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TMI Blog2020 (10) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... uction allowed in earlier years cannot be denied in subsequent years. Since deduction under section 80IA of the Act in respect to profit derived from eligible units has been allowed by Revenue till assessment year 1995-96, the same cannot be denied subsequently. AR made reference to the decision of the CIT(A) in assessee s own case for the assessment year 1994-95. CIT(A) has not taken into account the revenue s stand in the earlier years and deviated from the same without any substantial reasons or evidence on record. Thus, the claim of deduction made by the assessee under section 80I/80IA/ 80HH are genuine in this year as well - Decided in favour of assessee. Misc. Income and Interest income eligible for deduction u/s 80IA, 80I and 80HH - HELD THAT:- Assessee has produced all the relevant evidence as regards to how the scrap sale is derived from the industrial undertaking. As regards to interest on fixed deposits, various decisions of the Hon ble High Court categorically held that the deduction in respect of interest on fixed deposits under Section 80IA is allowable. The revenue has not pointed out as to why the same should be denied to the assessee. The case laws given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed. Deferred revenue expenditure - HELD THAT:- Expenditure incurred on market survey to assess the degree and extent of utilization of additional ethylene proposed to be produced by the assessee is related to the business related. Thus, revenue expenditure incurred by an existing business for expansion or setting up of new unit in the same business is allowable business deduction. Therefore, the CIT(A) rightly allowed the said expenditure. - I.T.A. No. 4454/Del/2013 I.T.A. No. 4642/Del/2013 - - - Dated:- 26-10-2020 - SH. R. K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Appellant by : Sh. Ajay Vohra, Sr. Adv. Sh. Rohit Jain, Adv. Ms. Deepashree Rao, C.A. Respondent by : Sh. Sambit Tripathy, CIT-D.R. ORDER PER SUCHITRA KAMBLE, JM These two appeals are filed by the assessee and Revenue against the order of the Commissioner of Income Tax [Appeals]-IX, New Delhi dated 31.05.2013 for Assessment Years 1996-97. 2. The Grounds of appeal are as under:- ITA N o.4454/Del/2013 (Assessee s appeal) 1. That the Commissioner of Income-tax (Appeals) ( the CIT(A) ) erred on facts and in law in holding that Lean gas is manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble business of the appellant. 4. That on facts and circumstances of the case and in law, the CIT (A) erred in not directing the assessing officer to reduce the amounts capitalized and transferred to expenditure during construction from interest and miscellaneous income excluded f r o m e l i g i b l e profits for the purpose of computing deduction under sections 80HH, 80IA of the Act. 5. That on the facts and circumstances of the case and in law, the CIT(A) erred in disallowance of amortization of leasehold rent of ₹ 27,30,000, being proportionate lease rental paid by the appellant to various local authority spread over the term of the lease. The appellant prays for leave to add, alter or delete any or all of the aforesaid grounds at or before the time of hearing of the appeal. ITA No.4642/Del/2013 (Revenue s appeal) 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the assessing officer to give the benefit of section 80I/80IA on manufacturing of lean gas at Vijaipur and Vaghodia. 2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in directing the AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng aggrieved by the assessment order the assessee filed an appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 6. As regards to Ground No. 1 and 2 of the assessee s appeal and revenue s appeal, relating to deduction under Section 80IA/ 80I/ 80HH, the Ld. AR submitted that the assessee claimed deduction under Section 80IA/ 80I and 80HH on production of LPG and Lean Gas undertaken at LPG plants and various customer terminals by treating the same as separate and independent units. The said deduction was duly supported by audit certificates. Accordingly, deduction aggregating to ₹ 151,95,06,878/- in respect of the profits derived from the aforesaid undertakings was claimed in the following manner: S. No. Particulars Amount (In crores) 1. Deduction under Section 80HH 56.4326 2. Deduction under Section 80I 7.7621 3. Deduction under Section 80IA @ 30% - non-backward areas 71.4236 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essure at which it is to be delivered. Lean gas and natural gas, in the form and state/composition, at/ in which it is extracted from the LPG plant/ received at Hazira cannot be utilized by the end customers, unless the processes (which the assessee undertakes) are undertaken by using various huge/ sizeable, technologically advanced and sophisticated plant and machinery installed at the customer terminals and at various points along the Hazira-Bijaipur-Jagdishpur