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TMI Blog2023 (6) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... ongwith interest. However, if in the subsequent year refund of interest is withdrawn, then the same should be reduced from the total income of the assessee. Accordingly, we direct the A.O. to tax interest income in terms of the order of the tribunal for A.Y. 1993-94 as reproduced above, keeping in view our above observation Reduction of interest income while calculating the deduction u/s 80HHC - HELD THAT:- As decided in ACG Associate Capsule Pvt. Ltd. [ 2012 (2) TMI 101 - SUPREME COURT] for computation of profit of business for the purpose of deduction under section 80HHC of the Act, only 90% of net interest or net rental income is to be reduced under clause (1) of Explanation (baa) to section 80HHC of the Act. Reduction of rental income while calculating deduction u/s 80HHC - HELD THAT:- We find that the coordinate bench of the Tribunal [ 2022 (2) TMI 376 - ITAT MUMBAI] , passed in assessee s own case for the assessment year 2002 03 held net rent expenditure and net commission expenditure is required to be reduced from eligible profit rather than the gross rent and gross commission for the computation of deduction u/s 80HHC Deduction u/s 80HHC - Reduction of miscellaneous receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue be remanded to the AO to examine whether taxes have been paid in Egypt. Since as per the legal position, as it existed prior to the aforesaid amendment, the country of residence is completely precluded from taxing the said income, and therefore, accepting the prayer of the learned DR would result in a complete academic exercise. Thus, respectfully following the legal position as it existed during the year under consideration, which was taken due note by the coordinate bench in the aforesaid decision, we uphold the plea of the assessee that the dividend income received by the assessee from Egypt entity is to be excluded while computing the taxable income of the assessee in India. Accordingly, the additional ground filed by the assessee vide application dated 23/01/2013, is allowed Disallowance on account of rural development expenditure - HELD THAT:- Issue to be decided in favour of assessee as expenditures incurred were for the purpose of business and claimed the same as allowable under section 37(1). Disallowance made on account of exchange rate fluctuation loss - HELD THAT:- Hon ble Supreme Court in the case of Woodward Governor India Pvt. Ltd [ 2009 (4) TMI 4 - SUPREME COU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revoked for this reason and the said agreement was still valid in the year under consideration - we find no infirmity in the impugned order allowing deduction u/s 80-IA to the assessee in respect of profits from the rail system. Deduction u/s 80IA in respect of Vikram Unit to be allowed as relying on own case for the assessment year 2002 03 [ 2022 (2) TMI 376 - ITAT MUMBAI] . Deduction u/s 80M - source of investment in shares and securities on which dividend was earned - allocation of any expenditure as expenditure relatable to the dividend income - HELD THAT:- As decided in own case A.Y. 1990 91, 1991 92, 1992 93 borrowed funds were utilized for making investments in securities on which dividend was earned and, therefore, the allocation of part of interest for earning dividend was unjustified. Assessee has filed before us a comparative chart for the source of investment in shares and securities on which dividend was earned The said chart is reproduced herein below. As is evident from the aforementioned chart, the assessee s own funds were much more than the value of investment on which dividend was received in all the three years. It is not disputed that there were no specific bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to Rs. 1,30,00.904/- should be allowed in the previous year. 2 Disallowance of Club membership fees The CIT (A) erred in not allowing club membership fees of Rs. 8,48,100/- paid to Wellington Sports Club as deduction. 3 Interest received from Income Tax Department: 3.1 The CIT (A) erred in upholding the action of the AO in taxing interest of Rs. 14,38,79,778/- allowed by the Department. 3.2 The CIT (A) failed to appreciate that no income can be taxed until the entitlement is absolute or irretrievable. The CIT (A) ought to have held that interest allowed by the Department is not to be taxed till the matters are finally decided and the appellant is absolutely entitled to such interest. 4. Deduction under section 80 HHC 4.1 The CIT (A) erred in not directing the AO to allow deduction under section 80 HHC, as claimed by the appellant. 4.2 The CIT (A) ought to have held that no amount of interest received is to be reduced from profit of the business for the purpose of calculating deduction u/s. 80 HHC. 4.3 Without prejudice to the above, the CIT (A) failed to appreciate that interest paid during the previous year amounting to Rs. 168,40,60,135/- was higher than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) of the IT. Act. The appellant craves leave to add to, alter, amplify or delete any of the above ground(s) before or at the time of hearing. The appellant respectfully prays that relief prayed for in the abovementioned grounds be granted and that the appellate order of the learned CIT (A) be modified accordingly." 4. The issue arising in ground no.1, raised by the assessee, is pertaining to the amount paid or written back, during the year under consideration, which had already been disallowed in earlier years under section 43B of the Act. 5. At the outset, the learned Sr. Counsel, appearing for the assessee, submitted that this ground is in respect of alternate claim of the assessee to allow deduction under section 43B(c), (d) and (e) of the Act in respect of liability disallowed in earlier years, which are paid/written back in the year under consideration. The learned Sr. Counsel further submitted that the claim of the assessee under section 43B of the Act has been allowed by the Tribunal in earlier years and, therefore, this ground now is rendered infructuous. 6. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wherein appeal of department in earlier year was dismissed by the Tribunal, therefore, ground taken by assessee for disallowance during the year has become infructuous. The view taken by the Tribunal in A.Y. 2000-01 is respectfully followed, ground of the assessee becomes otiose and is accordingly dismissed." 7. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 2000-01 is respectfully followed, ground raised by the assessee is accordingly dismissed." 7. Thus, respectfully following the aforesaid decision, ground no.1, raised in assessee's appeal is dismissed. 8. The issue arising in ground no.2, raised in assessee's appeal, is pertaining to the disallowance of Club Membership fees. 9. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee paid Club Membership fees of Rs. 11,32,074, towards membership fees to various Clubs. During the assessment proceedings, on a perusal of the details, it was observed that an amount of Rs. 8,48,100, is paid to Willingdon Sports Club for obtaining Corporate Membership. Accordingly, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- "On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the sum of Rs. 6,183/- incurred in the Diners Club and Rs. 17,350/- incurred in the Taj Hotel Membership fees for S.V. Birla disallowed by Assessing Officer on the reasoning that early hearing same is business expenditure. 16. We have heard both the parties, we find that he aforesaid issue raised in the assessment year 1993-94 is covered in favour of the assessee by the decision of the jurisdictional High Court in Otis Elevator CO. (India) Ltd., v. CIT 195 ITR 682 (Bom.). Respectfully following the same, we dismiss the ground raised by the department." 13. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in ay 1993-94 is respectfully followed, accordingly, ground raised by the assessee is allowed." 12. The learned Departmental Representative ("learned DR") could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in the facts and law was alleged in the relevant assessment year. Therefore, respectfully following the judicial precedent in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid interest granted to the assessee, the amount which has been withdrawn subsequently. We direct accordingly." 8. It was argued by the Id. A.R. that benefit of interest so allowed by the department was subsequently withdrawn as a result of the appellate orders should be given to the assessee and the interest subsequently withdrawn should not be taxed and for this, reliance was placed on the decision of the Tribunal in the case of Avada Trading Co. (P.) Ltd. vs. ACIT (2006) 100 ITD 131. 9. We have considered the rival contentions. As far as the taxability of interest amounting to Rs. 13,64,09,609/- is concerned, granted alongwith interest. However, if in the subsequent year refund of interest is withdrawn, then the same should be reduced from the total income of the assessee. Accordingly, we direct the A.O. to tax interest income in terms of the order of the tribunal for A.Y. 1993-94 as reproduced above, keeping in view our above observation" 16. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal is respectfully followed, we order accordingly." 16. The learned DR could not show us any reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "14. The next grievance of the assessee relates to allowing deduction u/s 80HHC of the Act with respect to interest income. The issue under consideration is squarely covered by the decision of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd., 343 ITR 89(SC) wherein it was held that net interest income is to be excluded from the eligible profit for computing deduction u/s 80HHC rather than gross interest. 15. An identical issue raised as additional grounds for the assessment year 1996-97 and 97-98 was considered and decided by this Tribunal in assessee's own case in paras 30 & 30.1 as under: "30 As regards the additional ground no.1 pertaining to deduction u/s 80HH on gross interest the Sr Id counsel for the assessee has submitted that this issue has been decided by the Hon'ble Supreme Court in the case of ACG Associated Capsules vs CIT vide decision dated 8.2.2012; therefore, the deduction u/s 80HH should be allowed on the gross interest received. 30.1 Since this ground has been raised by the assessee first time in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the rental income credited to the Profit & Loss Account for computing the profit of business for the purpose of deduction under section 80HHC of the Act. 25. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 26. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee's own case for the assessment year 2002-03 cited supra, by following the decision rendered in the preceding year, observed as under:- "21. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding, the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "17. On the same proposition, the net rent expenditure and net commission expenditure is required to be reduced from eligible profit rather than the gross rent and gross commission for the computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary, the learned DR submitted that there is no examination by any of the lower authorities whether these receipts are directly in relation to operations carried out by the assessee. 33. We have considered the submissions of both sides and perused the material available on record. From the perusal of the audited financial statements, forming part of the paper book, we find that during the year, the assessee received miscellaneous receipts of Rs. 11.48 crore. The details of these receipts as provided on Page-41 of the paper book, are as under:- Statement of Misc. Receipts Sr. no. Units Amount (Rs.) 1. CFD 10,52,686 2. SFD Nagda 17,88,183 3. SFD - Mavoor 1,46,511 4. Pulp - Mavoor 10,297 5. Grasilene 9,62,379 6. BC 35,60,754 7. Pulp - Harihar 36,018 8. Chemical - Nagda 51,68,205 9. Membrane 27,76,339 10. CSA 2,814 11. Textile Divn - BTM 31,05,371 12. V. Woollen 0 13. BTM - Bhiwani 33,61,022 14. Power Divn - Bhiwani 10,776 15. Elegant 11,31,001 16. Vikram Cement 2,85,91,311 17. Aditya Cement 85,42,247 18. Grasim Cement 11,80,249 19. Rajashree Cement 3,45,675 20. Cement South 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly, in