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TMI Blog2022 (1) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance u/s 80IA for Rail Systems and for Power Plants - Rail Systems and Power Plants transferred from Samruddhi Cement Limited to the appellant Company pursuant to the scheme of amalgamation, the deduction is not allowable as per the provisions of section 80IA(12A) - HELD THAT:- The coordinate Bench of this tribunal in AY 2010-11[ 2017 (12) TMI 1134 - ITAT MUMBAI] analysed the issue in great detail and allowed the claim of the assessee. It has been held that the Rail undertakings are infrastructure facilities and eligible for deduction u/s.80IA - Since the facts and circumstances with regard to this claim of the assessee remain same in this year, following the orders of Coordinate Bench in assessee s own case for earlier assessment years, especially for AY 2010-11, we uphold the action of the LD CIT(A) and dismiss this ground raised by the Revenue. Disallowance u/s 14A r.w.r. 8D - indirect expenses incurred for earning exempt income - HELD THAT:- The facts in the present case are similar to the facts in the earlier years. For the year under consideration, the disallowance offered by the assessee is in respect of salary cost of the employees looking after the investment activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has neutralised the disability enshrined in sub-section (12) by inserting sub-section (12A) in section 80IA of the IT Act. If the intention of tax holiday under section 80IA was to provide incentive to only original investor, the legislature would have never inserted sub-section (12) in the statute. At least, the memorandum explaining the provisions of Finance Bill 2007, regarding insertion of sub-section (12) in Section 80IA should have clarified why the legislature thought fit to deviate from the its basic intent of providing incentive to the original investor and provide benefit to the successor. We have seen earlier, the memorandum explaining the provisions of Finance Bill 2007 has no such reference. It is, therefore, difficult to accept the contention of the Revenue and accept the contents of Circular no. 3 of 2008 to be depicting correct intention. In our view, therefore, the clarification provided in the circular for insertion of sub-section (12A) cannot be extended beyond what is unambiguously stated in the provisions of the IT Act. Sub-section (12A) simply states that from a particular date i.e. 31 March 2007 the provisions of sub-section (12) shall not apply in the speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not made by the Grasim / SCL in their ROI. This ground is remitted back to Ld AO and accordingly it is allowed for statistical purpose. Admissibility of the additional grounds - HELD THAT:- We are of the view that a legal plea can be raised by the affected party at any point of time in the matter pending for adjudication. Further, it is settled proposition of law that mere procedural lapse, or omission on the part of the assessee, cannot lead to denial of substantive benefit/eligible claim in the hands of the assessee. Keeping in view, of above discussion and decision of the Hon ble Apex Court, the additional grounds filed by the assessee are accepted and taken up for adjudication Claim of deduction towards the education cess and secondary and higher education cess - HELD THAT:- Education cess, secondary and higher education cess should be allowed as deduction. Their Lordships had held that Section 40a(ii) of the Act applies only to taxes other than cess. This issue is also decided in favour of assessee by Jurisdictional High Court in case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] which has been followed in various Tribunal orders subsequently. We direct the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or machinery lying as CWIP as on 1 April 2013 but installed during the financial year 2013-14 confirmed. We therefore direct the AO to allow deduction as investment allowance u/s 32AC of the IT Act. X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law, the Learned AO erred in not making a reference to the Learned TPO under Section 92CA(2) of the Act, pursuant to the notice dated 26 November 2014 issued under Section 153C of the Act and accordingly, the order issued under Section 92CA(3) of the Act dated 28 November 2014 by the Learned TPO, in absence of such reference, is bad in law and liable to be quashed. Revenue's Appeal- ITA No. 2871/Mum/2018 - Assessment Year 2011-12 2. The grounds taken by the revenue are as under: 1) On the facts and in the circumstances of the case and in law, the Ld. LD CIT(A) erred, in holding that the sales tax exemption benefits of ₹ 19,99,06,000/ - are capital receipts not liable to income tax. 2) On the facts and in the circumstances of the case and in law, the Ld. LD CIT(A) erred, in holding that the sales tax exemption benefits of ₹ 19,99,06,000 / -are capital receipts not liable to income tax in view of the Hon'ble ITAT decision in the assessee's own case in earlier years i.e. 2004-05 to 2010-11 without appreciating the facts that the revenue has not accepted the decision of the Hon'ble, ITAT on this issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee and included it as part of its returned total income. 11) Whether the Ld. LD CIT(A) is right by deciding the case under the factually incorrect assumption that the assessee has not charged any guarantee commission when the assessee has actually charged the same. 12) Whether the Ld. LD CIT(A) is right in deciding the case by relying on the decision of the Hon'ble ITAT of Videocon Ind. Ltd. vs Addl. CIT in ITA No.- 6662/ Mum/ 2012 ignoring the fact that in that case no guarantee fees were charged and therefore, facts are not identical CO. No. 129/Mum/2018 - Assessment Year 2011-12 3. The cross objections filed by UTCL against the appeal of the Revenue are as under: "On the facts and in the circumstances of the case an in law, the learned AO has : 1) erred in challenging the order of the LD CIT(A), wherein LD CIT(A) allowed the sales tax exemption benefits of ₹ 19,99,06,000 as capital receipt not chargeable to income tax, without appreciating that the LD CIT(A) has allowed relief by following the decision of the Hon'ble ITAT in case of the Respondent in earlier years from AY 2004-05 to AY 2010-11. 2) erred in challenging the order of the LD CIT(A), wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue's appeal relate to the claim of the assessee in treating the sales tax exemption benefit received, amounting to ₹ 19,99,06,000/- as capital receipts not liable to tax. Ground no.1 of the assessee's cross objection is connected with this claim. 6. This issue has been subject matter of appeal in the assessee's own case from AY 2004-05 onwards and has been decided in favour of the assessee from AY 2004-05 onwards. The latest order on this issue is for AY 2010-11 in ITA No. 7614/Mum/2014 and 7631/Mum/2014 dated 5 April 2017 wherein the Coordinate bench has followed the decisions in earlier years and allowed the plea of the assessee. The Coordinate Bench held as under: "99. We have considered rival contentions and carefully gone through the orders of the authorities below as well as the order passed by the Tribunal in assessee's own case in the A.Y.2004-05 to 2006-07. We found that exactly similar issue was considered in detail by the Tribunal and after discussing various judicial pronouncements held that subsidy so received by the assessee was capital in nature, therefore not liable to tax as revenue receipt." "100. The facts and circumstances during the years under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,764/-. Ground no.5 of the assessee's cross objection is connected with this claim 12. This issue is also covered in favour of the assessee in its own case by the orders of coordinate bench of this Tribunal for AY 2007-08 to AY 2010-11, wherein the coordinate bench has accepted the assessee's plea that the amount suo moto offered for disallowance is appropriate and without pointing out any defect in the workings of the assessee, no further disallowance can be made by the AO. The observation of the coordinate bench in AY 2010-11 is reproduced below: "104. We had carefully gone through the order of the authorities below as well as the order passed by the Tribunal in assessee's own case for the AY 2007-08 and 2008-09 wherein the Tribunal has restricted the disallowance under Rule 8D(iii) to the extent of amount offered by the assessee as attributable to earning of exempt income. During the year under consideration, we found that assessee has offered expenses on Cost to Company basis of employees, executives and staff those were looking after the profit on investment in the mutual funds amounting to ₹ 43,31.541/ Assessee has also offered expenditure indirectly attributable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Coordinate Bench of this Tribunal in assessee's own case for earlier year and the Bombay High Court's ruling for AY 2008-09 against which the SLP filed by the Revenue has been rejected by the Hon'ble Apex Court, we hold that total disallowance for the purpose of section 14A should be restricted to the amount suo moto offered by the assessee i.e. ₹ 71,50,186 and accordingly dismiss the ground raised by the Revenue in this regard. 