9911796707
TMI Blog2023 (7) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... evised return of income, the assessee claimed a deduction under section 80IA of the Act of Rs. 11,85,52,834, in respect of the profits of the Rail System. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as under section 142(1) of the Act were issued and served on the assessee. The assessee is engaged in the production and sales of Chemicals, Cement, and Textiles, and the production of Sponge Iron, and Viscose Staple Fibre. The Assessing Officer ("AO"), vide order dated 28/01/2005, passed under section 143(3) of the Act, assessed the total income of the assessee at Rs. 812,27,65,519, after making certain additions/disallowances to the income declared by the assessee. The learned CIT(A), vide impugned order granted partial relief to the assessee. Being aggrieved, both, the assessee as well as the Revenue, are in appeal before us. 3. The assessee, in its appeal, has raised the following grounds:- "1. Disallowance under section 43B: 1.1 The CIT (A) erred in not allowing the amounts paid or written back during the previous year amounting to Rs. 1,09,91,739/-, which had already been disallowed in the past under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) erred in holding that profits from sale of DEPB credits Rs. 5.82,12,856/- are not income directly derived from exports business and erred in directing the AO to reduce 90% of DEPB credits from profits of business. 4.9 The CIT (A) ought to have held that DEPB credit is derived from exports business and shouldn't be reduced from business profits for the purpose of calculation of deduction allowable u/s. 80 HHC. 5. Appropriation of Head Office expenses 5.1 The CIT(A) erred in confirming the AO's action in apportioning Head Office expenses and reducing the amount of allowable deduction u/s. 80-0. 5.2 The CIT(A) failed to appreciate that Head Office expenses cannot be reduced from receipts while computing allowable deduction u/s. 80-O. 5.3 Without prejudice to the above, the CIT(A) failed to appreciate that even if head office expenses are to be reduced from gross receipts for computing allowable deduction u/s. 80 O, such expenses can only be a certain percentage of the gross receipts eligible for deduction u/s. 80 O and not the total turnover of the division. 6. Miscellaneous Receipts 6.1 The CIT(A) erred in holding that miscellaneous receipts of Rs. 97, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Ltd. v/s ACIT, in ITA no.4753/Mum./ 2004 and ITA no.5584/Mum./2004, for the assessment year 2002-03, wherein the coordinate bench, while dismissing the similar issue, following the earlier decision rendered in assessee's own case, observed as under:- "6. 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. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 4083/Mum./2003 dated 22.10.2014 held as under: - "2. Rival contentions have been heard and perused the record. The assessee is engaged in manufacturing and sale various products. During the course of scrutiny assessment, the A.O. disallowed assessee's claim of deduction u/s 43-8 of the Act in respect of liabilities disallowed in earlier years which are paid/written back in the current year. The A.O. found that in the computation of income an amount of Rs. 10.85 crores has been considered as disallowance u/s 43-8 (a) of the Act by the assessee itself. However, an amount of Rs. 1.31 crores was not considered as disallowance u/s 43-8 of the Act falling under clause (b) to (d). The con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of Rs. 4,72,350, is paid to Otters Club for obtaining Life Membership. Accordingly, the assessee was asked as to why this payment should not be treated as capital expenditure. In response thereto, the assessee submitted that the payments have been made to the club for enrolling senior officials as members for the purpose of promoting the business of the assessee company. It was further submitted that such members meet various kind of people because of which they developed business relationships benefiting the assessee company. The assessee also submitted that in commercial work, the contact with right persons is vital for efficient business organization and, therefore, the expenditure should be allowed as business expenditure. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that the payments made for obtaining membership is not allowable expenditure and the payments made towards annual renewal fees and expenditure incurred at Clubs for the business purpose is allowable expenditure, but not the payment made for obtaining membership. The AO further held that by such payment, the assessee got the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 assessee's own case cited supra, we uphold the plea of the assessee and allow the Club Membership fees paid by the assessee." 12. In the present appeal, the learned Departmental Representative "learned DR") could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case. This issue is recurring in nature and has been decided in faovur of the assessee in the preceding years. Therefore, respectfully following the judicial precedent rendered in assessee's own case cited supra, ground no.2, raised in assessee's appeal is allowed. Further, the depreciation already granted by the AO is directed to be withdrawn in view of our aforesaid findings. 