9911796707
TMI Blog2019 (9) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... l within the meaning of refining , if the intention of the Legislature is considered. Thus, the MS Plant of the assessee company is an undertaking engaged in refining of mineral oil and fulfills all the conditions of section 80-IB(9)(iii) of the Act, as a result of which the assessee company is entitled to benefit of section 80-IB(9)(iii) consecutively for seven assessment years starting from assessment year 2007-08. Based on these facts and circumstances, we direct the assessing officer to allow deduction under section 80-IB(9) of the Act, for the Seven Assessment Years 2007-08 to 2013-14 . Deduction u/s 80IC - special benefit to be given to new undertaking - HELD THAT:- Under section 80-IC(2)(iii), a 100% deduction from the profit of an assessee is allowed if the gross total income of the assessee includes profit of an undertaking producing article specified in Fourteenth Schedule subject to certain conditions. Section 80-IC is a special provision in respect of certain undertakings or enterprises in certain special categories states. The intention of the legislation is clear that certain underdeveloped states should be developed to the extent of national level for which special b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses under the head Retirement Benefit of Employees - HELD THAT:- in case of Hindustan Petroleum Corporation Ltd. [ 2014 (7) TMI 290 - ITAT MUMBAI] held that provisions of post retirement benefits based on actuarial valuation is an allowable expenses u/s 37(1) of the Act. Therefore, respectfully following the judgment Supra we direct the assessing officer to allow provisions of post- retirement benefits based on actuarial valuation as expense u/s 37(1) of the Act, after due verification and in accordance to law. Deduction of expenditure on account of corporate social responsibility - HELD THAT:- ACIT Vs. Jindal Power Limited [ 2016 (7) TMI 203 - ITAT RAIPUR] for the Assessment Year 2008-09, where it has been held that expenditure on Corporate Social Responsibility though voluntary, is allowable as business expenditure. It is also held that Explanation 2 to section 37(1) inserted w.e.f. 01-04-2015 is not retrospective. It applies only to Corporate Social Responsibility expenditure referred to in section 135 of the Companies Act,2013 and not to voluntary Corporate Social Responsibility expenditure. The Tribunal has observed that the amendment in the scheme of section 37(1) which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party is not accepted and communicated to the party is not credited to the account of the party or the amount is not credited to any account whether called interest payable account or suspense account or by any other name in the books of account. Only a liability has been created in the books of account and no income by way of interest is credited to any account. Hence, provisions of explanation to section 194A are not applicable. Since there is a view that interest from part of judgement debt, following the well settled trite of law that if two views are possible, the favourable view to the assessee should be taken, the assessee company deserves benefit of doubt for non-deduction of tax at source under section 194A Addition u/s 14A - HELD THAT:- There is no disallowance under Rule 8D(2)(i). Besides under rule 8D(2)(ii) no disallowance can be made as the assessee has own funds which is more than investments made by assessee. However, for disallowance under Rule 8D(2)(iii) only the dividend bearing securities should be considered; for that we rely on the judgment of the Co-ordinate Bench of Kolkata in the case of REI Agro Ltd [ 2013 (9) TMI 156 - ITAT KOLKATA] . Therefore, we direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 A.Y. 2012-13 ₹ 150,01,08,829/- Ground No. 1 A.Y. 2013-14 ₹ 132,81,10,853/- (2) Disallowance of claim of deduction under section 80-1C of the Income Tax Act, 1961. Ground and Assessment Year Amount Ground No.(4) for the Assessment Year 2008-09; ₹ 351,28,35,732/- Ground No.(4) for the Assessment Year 2009-10; ₹ 221,27,40,983/- Ground No.(7) for the Assessment Year 2010-11 ₹ 170,67,11,881/- (3). Disallowance of claim of expenses under the head 'Prior Period Exp.' Ground and Assessment Year Amount Ground No.(l) for the Assessment Year 2007-08; ₹ 2,36,95,427/- Ground No.(l) for the Assessment Year 2008- 09; ₹ 2,87,62,938/- Ground No.(5) for the Assessment Year 2012- 13 ₹ 1,24,06,614/- (4) Disallowance of claim of expenses under the head 'Retirement Benefit of Employees'. Ground and Assessment Year Amount Ground No.(3) for the Assessment Year 2007-08; ₹ 1,00,22,722/- Ground No.(2) for the Assessment Year 2008-09; ₹ 1,02,74,000/- Ground No.(l) for the Assessment Year 2009- 10; ₹ 96,67,000/- Ground No.(2) for the Assessment Year 2010-11; ₹ 8,37,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Ground.No.