pipeline, the cost of which runs into crores of rupees. After undertaking the processes, as aforesaid, the processed lean gas/ natural gas is sold to various end customers through customer terminals. Thus, the Ld. AR submitted that the only dispute is whether the activities undertaken by the assessee at the customer terminals, to deliver processed lean gas/ natural gas, amount to manufacture or production of article or thing, such that profits derived therefrom would be eligible for deduction under Sections 80I and 80IA of the Act. 7. The Ld. AR submitted that the CIT(A) accepted that benefit of deduction under Section 80I/ 80IA of the Act is admissible on Lean gas manufactured/ produced, but held that such deduction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form produced at the LPG plant, is not in a state of being delivered to the customers and various processes have to be undertaken to make the gas fit to use so as to be delivered at the customer terminals; and Processed Natural Gas, which is not routed through the LPG plant, is also supplied to various customers after undertaking various processes/ activities, as per the specific requirements of the customer so as to make the same fit to use; And consequently, the contention that production takes place at LPG Plant only is incorrect and legally unsustainable. The Ld. AR submitted that there is a contractual obligation on the assessee to deliver Processed Lean Gas in usable form at customer terminal. It is a matter of fact, that no part of Lean Gas is sold by the assessee except through customer terminals, which is the last stage of processes undertaken by the assessee before delivery to the final customers. The Ld. AR pointed out that the submission that the assessee undertakes the aforesaid activities in order to fulfill its contractual/ commercial obligations, is supported by the relevant terms of the contract(s) which had been duly placed before the assessing officer. On a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous. The Ld. AR submitted that the substantial activities undertaken at Terminal by the assessee. Hence, the finding of the CIT(A) that no manufacturing/ production takes place at customer terminal, is erroneous since the CIT(A) also failed to appreciate that a typical gas terminal has the following facilities: 1) Pig Launcher Receiver 2) Separation and filtration 3) Heating 4) Pressure regulation and control 5) Pressure relief valve 6) Measurement 7) Flow control 8) Condensate removal and handling Each of the aforesaid activities/ processes undertaken at customer terminal(s), has been explained in detail in pages 685-691 of the paper book. The Ld. AR submitted that depending on the quality of the gas received from the producer and the contractual requirements of the consumer necessary facilities, entailing investment in crores, in different combinations are installed at the dispatch and receiving terminals. In view of the aforesaid, the Ld. AR submitted that removal of impurities and dehumidification are not the only activities/ processes undertaken by the assessee. The processes/ activities undertaken by the assessee are, on the contrary, substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precedents, which are as under: i. UOI v. J. G. Glass Industries Ltd.: (1998) 97 ELT 5 (SC) ii. CIT v. Oracle Software India Ltd.: 320 ITR 546 (SC) of the word manufacture . The Supreme Court held as under: Kores India Limited vs. CCE: 2004 (174) ELT 7 (SC) India Cine Agencies vs. CIT: 308 ITR 98 ITO v. Arihant Tiles and Marbles (P) Ltd.: 320 ITR 79/ 227 CTR 513 CIT vs Emptee Poly-Yarn (P) Ltd: 320 ITR 665 (SC) CIT vs. Hindustan Petroleum Corp Ltd.: 396 ITR 696, Puttur Petro Products (P.) Ltd. vs. ACIT: 361 ITR 290 Central U.P. Gas Limited vs. DCIT: ITA No.224 of 2014 CIT vs. Gujarat Gas Company Ltd.: ITA No. 60 of 2009 Even the procedure/activity of purification, odorization, de-sulphurication, removing moisture content, regulating temperature and pressure etc., clearly falls within the ambit of manufacture and production for the purposes of section 80-I/IA and section 80HH of the Act. 10. The Ld. AR also relied upon the following decisions, wherein explaining the meaning of the word production , it has been held that the said term is much wider in scope than the term manufacture and that so long as a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute manufacture and the assessee would be entitled to the deductions/ tax holiday under Sections 80HH, 80I, 80IA of the Act. The conclusion/ finding of the CIT(A) that deduction in respect of Lean gas is admissible at the stage of LPG plant is erroneous. 