13. The issue arising in ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and consequently the interest granted is withdrawn the same would not partake the character of income. We accordingly direct the Assessing Officer to reduce from the taxability of 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 abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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:- "18. 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: - "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and allow grounds no.4.2 and 4.3, raised in assessee's appeal." 22. In the present case, it is not disputed that interest paid by the assessee during the year is Rs. 153.88 crore, while interest received by the assessee is Rs. 21.56 crore. Therefore, respectfully following the judicial precedent rendered in assessee's own case cited supra, we uphold the plea of the assessee and allow the ground no. 4.2 and 4.3, raised in assessee's appeal. 23. The issue arising in grounds no.4.4, raised in assessee's appeal, is pertaining to the reduction of rental income while calculating deduction under section 80HHC of the Act. 24. The brief facts of the case pertaining to the issue, as emanating from the record, are: The AO, vide assessment order passed under section 143(3) of the Act, reduced 90% 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. 25. Having considered the submissions of both sides and perused the material availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculating the deduction under section 80HHC of the Act. 28. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the assessment proceedings, the assessee submitted that the miscellaneous receipts of Rs. 11,24,95,218, should not be reduced from the profit of the business for computing deduction under section 80HHC of the Act. 29. The AO, vide assessment order, passed under section 143(3) of the Act, did not agree with the submissions of the assessee and reduced 90% of the miscellaneous receipts of Rs. 11,24,95,218, to the Profit & Loss Account for the purpose of computation of deduction under section 80HHC of the Act. 30. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee ss on this issue. Being aggrieved, the assessee is in appeal before us. 31. Having considered the submissions of both sides and perused the material available on record, we find that a similar issue came up for consideration before the coordinate bench of the Tribunal, and the Tribunal, vide order dated 13/06/2023, passed in assessee's own case for the assessment year 2003-04 cited supra, restored the issue to the file of the AO for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the coordinate bench of the Tribunal in DCIT v/s Gharda Chemicals Ltd., [2016] 71 taxmann.com 56 (Mumbai-Trib.), wherein the coordinate bench, inter-alia, held that registration charges written back cannot be excluded from the profit of the business for the purpose of computing deduction under section 80 HHC of the Act. Similarly, 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- "8. We do not find any merit in the argument advanced on behalf of the Department. In this case, we are concerned with profits from business of exports of goods manufactured by the assessee. Therefore, the export profits were required to be computed in the ratio of export turnover to total turnover as contemplated by the above formula. Explanation (baa) was introduced into the Act by Finance (No. 2) Act, 1991 with effect from 1-4-1992. Under the Circular of CBDT bearing No. 621 dated 19-12-1991, it has been stated that the above formula gave distorted figure of export profits when receipts like interest, commission etc. which do not have element of turnover are included by the assessee in profit and loss account. Therefore, Explanation (baa) came to be introduced. Under that Explanation, profits of business, for the purposes of section 80HHC, does not include receipts which do not have element of turnover like rent, commission, interest etc. However, as some expenditure might be incurred in earning such incomes an ad hoc 10% deduction from such incomes is provided to account for those expenses. However, the learned counsel for the Department cannot invoke Explanation (baa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes Explanation (baa) which is not the purpose and the object of that Explanation. In the present case, the receipt in question is labour charges. However, this nomenclature may not be accurate. In the present case, the assessee is a manufacturer and exporter of garments. In the present case, the Tribunal has recorded a finding of fact which is not challenged, namely, that there was no difference between the activities relating to export business carried on by the assessee and the processes carried on for manufacturing garments for others under job-work contracts. The Tribunal has further found, on facts, that