(5)for the Assessment Year 2009-10, ₹ 2,58,27,259/- And ₹ 22,83,310/- (11). Disallowance of claim of deduction for "Provision for Allowance for Non-Management Staff'" Ground and Assessment Year Amount Ground No.(3) for the Assessment Year 2010-11; ₹ 17,46,80,387/- (12). Disallowance of claim of deduction for 'Other Provisions'. Ground and Assessment Year Amount Ground No.(4) for the Assessment Year 2010-11; ₹ 5,61,254/- 4. Now, we shall take above grounds, one by one. Common ground No.1 raised by the assessee is as follows: (1) Disallowance of claim of deduction under section 80-IB(9) of the Income Tax Act, 1961 for the Motor Spirit New Industrial undertaking of the Assessee Company, commissioned on 25-07-2006. Ground and Assessment Year: Amount Ground No. 4. A.Y. 2007-08 ₹ 38,65,11,189/- Ground No. 3 A.Y. 2008-09 ₹ 172,37,79,956/- Ground No. 3 A.Y. 2009-10 ₹ 127,81,23,636/- Ground No. 6 A.Y. 2010-11 ₹ 156,85,51,986/- Ground No. 4 A.Y. 2011-12 ₹ 156,46,99,775/- Ground No. 1 A.Y. 2012-13 ₹ 150,01,80,829/- Ground No. 1 A.Y. 2013-14 ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not include petroleum and natural gas. The Id CIT(A) held that when petroleum is not included under mineral oil, there is no question of Naphtha to be considered as mineral oil because Naphtha, is not petroleum but it is a petroleum product made by refining of crude petroleum oil. Thus, the Id CIT(A) held that Naphtha is not mineral oil for the purpose of section 80-IB(9) of the Act . He also held that production of motor spirit from Naphtha is not a process of refining for the purpose of section 801B(9)(iii) of the Act. The Id CIT(A) held that a process of refining means to make fine or to purify, without involving any significant change in the substance and if the process involves conversion of one substance into another and especially when it also involves change of chemical composition of the substance, then the process cannot be said to be one of refining . Thus, he held that as process of conversion of Naphtha into Motor spirit involves change of chemical composition and conversion of one substance (Naphtha) into another i.e. Motor Spirit (Gasoline) with the help of catalysts, this process cannot be a process of refining. He, thus, held that the assessee company did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that section 80-IB of the Act allows deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings in computing the total income of an assessee an amount equal to such percentage and for such number of assessment years as specified in the section. A perusal of legislative history of section 80-IB(9) of the Act shows that the Finance Act,1999 restructured old section 80IA into two sections, section 80IA and 80-IB,w.e.f. 01-04-2000. (i).Sub section (9) of section 80-IB of the Act as introduced by Finance Act,1999 w.e.f. 01-04-2000 reads as under : "(9) The amount of deduction to an undertaking which begins commercial production or refining of mineral oil shall be hundred per cent of the of the profit for a period of seven consecutive assessment years including the initial assessment year : Provided that where the undertaking is located in North Eastern Region, it has begun or begins commercial production of mineral oil before the 1st day of April,1997 and where it is located in any part of India, it begins commercial production of mineral oil on or after the 1st day of April,1997: Provided further tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted by Finance Act,2016 ,w.e.f 01-04-2017) (Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March,2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O19018/22/95-ONG.DO.VL,dated the 10th February,1999 or in pursuance of any law for the time being in force or by the Centre or a State Government in any other matter); inserted by Finance Act,2011 w.e.f 01-04-2012) (iii) Is engaged in refining of mineral oil and begins such refining on or after the 1st day of October ,1998; but not later than the 31st day of March,2012. (iv) Is engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts (hereinafter referred to as 'NELP -VIII') under the New Exploration Licencing Policy announced by the Government of India vide Resolution No.O-19018/22/95-ONG.VL, dated 10th February,1999 and begins commercial production of natural gas on or after the 1st day of April,2009. (inserted w.e.f.01-04-2010) (but not later than 31st day of March,2017); inserted by Finance Act,2016 ,w.e.f 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Finance (No.2) Act, 1998 and in subsection (4E), after the words "commercial production", the words " or refining" were inserted and also the following proviso was inserted w.e.f01-04-1999: "Provided that the provisions of this section shall apply in case of refining of mineral oil where the undertaking begins refining on or after the 1st day of October,1998." The issues of disputes in respect of the claim of the assessee are,(i) whether the raw material 'Naphtha' processed by the new unit falls within the definition of 'Mineral oil' and (2) whether the process of conversion of 'Naphtha' to gasoline and other products falls within the meaning of 'refining'? We note that both the terms are not defined in section 80-IB(9) of the Act and hence the meaning of the words has to be derived from other sections of the Act, definitions given in other statutes and from common parlance meaning. 