13. The Ld. DR submitted that original assessment order was passed on 19.03.1999 u/s 143(3). The CIT(A) passed the order dated 08.03.2000. The assessee filed appeal before the Tribunal. During the course of hearing before the Tribunal, the assessee filed additional evidence. The Tribunal set aside the order of the CIT(A) and restored the matter to the file of the Assessing Officer with a direction to consider the additional evidence and other material on record and other evidence with Section 254 on 31.12.2009. Against the said order the CIT(A) passed order dated 31.05.2013. The Ld. DR pointed out that in the original/first round before the Tribunal, the assessee furnished following documents as additional evidence: i. Note on functioning of compressor stations ii. Affidavit of Mr. S. P. Rao iii. Certificate issued by Shriram Institute for Industrial Research The Ld. DR further pointed out that apart from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was decided by Govt. of India and the assessee was required to pay ONGC the price of gas actually received by it from the consumers, as mentioned in para 5 of MOU. In fact, total consumer price charged by the assessee from its customers had three components:- a) Production price It was required to be paid to the ONGC b) Gas Pool Price It was determined by Govt. of India and was required to be kept by GAIL in a separate account on behalf of the Ministry of Petroleum and Natural Gas, GOI which was required to be remitted to the Govt. of India as per directions. c) Transportation Charges Only the transportation charges could be retained by GAIL as its revenue. The fact regarding transportation charges payable to GAIL is further mentioned in clause (vi) of the letter of Ministry of P NG dated 18.09.1997. Further, in clause (viii) of the said letter, provisions of gas pool account are specified. In clause (x) of the said letter, it is mentioned that GAIL shall pass on to ONGC and OIL in proportion to the gas supplied by them on a net back basis the entire proceeds of sales of gas of ONGC and OIL, after making deductions under paras (viii) and (ix) abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re cannot be any dispute about the fact that deduction u/s 80IA/80HH/80I are not admissible on the said transportation charges . However, the CIT(A) has not examined this issue in the appellate order passed in the second round of appeal. This is the root of the matter and on this ground only the assessee is not eligible for deduction u/s 80HH/80I/80IA. 16. The Ld. DR submitted that the business of the assessee consists of transporation of gas purchased from ONGC to customers and production of LPG at LPG Plants at Vaghodia and Vijaypur. The core business of the assessee has been transportation of gas received from ONGC to different customers through its pipelines against which it receives transportation charges. The natural gas supplied by ONGC to GAIL is already sweetened by ONGC at its Hazira Plant. This fact has been explained by ONGC. The Ld. DR has given the schematic diagram of natural gas processing at ONGC Hazira before supply to M/s GAIL in his paper book which substantiate the fact that sweetening of natural gas was done by ONGC before supply to GAIL. The reply submitted by ONGC before the Asstt. Collector, Central Excise and Customs, Surat vide letter dated 11.04.1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from gas wells condensate wells or oil wells and the residue gas remaining after proceed such gas for the removal of liquid able hydrocarbons and impugned therefore to gas specifications given in Annexure- 1 The Ld. DR further pointed out that NTPC desires to purchase and receive Natural Gas as produced in its natural state or stripping of heavier components for other uses hereinafter referred GAS obtained from the Western Offshore Gas fields as fuel for the plant of the buyer. The agreement does not talk of lean gas. The customer is desirous of buying natural gas in its natural state or sweetened gas after the removal of impurities like Hydrogen Sulphide, CO2 and other impurities. Identical agreements have been entered with other customers by the assessee as per the evidence produced by the assessee. Further the specification of gas required by NTPC is mentioned as under: Specification of Gas: The gas shall have the following limits of composition at the delivery point: i) Methane Not less than 75% by volume ii) Other Gaseous Hydrocarbons Not more than 20% by volume iii) Non-Cumbustible gases other than hydrocarbons including Nitrogen Carbon-diox ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracts that all the customers require not less than 75% Methane, other gaseous hydrocarbon not more than 20%, non-combustible gases other than hydrocarbon not more than 8%, H2S- 10 PPM Vol (Max) etc. The gas which is received from ONGC by the gas contains all the above specifications of gas. In not even a single instance in any of the agreements customer has expressed requirement of lean gas, after extraction of C3 and C4 from natural gas. The Ld. DR pointed out that the analysis of natural gas supplied by ONGC to GAIL meets all the above specifications. Hence, the argument of the assessee that it was required to supply lean gas to its customers after extracting C3-C4 as per contractual obligations has no legs to stand. Considering the above facts, it becomes clear that the composition of natural gas required by the customers was being met or could be met by the gas supplied by the ONGC to GAIL and therefore, the claim of the assessee that as per contractual obligation processed lean gas was to be supplied to its customers is factually incorrect and misleading. During the relevant assessment year, the assessee had LPG Plants at Vaghodia and Vijaypur along the HBJ pipeline. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Shri S. P. Rao, only 42% of the natural gas is subjected to LPG extraction. This fact is very clearly admitted that the gas is depleted when C3 C4 are removed, thereby, leading to lowering of its caloritic value. Hence, whatever processing is involved is not by way of value addition but by way of depletion and hence, the same cannot be treated as manufacturing for the purpose of Sec. 80HH, 80I and 80IA. The Ld. DR pointed out that even if LPG plants of the assessee would not have been there, the assessee could have supplied sweetened natural gas received from ONGC to its customers whose main requirement was minimum 75% of methane in the gas by volume which was always there in the said sweetened gas. The Ld. DR submitted that the assessee wants to present the facts in such a manner so as to show whole of its business is covered u/s 80IA/80I/80HH. However, the correct position is that its main business is transportation of gas on which 80IA/80HH/80I is not admissible. It can claim 80IA only on profits from LPG manufacturing which is a separate and distinct activity in addition to business of transportation of gas. The Ld. DR pointed out that ONGC was not making any claim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging of the goods for the purposes of transporting them by road/rail/air transport, the only difference that in this case the means of transportation is by pipeline which has its own peculiar packaging. The meaning of the expression manufacture was considered by the Supreme Court in Dy. CST vs. Pio Food Packers (1980) 46 STC 63, among other decisions. In the decision, the test evolved for determining whether manufacture can be said to have taken, is, whether the commodity which is subjected to the process of manufacture can not longer be regarded as the original commodity but is recognized in the trade as a new and distinct commodity. The so called processing that the assessee has performed with regard to filtering, de-moisturisation, etc., cannot be said to be manufacturing. Lean or rich natural gas is only with regard to change in its calorific value, which we have seen is itself not standardised at the CTP. The product purchased by GAIL from ONGC remains recognizable as natural gas right through the HBJ pipeline, till it is sold. The Ld. DR relied upon the prospectus of GAIL for Global Depository Receipts Offer for 1999. The Ld. DR further submitted that natural gas must be h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be compressed for fast movement and once gas is pressurized, its temperature rises. As mentioned above, due to low sub-soil temperature the gas is cooled and therefore, it is required to heat it again. Further, cleaning of gas is required at regular intervals to remove condensate and dirt etc. which is the general requirement of gas transportation by pipes world over. In view of the above facts, the plea of the assessee that there is production of new product at terminals/compressor stations for supply of gas at tailor-made temperature and pressure etc. is nothing but a ploy to misplace and distort the facts in order to claim deduction. At terminal stations the nature and composition of natural/use gas remains the same even after removing condensate and dirt particles and it cannot be treated as manufacture /production of a new product by any stretch of imagination. The issue with regard to the break up of profits in terms of units also needs to be highlighted. In the computation of income, the assessee has claimed deductions u/s 80I II I, 80IA and 80I unit-wise. It is an accepted fact that these deductions are to be computed on the basis of industrial units. However, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 17.03.1999. The depreciation chart has been made site- wise and not unit-wise by the assessee. There is no way in which one can relate the machinery, given vide the said letter. In fact, the whole computation of deduction u/s 80HH, 80IA and 80I is purely a hypothetical computation. The ground reality is that the entire HBJ pipeline system and its taps-offs constitute one unit. Subsequently, in the following years, the assessee has set up new pipeline systems in South and East India, which can be said to represent separate units. But in the financial year 1995-96, for all practical purpose, there is only one single unit i.e. the HBJ pipeline system. It is only this unit which is partially eligible for deduction u/s 80I II I, keeping in view the other factors which was referred earlier. The assessee is, therefore, not eligible for deduction u/s 80IA and 80I, except on its LPG units at Vijaypur and Vadodhia. The claim of the