the activity of labour job involved use of machinery, labour and material which were also forming part of the activity of manufacturing garments for its own sales. The Tribunal further found that there was no difference between manufacturing of garments for the assessee's own sales and manufacturing of garments for others on labour job basis. These are findings of fact. They have not been challenged in the Memo of Appeal. The Memo of Appeal proceeds only on the basis that because the receipt is by way of labour charges, Explanation (baa) stood attracted. As stated above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, we remand this issue to the file of the AO for de novo adjudication. We further direct that if upon examination it is found that the receipt is having an element of turnover or arises out of the business operation of the assessee then the same cannot be excluded from the profit of the business for the purpose of computing deduction under section 80HHC of the Act. During the hearing, the learned Sr. Counsel also submitted that the net miscellaneous expenses incurred by the assessee is Rs. 70.34 crore, while miscellaneous income is Rs. 11.48 crore and therefore applying the ratio laid down by the Hon'ble Supreme Court in ACG Associated Capsules Pvt. Ltd. (supra), only the net amount can be added. As noted above, under the broad head ‗Miscellaneous Receipt' the assessee has received income of varied nature. Therefore, we deem it appropriate to remand this aspect also to the file of the AO for de novo adjudication after necessary examination. If upon examination it is found that the miscellaneous expenses incurred by the assessee are of a similar nature as business income earned, then relief be granted to the assessee in light of the decision in ACG Associated Capsules Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance / failure 17,225 42. Interest recd. In petty cash books 2,328 43. Rebate on sale tax / tax refund 30,560,105 44. Recovery from chargeable issues 166,928 45. Credit given by bank 115,000 46. Railway claim received 63,124 47. Excess claim refunded by railway 22,714 48. Bad debts recovered 7,492,838 49. Recovery against damaged properties/ cement 539,781 50. Gain on forex cover 846,551 51. Royalty 1,719,759 52. Rate diff/ Addl. Consumption 689,075 53. W.C. Premium refund 90,779 Total 112,495,221 33. During the hearing, the assessee provided the following details of these receipts:- Particulars Amount 1. Subsidy Rs. 52.74 lakh 2. Scrap sales Rs. 39.47 lakh 3. Sundry balances written back Rs. 30.57 lakh 4. Provision written back Rs. 19.81 lakh 5. Liquidated damages Rs. 59.60 lakh 6. Deposit forfeited Rs. 9.09 lakh 7. Hire charges Rs. 43.53 lakh 8. Bad debts recovered Rs. 74.93 lakh 9. Other miscellaneous income Rs. 4.89 crore 10. Net miscellaneous expenses incurred Rs. 49.67 crore 11. Paid Rs. 60.92 crore 12. Received Rs. 11.25 crore 34. In respect of each of the aforesaid receipts, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to reduce only 90% of such income for calculating the deduction under section 80HHC of the Act, therefore, in view of the aforesaid decision we find no infirmity in the aforesaid direction of the learned CIT(A). Accordingly, grounds no.4.8 and 4.9 raised in assessee's appeal are decided in light of the decision of the Hon'ble Supreme Court. 38. The issue arising in grounds no.5.1 and 5.2, raised in assessee's appeal is pertaining to allocation of Head Office expenses and reducing the same from deduction under section 80-O of the Act. 39. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee has claimed a deduction of Rs. 2,38,533, under section 80-O of the Act. The total turnover of the ED&D unit for the previous year was Rs. 27.15 crore. Therefore, the AO, vide assessment order passed under section 143(3) of the Act, allocated the Head Office expenses of Rs. 7,05,900 (being 0.26% of the turnover) against the royalty income of Rs. 23,85,325, and computed the deduction under section 80-O of the Act to Rs. Nil (10% of Rs. 23,85,325 minus Rs. 7,05,900). 40. The learned CIT(A), vide impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing head office expenses and thereby reducing the quantum of deduction available to the assessee under the following provisions: Section Rs. 8OHH 14,20,000 801 5,54,600 80M 7,50,000 80-0 3,50,000 30,74,600 25.1 Facts of the case, in brief, are that the AO estimated the expenses and allocated head office expense to the various units which had claimed benefits u/s. 8OHH,801, 80M and 80-0 of the Act. Since the nexus between the head office and the individual units cannot be denied and since the assessee did not give details so as to give better allocation of these expenses to various units, the CIT(A) upheld the action of the AO. Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 25.2 After hearing both the sides, we find the AO has only allocated the expenses but no income was allocated. We find the co-ordinate Bench of the Tribunal in the case of M/s. Procter & Gamble India Ltd. Vs. DCIT, vide ITA No. 5466/Mum/99 order dated 27th November, 2006 for the A.Y. 1990-91 has held that head office expense allocated to the units are not to be taken into consideration for computing the income of the assessee eligible for deduction u/s. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the record, are: The AO, vide assessment order passed under section 143(3) of the Act, held that the miscellaneous receipts are not derived from industrial undertaking and thus, the assessee is not entitled to deduction under section 80-IA of the Act on such receipts. 46. The learned CIT(A), vide impugned order, noted that the AO has not discussed this issue in the assessment order and has also not given the reason for excluding the miscellaneous receipts from the profit of eligible business for computing deduction under section 80-IA of the Act. The learned CIT(A) noted that under the miscellaneous receipts, the assessee has shown the income out of interest receipts, access provision written back, prior period adjustments, rent, miscellaneous receipts, job charges, exchange rate difference, export incentives, profit on the sale of DEPB license, notice pay, sludge sales, etc. Accordingly, the learned CIT(A) held that the AO is supposed to examine the nature of each item of miscellaneous receipts included by the assessee in the profit of the eligible unit and exclude only those receipts which do not directly emerge from running of the undertaking. The learned CIT(A), vide impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of DEPB license, notice pay and sludge sales. As per the assessee, all these receipts are directly connected with and derived from the eligible business, and therefore, should be considered for computation of deduction under section 80-IA of the Act. As is evident from the record, the learned CIT(A) only examined the receipts from job charges and excess provisions written back and considered the same to be business profits for computing deduction under section 80-IA of the Act. While, the other receipts, as noted above, under the broad category of 'miscellaneous receipts' were not examined by any of the lower authorities to determine whether they are derived by the undertaking or the enterprise from the eligible business, as per the provisions of section 80-IA of the Act. Therefore, in view of the above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication as per law, after examining each and every receipt under the category of 'miscellaneous receipts', which were excluded from the business profits by the learned CIT(A) for computing the deduction under section 80 IA of the Act. Thus, to this extent, the impugned order on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area and thus the incentive is in the capital field and therefore cannot be taxed as revenue receipt. The incentive is based on the amount of investment in fixed assets. It is to induce or motivate the businessman to move and take a risk. 5. The assessee company is liable to pay sales tax on sale of finished goods and purchase of raw material and other inputs as per the applicable sales tax law of the State. However, in accordance with the Scheme, the assessee has been allowed to retain the same subsidy. The assessee is required to file returns with the concerned authorities, which work out the notional liability of sales tax and complete the assessment. In the books, the total amounts of sale proceeds are credited to profit and loss account, which includes notional liability of sales tax. The amount of notional sales tax liability should have been reduced from the revenue receipts as it is embedded in such receipts, though having character of subsidy. We submit that books of account are not sacrosanct and if true nature of the receipt or payment is different then the same has to be evaluated on the basis of substance of the transaction and in accordance with the law applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 54. We have considered the submissions of both sides and perused the material available on record. As per the assessee, the object for the grant of the incentive by the State Governments is to promote setting up industries in the backward/notified areas and therefore, the subsidy is capital in nature. In the year under consideration, the assessee received sales tax subsidiary under the following schemes:- * Packet Scheme of Incentive, 1988 dated 01/10/1988 by State of Maharashtra * Sales Tax New Incentive Scheme for Industries 1989, Rajasthan * Sales Tax Exemption Scheme (Madhya Pradesh Industrial Policy & Action Plan, 1994) * Sales Tax Waiver Scheme (Package of Fiscal Incentives offered by Government of Tamil Nadu to Industries) * Punjab Industrial Incentive Code under the Industrial Policy, 1996 * Haryana Valued Added Tax Act, 2003 * Sales Tax Exemption Scheme (M.P. Vanijyikar Adhiniyam, 1994) * Sales Tax Incentive Scheme (Incentives offered by Government of Gujarat under the New Incentive Policy-Capital Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post commencement of business. Hence, by applying the purpose test, apparently, the subsidy / incentive received in the instant case would only have to be construed as capital receipts not chargeable to income tax. In this regard, we find that ld. AR placed reliance on the decision of Hon‟ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392, wherein the incentive conferred under that scheme were two fold. First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon'ble Supreme Court in para 14 of its decision had held that "character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial." In fact, the Hon'ble Supreme Court while rendering this decision had duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd., reported in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her it is taxable income in the hands of the recipient. In that case, it was pointed out after discussing the Seaham Harbour Dock Co. 