10. Now we shall examine the term 'Mineral oil' which is defined by various Acts as under :- (i) The term 'Mineral oil' is defined in section 42, section 44BB and section 293A of the Act and as per these sections; the term 'mineral oil' includes petroleum and natural gas. Since, ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, wood naphtha or methyl alcohol), cellulose enamels, lacquers and paints cement (patent), cleaning soaps, metal polices, paint removers, rubber solution, thinner" (iii) Petroleum and Natural Gas Rules, 1959 defines Petroleum Product in Rule 3(n) as "Petroleum Product" means any commodity made from petroleum or natural gas and shall include refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas gasoline, naphtha, distillate, gasoline, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by-products derived from oil condensate, gas or petroleum hydrocarbons, whether herein enumerated or not". (iv) The Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act,1962 defines as : Section 2(c) "Petroleum" has the same meaning as in the Petroleum Act, 1934, and includes natural gas and refinery gas". (v) The Oil Industry (Development) Act,1974 defines 'Petroleum Product' as :- 2(m) " petroleum product" means any commodity made from petroleum or natural gas and incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to indicate diesel fuel. There is a conjecture that the word 'naphtha' came (via Greek where it means any sort of petroleum) from Vedic God name ApamNapat. (v) In modern times, naphtha is obtained in petroleum refineries as one of the intermediate products from the distillation of crude oil. It is a liquid intermediate between the light gases in the crude oil and the heavier liquid kerosene. Naphthas are volatile, flammable and have a specific gravity of about 0.7. The generic name 'naphtha' describes a range of different refinery intermediate product used in different applications. To complicate the matter further, similar naphtha types are often referred to by different names. Naphtha is used primarily as 'feedstock' for producing a high octane gasoline component (via the catalytic reforming process). It is also used in the petrochemical industry for producing olefins in steam cracker and in the chemical industry for solvent (cleaning) applications. (vi) Petroleum naphtha is an intermediate hydrocarbon liquid stream derived from refining of crude. It is most usually desulfurized and then catalytically reformed, which rearranges or restructures the hydrogen molecules in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petroleum products are 'Minerals' a refinery involved in refining of crude oil to produce petroleum products such as Naphtha, Motor Spirits, Aviation Turbine Fuel, Superior Kerosene Oil, High Speed Diesel etc. can be considered a 'Mineral based Industry'. IIP has relied upon various industry parlance, technical understanding, definitions and dictionary meaning of the term 'Mineral' to arrive at such an opinion. IIP, while giving such an opinion, have not taken cognizance of the interpretations given by any court of law on the subject and any definition in the tax laws. This opinion is purely guided by the technical and commercial understanding of the term 'Mineral' within the oil and gas industry." We note that from the above definitions, it is abundantly clear that 'naphtha' is a 'petroleum product' or 'petroleum' and as 'petroleum' and 'petroleum product' fall within the definition of ' mineral oil', therefore the assessee company is, entitled to benefit of deduction u/s 80-IB(9)(iii) of the Act. 13. We note that Id CIT(A) also mentioned in his consolidated appellate order dated 08-10-2013 for the Assessment years 2007-08 to 2010-11 in page 9 in first para that , 'Naphtha, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the assessee because of para 19.1 of Circular No.1/2009 dated 27-03-2009 which excluded even 'Petroleum and Natural Gas' from the meaning of 'mineral oil'. 