assessee in respect of deduction at customer terminals may be compared to claim of deduction on transportation of ice- cream. A person who is providing transportation services to ice-cream manufacturer, has to provide optimum temperature so that ice cream is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CST (1986) 62 STC 197(MP) xxiv) Sterling Foods vs. State of Karnataka 1986 (63) STC 239 (SC) xxv) Enner Refineries vs. AssL CCT (1994) 92 STC 78 (Guj) xxvi) Singh Engineering Works P. Ltd. vs. CIT (1979) 119 ITR 891 (Allh) xxvii) Koshy s Pr. Ltd. vs. CIT (1985) 154 ITR 53 (Kar.) xxviii) Kamal Biscuit Factory vs. CST (1985) 60 STC 344 (Allh.) xxix) Dy. CST vs. Pio Food Packers (1980) 46 STC 63 xxx) South Bihar Sugar Mills vs. UOI (1978) ELT (J) 3 xxxi) Empire Industries Ltd. vs. UOI (1986) 162 ITR 846 (SC) xxxii) CIT vs. Lucky Mineral Pvt. Ltd. 226 ITR 245 19. The Ld. DR further submitted that as regards the claim of the assessee that deduction allowed in earlier years cannot be denied in subsequent year, the assessee claimed deduction u/s 80IA of the Act with respect to profit derived from eligible units has been allowed by Revenue till A.Y. 1995-96, the same cannot be denied subsequently. In A.Y. 1990-91, the Assessing Officer mentioned in the Assessment Order that what the assessee was doing was simply buying natural gas and removing impurities from it and then selling as lean gas and LPG. This therefore, is not a manufacturing ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of gas to GAIL. It was also noticed by the Assessing Officer that GAIL was essentially receiving transportation charges from the customers which was its revenue while remaining amount collected from the customers was remitted to ONGC or Ministry of Petroleum Natural Gas. Therefore, in the earlier years, the Assessing Officer has not taken a view on these facts which is being reversed in the year under consideration. The Ld. DR further pointed out that the assessee has mainly relied on the decision of Gujarat High Court in case of Saurashtra Cement Chemical India vs. CIT 123 ITR 669 (Guj.) and other decisions of various High Courts which are different from the present case. In Saurashtra Cements (supra), the claim u/s 80J was allowed in the initial assessment year by treating the extension in capacity of the plant as formation of a new industrial undertakings. However, in the subsequent year, the Assessing Officer sought to deny the said claim on the consideration of the same facts, which was set aside by the Hon ble Gujarat High Court. In case of Paul Bros. (supra), the issue was related to jurisdiction assumed by the CIT u/s 263 of the Act. Hence, the facts of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terminals, which are not routed through LPG plant. Moreover, since deduction is admissible for specified years, as a consequence of the order of the CIT(A), deduction in respect of profits derived from processed Lean Gas shall be considered from the year of setting up of the LPG Plant and not the relevant customer terminal at which such processed Lean Gas is supplied to the customer. Extensive processing activities undertaken by the assessee at the customer terminals to make lean gas and natural gas marketable and fit for use, clearly constitute manufacture . The contention of the assessee is that the claim of deduction made by the assessee under section 80I/80IA/ 80HH are genuine as the similar claims have been allowed in the earlier years by the revenue. Deduction allowed in earlier years cannot be denied in subsequent years. Since deduction under section 80IA of the Act in respect to profit derived from eligible units has been allowed by Revenue till assessment year 1995-96, the same cannot be denied subsequently. The Ld. AR made reference to the decision of the CIT(A) in assessee s own case for the assessment year 1994-95. Therefore, the CIT(A) has not taken into account the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding taxability of the said interest income as income from other sources was rejected by the Hon ble High Court. The Ld. AR also relied upon the following decisions: i. ACIT vs. Maxcare Laboratories Limited 92 ITD 11 (Cuttack Tri.) ii. DLF Power Limited in ITA No. 1195/Del/2002 (Del. Tri.) iii. Bharat Rasayan Ltd. vs. JCIT ITA No. 4639/Del/2000 (Del. Tri.) As regards to employees loans and advances, the Ld. AR submitted that the interest on loan provided to employees is inextricably linked to the business of the assessee and constitutes business income eligible for deduction. The Ld. AR relied upon the following decisions: i. CIT vs. Eltek SGS (P) Ltd. 300 ITR 6 (Del) ii. Joyco India (P) Limited vs. ITO 122 TTJ 940 (Del.) iii. Maruti Udyog Ltd. vs. DCIT 92 ITD 119 (Del.) iv. Kirloskar Ebara Pumps Ltd. vs. DCIT 138 TTJ 211 (Pune) v. Shipping Corporation of India Ltd. vs. Addl. CIT Lex doc ID 415851 As regards to interest on customer outstanding is profit derived from eligible undertakings and entitled for deduction under Section 80IA/80I, in department s appeal, the Ld. AR