9911796707
TMI Blog2023 (2) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating present appeal. Further, the Ld. AR of the Assessee has vehemently relied upon decision of coordinate bench in the case of Ambuja Cement Limited, holding company of Assessee for AY 2005-06 to 2012-13 and same are summarised herein below: - SR No ITA No Date of order 1 5883/Mum/2012& 5927/Mum/2012 for AY. 2005-06 30/10/2022 2 2848/Mum/2013 and 2366/Mum/2013 for AY 2006-07 03/11/2022 3 6375/Mum/2013 & 6405/Mum/2013 for AY 2007-08 07/11/2022 4 2968/Mum/2015 & 3307/Mum/2015 for AY 2008-09, 1665/Mum/2019 & 2428/Mum/2019 for AY 2009-10 07/11/2022 5 2384/Mum/2019 for AY 2010-11, 3475/Mum/2018 for AY 2011-12 &1241/Mum/2018 for AY 2012-13 07/11/2022 6 2384/Mum/2019 & 2958/Mum/2019 for AY 2010-11, 3843/Mum/2019 & 3475/Mum/2019 for AY 2011-12, 1241/Mum/2018 & 1889/Mum/2018 for 2012-13 07/11/2022 ITA 3786/MUM/2009 (REVENUE APPEAL) 2. First we take up Revenue Appeal in ITA No. 3786/Mum/2009 (where ever applicable common ground in assessee's appeal is also taken up together). 3. In the Ground No.1, Department has raised the following grievance: - "On the facts and the circumstances of the case and in law the CIT(A) erred in observing that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) has discussed the above issue at Para No.5.4 and 5.5. of his order and held as under: "5.4 I have carefully considered the submission Under Sec. 14A(1), no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not fall part of the total income under Income Tax Act. Under Section-14A(2), if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to exempted income, he will determine the amount of expenditure incurred in relation to the exempted income, in accordance with the prescribed method. The prescribed method referred here is Rule 8D. There is no direct expenditure specifically incurred to earn the exempted income. Under Rule8D(2)(ii), the interest expenditure which is not directly attributable to any particular income or receipt is to be computed. 5.5 I have carefully considered the Ld. AR's submission that sufficient interest free own funds are available and that the investments generating exempted dividend income is only 20% of the total own funds available. However, all sorts of funds have been put in the common basket and util ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely. Hence she contended that the observation of Assessing Officer is proper and prayed that order of Assessing Officer may be restored. 11. Considered the rival submissions and material placed on record. It is observed that Assessing Officer has not made disallowance u/s 14A applying rule 8D as it was not in statute in the year under consideration. The Assessing Officer has made proportionate disallowance of interest as per formula mentioned in Para No. 4.2 of Assessment Order. It is observed that Assessee has sufficient own funds in form of share capital and reserves and surplus in comparison with investment in shares made by it. On this issue, Hon'ble Supreme Court held in the case of South Indian Bank Ltd[2021] 130 taxmann.com 178 as under: "Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income not includible in total income (General) - Assessee-scheduled banks earned income from investments made in tax-free securities - Assessing Officer made proportionate disallowance of interest attributable to funds invested to earn tax free income under section 14A on grounds that separate accounts were not maintained for investment in tax-free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 in departmental appeal is dismissed and ground of appeal filed by Assessee is allowed. 14. In the Ground No 2, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of different unutilised CENVAT credit of Rs..16,93,37,435/- without appreciating the fact that the Assessing Officer has rightly made the said addition by invoking the provision of Sec. 145A of the Act." 15. The Assessing Officer has dealt with the issue at Para No. 5 to 5.3 of Assessment Order. The Assessing Officer has observed that Assessee has following exclusive method of accounting and unutilised CENVAT credit on closing stock of raw material and stores is Rs..16,93,37,435/- which is required to be added back to total income of assessee considering provisions of Section 145A of the Act. 16. In appeal Ld.CIT(A) has discussed the above issue at Para No. 6.4 and 6.5. of his order and held as under: "6.4 I have carefully considered the submissions of the Ld. AR and gone through the relevant judicial decisions cited by the Ld. AR. Under Section-145A of the Act, the element of any tax, duty, cess or fee is to be adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision is reproduced hereunder:- "5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the Modvat credit. The same would be permissible. The Apex Court in the case of Indo Nippon Chemicals Co. Ltd. (supra) while affirming the order of High Court, has observed that the income was not generated to the extent of Modvat credit or unconsumed raw material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. 6. Considering the above, the amount of the unutilized Cenvat credit could not have been directly added to the closing stock. The Tribunal has not committed any error." (underlined for emphasis by us) It is evident from the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee by the ITAT and my predecessors in the earlier years. Following such decisions, the addition made by the Assessing Officer is deleted. 23. Aggrieved with the above observation of Ld.CIT(A), Revenue has filed this appeal. During the course of appellate proceedings, Ld. AR of the assessee has relied upon finding of Ld.CIT(A) and contended that identical issue is also decided in its favour in A.Y. 1987-88 to 1991-92 and also in A.Y. 2004-05, whereas Ld.DR has relied upon finding of Assessing Officer and contended that observation of Assessing Officer may be restored. 24. Considered the rival submissions and material placed on record. It is observed that identical issue has been decided in favour of assessee by Coordinate bench assessee's own case for A.Y. 2004-05 in ITA No 5259/Mum/2027 dated 27/05/2022 wherein it is held as under: "3. We have heard the rival contentions and perused the material on record. We note that the Tribunal has decided identical issue in the favour of the Assessee in Assessee's own case in ITA No. 647/Mum/1997 (AY 1991-92), ITA No. 2361/Mum/1995 (AY 1990- 91), ITA No. 288/Mum/1993 (AY 1989-90), ITA No. 968/Mum/1992 ITA. No. 5259 & 4895/Mum/2007 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of Rs..1,50,42,422/- holding that the amount received on sale of TDR is a capital receipt. 27. During the course of appellate proceedings, Ld.AR of the assessee has admitted that it is capital receipt and Ld. DR has relied on the findings of Assessing Officer. Considering the above, addition made by Assessing Officer for Rs..1,50,42,422/- is sustained and this ground of appeal in departmental appeal is allowed. 28. In the Ground No 5, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition made by the Assessing Officer on account of sales tax subsidy under the normal provisions and u/s.115JB of the Act, relying on the order of his predecessor without appreciating the new fact brought out by the Assessing Officer in the impugned assessment order." 