14. We note that the opinion of the Indian Institute of Petroleum (IIP) was filed before the Id AO and the same was also mentioned in the submission before the Id CIT(A). The Id AO held that the opinion did not consider interpretation given by Court of law or any definition in tax law. The Id CIT(A) did not consider the same. The authorities below did not consider any interpretation given by law and concluded the issue based on Circular No.1/2009 dated 27-03-2009 of the CBDT. It is well settled that Circular issued by CBDT is not binding on any court of law or on an assessee. The opinion of the IIP was based on technical and commercial understanding of the meaning of 'mineral oil' followed in Oil and Gas Industries in the Country and such opinion must be followed in defining the term 'Mineral Oil' in tax laws. Thus, we note that the finding of the authorities below, was based on the Circular 1/2009 dated 27-03-2009. However, intention of the Legislature does not go with the meaning of 'Mineral Oil' given in the Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2006-07, relevant to assessment year 2007-08. Thus, the assessee company began refining before 01-04-2009 and it did not require special concession introduced in the amendment in section 80-IB(9) of the Act by Finance Act,2008. However, no restriction should be imposed on the assessee company where its claim is allowable within normal provisions of section 80-IB(9) without special attention. Thus, para 19.1 of Circular No.1/2009 dated 27-03-2009 is contrary to the intention of the Legislature as it restrict the scope of section 80-IB(9) rather than giving concession to public sector and specific companies in the amended section. 15. We note that Circular No.1/2009 dated 27-03-2009 had created a lot of controversy. Therefore, at this juncture it is relevant to note the extracts from the speech of the Finance Minister to the debate in the Lok Sabha on 29-04-09 on Finance Bill 2008, which is given below: "11. Some concerns have been expressed regarding the scope of section 80-IB(9) of the Income Tax Act. As Honourable Members are aware, this sub section allows 100 per cent tax exemption in respect of an undertaking which begins 'commercial production or refining of mineral oi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following is the extract from the reply of the Hon'ble Finance Minister to the debate in the LokSabha on 29-04-2008, on Finance Bill, 2008: " 10. Sir, clause 15 of the Finance Bill,2008 seeks to insert a new proviso in sub section(9) of section 80-IB so as to provide that no deduction shall be allowed to an undertaking engaged in refining of mineral oil, if it begins refining on or after 1st April,2009. Consequent to this proposal, three public sector refineries under construction in Paradeep, Bina and Bathinda may not complete before 1st April,2009. With a view to ensuring that the benefit to these refineries is not denied on account of their inability to adhere to this deadline, it is proposed to amend the proposal to provide that such refineries would be eligible to avail of the benefit if they begin refining not later than 31st March,2010" Following the statement of the Hon'ble Finance Minister in the LokSabha, vide Notification No.66 of 2008 dated 30-05-2008, eight mineral based refineries were notified by the Central Government for the purpose of section 80-IB(9). A perusal of the processes of these refineries clearly shows that their processes are similar to the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Circular does not hold good w.e.f.01-04-2000. Moreover, scope of section 80-IB(9) has also been extended to production of natural gas in blocks licensed under the VIII Round of bidding in NELP -VIII by insertion of para (iv) in section 80-IB(9) of the Act by Finance (No.2) Act,2009 w.e.f 01-04-2010. When the scope of the section 80-IB(9) has been made wider, there was no justification in following a narrower meaning enunciated by the Circular, that too, explaining the scope of the Finance Act,2008 where the required conditions for section 80-IB(9) to be followed were removed. Thus, there is an enlargement of the benefits under the provisions of section 80-IB(9) and restrictive meaning given by the Circular does not hold good if the Gold en Rule of Interpretation is considered. Therefore, there is no justification of giving narrower meaning of the words 'mineral oil'. For that we rely on the judgment of the Hon'ble Bombay High Court in Burmah Refineries Ltd reported in 61 ITR 493 (Bom) wherein the court was construing the meaning of the expression 'mineral oil' in a different context, actually, the decision fully supports the stand taken by the assessee company. The Hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that ethyl alcohol was 'petroleum' within the meaning of Petroleum Act." Similarly, in case of Indian Oil Corporation VDCIT (2005) 4 SOT 1 (Mum) the Coordinate Bench of Mumbai Tribunal has held that petroleum products manufactured by the assessee, namely, naphtha, diesel and fuel oil fall under the expression 'mineral oil' and do not qualify for deduction u/s 80HHC. Though the decision was relating to section 80HHC, the Tribunal discussed the meaning of 'mineral oil' which is also not defined in section 80HHC. 17. We note that Circular issued by CBDT cannot restrict a statutory interpretation. The interpretation as enunciated by Tribunals and Courts cannot be overwritten by a Circular. The Hon`ble Apex Court in case of Hindustan Aeronautics Ltd V CIT (2000) 243 ITR 808(SC) has held that Circulars or Instructions given by the