16. Ground nos.6 and 7 raised by the Revenue relate to treating the receipts on sale of CER certificates as capital receipts instead of revenue receipts. Ground no.3 of the assessee's cross objection is connected with this claim 17. We note that this issue has also been decided in favour of the assessee in its own case by the Coordinate Bench of this Tribunal in ITA No. 1348/Mum/2012 for AY 2008-09 vide order dated 28 Feb 2014. The observation of the Tribunal on this issue is as under: "43. We find that the assessee has shown the sale consideration out of sale proceeds of Carbon Credit under the head 'other income' as revenue receipts which now it wants to claim as capital receipts in the light of the decision of the Tribunal. Since no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 29.03.2016 was passed u/s. 153C r.w.s 144(3) r.w.s 143(3) of the IT Act assessing the total income at ₹ 15,25,40,74,592/-. 23. Ground no.1 of the appeal filed by the assessee relate to disallowance of claim made by the assessee amounting to ₹ 82,61,81,708 for rail system and ₹ 18,81,43,054 for power generation. The AO has held that the undertakings which were transferred to the assessee from Samruddhi Cement Limited pursuant to the scheme of amalgamation are not eligible for tax holiday benefit under section 80IA in view of the provisions of sub-section (12A) of section 80IA of the IT Act. 24. Before we get into the merits of the claim of the assessee, it is important to understand the facts in the case before us. i. The assessee is a subsidiary of Grasim Industries Limited (Grasim) with the promoter holding of more than 60%. ii. During the financial year 2010-11, as per the Scheme of Amalgamation duly approved by the Hon'ble High Courts of Bombay and Gujarat, Samruddhi Cement Ltd. (SCL) was amalgamated with the assessee w.e.f. 01.07.2010 (appointed date). The amalgamating company, viz. SCL was a 100% subsidiary of Grasim. iii. Pursuant to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance of infrastructure facility, industrial parks and special economic zones or generation, distribution or transmission of power, laying and operating and similar benefit is proposed for laying and operating a cross-country natural gas distribution network, including gas pipelines and storage facilities being an integral part of the network, etc. Sub-section (12) of the said section 80-IA, inter alia, provides that where any undertaking of an Indian company which is entitled to the deduction under the said section is transferred before the expiry of the period specified therein, to another Indian company in a scheme of amalgamation or demerger, the provisions of the said section 80-IA shall 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. It is proposed to insert a new sub-section (12A) in section 80-IA so as to provide that the provisions of sub-section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31-3-2007. This amendment will take effect from 1st April, 2008 and will, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to put to rest the divergent views taken by the authorities on this issue. It was also pointed out that sub-section (12) to section 80IA did not confer any new right to an assessee to claim the deduction. Sub-section (12) merely clarified that the successor company shall be eligible to claim the deduction for the residual period which according to the AR of the assessee was statutorily vested as per section 80IA(1) of the IT Act. 31. The Ld AO as well as Ld CIT(A) are of the view that with the introduction of sub-section (12A), since the provisions of sub-section (12) shall not apply to the undertakings or enterprises which are transferred in the scheme of amalgamation or demerger after 31-3-2007, the statute has disabled the enabling provision enshrined in subsection (12) of Section 80IA of the IT Act. 32. The Ld AR of the assessee on the other hand, as aforementioned, argued that sub-section (12) of section 80IA did not create any new right of tax holiday to the successor entity at the first place. Thus, insertion of sub-section (12A) in section 80IA of the IT Act, which merely disabled the applicability of sub-section (12), cannot be construed as withdrawal of right to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim deduction u/s. 80-IA in respect of the eligible undertakings for the residual period, the tax authorities cannot deny the deduction in contempt of the order of Hon'ble High Court. 37. Without prejudice to the above arguments, the Ld AR of the assessee also submitted following additional arguments in support of claim: i. Interpretation of sub-sections (12) & (12A) leads to unjust and discriminatory result in so far as the successor company in case of amalgamation/ demerger would not be eligible for the deduction, whereas a purchaser of unit or a successor pursuant to dissolution/slump sale, conversion of proprietorship /firm into company etc. shall be able to claim the tax holiday. Therefore, the AR submitted that an interpretation which leads to absurd consequences and results in discrimination should be avoided. ii. Sub-section (12) applies only to an "undertaking" and not to an "enterprise", therefore sub-section (12A) which negates the applicability of sub-section (12) will not apply to rail systems which are regarded as "enterprise" for the purpose of section 80-IA(4)(i). iii. Sub-section (12) of section 80IA presupposes that the amalgamating Company/ demerging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amation. 42. Before getting into the merits of the dispute, it is worthwhile to briefly touch upon the legal provisions concerning allowability of deduction under section 80IA of the IT Act. 43. Sub-section (1) to section 80IA allows the deduction, in respect of the profits derived from the eligible business (as specified in the section, which includes certain eligible business), in accordance with and subject to the provision of the section. The relevant section is reproduced below: "[1] Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years". 44. Sub-section (4) of section 80IA provides as under: any enterprise carrying on the business of (i) developing or(ii) operating and maintaining or (iii) developing, operating and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking continues to carrying on its business without any reconstruction of business already in existence." 