29. The Assessing Officer has dealt with the issue at Para No. 6 to 6.2 of Assessment Order. The Assessing Officer has observed that assessee has claimed sales tax incentives for various units such as Tikaria (UP), Chanda (Maharashtra), Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various courts, each scheme was also provided during the course of appellate proceedings, The Ld.AR of the assessee has also referred to decision of Coordinate bench in its own case for A.Y. 2003-04 wherein identical issue was decided in favour of the assessee. The Ld. AR has also relied upon decision of coordinate bench in the case of Ambuja Cement Limited (referred supra) for A.Y. 2005-06 to 2011-12 wherein sales tax incentives received by assessee for various units set up in different states and availed different incentive schemes as capital receipts. The Ld. AR has also relied upon decisions of various ITAT as well as High court for various different schemes wherein sales tax incentives are treated as capital receipts. 32. Considered the rival submissions and material placed on record. On this issue, coordinate bench in the case of Ambuja Cement Limited in ITA No 5883/Mum/2012 & 5927/Mum/2012 (A.Y.2005-06) dated 31/10/2022 has held as under: "..... The relevant material facts, so far as necessary for adjudication of these grievances, are as follows. The assessee before us is a company engaged in the business of manufacturing of cement and generation of electricity. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. None of the parties is satisfied. While the assessee is aggrieved of the amount of Rs 39,36,21,956 being included in his taxable income, the Assessing Officer is aggrieved of the learned CIT(A)'s granting relief of Rs 130,57,12,796. Both parties are in appeal before us. 6. We have heard the rival contentions, perused the material on record, and duly considered the facts of the case in the light of the applicable legal position. 7. We find that the learned CIT(A) has, in his elaborate analysis, primarily followed the Special Bench decision in the case of DCIT Vs Reliance Industries Ltd [(2004) 88 ITD SB 273 (Mum)]. Upon analysis of this decision, he has noted that 'for deciding the nature of subsidy, whether capital or revenue, what should be seen and examined is the purpose for which the subsidy has been given, and not the timing of the subsidy or the manner in which it has been given to the industry', as is also held by Hon'ble Supreme Court in the case of CIT Vs Ponni Sugar and Chemicals Ltd [(2008) 306 ITR 392 (SC)]. A large number of judicial precedents have been cited in this context. Learned CIT(A) has then held that so far as the object and purpose for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment. In this regard, he has relied upon the decision of High Court of Bombay in the case of CIT v. Reliance Industries Ltd. [2010] 8 taxmann.com 218/[2011] 339 ITR 632, wherein it is held that object of subsidy being to set up new units in backward area is a capital receipt and another decision of High Court of Calcutta in the case of CIT v. Chhindwara Fuels [2001] 114 Taxman 707/[2000] 245 ITR 9, wherein it is held that subsidy in the form of refund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr. Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discussed the issue in detail in para 54 and 55 of its decision, which reads as under:- "54. Per contra, the learned D.R. Supported the orders passed by the Assessing Officer and the learned CIT (A). Referring to the judgment in Sahney Steel and Press Works Limited v. CIT 228 ITR 253 (SC), he submitted that the impugned sales tax exemption increased the profits of the assessee by eliminating the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-today functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry. 13. In a recent decision dated 28th January 2013 in Tax Appeal No. 450 of 2012 and connected appeals, we had an occasion to examine the nature of incentives received by the assessee from the State Government in the form of entertaining tax waiver for setting up multiplexes. In such context, we had in wake of the revenues contention that the receipt was revenue in nature, held and observed as under : "From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253, the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of find is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. Such But if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade." 11. He also submitted that in view of above decisions, these appeals may not be entertained. 12. We have heard both the learned counsel and perused the record. We have also gone through the decisions cited before us. After considering the material on record, we are of the view that the issues involved in these appeals are squarely covered by the decisions of this Court in Birla VXL Ltd. (supra) and in Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice 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 228 ITR 253 and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case. In this regard, it would be relevant to reproduce the operative portion of the decision of Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., as under:- 14. The second case is Lincolnshire Sugar Co. Ltd. v. Smart 20 TC 643. In that case it was found that Lincolnshire Sugar Co. Ltd carried on the business of manufacturing sugar from home grown beet. The company was paid various sums under British Sugar Industry (Assistance) Act, 1931, out of monies provided by the Parliament. The question was whether these monies were to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.3.6. Yet another decision was rendered by Hon'ble Supreme Court in the case of CIT vs. Chapalkar Brothers reported in 400 ITR 279 which held that where the object of respective subsidy schemes of State Government was to encourage development of multiple theatre complexes, incentives would be held to be capital in nature and not revenue receipts. The relevant operative portion of the judgment is reproduced hereunder:- 18. After discussing the judgment in Sahney Steel & Press Works Ltd.'s case (supra) this Court then held: "The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to the applied in judging the character of a subsidy. The test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the decision of Hon'ble Supreme Court both in the case of Sahney Steel and Press Works Ltd., and Ponni Sugars and Chemicals referred to supra had held as under:- "7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitlement was related to percentage of fixed capital investment. 8. It is undoubtedly true that such subsidy was computed in terms of sales tax deferment and necessarily therefore, would accrue to an industry only once the commercial production commences. However, this by itself would not be either a sole or concluding factor. In case of Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax reported in 228 ITR 253 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the scheme. For example, the scheme was applicable only to the new project or to a existing project provided investment in fixed capital or capacity was increased atleast by 50%.Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. In other words, the upper limit of total incentive which the unit could receive from the State Government in the form of tax waiver would not exist 100% of the eligible capital investment regardless of the residue of the period of its exemption eligibility as per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee." 11. In the result we find no error in view of the Tribunal. Tax Appeals are dismissed. 