Board are no doubt binding in law on the authorities under the Act, but when the Supreme Court or the high Court has declared the law on the question arising consid eration, it will not be open to a court to direct that a circular should be given effect to and not the view expressed in a decision of the Supreme Court or the High Court. The Apex Court in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fortified by the recent Judgment of the Coordinate Bench of Guwahati in the case of ACIT Vs. Oil India Ltd, in ITA No.120 to 123/Gau/2008, for A.Y.2003-04 to 2006-07, order dated 28.08.2019, wherein, n Id entical facts, it was held as follows: "23. We further notice after a deeper scrutiny that the assessee's main produce "crude oil" is treated as interchangeable to mineral oil including Natural Gas and Petroleum as per sec. 3(c) of the Oil Fields (Regulation and Development) Act, 1948 (No.53 of 1948) or the Oil Fields (Regulation and Development) Amendment Act 1969 (No. 30 of 1969). Section 42 read with its Explanation, Section 44BB Explanation (ii) and Section 293A Explanation (a) also define "mineral oil" as having the very inclusive meaning. We observe in this backdrop that the assessee is engaged in a "mineral based industry" as per the foregoing clinching expression employed as in 14th Schedule. 24. The Revenue's case that this crude oil production does not amount to mineral based industry as per item No.16 in 14th Schedule of the Act carries no substance since the above stated expression has to be construed in ordinary connotation without having regard the further cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The CIT(A) has Id entically held that it ought to have raised its claim u/s. 80-IB(9) of the Act. The assessee has pleaded its Id entical additional ground therefore seeking to claim the impugned deduction u/s80-IB(9) of the Act. We conclude in this factual backdrop that our findings hold ing it eligible for sec. 80IC deduction for assessment years 2005-06 and 2006-07 would apply mulatis mulandis in these four latter assessment year(s) as well. Its additional ground is therefore rendered infructuous. Both the lower authorities action denying Revenue's sec. 80IC(2)(iii) deduction involving varying sum (supra) stands reversed. The assessee succeeds in its instant four appeal(s) in above terms." Therefore, the meaning of 'mineral oil' deserved to be considered in a wider manner. Moreover, the meaning of refining should be construed in the context of a refinery and it should not be restricted to simple purification process as opined by the Id AO and upheld by the Id CIT(A). The Id AO and the Id CIT(A) has held that 'Naphtha', the raw material used by the M S Plant is a 'Petroleum Product'. The 'Mineral oil' would include petroleum and petroleum products. Moreover, the MS Plant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of national level for which special benefit is given to new undertaking in those states under the provisions of the Act. We note that assessee company has satisfied the conditions of section 80IC(2)(b)(iii) of the Act, therefore, entitled to claim deduction under section 80IC(2)(b)(iii) of the Act. It is well settled that that the beneficial provisions should be liberally construed while interpreting taxing statute. Since, section 80-IC is a beneficial provision giving incentives to specified industries in specific states, it has to be interpreted liberally to achieve the objectives for the purpose for which it was enacted. We have relied on a number of decisions, while adjudicating the issue relating to 80IB(9) of the Act that beneficial provisions should be liberally interpreted and such decisions will also be applicable to section 80-IC of the Act. From the facts and issue of law, it is clear that the Id CIT(A) is not justified in upholding the decision of the Id AO is disallowing the benefit of section 80IC of the Act to the assessee company for the assessment years 2008-09, 2009-10 and 2010-11. We direct the AO to allow the deduction under section 80IC(2)(b)(iii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tile system of accounting, only income that has accrued during the previous year and the expenses incurred during the said period can only be considered in the taxable income. Hence, the Id AO disallowed prior period expenses being Sale of Product of ₹ 8,81,913/- and Raw Materials Consumed amounting to ₹ 2,28,13,514/-; in total ₹ 2,36,95,427/- (₹ 8,81,913 + ₹ 2,28,13,514) debited to profit and loss Account . 