submitted that the issue is covered in favour of the assessee by fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble Supreme Court that there must be for the application of the words derived from , a direct nexus between the profits and gains and the industrial undertaking. That decision was in reference of deduction claimed under Section 80HH of the Act. The issue was raised whether the said ratio is applicable in the case of education claimed under Section 80IA/80IB. This controversy was put to rest by the Hon ble Supreme Court in case of Liberty India (supra) by holding that it is evident that Section 80IB provides for allowing of deduction in respect of profits and gains derived from the eligible business. The words derived from is narrower in connotation as compared to the words attributable to . In other words, by using the expression derived from , Parliament intended to cover sources not beyond the first degree. In this case, the assessee has earned interest income on FS, ICD and Bonds. The source of first degree is FD, ICD and bonds and therefore, the interest income is not derived from the industrial undertaking. The Ld. DR relied upon the following decisions: i. Liberty India vs. CIT (2009) 317 ITR 218 (SC) ii. CIT vs. Ritesh Industries Ltd. (2005) 142 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible undertakings and entitled for deduction under Section 80IA/80I, in department s appeal, the issue is covered in favour of the assessee by various decisions of High Court. As regards to miscellaneous income, the said income is inextricably linked to and have first degree nexus with the profits and gains of the eligible undertaking and the same were eligible for deduction. Therefore, Ground No. 3 in assessee s appeal is allowed and Ground No. 3 in revenue s appeal is dismissed. 20. As regards to Ground No. 4 of the assessee s appeal relating to interest transferred to expenditure during construction liable to be excluded from eligible profits, the Ld. AR submitted that while excluding interest and miscellaneous income for deduction under Section 80I/80IA of the Act, the Assessing Officer has excluded gross interest and miscellaneous income. Out of interest income of ₹ 18711.37 lacs and miscellaneous income of ₹ 926.70 lacs, interest of 21.06 lacs and miscellaneous income of ₹ 170.01 lacs are reduced from income and transferred to IEDC a/c and capitalized and balance interest income of ₹ 18690.31 lacs and balance miscellaneous income of ₹ 756.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order and the order of the CIT(A). 23. We have heard both the parties and perused all the relevant material available on record. The issue is decided by the Hon ble Delhi High Court in assessee s own case for A.Y. 1996-97 against the assessee. The facts are identical in the present assessment year relating to this issue. Therefore, Ground No. 5 of the assessee s appeal is dismissed. 24. As regards to Ground No. 4 of revenue s appeal relating to horticulture expenses, the Ld. DR submitted that the said expenses are rightly disallowed by the Assessing Officer. The Ld. DR relied upon the Assessment Order. 25. The Ld. AR submitted that during the relevant previous year, the assessee incurred horticulture expenses amounting to ₹ 85,21,221/- comprising of expenditure incurred, inter alia, on planting of trees, maintenance of lawns and areas in the close vicinity of the offices/ plants of the assessee in accordance with the mandate of the Government. The Ld. AR submitted that the assessee is primarily engaged in the business of exploration, production and distribution of gas. In order to conduct such business activities, the assessee requires various regulatory appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia, required the assessee company to install and operate air pollution control system in order to achieve norms prescribed in the said letter. The Ld. AR submitted that the aforesaid expenditure is required to be incurred as a measure of restoring the environmental impact resulting from the activities of the assessee, and for that reason; too, the same is an allowable business donation. The expenditure on horticulture expenses amounting to ₹ 85,21,221 was revenue expenditure and not capital in nature, inasmuch as, as a result of the aforesaid expenditure, there is neither the acquisition of any capital asset nor any enduring benefit to the assessee in the capital field. The aforesaid expenditure has been incurred purely as a matter of statutory obligation and as a condition precedent to conduct its business. Further, the assessee has to incur such expenses on a continuing basis in order to comply with the conditions put by various approvals and to minimize the impact of its business activities on the environment. Being so, the Ld. AR submitted that the aforesaid expenditure is liable to deduction under Section 37(1) of the Act. The Ld. AR relied upon the following deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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