5.3.7.1. It is pertinent to note that against this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Mumbai Tribunal in the case of Bajaj Auto Ltd (ITA No. 49 and 1101 of 1991). The Special Bench held that the decision of Bajaj Auto has not overruled the decision of Hon'ble Mumbai Tribunal for AY 1985- 86 on the following basis: i) There cannot be any question of overruling the decision of one Bench by another bench of equal strength as it would be contrary to the established norms of judicial system in the country. ii) Even on merits it cannot be said that the Tribunal has laid out more stress on the form of the scheme and not their substance as held in Bajaj Auto as the Tribunal in the order for AY 1985-86 has explained the difference between exemption schemes of Maharashtra and Andhra Pradesh in detail. iii) Reliance placed by Tribunal in Asst Year 1985-86 on the decision of Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd. v. CIT (228 ITR 253) cannot be said to be erroneous. The Tribunal did recognise that the object with which subsidy is given is decisive as laid down by Hon'ble Supreme Court. If the scheme is for setting up or expansion of industry in a backward area, it will be capital, irrespective of the modality or source of fund. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Jurisdictional High Court is reproduced hereunder:- "(c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restoring the issue of taxability of the sale tax exemption benefit of Rs.58 crores availed by the assessee to the file of the Assessing Officer for deciding afresh after considering the decision of the Special Bench of the ITAT in the case of DCIT V. Reliance Industries Ltd., 88 ITD 273, which has not been accepted by the Revenue? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in entertaining the additional ground without appreciating that the assessee had treated the amount of sales tax exemption benefit of Rs.58 crores as revenue receipt and had included this amount in the returned income and it had been taxed accordingly and the assessee did not raise this issue before the CIT(A) and the issue had attained finality?" 5.4.3. While disposing of the questions Nos. c & d, the Hon'ble Jurisdictional High Court categorically held that the decision of the Special Bench of Tribunal had not been reversed or stayed by any higher judicial forum and it holds good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was contended that the facts on record are available and the Tribunal has merely asked the Assessing Officer to take a decision on the assessee's contention. 5. As long as the material exists on record, a contention raised by the assessee for the first time before the Tribunal, cannot be barred. So much is clear from series of judgments of various Courts including of this Court in case of CIT Vs. Pruthvi Brokers and Shareholders P. Ltd. (2012) 349 ITR 336. It is not the case of the Revenue that the assessee in the context of its contention on the nature of the subsidy, desired to produce additional evidence. It is true that the judgment of this Court confirming the order of the Tribunal in case of Reliance Industries Ltd. has been partially reversed by the Supreme Court. A question of law has been framed and placed for consideration of the 4 of High Court. However, this does not mean that the judgment of the Tribunal as on today stands reversed or stayed. In any case, quite apart from the judgment in the case of Reliance Industries Ltd. of the Special Bench of the Tribunal, it is always been for the assessee to contend before the Assessing Officer by pointing out the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales tax exemption was a capital receipt" and will, in due course though, adjudicate on this legal issue. To that extent, Hon'ble Bombay High Court's order dated 15th April 2009, to the extent of declining to admit this question, stands reversed. However, the decision of the Special Bench still holds good as the same has not, and at least not yet, even been examined by Hon'ble Bombay High Court. Mere admission of appeal against a decision, as is elementary, does not affect the biding nature of a judicial precedent. The Special Bench decision, in the case of Reliance Industries Ltd. (supra), was not reversed by Hon'ble Supreme Court, but was directed to be examined, on merits, by Hon'ble Bombay High Court. That is quite different from disapproving the special bench decision, but it appears that the coordinate bench was led to believe, and there could not have been any other reason for ignoring the special bench decision, that this Special Bench decision is reversed. That is patently incorrect, and when we pointed it out to the learned Commissioner (DR), he did not have much to say except to rely upon the coordinate bench decision which seems to have followed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h decision in the case of Reliance Industries Ltd. (supra) and coordinate bench decision in the case of Ajanta Manufacturing Ltd. (supra), and decline to interfere in the matter." (emphasis supplied by us) 5.4.6. In view of the above, no fault could be attributed on the ld. CIT(A) placing reliance on the decision of the Special Bench of the Tribunal and granting relief to the assessee in the instant case. 9. In the Special Bench decision in the case of Reliance Industries Ltd (supra), what came up for consideration was specifically the sales tax subsidy, and that decision, as we seen in the elaborate analysis of the coordinate bench- as extracted above still holds good in law. In the case of CIT Vs Chaphalkar Brothers [(2018) 400 ITR 279 (SC)], Hon'ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the I.T. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit u/s 115JB of the I.T. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the case of Sutlej Cotton mills Ltd. v. Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB), held that a particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Ltd. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) both for the purposes of normal tax as well for the purposes of computation u/s.115JB of the Act and be excluded while computing taxable income. 34. In the result, ground of appeal raised by the Departmental is dismissed. 35. In the Ground No 6, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition made by the Assessing Officer by disallowing the provision of Director's retirement benefit of Rs..1,88,80,377/- treating the same as unascertained liability. 36. The Assessing Officer has dealt with the issue at Para No.11 to 11.3 of Assessment Order. The Assessing Officer has observed that appellant has made provision for Director's Retirement Benefit for Rs..1,88,80,377/- which was considered as provision for unascertained liability. The Assessing Officer has not accepted the plea of assessee that provision is based upon actuarial valuation and he made addition of such amount. 37. This issue is dealt by Ld.CIT(A) at Para No. 10.6 of his order as under: 10.6 I have gone through the submissions of the Ld. AR and the assessment order. The facts of the Assessee's claim are covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation, so, he allowed the claim made by the assessee. 19.1. Before us, the DR argued that the FAA allowed the claim that was not before the Assessing Officer. The DR contended that provision made for Director's Retirement Benefit was made on the basis of actuarial valuation, that it represented a liability in praesenti that was to be discharged at future date. He referred to the case of Bharat Earth Movers (245 ITR 428). He also stated that similar claim was allowed by the Tribunal while deciding the appeal for the AY.1990-91. 