22. Aggrieved by the order of AO, the assessee carried the matter in appeal before the Id CIT(A), who has confirmed the addition made by the assessing officer. Aggrieved, the assessee is in appeal before us. 23. We have heard both the parties and perused the material available on record, we note that in para 7 of the assessment order, the Id AO held that under scheme of the Act, tax is levied on income of the previous year. In mercantile system of accounting, only the income that has accrued during the previous year and the expenses incurred during the said period can only be considered in computing the taxable income of a particular previous year, each year being a separate self contained unit of assessment. Hence, the Id AO disallowed prior p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the assessee is as follows: "(4) Disallowance of claim of expenses under the head 'Retirement Benefit of Employees'. Ground and Assessment Year Amount Ground No.(3) for the Assessment Year 2007- 08; ₹ 1,00,22,722/- Ground No.(2) for the Assessment Year 2008- 09; ₹ 1,02,74,000/- Ground No.(1) for the Assessment Year 2009- 10; ₹ 96,67,000/- Ground No.(2) for the Assessment Year 2010-11; ₹ 8,37,000/"-. 25. We note that Ground No. (3) for the Assessment Year 2007-08, Ground No.(2) for the Assessment Year 2008-09 , Ground No.(1) for the Assessment Year 2009-10 and Ground No.(2) for the Assessment Year 2010-11 are against disallowance of claim of deduction of expenses under the head 'Retirement Benefit of employees'. The brief facts qua the issue are that for the assessment year 2007-08, the assessee claimed deduction of ₹ 1,00,22,722/-being provisions for retiring benefits of employees, in computation of income under the general provisions of the Act as well as in determining income u/s 115JB of the Act, which was arrived at based on actuarial valuation. The Id AO added the amounts both in computation of income unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,000/being provisions for re-settlement benefits of employees, in computation of income under the general provisions of the Act as well as in determining income u/s 115JB of the Act, which was arrived at based on actuarial valuation. The Id AO added the amount in computation of income under general provisions of the Act hold ing that the amount is not an ascertained liability. However, the Id AO did not compute income u/s 115JB of the Act as income under the general provisions of the Act was on the higher sId e and book profit as shown by the assessee was taken in the assessment order. The Id AO considered the issue in para 05.00 to 05.2.1 (page 4 to 6) of his order dated 30-11-2012 Hence, only Ground no.(2) was taken before the Id CIT(A) against additions of ₹ 8,37,000/under the general provisions of the Act. 26. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Id CIT(A) who has confirmed the addition made by the assessing officer. Aggrieved, the assessee is in further appeal before us. 27. We have heard both the parties and perused the material available on record, we note that for the assessment year 2007-08 , the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited to P &L account based on actuarial valuation and to consider the amount as ascertained liability. He also stated that the Assessing Officer would re-compute the book profit u/s 115JB of the Act in accordance with the direction. However, the Id CIT(A) did not mention that such ascertained liability should also be deducted in computation of income under the general provisions of the Act. Thus, the Id CIT(A), in effect, only considered the Ground No.(7) for the Assessment Year 2007-08 which is related to allowability of deduction of 'retirement benefit for employees' in determining book profit u/s 115JB of the Act. As stated para 5.1 to 5.5 hereinabove, the assessee company had another Ground (3) for the Assessment Year 2007-08, Ground No.(2) for the Assessment Year 2008-09, Ground No.(1) for the Assessment Year 2009-10 and Ground No.(2) for the Assessment Year 2010-11 relating to deduction of 'Retirement Benefit for Employees' under general provisions of the Act and the Id CIT(A) inadvertently did not address the same in his consolidated order though he agreed with the contention of the assessee company that amounts based on actuarial valuation will be treated as ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were debited in the profit and loss account. However, while making computation of income, the same were added back under erroneous impression of the Act and wrong understanding of the provisions of law, that the same were not allowable expenditures. The matter was not raised before the Id AO and realising the mistake, the issue was raised for the first time before Id CIT(A). It was prayed before the Id CIT(A) that the grounds should be accepted and the issue should be considered on merits. However, the CIT(A) did not accept the submissions of the assessee company. The Id CIT(A) considered the issue in para (C) of page 6 of the consolidated order dated 08-10-2013. The Id CIT(A) held that the claim made during appellate proceedings for the first time cannot be entertained in view of Apex Court decision in case of Goetze(India) Ltd Vs. CIT 284 ITR 323(SC). Hence, the Id CIT(A) rejected the claim of deduction of expenses on account of Corporate Social Responsibility activities and additional grounds raised by the assessee company were dismissed. 