's case (supra)as well as that of Lincolnshire Sugar Co. Ltd. 5 case (supra)that subsidy given by the Canadian Government to encourage construction of dry docks was 'an aid to the construction of dry dock and not an operational subsidy'. 17. This precisely is the question raised in this case. By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were trade for a period of five years calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies." 56. Thus, respectfully following the aforesaid decision, rendered in assessee's own case, we are of the considered view that the sales tax exemption received by the assessee, in the year under consideration, under the similar sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed assets by the assessee. Therefore, in view of the above, we find that the sales tax exemption scheme of the Government of Gujarat is of the nature similar to the schemes considered by the coordinate bench in the earlier years, and thus, sales tax exemption received under this scheme is in the nature of capital receipt. 59. As regards the Punjab Industrial Incentive Code under the Industrial Policy, 1996, forming part of the paper book from pages 481-490, we find that the said scheme was formulated with a view to promote growth of the industry in the State and for that purpose it provides various incentives for new industrial units that come into production or undertake expansion on or after 01/04/1996. We find that in the scheme, inter-alia, the capital subsidy is provided to the new large and medium units set up in the notified area as mentioned in Annexure-I of the scheme. We find that under the said scheme certificate of eligibility was also issued to the assessee in respect of Vikram Bathinda Cement Grinding Unit. Thus, the dominant purpose for which this incentive scheme was introduced is also for setting up the industry in the notified area to promote industrial growt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in assessee's own case in Grasim Industries Ltd (supra), vide order dated 14/12/2021, for the assessment year 2002-03, decided the similar issue in favour of the assessee, following the decision rendered in preceding years, by observing as under:- "40. 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: - "The next grievance relates to the disallowance of royalty and interest on royalty u/s 43B of the Act treating it as tax. The issue is now settled by various orders of the Tribunal in assessee's own case for assessment years 1995-96 to 2000-01. A similar issue was considered by the Tribunal in the assessee's own case in A.Y. 1999-2000 in ITA No.5631/M/2002, wherein we find that the Tribunal has followed its earlier order in the assessee's own case in ITA No. 5630/Mum/02 for A.Y. 1998-99. In the absence of any contradictory facts brought on record by the Revenue, following the aforementioned de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 13/06/2023 cited supra, the coordinate bench observed as under:- "65. Having considered the submissions of both sides, we find that as per Article 11(2) of the India- UAR (Egypt) DTAA, dividends paid by a company which is a resident of the UAR (Egypt) to a resident of India may be taxed in the UAR (Egypt). As noted above, it is the plea of the assessee that prior to amendment by Finance Act 2003, w.e.f. 01/04/2004, to section 90 of the Act, the term "may be taxed" means that only the source country has the right to tax the income earned in such country and the resident country does not have any taxing rights. Therefore, the dividend received by the assessee from the Egyptian company, in the present case, is only taxable in Egypt. We find that while examining the issue of applicability of the aforesaid amendment vide Finance Act, 2003 to section 90 of the Act, and the aforesaid Notification issued under the said section, the coordinate bench of the Tribunal in Essar Oil Ltd v/s ACIT, [2013] 42 taxmann.com 21 (Mum-Trib.), observed as under:- "88 We summarise our conclusion as under:- (i) ..... (ii) The notification dated 28th August 2008, reflects a particular inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Supreme Court in a way has confirmed the entire reasoning of the S.R.M. Firm (supra) which, in our opinion, is slightly different from the judgment of the Hon'ble Supreme Court in P.V.A.L. Kulandagan Chettiar (supra) to the extent that the phrase "may be taxed" was not expressly