48. A corollary can also be drawn from the provisions of section 10A which provides for deduction to undertakings deriving profits from export of specified article or software. The language used in section 10 is similar to section 80IA where the deduction is prescribed for an undertaking. The Hon'ble jurisdictional High Court in the case of CIT vs. Sonata Software Ltd. [2012] 343 ITR 397 dealing with the issue relating to eligibility of the successor entity which had acquired the eligible undertaking on slump sale basis to claim deduction under section 10A, held as under: "11. The Tribunal in the present case has come to the conclusion that where a running business is transferred lock, stock and barrel by one assessee to another assessee the principle of reconstruction, splitting up and transfer of plant and machinery cannot be applied. According to the Tribunal the benefit of Section 10A attaches to the undertaking and not to the assessee which owns the undertaking. The benefit of Section 10A was held to have attached itself to the STP unit of the software division whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. It is hence important to understand the purpose of introduction of sub-section (12) in the statute. 53. The Memorandum explaining the provisions of the Finance Bill, 1999, stated that the insertion of sub-section (12) in the statute was to neutralise the tax effects of a business reorganisation. Relevant portion of the Memorandum explaining the provisions of the finance Bill was as follows: "86. With growing liberalisation of the economy has come the need for industrial restructuring so that companies can focus better on their core activities. The corporate sector has been voicing the need for a flexible fiscal policy for regulating business reorganisations. In response to this need, I propose a comprehensive set of amendments to the Income tax Act to make such business reorganisations fully tax neutral. ... 87. ... Further, it is proposed that all fiscal concessions will survive for the unexpired period in the case of amalgamation and demergers". (Extracts from the speech of Finance Minister)" The Memorandum further explained as under: "The business and economic development of the country has thrown up the need for rationalisation of laws relating to busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act to mean the merger of one or more companies with another company or the merger of two or more companies to form one company. There are a number of provisions in the Income-tax Act having bearing on amalgamation. Demerger is relatively a new phenomenon in the Indian corporate sector. A demerger is a reorganization of a company where all the existing assets and liabilities are divided into one or more additional entities leading to resulting companies. While there are no specific provisions under the Companies Act governing demergers, some transactions of this nature do take place through schemes of compromise or arrangement under sections 391 to 394 of the Companies Act and these are sanctioned by the High Courts. A slump sale is a form of reorganization where an undertaking or a division is transferred from one person to another for a lump sum consideration without values being assigned to the individual assets and liabilities transferred. 56.3 Extensive amendments in the Income-tax Act have been carried out on the basis of the following broad principles: a) The restructuring shall not attract additional liabilities to tax and also not result in the withdrawal of reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the amalgamated company continued to carry on the business of the undertakings. It claimed the deduction of tax holiday for all the eligible undertakings. The AO disallowed the deduction on the ground that it did not set up the aforesaid units and there was no provision in the Act for granting the benefit of deduction to the amalgamated company. The Ld CIT(A) and the Tribunal upheld the claim of the taxpayer. The Hon'ble Madras High Court confirmed the decision of the Tribunal and observed as follows: "A reading of the provision of sections 80HH and 80-I of the Act, it is clear that the same has been incorporated to encourage the new industrial undertaking on fulfilment of certain conditions mentioned therein. If the conditions mentioned in the sections are complied with by the assessee, the benefit extended by the provisions has to be granted to the assessee. The amalgamation of one company with the other company cannot be regarded as a splitting up or reconstruction or by a transfer of a new busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking is transferred as a running concern 60. The aforesaid Board Circular have been relied upon by various Courts and its applicability have been upheld. The Hon'ble Allahabad High Court in the case of Prisma Electronics [2015] 377 ITR 207 was concerned with deduction under section 80-IB on conversion of proprietorship concern into partnership firm. In this regard, it was held as under: "11. From a perusal of the aforesaid provision, it is clear that Section 84 is more or less the same as provided in Section 80-IB of the Act. The Central Board of Direct Taxes issued a circular F. No.15/5/63-IT(A-1) dated 13th December, 1963 indicating that the benefit of Section 84 is attached to the undertaking and not to the owner thereof and, consequently, the successor would be entitled to the benefit for the unexpired period of 5 years provided the undertaking is taken over as a running concern. 12. The same principle is applicable in the instant case. Admittedly, the undertaking was in existence since 2002. The proprietorship concern changed into a partnership firm. The benefit under Section 80-IB of the Act is available to the partnership firm and the conditions imposed under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under section 80J for the unexpired period in case of amalgamation has also been examined by the Hon'ble Bombay High Court in case of Tyresoles Concessionaire (P.) Ltd [1995] 81 Taxman 279. Relevant findings of the High Court while deciding the issue in favour of the assessee were as follows: "10. So far as the next question is concerned, we find that the amalgamated company claimed relief under section 80J for the period from 1-1-1975 to 31-3-1975. This relief was refused by the ITO on the ground of non-fulfilment of the conditions of section 80J(5). So far as the fulfilment of the conditions of section 80J(5) is concerned, we find that there is a clear and categorical finding of the Tribunal that all the conditions were fulfilled. The only question to be decided is whether having regard to the provision of section 80J, the assessee-company is entitled to claim development rebate for the balance period of 5 years. We have carefully perused the provisions of section 80J. Relief under that section is available only to those industrial undertakings which fulfil all the conditions specified in sub-section (4) thereof, the relevant conditions for the present purpose being condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year, the amalgamating company will be eligible to claim deduction upto the period the undertaking was operated by it and, the amalgamated company will be eligible to claim deduction for the period the undertaking was operated by it after the amalgamation. In this case, the Tribunal was interpreting the provisions of section 80J, which did not have a provision similar to sub-section (12) of section 80IA. 68. In summary, prior to insertion of sub-section (12) in section 80IA, the deduction was allowed to the amalgamating and the amalgamated companies on a pro-rata basis for the year in which the amalgamation took place. Sub-section (12), although allowed the benefit to the successor entity to which the undertaking was transferred, it changed the position a little, by disentitling the amalgamating company to claim any deduction in the year of amalgamation. Therefore, sub-section (12) did not create a new right, since this right was already provided in the statute to the successor. It, in effect, curtailed the rights of the amalgamating company or demerged company by disenabling them to claim any benefit in the year of amalgamation/demerger. 69. We also tend to agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after 1-4-1989. Section 188A reads : "Joint and several liability of partners for tax payable by firm.