factory premises. Further even the maintenance of the Rail system such as alignment of track gauge maintenance, patching of ballast, maintenance of railway track sleepers, signaling points and railway gate crossing from private siding to connecting point of nearest railway station is done by the railway system. Thus, the revenue of the railway undertaking is the sum aggregate of the above services rendered by it to the cement division. For the purpose of computation, the railway undertaking has adopted the minimum freight rate (further discounted at 50%) which the Indian railways charges for the transportation of these materials. Since this is the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such infrastructure facility is said to have become operational. As per our considered view one of condition for claiming deduction under the pre-amended section 80IA(4) (i.e. prior to AY 2002-03) stipulated that the assessee should enter into an agreement with the Government (Central or State) or other authorities mentioned therein for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility. Further, the agreement should also provide for transfer of such infrastructure facility to such authorities within the period stipulated in the agreement. The Central Government realizing the need to encourage investment particularly in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems made certain amendments to the conditions for eligibility of claim u/s. 80lA through Finance Act, 2001. Amongst others amendments, the Central Govt. removed the abovementioned condition and accordingly, the amended section 80IA(4) clause (b) stood as under from AY 2002-03 onwards: (b) it has entered into an agreement with the Central Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80-IA(4) i.e. post AY 2002-03, L T as well as UTCL were eligible for claiming deduction u/s 801A. As per section 80IA(2), the deduction is available at the option of the assessee, for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. The assessee has started claiming deduction post AY 2004-05 and is within the period of available twenty years. Under section 80IB, u/s 80lC, 80ID and 80lE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80lA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee to avail the benefit. 88. In view of the amended provisions of Section 80-IA, the year in which the claim is first made i.e. initial assessment year, must apply for determination of eligibility of the claim. In respect of AY 2004-05 onwards including assessment year 2009-10 and 2010-11, since the condition relating to transfer of such facility to Central Govt. was no longer a prerequisite for eligibility of claim u/s 80-IA(4)(b), the assessee has correctl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per fiction created by section 80IA(5), the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year . Prior to 1-4-2000, section 80IA(12) defined the initial assessment year for various types of eligible assessees. However, after the amendment by the Finance Act, 1999, the definition of initial assessment year has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in section 80IA(2) from which it chooses its' 10 years of deduction out of 20 years, then only deduction u/s 80lA can be determined. 91. ITAT Chennai Bench have dealt with similar issue in case of Mohan Breweries 116 ITTD 241 which pertains to AY 2004-05 (i.e., after the amendment of S. 80-IA by the Finance Act 1999), the Chennai Tribunal has held that the initial assessment year is the first year of claim and S. 80-IA itself becomes applicable only when the assessee makes the claim for the first time and not before that. Hon'ble Madras High Court has upheld the judgment of Chen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger. (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. 95. Section 80IA(2) further provides that the deduction is available at the option of the assessee for any ten consecutive assessment years out of twenty years beginning from the year in which the undertaking or enterprise develop and operate any infrastructure facility. UTCL has started to claim deduction within the prescribed period of twenty years. The claim is thus legitimately made by assessee complying the requirements mentioned under section 801A. 96. In view of the above discussion and respectfully following the order of the Tribunal in assessee s own case for the A.Y.2004-05 to 2008-09, we do not find any merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the sole reason that the different view has been taken in the case of Bajaj Auto Ltd (supra) and subsequent other decisions. Thereafter, the Special Bench in the case of Reliance Industries was constituted who examined the Maharashtra Sales tax scheme and Gujarat Sales tax scheme and came to the conclusion that the benefit of sales tax exemption as per Maharashtra Sales tax scheme is capital receipt not liable to tax. This decision of the Special Bench has now been affirmed by the Hon'ble Bombay High Court in the case of Reliance Industries (supra) and held that 'the object of the subsidy was to set up a new unit in backward area to generate employment'. The subsidy was held as capital receipt; accordingly, the decision of the Special Bench was confirmed. While confirming, the decision of the Supreme Court in the case of Ponni Sugars Chemicals Ltd in 306 ITR 392 was also taken into consideration by the Hon ble Bombay High Court. 5.2 We further noted that in similar circumstances the other Bench of the Tribunal in the case of Maharashtra Oil Extraction P Ltd in 7618/Mum/2005 for A. Y. 2003-04 following the decision in the case of Reliance Industries has allowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the jurisdictional High Court as referred above, no disallowance is warranted on account of interest as the assessee has sufficient interest free funds available with it. Learned AR has also invited our attention to the cash flow statement placed in the paper book to indicate that cash surplus was much more than the fund invested for earning exempt income, therefore, with a limited issue of verifying the cash surplus available vis- -vis amount invested in tax free securities, we restore the matter back to the file of the AO. If the AO finds that cash surplus so generated is more than the amount of investment in tax free securities / units of mutual funds, no disallowance on account of interest is warranted under Rule 8D 2(ii). We direct accordingly. 103. The assessee is also aggrieved for disallowance of expenditure other than interest amounting to ₹ 2,65,70,329 alleged to be incurred on exempt income u/s.14A. Contention of learned AR was that assessee has already offered for disallowance of indirect expenditure of ₹ 55,40,932/- being very reasonable and attributable to earning of exempt income. However, without giving any cogent reason, the AO has not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has invested the funds out of own funds temporarily available having no interest cost, no disallowance of interest is warranted in view of the decision of the Jurisdictional High Court in case of Reliance Utilities and Power Ltd., 313 ITR 340 and HDFC Bank Ltd., 366 ITR 505. Our attention was also drawn to the detailed working submitted before the Revenue authorities alongwith the statement of bank accounts and cash flow showing daily movements and fund from which investments were made to demonstrate that there is no element of borrowed funds in the aforesaid investment made during the year in investment of mutual funds. Keeping in view the totality of facts and circumstances of the case and in the interest of justice and fair play, we restore this issue back to the file of the AO to verify the availability of cash surplus of ₹ 1571.93 crores generated during the year and which was invested in the units of mutual funds. If the AO found that assessee has generated cash surplus of 1571.93 crores, no disallowance on account of interest expenditure should be made in so far as cash surplus is much more than the investment so made in the units of mutual funds. We direct ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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