respect of scrap sales and sale of empty cement bag, plastic barrel, scrap barrel, waste oil, the assessee has placed reliance upon the decision of the Hon'ble Madras High Court in CIT v/s TTK LIG Ltd., 2018 (11) TMI 53, wherein the Hon'ble High Court held that sale of scrap is derived from operation activity of the undertaking and therefore cannot be excluded from business profit while calculating deduction under section 80HHC of the Act. Further, in respect of insurance claim and recovery, the assessee has placed reliance upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Pfizer Ltd, [2011] 320 ITR 62 (Bom.), wherein the Hon'ble jurisdictional High Court held that contract of insurance is a contract of indemnity and the indemnification stand on the same footing as the income that would have been realised by the assessee of the sale of the stock in trade. Accordingly, the Hon'ble Court held that the insurance claim on account of the stock in trade does not constitute an independent income or receipt of the nature similar to brokerage, commission, interest, rent, or charges and thus would not be subjected to deduction of 90% under clause (1) of Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to account for those expenses. However, the learned counsel for the Department cannot invoke Explanation (baa) in every matter involving receipts by way of brokerage, commission, interest, rent, labour charges etc. These items of income have got to be seen in the context of the business activity of the assessee. To give an example, in the case of a manufacturing Company which undertakes exports, receipt of interest or commission may not be Operational Income because they do not have the element of turnover and consequently Explanation (baa) will apply. However, that will not be the case if the assessee is carrying on the business of Financing because in the case of Financing, the interest income which accrues to the assessee will have the element of turnover and in such a case, receipts like interest, will not attract Explanation (baa). The point which we would like to make, therefore, is that in every matter the Assessing Officer will have to ascertain whether receipt of interest, commission, labour charges etc. were a part of Operational Income. We cannot lay down any standard test for deciding what would constitute Operational Income. Broadly, the Department will have to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that because the receipt is by way of labour charges, Explanation (baa) stood attracted. As stated above, each case will have to be examined by the Assessing Officer. As stated above, in each case of receipt of labour charges, rent, interest, commission etc. the Assessing Officer will have to ascertain whether the element of turnover existed. In the present case, the Tribunal has found, on facts, that there was an element of job-work turnover and therefore, the Tribunal concluded on the facts of this case that the receipt of labour charges was not in the nature of brokerage, commission, rent, interest or charges as mentioned in Explanation (baa) to section 80HHC. Further, the assessee received Rs. 66,35,083 as processing charges. This can be seen from profit and loss account. The Company is engaged in manufacture and sale of garments, both domestically and by way of exports. The processing charges earned was by using the entire undertaking of the Company which also manufactured garments for domestic sales and export sales and which processing charges were earned by incurring expenditure of the factory like wages, electricity charges etc. debited in profit and loss account. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income earned, then relief be granted to the assessee in light of the decision in ACG Associated Capsules Pvt. Ltd. (supra). As a result, grounds No. 4.5, 4.6, and 4.7 raised in assessee's appeal are allowed for statistical purposes. 38. The issue arising in ground no. 4.8, raised in assessee's appeal, is pertaining to adjusting loss on the export of trade in goods against profit on export of manufactured goods, while calculating the deduction under section 80HHC of the Act. 39. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the assessment proceedings, the assessee contended that the loss on export of trading goods should not be adjusted against the profit on the export of manufactured goods. The AO vide order passed under section 143(3) of the Act did not agree with the submissions of the assessee and by placing reliance upon the decision of Hon'ble Jurisdictional High Court in IPCA Laboratories v/s CIT (251 ITR 401) held that loss arising on the export of trading goods is required to be adjusted against the profit on the export of manufactured goods and deduction under section 80HHC is to be allowed on the net amount. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng deduction u/s 80-O of the Act amounting to Rs. 3,18,000/-. 26. The issue has been decided in favour of the assessee by the Tribunal for the assessment years 1996-97, 1997-98, 1994-95 & 1995-96. It was further brought to our notice that no appeal has been filed by the Department against the decision of the Tribunal for allowing appropriation of HO expenses in computing deduction u/s 80-O of the Act. 27. For the assessment year 1996-97 and 1997-98, this Tribunal has considered and decided an identical issue in para 15.2 to 15.4 as under. "15.2 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. A similar issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 29.1 & 29.2 as under: 29.1 On a similar issue the Tribunal in assessee's own case in AY 1994-95(supra) in paragraphs 25 to 25.2 has held as follows:- '25. In grounds of appeal No. 32 to 35, the assessee has challenged the order of the CIT(A) in allocating head office expenses and thereby reducing the quantum of deduction available to the assessee under the following provisions: Section Rs. 8OHH 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra, we uphold the plea of the assessee and allow grounds no.5.1 and 5.2 raised in assessee's appeal. 