19.2.We find that the issue of a certain business liability was deliberated upon and adjudicated by the Hon'ble Apex Court in the case of Bharat Earth Movers and it was held that if a business liability had definitely arisen in the accounting year and was capable of being estimated with reasonable certainty, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. Following the principle laid down by the Apex court in the above case and the decision of the Tribunal delivered for the AY.1990-91, we decide ground no.18 against the Assessing Officer." 60. In view of the said finding, we a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fshore banking unit Bahrain is agent for loan borrowed from SBI International(Mauritius) limited and if interest is paid to NRI, provisions of Section 195 is applicable. As assessee company has not deducted TDS on such payment, Assessing Officer made disallowance u/s 40(a) of the Act. 43. This issue is dealt by Ld.CIT(A) at Para No. 11.4 of his order as under: "11.4 I have carefully considered the submissions of the Ld. AR. The payment has been made to the Bahrain Branch of State Bank of India (SBI). This branch is part of SBI which is governed by the Banking Regulation Act. Section194A(3)(iii)(a) of the Income Tax Act, 1962 provides exemption from the application of 194A(1) to any banking Company to which the Banking Regulation Act, 1949 applies. So payment of interest to the State Bank of India is exempted from the deduction of tax at source u/s. 194A(1). Since the provisions of Section-194A are not applicable to the transaction there cannot be any disallowance u/s. 40(a). Hence, the disallowance of deduction made u/s. 40(a) is cancelled and the ground of appeal is allowed." 44. Against the above observation of Ld.CIT(A), Revenue has filed further appeal. During the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ICICI Bank Ltd., has been clarified........" 46. It is observed that Ld.CIT(A) in his order has given finding that Bahrain Branch of State Bank of India (SBI) is part of SBI which is governed by the Banking Regulation Act and this fact is not disputed by LD DR. Further it is also a settled position that a branch office is part of the entire SBI and not a separate legal entity. Payment to foreign branch of Indian entity tantamount to payment made to Indian company only. Accordingly, provisions of Section 195 are not applicable in respect of payments made to foreign branch of Indian Bank. Considering such fact and relying upon decision of Coordinate bench referred supra, we are inclined to accept the findings of Ld.CIT(A) for deleting the addition made by Assessing Officer. This ground of appeal in Departmental appeal is dismissed. 47. In the Ground No 8, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the disallowance of the cost of dismantling assets holding that the said expenditure is allowable as revenue expenditure." 48. The Assessing Officer has dealt with the issue at Para No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was upheld by the CIT (A) following the decision in the case of Lake Palace Hotels and Motels Pvt. Ltd vs. CIT (1995) 213 ITR 735 (Raj.). Similar issue in assessee's own case has been allowed by the ITAT Mumbai in the following appeals: a)AY91-92-ITANo.1105/Mum/97 b)AY92-93-ITANo.3961/Mum/97 c)AY96-97-ITANo.3783/Mum/00 d)AY97-98-ITANo.3298/M/01 12.2 Respectfully following the decision in earlier years, which have not been challenged by the Revenue, we allow assessee's claim. We also hope that the Revenue will not make similar I disallowances in later years as it has accepted the decision of the ITAT in earlier years. Ground is considered allowed." 52. Respectfully considering decision of Coordinate bench in assessee's own case referred supra, disallowance made by Assessing Officer is deleted. This ground of appeal in Departmental appeal is dismissed. 53. In Ground No 9, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in directing the Assessing Officer to allow deduction u/s.80IA in respect of TG-3 Power Plant. 54. On identical issue in Assessee's appeal, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, the Assessee has done power generation which is one of the eligible activities under this section. So the Assessee had the option of claiming the deduction u/s. 80IA for any ten consecutive assessment years within 15 years from AY: 1995- 96. The Assessee claimed deduction in the year 1999-2000, so the claim should have continued for the next nine years in order to maintain the eligibility for such deduction. However in the Assessee's case deduction has not been claimed after 1999-2000 and is claimed again this year ie. 2005-06. As mentioned earlier, the Ld.AR of the Assessee has argued before me that the deduction u/s. 80IA is not given to the assessee but to a specific unit. He has cited the Board's Circular no. 13.12.1963 in this regard. Once this proposition is accepted that the deduction is allowed on income from a specific unit, whether such unit was in the possession of the original founder or with somebody else, will not be material. But it is imperative that deduction u/s. 80IA must be claimed in respect of the income from this unit consecutively for a period of 10 yrs from any point out of the span of 15 yrs from commencement of the business. It is adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of this unit, the Assessee who has purchased the unit can claim such deduction, as the other conditions prescribed u/s. 80IA are fulfilled. In view of this, the AO is directed to allow deduction u/s.80IA in respect of TG-3. As has already been held earlier, no such deduction is allowable in case of TG-2. the AO is directed accordingly. 57. Against the observation of Ld.CIT(A), Revenue has filed further appeal for allowing the deduction u/s 80IA claimed for TG-3 whereas Assessee has filed further appeal for denying the deduction u/s 80IA claimed for TG-2. During the course of appellate proceedings, the Ld. AR of the Assessee has contended that entire business is purchased as a going concern on slump sale basis, deduction under Section 80IA is available to it. The Ld. AR of the assessee has referred to provisions of Section 80-IA which states that if new undertaking is not setup by splitting up, or the reconstruction of a business already in existence and it is not formed by transfer to a new business or machinery or plant previously used for any purpose, deduction would be allowable. The Ld.AR has argued that assessee has acquired entire unit as a whole which means that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of previously used plant & machinery. It is relevant to refer to provisions of Section 80IA which reads as under: "3) This section applies to an undertaking referred to in [clause (ii) or] clause (iv) of sub-section (4)] which fulfils all the following conditions, namely: (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an 52[undertaking] which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such 52[undertaking] as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose:" 61. It is relevant to refer to Oxford dictionary, the term "split up" means to separate of end relationship. It is undisputed fact in present case that assessee has acquired both the units as a whole. It is not the case that assessee has set up two different power plant by purchasing only partial assets which were used by another assessee but entire undertaking itself is pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions mentioned in section 10A(2) and, thus, its claim for exemption under section 10A was to be allowed - Held, yes [In favour of assessee] 62. Further, in CIT v. Silical Metallurgic Ltd (324 ITR 29), the facts before Hon'ble Madras High Court were as follows: there were three units at different places being new industrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the amalgamated company continued to carry on the business of the undertakings. It claimed the deduction of tax holiday for all the eligible undertakings. The Assessing Officer disallowed the deduction on the ground that it did not set up the aforesaid units and there was no provision in the Act for granting the benefit of deduction to the amalgamated company. The Ld.CIT(A) and the Tribunal upheld the claim of the taxpayer. The Hon'ble Madras High Court confirmed the decision of the Tribunal and observed as follows: "A reading of the provision of sections 80HH and 80-I of the Act, it is clear that the same has been incorporated to encourage the new industrial undertaking on fulfilment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over as a running concern". The Board set out two principles (prima facie, independent of one another or the later dependent on the primary and the first principle): i. The deduction attaches to the undertaking and not to the owner; and ii. A successor would be entitled to the deduction, for the residual period, if the undertaking is transferred as a running concern 64. The aforesaid Board Circular have been relied upon by various Courts and its applicability have been upheld. The Hon'ble Allahabad High Court in the case of Prisma Electronics [2015] 377 ITR 207 was concerned with deduction under section 80-IB on conversion of proprietorship concern into partnership firm. In this regard, it was held as under: "11. From a perusal of the aforesaid provision, it is clear that Section 84 is more or less the same as provided in Section 80-IB of the Act. The Central Board of Direct Taxes issued a circular F. No.15/5/63-IT(A-1) dated 13th December, 1963 indicating that the benefit of Section 84 is attached to the undertaking and not to the owner thereof and, consequently, the successor would be entitled to the benefit for the unexpired period of 5 years provided the undertakin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h does not mean that if in block of 10 years, deduction u/s 80IA was not claimed for one or more reasons, such claim is lapsed for subsequent years. Further it is also a settled position that the deduction u/s 80IA is qua undertaking and not qua entity. Every undertaking will be entitled to avail deduction u/s 80IA for a period of 10 consecutive years from 15 years from the commencement of business. There is substance in the argument of Ld. AR of the assessee that Tata Power Company Limited might not have claimed for deduction u/s 80IA for various reasons and there is nothing on record to prove that said company was not entitled for deduction in respect of 80IA on such power plant. On the other hand, claim of deduction u/s 80IA made by assessee is emanating from notes forming part of return of income for A.Y. 1999-2000 and not disputed by Assessing Officer in assessment proceedings hence there is no reason for not allowing deduction u/s 80IA for TG-2 Wadi. The Hon'ble Bombay High court in the case of Simple Food Products (P.) Ltd. [2017] 84 taxmann.com 239 has held that if deduction u/s. 80-IB was granted for an initial assessment year, same could not be rejected for subsequent ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring unit. Since these two items of expenditure are specifically incurred for cement manufacturing units the AO directed to exclude these two items out of the expenditure he has considered as mentioned at page 27 para 16.7 of the assessment order. The deduction should be reworked accordingly." 73. Against the observation of Ld.CIT(A), both department and assessee has further filed appeal. The Ld.AR of the assessee has argued that as expenditure identified by Assessing Officer are not at all required to be incurred for such Power Unit eligible for deduction u/s 80IA, no allocation of such expenditure is required to be made. Reliance was placed mainly on following decisions: (i) DCW Ltd. v. Addl. CIT [(2010) 37 SOT 322 (Mumbai Tribunal)] (ii) Proctor & Gamble India Ltd. v. DCIT [ITA No.5466 of 1999 &Ors. (Mumbai Tribunal)] (iii) DCIT v. Reliance Infrastructure [ITA No.1704 of 2019 (Mumbai Tribunal)] (iv) DCIT v. Aditya Birla Nuvo Ltd. [(2016) 67 taxmann.com 380 (Mumbai Tribunal)] (Para 8) (v) Grasim Industries Ltd. v. DCIT [ITA No. 5628 of 2002 (Mumbai Tribunal)] 74. The Ld.AR of the assessee has also stated that department has not filed further appeal against decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation would be more appropriate based on expenditure incurred by the units vis-à-vis overall expenditure. To this extent, we uphold the plea of the assessee. 109. In view of the above discussions, as also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee‟s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis-àvis overall expenditure" 76. Respectfully following decisions of coordinate bench referred supra, Assessing Officer is directed to allocate Head office expenses (other than a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative relied upon the assessment order, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities and relied upon the decision of the Tribunal in Assessee's own case for the Assessment Year 2002-03 and 2003-04 wherein the Tribunal had granted relief to the Assessee. 14.2.4. We note that the Hon'ble Bombay High Court has, in the case of CIT vs. Echjay Forgings (P) Ltd. (2001) 251 ITR 15 has held as under: "4. The short point which arises for consideration in this appeal is, whether the Assessing Officer was right in disallowing claims for deduction in respect of the five items and ordering addition thereof to the net profit for the purposes of section 115J. 5. The addition of the five items to the net profit is, accordingly, discussed hereinbelow: (I) Addition of wealth-tax paid by the assessee to the net profit 6. Mr. Desai, the learned senior counsel for the department, fairly concedes that the net profit, as shown in the profit and loss account, will not be increased by the amount of wealth-tax paid because under clause (a) of the Explanation to section 115J(1A), what is contemplated is the amount of income-tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Revenue is dismissed." 81. Respectfully following the decision of coordinate bench referred supra, addition of provision for wealth tax made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 82. In the Ground No 12, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of provision for normal and additional gratuity while computing the book profit u/s.115JB of the Act. 83. The Assessing Office has dealt with this issue at Para No. 23 of his order and observed that as assessee has not established that Gratuity provisions are made towards ascertained liabilities, same are added back while computing total income. This issue is dealt by Ld.CIT(A) at Para No. 22.6 of his order as under: "22.6 As the Ld.AR has brought to my notice that this issue has been decided by the ITAT, Mumbai in the case of the Assessee in AY: 1990-91 following the decision of the Bombay High Court in the case of Echjay Forgings P Ltd (surpa). Further my predecessors have decided the issue in favour of the Assessee in AYs: 1998-99, 2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the A.Y. 1990-91 in ITA. No.2361/M/1995 & in the A.Y. 2002-03 in ITA. No.4987/M/2007. There is nothing on record to which it can be assumed that the order has been varied or changed in appellate proceeding. Since this issue has been duly adjudicated in favour of the assessee by above mentioned decision of the Hon'ble ITAT, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is being decided in favour of the assessee against the revenue." 