-Every person who was, during the previous year, a partner of a firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the assessment year to which such previous year is relevant, and all the provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of such penalty or other sum." 72. In our view since the benefit is implicit in sub-section (1) read with sub-section (4) of section 80IA of the IT Act, the discontinuance of subsection (12) by insertion of sub-section (12A) does not take away the benefit provided in sub-section (1) of section 80IA of the IT Act. 73. We may also refer to one more amendment made by the Finance Act, 1999 (by which sub-section (12) was introduced in section 80IA of the IT Act), for the purposes of "tax neutral" business reorganisation i.e. 35AB(3). This amendment relate to an expenditure which was incurred in a particular year and the allowance was spr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 2007 w.e.f. 01.04.2008. It reads as follows: "(12A) Nothing containing sub-section (12) shall apply to an enterprise or undertaking which is transferred in the scheme of amalgamation or demerger on or after the 1st day of April, 2007". 77. Notes on clauses to the Finance Act, 2007 explains it as follows: "It is proposed to insert sub-section (12A) so as to provide that nothing contained in sub-section (12) shall apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007". 78. The Notes on clauses simply reiterated what has been stated in subsection (12A). The memorandum explaining the provisions of the Finance Bill 2007, which has been relied upon by the AO as well as LD CIT(A) states as under: "Tax benefit u/s 80-IA not available to undertakings / enterprises of Indian companies undergoing amalgamation or demerger after 31.03.2007 The existing provisions of section 80-IA provide for 100% deduction for ten years in respect of profits and gains of certain undertakings or enterprises engaged in the business of development, operation and maintenance of infrastructure facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the view that by doing so, the legislature has restored the position that prevailed prior to insertion of sub-section (12) in section 80IA. As discussed above, various Courts have confirmed the availability of benefit of tax holiday claims (although under different sections) and allowed to the successor even prior of specific provisions of sub-section (12) in section 80IA of the IT Act. 81. Wherever the legislature intended denial of any deduction, it expressly so provided. To illustrate, section 10A(9) (since omitted) which sought to deny the deduction under section 10A, where there was a change in shareholding, it was expressly so provided and a reference was drawn to the sub-section conferring the deduction. Sub-section (9) of section 10A of the IT Act read as under: "(9) Where during any previous year, the ownership or the beneficial interest in the undertaking is transferred by any means, the deduction under sub-section (1) shall not be allowed to the assessee for the assessment year relevant to such previous year and the subsequent years". 82. Thus, a conscious use of different terminology or language is found to be adopted for every amendment and that diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no justification for passing on the benefit to someone who had not taken these risks and had only acquired the eligible undertaking much later when the risks had reduced. Hence, a new sub-section (12A) has been inserted in section 80-IA so as to provide that the provisions of sub-section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31.03.2007. Thus, if an undertaking or an enterprise is transferred in a scheme of amalgamation or demerger after 31.03.2007, the benefits of deduction u/s 80-IA will not be available to the amalgamated or demerged undertaking or enterprise. The content of this circular will supersede whatever contrary has been stated, on this issue, in any other circular, issued by the Central Board of Direct Taxes earlier. (Emphasis supplied) 35.2 Applicability - this amendment will take effect from 01.04.2008 and will accordingly apply in relation to the assessment year 2008-09 and subsequent years." 85. TheLd DR contended that the intention of providing benefit under section 80-IA was to accord incentive to those who had made initial investment and taken entrepreneurial risk. He accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99) has held as under: "6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/ circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." 90. We also place reliance on the decision of the Allahabad High Court in a case Shivangee Crafts Limited vs. State of UP. A writ petition was filed by assessee in reference to UP Trade Tax Act, 1948, wherein the Court has held that till such time as a clarification or amendment by the Legislature or by Ordinance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th noting that in the present case, the initial investment in eligible undertakings /enterprises was made by Grasim (the holding company of the assessee). These undertakings were demerged by Grasim to its wholly owned subsidiary, viz. SCL. Subsequently, SCL was amalgamated with the assessee w.e.f. 1 July 2010. Accordingly, even after the amalgamation of SCL with the assessee, there is no change in the entity which made the initial investment since Grasim still retains the entrepreneurial risk with itself as the ultimate shareholder of the assessee company. Therefore, even assuming that the CBDT Circular is to be relied upon, the conditions prescribed by the CBDT for denial of deduction is not fulfilled in the present case. Accordingly, even on this count, the deduction should continue to be available to the assessee company. 94. We are also inclined to draw reference to one more argument of the AR of the assessee. The scheme of amalgamation of SCL with the assessee was duly approved by the Hon'ble High Courts of Bombay and Gujarat. The Hon'ble Courts in its order has explicitly conferred upon the assessee, being the amalgamated company, a right to claim deduction under section 80- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee with respect to eligible units acquired from SCL. Accordingly, Ground no.1 of the assessee is allowed. 98. Ground no.2 of the assessee relate to disallowance of additional depreciation under section 32(1)(iia) of the IT Act in respect to assets installed during the FY 2009-10 (i.e. AY 2010-11) and are used for a period less than 180 days in that year (spill over depreciation). 99. The Ld CIT(A) upheld the action of the AO and has held as under: "It can be seen that there is no explicit provision like section 32(2) to deal with depreciation that cannot be claimed due to statutory restriction. The restriction to 10 % (one half of 20 %) arose as a result of not using the asset on which additional depreciation is claimed more than 180 days. What has not been claimed gets absorbed to closing WDV and for next year depreciation is claimed on the opening WDV. There is no provision in law to cull out a specific portion out of opening WDV and claim the same in the next year in a manner not prescribed by law. Whatever legal arguments are given, in absence of specific provision in law, the claim is inadmissible. From the submission made before me citing judicial decisions, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given liberal interpretation so as to benefit the assessee. The Hon'ble Courts have held that the accelerated depreciation as per clause (iia) to Section 32(1) is a benefit granted to the assessee, the law cannot be read in a manner to make such benefit void merely because it is not explicitly provided. 104. The Division Bench of the Madras High Court in case of CIT vs T. P. Textiles Pvt. Ltd. [394 ITR 483], took note of the amendment vide third proviso to clause (ii) of sub-section 1 of Section 32 of the Act and observed as under: "10.1:- The plain language of section 32(1)(iia) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. 10.2:- As a matter of fact, with effect from April 1, 2016, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment. 10.3 …. …. …. …. …. …. …. 