45. In view of our decision in respect of grounds no.5.1 and 5.2, the issue arising in ground no.5.3 is rendered infructuous and, therefore, is kept open. 46. The issue arising in ground No. 6, raised in assessee's appeal, is pertaining to reducing the long-term capital loss on the sale of equity shares. 47. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year, the assessee sold 15,03,79,023 equity shares of MRPL. Out of these, 9,53,79,023 equity shares were acquired on 26/12/1998 on the conversion of fully convertible debentures ("FCD"). These FCDs were allotted to the assessee on 27/06/1997. While computing the long-term capital loss, the assessee has computed index cost considering the date of acquisition of FCD as the date of acquisition of the equity shares. During the assessment proceedings, the assessee was asked to explain that in view of the third proviso to section 48(ii) of the Act indexation on debentures is not allowable. In response thereto, the assessee submitted that the third proviso is applicable to long-term c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res which were received on the conversion of debentures. Therefore, the issue arises whether the same analogy can be applied for determining the date of acquisition of the shares on conversion of the FCD. We find that the Hon'ble Punjab and Haryana High Court in CIT v/s Naveen Bhatia, [2015] 62 taxmann.com 87 (P&H), held that where the assessee was allotted convertible debentures and later on same were converted into shares, while computing capital gains arising from the sale of said shares, it would be but logical to reckon the date of acquisition of convertible debentures as date of acquisition of such shares. The relevant findings of the Hon'ble High Court, in the aforesaid decision, are as under:- "8. A plain reading of Section 47(x) would indicate that the conversion of convertible debentures into shares would not constitute transfer for the purposes of computation of income under the head 'capital gains'. Similarly, Section 49(2A) of the Act clarifies that for computing the capital gains on sale of shares received on conversion of convertible debentures, the cost of acquisition of shares shall be the cost of convertible debentures and thus it shall be deemed to be the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year and there is no ambiguity on the language of the section. Accordingly, the AO disallowed the additional depreciation claimed by the assessee on assets acquired in earlier years and put to use during the relevant previous year. The learned CIT(A), vide impugned order, rejected the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 52. We have considered the submissions of both sides and perused the material available on record. As per the assessee, the additional depreciation section 32(1)(iia) of the Act is also available in respect of assets which were purchased in the year prior to the relevant previous year but were installed in the relevant previous year. In this regard, the assessee placed reliance upon the decision of the Hon'ble Gujarat High Court in Pr. CIT v/s IDMC Ltd, [2017] 393 ITR 441 (Guj.). We find that in the aforesaid decision, following substantial question of law came up for consideration before the Hon'ble High Court:- "Whether on the facts and circumstances of the case and in law, the Tribunal was justified in law in allowing additional depreciation claim of Rs. 2,18,50,976/= @ 20% under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt previous year, therefore, respectfully following the aforesaid decision of the Hon'ble Gujarat High Court we allow the additional depreciation claimed by the assessee under section 32(1)(iia) of the Act. As a result ground No. 7, raised in assessee's appeal is allowed. 55. Ground no.8 raised in assessee's appeal seeking the cost of this appeal was not pressed during the hearing. Therefore, the same is dismissed as not pressed. 56. Vide application dated 03/07/2006, the assessee sought admission of the following additional ground of appeal:- "1. The learned CIT(A) ought to have held that the sum of Rs. 2,78,28,270/- being royalty was an allowable deduction when computing the assessee's income chargeable to tax and could not be disallowed by applying section 43B of the Act. 2. The learned CIT(A) ought to have held that the sum of Rs. 2,09,58,531/- being interest on royalty was an allowable deduction when computing the assessee's income chargeable to tax and could not be disallowed under section 43B of the Act. The appellant craves leave to add, to alter, amplify or delete all or any of the ground (s) before or at the time of hearing." 57. Since, the issue raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/04/2006, raised the following additional grounds of appeal:- "1. On the facts and circumstances of the case and in law, the Appellant prays that the ("AO") be directed to: i. Exclude from taxable profits, the sales tax exemption benefit of Rs 93 crores, which is included in Sales and which is taxed in the assessment order as part of profits of the business; and ii. To treat the same as capital receipt not chargeable to tax. The Appellant craves leave to add and/or to amend and/or to alter the above Ground of Appeal." 60. Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in NTPC Ltd vs CIT: [1998] 229 ITR 383 (SC). Having heard the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee's own case in Grasim Industries Ltd (supra), vide order dated 14/12/2021, for the assessment year 2002-03, while deciding the similar issue observed as under:- "37. Consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, a company incorporated and registered in Egypt (U.A.R.) was not taxable in India. The appellant craves leave to add, to alter, amplify or delete all or any of the ground (s) before or at the time of hearing." 63. Since, the issue raised by way of additional ground is a legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in NTPC Ltd. (supra). 