14.3.5. Respectfully following the decision of the co-ordinate Bench of the Tribunal in the case of the Assessee for the Assessment Year 1990- 91 (ITA No. 2361/Mum/1995), Assessment Year 2002-03 (ITA No. 4987/Mum/2007 & others) and Assessment Year 2003-04 (ITA No. ITA. No. 5259 & 4895/Mum/2007 Assessment Year: 2004-05 4242/Mum/2007), we confirm the order of CIT(A), and hold that provision for Normal/Additional Gratuity of INR 5,86,82,751/- is in the nature of provision for an ascertained liability and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt it holds that provision for Leave Encashment of INR 3,26,00,238/- is in the nature of provision for ascertained liability created on the basis of actuarial valuation and is, therefore, not required to be added back while computing Book Profits in terms of Clause (c) of Explanation 1 to Section 115JB(2) of the Act. Accordingly, order of CIT(A) on this issue is confirmed and Ground No. 10 raised by the Revenue is dismissed." 90. Respectfully following decision of coordinate bench referred supra, addition of provision for leave encashment made while computing book profit u/s 115JB is deleted. Accordingly, this ground of appeal in Departmental Appeal is dismissed. 91. In the Ground No 14, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of provision for Director's retirement benefits while computing the book profit u/s.115JB of the Act." 92. The Assessing Officer has dealt with this issue at Para No. 25 of his order and observed that assessee has not explained how provision for Director's retirement benefit made by assessee is towards ascertained liability hence while computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: "26.5 On consideration of the submission made by the ARs of the appellant, I find that provision for director's retirement benefit cannot be considered as unascertained liability since the same has been calculated on the basis of actuarial valuation and is squarely covered by the decision of Hon'ble Apex Court in the case of Bharat Earth Movers (supra). Therefore, provision for director's retirement is an allowable deduction in computing profits and gains of business or profession. Further, in my view additions made in computing book profit u/s 115JB on the ground that the same has been added back in the computing total income under normal provisions of the Act is not tenable. Thus, respectfully following the decision of Mumbai High Court in the case of Echjay forgings Ltd. (Supra) and the decision of Hon'ble Tribunal in the appellant own case for AY 1990-91 as well as my own orders for AY 1998-99 and for AY 2002-03 as discussed herein above the addition made by the Assessing Officer is deleted and this ground of appeal is allowed." 33. Since the case of the assessee has duly bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation of Ld. CIT(A), department has filed this ground in this appeal. Before us, Ld. AR fairly conceded that above issue is against assessee by the decision of coordinate bench of ITAT in A.Y.2002-03 to 2004-05 and matter was set aside to file of Assessing Officer. The Ld.DR has relied upon finding given by Assessing Officer as well as finding of ITAT in earlier years and argued that order of Assessing Officer may be restored. 99. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has set aside the matter to file of Assessing Officer. The relevant finding is reproduced herein below: "14.6.3. We have heard the rival contentions and perused the record. While the Departmental Representative relied upon the decision of the Tribunal in Assessee's own case for the Assessment Year 2003-04, the Authorised Representative of the Assessee reiterated the submissions made before the lower authorities before fairly conceding that the identical issue has been remanded to the to the file of the Assessing Officer by the Tribunal in Assessee's own case for the immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard. The order of Ld. CIT(A) on this issue is set aside with the aforesaid directions. This ground of appeal in Departmental Appeal is allowed. 101. In the Ground No 16, Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of VRS pertaining to earlier years, capital expenditure debited & write down of value of assets while computing the book profit u/s.115JB of the Act." 102. The Assessing Officer has dealt with this issue at Para No. 27 of his order and observed that while passing the assessment order of earlier years, VRS expenses pertaining to earlier years, capital expenditure debited & write down of value of assets was added back while computing book profit u/s 115JB of the Act hence in current year, for identical reasons such expenses are added back to total income. This issue is dealt by Ld. CIT(A) at Para No. 26.8 of his order as under. "26.8 I have gone through the submission of the Ld. AR. The Ld. AR has brought to my notice that this issue has been decided by my predecessors in favour of the Assessee for AYs: 2002-03, 2003-04 & 2004-05, relying on the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounts of the Assessee have been prepared in accordance with Parts II and III of Schedule VI to the Companies Act and the same has been duly certified by the statutory auditors, and therefore, in absence of any specific clause in Section 115JB(2) of the Act providing for increase of Book Profits by the amount of VRS expenses, no further adjustment is called for on this account. In the immediately preceding assessment year (AY 2003-04), identical issue has been decided in favour of the Assessee wherein the Tribunal has, vide common order, dated 13.03.2019, passed in ITA No. 4242/MUM/2007 & ITA No. 4988/MUM/2007 has held as under: "34. Under this issue the revenue has challenged the deletion of addition made in respect of VRS expenditure pertaining to earlier years in computing Book Profit u/s 115JB of the Act in sum of Rs..18,69,64,996/-. The relevant finding has been given in CIT(A) in Para No. no. 27.4. On appraisal of the above said finding, we are of the view that the CIT(A) has allowed the claim of the assessee on the basis of decision of the case titled as Apollo Tyres Ltd. CIT (2002) 255 ITR 273 (SC). We also noticed that the issue has already been covered in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssors in favour of the appellant in AYs-2001-02 to 2004-05, following the decision of the ITAT, Mumbai in the case of ITO -vs.- Frigsales (India) Ltd (supra). Since the facts are the same, I follow the orders of my predecessor and allow the appeal. 28.7 So far as the profit on sale of investments of Rs..3,02,73,345 is concerned, the issue is decided against the appellant following my predecessors order on the same issue for the earlier years. 