dealt with by the Hon'ble Supreme Court as the reasoning of the High Court was affirmed on different ground. Thus, the later decision of the Hon'ble Supreme Court in Turquoise Investments & Finance Ltd. (supra) can be said to be the view expressed by the decision in S.R.M. Firms (supra) by the Madras High Court. In this background, that the three High Courts have expressed their views and which have been affirmed by the Hon'ble Supreme Court in some context or the other, specially the decision of Turquoise Investments & Finance Ltd. (supra), wherein the Apex Court has approved these decisions completely, then as a judicial precedence, one has to accept that the phrase "may be taxed" has to be inferred as allocating the taxing right to the source country only on the income earned in such country and the country of resident is completely precluded from taxing the same income." 66. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The effect of Hon'ble Supreme Court's judgment in Kulandagan Chettiar's case (supra) thus was clearly overruled by the legislative developments. It was specifically legislated that the mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of an assessee in India and that "such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement". A coordinate bench of this Tribunal, in the case of Essar Oil Ltd (supra) also proceeded to hold that this notification was retrospective in effect inasmuch as it applied with effect from 1st April 2004 i.e. the date on which sub-section 3 was introduced in Section 90." (emphasis supplied) 67. Therefore, in view of the above, we find no merit in the plea of the assessee. Accordingly, the additional ground filed by the assessee vide application dated 23/01/2013 is dismissed. 68. In the result, the appeal by the assessee is partly allowed for statistical p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction u/s.80HHC by relying on the jurisdictional High Court's decision in the case of Sudarshan Chemical Industries Ltd. (245 ITR 769) without appreciating that the department has not accepted the same by filing an SLP. 8. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to reduce only 90% of Rs. 5,82,12,856/- from the business profits being the DEPB income, for the purpose of computing the deduction u/s. 80HHC without appreciating that explanation (baa) of section 80HHC does not have any such provision of reducing 90% of such income. 9. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to allow deduction u/s.80-1A in respect of profits of Rail System Raipur and Hotgi by relying upon his decision for the AYrs. 2003-04 without appreciating that the department has not accepted the same by filing an appeal with the ITAT. 10. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 11. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 70. The issue arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: - "31. Ground No. 1 in Revenue's appeal relates to the disallowance u/s 43B of the Act which has been dealt with by the A.O. at para No. 9-9.5 of his order. The ld. CIT(A) dealt with 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se conditions and, therefore, are not eligible for deduction. 77. The learned CIT(A), vide impugned order, following the decision of its predecessor-in-office, rendered in assessee's own case deleted the aforesaid disallowance made by the AO. Being aggrieved, the Revenue is in appeal before us. 78. 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 13/06/2023, passed in assessee's own case for the assessment year 2003-04 cited supra, while deciding similar issue in favour of the assessee by following the decision rendered in the preceding year, observed as under:- "78. 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:- "52. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee incurred expenditure of Rs. 71,43,397, towards rural development expenditure. In this regard, the assessee submitted that rural development activities include family welfare expenses, agricultural training, and environment program, supply of horticulture sapling to villagers, self-help training, natural resources management, medical camps, medicine distribution, etc., where the majority of working population employed in assessee's factories/offices are residing. Accordingly, the assessee submitted that the expenditures incurred were for the purpose of business and claimed the same as allowable under section 37(1) of the Act. On the basis that in the assessment year 2003-04, such expenditure was disallowed, the AO disallowed the expenditure in the year under consideration. 82. The learned CIT(A), vide impugned order, following the decision of its predecessor-in-office in assessee's own case deleted the aforesaid disallowance made by the AO. Being aggrieved, the Revenue is in appeal before us. 83. Having considered the submissions of both sides and perused the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid decision rendered in assessee's own case. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent rendered in assessee's own case cited supra, grounds no.3, raised in Revenue's appeal is dismissed. 