64. The issue arising in the aforesaid additional ground of appeal is pertaining to the taxability of the dividend received from the Egyptian company. During the year under consideration, the assessee received a dividend amounting to Rs. 78,48,577 from M/s Alexandria Carbon Black Company S.A.E., a company incorporated and registered under the laws of Egypt (U.A.R.) and offered the dividend income to tax. It is the plea of the assessee that as per the terms of the India and United Arab Republic (Egypt) Double Taxation Avoidance Agreement ("DTAA"), the dividend received is taxable only in Egypt and therefore the same is to be excluded while computing the taxable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India through this notification will be effective from 1st April 2004, i.e., from the date when provision of section 90(3) was brought in the statute, giving a Legal frame work for clarifying the intent of one of the negotiating parties;" 66. The coordinate bench of the Tribunal also noted the legal position as it existed prior to the aforesaid amendment as under:- "57A. If we analyse all the judgments as have been referred to above, it is evident that:-- • Firstly, in R.M. Muthaiah (supra), the expression "may be taxed" has not been expressly dealt with, however, in the context of Article-6(1), wherein similar phraseology has been used, the High Court has given its decision that once it has been taxed in the foreign country, the same cannot be taxed in India. Thus, this decision in a way interprets the phrase "may be treated" to mean that source country has a right to tax to the exclusion of resident state; • Secondly, in S.R.M. Firm (supra), the High Court has in a very clear terms, has interpreted the expression "may be taxed" to mean that once the income is taxable in other contracting State that is country of source then country of resident i.e., India is pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r position, wherein various courts have interpreted the expression "may be taxed". Since the year under consideration is the assessment year 2003-04, therefore, respectfully following the aforesaid decision the amendment vide Finance Act 2003, to section 90 of the Act is not applicable to the present case. In view of the above, we find no merits in the submissions of the learned DR that this issue be remanded to the AO to examine whether taxes have been paid in Egypt. Since as per the legal position, as it existed prior to the aforesaid amendment, the country of residence is completely precluded from taxing the said income, and therefore, accepting the prayer of the learned DR would result in a complete academic exercise. Thus, respectfully following the legal position as it existed during the year under consideration, which was taken due note by the coordinate bench in the aforesaid decision, we uphold the plea of the assessee that the dividend income received by the assessee from Egypt entity is to be excluded while computing the taxable income of the assessee in India. Accordingly, the additional ground filed by the assessee vide application dated 23/01/2013, is allowed. 68. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of Rs. 95,24,532/-, being expenses incurred for making advertisement film, relying upon the order of the CIT(A) in the assessee's own case for the AYrs. 2001-02 & 2002-03 which have been contested by the department in further appeal before the ITAT. 7. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of professional fees of Rs. 10,75,000/- paid in connection with software development and implementation of ERP accepting the assessee's contention that in the field of computer software new devices and user friendly concepts are introduced which are fast changing and no software could be of enduring nature without appreciating that the Rajasthan High Court has, in the case of Arawali Constructions Co. P. Ltd. (259 ITR 30), held that expenditure incurred in the acquisition of computer software is a capital expenditure and, in view of the same, the Assessing Officer rightly treated software expenses of Rs. 10,75,000/- as a capital expenditure and disallowed the same. 8. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to exclude the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail System", claimed deduction u/s.80-1A; and (v) further that the assessee company has only split / restructured the asset from 'Cement Division' for the purpose of claiming deduction u/s 80-IA as 'Rail System'; and (vi) further that the assessee company has engaged only one employee effectively for the purpose of having liaison with railway authorities regarding the operations of the alleged 'Rail System'; and (vii) further the claim u/s.80-IA is based on the receipt of the alleged 'Rail System' on notional basis and not on actual receipt basis." 12. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance made by the Assessing Officer by reducing the deduction u/s.80M by Rs. 38,69,281/-, relying upon the order of the CIT(A)/ITAT in the assessee's own case for the AYr 1993-94, which has been contested by the department in further appeal u/s.256(2). 13. The appellant, prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 14. The appellant craves leave to amend or alter any ground or add a new ground which may be nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith this issue at page No. 2, para 5 of his order and deleted the disallowance by following the order of the Tribunal in earlier years. From the record, we found that the Tribunal has been consistently allowed the issue in favour of the assessee in assessment years 1990-91, 1993-94, 1994- 95, 1996-97, 1997-98 & 1998-99. We further found that against the order of the Tribunal, the Department has not filed any appeal before the Hon'ble High Court in assessment years 1996-97, 1997-98, 1995- 96 & 1994-95. As the matter has been settled and the ld. CIT(A) deleted the disallowance by following the order of the Tribunal, we do not find any reason to interfere with the order of the Ld. CIT(A) deleting the disallowance made by the A.O. u/s 43-B of the Act." 49. Respectfully following the above decision, we sustain the order passed by the Ld.CIT(A) and dismiss the Ground No. 1 raised by the revenue." 74. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "32. With regard to the contribution to the local organization, the issue has been dealt with by the A.O. at page 6 -7, para 10 of his order. The ld. CIT(A) deleted the addition/disallowance by dealing the issue at page 3, para 7 of his order wherein he has followed the order of the Tribunal in earlier years. 