11:- We may only indicate that during the course of the arguments, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the balance additional depreciation claim has been allowed by the Hon'ble High Court in the succeeding AY where the asset was purchased and put to use for less than 180 days. The Hon'ble Bombay High Court also relied on the decision rendered by the Karnataka High Court in Rittal India Pvt. Ltd. (380 ITR 423) and Madras High Court ruling in T.P. Textiles Pvt. Ltd. (supra), to hold that amendment made vide insertion of third proviso to Sec.32(1)(ii) w.e.f. April 1, 2016 (which allows claim in succeeding year), is clarificatory in nature and would apply to all pending cases. 106. We also find that the Coordinate Bench of this Tribunal in the case of Grasim Bhiwani Textiles Limited vs ACIT (ITA 790 & 791/Mum/2014), has also allowed the claim of spill over depreciation observing as under: "6. The issue under consideration is also squarely covered by the order of coordinated bench in the case SIL Investment Ltd., 73 DTR 0233, wherein it was held that additional depreciation, which was restricted in the year of purchase to the extent of 50% on the plea of machinery having been put to use for a period of less than 180 days, the balance of additional depreciation is required to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements of Section 35(2AB)(1) which reads as under : "(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and two times of the expenditure so incurred." 113. It is clear from the provisions of section 35(2AB) that once R&D facility is approved by the DSIR, the expenses incurred by the assessee have to be allowed. If the law wanted the expenditure to be approved by the prescribed authority, same would have been expressly provided in the section. 114. The Bangalore Tribunal in case of Natural Remedies Pvt. Ltd. vs. ACIT (2021) 61 CCH 0005 has held that for the period prior to the Income Tax (Tenth Amendment) Rules, 2016, with effect from 01.07.2016, which amended Rule 6(7A) of the IT Rules, deduction u/s 35(2AB) of the IT Act has to be allowed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) of the Act, as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) of the Act and under Sec.35(2AB) of the Act are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) of the Act should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) of the Act applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) of the Act is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case obtained approval in Form No.3CM as required by Rule 6 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were issued by the parties in the name of the erstwhile entity. 121. It was confirmed that neither Grasim Industries nor SCL has claimed any credit of such TDS or TCS in its return of income for any year. The AR also referred to clause 11(d) at page no. 27 of the Scheme of Amalgamation, wherein it has been mentioned that all taxes paid/ payable by the Transferor Company (including TDS) shall be deemed to be paid by the Transferee Company. Accordingly, credit in respect of TDS/ TCS deposited in the name of the amalgamating company ought to be allowed to the assessee as it is rightfully claimed and allowable. 122. Our attention was invited to the decision of coordinate Bench of Ahmedabad Tribunal in case of Adani Gas Ltd. vs. ACIT (ITA No. 2241/Ahd/2011) wherein it has been observed as under: "13. … We conclude accordingly that once the demerged gas distribution undertaking no more exists w.e.f. 01-01-2007 coming to be the appointed day, the assessee-resulting company is entitled for all the pro rata adjustments of TDS, advance tax and MAT credits as per law; to be utilized in former's account. The net result of our above discussion is that assessee's arguments in princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lect the details of the entire tax deducted at source for and on behalf of a deductee cannot be placed on an assessee-deductee. The assessee, by furnishing the TDS certificate/s bearing the full details of the tax deducted at source, credit for which is being claimed, has in our view discharged the primary onus on it toward claiming credit in its respect. He, accordingly, cannot be burdened any further in the matter. The Revenue is fully entitled to conduct proper verification in the matter and satisfy itself with regard to the veracity of the assessee's claim/s, but cannot deny the assessee credit in respect of TDS without specifying any infirmity in its claim/s. Form 26AS is a statement generated at the end of the Revenue, and the assessee cannot be in any manner held responsible for any discrepancy therein or for the non-matching of TDS reflected therein with the assessee's claim/s. Where so, no doubt a matter of concern, is one which is to be investigated and pursued by the Revenue, which is suitably armed by law therefor. The plea that the deductor may have specified a wrong TAN, so that the TDS may stand reflected in the account of another deductee, is no reason or gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/crossobjections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. C.I.T. this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposition of law that mere procedural lapse, or omission on the part of the assessee, cannot lead to denial of substantive benefit/eligible claim in the hands of the assessee. Keeping in view, of above discussion and decision of the Hon'ble Apex Court, the additional grounds filed by the assessee are accepted and taken up for adjudication. 133. Ground nos. 6 and 7 are the additional grounds filed by the assessee with regard to claim of deduction towards the education cess and secondary and higher education cess. 134. We find that this issue is squarely covered by the decision of the Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT in Income Tax Appeal No.52 & 68 of 2018 dated 31/07/2018. The Hon'ble Rajasthan High Court had taken into account the CBDT Circular dated 18/05/1967 and held that the education cess, secondary and higher education cess should be allowed as deduction. Their Lordships had held that Section 40a(ii) of the Act applies only to taxes other than cess. This issue is also decided in favour of assessee by Jurisdictional High Court in case of Sesa Goa Limited vs. JCIT (Tax Appeal No. 17 of 2013) order dated 28 Feb 2020, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal and Ground no. 6 and 7 of assessee's cross objection for the subject year are also related to additions made by the AO on Corporate Guarantee commission pursuant to the Transfer Pricing order passed by the TPO. All these grounds are taken up together for adjudication. 140. The relevant facts are, an addition was made in the assessment towards corporate guarantee commission in respect of corporate guarantee extended by the assessee to the bankers of its subsidiaries in middle east. During AY 2011-12, the assessee had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL). For the purpose of overseas acquisitions, the assessee had given corporate guarantee to the bankers of its Associated Enterprises (AEs) for providing loan to the AE for the purpose of capital commitments and working capital facility availed by them. 141. Guarantee for an amount of USD 156 Millions was given in respect of foreign currency loans taken by UCMEIL, for the purpose of overseas acquisitions. Further, corporate guarantee for an amount of USD 215 Millions was given on behalf of Star Cement, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated u/s.143(2) of the IT Act prior to such notice based on the original return filed and the transfer pricing proceeding initiated by reference dated 5 July 2013 got abated and ceased to exist. The Bombay High Court in the case of JSW Steel Limited ([2020] 115 taxmann.com 165 has held that once proceeding is initiated under section 153A of the Act, the original return of income and the assessment pending on that date loses its validity and, a fresh return of income is required to be filed which the AO is obliged to assess afresh. The relevant extract of the judgement is reproduced below: "12... Further sub section(a) of section 153A(1) provides for issuance of notice to the persons searched under section 132 of the Act to furnish a return of income. However, the second proviso to section 153A of the said act makes it clear that assessment relating