109. Against the above observation of Ld. CIT(A), both assessee and Revenue has filed cross appeals. The Ld. AR has fairly conceded that similar issue is decided against assessee in A.Y. 2002-03 to 2004-05 by Coordinate bench. However, Ld. AR has relied upon following decisions in support of claim. (i) DCIT v. Gloster Jute Mills Ltd. [(2017) 185 TTJ 339 (Kolkata Tribunal)] (ii) Shivalik Ventures (P.) Ltd. v. DCIT [(2015) 70 SOT 92 (Mumbai Tribunal)] (iii) JSW Steel Ltd. v. ACIT [ITA No.923 of 2009 dated January 13, 2017 (Mumbai Tribunal)] (iv) Ambuja Cements Ltd [ITA No. 2384/Mum/2019 and ors.] (AY 2010-11) (Para 18-20; internal page 4-5) 110. The Ld. DR has relied upon finding given by Assessing Officer as well as finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the co-ordinate Bench of the Tribunal in Assessee's own case, we set aside the order of CIT(A) and restore the order of the Assessing Officer on this issue. Accordingly, Ground No. 18 raised by the Revenue is allowed. " 112. However, during the course of the hearing the Ld. AR also referred to the decision of Hon'ble Karnataka High Court in the case of Best Trading and Agencies Limited v. DCIT [119 Taxmann.com 129]. The finding of the said decision at Para No. 13 is reproduced hereunder for ready reference: "................... 13. section 115JB(5) of the Act reads as under: "(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee being a company, mentioned in this Section." Thus, by virtue of sub-section (5) of section 115JB, the application of other provisions of the Act are open, except if specifically barred by the section itself. The indexed cost of acquisition is a claim allowed by section 48 of the Act to arrive at the income taxable under the income from capital gains. The difference between the sale consideration and indexed cost of acquisition represents the actual cost of the assessee, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble Pune ITAT in the case of Smruthi Organisers Limited wherein it is held that for computing book profit u/s 115JA, clause (viii) of the explanation being export profit to be claimed on the basis of book profits and not as per Section 80HHC. However, this contention of assesse was not accepted by Assessing Officer on the ground that zero deduction is eligible for deduction u/s.80HHC w.e.f 2005-06. This issue is dealt with by Ld. CIT(A) at Para No. 29.6 to 29.8 of order which reads as under: "The Ld. AR of the appellant submitted that, the above clarifications issued in the context of section 115JB, are equally important and applicable in the context of section 115JB since the exclusion from Book Profit are more or less same u/s 115J, 115JA and 115JB. It was further submitted that Section 115JB is a selfcontained code where by virtue of legal fiction tax on book profit is sought to be levied. Section 115JB is an alternative mode of taxation where taxation is not on the basis of total income as computed under the Act but it is on the basis of the book profit computation. When in principle it is decided that book profit tax shall be levied on everything except certain ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restored. 118. Considered the rival submissions and material placed on record. It is relevant to refer to provisions of Section 115JB on statue for year under consideration. "(iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (v) the amount of profits eligible for deduction under section 80HHE computed under subsection (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi) the amount of profits eligible for deduction under section 80HHF computed under subsection (3) of that section, and subject to the conditions specified in that section; or" 119. During the course of hearing the Ld. AR referred to identical decision of Ahmedabad ITAT in the case of Torrent Pharmaceuticals Limited for AY 2009-10. Relevant portion of the finding vide ITA No. 1285/Ahd/2017 is reproduced hereunder for ready reference: "95. Ground No. 5: The grievances raised by the assessee in this ground is that the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the amount of profit under section 115JB of the Act. 97. Aggrieved assessee preferred an appeal to the learned CIT-A, who confirmed the order of the AO by observing as under: I have considered the assessment order, facts on the case and the submissions made by the appellant. The AO made the impugned addition since assessee has subtracted the profit eligible u/s.80HHC of Rs..79,58,97,799/- from its book profit. In view of the amendment brought into section 80HHC by the Finance Act, 2011 with effect from 1.4.2005, the said profit u/s.80HHC is not eligible for deduction from the book profit. In view of the same the AO's action is disallowing the same was correct and the same is upheld. Ground of appeal no.11 is dismissed. 98. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 99. The learned AR before us contended that the amendment brought under the statute with retrospective effect, denying the benefit to the assessee is unconstitutional, particularly, in the circumstances when such amendment was brought to nullify the judgment of the Hon'ble Supreme Court in the case of Ajanta Pharma reported in 327 ITR 305. 99.1 It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is permissible for the Legislature to retrospectively legislate, such retrospectivity is normally not permissible to create an offence retrospectively. There were clear judgments, decrees or order of courts and Tribunals or other authorities which were required to be neutralized by the validation clause. It could only be assumed that the judgments, decrees or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the validation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. [Para 7] The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect. [Para 8] 101.2. Undeniably, the Parliament is empowered to bring amendments under the statute that too retrospectively provided it is not detrimental to the assessee. In other words any amendment denying the benefit to the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the appellant's favour by the ITAT, Mumbai in the appellant's own case for AY:1990-91. Further my predecessors in AYs:1998-99, 1999-2000, 2003-04 and 2004-05 have decided the issue in favour of the appellant. Taking into account these orders, I also decide the issue in favour of the appellant." 123. Against the observation of Ld. CIT(A), department has filed the ground in this appeal. Before us, Ld. AR relied upon finding of Ld.CIT(A) and argued that issue is in favour of assessee by decision of ITAT for A.Y. 2003-04 and 2004-05. On the other hand, Ld. DR has relied upon finding given by Assessing Officer and argued that order of Assessing Officer may be restored. 124. Considered the rival submissions and material placed on record. On this issue, coordinate bench in assessee's own case for A.Y. 2004-05 in ITA No 5259/MUM/2007 dated 27/05/2022 has decided this issue in favour of assessee. The relevant finding is reproduced herein below: "21.3. Now, the Revenue is in appeal before us against the above finding of the CIT(A) on this issue. We note that CIT(A) has granted relief to the Assessee following decision of the Tribunal in the case of the Assessee in Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to Section 115JB(2) of the Act. Accordingly, Ground No. 20 raised by the Revenue is dismissed." 125. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld. CIT(A) holding that amount transferred from Share Premium Account to the profit & loss account was correctly reduced from Book Profits by the Assessee while computing book profit as per the provisions of Clause (i) of Explanation to Section 115JB(2) of the Act. This ground of appeal in Departmental Appeal is dismissed. 