33. We have considered the rival contentions and we found that the issue has been decided by the Tribunal consistently in favour of the assessee in the assessment years 1986-87 to 1989-90, 1994-95 & 1995-96 to 1997-98. In an appeal further filed by the Revenue before the Hon'ble High Court in assessment years 1988-89, 1994-95, 1995-96, the same has been decided in favour of the assessee. The order of the Tribunal for 2000-01 was not challenged by the Department before the Hon'ble High Court on this issue. Respectfully following the order of the Tribunal and Hon'ble High Court in assessee's own case, we do not find any reason to interfere with the order of the ld. CIT(A)." 53. Respectfully following the above decision, we s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "38. Ground No. 6 of Revenue's appeal relates to the disallowance of rural development expenses. The A.O. has dealt with this issue at page 9, para 15 and the ld. CIT(A) has dealt with this issue at page 4-5, para 11 of his order. We found that the issue has been decided by the Tribunal in assessee's own case in its favour in assessment years 1998-99, 1999-00 & 2000-01. We further found that the Department on this ground is not in appeal before the Hon'ble High Court in these years. Respectfully following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) for deleting the rural development expenses amounting to Rs. 66,08,937/-. 61. Respectfully following the above decision, we sustain the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly." 84. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. This issue is recurring in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA. No. 4083/Mum/2003 dated 22.10.2014 held as under:- "39. Ground No. 7 pertains to exchange rate fluctuation loss on conversion of trading assets and liabilities amounting to Rs. 2,00,03,443/-. The A.O. has dealt with this issue at page 9-10, para 16-16.6and the ld. CIT(A) has dealt with this issue at page 5, para 12 of his order. The ld. CIT(A) has allowed the assessee's claim after having observed at para 12. We found that the issue has been decided by the Tribunal in assessee's own case in its favour in assessment years 1998-99 to 2000-01. Furthermore, the Department is not in appeal on this ground before the Hon'ble High Court against the Tribunal order. The Hon'ble Supreme Court in the case of Woodward Governor India Pvt. Ltd., 312 ITR 254 (SC) has decided this issue in favour of the assessee. Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A) deleting the disallowance made on account of exchange fluctuation loss on conversion of trading assets and liabilities on balance sheet date." 66. Respectfully following the above decision, we sustain the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly." 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- "78. Considered the submissions and material placed on record, we observe from the record the coordinate bench has already considered this issue and decided the issue in favour of the assessee in the case of Fluid Air (supra), the relevant findings are given below: "17. Considering all the facts and circumstances of the case as well as the decisions referred to above, we are of the opinion that as the assessee had paid all the amounts within a period from 9 to 22 days from the date of payment of wages/salary and therefore the submissions, regarding admissibility of benefits for having a bona fide belief entertained as a result of its advice by the tax advisors that the payment was to be made after 15 days from the date of payment of salaries and wages that the delay; otherwise had been due to financial difficulty as well as the submission that the delay was not intentional or was not to defraud the revenue because by delaying the payments by a few days the assessee was not to get any benefit rather was putting it to the risk of serious penal consequences, as envisaged in sections 43B, 2(24)(x) read with the provisions of section 36(1)(va) which no prudent person would like t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention so that absurdity and the interpretation which leads to injustice may be avoided. Thus, we do not find any reason to interfere with the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly." 93. In the present case, the assessee claims that the payment of P.F/ESIC has been made within the grace period and, therefore, is an allowable deduction. In view of the above, we deem it appropriate to restore this issue to the file of the jurisdictional AO to examine the payments of P.F/ESIC made during the period as provided in the relevant statute and to delete the disallowance to that extent. Accordingly, ground no.5, raised in Revenue's appeal is allowed for statistical purposes. 94. The issue arising in ground no.6, raised in Revenue's appeal, is pertaining to the disallowance of expenditure incurred for making advertisement films. 95. The brief facts of the case pertaining to the issue, as emanating from the record, are: For the year under consideration, the assessee incurred expenditure on advertisement film. During the assessment proceedings, the assessee was asked to furnish the details of expenditure incurred on the production of adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilm does not loose its value as soon as it is telecast once. Rather, repeated telecast of an ad film makes people aware and increases the brand value of the product. Depending on the quality of the ad film and the response of the public, the ad film can be aired on TV/Radio for many years. In the contemporary advertising scene, it is not difficult to recall that several ads of popular brands are being aired for so many years. Thus the production of ad films results in acquisition of a product, which is a capital asset. This capital asset can be utilised for advertisement for assessee's product. An ad film is sometimes not discontinued fully. Some of the parts of ad film are deleted and fresh parts are shot and new ad film is used by making small adjustment in the old film. Thus, it is clear that the production of ad film does not involve any advertisement at all. Assessee is not in the business of films and sale thereof. Therefore, the cost of production of ad film cannot be held to be revenue expenditure for assessee. By incurring this expenditure, assessee has acquired a capital asset, which can be exploited for the business purpose of assessee, namely advertisement: 15.5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "47. The issue in ground No. 13 with regard to deleting the disallowance of expenses incurred for making advertisement films has been dealt with by the A.O. at page 15-16, para 26. The ld. CIT(A) deleted the same after having observed at page 12-13, para 21 of his order. We found that the issue has already been settled by the Tribunal in assessee's own case in A.Y. 1976-77 and no ground was taken by the Department before the Hon'ble High Court. Similar issue has been decided by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC). Accordingly, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company." 