to any assessment year filed within a period of the six assessment years pending on the date of search under section 132 of the Act shall abate. Thus if on the date of initiation of search under section 132, any assessment proceeding relating to any assessment year falling within the period of the said six assessment years is pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act, the AO was required to make a fresh reference under section 92CA(1) of the IT Act. Since no fresh reference has been made the order passed by TPO dated 28 November 2014 is bad in law as it is based on the abated proceedings. The order of the TPO is, therefore treated as non-est. 147. Further, in the present case the notice under section 143(2) of the IT Act pursuant to fresh proceedings under section 153C was issued on 8 January 2015. The order of the TPO has been passed on 28.11.2014 i.e. before the assessment proceedings initiated by issue of notice u/s.143(2). The Pune Bench of the Tribunal in the case of Maximize Learning Private Limited (ITA No. 2234/PN/2012 dated 2 February 2015) has observed that the law is quite clear i.e. TPO gets the jurisdiction to pass an order under section 92CA(3) of the Act only after the return is selected for scrutiny under section 143(2) and reference is made under section 92CA(1) of the Act after the issuance of notice under section 143(2) of the Act. Since in the instant case, the TPO had passed the order even before issuance of notice under section 143(2) of the Act, the order passed under section 92CA(3) of the Act is without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own for making investment. Accordingly, the AO agreed with the assessee's contention that no interest is required to be disallowed u/s 14A of the IT Act. As for the other expenses, the AO has disregarded the submission of the assessee. Applying Rule 8D(2)(iii) the AO reworked the computation of disallowance at ₹ 1,81,80,007. The AO has not given any specific findings or reasons for rejecting the assessee's computation of other expenses offered for disallowances. Having computed the quantum of disallowance u/s.14A to ₹ 1,81,80,007/-, the AO did not make any separate addition to the returned income since the assessee had suo moto disallowed an amount of ₹ 2,36,25,581/- in its computation. This was despite the fact that AO agreed with the assessee's contention that no disallowance is required with regard to interest. 154. The LD CIT(A) agreed with the contention of the assessee and restricted the disallowance to ₹ 81,58,878/-. The LD CIT(A) followed the decision of Coordinate Bench of this Tribunal in assessee's own case for the earlier years and allowed the appeal of the assessee. 155. We have dealt with the issue of disallowance of other expenses in Groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to ₹ 38,87,646/- on the basis of report received from DSIR. 160. This ground is similar to Ground no.3 of the assessee's appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that year, discussed above, we have already taken a view that the amended Rule 6(7) of the IT Rules was applicable from AY 2016-17. There was no requirement for the AO to obtain specific report from the DSIR approving the expenses for the year under consideration. Accordingly, since the AO has not found any defect in the expenses incurred by the assessee, the same should be allowed as deduction. 161. Ground no.5 of the appeal relate to short grant of TDS/TCS credit claimed by the assessee on the basis of certificates and for which entries are not found in Form 26AS. 162. This ground is similar to Ground no.4 of the assessee's appeal in ITA No. 1413/Mum/2018 wherein we have directed the AO to grant credit for TDS/TCS on the basis of certificates available with the assessee (including certificates which are in name of Grasim/SCL) since mismatch with Form 26AS cannot be attributed to the taxpayer. Following our decision in AY 2011-12, we direct the AO to grant credit for TDS/TCS for which the assessee pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly. 170. Additional Ground nos. 10 of the appeal relate to the validity of transfer pricing order passed by the learned TPO. The assessee has questioned the validity of transfer pricing proceedings and the consequent order passed by the TPO raising a plea that the same should be treated as non-est. 171. This ground is similar to additional Ground no.9 filed by the assessee in ITA no.1413/Mum/2018 for AY 2011-12. Incidentally the Revenue has also raised Ground nos.5 to 10 in ITA no 2872/Mum/2018 for AY 2012-13 against the relief allowed by LD CIT(A) in respect of additions made with regard to commission on corporate guarantee. Against the said grounds of Revenue, the assessee has also filed cross objection and Ground nos.4 and 5 in CO No. 130/Mum/2019 relate to the same matter. The Grounds raised by the Revenue and the CO filed by the assessee on this issue are similar to Ground nos.8 to 12 of the Revenue's appeal in ITA no 2871/Mum/2018 for AY 2011-12 and Ground no. 6 and 7 in CO No.129/Mum/2019 of the CO filed by the assessee for AY 2011-12. 172. We have disposed of the Revenue's appeal and the assessee's appeal including their cross objection on this issue for AY 2011-12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions made by the AO pursuant to the recommendation in the order of the TPO also does not survive. This ground of the assessee is accordingly allowed. 176. Having allowed the ground of the assessee, the grounds filed by the Revenue on this issue (Ground nos.8 to 12) in ITA no. 2872/Mum/2018 as well as Ground nos. 4 and 5 of the cross objection filed by the assessee in CO 130/Mum/2019 becomes infructuous and does not require any separate adjudication. Revenue's Appeal - ITA No. 2872/Mum/2018 - Assessment Year 2012-13 177. Ground nos. 1 and 2 of the Revenue's appeal relate to claim of the assessee in treating sales tax exemption benefits received amounting to ₹ 1,79,49,21,867/- as capital receipts not liable to tax. Ground no.1 of the assessee's cross objection is connected with this claim. 178. These grounds are similar to Ground nos.1 and 2 of the Revenue's appeal in ITA No. 2871/Mum/2018 and assessee's cross objection in CO no. CO 129/Mum/2019 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assessee's own case for earlier years. Since the facts relating to this ground remain same, following our deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal relate to denial of claim by the AO u/s. 35(2AB) in respect of R&D expenses on the basis of report received from DSIR. 187. This ground is similar to Ground no.3 of the assessee's appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that year, discussed above, we have already taken a view that the amended Rule 6(7) of the IT Rules was applicable from AY 2016-17. There was no requirement for the AO to obtain specific report from the DSIR approving the expenses for the year under consideration. Accordingly, since the AO has not found any defect in the expenses incurred by the assessee, the same should be allowed as deduction. 188. Ground no. 4 of the appeal relate to short grant of TDS/TCS credit claimed by the assessee on the basis of certificates and for which entries are not found in Form 26AS. 189. This ground is similar to Ground no.4 of the assessee's appeal in ITA No. 1413/Mum/2018 wherein we have directed the AO to grant credit for TDS/TCS on the basis of certificates available with the assessee (including certificates which are in name of Grasim/SCL) since mismatch with Form 26AS cannot be attributed to the taxpayer. Following our decision in AY 2011-12, we direct the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2873/Mum/2018 - Assessment Year 2013-14 197. Ground nos.1 and 2 of the Revenue's appeal relate to claim of the assessee in treating sales tax exemption benefits received as capital receipts not liable to tax. Ground no.1 of the assessee's cross objection is connected with this claim. 