126. In the Ground No 20 Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of Rs 15 crore being debenture redemption reserve while computing book profit u/s 115JB of the Act." 127. The Assessing Office has dealt with this issue at Para No.31 of his order and observed that as per section 115JB of the Act, any amount carried to any reserve by whatever name called is to be added back and hence he made addition of Rs..15 crores being debenture redemption reserve while computing book profit u/s 115JB of the Act. This issue is dealt by Ld. CIT(A) at Para No.31.7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd matter has attained finality. Hon'ble Bombay High court in the case of Raymond Limited [2012] 21 taxmann.com 60 has held that Amount set apart as a Debenture Redemption Reserve (DRR) is not a reserve within the meaning of Explanation (b) to section 115JA. Respectfully following decision of coordinate bench referred supra, we confirm the order of Ld.CIT(A) holding that amount transferred to Debenture Redemption Reserve cannot be added back while computing Book Profits. This ground of appeal in Departmental Appeal is dismissed. 131. In the Ground No 21 Department has raised the following grievance: "On the facts and the circumstances of the case and in law the CIT(A) erred in deleting the addition of Rs 15,30,00,000/- being expenditure incurred to earn dividend income while computing book profit u/s 115JB of the Act." 132. The Assessing Office has dealt with this issue at Para No. 4 of his order. The Assessing Officer has observed that assessee has earned exempt dividend income in year under consideration and computed proportionate interest disallowance at Rs..15,30,00,000/- u/s. 14A and similar amount is added back while computing total income as well as book profit u/s 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd [(2017) 82 taxmann.com 415 (Del SB)]. The assessee gets relief on this point as well." 136. Considering such facts and decisions referred supra, it is held that disallowance u/s 14A cannot be made while computing book profit u/s.115JB of the Act. This ground of appeal in departmental appeal is dismissed. 137. Ground no. 22 is general in nature and is thus dismissed. 138. In the result, the appeal of the department is partly allowed as per the terms indicated above. ITA NO. 3490/MUM/2009 (ASSESSEE APPEAL) 139. We now take up the appeal filed by the assessee in ITA No 3490/Mum/2009. 140. Ground no. 2 relates to addition of corporate tax paid at Saudi Arabia while computing income under normal provisions of the Act. The Ld. AR has not pressed this ground of appeal hence same is dismissed. 141. Ground no. 5 relates to short allowance of depreciation. The Ld.AR has not pressed this ground of appeal hence same is dismissed. 142. Ground no. 6 relates to setting off of unabsorbed depreciation of current year with short term capital gain of current previous year with short term capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal is dismissed." 146. The Ld. AR of the assessee has contended that assessee company has adjusted premium on redemption of FCCB against Securities Premium account. The same has been claimed as exclusion in revised return while computing book profit u/s 115JB on the ground that adjustment of premium on redemption of FCCB against Share premium account is nothing but a construction debit to Profit & loss account with such premium and a corresponding constructive credit to Profit & loss account withdrawing Share premium. It was thus argued that constructive debit is admissible in computation of book profit whereas constructive credit is not income as withdrawn of amount from Share Premium amount is not liable for book profit u/s 115JB of the Act as held by Hon'ble ITAT in assessee's case. On the other hand, Ld.DR has argued that premium on redemption of FCCB is not claimed as deduction in Profit & loss account hence such amount cannot be separately claimed while computing book profit u/s 115JB of the Act. 147. Considered the rival submissions and material placed on record. It is undisputed fact that assessee company has adjusted premium on redemption of FCCB against Securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm an identifiable part of the company's reserves within the meaning of Schedule VI, shall be disregarded in determining the sum to be included in the [securities] premium account." 148. Further, bonds are treated as debentures as per section 2(12) of Companies Act, 1956 which defines debentures as follows: "(12) "debenture" includes debenture stock, bonds and any other securities of a company, whether constituting a charge on the assets of the company or not". 149. It is observed that though as provided in sub-section (1) of section 78 of Companies Act, 1956, share premium account has to be given similar treatment as share capital and the same cannot be reduced except by due process of law for reduction of share capital, sub-section (2) carves out four exceptions to the same. Clause (d) of section 78(2) clearly provides that premium payable on redemption of debentures can be provided out of share premium account. As per section 2(12) of Companies Act 1956, debentures includes bonds. Thus, accounting treatment made by assessee is as per Companies Act, 1956, books of account are prepared as per prevailing accounting policies which suffices the requirement of Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without considering the fact that no liability had accrued during the year under appeal and it was a contingent liability which was payable only after the expiry of 10 years and directed the AO to follow the decision of Supreme Court in the case of Madras Industrial Investment Corporation Ltd. v. CIT where facts of the case are different from those of Supreme Court's decision?" Facts 2. During the assessment year in question, the assessee-company had issued zero interest unsecured redeemable convertible debentures of Rs. 100 each redeemable after 10 years at a premium of 100 per cent. These debentures are redeemable after 10 years from the date of allotment at a premium of 100 per cent. Assessee claimed before the AO a spread over, Assessee claimed that the premium payable by it was Rs. 5,47,50,000 after expiry of 10 years. However, the assesses claimed deduction of Rs. 54,75,000 per annum. The said amount was debited to the P&L a/c for the accounting year ending 31st March, 1995. In the annual report, a footnote was added that premium on zero interest unsecured redeemable debentures of Rs. 100 each was redeemable after 10 years at a premium of 100 per cent. The AO disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been certified that zero interest unsecured redeemable convertible debentures of Rs. 100 each redeemable after 10 years at a premium of 100 per cent had been issued during the assessment year in question. There is no reason for us to discard this note of the auditor. Even in the assessment order, no reasons have been given by the AO for discarding this note of the auditors. Lastly, we may point out that even assuming for the sake of argument that the borrower had a discretion to change the terms of the issued debentures, there is nothing in the record to show that during the assessment year in question the borrower had exercised such a discretion. In the absence of factual matrix; we have no option but to confirm the judgment of the Tribunal. In our view, the judgment of this Court in the case of Taparia Tools Ltd. v. Jt CIT (supra) is applicable to this case. In our view, the judgment of the Supreme Court in the case of Madras Industrial Investment Corporation v. CIT (supra) is also applicable. Order In the circumstances, we answer the above quoted question in the affirmative i.e., in favour of the assessee and against the Department. 6. Accordingly, both the above appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