95. Respectfully following the above decision, we do not find any reason to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and circumstance of the case and in law, the Hon'ble ITAT was justified in deleting the additions in respect of disallowance of software expenditure to the extent of Rs. 23,62,368/- as capital expenditure as software used for the first time will have to be considered as capital in nature? (b) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in deleting the additions made in respect of the scrap sales as while computing the eligible deduction u/s 80HHC of the Act , any receipt credited to the profit & loss account should either be included in the total turnover or 90% of the same should be reduced while computing profit of the business.?" 2. As regards the first question, ITAT relying upon on its order in the assessee's own case relating to Assessment year 2001-02 held that the software expenditure was a revenue expenditure. The appeal filed by the Revenue for the assessment year 2001 and 2002 has been dismissed for want of removal of office objections and thus the order passed by the ITAT for the Assessment year 2001-2002 has attained finality. Moreover, the Tribunal in its order relating the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under section 80HHC of the Act. Thus, respectfully following the aforesaid decision, ground no.8, raised in Revenue's appeal is dismissed. 106. The issue arising in ground no.9, raised in Revenue's appeal is pertaining to apportionment of Head Office expenses to the units eligible for deduction under section 80IA of the Act. 107. The brief facts of the case pertaining to the issue, as emanating from the record, are: The assessee company has claimed deduction under section 80IA of the Act based on the income of the respective unit. Since the Head Office is a controlling unit which manages the affairs of all the units, proportionate expenditure of the Head Office was deducted from the eligible profits of respective units. 108. The learned CIT(A), vide impugned order, directed the Assessing Officer to exclude the allocation of Head Office expenses to the respective units claiming deduction under section 80IA of the Act by following the decision rendered in assessee's own case in the preceding years. Being aggrieved, the Revenue is in appeal before us. 109. Having considered the submissions of both sides and perused the material available on record, we find that the coordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profit of Vikram Power Unit. 113. The learned CIT(A), vide impugned order, following the decision of its predecessor-in-office in assessee's own case in earlier assessment year deleted the aforesaid disallowance made by the AO. Being aggrieved, the Revenue is in appeal before us. 114. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench, vide order dated 14/12/2021, passed in assessee's own case for the assessment year 2002-03, while following the decision rendered in the preceding year, decided the similar issue in favour of the assessee, by observing as under:- "113. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "Ground No. 19 of Revenue's appeal pertains to deduction u/s 80-IA of the Act in respect of Vikram Power Unit amounting to Rs. 3,58,74,158/-. 57. The ld. CIT(A) has dealt with this issue at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA(4), the assessee submitted that the infrastructure facility includes a rail system. The assessee further submitted that in addition to the employee of the assessee, railway staff is also posted for the operation and maintenance of the railway system as per guidelines of the Indian Railway Board. The system also has been commissioned after obtaining various/compliance certificates required by Railway Authorities from time to time. The assessee also submitted that for establishing a rail system and allowing the movement of racks, an agreement dated April 2000 was entered into by the assessee with the Government of India. The assessee further submitted that the income offered for tax by the assessee includes income from the rail system and the assessee has the option to claim deduction under section 80-IA of the Act for any ten consecutive years out of twenty years beginning from the assessment year 2000-01. Therefore, the assessee has opted for claiming deduction under section 80-IA from the assessment year 2003-04 onwards. The assessee further submitted that it fulfils all the conditions as are provided in sub-section (4) and has also filed along with its return of income Form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... System. which was made operative in September 1999. The appellant company duly entered into an agreement with Southern East Railway, which is a part of Government of India. It was submitted that there was option available u/s 801A with the appellant to claim deduction for any 10 consecutive years at its own choice. The appellant has opted for claiming the deduction from AY 2003-04 onwards. The income offered for tax by the appellant includes income from Rail System." 