198. These grounds are similar to Ground nos.1 and 2 of the Revenue's appeal in ITA No. 2871/Mum/2018 and assessee's cross objection in CO no. 129/Mum/2019 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assessee's own case for earlier years. Since the facts relating to this ground remain same, following our decision in AY 2011-12, we reject this ground raised by the Revenue 199. Ground nos. 3 and 4 of the Revenue's appeal relate to availability of deduction under section 80IA of the IT Act with respect to the rail system developed, operated and maintained by the assessee. Ground no.2 of the assessee's cross objection is connected with this claim. 200. These grounds are similar to Ground nos.3 and 4 of the Revenue's appeal in ITA No. 2871/Mum/2018 and assessee's cross objection in CO no. 129/Mum/2019 for AY 2011-12 for AY 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m was made in the return by way of notes as well as during assessment proceeding that nothing should be taxed towards corporate guarantee commission and amount offered for addition should be deleted 207. The Ld AO added as notional income an amount of ₹ 25,41,59,209/- being commission chargeable on the Corporate Guarantee provided by the assessee Company to the bankers for providing loan to the AEs of the assessee Company. The LD CIT(A), however, deleted the addition on the ground that the provision of guarantee cannot be considered to be an international transaction as it had no impact on the profits, income or assets of the assessee company. Reliance was placed on the decision of earlier years wherein LD CIT(A) had relied upon the decision of Coordinate Bench of this Tribunal in case of Videocon Industries Limited vs. ACIT ITA No. 6662/Mum/2012. 208. The AR of the assessee submitted that as part of the assessee Company's expansion plan and foraying into business outside India, the assessee Company had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL) 209. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done. In our view the comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company." 214. The adequacy of the ALP of corporate guarantee fee at 0.5% can also safely be gathered by drawing support from the following judicial pronouncements: - Aditya Birla Minacs Worldwide Ltd. vs. JCIT (2016) 47 CCH 760 (Mum Tribunal) - Godrej Household Products Ltd. vs. Addl. CIT 41 taxmann.com 386 (Mum Tribunal) - Nimbus Communications Limited vs. Addl. CIT (2014) 149 ITD 0508 (Mum Tribunal) - Hindalco Industries Ltd. vs. Addl. CIT (62 taxmann.com 181) (Mum Tribunal) - Manugraph India Ltd. vs. DCIT (2015) 43 CCH 348 (Mum Tribunal) - Prolific Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to obtain specific report from the DSIR approving the expenses for the year under consideration. Accordingly, since the Ld AO has not found any defect in the expenses incurred by the assessee, the same should be allowed as deduction. 223. Ground No.4 of the appeal filed by the assessee relates to disallowance of claim of investment allowance under section 32AC of the Act. 224. During the year under consideration, the assessee Company claimed in its original return filed u/s 139(1) an investment allowance u/s. 32AC of the IT Act on account of investment in plant and machinery. 225. The Finance Act, 2013 introduced a new section 32AC in the IT Act with effect from 1 April, 2014, which provides that a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset amounting to ₹ 100 crores or more, after the 31st day of March, 2013 but before the 1st day of April, 2015, then such company is entitled to an investment allowance of 15 percent of the investment in such new assets. The intention of the legislature was to provide incentive to the taxpayers making substantial investments in plant or machinery and thereby boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all any plant or machinery valuing ₹ 100 crores or more in a span of one year. Such a situation is not intended by the legislature and therefore the word "and" has to be read as "or" to arrive at the intended consequences. 230. The provisions of section 32AC is reproduced below for better understanding of the issue: "32AC. (1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,- (a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and (b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to insert a new section 32AC in the income tax Act…." [clause 5]. 233. It is also worth noting that section 32AC was further amended by Finance Act, 2014 whereby subsection (1A) was introduced with effect from 1 April 2015. The relevant extract of the budget Speech 2014 in respect of such amendment is reproduced below: "198. The manufacturing sector is of paramount importance for the growth of our economy. This sector has multiplier effect on creation of jobs. Last year, an incentive in the form of investment allowance to a manufacturing company that invests more than ₹ 100 Crore in plant and machinery during the period from 01.04.2013 to 31.03.2015 was announced. Considering the need to incentivize smaller entrepreneurs, I propose to provide investment allowance at the rate of 15 percent to a manufacturing company that invests more than ₹ 25 Crore in any year in new plant and machinery. This benefit will be available for three years i.e. for investments up to 31.03.2017. The Scheme announced last year will continue to operate in parallel till 31.03.2015." 234. The memorandum explaining the provision of Finance (No.2) Bill, 2014 in respect of the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery', and not in isolation. A new 'plant' or 'machinery' can be said to have been acquired when the individual components of the plants are aggregated and installed together so that the resulting equipment takes the character of 'plant' or 'machinery' as is generally understood. "Acquisition" of plant or machinery cannot be read to mean mere purchase/ ownership/ possession of individual items or components of a plant or machinery. Restricting the meaning of acquisition of plant or machinery to mere purchase of individual components of 'plant' in piecemeal, which are accounted under the head 'Capital Work-in-Progress' will give absurd results not intended by the legislature. 237. The assessee is the largest cement manufacturer in the country having plants across various location in India. Huge plant and machineries are required for the manufacturing of cement. These plants are in the nature of complex machineries. Various components purchased by the assessee are to be assembled and commissioned together which takes substantial amount of time given the complexity, size and nature of the machinery/ project/ plant required for the business. The sheer size of various plants/ machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned together and the plant is ready for use. The Revenue has never allowed depreciation on any individual component of plant/machineries acquired before the previous year since the process of assembling and commissioning was completed during the year. The claim of depreciation commences only from the day the plant is fully installed including on the value of component lying in capital work in progress but capitalised as plant and machinery on completion of installation. Thus, the meaning of the term "acquired" used in section 32 is considered as fulfilled only when the plant / machinery is "installed". The language used in section 32AC being similar to the language used in second proviso to section 32(1), we must give the same interpretation. 