86. The issue arising in ground no.4, raised in Revenue's appeal is pertaining to the deletion of disallowance made on account of expenses incurred for making advertisement films. 87. 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 advertisement films. The assessee was also asked to explain as to why the expenditure incurred on the production of advertisement films should not be treated as capital expenditure. In response thereto, the assessee submitted that it incurred an expenditure of Rs. 1,14,02,119, on the production of advertisement films. The AO, vide order passed under section 143(3) of the Act, did not agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue. We order accordingly." 98. 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 relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.6, raised in Revenue's appeal is dismissed." 90. In the present appeal, the learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent rendered in assessee's own case cited supra, grounds no.4, raised in Revenue's appeal is dismissed. 91. The issue arising in ground no.5, raised in Revenue's appeal is pertaining to the deletion of disallowance incurred towards earning exempt income. 92. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee received a exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.6, 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. 96. The brief facts of the case pertaining to the issue, as emanating from the record, are: The assessee company has claimed deduction under section 801A 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. Accordingly, the AO reduced the eligible deduction by 0.26% of the turnover of the respective units while computing the deduction under section 80IA of the Act. 97. The learned CIT(A), vide impugned order, directed the AO 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. 98. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tfully following the judicial precedent rendered in assessee's own case cited supra, grounds no.6, raised in Revenue's appeal is dismissed. 100. The issue arising in ground no.7, raised in Revenue's appeal, is pertaining to the exclusion of sales tax and excise duty from the total turnover. 101. We find that this issue is no longer res integra and has been decided in favour of the assessee by the Hon'ble Supreme Court in CIT v/s Lakshmi Machine Works, [2007] 290 ITR 667 (SC), wherein the Hon'ble Supreme Court held that excise duty and sales tax component cannot form part of the total turnover for computation of deduction under section 80HHC of the Act. Thus, respectfully following the aforesaid decision, ground no.7, raised in Revenue's appeal is dismissed. 102. The issue arising in ground no.8, raised in Revenue's appeal is pertaining to the reduction of 90% of DEPB income from business profit for computing deduction under section 80HHC of the Act. 103. After hearing both the parties, we find that this issue is no longer res integra and has been decided by the Hon'ble Supreme Court in Topman Exports Ltd. v/s CIT, [2012] 342 ITR 049 (SC), wherein the Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of goods, the assessee company developed an infrastructure facility for the rail system and the same satisfies the conditions for deduction under section 80-IA of the Act. We find that the assessee on this aspect made detailed submissions before the AO, which have been recorded in para 21.3 of the assessment order. Similarly, the assessee also made submissions before the learned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for operating and maintaining the Rail System. It employees required personnel directly or through the railway authorities and is bearing the salary cost. relating thereto. Rail System is developed on the basis of entirely different technology and employs different equipment and machinery from those applied by the cement unit for cement production. It was also submitted that the 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. 16.8 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. 16.9 The appellant submitted that there is no basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any purpose other than for the purpose of appellant's business. The entire loading and unloading is done under the insistence of and supervision of the appellant. The appellant decides the destination to which the material is to be transported. Entire risk and reward in relation to the Rail Sytem are of the appellant. Therefore, it was submitted that the appellant has 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 agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, we are of the considered view that in order to determine the eligibility of the assessee for deduction under section 80-IA of the Act, the provisions of the Act as applicable for this year become relevant. We find that vide Finance Act 2001, w.e.f. 01/04/2002, the provisions of section 80-IA (4) of the Act were amended and the same reads as under:- "(4) This section applies 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 claimin ..... 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