120. The learned DR submitted that the assessee has not submitted any agreement entered into with the Government Authority within the meaning of section 80-IA (4) applicable for the financial year 1999-2000 of a date prior to September 1999. The learned DR further submitted that the assessee has constructed a private siding for captive usage which cannot be termed as a public infrastructure facility within the meaning of section 80-IA(4) of the Act and therefore, the assessee is not eligible for claiming deduction under section 80-IA of the Act as applicable for the assessment year 2000-01. The learned DR also submitted that no agreement was entered into by the assessee as required under section 80-IA(4) of the Act as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A), which have been recorded in para 16.4-16.13 of the impugned order, as under:- "16.4 The appellant made detailed submission with regard to the issue in dispute before the undersigned. It stated that the appellant company had established a cement plant in Raipur. The nearest available Railway Siding was at a distance of around 20 kilometres from the plant. To facilitate inward and outward movement of goods, the appellant developed infrastructure facility of Rail System. which was made operative in September 1999. The appellant company duly entered into an agreement with Southern East Railway, which is a part of Government of India. It was submitted that there was option available u/s 801A with the appellant to claim deduction for any 10 consecutive years at its own choice. The appellant has opted for claiming the deduction from AY2003-04 onwards. The income offered for tax by the appellant includes income from Rail System. 16.5 The appellant further submitted that the Rail System is a 'Profit Centre'. The Rail System is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the appellant compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rail System is not formed by splitting up on reconstruction of a business already in existence or by the transfer to a new business of machinery previously used for any purpose. It was therefore, argued that the Rail System is not a part of the cement unit but is an independent unit. 16.9 The appellant submitted that the conditions specified in Section 801A (4)() in respect of an infrastructure facility are fully satisfied in the present case. The Rail System is owned by the appellant company which is a company registered in India. The appellant has entered into an agreement with the Central Government for operating and maintaining the new infrastructure facility. It has started operating and maintaining the infrastructure facility after 1st April 1995. 16.10 The appellant submitted that there is no basis on which the Assessing Officer has mentioned that the legislature's intention was to cover organisations like Konkan Railway, Delhi Metro Corporation, etc. There is no such specific mention in the Act. The appellant relied on the decision of the Bajaj Tempo Ltd vs CIT 156 ITR 188(SC). 16.11 Regarding maintenance of separate books of account, the appellant submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effective and total control over the Rail System." 123. After considering the aforesaid submission, the learned CIT(A) vide impugned order came to the conclusion that all the 3 conditions required to be fulfilled as per section 80-IA(4)(i) of the Act are satisfied by the assessee. At the outset, it is pertinent to note that in respect of the same rail terminal at Rawan District, Raipur, deduction under section 80-IA of the Act was allowed in the case of assessee's subsidiary company in UltraTech cement Ltd v/s DCIT, in ITA No. 1412/Mum./2018, etc., vide order dated 14/12/2021, by the coordinate bench of the Tribunal. 124. In the assessment order, the AO held that in the present case, the rail system does not have any agreement with the authorities mentioned above. On the contrary, the learned DR though agreed that the assessee has entered into an agreement with South-Eastern Railway administration on 10/04/2000 for the Rail System at Rawan District, Raipur, however, submitted that the same is subsequent to the commencement of operations on 25/09/1999. The learned DR also submitted that since the infrastructure facility was made operational during the financial year 1999-2000, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to-- (i) any enterprise carrying on the business of (i) developing or ( ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :-- (a) it is owned by a company registered in India or by a consortium of such companies; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:" 126. We find that all the aforesaid conditions are satisfied in the present case for claiming deduction under section 80-IA of the Act. As regards the submission of the learned DR that the assessee has constructed a private siding for captive use, we find that similar submission was rejected by the coordinate bench of the Tribunal in the case of assessee's subsidiary company in UltraTech cement Ltd (supra), vide order dated 14/12/2021. Further, even though the agreement wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred for earning the dividend income while computing deduction under section 80M of the Act by observing as under:- "22.6 The assessee company has submitted that the Head Office makes all the investments. Head Office provides funds to the business units and cash profit of the business units is transferred to the Head Office on regular basis. Audited balance sheet and profit and loss account of the head office was submitted. I find that total funds available as on 31.3.2003 were of Rs. 3597.71 crores. Investment made in shares of other companies as on 31.03.2003 was of Rs. 1796.05 crores. Interest expense for the financial year ended on 31.03.2003 was Rs. 77,50,647/-. Therefore, the proportionate disallowances out of interest are worked out at Rs. 38,69,281/- i.e. Rs. 1796.05 / 3597.71 x 77,50,647/- = 38,69,281/- and the same is disallowed as expenses incurred for earning dividend income while computing deduction u/s 80M of the I.T. Act." 129. As a result, the AO reduced the deduction under section 80M of the Act to Rs. 31,92,65,173. The learned CIT(A), vide impugned order, following the judicial precedents in assessee's own case deleted the aforesaid disallowance made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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