31. Aggrieved by the order of the Id CIT(A), the assessee is in appeal before us. 32. We note that Id CIT(A) is not justified in not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not confined to the subject matter of the appeal, but extends to the subject matter of assessment. The entire assessment is thrown open before the AAC. The AAC may deal with all points and grounds which arise from not merely the subject matter of appeal, but even from larger area of subject matter of assessment. In case of Cellulose Products India Ltd (1985) 151 ITR 499(Guj)(FB) while interpreting the power of Tribunal, the full Bench of Hon'ble Gujarat High court has held that the powers of the AAC are wider than the power of the Tribunal. The principle laid down in earlier decisions was also approved in the Full Bench decision that the jurisdiction and power to deal with the matter in issue must be from the perspective as what was subject matter of assessment and not merely what was the subject matter of appeal. Reference may also be made to another decision of Hon'ble Gujarat High Court in case of CIT V Ahmedabad Crucible Company (1994) 206 ITR 574(Guj). In case of SmtPrabhavati S Shah V CIT (1998) 231 ITR 1 (Bom) it is held that on a plain reading of Rule 46A, it is clear that this rule is intended to put fetters on the right of the assessee to produce before AAC, any eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure based on Net Profit as per Guidelines of CSR issued by the Government, it is submitted that a measuring rod has to be decided to finalise the quantum of CSR expenses and net profit is the best measuring rod. In the Guidelines, loss making Enterprises are exempted from incurring CSR expenses on the logic that the Enterprise must survive on its own before contributing for the welfare to the State. The CSR expenses are mandated to all profit making Central Public Sector enterprise. Hence, Gross Receipt or Turnover of an enterprise is not considered to determine the quantum of CSR expenses. Thus, simply because Net Profit is taken as base for determining the budget of CSR expenses, it need not lead to the conclusion that the expenses are application of funds and not allowable expenses. In accounting treatment of CSR expenditure, these are revenue in nature and the same should be charged as expenses to the Statement of Profit and Loss Account. However, when an 'asset' is created from such expenditure, the definition of the word 'asset' as per 'Framework for Preparation and Presentation of Final Statement' issued by the Institute of Chartered Accountants (ICAI) should be follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been introduced with effect from 1st April,2015 cannot be construed as to disadvantage to the assessee in the period prior to the amendment. This disabling provisions, as set out in Explanation 2 to section 37(1), refer only to such corporate social responsibility expenses as under section 135 of the Companies Act,2013 and, as such, it cannot have any application for the period not covered by this statutory provisions which itself come to existence in 2013. Explanation 2 to section 37(1), is therefore, inherently incapable of retrospective operation and prospective in nature. From the facts of the case and issue of law discussed hereinabove, it is clear that the assessee company is entitled to claim of deduction of its Corporate Social Responsibility expenses u/s 37(1) of the Act. Therefore, we allow assessee`s Ground No. (6) for the Assessment Year 2007-08, Ground No.(6) for the Assessment Year 2008-09 , Ground No.(7) for the Assessment Year 2009-10 and Ground No.(5) for the Assessment Year 2010-11, Ground No.(2) for the Assessment Year 2011-12, Ground No.(3) for the Assessment Year 2012-13,Ground No.(3) for the Assessment Year 2013-14, relating to claim of deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that there was an apparent mistake in computation of income for the Assessment Year 2009-10 as prior period depreciations amounting to ₹ 2,58,27,259/- and ₹ 22,83,310/-were not adjusted in computation of income. It was claimed that the two amounts should have been added to current depreciation. During assessment proceedings, the assessee company realised the mistake and informed the Id AO in its written submission in para 3(c) of the submission dated 12-08-2011 which is given in page 4 of the Paper Book for the Assessment Year 2009-10. On appeal, the Id CIT(A) has held that the proper course of action for the assessee was to revise the return of income u/s 139(5) of the Act. The assessee having failed to revise the return u/s 139(5) within prescribed time, the same cannot be allowed in view of the decision of Apex Court in Goetz (India) Ltd V CIT 284 ITR 323(SC). Therefore, the Id CIT(A) dismissed the ground of the assessee in para (L) in page 12 of his consolidated order dated 08-10-2013. Aggrieved by the order of Id CIT(A), the assessee is in appeal before us. We note that Id CIT(A) is not justified in not considering the matter on merit. The mistake was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.