241. We further note that the issue relating to availability of additional depreciation under section 32(1)(iia) wherein the phrase used is "acquired and installed after the 31st day of March" has been subject matter of litigation. The Coordinate Bench of this Tribunal in the case of Euro Pratik Ispat Pvt. Ltd. vs. ACIT (ITA No. 1682/Mum/2011) has observed as under : "In our opinion machinery was installed in the AY under appeal, though acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and installed after 31-3-2005 by an tax-payer and a further sum equal to twenty percent of the actual cost of such machinery or plant shall be allowed as deduction. Provisions of Section 32(1)(ii) of the Act are a piece of beneficial legislation being incentive provision is a piece of beneficial legislation is to be liberally construed to grant the benefit to the tax-payer to fulfill the mandate of legislation which is to promote investment in business of manufacturing or production of any article or thing or in the business of generation or generation or distribution of power, rather than in the manner which may frustrate the object. Reference can be drawn to the following observations of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC): "The provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; since the provision for promoting economic growth has to be interpreted liberally, restrictions on it too has to be construed so as to advance the objective of the provisions and not to frustrate it." "The words used u/s 32(1)(iia) of the Act are 'acquired and installed' after 31st da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial unit started in financial year 2004 - 05 and concluded in financial year 2005-06, the entire set of new machineries and plant were acquired by the assessee company as an integrated activity with the sole and common objective towards the setting up of new coke production plant which was carried out in financial year 2004-05 and in financial year 2005-06, with the installation of said new plant and machineries getting completed in April 2005 with the commencement of commercial production of LAM coke in April 2005 when the said new plant became operational and acquisition of said machineries and plant cannot be seen and visualized in itemized manner as unless these new plant and machineries are integrated together they will not achieve the desired results. The assessee company has finally installed the entire new plant and machineries in April 2005 i.e. after 31-3-2005 and assessee company is entitled to the benefit u/s 32(1)(iia) of the Act for claiming additional depreciation in the impugned assessment year because what is relevant is that new machineries and plant which were acquired before 31-03-2005 and also post 31-03-2005 were all purchased as an integrated activity c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in the chain of events with the common and sole objective of setting up new coke production plant by the assessee company, as the installation of new machinery and plant which started in financial year 2004-05 got completed after 31-3-2005 with the commencement of commercial production starting in financial year 2005- 06 i.e. post 31-03-2005 with the plant becoming operational. Thus, in our considered view, the assessee company is entitled for claim of additional depreciation u/s 32(1)(iia) of the Act amounting to ₹ 83,55,387/- during the assessment year 2006-07." 243. The Hon'ble Gujarat High Court in the case of PCIT vs. IDMC Ltd. [2017] 393 ITR 441 also took a similar view on the issue and has observed as under: "Applying law laid down by the Supreme Court in various decisions to the facts of the case on hand, if the submission on behalf of the revenue is accepted, it will lead to an absurd and unjust result and the purpose and object of granting the additional depreciation will be frustrated. If the contention on behalf of the revenue is accepted, in that case, the assessee shall never get the additional depreciation as provided under section 32(1)(iia). In the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 32AC of the Act then, it would lead to absurd results as the aforesaid assets which have been considered by the Supreme Court and the High Courts falling within the meaning of "plant" would not be eligible for deduction under section 32AC of the Act since the aforesaid assets are incapable of installation. Designs, plans, drawings, bottles, books, etc. by their very nature are not required to be installed and on their acquisition, they are ready to be put to use. Therefore, a manufacturer who is acquiring designs, drawings, plans which are considered as plant and machinery for the type of business they are in, will not be eligible to claim deduction under section 32AC since according to the Revenue the designs, drawing, plans are not installed by the assessee. 246. It is fairly well settled law that where the word "and" as is understood leads to unintended results, then it should be interpreted to mean "or". The Supreme Court in the case of CIT vs. Ram Kishan Dass 413 ITR 337 (2019) SC has held: "Secondly, the alternate construction of the proviso is that the expression "and for any good and sufficient reason" should be read to mean "or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to deduction u/s 32AC of the Act on the value of cost of components of plant or machinery lying as CWIP as on 1 April 2013 but installed during the financial year 2013-14. We therefore direct the AO to allow deduction as investment allowance u/s 32AC of the IT Act. 250. Ground no.5 of the appeal relate to short grant of TDS/TCS credit claimed by the assessee on the basis of certificates and for which entries are not found in Form 26AS. 251. This ground is similar to Ground no.4 of the assessee's appeal in ITA No. 1413/Mum/2018 wherein we have directed the AO to grant credit for TDS/TCS on the basis of certificates available with the assessee (including certificates which are in name of Grasim/SCL) since mismatch with Form 26AS cannot be attributed to the taxpayer. Following our decision in AY 2011-12, we direct the AO to grant credit for TDS/TCS for which the assessee produces certificates including the certificates in the name of erstwhile entities. The AO can satisfy itself to the effect that the claim in respect of the same certificates are not made by the erstwhile entities. 252. Ground no. 6 is general in nature and does not require separate adjudication and hence accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar to Ground nos.1 and 2 of the Revenue's appeal in ITA No. 2871/Mum/2018 and assessee's cross objection in CO No. 129/Mum/2019 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assesse's own case for earlier years. Since the facts relating to this ground remain same, following our decision in AY 2011-12, we reject this ground raised by the Revenue 261. Ground nos.3 and 9 of the Revenue's appeal relate to availability of deduction under section 80IA of the IT Act with respect to the rail system developed, operated and maintained by the assessee, amounting to ₹ 1,05,45,74,078/-. Ground nos.2 and 3 of the assessee's cross objection is connected with this claim. 262. These grounds are similar to Ground nos.3 and 4 of the Revenue's appeal in ITA No. 2871/Mum/2018 and assessee's cross objection in CO No. 129/Mum/2019 for AY 2011-12 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assesse's own case for earlier years, particularly AY 2010-11. Since the facts relating to this ground remain same, following our decision in AY 2011-12, we reject this g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Biocon Ltd. We may add here that the case of Biocon has been now upheld by the Hon'ble Karanataka High Court in 131 taxmann.com 187. 268. Ground no. 10 and 11 of the appeal relate to the addition made by the AO regarding Corporate Guarantee commission in pursuant to the order passed by the TPO. Ground no.7 and 8 of the assessee's cross objection is connected with this claim 283. We have decided this issue while adjudicating Ground No.6 to 11 of the Revenue's appeal in ITA No.2873/Mum/2018 for AY 2013-14. Since facts in this year remain same with the one discussed earlier, we direct the AO to adopt 0.5% as an arms' length consideration for the corporate guarantee issued by the assessee in favour of its AEs. 284. The grounds raised by the Revenue and the CO filed by the assessee is accordingly disposed off. 285. In the result appeals and Cross Objection of the assessee for Assessment Years 2011-12, 2012, 2013-14 and 2014-15 are partly allowed as indicated above. Appeals of the revenue for Assessment Years 2011-12, 2012-13 are dismissed and appeals for Assessment Years 2013-14 and 2014-15 are partly allowed as indicated above. Order pronounced on 14.12.2021 as per Rule 34(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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