(4) for the Assessment Year 2010-11; ₹ 5,61,254/- The assessee informs us by way of written submission that he does not want to press this ground, therefore, we dismiss the common ground No. 12 raised by the assessee as not pressed. 43. Now, we shall take Revenue's appeal. Ground No. 1 and 2 raised by Revenue in ITA No.97/Gau/16, A.Y. 2011-12 relates to claim of deduction ₹ 17,46,80,387/- being the amount paid during the previous year 2010-11 for pay revision of non-managerial staff" as no such deduction was claimed by the assessee in its return of income A.Y. 2011-12. 44. We have heard both the parties and perused the material available on record, we note that Id CIT(A) allowed the claim of the assessee observing the following: " As the amount was not allowed in the previous year as not accrued or not paid basis, the same should be allowed as deduction on payment basis. If the payment is made during the relevant assessment year 2011-12, the assessee company is entitled to deduction of the amount of ₹ 17,46,80,387/-. I direct the Assessing Officer to verify the facts and allow the deduction on payment basis, if not allowed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of Id CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. 47. Ground No.5 raised by Revenue in ITA No.97/Gau/16, A.Y. 2011-12 relates to in directing the assessing officer to verify the facts relating to the issue of ₹ 2,09,46,273/- under the head 'Provision for Stores' as giving direction for verifying the facts and allowing it is not within the purview of section 251(a) of the Income Tax Act, 1961. 48. We have heard both the parties and perused the material available on record, we note that Id CIT(A) allowed the claim of the assessee observing the following: "If the amount of ₹ 2,09,46,273/- was disallowed and taxed in earlier assessment years, the same amount should not be taxed again in the assessment year 2011-12, if entries are passed in the books of account by crediting the amount in the profit and loss account. Otherwise, the amounts will be taxed in two assessment years. I direct the Assessing Officer to verify the facts and allow deduction of the amount if the same is taxed twice." We note that on perusal of the assessment order 2010-11, it is observed that the assessee had debited ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company, an unilateral action is taken by the assessee company to recognize its liability and a sum of money is kept separately as provisions in its books of account for the liability. The liability is recognized and provided for in the books of account, but the claim of the party is not accepted and communicated to the party is not credited to the account of the party or the amount is not credited to any account whether called interest payable account or suspense account or by any other name in the books of account. Only a liability has been created in the books of account and no income by way of interest is credited to any account. Hence, I am of the view that provisions of explanation to section 194A are not applicable. Since there is a view that interest from part of judgement debt, following the well settled trite of law that if two views are possible, the favourable view to the assessee should be taken, the assessee company deserves benefit of doubt for non-deduction of tax at source under section 194A of the Act. As I hold that provision of section 194A is not attracted to the facts of the case and the assessee, provisions of section 40(a)(ia) is not attracted." Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Tribunal in the case of REI Agro Ltd. (supra). We note that there is no disallowance under Rule 8D(2)(i). Besides under rule 8D(2)(ii) no disallowance can be made as the assessee has own funds which is more than investments made by assessee. However, for disallowance under Rule 8D(2)(iii) only the dividend bearing securities should be considered; for that we rely on the judgment of the Co-ordinate Bench of Kolkata in the case of REI Agro Ltd (supra). Therefore, we direct the AO to compute the disallowance under rule 8D(2)(iii) r.w. section 14A, of the Act, taking into account dividend bearing securities. Therefore, we allow these grounds raised by Revenue for statistical purposes. 54. Ground No. 2 raised by the Revenue in ITA No.29/kol/18, for A.Y. 2014-15 relates to deletion of addition of ₹ 11,49,095/-.. 55. We note that CIT(A) during A.Y 2012-13 & A.Y 2013-14 allowed provision for interest, part of which was reversed in A.Y 2014-15. AO had gone for appeal to ITAT for A.Y 2012-13 & A.Y 2013-14.Reversal of the said provision in A.Y 2014-15 was disallowed in assessment by AO, which was not contested by NRL, as provision was already allowed in earlier assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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